Some of the largest Managed Care providers in the world have announced their earnings for 2022, and the results are looking promising for the Managed Care space. Humana Inc., Centene Corporation and Cigna Corp. all achieved positive operating and financial results for 2022, with some even surpassing their expectations for the year. However, M&A within the Managed Care sector slowed in 2022, with just 43 transactions announced, a 10.4% decrease from 2021 when 48 deals were announced. This decline is the result of a shift in these company’s growth strategy as they focus on cleaning up their portfolios through divestments.
Humana Inc. (NYSE:HUM)
Humana reported strong operating and financial results, with an annual revenue of $92.97 billion, an 11.8% increase from 2021 when $83 billion was announced in revenue.
Founded in 1961 and based in Louisville, Kentucky, Humana is one of the largest health insurance companies in the United States, providing private, Medicare and Medicaid plans.
Humana has been involved in some large M&A transactions in recent years, including its sale of 60% interest of its Kindred at Home division to the private investment company, Clayton, Dubilier & Rice, for $2.8 billion. Humana had previously acquired Kindred at Home in April 2021 for $7.1 billion.
In August 2022, Humana announced its acquisition of Inclusa, Inc., a managed care organization (MCO) in Wisconsin supporting approximately 16,600 older adults and adults with disabilities, for an undisclosed price
Key Earnings Metrics:
Humana’s operating and financial results surpassed their expectations for 2022. Humana reported adjusted earnings per share (EPS) of $25.24, which represents an annual growth of 22%. The company provided a full-year 2023 EPS guidance of at least $28, which represents 11% growth over 2022. The company also confirmed its expectation of individual Medicare Advantage (MA) membership growth of at least 625,000 members, which represents a 13.7% increase year-over-year.
The company addressed the recent Risk Adjustment Data Validation (RADV) final rule and expressed their belief in the importance of risk adjustment in the MA program.
Humana’s focus on value-based care through its platform, analytics, digital capabilities and customer-centric products and services has helped the company achieve differentiated success, as demonstrated by Humana’s five consecutive years of leading Star Ratings results and individual MA membership growth. Humana is a leader in the delivery of senior-focused integrated value-based care and has 70% of its individual MA members engaged in value-based arrangements. Humana plans to continue growth in 2023 with targeted investments, benefits and marketing, with the majority of their growth coming from the non-D-SNP space.
Key Quotes From Q4 2022 Earnings Call:
“Today, Humana continued the momentum seen throughout 2022 and reported another quarter of strong operating and financial results… We achieved this compelling earnings growth while also making meaningful progress in advancing our strategy.” – Bruce Broussard, president and CEO of Humana
“We also reaffirmed our expectations for a full year individual Medicare Advantage membership growth of at least 625,000 members, a 13.7% increase year-over-year… ” – Bruce Broussard
“Humana’s focus on value-based care and the use of deep analytics and digital capabilities set it apart from peers.” – Bruce Broussard
“Our deep focus on value-based care… is one of the differentiated capabilities that gives Humana a durable competitive advantage… We believe these differentiated capabilities have contributed to our durable success in quality and customer experience.” – Bruce Broussard
“The majority of the growth in 2023 is coming from the non-D-SNP space. We added approximately 422,000 non-D-SNP members through 2023 AEP, a significant increase from the 90,000 added in 2022 AEP, and representing an impressive 10% year-over-year growth in non-D-SNP membership.” – Bruce Broussard
Centene Corporation (NYSE:CNC)
Like Humana, Centene also reported positive growth in its annual revenue, increasing 14.74% from approximately $126 billion in 2021 to $144.5 billion in 2022. Centene reported adjusted EPS for 2022 of $5.78, up 12% from 2021 when $5.15 was announced. The company also saw solid growth in its core business lines, including marketplace products and Medicare Advantage business.
Centene Corporation is a large healthcare company that offers a range of health services, including Medicaid and MA managed care, health insurance marketplace products and behavioral health services. The company operates in multiple states across the United States and serves a diverse population of individuals and families.
After being active in the M&A market during 2020 and 2021 with several acquisition announcements, Centene made moves to divest some of its assets. The company closed three divestitures in 2022 and announced a fourth, indicating a shift in the company’s growth strategy and a focus on improving its existing operations rather than expanding through acquisitions. During the first weeks of 2023, Centene closed the previously announced sale of Magellan Specialty, as well as the sales of Centurion and HealthSmart, bringing the total number of divestitures since Q4 of 2021 to seven.
