ANTM - Earnings call transcript Q3 2019

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Operator

Ladies and gentlemen, thank you for standing by and welcome Anthem Third Quarter Results Conference Call. At this time, all lines are in a listen-only mode. Later, there will be a question-and-answer session. Instructions will be given at that time [Operator Instructions].

As a reminder, this conference is being recorded.

to conference like company's to now management. would turn over the the I

Chris Rigg

welcome quarter of Norwood, Relations. Government Anthem's This morning. CFO; and President to Good And Felicia Gallina, John third and morning Gail Rigg, Division. our Business Specialty President and Division; CEO; this Haytaian, is Vice our XXXX Commercial of President us Investor President of With Pete are Boudreaux, our Chris call. earnings Business

our call initiatives greater by our financial giving priorities. Gail third will updated of on business quarter metrics detail, followed overview key John begin our over and XXXX comments by in the go key financial discuss results, an outlook. growth and will our then enterprise-wide

We be will then available for Q&A.

certain measures these reference GAAP Reconciliations During site, directly our comparable we non-GAAP to are most the non-GAAP available on antheminc.com. measures Web will of the measures. call,

cause our also We risks the which generally these control some call. that carefully results on factors uncertainties in statements cautioned risk beyond and review will can many are release listeners our risks actual subject We with be These Listeners predict and making certain of difficult to uncertainties, are this statements the forward-looking Anthem. from to the to are differ to press today's discussed quarterly current expectations. filings and and materially advise SEC. of

Gail. over I to will call turn now the

Gail Boudreaux

share morning. of and across Chris revenue share good businesses. growth we earnings strong Today adjusted $X.XX $X.XX, and our reported XXXX earnings per earnings you, and Thank reflecting quarter of third GAAP per

quarter, and a Operating substantial margin improvement, year-over-year. the was sequentially X.X% for both

revenue nearly increasing strong quarter quarter XX% for exceed to and Medical enterprise-wide businesses targets. risk of across prior our quarters, consumers over year total all X.X will businesses results million served increased and in of accounting our XX% growth. long-term robust our $XX.X by with membership the billion. operating a revenue earnings we XXXX, third growth several been have Anthem's our last the Over financial

specialty also the of businesses Connection solid XXX,XXX XXX,XXX consumers nearly months. in first Specialty months been driving gaps a year, our has across offering, innovations key Anthem Anthem Health enabler sale, to this new more specialty our to by care nine information nearly effective medical packaged and the product delivered and reduce quarter first and close strategy integrating in adding growth, costs. to of increase Full

broadly our on identified As nearly a account we clinical XX% initiated Anthem effective leveraging Health dentist opioid network we to and By connection, that alternative. prescriptions. mobilizing Anthem part for non-narcotic of local Whole teams, of educate this insight dentist provider effort multiyear and

our day the As opioids by were a by prescriptions result, prescribed more than supply dental exceeding opioid of more than X XX%. and by providers cut decreased number XX%

to is example manage to the focus improved and support today. of Our society healthcare reduced outcomes costs, This designed facing whole our on and giving power data, performance. care them impacting tools effectively the capabilities most providers issues health one clinical of focus pressing by person illustrates deliver while to

of of at we're to added to of our pharmacy remaining remain go in now aspects all driving We're competitive IngenioRx X, value XXXX. on to track of end-to-end expect a IngenioRx aspects members much is well, strategic extremely The provide that to business and be our migration the key example across the to on January and a we our of IngenioRx transition, ability the on business. all in the services by pricing. execute to platform have position our continues confident more execution

or and model, side-by-side to deploy concerns. migration, a critical teams XX/X. our to functional wave successful been cross and command together bringing center each effectively Through able real performance quickly [SWAT] to With time we've of we've resolve this in areas operational any issues hundreds representing of monitor model work implemented associates,

served. but improved than alignment continued profile nearly serve anticipated, revenue the to the a performance, we our the our We results as value populations members rate this risk strong programs. state delivering added Medicaid relative of at individuals even to better our quarter, of We partners previously had greater XXX,XXX growth slower and confident remain improve that for in while see we'll through continue XXXX. we Medicaid and

and previously strengthen Improving Our person addition priority our needed around potential portfolio enterprise. there efforts close key help unlock the announced our track behavioral This still and on work care. Beacon but in market in Anthem full in quarter. focus. strategic areas Health made more position order around to our a acquisition performance remains whole will the is of the to remains to many late in Anthem fourth We've health execution progress of further

the disappointed improve did the with Unfortunately, by were very year announced rating which star We're largely payment XXXX, at scores Pharmacy results. recently had for Clinical ratings impacted we these rate not our targeted.

to our sight with organization results dramatically However, line forward. accountability with transition refocused to of have going and clear IngenioRx, the deliver improved successful we

We percentage are members improving in plans. star of committed absolutely our to the four

meaningful on and Across intensely provider creating the remain we services and and for partners. products Anthem, care our affordable innovative, focused customers, consumers

invest capabilities and AI experience in digital in healthcare of to order consumers today. our the demand kind continue to We create

empowering engagement with is and more record by providers. supporting We're This communication care Our excited own next Sydney, the be traction. in their electronic gaining platform. unique decisions consumer to engaged is generation about launch our recently consumers launched personal healthcare of alignment greater health tool

and healthcare experience and over AI, providing Sydney on simpler, they a control with unique total wellness needs, benefit how engagement is tailored personalized personalized Sydney care, ultimately more is and consumers improved promise By a our resulting and giving us goals and their regarding more. data their individual's to each lower delivering a experience, engage cost. where leveraging and of coverage, health

year to membership based Commercial, of Turning anticipate solid both and In risk another XXXX. growth. we fee

recently of announced network, provider affordable to launched with Anthem's the high include chamber portfolio employers broad giving meet a along addition our newly innovative HealthSync are. association more deployed IngenioRx, to they choices. where product based In performing we've These of customers benefit the products

success such exceeding anticipate account determined cost on Health our expect and is programs, end-to-end have X You, of Clinical National satisfaction. Total improved of growth. are strong to We this Since our in better and with approximately net we've consumers Total model, expectations million member another ability in our launching at January XXXX. front. buyers by one customers lowest year members as clinical represent quality integrated our digital-first most national the year, added this account deliver to million sophisticated

consecutive have the to value benefits. remain to the design continue supplemental our and seniors Advantage, to highly based we Medicare and grown In attractive enrollments that we're outpace year, we through on nearly deliver confident will market in for fourth XXXX, pleased XX% by plan the

