Cobalt Corporation
Quarterly Highlights
(In thousands, except per share data)
March 31, 2003
- -------------------------------------------- -------------------------------------------------------------
Results of Operations 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Total
- -------------------------------------------- -------------------------------------------------------------
2003
- ----
Total revenues $ 408,567 $ 0 $ 0 $ 0 $ 408,567
Health services revenues 403,946 0 0 0 403,946
Net income 11,142 0 0 0 11,142
Diluted EPS (1) 0.26 0.00 0.00 0.00 0.26
2002
- ----
Total revenues $ 380,970 $ 382,881 $ 390,392 $ 393,107 $ 1,547,350
Health services revenues 378,039 379,250 385,691 390,666 1,533,646
Income from Cobalt continuing
operations (2) 13,244 22,762 13,888 15,123 65,017
Income (loss) from Cobalt
discontinued operations, net of tax 9,359 (250) (171) 0 8,938
Net income 22,603 22,512 13,717 15,123 73,955
Diluted EPS from Cobalt continuing operations (1) 0.32 0.54 0.33 0.35 1.54
Diluted EPS from Cobalt discontinued operations (1) 0.23 (0.01) (0.01) 0.00 0.21
Diluted EPS (1) 0.55 0.53 0.32 0.35 1.75
(1) The sum of the quarters may not equal the earnings per common share for
the year, due to the change in the number of shares outstanding during
the year.
(2) Includes income from investment in affiliates of $2.9 million, $12.5
million, and $0.2 million in the first, second, and fourth quarter of
2002, respectively.
Cobalt Corporation
Operating Highlights
(In thousands)
March 31, 2003
----------------------------------------------- ---------------------------------------------
2002 YTD 2003 YTD
- ------------------------------------- ----------------------------------------------- ---------------------------------------------
Operating Data 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr 12/31/02 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr 12/31/03
- ------------------------------------- ----------------------------------------------- ---------------------------------------------
Health services revenues:
Insured medical products $305,127 $306,145 $311,386 $317,424 $1,240,082 $323,132 $ 0 $ 0 $ 0 $323,132
Specialty managed care
products and services 45,328 45,434 46,504 47,844 185,110 44,045 44,045
Government services 28,809 27,971 28,375 26,564 111,719 27,810 27,810
Self-funded products 7,233 7,757 7,967 7,681 30,638 14,268 14,268
Eliminations (8,458) (8,057) (8,541) (8,847) (33,903) (5,309) (5,309)
------- ------- ------- ------- --------- ------- -------- ------- ------- -------
Total 378,039 379,250 385,691 390,666 1,533,646 403,946 0 0 0 403,946
Medical and other benefits:
Insured medical products 268,222 266,976 269,652 266,844 1,071,694 279,799 279,799
Specialty managed care
products and services 27,473 27,209 27,427 25,751 107,860 27,257 27,257
Eliminations (3,337) (3,377) (3,274) (2,895) (12,883) (3,215) (3,215)
------- ------- ------- ------- --------- ------- -------- ------- ------- -------
Total 292,358 290,808 293,805 289,700 1,166,671 303,841 0 0 0 303,841
Selling, general, administrative,
and other expenses:
Insured medical products 33,060 33,837 34,605 37,904 139,406 34,760 34,760
Specialty managed care products
and services 16,381 16,956 17,265 18,535 69,137 13,767 13,767
Government services 28,277 27,499 28,110 26,275 110,161 27,310 27,310
Self-funded products 6,889 7,088 6,755 7,381 28,113 12,606 12,606
Corporate holding company (2,615) (124) (456) 634 (2,561) (429) (429)
Eliminations (5,124) (4,675) (5,267) (5,951) (21,017) (2,096) (2,096)
------- ------- ------- ------- -------- ------- -------- ------- ------- -------
Total 76,868 80,581 81,012 84,778 323,239 85,918 0 0 0 85,918
Investment income, net 2,827 3,708 4,521 3,789 14,845 4,397 4,397
Net realized investment gains
(losses) 104 (77) 180 (1,348) (1,141) 224 224
------- ------- ------- ------- -------- ------- -------- ------- ------- -------
Total investment results 2,931 3,631 4,701 2,441 13,704 4,621 0 0 0 4,621
Income from continuing operations
before interest, amortization,
income tax expense and income
from investment in affiliates 11,744 11,492 15,575 18,629 57,440 18,808 0 0 0 18,808
Interest 172 71 116 316 675 275 275
Amortization of intangible assets 0 0 0 0 0 325 325
------- ------- ------- ------- -------- ------- -------- ------- ------- -------
Income from continuing operations
before income tax expense
and income from investment in
affiliates 11,572 11,421 15,459 18,313 56,765 18,208 0 0 0 18,208
Income tax expense (1,180) (1,124) (1,574) (3,426) (7,304) (7,066) (7,066)
Income from investment in
affiliates, net of tax(1) 2,852 12,465 3 236 15,556 0 0
------- ------- ------- ------- -------- ------- -------- ------- ------- -------
Income from continuing operations 13,244 22,762 13,888 15,123 65,017 11,142 0 0 0 11,142
Income (loss) from discontinued
operations, net of tax(2) 9,359 (250) (171) 0 8,938 0 0
------- ------- ------- ------- -------- ------- -------- ------- ------- -------
Net income $22,603 $22,512 $13,717 $15,123 $ 73,955 $11,142 $ 0 $ 0 $ 0 $11,142
======= ======= ======= ======= ======== ======= ======== ======= ======= =======
(1) YTD 2002 includes a $10.0 million gain on the sale of 4.4 million AMZ shares.
