þ
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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¨
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Delaware
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61-0647538
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(State of incorporation)
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(I.R.S. Employer Identification Number)
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500 West Main Street Louisville, Kentucky
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40202
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(Address of principal executive offices)
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(Zip Code)
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Registrant’s telephone number, including area code: (502) 580-1000
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class
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Name of exchange on which registered
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Common stock, $0.16 2/3 par value
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New York Stock Exchange
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Page
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Part I
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Item 1.
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Item 1A.
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Item 1B.
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Item 2.
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Item 3.
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Item 4.
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Part II
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Item 5.
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Item 6.
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Item 7.
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Item 7A.
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Item 8.
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Item 9.
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Item 9A.
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Item 9B.
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Part III
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Item 10.
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Item 11.
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Item 12.
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Item 13.
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Item 14.
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Part IV
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Item 15.
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Item 16.
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Retail Segment
Premiums and Services Revenue |
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Percent of
Consolidated Premiums and Services Revenue |
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(dollars in millions)
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Premiums:
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Individual Medicare Advantage
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$
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35,656
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63.2
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%
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Group Medicare Advantage
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6,103
|
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10.8
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%
|
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Medicare stand-alone PDP
|
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3,584
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6.4
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%
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Total Retail Medicare
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45,343
|
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80.4
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%
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State-based Medicaid
|
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2,255
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4.0
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%
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Medicare Supplement
|
|
510
|
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0.9
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%
|
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Total premiums
|
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48,108
|
|
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85.3
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%
|
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Services
|
|
11
|
|
|
—
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%
|
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Total premiums and services revenue
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$
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48,119
|
|
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85.3
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%
|
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Group and Specialty
Segment Premiums and Services Revenue |
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Percent of
Consolidated Premiums and Services Revenue |
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(dollars in millions)
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External Revenue:
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Premiums:
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Fully-insured commercial group
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$
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5,444
|
|
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9.7
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%
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Specialty
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1,359
|
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2.4
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%
|
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Total premiums
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6,803
|
|
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12.1
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%
|
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Services
|
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835
|
|
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1.5
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%
|
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Total premiums and services revenue
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$
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7,638
|
|
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13.6
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%
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Intersegment services revenue
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$
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18
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n/a
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Healthcare Services
Segment Services Revenue |
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Percent of
Consolidated Premiums and Services Revenue |
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(dollars in millions)
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Intersegment revenue:
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Pharmacy solutions
|
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$
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20,514
|
|
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n/a
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Provider services
|
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1,994
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n/a
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Clinical care services
|
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662
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n/a
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Total intersegment revenue
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$
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23,170
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External services revenue:
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Pharmacy solutions
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$
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203
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0.4
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%
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Provider services
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228
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0.4
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%
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Clinical care services
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176
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0.3
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%
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Total external services revenue
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$
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607
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1.1
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%
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Retail Segment
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Group and Specialty Segment
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(in thousands)
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Individual
Medicare Advantage |
Group
Medicare Advantage |
Medicare stand- alone PDP |
Medicare Supplement
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State-
based contracts |
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Fully-
insured commercial Group |
ASO
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Military services
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Total
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Percent
of Total |
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Florida
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636.8
|
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9.9
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234.2
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11.4
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333.4
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125.7
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36.2
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—
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1,387.6
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8.4
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%
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Texas
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246.9
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241.9
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305.1
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10.6
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—
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171.6
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30.4
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—
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1,006.5
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6.1
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%
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Kentucky
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89.0
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63.7
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215.6
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5.8
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—
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112.6
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138.5
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—
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625.2
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3.8
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%
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California
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70.9
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0.2
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484.4
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20.3
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—
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—
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—
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—
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575.8
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3.5
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%
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Georgia
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114.2