We also in anticipate our group retiree business. continued growth

supplemental These addition our are and areas Walmart. already over services which by such For an benefit choices, partnership name include successful XXXX, just highly transportation, are counter caregiver as a to seniors education, we're valued to nutritional few. with support enhancing the and in our benefit

unique Our area on this proving resonating is that truly care person Anthem's efforts this whole focus in population. are with important

our know, ahead. the for business year you in membership revenue and growth robust As positioned well Medicaid is

with of strong members Centene the state live will is organic add Our North and working Missouri our serve in to WellCare and our XXX,XXX partners transaction. forward quarter, first to go Supplementing members. growth, approximately expected to upon partnership we completion in look Carolina the in Nebraska

to environment. a I'm With This address remains to to Anthem focus the second Dow responsibly sustainability organization. the share pleased year key to commitment Index was commitment also for that, during acknowledges Jones for our healthcare Our dynamic in and recognition a quarter. evolving our facing Sustainability today's row that challenges ever the named this

our foundation and At focus for talent continues Anthem, on to serve as culture success. our

are our we execution. not improve enhancing can to focus impact and and will system know for our support satisfied talent those more serve. the growth to and we We Anthem's across organization across improve healthcare We're the do performance on

over John? call our I review XXXX. our will of more performance prepared quarter our for with a detailed third initial now of to assessment concluding John pass before financial remarks the

John Gallina

and morning. you, good Thank Gail

reported was Gail in by quarter. year-over-year over up operating $X.X quarter XX% solid Adjusted year. we third quarter, year over billion per $X.XX. XX% the with the more earnings the than net financial consolidated As our total, results to gain income share increasing prior In stated, prior adjusted XX% grew

we quarter, third while the shared in our government the with half for business The outlook XX% segment commercial the quarter by quarter performance of improved by second in year. to gain the XXXX. second more the the business compared During grew grew operating XX% of

double-digit As that see, can growth in our we deliver only substantial generated so. doing on you commitments, we not

revenue now With operating in billion approximately the versus the prior third the an HIF-adjusted was to of quarter Operating range of a on we quarter now $XX XXXX our revenue with XX% expect $XX.X increase $XXX billion updated premium outlook, revenue billion, year year XX% and of basis. $XX full in of billion.

a track on of deliver to organic strongest in operating firmly our revenue over year decade. are We growth

operating reflects in businesses, during revenue increase quarter risk-based overall growth in as as cost cover increases premium The trends. to well our strong the enrollment

addition, growth the the in clinical our revenue of integrated and results In specialty our from related IngenioRx benefitted launch to offerings. and

few isolated the in ratio full was large insurer was commercial unfavorable your reserves is quarter. quarter. driven of segment. favorable that prior totaled representing fee. quarter current expense, we'll the later over development year. development X.X% The In the including be waver only one included $XX medical unfavorable somewhat year third was the loss of impact increase prior in quarter, to immaterial, year this representing groups by increase an of the it year loss medical The The benefit predominantly The XXX developed health the but This a did points unfavorably, XX.X%, ratio basis year and terminating the the impact the magnitude million of and development. our

and XX that contained, is Medicaid sequential group a HIF-adjusted our MLR reaffirmed important disenrollment. ongoing quarter to in year-over-year points medical despite were the or X% basis third basis medical note costs is Overall, plus at on minus improved local trend well range. our costs It

But in year stabilization. We the range challenge continue the we margin Medicaid MLR full XX.X%. trending of further our is XXXX, to re-verification in XX.X% of magnitude given faced expect the to

of the points to compared The was ratio XX.X%, a coupled SG&A reflects quarter. year our historically of one with decrease fee. health growth, strong Our prior a insurer top decrease the basis line waiver XXX

we the to in to of be For XX.X%. expect now ratio the SG&A year, our range full XX%

Turning to the balance sheet.

consistent is third which at with Our the was our the of debt-to-cap end XX% range. target quarter, ratio

pleased successfully time a During the and a coupon I all billion offering especially XX record life were at to at a am issued XX of weighted lows. years. weighted debt XX completed average notes of X.XX% average and we our quarter, year that $X.X third

committed capital sustainable on focused Efficient long top our conference, this cost Earlier we at to total deployment Day term an priority. Investor return. strategy deployment capital remain year and discipline opportunistic shareholder

have far this we two strategic announced acquisitions. year, for So plans

while the expertise and building deepens put, Medicaid, our in One we're of footprint other our and which populations. Simply expands investing our business managing specialized clinical strategically.

