Cash Flow and Financial Condition

Net cash used in operating activities as determined under GAAP was $31 million for the year ended December 31, 2012, compared with net cash provided by operating activities of $162 million for the year ended December 31, 2011.

Modified for the timing of receipts from, and payments to, WellCare’s government customers, net cash provided by operating activities was $145 million for 2012, compared with $263 million for 2011. The decrease in the Company’s operating cash flow is primarily the result of the $122 million decrease in income before taxes, as determined under GAAP, in 2012 compared with 2011, as well as an increase in federal and state income tax payments, that were partially offset by a decrease in payments related to resolving government investigations and related litigation.

As of December 31, 2012, unregulated cash and investments were approximately $194 million, compared with $350 million as of September 30, 2012. The decrease during the fourth quarter resulted primarily from payments for acquisitions as well as capital contributions to certain of the Company’s regulated entities, offset in part by dividends from certain regulated companies.

Days in claims payable were 40 days as of December 31, 2012, compared with 40 days as of September 30, 2012, and 54 days as of December 31, 2011.

Financial Outlook

The Company is providing its financial outlook for the year ending December 31, 2013:
  • Adjusted net income per diluted share is expected to be between approximately $4.50 and $4.85.
  • Premium revenue in total is expected to be between $8.7 and $8.8 billion.
  • Premium revenues and MBRs for each of the Company’s segments are anticipated as follows:
Segments     Premium Revenue Year-over-year Changes     MBRs
Medicaid     Increase 14% to 16%     87.25% to 88.25%
Medicare Advantage     Increase approximately 50%     86.50% to 87.50%
Medicare PDP     Decrease 20% to 25%     83.75% to 84.75%
  • The adjusted administrative expense ratio is expected to be between approximately 8.7% and 8.9%.

All elements of the Company’s outlook exclude the impact of Medicaid premium taxes. The Company’s outlook does not include the pending acquisition of Missouri Care.

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