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2.2
|
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124.5
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11.1
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—
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|
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158.5
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45.2
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—
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455.7
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2.7
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%
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Illinois
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108.7
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23.3
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185.2
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5.7
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7.7
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46.0
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76.8
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—
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453.4
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2.7
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%
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Ohio
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128.6
|
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22.1
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184.3
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45.8
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—
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44.6
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27.5
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—
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452.9
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2.7
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%
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Missouri/Kansas
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82.5
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4.9
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227.2
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9.1
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—
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45.0
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17.4
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—
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386.1
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2.3
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%
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North Carolina
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149.5
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0.5
|
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172.6
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6.0
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—
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—
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—
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—
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328.6
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2.0
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%
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Tennessee
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144.3
|
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4.3
|
|
117.2
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4.9
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—
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41.4
|
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12.9
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—
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325.0
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2.0
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%
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Louisiana
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161.1
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12.1
|
|
61.3
|
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2.2
|
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—
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59.6
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13.5
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—
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309.8
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1.9
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%
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Wisconsin
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58.7
|
|
10.0
|
|
121.6
|
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6.3
|
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—
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|
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68.7
|
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36.8
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—
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302.1
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1.8
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%
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Indiana
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103.5
|
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6.8
|
|
145.8
|
|
9.0
|
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—
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|
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21.2
|
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12.6
|
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—
|
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298.9
|
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1.8
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%
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Virginia
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121.6
|
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3.1
|
|
159.1
|
|
8.6
|
|
—
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|
|
—
|
|
—
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|
—
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|
292.4
|
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1.8
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%
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Michigan
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52.9
|
|
12.9
|
|
140.2
|
|
3.4
|
|
—
|
|
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2.8
|
|
0.4
|
|
—
|
|
212.6
|
|
1.3
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%
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Arizona
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76.0
|
|
0.4
|
|
97.6
|
|
4.8
|
|
—
|
|
|
25.0
|
|
5.5
|
|
—
|
|
209.3
|
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1.3
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%
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Pennsylvania
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46.6
|
|
0.4
|
|
156.2
|
|
4.7
|
|
—
|
|
|
—
|
|
—
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|
—
|
|
207.9
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1.2
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%
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South Carolina
|
87.0
|
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0.5
|
|
71.3
|
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5.2
|
|
—
|
|
|
—
|
|
—
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|
—
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|
164.0
|
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1.0
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%
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Military services
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
—
|
|
—
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|
5,928.6
|
|
5,928.6
|
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35.8
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%
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Others
|
585.2
|
|
78.6
|
|
1,800.9
|
|
79.4
|
|
—
|
|
|
82.0
|
|
28.2
|
|
—
|
|
2,654.3
|
|
15.9
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%
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Totals
|
3,064.0
|
|
497.8
|
|
5,004.3
|
|
254.3
|
|
341.1
|
|
|
1,004.7
|
|
481.9
|
|
5,928.6
|
|
16,576.7
|
|
100.0
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%
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•
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increased use of medical facilities and services;
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•
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increased cost of such services;
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•
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increased use or cost of prescription drugs, including specialty prescription drugs;
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•
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the introduction of new or costly treatments, including new technologies;
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•
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our membership mix;
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•
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variances in actual versus estimated levels of cost associated with new products, benefits or lines of business, product changes or benefit level changes;
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•
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changes in the demographic characteristics of an account or market;
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•
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changes or reductions of our utilization management functions such as preauthorization of services, concurrent review or requirements for physician referrals;
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•
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changes in our pharmacy volume rebates received from drug manufacturers;
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catastrophes, including acts of terrorism, public health epidemics, or severe weather (e.g. hurricanes and earthquakes);
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medical cost inflation; and
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government mandated benefits or other regulatory changes, including any that result from the Health Care Reform Law.
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•
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claims relating to the methodologies for calculating premiums;
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•
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claims relating to the denial of health care benefit payments;
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claims relating to the denial or rescission of insurance coverage;
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challenges to the use of some software products used in administering claims;
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claims relating to our administration of our Medicare Part D offerings;
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medical malpractice actions based on our medical necessity decisions or brought against us on the theory that we are liable for providers' alleged malpractice;
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claims arising from any adverse medical consequences resulting from our recommendations about the appropriateness of providers’ proposed medical treatment plans for patients;
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•
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allegations of anti-competitive and unfair business activities;
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provider disputes over compensation or non-acceptance or termination of provider contracts;
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disputes related to ASO business, including actions alleging claim administration errors;
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qui tam litigation brought by individuals who seek to sue on behalf of the government, alleging that we, as a government contractor, submitted false claims to the government including, among other allegations, resulting from coding and review practices under the Medicare risk-adjustment model;
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claims related to the failure to disclose some business practices;
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claims relating to customer audits and contract performance;
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claims relating to dispensing of drugs associated with our in-house mail-order pharmacy; and
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professional liability claims arising out of the delivery of healthcare and related services to the public.