We the also that careful in to deployment decision After and conditions. take of capital the the made share we both committed would of environment, market market to be the plan repurchases and advantage our a accelerate of quarter, pace flexible broader balanced. consideration

million at of market result, and share As of Total the to count shares shares. between $XXX.XX, average subject expected we billion XXXX the we weighted XXX buyback year share third the range a $X.X to billion the is expect be to price for $X.X to repurchased a X.X XXX quarter conditions. million now million during and in be

billion representing flow an the XXXX. primarily our driven and membership increase income, net the times signifying to quarter was businesses. increase earnings Medicaid quality for was Medicare quarter $X.X high cash billion $X.X or in and the by third in of growth of The quarter X.X compared Operating

solid operating income. first a times year, For the the flow or of net cash X.X $X.X months was nine billion

to than our of flow of to and our full result strong $X.X year better timing the collections, and we expect greater efforts a for operating billion. As proactive the manage now year-to-date growth cash cash be

$X expected has at a challenges contribute substantial which earnings including Anthem. least year year the faced made is Despite we productive we per full at share. to been to XXXX launch now progress, early adjusted have IngenioRx, on, the of

and guidance earnings expect to As than a $XX.XX. our per XXXX year adjusted be greater now we're raising result, our full share

are to committed cost our net which fully line and of the driving in are across top members, reflected businesses. while achieving bottom We greater digit of care for lowest double diversification our momentum. our XXXX XXXX on completing growth focus quarter XXXX is targets. to sustainable left value driving growth our and still trajectory, in and us one long-term positive is with enter enabling on our Both There

that, call I now over with back will to Gail. And pass the

Gail Boudreaux

Thanks, John.

all heard we growing you've this As throughout morning, are fronts. on

quality our driving Our care at higher net revenue progress and we made of the growth lowest is have cost. substantial in strong advancing mission

to compelling focus outweigh our shift challenges. term growth, to and tailwinds XXXX, short begin the impact the that we headwinds the long-term are for As faced from far with manageable lay that foundation we

into execution sustainable heading by Our our on commitment our for an growth fueled and value XXXX emphasis to precision with is stakeholders.

provide fee from contracts growth specialty tailwinds; growth, from the As health insurance deployment. our IngenioRx, our view is and increased outlook and and customary, from our the overall following by in fee. Medicare return accretion and in will fourth margin and in we individual quarter Medicaid in be earnings for businesses more call, group initial based on normalization penetration contemplates will our XXXX of dilution the full membership improvement but of margin detailed in XXXX year programs clinical the These business, partially the capital government Medicaid, impact of XXXX XXXX offset

earnings XXXX low relative to target guidance. growth our this our XXXX view XX% per adjusted original of At rate stage, end share to our core would XX% point the to near growth early on

to at strong forward roughly to continue operating We're in total gain and $XXX earnings on we the will on revenue and year million, IngenioRx least momentum XXXX. year per ahead. building growth, another $X.XX We produce share expect of our track historically in look of for or

approach them in vision mission, are to my here care. who anniversary second our values day at service I than who their every associates of mean XX,XXX proud Anthem, I trust As incredibly those with us living and more

that, operator, to open And questions. will with up it we

Operator

Instructions]. we now question-and-answer Ladies the and will session gentlemen, begin [Operator

line Please ahead. the first Citi. Your go from Ralph question from Giacobbe comes of

Ralph Giacobbe

MLR with the start details year commercial. development around quantified more you the could I within impact the little How sort Just the quarter. of fee as in on a higher know hoping and the well outlook reserve that? that Thanks. providing unfavorable you of And for any much reflects details

Gail Boudreaux

and about maybe feel Ralph. our to we to John very ask then up MLR business, which to I'm about the Haytaian overall talk tie going Thanks, Pete commercial strongly question.

Pete Haytaian

fully we improve to one, our to our it done we've Number Commercial I'd insured operating business, couple year, do As earlier and membership this with that things. our want grow to relates a both. set year-over-year say out to And performance. confidence we

has see the margins release. strong through you improvement. year-over-year shown Our operating and And that can performance

growth. In addition that, to we've membership seen solid

feel in fact, fully insured good we've XX large net about really In months group business, so the nine of in that. last seen our growth, we sequential

and few is a development being We unfavorable in-year had immaterial. The really a large groups blue.

the fully insured didn't We have a with, have but minds some of quite frankly. large we meeting groups

very those outlook fully as so on. going to groups And into are moving be we insured and QX And it with our relates feel our business. XXXX, comfortable to

John Gallina

for MLR them your In you entire proof re-verification just peers, guidance. as give the and of us see states points the you'd remaining efforts X% up increasing clear, average Ralph, you'll John, the information. states and Medicaid the In months you of in as driving some from impact. we've increase have like And X% high disenrollment high opportunity minimal X% with appreciate statutory I And states, if the if To provide our the seen year-over-year that to be those is And little of are this MLRs same year average with X% the the thank disenrollment. bit those your process, really for question. Medicaid as filings up on specifically year-over-year. a associated verification with going on modeling populations others, clarity. states, I'll being as couple But a is more first the the six some in and you for review

times in medical see our medical if to impacted it quarter take in call, XX will up you told the time. re-verification over ratio and our block you have of you'll this has just half a ratio, And states apply points. loss that basis Medicaid little our we point loss the consolidated half consolidated as X% prior that at And go the

ranges for time our midpoint with year ratio, just our the the the that margin you'll the associated is would XX ratio the target points. basis revenue lack revenue then point of drive made another of And it with your re-verification, medical low those between the the margin at quick of for Medicaid difference associated we're purposes on lack re-verification. end of apply modeling operating the on that with the proof we've of again by if loss consolidated see dollars and the operating low end And to you margin, loss our the about medical commentary

issue, associated drive So both was to increase and entire guidance these is commercial points that that benefit with the change. expense the really things of didn't are just X.X% proof only of that annual show which Medicaid

So thank for question. you the

Operator

Research. of next Justin Wolfe line from go Lake Your comes the from ahead. Please question

