NASHVILLE, Tenn.--(BUSINESS WIRE)--Apr. 30, 2009-- HealthSpring, Inc. (NYSE:HS) today announced its results for the quarter ended March 31, 2009. Highlights for the 2009 first quarter included:

• Net income of $20.6 million, or $0.38 per diluted share, compared with $21.1 million, or $0.37 per diluted share, in the 2008 first quarter;
• Premium revenue of $634.6 million, up 17.3% over the 2008 first quarter; and
• Medicare Advantage membership of 175,138, up 14.8% over the 2008 first quarter, and 8.1% compared with year-end 2008, and stand-alone PDP membership of 286,810, up 11.2% over the 2008 first quarter and relatively flat compared with 2008 year-end.

Commenting on 2009 first quarter results, Herb Fritch, Chairman and Chief Executive Officer, said, “The first quarter was a solid beginning to 2009 for HealthSpring, particularly for our Part D and South Florida operations. In addition, we are very encouraged by the strongest open-enrollment period in the history of our Company, particularly as it indicates the relative attractiveness of our various Medicare product offerings.”

Operating Highlights

Revenue

• Medicare Advantage premium revenue (including the prescription drug component of HealthSpring's Medicare Advantage plans, or "MA-PD") was $541.4 million for the 2009 first quarter, reflecting an increase of 17.9% over the 2008 first quarter. The premium revenue increase is attributable to 4.0% higher premiums per member per month, or "PMPM," and a 14.8% increase in membership. The 2008 first quarter included $12.0 million of additional premium revenue estimated for 2007 final retroactive risk adjustment settlements with CMS. This adjustment had a favorable impact on net income of $5.3 million, or $0.09 per diluted share, in the year-earlier quarter. The accrual for 2008 final retroactive risk settlements in the 2009 first quarter was not significant.
• Medicare Advantage premiums PMPM were $1,047.24 in the 2009 first quarter, representing an increase of 6.8% compared with the prior year’s quarter, as adjusted to exclude out-of-period retroactive risk adjustments in the prior-year period.
• Stand-alone PDP premium revenue was $92.5 million for the 2009 first quarter, an increase of 16.7% compared with the 2008 first quarter. The higher revenue resulted from an 11.2% increase in membership and a 5.1% increase in PDP premiums PMPM in the current period.
• Investment income decreased $3.3 million, or 67.8%, to $1.6 million for the 2009 first quarter, primarily as a result of a decline in the average yield on invested and cash balances.

Medical Expense

• Medicare Advantage medical loss ratio ("MLR") was 81.3% for the 2009 first quarter, compared with 80.9% for the prior year’s first quarter, as adjusted to exclude out-of-period retroactive risk adjustments in the prior-year period. As expected, the MLR deterioration for the current period was primarily attributable to increases in medical expense PMPM outpacing PMPM revenue increases, which were partially offset by improvements in the Florida plan’s MLR resulting from reduced utilization and unit costs. Unfavorable MLR results in the Company's core Medicare Advantage business were also partially offset by MLR improvement in the drug benefit component of MA-PD in the current period.
• PDP MLR was 95.8% for the 2009 first quarter compared with 96.8% in 2008. The improvement in the 2009 PDP MLR was primarily the result of PMPM revenue increases in the current period.

Selling, General & Administrative (SG&A)

• SG&A expense increased $9.4 million and represented 11.2% of total revenue in the 2009 first quarter compared with 11.4% of total revenue in the 2008 first quarter. The improvement in SG&A as a percentage of revenue was primarily the result of premium revenue increases. The dollar increase in the 2009 first quarter was primarily the result of additional personnel and higher sales commissions attributable to the membership growth.

Interest Expense

• Interest expense in the 2009 first quarter decreased $1.1 million compared with the 2008 first quarter as a result of lower interest rates and lower average principal balances.
• The Company's weighted average effective interest rate (inclusive of the amortization of deferred financing costs) for the three months ended March 31, 2009, was 6.4% compared with 7.2% for the three months ended March 31, 2008.