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•
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At December 31,
2018
, under our contracts with CMS we provided health insurance coverage to approximately
636,800
individual Medicare Advantage members in Florida. These contracts accounted for
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•
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At December 31, 2018, our military services business, which accounted for approximately
1%
of our total premiums and services revenue for the
year ended December 31, 2018
, primarily consisted of the TRICARE T2017 East Region contract replacing the 5-year T3 South Region contract that expired on December 31, 2017.
The T2017 East Region contract is a consolidation of the former T3 North and South Regions, comprising thirty-two states and approximately 6 million TRICARE beneficiaries, under which delivery of health care services commenced on January 1, 2018.
The T2017 East Region contract is a
5
-year contract set to expire on December 31, 2022 and is subject to renewals on January 1 of each year during its term at the government's option.
The loss of the TRICARE T2017 East Region contract may have a material adverse effect on our results of operations, financial position, and cash flows.
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•
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There is a possibility of temporary or permanent suspension from participating in government health care programs, including Medicare and Medicaid, if we are convicted of fraud or other criminal conduct in the performance of a health care program or if there is an adverse decision against us under the federal False Claims Act. As a government contractor, we may be subject to qui tam litigation brought by individuals who seek to sue on behalf of the government, alleging that the government contractor submitted false claims to the government. Litigation of this nature is filed under seal to allow the government an opportunity to investigate and to decide if it wishes to intervene and assume control of the litigation. If the government does not intervene, the lawsuit is unsealed, and the individual may continue to prosecute the action on his or her own.
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•
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CMS uses a risk-adjustment model which adjusts premiums paid to Medicare Advantage, or MA, plans according to health status of covered members. The risk-adjustment model, which CMS implemented pursuant to the Balanced Budget Act of 1997 (BBA) and the Benefits Improvement and Protection Act of 2000 (BIPA), generally pays more where a plan's membership has higher expected costs. Under this model, rates paid to MA plans are based on actuarially determined bids, which include a process whereby our prospective payments are based on our estimated cost of providing standard Medicare-covered benefits to an enrollee with a "national average risk profile." That baseline payment amount is adjusted to reflect the health status of our enrolled membership. Under the risk-adjustment methodology, all MA plans must collect and submit the necessary diagnosis code information from hospital inpatient, hospital outpatient, and physician providers to CMS within prescribed deadlines. The CMS risk-adjustment model uses the diagnosis data to calculate the risk-adjusted premium payment to MA plans, which CMS adjusts for coding pattern differences between the health plans and the government fee-for-service program. We generally rely on providers, including certain providers in our network who are our employees, to code their claim submissions with appropriate diagnoses, which we send to CMS as the basis for our payment received from CMS under the actuarial risk-adjustment model. We also rely on these providers to document appropriately all medical data, including the diagnosis data submitted with claims. In addition, we conduct medical record reviews as part of our data and payment accuracy compliance efforts, to more accurately reflect diagnosis conditions under the risk adjustment model. These compliance efforts include the internal contract level audits described in more detail below, as well as ordinary course reviews of our internal business processes.
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•
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Our CMS contracts which cover members’ prescription drugs under Medicare Part D contain provisions for risk sharing and certain payments for prescription drug costs for which we are not at risk. These provisions, certain of which are described below, affect our ultimate payments from CMS.
