Coventry Health Care, Inc. (CVH) today reported consolidated operating results for the quarter ended December 31, 2009. Operating revenues totaled $3.4 billion for the quarter with net earnings of $109.1 million, or $0.74 earnings per diluted share (EPS). For the year ended December 31, 2009, total revenues from continuing operations were $13.9 billion with net earnings from continuing operations of $315.3 million, or $2.14 per diluted share.

"I am pleased with the progress that the Company has made during 2009 including a strong finish to the year in the fourth quarter," said Allen F. Wise, chairman and chief executive officer of Coventry. "Although we continue to operate in a challenging economic environment, as we enter 2010 we remain confident that our focus on Coventry’s seven core businesses will best position us for the future."

Fourth Quarter 2009 Consolidated Highlights

-- Revenues from continuing operations increased 15.2% from the prior year quarter

-- Medicare Coordinated Care Product (CCP) membership growth of 36% from the prior year quarter

-- Medicare Part D membership growth of 47,000 from the prior quarter

-- Health plan commercial group risk medical loss ratio of 82.9%

-- Excellent liquidity position -- Approximately $510 million of deployable free cash at the parent at quarter-end

-- Debt repayment of $110 million during the quarter

-- Investment portfolio continues to be in a net unrealized gain position at quarter-end

-- Announced agreement to acquire Preferred Health Systems, Inc., a commercial health plan based in Wichita, Kansas, which closed on February 1, 2010

Full Year 2009 Consolidated Highlights

-- Revenues from continuing operations increased 18.5% from the prior year

-- Fourth consecutive year of strong performance from Medicare Part D including growth of 752,000 members from the prior year, an increase of 81%

-- Health plan commercial group risk medical loss ratio of 81.9%

-- Individual commercial risk membership growth of 23,000 from the prior year

-- Cash flows from operations were $881.8 million

-- Debt reduction of $303.5 million from the prior year resulting in a 30.1% debt to capital ratio at year-end

-- Completed the divestiture of a non-core business, First Health Services Corporation (FHSC), during the third quarter of 2009

Selected Fourth Quarter and Full Year 2009 Highlights

-- Health Plan Commercial Group Premium Yield & Medical Loss Ratio (MLR). Reported commercial group risk premium yields rose to $306.75 PMPM (per member per month) in the quarter, an increase of 5.9% from the prior year quarter. Reported commercial group risk premium yields rose to $301.63 PMPM for the year, an increase of 5.4% from the prior year. The health plan commercial group risk MLR was 82.9% in the quarter, a decrease of 30 basis points from the prior year quarter.

-- Medicare Advantage Membership & MLR. As of December 31, 2009, Medicare Advantage membership was 515,000, an increase of 135,000 members from the prior year. Medicare Advantage CCP membership was 186,000, an increase of 49,000 members from the prior year. The Medicare Advantage MLR was 89.4% in the quarter, a decrease of 150 basis points from the prior year quarter. The Medicare Advantage PFFS product line contributed $0.06 per diluted share in the fourth quarter. When combined with the contribution of $0.07 per diluted share previously reported for third quarter year-to-date, the total contribution from the Medicare Advantage PFFS product line was $0.13 per diluted share for full year 2009. As previously announced, the Company has exited this product line effective January 1, 2010.

-- Medicare Part D Membership & MLR. As of December 31, 2009, Medicare Part D membership was 1,683,000, an increase of 47,000 members from the prior quarter and 752,000 members from the prior year. The Medicare Part D MLR was 64.4% in the quarter and 85.7% for the full year.

-- Medicaid Membership. As of December 31, 2009, Medicaid membership was 402,000, an increase of 11,000 members from the prior quarter. The Medicaid MLR was 85.8% in the quarter, a decrease of 10 basis points from the prior year quarter.

-- First Health Services Corporation Divestiture. As previously disclosed, the FHSC divestiture closed on July 31, 2009. In accordance with GAAP, the historical FHSC results of operations are classified as discontinued operations and are excluded from consolidated continuing operations for each period presented. In addition to the results of FHSC operations, the discontinued operations for the full year period of 2009 includes charges to reflect the impact of the FHSC divestiture. As previously disclosed, during 2009 the Company recorded a primarily non-cash charge of $0.56 per diluted share to complete the divestiture. When combined with the $0.06 of EPS generated from FHSC operating results during Coventry’s ownership period ending July 31, 2009, the total EPS from discontinued operations was a loss of $0.50 for the year ended December 31, 2009.

