Filed by RightCHOICE Managed Care, Inc.
Pursuant to Rule 425 under the Securities Act of 1933
Subject Company: RightCHOICE Managed Care, Inc.
Commission File No. 333-34750
For Further Information
Kevin Aandahl 314-923-6268
Deb Wiethop 314-923-4767
RightCHOICE Reports Third Quarter Earnings of 50 Cents Per Share
Strong Enrollment and Operating Efficiency Drive Results;
Company Looks Forward to November 28 Shareholder Vote on
Reorganization
ST. LOUIS, OCTOBER 26, 2000 - RightCHOICE Managed Care, Inc.
(NYSE:RIT) today reported third quarter net income of $9.5
million, or 50 cents diluted earnings per share, compared with
net income of $4.0 million, or 21 cents diluted earnings per
share, in the third quarter of 1999. For the nine months ended
September 30, 2000, net income was $25.5 million or $1.34 diluted
earnings per share compared to $12.6 million or 67 cents diluted
earnings per share for the comparable period of 1999.
Strong enrollment growth in both the Alliance underwritten and
the HealthLink self-funded business led to an 18 percent increase
in third quarter revenues in 2000 compared to 1999. Total
membership increased to 2.5 million members at September 30,
2000, a 13 percent increase over the same period in 1999.
Underwritten membership increased to more than 496,000, an 8
percent increase, and self-funded membership increased to 2.0
million, a 14 percent increase, over September 30, 1999.
The general and administrative (G&A) expense ratio improved to
18.0 percent in the third quarter of 2000 compared with 20.0
percent for the same period last year, primarily as a result of
controlled spending coupled with strong enrollment and revenue
growth.
"This sustained financial performance demonstrates that excellent
service for our members and improving the operating performance
of the company are compatible goals," stated John O'Rourke,
chairman, president and chief executive officer of RightCHOICE.
"We believe that our enrollment growth reflects our enhanced
product offerings and high quality service, and that our
financial health and operating efficiency directly benefit our
members."
For the three months ended September 30, 2000, compared with the
same period in 1999, RightCHOICE reported:
* Revenues were $241.4 million compared with $204.5 million.
* Operating income increased 146 percent to $12.8 million,
compared to $5.2 million.
* Earnings before interest expense, taxes, depreciation and
amortization increased 65 percent to $21.2 million compared with
$12.9 million.
* The medical margin per member per month (PMPM) increased 12
percent to $27.62 PMPM from $24.62 PMPM.
* The medical loss ratio (MLR) decreased to 81.2 percent
compared with 81.6 percent.
* Cash flow from operations increased 6 percent to $9.2
million compared with $8.7 million.
For the nine months ended September 30, 2000, compared with same
period of 1999, RightCHOICE reported:
* Revenues increased 15 percent to $694.0 million, compared
with $603.7 million.
* Operating income increased 125 percent to $32.4 million,
compared to $14.4 million.
* Earnings before interest expense, taxes, depreciation and
amortization were $58.5 million compared with $37.2 million.
* The medical margin per member per month (PMPM) increased 14
percent to $26.89 PMPM from $23.58 PMPM.
* The medical loss ratio (MLR) improved to 81.2 percent,
compared with 82.0 percent, and the general and administrative
(G&A) expense ratio improved to 18.8 percent compared with 20.2
percent.
* Cash flow from operations was $27.3 million compared with
$7.8 million.
"Effective execution of our business plan delivered these strong
results," O'Rourke stated. "We've created more opportunity to
deliver greater value and choice to our members, such as the
continued recognition of our BlueCard PPO nationwide network and
the introduction of our AlliancePreferred(SM) program."
Starting January 1, 2001, RightCHOICE will roll out the
AlliancePreferred program that allows members in metropolitan St.
Louis to access benefits offered in the company's popular
AllianceChoice(SM) program but with different networks. The
AlliancePreferred program will be comparably priced with the
AllianceChoice program and its network includes the SSM Health
System and Tenet St. Louis hospitals. The AllianceChoice network
includes Unity and BJC hospitals.
"We also believe that our value-driven approach is reflected in
the best practice awards RightCHOICE has received from our
national association," O'Rourke said.
RightCHOICE recently received two Blue Cross and Blue Shield
Association awards, for both its TakeCharge(SM) asthma program and
its leadership in establishing the St. Louis Diabetes Coalition.
The awards were presented October 16 in two of four categories in
the Association's Innovations and Best Practices in Medical and
Pharmacy Management national awards program.
RightCHOICE has expanded its Physician Group Partners Program
contract with a cardiology group and an orthopedic group for the
specialist model of the program effective October 1, 2000.