(2) The first quarter of 2002 includes a $9.9 million net gain on the sale of Innovative Resource Group, LLC, which is treated
as discontinued operations. During the second and third quarter of 2002, additional expenses were recorded, adjusting the
net gain to $9.6 million.
YTD
- ------------------------------------- -------------------
Operating Data 03/31/02 03/31/03
- ------------------------------------- -------------------
Health services revenues:
Insured medical products $305,127 $323,132
Specialty managed care
products and services 45,328 44,045
Government services 28,809 27,810
Self-funded products 7,233 14,268
Eliminations (8,458) (5,309)
------- -------
Total 378,039 403,946
Medical and other benefits:
Insured medical products 268,222 279,799
Specialty managed care
products and services 27,473 27,257
Eliminations (3,337) (3,215)
------- -------
Total 292,358 303,841
Selling, general, administrative,
and other expenses:
Insured medical products 33,060 34,760
Specialty managed care products
and services 16,381 13,767
Government services 28,277 27,310
Self-funded products 6,889 12,606
Corporate holding company (2,615) (429)
Eliminations (5,124) (2,096)
------- -------
Total 76,868 85,918
Investment income, net 2,827 4,397
Net realized investment gains
(losses) 104 224
------- -------
Total investment results 2,931 4,621
Income from continuing operations
before interest, amortization,
income tax expense and income
from investment in affiliates 11,744 18,808
Interest 172 275
Amortization of intangible assets 0 325
------- -------
Income from continuing operations
before income tax expense
and income from investment in
affiliates 11,572 18,208
Income tax expense (1,180) (7,066)
Income from investment in
affiliates, net of tax(1) 2,852 0
------- -------
Income from continuing operations 13,244 11,142
Income (loss) from discontinued
operations, net of tax(2) 9,359 0
------- -------
Net income $ 22,603 $ 11,142
======= =======
- --------------------------------------------------------
(1) YTD 2002 includes a $10.0 million gain on the sale of 4.4 million AMZ
shares.
(2) The first quarter of 2002 includes a $9.9 million net gain on the sale of
Innovative Resource Group, LLC, which is treated as discontinued
operations. During the second and third quarter of 2002, additional
expenses were recorded, adjusting the net gain to $9.6 million.