2010 Full Year Guidance

-- Risk revenue of $9.74 billion to $10.20 billion

-- Management services revenue of $1.12 billion to $1.17 billion

-- Consolidated revenue of $10.86 billion to $11.37 billion

-- Consolidated MLR of 82.7% to 83.5%

-- Cost of sales expense of $235.0 million to $245.0 million

-- Selling, general, and administrative expense (SG&A) of $1.92 billion to $1.96 billion

-- Depreciation and amortization expense of $137.0 million to $145.0 million

-- Other income of $78.0 million to $84.0 million

-- Interest expense of $80.0 million to $86.0 million

-- Tax rate of 37.0% to 38.0%

-- Diluted share count of 144.0 million to 147.5 million

-- EPS on a diluted basis of $2.10 to $2.25

Mr. Allen F. Wise, chairman and chief executive officer of Coventry, will host a conference call at 8:00 a.m. ET on Tuesday, February 9, 2010. To listen to the call, dial toll-free at (800) 581-5838 or, for international callers, (719) 785-1754. Callers will be asked to identify themselves and their affiliations. The conference call will also be webcast from Coventry’s Investor Relations site at www.coventryhealthcare.com. Coventry asks participants on both the call and webcast to review and be familiar with its filings with the Securities and Exchange Commission. A replay of the call will be available for one week at (888) 203-1112 or, for international callers, (719) 457-0820. The access code is 7360942.

This press release contains forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are defined as statements that are not historical facts and include those statements relating to future events or future financial performance. Actual performance may be significantly impacted by certain risks and uncertainties including those described in Coventry’s Annual Report on Form 10-K for the year ended December 31, 2008 and Coventry’s Form 10-Q for the quarter ended September 30, 2009. Coventry undertakes no obligation to update or revise any forward-looking statements.

Coventry Health Care (www.coventryhealthcare.com) is a diversified national managed healthcare company based in Bethesda, Maryland, operating health plans, insurance companies, network rental and workers’ compensation services companies. Coventry provides a full range of risk and fee-based managed care products and services to a broad cross section of individuals, employer and government-funded groups, government agencies, and other insurance carriers and administrators.

COVENTRY HEALTH CARE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except per share data)
                                                                Quarters Ended                        Years Ended
                                                                December 31,                          December 31,
                                                                2009               2008               2009                2008
Operating revenues:                                             (unaudited)        (unaudited)        (unaudited)
Managed care premiums                                           $   3,121,527      $   2,671,463      $   12,717,399      $  10,563,163
Management services                                                 306,620            305,279            1,186,127          1,171,064
Total operating revenues                                            3,428,147          2,976,742          13,903,526         11,734,227
Operating expenses:
Medical costs                                                       2,598,291          2,237,629          10,859,394         8,868,579
Cost of sales                                                       62,548             56,562             240,828            195,600
Selling, general, administrative                                    544,656            529,658            2,151,799          1,940,820
Depreciation and amortization                                       39,246             34,298             149,554            143,699
Total operating expenses                                            3,244,741          2,858,147          13,401,575         11,148,698
Operating earnings                                                  183,406            118,595            501,951            585,529
Operating earnings percentage of total revenues                     5.4       %        4.0       %        3.6        %       5.0        %
Interest expense                                                    20,272             25,840             84,875             96,386
Other income, net                                                   17,704             30,426             87,478             82,718
Earnings before income taxes                                        180,838            123,181            504,554            571,861
Provision for income taxes                                          71,758             41,835             189,220            209,861
Income from continuing operations                                   109,080            81,346             315,334            362,000
Income (loss) from discontinued operations, net of tax              -                  6,895              (73,033    )       19,895
Net earnings                                                    $   109,080        $   88,241         $   242,301         $  381,895
Net earnings per share:
Basic earnings per share from continuing operations             $   0.75           $   0.55           $   2.15            $  2.43
Basic earnings (loss) per share from discontinued operations        -                  0.05               (0.50      )       0.13
Total basic earnings per share                                  $   0.75           $   0.60           $   1.65            $  2.56
Diluted earnings per share from continuing operations           $   0.74           $   0.55           $   2.14            $  2.41
Diluted earnings (loss) per share from discontinued operations      -                  0.05               (0.50      )       0.13
Total diluted earnings per share                                $   0.74           $   0.60           $   1.64            $  2.54
Weighted average shares outstanding, basic                          145,751            146,813            146,652            148,893
Weighted average shares outstanding, diluted                        146,885            147,159            147,395            150,208