Justin Lake

question here, a on Obviously, actual. lot of numbers one I'll Just my ask XXXX. then and focus

that want with of $XX that's make minus here. right math sure and to around the And coming into the start and and entire $XX.XX add we And XX% Ingenio XX% somewhere $XX.XX, to Ingenio Just $XX.XX add $XX.XX. the I We us back get EPS, the you low between in gets year. core grow guide that then of by of got XXs. then the

I So the is math? to But going about that than the is be that. range wider know right

Gail Boudreaux

In exact -- guidance. not terms we're of giving

giving But say this tailwinds. about think past know, at As we Day you so articulated I'd you you're spring, your ballpark to our in clearly Investor we're what math, headwinds as the yes. and

Justin Lake

follow a And then on my question Medicaid. up was just

Specifically, I know said things got better. you

a for starting point. so a of should Medicaid can margin Thanks. Medicaid And year. have you of half half expecting idea running us of in are let's in next have end in what X%. into think at number so were about So you give the XXXX first how you in kind year the an back your do of we this the range, say to back we that a half, then Medicaid, low What's Can of the year? just

John Gallina

low the of range actually target of definitely terms close state to get half months expect do XXXX, rates we The us the going our our with we relatively be can for and timing to appropriate the with to perfectly year. to in out XXXX. the sharing But half margin associated take second sometimes negotiations it associated and And to expect where in work the range Medicaid target Unfortunately, then to end is be with for ultimately in first XX than is information XX margin be Medicaid. terms entire always of the partners. of the doesn't better

clearly in XXXX. a associated provide And expectation point lot But improvement premature percentage, on at with have really we metrics that provide guidance more until or we'll where it's exact the of point call. exactly Medicaid so to range this to fourth the we get an we the in are quarter

Gail Boudreaux

comments. me And add to let just John's

overall, Medicaid, good we think, I in having. terms the about quite conversations we're feel of

shared our we lot to and date we timing terms been have, you with the to that he able we're we've And of the this with working again, states. and feel XXXX. cycles. down very their feel achieve what for what As about comes good in and quite re-verification proactively we to data also a of But

positive very overall the about we're So going Medicaid environment business forward.

question, please? Next

Operator

Your the Please Suisse. comes next from go Rice of Credit A.J. ahead. question from line

A.J. Rice

something guys little the years would you when had outperform that's not. to continue exchange that any not margin have to talk Ingenio, on gone least in like -- I at about Just that a that in potential are margin. that so a it. sounds got declining that gain. or realized in that upside? of moderate? there if you the well to you that Is then about maybe continue ups then three you the ups, you It that It number. assumed that you like the follow-on things more the know realized on do terms public originally suggest to of like XXXX, just of what again And think question, have in that as to are true assuming you that just chance better. what's going table yet and forecast what's true sounds the what’s only And haven't you assumption or Is in Is finally, far of upside there? normalizes know trying an margin upside year had a Medicaid it same and you're row to for there terms conservatives be what's are potentially business for you were assuming sounds would in next

Gail Boudreaux

the So you and think A. businesses. question, of thanks multi-faceted multitude I hit for our J., most

of have So see let Thank John start we'll me if him it. can you. we part with first it and and address through get the

John Gallina

So money that business. of we XXXX, but having individual almost very reference, yes, dramatically successful frame we a the just And lost we XXXX line in We essentially expect essentially margins then had members of was in million good in XXXX, breakeven walked XXXX. XX% some performed really exchanges quite by our in normalization do a at of never XXXX a from it as basis and and and away and And a breakeven. reduced are extremely footprint on XXXX.

quite We the but have, not quickly we assumed. had and as moderate they in to margins XXXX as expect

XXXX, And into it's rebate that way get average. rolling a then MLR rules on the is three year based you work the while

then and ranges fairly XXXX, we've our good them years had XXXX. And so have XXXX much to for the got we information margin larger. in And hit prior and we three get target assuming with when 'XX you the rebates would were that 'XX,

that’s to going the upside. ability incremental have actually And to so limit

Gail Boudreaux

migration of members. our transition In the we really of first gone terms way of IngenioRx, has were the and the all, pleased with

obviously, didn't As in we up and greater you also that it. We really exactly certainty execution, when that's certainty our state would and occur both when on. guidance strong now saw, commercial and first know operational we we have of result our Medicaid now a approvals but gave

and opening so in the that. migrations most integrated our I of that year. businesses that advanced about the the we pleased can that space, feel very execution over will good probably the really of now our of my strong And in really all as migration, we capabilities happened last we has going shared digital complex the on that use And platform. remarks XXXX we're And again into one things be

for So please. very next question, thank much And question. you the

Operator

question next Stanley. of Your from Goldwasser Morgan comes line from go ahead. Please Ricky the

Ricky Goldwasser

to A that first have commercial to reserve in that’s to saw the the couple the just what responding now going fourth line so you on of up are competitive all, that of immaterial any But bit second anything and how better competitors before have and that that you? out now fact more the you opportunities not an in to are give that one. plans landscape and economics can surprised here, I see you offerings? read little impact affordable seeing early do And development business, the if and about and of you question questions follow compared a the just in how you're can there, unfavorable you ability provide XXXX So to quarter. understand Medicare marketplace bottom us terms that the for the talk is

Gail Boudreaux

getting commercial just limit we're would one to but I question. first to question. me comment Pete, multiple, to know to try ask, competitive. the going that on we'd one wanted marketplace are We let ask to we And