Designed for the PPO and POS programs, initial specialties in
addition to cardiology and orthopedics will include internal
medicine/family practice, pediatrics, OB/GYN and general surgery.
Like the current program for the HMO physicians, the program will
include patient satisfaction and quality measurements.
Outlook
RightCHOICE anticipates that it will end the year with fourth
quarter earnings of 48 cents to 52 cents per diluted share on a
stand-alone basis.
RightCHOICE added approximately 4,000 net new underwritten
members as of October 1, 2000. On December 31, 2000, membership
will decrease by the previously announced exit of approximately
41,000 HMO members of the Missouri Consolidated Health Care Plan,
which has been very unprofitable, and another 3,500 members of
the Medicare risk HMO product. Excluding these reductions,
effective January 1, 2001, RightCHOICE expects to add 10,000 net
new underwritten members.
Following the special shareholders' meeting on November 28, 2000,
the company plans to provide published outlook information to
reflect the combination of RightCHOICE with Blue Cross and Blue
Shield of Missouri.
The owners of at least a majority of the outstanding shares of
class A common stock must vote in favor of the reorganization for
its approval. Shares owned by Blue Cross and Blue Shield of
Missouri and by any executive officer or director of Blue Cross
and Blue Shield of Missouri or RightCHOICE will be excluded from
that vote. Shareholders who do not vote are effectively voting
against the reorganization.
On October 4, RightCHOICE announced that the Securities and
Exchange Commission declared effective the Registration Statement
on Form S-4 that relates to the proposed settlement with the
State of Missouri and its related reorganization. If shareholder
approval and other conditions to closing are met, the closing
could occur as soon as November 30, 2000, although the
reorganization agreement provides that the closing occur on or
before December 31, 2000.
A number of significant conditions must be satisfied before the
settlement is completed; in addition to receipt of approval of
the reorganization from the company's shareholders at the special
shareholders' meeting, the parties also have sought a private
letter ruling from the IRS and final approval of the
reorganization from both the Blue Cross and Blue Shield
Association and the Missouri Department of Insurance. The
reorganization is also conditioned upon the receipt of legal
opinions from counsel to the various parties.
In addition, there remains pending a case regarding the status of
Blue Cross and Blue Shield of Missouri that could affect the
closing of the reorganization. The case relates to whether Blue
Cross and Blue Shield of Missouri is a public benefit or a mutual
benefit company. Actions in that case could have an effect on the
timing of the closing of the reorganization.
Blue Cross and Blue Shield of Missouri and its for-profit
subsidiary, RightCHOICE Managed Care, Inc., are the largest
providers of health care benefits in Missouri in terms of
members. HealthLink provides network rental, administrative
services, workers' compensation and other non-underwritten health
benefit programs in Missouri and six neighboring states.
Caution Concerning Forward-Looking Statements
This press release includes "forward-looking statements" within
the meaning of the Private Securities Litigation Reform Act of
1995. These statements are based on management's current
expectations and are naturally subject to uncertainty and changes
in circumstances. Actual results may vary materially from the
expectations described above. Investors should not view these
forward-looking statements as guarantees of future performance.
The risks and uncertainties that could cause actual results to
differ materially are detailed in the company's filings with the
Securities and Exchange Commission, including its most recent
Quarterly Report on Form 10-Q and Annual Report on Form 10-K.
RightCHOICE is not under any obligation, and expressly disclaims
any obligation, to update or alter its forward-looking statements
whether as a result of new information, future events or
otherwise.
Important Information about Proposed Reorganization
RightCHOICE Managed Care, Inc., a Delaware corporation, referred
to below as New RightCHOICE, together with RightCHOICE Managed
Care, Inc., a Missouri corporation, referred to below as
RightCHOICE, has filed with the Securities and Exchange
Commission a definitive proxy statement/prospectus and other
documents regarding the proposed settlement and reorganization
transaction referred to above. You are urged to read the
definitive proxy statement/prospectus and other documents because
they contain important information. You may obtain a free copy
of the definitive proxy statement/prospectus and other documents
filed by New RightCHOICE (as well as by RightCHOICE) with the SEC
at the SEC's web site at www.sec.gov. The definitive proxy
statement/prospectus and these other documents may also be
obtained for free by RightCHOICE shareholders by directing a
request to: RightCHOICE Managed Care, Inc., 1831 Chestnut Street,
St. Louis, Missouri, 63103, Attn: Investor Relations, telephone
number (314) 923-4831; e-mail:[email protected]. RightCHOICE
and its respective officers, directors, employees and agents may
be deemed to be participants in the solicitation of proxies from
their shareholders with respect to the reorganization
transaction. Information concerning the participants in the
solicitation is set forth in the definitive proxy
statement/prospectus.
