HealthSpring, Inc. (NYSE:HS) announced its results for the fourth quarter and year ended December 31, 2009. Highlights included:
* Net income in the 2009 fourth quarter of $38.8 million, or $0.68 per diluted share, compared with $28.3 million, or $0.51 per diluted share, in the 2008 fourth quarter, an increase of 33.3% on a per diluted share basis.
* Full year EPS of $2.41, compared with $2.12 for 2008, an increase of 13.7%.
* Medicare premium revenue in the 2009 fourth quarter of $663.0 million, up 25.5% over the 2008 fourth quarter.
* Medicare premium revenue for the year of $2.6 billion, an increase of 22.5% over 2008.
* Medicare Advantage membership of 189,241 and stand-alone PDP membership of 313,045 at December 31, 2009, an increase of 16.8% and 10.8%, respectively, over the 2008 year end.
Fourth Quarter Operating Highlights
Revenue
* Medicare Advantage (including the prescription drug component of HealthSpring’s Medicare Advantage plans, or “MA-PD”) premiums were $586.5 million for the 2009 fourth quarter, reflecting an increase of 24.2% over the 2008 fourth quarter. The higher premiums in the 2009 fourth quarter were attributable to increases in both membership and per member per month, or “PMPM,” premium rates.
* Medicare Advantage PMPM premiums were $1,037.45 in the 2009 fourth quarter, compared with $976.58 in the 2008 fourth quarter. The PMPM premium increase in the 2009 fourth quarter resulted from rate increases in CMS-calculated base rates as well as rate increases related to risk scores.
* Stand-alone PDP premium revenue was $76.5 million for the 2009 fourth quarter, an increase of 35.6% compared with the 2008 fourth quarter. The increase in revenue was the result of a 10.8% increase in membership and an increase in PDP premiums PMPM in the 2009 fourth quarter.
* Investment income decreased from the 2008 fourth quarter by $2.3 million, or 75.2%, to $0.8 million for the 2009 fourth quarter, primarily as a result of a lower average yield on invested and cash balances.
Medical Expense
* Medicare Advantage medical loss ratio, or “MLR,” was 81.1% for the 2009 fourth quarter, compared with 78.9% for the prior year’s fourth quarter. The impact from risk adjustment payments relating to prior periods was favorable by 0.8% and 1.8% in the 2009 and 2008 fourth quarters, respectively. Increased inpatient procedure costs in our Tennessee health plan and higher outpatient expenses across all health plans resulted in an increase in the current period MLR, compared with the 2008 fourth quarter. These increases were partially offset by improvements in inpatient admissions across all markets and continued strong performance in the Florida health plan.
* PDP MLR was 60.7% for the 2009 fourth quarter, compared with 75.8% for the 2008 fourth quarter. Higher PMPM premium revenue in the 2009 quarter was the primary reason for the improvement in PDP MLR.
Selling, General & Administrative (SG&A) Expense
* SG&A expense as a percentage of total revenue in the 2009 fourth quarter decreased 100 basis points to 11.7%, compared with 12.7% in the 2008 fourth quarter. The improvement in SG&A as a percentage of revenue resulted primarily from improvements in the Company’s operating model and revenue increases. The $10.6 million increase for the 2009 fourth quarter compared with the 2008 fourth quarter was primarily the result of additional personnel costs associated with membership increases and increases in other administrative costs, including contract termination expenses.
Interest Expense
* Interest expense in the 2009 fourth quarter decreased $1.0 million compared with the 2008 fourth quarter as a result of lower effective interest rates and lower average principal balances.
* The Company’s weighted average effective interest rate (exclusive of the amortization of deferred financing costs) for the three months ended December 31, 2009, was 4.6%, compared with 5.5% for the three months ended December 31, 2008.
Income Taxes
* The Company’s effective income tax rate for the three months ended December 31, 2009, was 39.7%, compared with 36.1% for the three months ended December 31, 2008. The annual effective income tax rate for 2009 was 36.4%. The rate increase in the 2009 fourth quarter compared with the 2008 fourth quarter was the result of a greater concentration of the Company’s profitability in entities taxed at a higher state tax rate and the reversal of tax benefits on cancelled stock compensation awards, primarily for certain executives retiring in 2009.
No Comment Received
Leave A Reply