Pete Haytaian

before, relates out I nine XX we And rational product we've marketplace. the the marketplace. in growth, last performance. of net think we as I creating we're it mentioned the positive and about We've our growth. there competitive remains our remains that see it real excited segment an uptick seeing And continue seen and in business, our positioning of terms insured talked as We're are months, Yes, it our to options portfolio, before about a to marketplace, fully positioning. a

is that seeing One addition are thing with Ingenio that the we marketplace we have. today the other and of in capabilities that and

And little of more in bit that us mean bit strong rates really our other for I retention have a we for is seeing expected. are really, We by markets inertia than competitors. are and what

membership. our with sales are stickiness bit we that are more seeing bit little we close movement feel improving, good about a a little all do and ratios with to less and really the But that. marketplace, the in sales effectiveness, has Our

into slower of than our bit feel And so little uptake. really marketplace But insured we the XXXX. good other rates positioning that, going fully in about

Gail Boudreaux

And disciplined I we're growth. would Pete's market. And solid the very a happy really retention business, both It's what had invested I been mean, we've we've offerings. comments. add were in always think that rates just quite solid to We guess with heavily competitive. in it's I product seeing. We

with options, particularly we of well So positioned affordable for small in area. business feel XXXX our variety a

I are shared, we're really traction that most in brought we sophisticated who our seeing clients valuing the and the And great as largest our really to innovation are market.

very, maybe Felicia address So said, business as you overall, commercial very about And Norwood Medicare now. as it's -- strongly feel we very the the right can Pete question a had well.

Felicia Norwood

on thank our AEP. we in Gail, portfolio Medicare feel of question. you. terms for the And Ricky, We thank the side about our you Sure very good positioning as head into

brokers. know, been the really to carriers As one make our distribution first from you investment plans know, you as we're we benefits. channel of and strong incredibly has about our XXXX, feedback and supplemental what In day nine the into this, positive a but were

respect to Walmart, with the have characteristics over out And cost which that that benefits most differentiating in true This affordability some believe particularly with are receptivity the we these is our respect counter with seen great we've to of We to our has market seniors. benefits seniors. there. brought to great the advantage the and

year head We've enhanced offering well. we as as positioning is benefits out the AEP, So competitive this supplemental into our strong.

we about very respect selling our season are with XXXX bullish the So in Medicare. to expectations

Operator

ahead. comes go of Please Your the line Fischbeck America. of Kevin Bank next question from from

Kevin Fischbck

what of market, and on the your pharmacy How get of, fully a the the question that immediately XXXX -- Medicaid and Commercial sense the new should did broader that of that all of -- trying you through XXXX. but or membership? did for slowly benefit multiyear flow into of kind XXXX? kind guys build benefit was and so the across costs, because get Commercial did you you growth that expect following the thought benefit XXXX in view we and you maybe is just base your that a that products, reflective Maybe savings timing? Just a or of with pricing into Ingenio the pricing to treat up or is or as that transition from on of pace or you to that updated the through whatever customers of Medicare And any will that much got you reason about differently, for you

John Gallina

of than This benefit have billion, actually we value on And paid XXXX that $X have know that prior and drop from to take $X.XX Thanks, would that Gail's benefit the that And comments, with design $X I John. affordable the EPS. more bottom baked pricing, greater is Ingenio flow carrier. to question if the straight $XXX is Sure. we're understand we're options $X.X And which prepared your is customer. line, the other is either is which or what being to or we properly, million part is billion of slightly the obtaining then Kevin. was billion XX% into in that going the that our approximately versus of

we represent any and the of that, have the costs XXXX through employing. ESI with that did timing assumptions let we're still in contract the that pricing of of terms In of that for all the year, of we're we book the the pricing really go did really pharmacy XXXX. the not our majority under

about overanalyze rate. in now in is or it's So versus and The the provide into 'XX XXXX, read don't that providing going is and benefit to about run XXXX. $X.XX in over $X.XX XXXX Ingenio $X

Operator

go comes Goldman Tanal of question the from line ahead. from next Please Sachs. Your Steve

Steve Tanal

mouth, that's the you like unfavorable mentioned. isolated sort wouldn't in I words of have to you I sort development message the want hearing. large it But business, like your put an issue. seems that we're commercial development like situation favorable on had of a but the think feel don't I excluding group sounds

expect so favorable some we'd And typically, guess I development.

months maybe for land But well. color could So of accelerated trend that any this of the reiterated of is just balance looking of business. view and and through where So provide the color realizing nine of could has your as year, the that at first helpful might point the be the in any your you outlook. And local sort you you range? sort group

John Gallina

quarter-over-quarter, -- But did we we The don't development, favorable the MLR talk that. the we spite commercial since quarter-over-quarter and slightly impact the and tenth a expanded year referenced was about impacted that negative have In of of XX% Commercial by Commercial operating this it development. usually did development. it was that where prior grew current their certainly in-year margins development in terms it three percent of gains was had

expect So the business development. to commercial it a really prior that initially. is conservative have did employ. consistent may But have stronger we favorable the we than year We that to points appear what it fact will reserving methodology certainly is even

Gail Boudreaux

we again, feel we I to out. margins we I driver. that but really overall, commercial growth is our we look business. very fairly healthy comments think very add And And reserve very the guess, solid, have felt And is about you good would at the our think commercial and would minor Pete that of point that amount exactly as as it development I I that's John's addressed margins.

some you give clarity on to we that. So wanted

Next question, please.