Cobalt Corporation
Consolidated Statements of Operations
(In thousands, except share and per share data)
--------------------------------------------------------
March 31, 2003 2002 YTD
--------------------------------------------------------
- --------------------------------
Consolidated 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Total
- -------------------------------- --------------------------------------------------------
Revenues:
Health services revenues:
Premium revenue $337,966 $339,129 $344,737 $351,928 $1,373,760
Other revenue 40,073 40,121 40,954 38,738 159,886
Investment results 2,931 3,631 4,701 2,441 13,704
-------- -------- --------- --------- ---------
Total revenues 380,970 382,881 390,392 393,107 1,547,350
Expenses:
Medical and other benefits 292,358 290,808 293,805 289,700 1,166,671
Selling, general,
administrative, and other
expenses 76,868 80,581 81,012 84,778 323,239
Interest 172 71 116 316 675
Amortization of intangible assets 0 0 0 0 0
-------- -------- --------- --------- ---------
Total expenses 369,398 371,460 374,933 374,794 1,490,585
-------- -------- --------- --------- ---------
Income from continuing operations
before income tax
expense and income
from investment in affiliates 11,572 11,421 15,459 18,313 56,765
Income tax expense (1,180) (1,124) (1,574) (3,426) (7,304)
Income from investment in
affiliates, net of tax(1) 2,852 12,465 3 236 15,556
-------- -------- --------- --------- ----------
Income from continuing operations 13,244 22,762 13,888 15,123 65,017
Income (loss) from discontinued
operations, net of tax(2) 9,359 (250) (171) 0 8,938
-------- -------- --------- --------- ----------
Net income $ 22,603 $ 22,512 $ 13,717 $ 15,123 $ 73,955
========= ======== ========= ========= ==========
Weighted average common shares 40,637,194 40,904,010 41,272,729 41,550,021 41,093,967
Diluted weighted average
common shares 40,967,943 42,413,553 42,625,303 42,634,726 42,229,727
Earnings (loss) per common
share (3):
Diluted EPS from continuing
operations $ 0.32 $ 0.54 $ 0.33 $ 0.35 $ 1.54
Diluted EPS from discontinued
operations $ 0.23 $ (0.01) $ (0.01) $ 0.00 $ 0.21
-------- -------- --------- --------- --------
Total diluted EPS $ 0.55 $ 0.53 $ 0.32 $ 0.35 $ 1.75
======== ======== ========= ========= ========
- ----------------------------------------------------------------------------------------
(1) YTD 2002 includes a $10.0 million gain on the sale of 4.4 million AMZ
shares.
(2) The first quarter of 2002 includes a $9.9 million net gain on the sale of
Innovative Resource Group, LLC, which is treated as discontinued
operations. During the second and third quarter of 2002, additional
expenses were recorded, adjusting the net gain to $9.6 million.
(3) The sum of the quarters may not equal the earnings per common share for the
year due to the change in the number of shares outstanding during the year.
--------------------------------------------------- ---------------------
2003 YTD YTD
--------------------------------------------------- ---------------------
- --------------------------------
Consolidated 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Total 03/31/02 03/31/03
- -------------------------------- --------------------------------------------------- ---------------------
Revenues:
Health services revenues:
Premium revenue $ 357,377 $ 0 $ 0 $ 0 $ 357,377 $ 337,966 $ 357,377
Other revenue 46,569 46,569 40,073 46,569
Investment results 4,621 0 0 0 4,621 2,931 4,621
-------- ---------- -------- -------- -------- -------- ---------
Total revenues 408,567 0 0 0 408,567 380,970 408,567
Expenses:
Medical and other benefits 303,841 0 0 0 303,841 292,358 303,841
Selling, general,
administrative, and other
expenses 85,918 0 0 0 85,918 76,868 85,918
Interest 275 0 0 0 275 172 275
Amortization of intangible assets 325 0 0 0 325 0 325
-------- ---------- -------- -------- -------- -------- ---------
Total expenses 390,359 0 0 0 390,359 369,398 390,359
-------- ---------- -------- -------- -------- -------- ---------
Income from continuing operations
before income tax
expense and income
from investment in affiliates 18,208 0 0 0 18,208 11,572 18,208
Income tax expense (7,066) 0 0 0 (7,066) (1,180) (7,066)
Income from investment in
affiliates, net of tax(1) 0 0 0 0 0 2,852 0
-------- ---------- -------- -------- -------- -------- ---------
Income from continuing operations 11,142 0 0 0 11,142 13,244 11,142
Income (loss) from discontinued
operations, net of tax(2) 0 0 0 0 0 9,359 0
-------- ---------- -------- -------- -------- -------- ---------
Net income $ 11,142 $ 0 $ 0 $ 0 $ 11,142 $ 22,603 $ 11,142
======== ========== ======== ======== ======== ======== =========
Weighted average common shares 41,827,290 41,827,290 40,637,194 41,827,290
Diluted weighted average
common shares 42,678,666 42,678,666 40,967,943 42,678,666
Earnings (loss) per common
share (3):
Diluted EPS from continuing
operations $ 0.26 $ 0.00 $ 0.00 $ 0.00 $ 0.26 $ 0.32 $ 0.26
Diluted EPS from discontinued
operations $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.23 $ 0.00
-------- ---------- -------- -------- -------- -------- ---------
Total diluted EPS $ 0.26 $ 0.00 $ 0.00 $ 0.00 $ 0.26 $ 0.55 $ 0.26
======== ========== ======== ======== ======== ======== =========
---------------------------------------------------- ---------------------
(1) YTD 2002 includes a $10.0 million gain on the sale of 4.4 million AMZ
shares.
