Anthem, Inc.

Ladies and gentlemen, thank you for standing by and welcome to Anthem's fourth quarter earnings conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session where participants are encouraged to present a single question. If you wish to ask a question, please press star then 1 on your telephone keypad. You will hear a prompt that you have been queued. You may withdraw your question at any time by pressing star then 2. These instructions will be repeated prior to the question and answer portion of this call. As a reminder, today's conference is being recorded. I would now like to turn the conference over to the company's management. Please go ahead.

Good morning, and welcome to Anthem's fourth quarter 2021 earnings call. This is Steve Tunnell, Vice President of Investor Relations, and with us this morning on the earnings call are Gail Boudreau, President and CEO, John Galina, our CFO, Peter Haitayan, President of our Diversified Business Group and IngenioRx, Felicia Norwood, President of our Government Business Division, and Morgan Kendrick, president of our commercial business. Gail will begin the call with a brief discussion of the quarter, recent progress against our strategic initiatives, and close on Anthem's commitment to its mission. John will then discuss our financial results and outlook in greater detail. After our prepared remarks, the team will be available for Q&A. During the call, we will reference certain non-GAAP measures. Reconciliations of these non-GAAP measures to the most directly comparable GAAP measures are available on our website, antheminc.com. We will also be making some forward-looking statements on this call. Listeners are cautioned that these statements are subject to certain risks and uncertainties, many of which are difficult to predict and generally beyond the control of Anthem. These risks and uncertainties can cause actual results to differ materially from our current expectations. We advise listeners to carefully review the risk factors discussed in today's press release and in our quarterly filings with the SEC. I will now turn the call over to Gail.