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•
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We are also subject to various other governmental audits and investigations. Under state laws, our HMOs and health insurance companies are audited by state departments of insurance for financial and contractual compliance. Our HMOs are audited for compliance with health services by state departments of health. Audits and investigations, including audits of risk adjustment data, are also conducted by state attorneys
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Medical
Centers |
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Administrative
Offices |
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|||||||||
|
Owned
|
|
Leased
|
|
Owned
|
|
Leased
|
|
Total
|
|||||
Florida
|
13
|
|
|
207
|
|
|
—
|
|
|
69
|
|
|
289
|
|
Texas
|
1
|
|
|
17
|
|
|
2
|
|
|
14
|
|
|
34
|
|
Kentucky
|
2
|
|
|
3
|
|
|
15
|
|
|
12
|
|
|
32
|
|
Arizona
|
—
|
|
|
17
|
|
|
—
|
|
|
6
|
|
|
23
|
|
Louisiana
|
—
|
|
|
6
|
|
|
—
|
|
|
10
|
|
|
16
|
|
Virginia
|
—
|
|
|
8
|
|
|
—
|
|
|
7
|
|
|
15
|
|
Illinois
|
—
|
|
|
5
|
|
|
—
|
|
|
10
|
|
|
15
|
|
California
|
—
|
|
|
2
|
|
|
—
|
|
|
12
|
|
|
14
|
|
Ohio
|
—
|
|
|
1
|
|
|
—
|
|
|
13
|
|
|
14
|
|
South Carolina
|
—
|
|
|
6
|
|
|
—
|
|
|
6
|
|
|
12
|
|
New York
|
—
|
|
|
—
|
|
|
—
|
|
|
13
|
|
|
13
|
|
Nevada
|
—
|
|
|
7
|
|
|
—
|
|
|
5
|
|
|
12
|
|
Puerto Rico
|
—
|
|
|
1
|
|
|
—
|
|
|
10
|
|
|
11
|
|
Indiana
|
—
|
|
|
5
|
|
|
—
|
|
|
5
|
|
|
10
|
|
Georgia
|
—
|
|
|
8
|
|
|
—
|
|
|
3
|
|
|
11
|
|
Washington
|
—
|
|
|
7
|
|
|
—
|
|
|
4
|
|
|
11
|
|
Tennessee
|
—
|
|
|
—
|
|
|
—
|
|
|
9
|
|
|
9
|
|
New Jersey
|
—
|
|
|
—
|
|
|
—
|
|
|
9
|
|
|
9
|
|
Colorado
|
—
|
|
|
5
|
|
|
—
|
|
|
3
|
|
|
8
|
|
Michigan
|
—
|
|
|
5
|
|
|
—
|
|
|
3
|
|
|
8
|
|
North Carolina
|
—
|
|
|
2
|
|
|
—
|
|
|
4
|
|
|
6
|
|
Others
|
—
|
|
|
9
|
|
|
1
|
|
|
38
|
|
|
48
|
|
Total
|
16
|
|
|
321
|
|
|
18
|
|
|
265
|
|
|
620
|
|
Record
Date
|
|
Payment
Date
|
|
Amount
per Share
|
|
Total
Amount
|
|
|
|
|
|
|
(in millions)
|
2017 payments
|
|
|
|
|
|
|
1/12/2017
|
|
1/27/2017
|
|
$0.29
|
|
$43
|
3/31/2017
|
|
4/28/2017
|
|
$0.40
|
|
$58
|
6/30/2017
|
|
7/31/2017
|
|
$0.40
|
|
$58
|
9/29/2017
|
|
10/27/2017
|
|
$0.40
|
|
$57
|
2018 payments
|
|
|
|
|
|
|
12/29/2017
|
|
1/26/2018
|
|
$0.40
|
|
$55
|
3/30/2018
|
|
4/27/2018
|
|
$0.50
|
|
$69
|
6/29/2018
|
|
7/27/2018
|
|
$0.50
|
|
$69
|
9/28/2018
|
|
10/26/2018
|
|
$0.50
|
|
$69
|
|
12/31/2013
|
|
12/31/2014
|
|
12/31/2015
|
|
12/31/2016
|
|
12/31/2017
|
|
12/31/2018
|
||||||||||||
HUM
|
$
|
100
|
|
|
$
|
140
|
|
|
$
|
176
|
|
|
$
|
202
|
|
|
$
|
247
|
|
|
$
|
287
|
|
S&P 500
|
$
|
100
|
|
|
$
|
114
|
|
|
$
|
115
|
|
|
$
|
129
|
|
|
$
|
157
|
|
|
$
|
150
|
|
Peer Group
|
$
|
100
|
|
|
$
|
128
|
|
|
$
|
135
|
|
|
$
|
137
|
|
|
$
|
173
|
|
|
$
|
191
|
|
Period
|
Total Number
of Shares Purchased (1) |
|
Average
Price Paid per Share |
|
Total Number of
Shares Purchased as Part of Publicly Announced Plans or Programs (1)(2) |
|
Dollar Value of
Shares that May Yet Be Purchased Under the Plans or Programs (1) (2) |
||||||
October 2018
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
$
|
1,776,354,011
|
|
November 2018
|
1,937,797
|
|
|
309.63
|
|
|
1,937,797
|
|
|
1,176,354,010
|
|
||
December 2018
|
—
|
|
|
—
|
|
|
—
|
|
|
1,176,354,010
|
|
||
Total
|
1,937,797
|
|
|
$
|
309.63
|
|
|
1,937,797
|
|
|
|
(1)
|
On December 14, 2017, our Board of Directors authorized the repurchase of up to
$3.0 billion
of our common shares expiring on December 31, 2020, exclusive of shares repurchased in connection with employee stock plans.
