• Second quarter GAAP net income was $7.25 per share, including net positive adjustment items of $0.22 per share. Adjusted net income was $7.03* per share.
• Operating revenue grew by 14.1% over the prior quarter to $33.3 billion, or 15.8% adjusted for the repeal of the health insurance tax.
• Medical enrollment increased by 1.9 million members year over year and 820 thousand members in the second quarter to 44.3 million members.
• Third quarter 2021 dividend of $1.13 per share declared to shareholders.
• Raising full year adjusted net income outlook from greater than $25.10* per share to greater than $25.50* per share.

Anthem, Inc. (NYSE: ANTM) reported second quarter 2021 results reflecting strong financial performance.

“We continued to deliver on our commitments to our stakeholders while making considerable progress against our long-term strategy during the second quarter, all while navigating an uncertain environment due to the pandemic,” said Gail Boudreaux, President and CEO. “Our continued success is a function of our relentless focus on the needs of our clients and customers and an unwavering commitment to improve the health of humanity, starting with our members, their communities and our own associates."

*Refer to GAAP reconciliation tables.

CONSOLIDATED HIGHLIGHTS

Earnings Per Share: GAAP net income was $7.25 per share in the second quarter, including net positive adjustment items of $0.22 per share. Adjusted net income was $7.03* per share.

*Please refer to the GAAP reconciliation tables.

Membership: Medical enrollment totaled approximately 44.3 million members at June 30, 2021, an increase of 1.9 million lives, or 4.4 percent from the prior year quarter. Government Business enrollment increased by 2.1 million lives compared to the prior year quarter, driven by Medicaid, reflecting organic growth, aided by the temporary suspension of eligibility recertification efforts in our markets, and growth in Medicare Advantage. In addition, the acquisition of MMM during the second quarter added 315 thousand Medicaid members and 273 thousand Medicare Advantage members. Commercial & Specialty Business enrollment decreased by 174 thousand lives compared to the prior year quarter primarily attributable to in-group attrition in the group fee-based business as a result of the economic environment, partially offset by growth in our risk-based businesses.

During the second quarter of 2021, medical enrollment increased sequentially by 820 thousand lives, primarily driven by the acquisition of MMM, organic growth in the Medicaid business, higher BlueCard activity, and sales in excess of lapses in our Commercial risk-based businesses, partially offset by higher in-group attrition in the group fee-based business.

Operating Revenue: Operating revenue was $33.3 billion in the second quarter of 2021, an increase of $4.1 billion, or 14.1 percent, versus the prior year quarter and 15.8 percent after adjusting for the repeal of the health insurance tax in 2021. The increase was driven by higher premium revenue due to growth in Medicaid and Medicare and, to a lesser extent, rate increases to cover overall cost trend. The increase was further attributable to growth in pharmacy product revenue related to IngenioRx, partially offset by the repeal of the health insurance tax.

Benefit Expense Ratio: The benefit expense ratio was 86.8 percent in the second quarter of 2021, an increase of 890 basis points versus the prior year quarter and an increase of 750 basis points after adjusting for the repeal of the health insurance tax in 2021. The increase was driven by an increase in non-COVID and COVID-related healthcare costs as compared to relatively depressed levels in the same quarter a year ago.

Medical claims reserves established at December 31, 2020 developed better than the Company’s expectations during the second quarter of 2021.

Days in Claims Payable: Days in Claims Payable was 48.1 days as of June 30, 2021, an increase of 1.2 days from March 31, 2021 and an increase of 2.1 days as compared to June 30, 2020. The acquisitions of MMM and myNEXUS increased Days in Claims Payable by 1.6 days sequentially.

SG&A Expense Ratio: The SG&A expense ratio was 11.5 percent in the second quarter of 2021, a decrease of 240 basis points from 13.9 percent in the second quarter of 2020, primarily driven by growth in operating revenue and the repeal of the health insurance tax in 2021, partially offset by increased spend to support growth.

Operating Cash Flow: Operating cash flow was $1.7 billion, or 0.9 times net income in the second quarter of 2021, a decrease of $3.8 billion when compared year-over-year. The year-on-year decrease was driven by tax payments made during the second quarter that were deferred out of the same period in the prior year, as was permitted by the IRS, in addition to the negative impact of the repeal of the health insurance tax in 2021 on second quarter revenues.