Balance Sheet Highlights

• At March 31, 2009, the Company’s cash and cash equivalents were $304.9 million, $44.2 million of which was held at unregulated subsidiaries.
• Total debt outstanding was $258.5 million at March 31, 2009, compared with $268.0 million at December 31, 2008, and $292.5 million at March 31, 2008. There were no borrowings outstanding under the Company’s revolving credit facility at March 31, 2009 or 2008.
• For the first quarter of 2009, net cash provided by operating activities was $7.9 million compared with $14.0 million for the first quarter of 2008.
• Days in claims payable totaled 36 at the end of the 2009 first quarter compared with 37 at the end of the 2008 first quarter.
• During the quarter ended March 31, 2009, the Company did not repurchase any shares of its common stock.

Outlook

The Company maintains its previously published operating and financial guidance for 2009, including earnings per share guidance in the range of $2.00 to $2.20.

Conference Call

A live audio webcast of the conference call regarding first quarter results will begin at 10:00 a.m. ET on Thursday, April 30, 2009. The public may access the conference call through HealthSpring’s website, www.healthspring.com, under the Investor Relations tab. The conference call can also be accessed by dialing (913) 312-1474, confirmation number 1266294. An online replay will be available approximately two hours following the conclusion of the live broadcast and will continue for 30 days.

About HealthSpring

HealthSpring is based in Nashville, Tenn., and is one of the country’s largest coordinated care plans whose primary focus is the Medicare Advantage market. HealthSpring currently owns and operates Medicare Advantage plans in Alabama, Florida, Illinois, Mississippi, Tennessee and Texas and also offers a national stand-alone Medicare prescription drug plan. For more information, visit www.healthspring.com.

Cautionary Statement Regarding Forward Looking Statements

Statements contained in this release that are not historical fact are forward-looking statements, which the Company intends to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Statements that are predictive in nature, that depend on or refer to future events or conditions, or that include words such as "anticipates," "believes," "could," "estimates," "expects," "intends," "may," "plans," "potential," "predicts," "projects," "should," "will," "would," and similar expressions are forward-looking statements. Such statements include 2009 guidance. The Company cautions that forward-looking statements involve known and unknown risks, uncertainties, and other factors that may cause its actual results, performance, or achievements to be materially different from any future results, performance, or achievements expressed or implied by the forward-looking statements. Any projections or other forward-looking information in this release or made orally and related thereto are based on management’s beliefs and assumptions and on information available to HealthSpring at the time the statements were or are made, which is subject to change. Although any such projections and forward-looking information and the factors influencing them will likely change, HealthSpring will not necessarily update the information except as required by law, as HealthSpring will only provide guidance at certain points during the year. Information contained herein speaks only as of the date of this release.

The following factors, among others, could cause actual results to differ materially from those in the forward-looking statements: changes in membership enrollment and dis-enrollment patterns; legislative and regulatory actions or changes, including changes in the design of the Medicare program and changes in Medicare funding and premium rates; changes in our members’ utilization of medical services; changes in medical and prescription drug cost trends; the Company’s ability to accurately estimate CMS retroactive risk adjustments to Medicare premiums; the Company’s ability to estimate assets and liabilities with respect to funds provided by CMS and held and administered for the benefit of members; increasing competition from other Medicare plan offerings; the Company's ability to accurately estimate incurred but not reported medical claims; changes in estimated fair values of goodwill and other intangible assets as a result of, among other things, prolonged declines in the Company’s market capitalization; negotiation of acceptable contracts with physicians, hospitals, and other providers; contractual disputes with providers; increases in costs or liabilities associated with litigation; costs associated with compliance with regulatory mandates and with responding to regulatory audits; management changes; substantial changes in interest rates over a prolonged period; and changes in tax estimates, assets, or liabilities and valuation allowances related thereto. The foregoing list of factors is not intended to be exhaustive. Additional information concerning these and other important risks and uncertainties can be found under the headings "Special Note Regarding Forward-Looking Statements" and "Item 1A. - Risk Factors" in the Company's Annual Report on Form 10-K for the year ended December 31, 2008.

Source: HealthSpring, Inc.

HealthSpring, Inc.
Lankford Wade, 615-236-6200
Senior Vice President & Treasurer