Under the share repurchase authorization, shares may be purchased from time to time at prevailing prices in the open market, by block purchases, through plans designed to comply with Rule 10b5-1 under the Securities Exchange Act of 1934, as amended, or in privately-negotiated transactions, including pursuant to accelerated share repurchase agreements with investment banks, subject to certain regulatory restrictions on volume, pricing, and timing. On November 28, 2018, we entered into an accelerated stock repurchase agreement, the November 2018 ASR, with Goldman, Sachs & Co. LLC, or Goldman Sachs, to repurchase $750 million
of our common stock as part of the
$3.0 billion
share repurchase program authorized by the Board of Directors on December 14, 2017.
On November 29, 2018, we made a payment of $750 million to Goldman Sachs from available cash on hand and received an initial delivery of 1.94 million shares
of our common stock from Goldman Sachs.
The payment to Goldman Sachs was recorded as a reduction to stockholders’ equity, consisting of an $600 million increase in treasury stock, which reflects the value of the initial 1.94 million shares received upon initial settlement, and a $150 million decrease in capital in excess of par value, which reflected the value of stock held back by Goldman Sachs pending final settlement of the November 2018 ASR. Our remaining repurchase authorization was approximately
$1,176 million
as of February 21, 2019, excluding the
$150 million
pending final settlement of our November 2018 ASR.
|
(2)
|
Excludes 0.15 million shares repurchased in connection with employee stock plans.
|
|
2018
|
|
2017
|
|
2016 (a)
|
|
2015
|
|
2014
|
||||||||||
|
(dollars in millions, except per common share results)
|
||||||||||||||||||
Summary of Operating Results:
|
|
|
|
|
|
|
|
|
|
||||||||||
Revenues:
|
|
|
|
|
|
|
|
|
|
||||||||||
Premiums
|
$
|
54,941
|
|
|
$
|
52,380
|
|
|
$
|
53,021
|
|
|
$
|
52,409
|
|
|
$
|
45,959
|
|
Services
|
1,457
|
|
|
982
|
|
|
969
|
|
|
1,406
|
|
|
2,164
|
|
|||||
Investment income
|
514
|
|
|
405
|
|
|
389
|
|
|
474
|
|
|
377
|
|
|||||
Total revenues
|
56,912
|
|
|
53,767
|
|
|
54,379
|
|
|
54,289
|
|
|
48,500
|
|
|||||
Operating expenses:
|
|
|
|
|
|
|
|
|
|
||||||||||
Benefits
|
45,882
|
|
|
43,496
|
|
|
45,007
|
|
|
44,269
|
|
|
38,166
|
|
|||||
Operating costs
|
7,525
|
|
|
6,567
|
|
|
7,173
|
|
|
7,295
|
|
|
7,639
|
|
|||||
Merger termination fee and related costs, net
|
—
|
|
|
(936
|
)
|
|
104
|
|
|
23
|
|
|
—
|
|
|||||
Depreciation and amortization
|
405
|
|
|
378
|
|
|
354
|
|
|
355
|
|
|
333
|
|
|||||
Total operating expenses
|
53,812
|
|
|
49,505
|
|
|
52,638
|
|
|
51,942
|
|
|
46,138
|
|
|||||
Income from operations
|
3,100
|
|
|
4,262
|
|
|
1,741
|
|
|
2,347
|
|
|
2,362
|
|
|||||
Loss (gain) on sale of business
|
786
|
|
|
—
|
|
|
—
|
|
|
(270
|
)
|
|
—
|
|
|||||
Interest expense
|
218
|
|
|
242
|
|
|
189
|
|
|
186
|
|
|
192
|
|
|||||
Other expense, net
|
33