Share Repurchase Program: During the second quarter of 2021, the Company repurchased 1.3 million shares of its common stock for $480 million, at a weighted average price of $380.59. As of June 30, 2021, the Company had approximately $5.2 billion of Board-approved share repurchase authorization remaining.

Cash Dividend: During the second quarter of 2021, the Company paid a quarterly dividend of $1.13 per share, representing a distribution of cash totaling $278 million.

On July 20, 2021, the Audit Committee declared a third quarter 2021 dividend to shareholders of $1.13 per share. On an annualized basis, this equates to a dividend of $4.52 per share. The third quarter dividend is payable on September 24, 2021 to shareholders of record at the close of business on September 10, 2021.

Investment Portfolio & Capital Position: During the second quarter of 2021, the Company recorded net realized gains of $172 million. During the second quarter of 2020, the Company recorded net realized gains of $29 million. These amounts are excluded from adjusted earnings per share.

As of June 30, 2021, the Company’s net unrealized gain position in the investment portfolio was $1.0 billion, consisting primarily of fixed maturity securities. As of June 30, 2021 cash and investments at the parent company totaled approximately $980 million.

REPORTABLE SEGMENTS

Anthem, Inc. has four reportable segments: Commercial & Specialty Business (comprised of Individual, Group risk-based, Group fee-based, and BlueCard businesses); Government Business (comprised of the Medicaid, Medicare, and Federal Health Products & Services businesses); IngenioRx, and Other (comprised of the Diversified Business Group and corporate expenses not allocated to our other reportable segments).

Commercial & Specialty Business: Operating gain in the Commercial & Specialty Business segment totaled $791 million in the second quarter of 2021, a decrease of $581 million from an operating gain of $1,372 million in the second quarter of 2020. The decrease was primarily attributable to an increase in non-COVID related utilization as compared to relatively depressed levels in the prior year quarter, costs associated with COVID-19 including vaccine administration and testing, as well as investments to support growth. The decrease was partially offset by the non-recurring premium credits provided to members enrolled in select employer group and Individual health plans in the second quarter of 2020, as well as growth in our risk-based membership.

Government Business: Operating gain in the Government Business segment was $868 million in the second quarter of 2021, a decrease of $750 million from $1,618 million in the second quarter of 2020. The decrease was primarily attributable to an increase in non-COVID related utilization as compared to relatively depressed levels in the prior year quarter and costs associated with COVID-19. The decrease was partially offset by membership growth in the Medicaid and Medicare businesses.

IngenioRx: Operating gain was $405 million in the second quarter of 2021, an increase of $101 million, or 33.2 percent, from $304 million in the second quarter of 2020. The increase was driven by growth in integrated medical and pharmacy membership.

Other: The Company reported an operating gain of $17 million in the Other segment for the second quarter of 2021, compared with an operating gain of $66 million in the prior year quarter. The decrease was driven by an increase in non-COVID utilization impacting the risk-sharing arrangements within the Diversified Business Group, as utilization was depressed in the second quarter of 2020. This decrease was partially offset by a decline in unallocated corporate expenses.

OUTLOOK

Full Year 2021:

• GAAP net income is now expected to be greater than $24.89 per share, including approximately $0.61 per share of net unfavorable items. Excluding these items, adjusted net income is expected to be greater than $25.50* per share.
• Medical membership is now expected to be in the range of 44.8 - 45.3 million. Risk-based membership is now expected to be in the range of 19.3 - 19.6 million. Fee-based membership is expected to be in the range of 25.5 - 25.7 million.
• Operating revenue is now expected to be approximately $137.1 billion, including premium revenue of $116.5 billion - $117.5 billion.
• Operating cash flow is now expected to be greater than $5.8 billion.
• Investment income is now expected to be approximately $1.1 billion.
• Effective tax rate is now expected to be between 22.0 - 24.0%

* Refer to the GAAP reconciliation tables.

Basis of Presentation

1. Operating revenue and operating gain/loss are the key measures used by management to evaluate performance in each of its reporting segments, allocate resources, set incentive compensation targets and to forecast future operating performance. Operating gain/loss is calculated as total operating revenue less benefit expense, cost of products sold and selling, general and administrative expense. It does not include net investment income, net realized gains/losses on financial instruments, interest expense, amortization of other intangible assets, gains/losses on extinguishment of debt or income taxes, as these items are managed in a corporate shared service environment and are not the responsibility of operating segment management. Refer to the GAAP reconciliation tables.
2. Operating margin is defined as operating gain divided by operating revenue.