Operator

line of Matt ahead. Your next the Markets. go from Capital Please BMO Borsch question from comes

Matt Borsch

I how changes terms of for that account well? whether you're referenced into just was very things us and for maybe how in looking a you -- on look as out going national it strong January in sense think of sense X Is a you start hoping guidance playing retention X that that year, January I'm as could market you give and the in that process, the you did rates the earlier. not

Gail Boudreaux

address I'll question. let Pete that

Pete Haytaian

the inning the ninth the in innings. in obviously season. late We're sort selling of We're of

it a year feel have playing feel to a as we're think and XXXX, and our about results. to we but we it's We going And minor our and relates about and takes well really complete. positioning out good from how pointed retention going puts perspective a marketplace. year. some had growth into a perspective. very and our And year strong as very out this proposition remarks, we Most value her As XXXX, in almost prepared in the good there's that's importantly, Gail good

Things out recently engagement and have value platform and differentiated we've advocacy total and that X.X story members feel launched which program. like in our Total the about clinical good like Health management really really, work our Total new just advocacy AI care programs we've members capabilities, capabilities and done million Guide and platform now over consumer We with You, that with with programs in already perspective that through continuing historically million ecosystem. the resonating Sydney to in rolled our we've the marketplace from Anthem really launched X that and performing and an Health Engage and scores digital well And over MPS improve.

market. value our is in proposition So the out playing

business. respect in strong growth our have will national QX a We to with

Operator

next ahead. the from Please Fargo. comes Peter Your of go from line Costa Wells question

Peter Costa

love product more. unfavorable provider Was it development? the I of geography? commercial couple a down caused Difficulty] higher caused and accounts, that. it said you Was Was What some cost? development. what on higher I'd a was the [Technical exactly it its I exactly that know want to drill but understand understand -- specifically development unfavorable to type cost?

John Gallina

were. have priced I'd this going That's to especially of competitive trend. into bullish the issue actuarially feel that really we're on call, about. those be. feel what type determine the would causes our what given for get very talking aspects. that go increases say justified the for information terminated not care We the understand just you're been into we this about that reasons accounts the of of. can't fact But rate reasons level taken that really we once competitive comfortable very forward And granularity we that has We we

Operator

from Please JP comes from Morgan. ahead. Taylor Gary of question line next the Your go

Gary Taylor

XX% operating mix not retro the release. when want it's some up what increases for price go to government presumed And morning, of year-over-year. through we really just number and we the I initially really this growth, saw the back you driven the in acuity had But which that. strong income cited is that come to

costs you’d rates performance had not said was like as in You call anticipated. on as you said still of the things or and states you're good, quite cost primarily from getting what terms still

of it's there in from true to quarter, and the ups were happening wanted performance? So of if the some sources acuity benefits this I understand just not that cost material not what really was

Gail Boudreaux

Well, question. thank the for you much very

there's certainly that a I embedded in things question. think of couple

The as to is you think back quarter. as that call and from you about our comparative that XXXX to first well, XXXX go was XXXX in the

frankly, think, So quite a XXXX. below baseline I you're comparing,

quarter there So anything isn't XXXX in unusual for government this in our business.

of match population. lot progress getting on We the have that made the a rates

So feel that. really we good about

But a as business with geographies complex this is you know, and a mix. population

or lot we to that so quarter, a improvement didn't but through, seeing overall and we it in and have but we this to And improvement anything see and sort conversations point in a progress giant payment there's the that seeing retro the of those in we having feel of making business. states. in rates And did flow we of still our are we are are runway we're management

to lot So comparison. with and is question do but also where we're we can't more we But you. I guess the productive answer And the predict we like heading timing. states. believe have summary are the the confident. quite runway our again, conversations We feel we Thank a absolutely

Next question, please.

Operator

next comes from line ahead. Steven Barclays go of the Valiquette from Please question Your Capital.

Steven Valiquette

joining on for And been comment Thanks. Medicaid notion you around rules, still above material create of curious topic could either rule federal the in Anthem this into over and enrollees some extra of public plans charge Medicaid previously. I'm and the beyond could XXXX? late the into the volatility guess, light be do just on and membership, in courts can some talked of just enrollment. the Medicaid think 'XX shifting that you commercial if just that's So I about

Gail Boudreaux

I'll ask to Felicia comment.

Felicia Norwood

a charged In seen rule, business impact year-to-date. on terms public the our we haven't material of

is rule still the pending. However,

that through continue to to to we partners. be this our monitor going with the closely going this will as We of individuals are unknowns, with able And because state partners are work cautiously optimistic we're certainly our process.

things things been some And to our with respect understand have to partners maybe is impacted able akin that of individuals respect or with opportunity with eligibility. to impacted, individuals This the who of their been the an maintain is try one to we've do re-verification. in see to work and on early you to some state have to

So seen in business. thus as I far it's early. But impact still material haven't our a said, we

this throughout monitor this to closely our continue and work will partners we process. with So state

Operator

ahead. Your comes Please next Bernstein. from of go question Wilkes Lance the from line

Lance Wilkes

the there? sense political other or and of of And you And in specialty? the a greater about and concepts with public et have given Could joint what changed blues any like cross little Medicare partnership urgency dialog perspective Advantage, talk as other you're option, far the this bit sort Medicaid any cetera? do of in sales the that progress are strategy as ventures, out seeing blues

Gail Boudreaux

that that Medicaid. are opportunities. we our pleased closely we know, partnerships blue partners very across working of you in we're we As quite variety a with shared And have with

We partnership partnership fellow We're also Shield additional adding eight adding Cross our partnerships. Medicare Louisiana. with have Blue in System. are alliances the Maine And today. adding Blue We're Five with partners. Maine in a a Health we're

it's was just more your blues. the So I question blues. know broader than the specific to

IngenioRx you be saw, Cross will that As announced of an Idaho customers. we Blue

example. So there's another great

I we but more broadly, a business broad capabilities, diversified our array through both think through group. have of So also Medicaid

the Blue across spectrum. Shield work Medicaid. businesses Cross CareMore Carolina North we with for where our are Carolina of a doing and business AIMS Our partnership great Blue North is a example

environment the Our then clinics that and in CareMore business building be PBM. will IngenioRx as be well will

package Blue. the that to the me glimpse a to great So of things ability across offers really

as Blue affordability many think Medicare serve I a think across saw we're and for Cross the brand cost overall Cross Shield advertising one three and this Shield of that on and intensely Blue the Blue hopefully of And year. we the Americans in past plans. terms In Blue you focused focus access system, that I

to the have is working we on the have by an I So you're impact can we together, the And rule lot American that we what do a in system. healthcare system. think seeing more recognize

we the for but the bullish and So America. opportunities that thanks that can excited -- have across quite very about frankly Blue much impact we're the as question, very system, a

Next question, please.