Thanks, Steve, and good morning, everyone. Today, we're pleased to share Anthem once again delivered solid operating results in the fourth quarter, capping off another year of outstanding growth as we transform with focus and discipline from a health benefits company to a lifetime trusted partner in health. I'll start by sharing performance highlights for the quarter and the year and follow with some key actions and investments that drove our growth and laid the groundwork for what we expect will be another year of strong operating performance in 2022. In the fourth quarter, Anthem delivered GAAP earnings per share of $4.63 and adjusted earnings per share of $5.14, ahead of expectations and against the backdrop of COVID-19. For the full year, Anthem reported GAAP earnings per share of $24.73, and adjusted earnings per share of $25.98, reflecting a 16% increase year-over-year. During 2021, our investments in enhancing the customer experience, delivering innovative, customized whole health solutions, and deepening digital engagement help to deliver strong growth across our health benefits businesses, all while rapidly scaling our diversified health services solutions. We ended the year with 45.4 million members, up 2.4 million, or 6% year over year, with approximately three-quarters of those gains coming from organic growth. In our commercial business, improved selling strategies, and innovative, customized product offerings sustained our momentum and led to the best-ever selling season for our national accounts team. In addition, traction is accelerating as we address clients' unique needs in targeted subsegments, such as balanced funding for mid-sized employers and customized plans and digital tools for college students. The flexible architecture of our Sydney Health mobile app enables seamless integration into clients' ecosystems while helping deepen digital engagement with members in this fast-growing market. As a result, we anticipate delivering another year of growth in our group and individual businesses in 2022. For many employers, our focus on affordability and integrated whole health solutions is prompting consolidation with Anthem, eliminating other medical carriers, and integrating pharmacy management. Consequently, IngenioRx saw significant growth in net new sales to start 2022, keeping us on track with our goal of narrowing the profitability gap of risk-based and fee-based commercial customers. Moving to Medicare Advantage, our continuing work to strengthen Anthem's value proposition helped drive another strong annual election period. Customers want their benefits to meet their needs today and in the future, and packages like our Everyday Extras that offer holistic services such as transportation, personal home help, and healthy pre-prepared meal delivery are resonating because they provide the flexibility to choose what matters most to each individual. Offering flexible and personalized benefits will remain a key part of our approach in individual MA, and we expect ongoing enhancements to power another year of double-digit growth in 2022. We also expect a substantial membership increase in group Medicare Advantage when our contract serving the retirees of the City of New York begins on April 1st. This timing is consistent with the recent court ruling that upheld our contract and extended the open enrollment period for an additional three months. In Medicaid, our team did an outstanding job in 2021 demonstrating the differentiated value we offer states, built on our deep understanding of the needs of their communities. Our rich legacy of investing in community health uniquely positions us to address health disparities with solutions that extend beyond clinical care to improve health outcomes. Our 100% RFP win rate included renewals of our statewide contracts in Tennessee and Indiana and a new statewide contract in Ohio, which will help further deepen our roots in that state given our leading market share positions in commercial and Medicare Advantage. Then, as we begin serving Ohioans in July, our pending acquisition of Paramount Advantage's Ohio Medicaid contract will amplify our Medicaid footprint. This investment follows our pending acquisition of Integra, a New York managed long-term care plan that will strengthen our presence and capabilities in the greater New York City area. These examples demonstrate our commitment to strategic and programmatic M&A. And we've become more agile and proactive as we target health plans that deepen our existing benefits business and acquisitions which diversify and expand our addressable markets. A good example is our MyNexus acquisition, which enables members to live healthier lives in their homes. MyNexus has performed well to date driven partly by its expanding scope within Anthem. In addition, we expect the ongoing aging of the population and consumer preference for at-home care to propel growth for years to come. Over the last year, we significantly advanced our care provider strategy with investments in risk-bearing primary care providers and aggregators while enhancing value-based arrangements across our network. These arrangements accounted for more than 60% of our medical expense last year. We expect this strategy to accelerate membership growth, increase star ratings, and improve health outcomes and cost of care. Investing in providers and aggregators secures joint governance to maintain alignment of shared interests with our partners, giving Anthem value from sharing risk and elevating the customer and provider experience. Importantly, this strategy ensures Anthem is not overly reliant on one care model as value-based care matures. Our diversified business group will increasingly benefit from these arrangements by opportunities to service Anthem's providers with enablement programs and other diversified services, many of which target the needs of complex and chronic patient populations, where we see significant opportunities to improve outcomes, access, and total cost of care. We expect to remain flexible and thoughtful in our provider strategy, partnering in most markets and investing in care delivery in others where it makes sense. We also made meaningful headway in our digital transformation during the quarter with accelerated investments to deepen digital engagement and meet the increasing need for convenience and personalized care. During our peak onboarding period earlier this month, digital registrations rose 150% and visits to Sydney Health grew 142%. Capabilities and investments in artificial intelligence, which power our personalization engine, are helping optimize the customer experience and reduce low-value administrative tasks. For example, Our virtual primary care platform builds real-world learnings on commercial members' usage patterns and preferences to anticipate customer needs and offer customized experiences. And automating the onboarding process delivers better experiences by saving time and improving the accuracy of critical data and the quality of virtual visits. To illustrate, More than a thousand emergency room visits were avoided last month by predicting and addressing adverse health events through our virtual care options. Results like this are encouraging and we're excited to accelerate the pace. Anthem enters 2022 with strong growth momentum across all of our businesses. This gives us confidence in our ability to deliver growth in adjusted earnings per share consistent with our long-term target range of 12 to 15 percent, as John will discuss more in a moment. Looking ahead, you can expect us to continue investing in profitable growth, innovating for consumers, and advancing our digital platform for health as we work to achieve our purpose of improving the health of humanity. As part of our community health and sustainability commitments, I'm pleased to share We recently met our 100% renewable electricity goal four years ahead of schedule and are now producing enough clean energy via offsite purchase agreements to power all of Anthem's offices, data centers, and clinics. It's gratifying to see our efforts earn Anthem a place on the 2021 Dow Jones Sustainability Index for the fourth consecutive year and on Just Capital's 2022 rankings of America's Most Just Companies. We're also in the early stages of leveraging insights derived from a dynamic model tracking the health of our communities across local, social, and clinical drivers. We call it our Whole Health Index, and we believe it will help us more closely assess our progress towards helping people live healthier lives. In its simplest form, The index will help us identify the most promising opportunities to improve the health of our members and their communities. To date, we've leveraged the index to design and launch programs to manage obesity in five of our Medicaid states where this health issue is especially severe. We're currently learning from field tests and are excited about the possibilities ahead. Notably, in diabetes prevention, and customized wellness campaigns for employers based on the needs of their employees. As part of our ongoing work to support our customers' health, we also began offering risk-based commercial members free at-home COVID tests through our Sydney app starting last November. Delivered within one to two business days, the kits allow members to test safely without leaving the comfort of their homes. This program has positioned us well to comply with the administration's recent requirement to provide home testing at no cost. In closing, I'll leave you with these three takeaways. Anthem's fiscal year 2021 performance demonstrates our strategy to become a lifetime trusted partner in health is helping unlock Anthem's full potential. With our plans and continued investments for fiscal year 2022, we are excited about our ability to sustain this momentum and deliver growth in the years ahead. And our strategic approach to innovation and digital transformation enables us to move even faster and with greater agility as we accelerate our digital platform for health and offer new ways to attract, engage, and retain more customers while streamlining our business and simplifying the consumer experience. Now I'd like to welcome John to add his view on the quarter and our outlook for 2022. John?