(2) The first quarter of 2002 includes a $9.9 million net gain on the sale of
Innovative Resource Group, LLC, which is treated as discontinued
operations. During the second and third quarter of 2002, additional
expenses were recorded, adjusting the net gain to $9.6 million.
(3) The sum of the quarters may not equal the earnings per common share for the
year due to the change in the number of shares outstanding during the year.
Cobalt Corporation
Consolidated Balance Sheets
(In thousands)
--------------------------------------- -------------------------------------
March 31, 2003 2002(1) 2003
--------------------------------------- -------------------------------------
3/31 6/30 9/30 12/31 3/31 6/30 9/30 12/31
- ------------------------------------ --------------------------------------- -------------------------------------
Assets
Current Assets:
Cash and cash equivalents $ 49,200 $ 67,478 $ 63,179 $ 49,710 $ 65,669 $ $ $
Investments - available for sale(2) 204,843 306,270 347,121 373,870 386,459
Premium receivables 31,377 33,989 37,374 40,971 46,290
Due from clinics and providers 7,101 7,265 4,219 3,750 2,479
Reinsurance recoverables 27,762 27,706 30,847 30,046 36,220
Other receivables 42,268 41,623 47,376 43,431 46,152
Prepaid and other current assets 42,914 39,686 36,905 35,805 43,237
------- ------- -------- -------- -------- ------- ------- -------
Total current assets 405,465 524,017 567,021 577,583 626,506 0 0 0
Noncurrent assets:
Investments - held to maturity 10,979 12,591 12,688 12,780 12,974
Investment in AMZ (2) 63,677 0 0 0 0
Property and equipment, net 31,813 31,537 30,526 34,167 37,051
Goodwill and intangible assets, net 89,087 89,594 91,295 102,908 99,288
Prepaid pension 55,269 56,750 58,557 66,142 67,021
Deferred income taxes 32,275 33,088 37,868 33,528 18,658
Reinsurance recoverables 19,020 20,796 23,156 24,177 23,304
Other noncurrent assets 24,100 26,274 25,693 18,614 25,764
------- ------- -------- -------- -------- ------- ------- -------
Total assets $731,685 $794,647 $846,804 $869,899 $910,566 $ 0 $ 0 $ 0
======= ======= ======== ======== ======== ======= ======= =======
Liabilities and Shareholders' Equity
Current Liabilities:
Medical and other benefits payable $196,181 $194,562 $195,929 $198,101 $224,088 $ $ $
Advance premiums 87,755 85,975 100,569 92,277 113,097
Payables and accrued expenses 51,152 72,527 71,226 74,641 65,863
Short-term debt 12,315 8,516 3,425 12,451 3,575
Other current liabilities 38,836 34,854 42,742 35,500 36,456
------- ------- -------- -------- -------- ------- ------- -------
Total current liabilities 386,239 396,434 413,891 412,970 443,079 0 0 0
Noncurrent liabilities:
Medical and other benefits payable 48,121 50,094 53,734 56,777 53,743
Deferred income taxes 32,275 33,088 34,505 36,142 33,227
Postretirement benefits other than
pension 18,207 17,626 17,930 18,042 18,320
Long-term debt (3) 1,500 0 25,000 25,000 25,000
Other noncurrent liabilities 15,696 15,819 16,480 18,449 21,597
------- ------- -------- -------- -------- ------- ------- -------
Total liabilities 502,038 513,061 561,540 567,380 594,966 0 0 0
Shareholders' equity:
Common stock 249,965 255,095 259,443 261,482 262,437
Retained earnings (deficit) (18,054) 4,440 18,157 33,280 44,422
Accumulated other comprehensive
income (loss) (2) (2,264) 22,051 7,664 7,757 8,741
------- ------- -------- -------- -------- ------- ------- -------
Total Shareholders' equity 229,647 281,586 285,264 302,519 315,600 0 0 0
------- ------- -------- -------- -------- ------- ------- -------
Total liabilities and shareholder
equity $731,685 $794,647 $846,804 $869,899 $910,566 $ 0 $ 0 $ 0
======= ======= ======== ======== ======== ======= ======= =======
(1) Certain reclassifications have been made to the balances for 2002 to conform to the 2003 presentation.