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Income before income taxes and equity in net earnings
|
2,063
|
|
|
4,020
|
|
|
1,552
|
|
|
2,431
|
|
|
2,170
|
|
|||||
Provision for income taxes
|
391
|
|
|
1,572
|
|
|
938
|
|
|
1,155
|
|
|
1,023
|
|
|||||
Equity in net earnings of Kindred at Home
|
11
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Net income
|
$
|
1,683
|
|
|
$
|
2,448
|
|
|
$
|
614
|
|
|
$
|
1,276
|
|
|
$
|
1,147
|
|
Basic earnings per common share
|
$
|
12.24
|
|
|
$
|
16.94
|
|
|
$
|
4.11
|
|
|
$
|
8.54
|
|
|
$
|
7.44
|
|
Diluted earnings per common share
|
$
|
12.16
|
|
|
$
|
16.81
|
|
|
$
|
4.07
|
|
|
$
|
8.44
|
|
|
$
|
7.36
|
|
Dividends declared per common share
|
$
|
2.00
|
|
|
$
|
1.60
|
|
|
$
|
1.16
|
|
|
$
|
1.15
|
|
|
$
|
1.11
|
|
Financial Position:
|
|
|
|
|
|
|
|
|
|
||||||||||
Cash and investments
|
$
|
12,780
|
|
|
$
|
16,344
|
|
|
$
|
13,675
|
|
|
$
|
11,681
|
|
|
$
|
11,482
|
|
Total assets
|
25,413
|
|
|
27,178
|
|
|
25,396
|
|
|
24,678
|
|
|
23,497
|
|
|||||
Benefits payable
|
4,862
|
|
|
4,668
|
|
|
4,563
|
|
|
4,976
|
|
|
4,475
|
|
|||||
Debt
|
6,069
|
|
|
4,920
|
|
|
4,092
|
|
|
4,093
|
|
|
3,795
|
|
|||||
Stockholders’ equity
|
10,161
|
|
|
9,842
|
|
|
10,685
|
|
|
10,346
|
|
|
9,646
|
|
|||||
Cash flows from operations
|
$
|
2,173
|
|
|
$
|
4,051
|
|
|
$
|
1,936
|
|
|
$
|
868
|
|
|
$
|
1,618
|
|
Key Financial Indicators:
|
|
|
|
|
|
|
|
|
|
||||||||||
Benefit ratio
|
83.5
|
%
|
|
83.0
|
%
|
|
84.9
|
%
|
|
84.5
|
%
|
|
83.0
|
%
|
|||||
Operating cost ratio
|
13.3
|
%
|
|
12.3
|
%
|
|
13.3
|
%
|
|
13.6
|
%
|
|
15.9
|
%
|
|||||
Membership by Segment:
|
|
|
|
|
|
|
|
|
|
||||||||||
Retail segment:
|
|
|
|
|
|
|
|
|
|
||||||||||
Medical membership
|
9,161,500
|
|
|
9,206,300
|
|
|
8,751,300
|
|
|
8,327,700
|
|
|
7,360,300
|
|
|||||
Group and Specialty segment:
|
|
|
|
|
|
|
|
|
|
||||||||||
Medical membership
|
7,415,200
|
|
|
4,638,200
|
|
|
4,793,300
|
|
|
4,963,400
|
|
|
5,430,200
|
|
|||||
Specialty membership
|
6,072,300
|
|
|
6,986,000
|
|
|
6,961,200
|
|
|
7,221,800
|
|
|
7,668,500
|
|
|||||
Individual commercial segment:
|
|
|
|
|
|
|
|
|
|
||||||||||
Medical membership
|
—
|
|
|
128,800
|
|
|
654,800
|
|
|
899,100
|
|
|
1,016,200
|
|
|||||
Other Businesses:
|
|
|
|
|
|
|
|
|
|
||||||||||
Medical membership
|
—
|
|
|
29,800
|
|
|
30,800
|
|
|
32,600
|
|
|
35,000
|
|
|||||
Consolidated:
|
|
|
|
|
|
|
|
|
|
||||||||||
Total medical membership
|
16,576,700
|
|
14,003,100
|
|
14,230,200
|
|
14,222,800
|
|
13,841,700
|
||||||||||
Total specialty membership
|
6,072,300
|
|
|
6,986,000
|
|
|
6,961,200
|
|
|
7,221,800
|
|
|
7,668,500
|
|
(a)
|
Includes a reduction in premiums revenue of
$583 million
(
$367 million
after tax, or
$2.43
per diluted common share) associated with the write-off of commercial risk corridor receivables. Also includes benefits expense of
$505 million
(
$318 million
after tax, or
$2.11
per diluted common share) for reserve strengthening associated with our non-strategic closed block of long-term care insurance policies, which were sold in 2018.