Operator

Deutsche Hill Your from go ahead. next Bank. of the question Please comes from George line

George Hill

just, seeing risk Just of that it XXXX, XX kind so And next thinking think about kind to I'd of margin dependent XX in the expected of right? acuity it's one that talked you roll with improvements would earlier, about we John, to I a through? coming adjustments Medicaid the I year coincide the in And the starting into QX on issue tending about those upon how little through bit think piggyback XXXX. for asked that of am that and is say much the timing normally of months, to if Gary

John Gallina

In re-verification, well But piece and clear, the justified year, we related have negotiations every rates states. rate actuarially rate certainly of to renewals just much terms a it's of and exactly with to is with be our through like how it. renewals go

that is an of And margins starting Clearly, that's overall around so not is target have we about conversation the point part our states our portfolio the is. requires justified from but the the conversation. really of basis. acuity rates getting right actuarially The based the of entirety obviously, the hitting conversation re-verification, what that on getting rates regardless of on population of

So but regard, not rates issue right re-verification. it's in one is entire the just getting the

Operator

Your comes from next Raskin of line the go ahead. Nephron question Please Josh from Research.

Josh Raskin

improvement, kind your show safety And prepared remarks the through that advantage that around the Medicare biggest question experience, drug like were et we ones that like the decline. it metrics, focus categories of looked as on A know you look there's I in mentioned drug cetera. a the starts,

a and and that into can sort multiyear you there a Ingenio Is kind guys to huge ramps there next up think delay control there's know starts? the in around I think are 'XX of you an so or And going opportunity of you term to be 'XX. improve metrics Thanks. dug this So for as is MA things shorter in, certain fix? as you year,

Gail Boudreaux

some you as identified can As that you've we've clearly on -- the focused areas well. of

disappointed and of of on impact. In on dug we Last make moving now impact I an we that advantage as pharmacy deeply impact. in an moving already in Medicare we business have can intention data an was will one-one. know and our entire did results. impact that terms our where focus. of of largest contracts, remove, have some year, this year very are our part we to one figure having to plans we've and four-star the ability We're the said, But just with in we engaged very the our your of an question, be in those we And clinical members timeliness issue out

there. our better you we and impact, metrics can on we many our only we an have some we earlier. clinical So in in have yes, that example, metrics, feel HEDIS, did I with of still make improvements of the but that markets businesses across on for the of also where data the other shared execution we as opportunities the focus then there we believe And believe do opportunity certainly in part with there is that data integration our of consumer of some end-to-end on not

we can yes, believe an absolutely So we have impact.

do that On will us for pharmacy, that. expand under control, really a opportunity now own our owning be we believe multiyear pharmacy to XXX% dramatically

which So disappointment pharmacy you hit the in those as year, the core. this But was clinical at declined. biggest we look results, our results

the question. thank for very much So you

Next question, please?

Operator

ahead. Please comes Your the from of line go from Stephens. Fidel Scott question next

Scott Fidel

that's on Thanks. group business I And Question can margins talked about group how relative But provided that trending you for Thanks. in on plan. progressing continued sort expected know size XXXX long-term essentially. on or to that you just are class at to Medicare just just to XXXX, of you've the of is us the growth relative help that, of relative update MA us you And Advantage. then if Day? can sort maybe if Investor trajectory

Gail Boudreaux

market. Pete, on some Medicare I'll perspective share group have, the

Pete Haytaian

question. the Appreciate Scott. Thanks,

growth nice into in expect business, we know, you and XXXX. the retiree do to As we saw continue in group some XXXX growth really

before inherent have of said wrapped seeing clients existing commercial that through, and this respect our we're product. Medicare we pipeline to be our with opportunity greatest come continues As to

seeing we're so really there. And sales strong

store to do But some continues relates to the creating RFPs, as be market new well. and it also win business opportunities. As And there really sales we're we new at looking competitive.

as this and Blue So and another for partnerships about the exploring asked partnerships, was question Blue before actually we those. we're opportunity see wonderful

pharmacy competitive a it group XXXX and help beyond to will in and having certainly say I'd retirees. as relates finally bids then upcoming benefit And

in space. that good see feel continue that to growth we overall, So we'll

John Gallina

we dilution. XX takes is And it of first to say months business XX that dilutive when

be business block of appropriate get to level. continues it so And a an the to headwind we until

Operator

of Windley Dave Your ahead. the next comes go line Please Jefferies. question from from

Dave Windley

going quality. follow to a thinking to Josh earlier and I'm investments asked MA about starts question, that. net on improving this and ask my I'm

you As if you, much $X.X the How between as about would essentially in and think that then the design kind you allocating have of quality John tell gave that billion? would consume us. price be earlier the think business. about reinvest to I stars point the and $X.X so would you references billion think investments like how that you'd How to benefit