Conference Call and Webcast

Management will host a conference call and webcast today at 8:30 a.m. Eastern Daylight Time (“EDT”) to discuss the company’s second quarter results and outlook. The conference call should be accessed at least 15 minutes prior to the start of the call with the following numbers:

The access code for today's conference call is 8339667. The replay will be available from 11:30 a.m. EDT today, until the end of the day on August 20, 2021. The call will also be available through a live webcast at www.antheminc.com under the “Investors” link. A webcast replay will be available following the call.

About Anthem, Inc.

Anthem is a leading health benefits company dedicated to improving lives and communities, and making healthcare simpler. Through its affiliated companies, Anthem serves more than 117 million people, including more than 44 million within its family of health plans. We aim to be the most innovative, valuable and inclusive partner. For more information, please visit www.antheminc.com or follow @AnthemInc on Twitter.

Forward-Looking Statements

This document contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements reflect our views about future events and financial performance and are generally not historical facts. Words such as “expect,” “feel,” “believe,” “will,” “may,” “should,” “anticipate,” “intend,” “estimate,” “project,” “forecast,” “plan” and similar expressions are intended to identify forward-looking statements. These statements include, but are not limited to: financial projections and estimates and their underlying assumptions; statements regarding plans, objectives and expectations with respect to future operations, products and services; and statements regarding future performance. Such statements are subject to certain risks and uncertainties, many of which are difficult to predict and generally beyond our control, that could cause actual results to differ materially from those expressed in, or implied or projected by, the forward-looking statements. You are cautioned not to place undue reliance on these forward- looking statements that speak only as of the date hereof. You are also urged to carefully review and consider the various risks and other disclosures discussed in our reports filed with the U.S. Securities and Exchange Commission from time to time, which attempt to advise interested parties of the factors that affect our business. Except to the extent otherwise required by federal securities laws, we do not undertake any obligation to republish revised forward-looking statements to reflect events or circumstances after the date hereof. These risks and uncertainties include, but are not limited to: the impact of large scale medical emergencies, such as public health epidemics and pandemics, including COVID-19, and catastrophes; trends in healthcare costs and utilization rates; our ability to secure sufficient premium rates, including regulatory approval for and implementation of such rates; the impact of federal and state regulation, including ongoing changes in the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010, as amended; changes in economic and market conditions, as well as regulations that may negatively affect our liquidity and investment portfolios; our ability to contract with providers on cost-effective and competitive terms; competitive pressures and our ability to adapt to changes in the industry and develop and implement strategic growth opportunities; reduced enrollment; unauthorized disclosure of member or employee sensitive or confidential information, including the impact and outcome of any investigations, inquiries, claims and litigation related thereto; risks and uncertainties regarding Medicare and Medicaid programs, including those related to non-compliance with the complex regulations imposed thereon; our ability to maintain and achieve improvement in Centers for Medicare and Medicaid Services Star ratings and other quality scores and funding risks with respect to revenue received from participation therein; a negative change in our healthcare product mix; costs and other liabilities associated with litigation, government investigations, audits or reviews; risks and uncertainties related to our pharmacy benefit management (“PBM”), business including non-compliance by any party with the PBM services agreement between us and CaremarkPCS Health, L.L.C.; medical malpractice or professional liability claims or other risks related to healthcare and PBM services provided by our subsidiaries; general risks associated with mergers, acquisitions, joint ventures and strategic alliances; changes in U.S. tax laws; possible impairment of the value of our intangible assets if future results do not adequately support goodwill and other intangible assets; possible restrictions in the payment of dividends from our subsidiaries and increases in required minimum levels of capital; our ability to repurchase shares of our common stock and pay dividends on our common stock due to the adequacy of our cash flow and earnings and other considerations; the potential negative effect from our substantial amount of outstanding indebtedness; a downgrade in our financial strength ratings; the effects of any negative publicity related to the health benefits industry in general or us in particular; failure to effectively maintain and modernize our information systems; events that may negatively affect our licenses with the Blue Cross and Blue Shield Association; the impact of international laws and regulations; intense competition to attract and retain employees; and various laws and provisions in our governing documents that may prevent or discourage takeovers and business combinations.

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