COVENTRY HEALTH CARE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands)
                                            December 31,      September 30,     December 31,
                                            2009              2009              2008
                                            (unaudited)       (unaudited)
Assets:
Current assets:
Cash and cash equivalents                   $      1,418,554  $      1,691,847  $      1,123,114
Short-term investments                             442,106           355,417           338,129
Accounts receivable, net                           258,993           259,775           293,636
Other receivables, net                             496,059           501,348           524,803
Other current assets                               234,446           156,837           130,808
Total current assets                               2,850,158         2,965,224         2,410,490
Long-term investments                              1,994,987         1,888,670         1,709,878
Property and equipment, net                        271,931           270,153           308,016
Goodwill                                           2,529,284         2,535,718         2,695,025
Other intangible assets, net                       471,693           491,164           546,168
Other long-term assets                             48,479            33,949            57,821
Total assets                                $      8,166,532  $      8,184,878  $      7,727,398
Liabilities and Stockholders’ Equity:
Current liabilities:
Medical liabilities                         $      1,605,407  $      1,702,855  $      1,446,391
Accounts payable and accrued liabilities           682,171           630,190           474,561
Deferred revenue                                   110,855           107,172           104,823
Total current liabilities                          2,398,433         2,440,217         2,025,775
Long-term debt                                     1,599,027         1,708,935         1,902,472
Other long-term liabilities                        456,518           433,077           368,482
Total liabilities                                  4,453,978         4,582,229         4,296,729
Stockholders’ equity                               3,712,554         3,602,649         3,430,669
Total liabilities and stockholders’ equity  $      8,166,532  $      8,184,878  $      7,727,398

COVENTRY HEALTH CARE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(unaudited)
                                                            Quarter Ended      Year Ended
                                                            December 31, 2009  December 31, 2009
Cash flows from operating activities:
Net earnings                                                $     109,080      $     242,301
Adjustments to earnings:
Depreciation and amortization                                     39,246             151,815
Amortization of stock compensation                                9,716              47,047
Loss on disposal of FHSC                                          -                  81,557
Gain on repurchase of debt                                        -                  (8,371    )
Changes in assets and liabilities:
Accounts receivable, net                                          782                12,258
Medical liabilities                                               (97,447   )        159,095
Accounts payable and other accrued liabilities                    91,711             223,182
Deferred revenue                                                  3,683              9,514
Other operating activities                                        (63,769   )        (36,555   )
Net cash flows from operating activities                          93,002             881,843
Cash flows from investing activities:
Capital expenditures, net                                         (25,529   )        (60,323   )
Payments for investments, net of sales and maturities             (210,025  )        (325,816  )
Proceeds from acquisition settlements                             -                  10,197
Proceeds from FHSC disposal, net                                  -                  115,437
Net cash flows from investing activities                          (235,554  )        (260,505  )
Cash flows from financing activities:
Proceeds from issuance of stock                                   130                1,224
Payments for repurchase of stock                                  (21,051   )        (32,796   )
Repayment of debt                                                 (110,000  )        (294,930  )
Excess tax benefit from stock compensation                        180                604
Net cash flows from financing activities                          (130,741  )        (325,898  )
Net change in cash and cash equivalents for current period        (273,293  )        295,440
Cash and cash equivalents at beginning of period                  1,691,847          1,123,114
Cash and cash equivalents at end of period                  $     1,418,554    $     1,418,554
Cash and Investments:
Cash and cash equivalents                                   $     1,418,554    $     1,418,554
Short-term investments                                            442,106            442,106
Long-term investments                                             1,994,987          1,994,987
Total cash and investments                                  $     3,855,647    $     3,855,647

