Coventry Hlthcr has a market cap of $4.61 billion; its shares were traded at around $30.22 with a P/E ratio of 11.2 and P/S ratio of 0.4. The dividend yield of Coventry Hlthcr stocks is 1.5%. Coventry Hlthcr had an annual average earning growth of 17.8% over the past 10 years.
Highlight of Business Operations:Medical costs increased primarily as a result of the Kentucky Medicaid expansion and the acquisition of FHP, as well as the Medicare Part D membership growth and medical trend. Medical costs also increased as a result of organic membership growth for Medicare Advantage and Medicaid. This was partially offset by the decrease in Commercial membership, as noted above. Total medical costs as a percentage of premium revenue (“medical loss ratio” or “MLR”) increased 0.3% over the prior year quarter, from 82.6% to 82.9%, as a result of the increased Medicaid MLR results partially offset by the Medicare Advantage RADV audit reserve releases during the current year quarter. The overall MLR also increased due to a higher mix of Medicare Advantage and Medicaid members, which operate at a higher MLR, in the current quarter compared to the prior year quarter.
The provision for income taxes increased from the prior year quarter primarily due to an increase in earnings and, to a lesser extent, due to an increase in the effective tax rate. The effective tax rate on operations increased to 38.0% as compared to 35.5% for the prior year quarter, primarily due to the proportion of earnings in states with higher tax rates and by compliance with new health care reform regulations.
The revenue increase is also due to the growth of Medicare Part D revenue as a result of the addition of eight auto assign regions as well as an increase in product offerings from two in 2011 to three in 2012. Including the effect of the CMS risk sharing premium adjustments as well as ceded revenue, the premium was $95.60 PMPM in 2012 compared to $103.10 PMPM in 2011. Excluding the effect of CMS risk sharing premium adjustments and revenue ceded to external parties, Medicare Part D premiums for 2012 decreased to $85.44 PMPM, compared to $90.86 PMPM in 2011, primarily due to the addition of a new lower priced premium product in 2012.
Excluding funds held by entities subject to regulation and excluding our equity method investments, we had cash and investments of approximately $1.2 billion and $1.4 billion at March 31, 2012 and December 31, 2011, respectively. The decrease resulted primarily from the repayment of our 5.875% Senior Notes, cash paid for the FHP acquisition and capital contributions made by the parent company, partially offset by earnings generated by our non-regulated entities.
For our Medicaid business, we are forecasting 2012 membership to be in excess of 1,000,000 members, with an MLR in the mid-90%s. The anticipated membership growth is primarily due to new contracts with the State of Nebraska and the Commonwealth of Pennsylvania, which we expect to commence in the third quarter of 2012. We anticipate improvements in the Kentucky market MLR, compared to the current year period, as we work with the Commonwealth to implement a risk adjustment mechanism for revenue reimbursement and as we complete several initiatives to improve care and medical costs. Additionally, we expect to receive a 5.3% rate increase on our Kentucky Medicaid contract effective October 1, 2012.
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