Gail Boudreaux

billion mean, about a performance driving which the not excellence in pharmacy, down of this, Well, we of the And way. to cost clinical But you earnings know. fundamentally IngenioRx guess specialty these areas speed think bringing we and up that as broken lower it of sold, heavily new is we just that think a goods that just sold. really investing X cost so part because absolutely is I our around as and built get I areas we're in that that which we've clinical I benefit the of it's of goods migration, pharmacy. impact will has of the center, haven't lower integrated the help service of

in line have we to very sight on we are ability again, of an clear the have confident our opportunities what to around impact very what feel And know a pharmacy. And And in do. those. we need we

with of you billion, where it's aligns has plan each we're that business designs, broadly we $X.X think cetera. shared more As competitively I how of et you and think our the very based how John lines and and about with were different on approaching pharmacy,

us straight Medicare our you. not in opportunity some line impact But clearly, a of formula. tailwind from stars. us helps as offset So a Thank it's gives this and pharmacy Advantage

question, please. Next

Operator

of question Please comes next Your from the go Sarah Jaffray. Piper ahead. from line James

Sarah James

beyond about Thank could process was you hoping I the Ingenio. DBG talk you. selling

how years? better sense you next over conversations term sales a line product into strong some selling of look the of is could wondering to is the Just process term so the near and sight have the long understand mix of near couple Do how far. like what

Gail Boudreaux

selling the vary. much about of cycles businesses, I very as group think think services you any broadly

has long of for in time. business a AIMS the end period been Our market very

about also where cycle. a very CareMore is of mature but partnerships not integrations and mentioned much, have we sales working just help. talking part partners been they've to And Blue has very can they the areas Aspire actively as the we our that

isn't So you to XX lead as a least I'd XX pharmacy, it definite. think it's at time. say generally, about months But

scale and about off, the months because we CareMore and capabilities. the usually the discussion. provide closer As talking because AIM some really procurement also Beacon of large you're we in terms can think that sites, up new is fourth the really quarter, sale projects deal bringing with family shorter about nine unique you a capabilities we're plus excited in into believe bring a

we say we've see sales at really service business as a to growing business. and you're would least our feel to over that. we quite more four much three significant I diversified the years are good next progress we overall So forward frankly, is lead something to a sale very talking shared But the and But going looking is you terms about. But about already It's traction. in and months XX seeing to that about much we're time procurement of go in DBG just given the question, to fairly we're large as XX more conversations for people thank sharing these the forward. very much are

question, Next please?

Operator

question next of comes from the Evercore Newshel ahead. from line Please Your go Michael ISI.

Michael Newshel

frame of you geographic talked margin the of any planning, the to of revenue your normalization XXXX, growth and meaningful you exchanges For about? magnitude offset whether that be kind re-expansion could any can in

Gail Boudreaux

Pete, please?

Pete Haytaian

expansion about it's in I cost right in before and our performance our remains we focused disciplined we're can instances, respect and on partner delivering geographies really obviously We're leveraging our based of many pleased think with with care, individual value strategy at key we risk and economics play. And where but on strong we're on targeted upon really care to And partnership aligned and terms with where progress. the of based the relationships. adjustment. talked this being providers providers with partnering where largely been We've same we're in

and we better importantly, good as with then course expected. the talked and us our as two have for And be it well than respect relates positioned translated number product. this bit of number to to earlier, about results has being into we product right one to And

better before, in and partner we're going little I XXXX, positioned. said As some see we expansions. we're have those most in competitively providers case, to path participate to continue continuing that's remain of if can't and we going target competitive is do what the pockets markets We not And that bit our in are down we're this disciplined where to which and do product. the with competitors

the down we path of methodical about that continuing grow the So right that way. very business, thoughtful to feel and business being like we'll and we're continue in

Operator

today final go from from your of Rhyee line comes question And the ahead. Charles Please Cowen.

Charles Rhyee

commercial your that rates you that too Just get know Ingenio? termination, also didn't them it But But when say were to commercial had what because clarify those just clients them, around how next book earlier you're expect I have some reason this that re-price year? for comments, with on shouldn't accounts any pricing -- Gail have it. John, is be the you able much for few is up to business, these clear of the I saying generate impact want factor guess did been match around sounds in And to wanted. to you for through didn't what would to just like business for the into and your

Gail Boudreaux

follow and Well, to then ask start let John me I'll up.

of And really we the performing. the business our no, of feel in our we I We of feel First, mean, trend. strongly last very reaffirmed is terms strongly. book commercial part your question, about business.

and honestly Our a more products. products in of clinical specialty revenue outside good. bringing through And risk, improving. lot are even our They're adding just margins we're

you into no, about shouldn't anything overall, So business. read commercial our

think of to that is there I terms question, that your add. second because one, have maybe more much I'll answer don't In John

John Gallina

In is overall the really terms any. commercial not impact the of book, there on

of assume prior these the stay with that for the Our year. would members did rest us guidance

So difficult decision. was it a

a year our be there'll So end on membership. impact slight

is markets, our to and with really ability our strategy competitive the year pricing, position with there associated is our about for execute be change. and very commercial that. the no And to think us. that our team another However, of good with each outlooks, growth and Pete going for business feel growth XXXX our We

So thank you.

Gail Boudreaux

your everyone the in of Thank morning with questions. happy issues, phone And for we're for dealt you all that all address much like to thank line. questions and but there through everyone of were while get your still I'd we very able this to hanging the we

committed experience to thank their forward to delivering you. members. And personalized XX a all forward associates I remain and to those see, to our again want you speaking I nearly of can Thank we affordable we with serve. you simple, building our serving ongoing in As for for And commitment more XXXX. to million soon. I on our look momentum look

Operator

November will Xth. available after this XX:XX AM Ladies conference and replay Eastern today for be gentlemen, Time through

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Elevance Health (ELV) 23 Oct 192019 Q3 Earnings call transcript