Live Webcast of Conference Call
A live webcast of RightCHOICE's third quarter earnings conference
call will be available at www.ritusa.com starting at 2 p.m.
Central Standard Time, on Thursday, October 26, 2000.
Financial tables follow:
RightCHOICE Managed Care, Inc.
Consolidated Financial and Operating Results
(Unaudited; amounts in thousands except shares, per share and
operating data)
THREE MONTHS ENDED
SEPTEMBER 30, 2000 1999
Premium revenues:
Alliance PPO $ 70,731 $ 53,453
AllianceChoice POS 50,715 42,310
HMO (includes other POS) 55,718 51,814
Medicare supplement 22,049 22,915
Managed indemnity 653 955
Other specialty services 17,060 12,051
Total premium revenues 216,926 183,498
Fees and other income 24,489 21,005
Total revenues 241,415 204,503
Operating expenses:
Health care services 176,041 149,777
Commissions 9,183 8,525
General and administrative 38,942 36,587
Depreciation and amortization 4,440 4,405
Total operating expenses 228,606 199,294
Operating income 12,809 5,209
Investment income, net:
Interest and dividends 3,736 3,139
Realized losses, net (127) (63)
Total investment income, net 3,609 3,076
Interest expense (923) (1,414)
Other income, net 353 198
Income tax expense 6,301 3,064
Net income $ 9,547 $ 4,005
Basic earnings per share $ 0.51 $ 0.21
Diluted earnings per share $ 0.50 $ 0.21
Weighted average common shares 18,674,000 18,673,000
BALANCE SHEET DATA:
Cash and investments $ 264,966 $ 232,229
Total assets $ 544,532 $ 513,409
Medical claims payable $ 126,615 $ 116,445
Debt $ 28,063 $ 36,063
Shareholders' equity $ 184,778 $ 153,774
Book value per share* $ 9.89 $ 8.24
Tangible book value per share* $ 6.33 $ 4.36
*Based on common shares outstanding
OPERATING DATA:
Membership at end of period
Underwritten:
Alliance PPO 178,155 145,826
AllianceChoice POS 138,928 126,997
HMO (includes other POS) 127,722 130,526
Medicare supplement 49,888 54,187
Managed indemnity 1,505 1,965
Subtotal underwritten 496,198 459,501
Self-funded:
PPO 47,699 45,718
HMO 7,723 7,173
ASO (includes HealthLink):
Workers' Compensation 723,771 497,055
Other ASO 1,249,944 1,225,234
Subtotal self-funded 2,029,137 1,775,180
Total 2,525,335 2,234,681
Medical loss ratio 81.2% 81.6%
G&A ratio 18.0% 20.0%
Adjusted G&A ratio (excluding
depreciation and amortization) 16.1% 17.9%
NOTE: Health care services expense includes credit for
amortization of the provision for losses on a single contract.
RightCHOICE Managed Care, Inc.
Consolidated Financial and Operating Results
(Unaudited; amounts in thousands except shares, per share and
operating data)
NINE MONTHS ENDED
SEPTEMBER 30, 2000 1999
Premium revenues:
Alliance PPO $ 193,070 $ 154,500
AllianceChoice POS 145,380 123,380
HMO (includes other POS) 166,369 156,207
Medicare supplement 67,302 69,778
Managed indemnity 1,757 2,806
Other specialty services 47,258 34,319
Total premium revenues 621,136 540,990
Fees and other income 72,865 62,737
Total revenues 694,001 603,727
Operating expenses:
Health care services 504,452 443,762
Commissions 27,011 23,892
General and administrative 116,933 108,927
Depreciation and amortization 13,232 12,788
Total operating expenses 661,628 589,369
Operating income 32,373 14,358
Investment income, net:
Interest and dividends 10,640 9,850
Realized gains (losses), net 938 (512)
Total investment income, net 11,578 9,338
Interest expense (2,901) (3,423)
Other income, net 1,301 754
Income tax expense 16,838 8,438
Net income $ 25,513 $ 12,589
Basic earnings per share $ 1.37 $ 0.67
Diluted earnings per share $ 1.34 $ 0.67
Weighted average common shares 18,673,000 18,673,000
OPERATING DATA:
Medical loss ratio 81.2% 82.0%
G&A ratio 18.8% 20.2%
Adjusted G&A ratio (excluding
depreciation and amortization) 16.8% 18.0%
NOTE: Health care services expense includes credit for
amortization of the provision for losses on a single contract.