(2) Investment in the remaining 1.9 million shares of AMZ common stock as of June 30, 2002 was reclassified
as Investments - available for sale. The AMZ Investment is reported at fair market value and any unrealized
gain (loss) is included in Accumulated other comprehensive income (loss).
(3)Amount outstanding on the revolving credit loan due beyond twelve months.
Cobalt Corporation
Ratio Analysis from Continuing Operations
---------------------------------- ----------------------------------- ------------------
March 31, 2003 2002 2003 YTD
---------------------------------- ----------------------------------- ------------------
- ----------------------------------------
Ratio Analysis 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr 03/31/02 03/31/03
- ---------------------------------------- ---------------------------------- ----------------------------------- ------------------
Insured Medical Products:
Medical care ratio 87.9% 87.2% 86.6% 84.1% 86.6% 0.0% 0.0% 0.0% 87.9% 86.6%
Selling, general and administrative
expense ratio 10.8% 11.1% 11.1% 11.9% 10.8% 0.0% 0.0% 0.0% 10.8% 10.8%
Combined care and selling, general
and administrative expense ratio 98.7% 98.3% 97.7% 96.0% 97.4% 0.0% 0.0% 0.0% 98.7% 97.4%
Specialty Managed Care Products
and Services:
Combined loss and expense ratio 96.7% 97.2% 96.1% 92.6% 93.1% 0.0% 0.0% 0.0% 96.7% 93.1%
Government Services:
Operating expense ratio 98.2% 98.3% 99.1% 98.9% 98.2% 0.0% 0.0% 0.0% 98.2% 98.2%
Self-funded:
Operating expense ratio 95.2% 91.4% 84.8% 96.1% 88.4% 0.0% 0.0% 0.0% 95.2% 88.4%
Number of days in reserve 62.3 60.8 60.5 60.9 60.4
Cobalt Corporation
Membership Analysis
March 31, 2003
-------------------------------------------- ---------------------------------
2002 2003
- ---------------------------------------------- -------------------------------------------- ---------------------------------
Members/Lives at Period End 3/31 6/30 9/30 12/31 3/31 6/30 9/30 12/31
- ---------------------------------------------- -------------------------------------------- ---------------------------------
Insured Medical Products (by product type):
- ------------------------------------------
HMO 158,396 156,710 159,150 151,627 151,621
PPO 156,880 155,893 161,492 166,078 167,424
Point of Service 73,954 65,266 61,925 61,126 54,453
Medicaid 4,314 4,387 4,355 4,351 4,377
Other/Individual 76,240 75,484 73,979 73,654 73,174
--------- ---------- ----------- ----------- --------- ------- ------- -------
Total Insured Members 469,784 457,740 460,901 456,836 451,049 0 0 0
========= ========== =========== =========== ========= ======= ======= =======
Self-funded Products: (1)
- -------------------------
Medical 134,730 132,905 135,238 343,525 357,884
Dental 35,648 35,416 35,000 172,045 207,797
--------- ---------- ----------- ----------- --------- ------- ------- -------
Total Self-funded Members 170,378 168,321 170,238 515,570 565,681 0 0 0
========= ========== =========== =========== ========= ======= ======= =======
Specialty Managed Care Products and Services:
- --------------------------------------------
Life/AD&D 148,662 139,819 137,547 132,524 114,346
Dental 307,583 305,342 303,825 300,329 291,991
Disability 119,647 112,825 115,610 114,151 111,268
--------- ---------- ----------- ----------- --------- ------- ------- -------
Total Specialty Members 575,892 557,986 556,982 547,004 517,605 0 0 0
========= ========== =========== =========== ========= ======= ======= =======
Policies in force:
- -----------------
Workers' Compensation - IL 159 153 151 152 160
Workers' Compensation - WI 595 617 679 696 740
(1) December 31, 2002 counts include 211,654 medical and 135,823 dental CMSI members acquired on December 31, 2002.