COVENTRY HEALTH CARE, INC.
SELECTED OPERATING STATISTICS
(Unaudited)
                                                   Total             Q4 2009          Q3 2009          Q2 2009          Q1 2009          Total
                                                   2009                                                                                  2008
Membership by Product (000s)
Health Plan Commercial Risk                                             1,418            1,431            1,477            1,501            1,575
Health Plan Commercial ASO                                              685              689              697              702              714
Medicare Advantage CCP                                                  186              185              182              176              137
Medicaid Risk                                                           402              391              385              375              371
Health Plan Total                                                       2,691            2,696            2,741            2,754            2,797
Medicare Advantage PFFS                                                 329              336              329              318              243
Other National Risk                                                     2                5                15               21               24
Other National ASO                                                      564              567              571              575              633
Total Medical Membership                                                3,586            3,604            3,656            3,668            3,697
Medicare Part D                                                         1,683            1,636            1,555            1,501            931
Total Membership                                                        5,269            5,240            5,211            5,169            4,628
Revenues by Product Type (000s)
Commercial Risk                                    $  5,174,772      $  1,257,335     $  1,279,571     $  1,310,645     $  1,327,221     $  5,421,984
Commercial Management Services                        346,042           96,896           81,661           83,675           83,810           352,369
Medicare Advantage                                    4,901,918         1,247,725        1,268,592        1,224,011        1,161,590        3,177,244
Medicaid Risk                                         1,066,231         261,208          281,146          263,039          260,838          1,087,189
Total Health Plan and Medical Services Businesses     11,488,963        2,863,164        2,910,970        2,881,370        2,833,459        10,038,786
Medicare Part D                                       1,545,858         347,991          316,654          397,090          484,123          847,702
Other Premiums                                        94,562            23,291           23,568           23,746           23,957           64,783
Other Management Services(1)                          850,184           212,054          211,769          215,468          210,893          826,321
Total Specialized Managed Care Businesses(1)          2,490,604         583,336          551,991          636,304          718,973          1,738,806
Total Premiums                                        12,783,341        3,137,550        3,169,531        3,218,531        3,257,729        10,598,902
Total Management Services(1)                          1,196,226         308,950          293,430          299,143          294,703          1,178,690
Other/Eliminations                                    (76,041    )      (18,353   )      (18,851   )      (19,300   )      (19,537   )      (43,365    )
Total Revenue(1)                                   $  13,903,526     $  3,428,147     $  3,444,110     $  3,498,374     $  3,532,895     $  11,734,227
Consolidated Coventry
Operating Income % of Revenues(1)                     3.6        %      5.4       %      4.4       %      2.9       %      1.8       %      5.0        %
SGA % of Revenues(1)                                  15.5       %      15.9      %      15.3      %      15.3      %      15.4      %      16.5       %
Total Medical Liabilities (000s)                                     $  1,373,707     $  1,428,766     $  1,413,243     $  1,416,735     $  1,243,620
Days in Claims Payable (DCP)                                            53.53            54.78            54.07            55.11            54.75
Total Debt (millions)                                                $  1,599.0       $  1,708.9       $  1,806.8       $  1,902.6       $  1,902.5
Total Capital (millions)                                             $  5,311.6       $  5,311.6       $  5,332.9       $  5,402.8       $  5,333.1
Debt to Capital                                                         30.1      %      32.2      %      33.9      %      35.2      %      35.7       %
1) Operating statistics excluding discontinued operations.

COVENTRY HEALTH CARE, INC.
SELECTED REVENUE AND MEDICAL COST STATISTICS
(Unaudited)
                                   Total       Q4 2009       Q3 2009       Q2 2009       Q1 2009       Total
                                   2009                                                                2008
Revenue PMPM
Health Plan Commercial Group Risk  $ 301.63    $  306.75     $  304.13     $  299.79     $  296.36     $ 286.30
Medicare Advantage(2)              $ 855.16    $  849.62     $  853.90     $  857.05     $  860.46     $ 862.60
Medicare Part D(3)                 $ 84.40     $  83.42      $  84.63      $  85.27      $  84.35      $ 88.34
Medicaid Risk                      $ 229.94    $  218.62     $  239.22     $  230.27     $  231.93     $ 208.50
MLR %
Consolidated Total                   85.4   %     83.2   %      84.4   %      86.4   %      87.4   %     84.0   %
Health Plan Commercial Group Risk    81.9   %     82.9   %      82.1   %      81.7   %      80.9   %     81.7   %
Medicare Advantage                   89.9   %     89.4   %      89.4   %      90.4   %      90.5   %     89.0   %
Medicare Part D                      85.7   %     64.4   %      79.4   %      89.9   %      101.8  %     84.1   %
Medicaid Risk                        87.6   %     85.8   %      86.1   %      90.2   %      88.3   %     85.3   %

2)  Revenue PMPM excludes the impact of revenue ceded to external
    parties.
3)  Revenue PMPM excludes the impact of CMS risk-share premium
    adjustments and revenue ceded to external parties.

SOURCE: Coventry Health Care, Inc.

Coventry Health Care, Inc. 
John Stelben 
Interim Chief Financial Officer 
301-581-5729 
or 
Drew Asher 
SVP, Corporate Finance 
301-581-5717