Key Earnings Metrics:
The company had a productive year in 2022, generating fourth-quarter adjusted EPS of $0.86 and full-year 2022 adjusted EPS of $5.78. The three core business lines performed well, with Ambetter showing solid growth and market expansion. Centene had strong Medicare membership growth, and its local markets performed well, serving more Medicaid members than ever before. The company hit all major milestones and reduced distractions by making significant progress on its portfolio review process through divestitures. They closed three divestitures in 2022 and announced a fourth. The company also aligned its enterprise around a long-term strategic plan with a commitment to 12% to 15% long-term adjusted EPS growth. For 2023, the company has strong growth opportunities, with its Ambetter team applying a portfolio approach to pricing and product positioning, leveraging their local expertise and strong broker relationships to attract and retain membership across their Marketplace footprint.
Key Quotes From Q4 2022 Earnings Call:
“These strong results came in above the top end of our most recently issued 2022 guidance and were 7% higher than the midpoint of our initial outlook for the year.” – Sarah London, CEO of Centene
“In 2022, the strength of WellCare’s underlying performance was demonstrated through year-over-year [health benefits ratio] improvement.” – Sarah London
“Centene’s Marketplace products yielded exceptional growth during this year’s open enrollment, outpacing even the robust growth of the total market itself.” – Sarah London
“In our Medicare Advantage business, Centene generated outsized growth in 2022, ending the year with 21% more members compared to year-end 2021.” – Sarah London
“Our local markets also performed well throughout the year, serving more Medicaid members in more geographies than ever before… In California, Centene was ultimately selected to serve the state through direct contracts in 10 key markets, including Los Angeles and Sacramento counties.” – Sarah London
“2022 also marked the first full year of execution on our value creation plan, and it was by every measure a success.” – Sarah London
“With our senior leadership team in place and the company’s demonstrated progress against our strategic and financial goals in 2022, we are well positioned to capitalize on the momentum of the past year and successfully continue our value creation journey for shareholders and members in 2023.” – Sarah London
Cigna Corp. (NYSE CI)
Cigna’s 2022 results did not disappoint, announcing a 3.7% increase in annual revenue from $174 billion in 2021, to $180.5 billion in 2022. Additionally, the company reported full-year adjusted earnings per share of $23.27, reflecting a 14% growth rate compared to $20.47 per share in 2021.
Cigna is a global health service company that provides insurance, health care management and consulting services to individuals and businesses. It offers a range of health insurance options, such as medical, dental, vision and life insurance, as well as employee benefits, wellness programs, and health care management services. The company operates in more than 30 countries and has more than 40 million customers worldwide.
Cigna has been active in the M&A market in recent years. In 2018, Cigna completed its acquisition of Express Scripts, a pharmacy benefit management (PBM) company, for $67 billion. This acquisition was one of the largest healthcare deals in history and allowed Cigna to expand its offerings to include PBM services and data analytics capabilities. The company hasn’t made or announced any major acquisitions since, however, like Centene, Cigna also decided to offload some of its assets last year. The company sold its life, accident and supplemental benefits businesses to Chubb in July 2022 for $5.4 billion.
Key Earnings Metrics:
In 2022, Cigna exceeded its revenue and earnings outlook and returned $9 billion to shareholders through share repurchase and dividends. Cigna’s Evernorth saw sustained growth and profitability, with Q4 revenues of $36.2 billion and pre-tax adjusted earnings of $1.7 billion. Cigna Healthcare grew its medical customer base by 5% and improved full-year pre-tax adjusted margins to 9%, with adjusted revenues of $11.1 billion and pre-tax adjusted earnings of $500 million. For 2023, the company expects continued growth, with consolidated adjusted revenues projected to be at least $187 billion and consolidated adjusted income from operations projected to be at least $7.33 billion. Additionally, the company plans to continue expanding its MDLIVE virtual patient visits and accelerating its value-based care capabilities. Cigna is investing in resources to make prescriptions more accessible and affordable for approximately 20 million Centene customers starting in 2024.
Key Quotes From Q4 2022 Earnings Call:
“[We] exceed[ed] our revenue and earnings outlook and returned meaningful capital to our shareholders.” – David Cordani, Chairman and CEO of Cigna
“We’re very pleased with our strong performance in 2022, reflecting focused execution and growth across both Evernorth and Cigna Healthcare, with each segment achieving pre-tax adjusted earnings growth in-line or above our long-term targets… This positions us well for continued growth in 2023.” – Brian Evanko, CFO of Cigna
“Our U.S. commercial business had a standout performance, achieving outsized customer growth while maintaining pricing discipline and driving margin improvement.” – David Cordani
“Both full-year and fourth-quarter results benefited from pricing discipline and affordability initiatives, including our clinical programs.” – Brian Evanko
“Overall, Cigna’s 2022 results were strong, reflecting focused execution for the benefit of our clients and customers. As we turn to 2023, we continue to expect underlying growth in both Evernorth and Cigna Healthcare while continuing to make strategic investments to drive future growth.” – Brian Evanko
“For the full-year 2023 outlook, we expect consolidated adjusted revenues of at least $187 billion.” – Brian Evanko