|
•
|
Our 2018 results reflect the continued implementation of our strategy to offer our members affordable health care combined with a positive consumer experience in growing markets. At the core of this strategy is our integrated care delivery model, which unites quality care, high member engagement, and sophisticated data analytics. Our approach to primary, physician-directed care for our members aims to provide quality care that is consistent, integrated, cost-effective, and member-focused, provided by both employed physicians and physicians with network contract arrangements. The model is designed to improve health outcomes and affordability for individuals and for the health system as a whole, while offering our members a simple, seamless healthcare experience. We believe this strategy is positioning us for long-term growth in both membership and earnings. We offer providers a continuum of opportunities to increase the integration of care and offer assistance to providers in transitioning from a fee-for-service to a value-based arrangement. These include performance bonuses, shared savings and shared risk relationships. At December 31, 2018, approximately
2,039,100
members, or
67%
, of our individual Medicare Advantage members were in value-based relationships under our integrated care delivery model, as compared to
1,901,300
members, or
66%
, at December 31, 2017.
|
•
|
Our consolidated pretax income was
$2.06 billion
for
2018
compared to
$4.02 billion
in
2017
. A number of significant items effected our year-over-year comparisons including the following:
|
◦
|
The net gain associated with the terminated Merger Agreement, mainly the break-up fee of $936 million in 2017.
|
◦
|
The loss on sale of KMG of
$786 million
in 2018.
|
◦
|
Charges in 2017 of $219 million associated with voluntary and involuntary workforce reduction programs, the Penn Treaty guaranty fund assessment and costs associated with the early retirement of debt.
|
◦
|
Lower year-over-year segment earnings in our Retail, Group and Specialty and Healthcare Services segments reflects the impact of investing the benefit of a lower tax rate from the 2017 Tax Reform Law into the establishment of an annual incentive compensation program for a broader range of employees, together with additional investments in the communities of our members, technology and our integrated care delivery model to drive more affordable healthcare and better clinical outcomes.
|
◦
|
Our year-over-year pretax comparisons were also favorably impacted by strong Medicare Advantage membership growth and operating efficiencies from productivity initiatives implemented in 2017. These increases were partially offset by enhanced 2018 Medicare Advantage benefits resulting from investing the better than expected 2017 individual Medicare Advantage pretax earnings, coupled with the return of the health insurance industry fee, and a more severe flu season in 2018.
|
•
|
Year-over-year comparisons of diluted earnings per common share were also favorably impacted by a lower number of shares used to compute earnings per common share from share repurchases and the impact of a lower tax rate for the year ended December 31, 2018.The 2017 Tax Reform Law coupled with the tax benefit
|
•
|
We returned capital to our shareholders in the form of increased shareholder dividends and significant share repurchase. In 2018, we increased our per share dividend by 25% and repurchased shares worth approximately $1.1 billion, including the accelerated share repurchase agreement, or ASR, that we entered into in November 2018.
|
•
|
The annual health insurance industry fee was suspended for calendar year 2017, but resumed in 2018. Operating costs associated with the health insurance industry fee attributable to 2018 were
$1.04 billion
paid in October 2018. This fee is not deductible for tax purposes, which increases our effective income tax rate. The one-year suspension in 2017 of the health insurance industry fee significantly reduced our operating costs and effective tax rate during 2017.
The annual health insurance industry fee is also suspended for calendar year 2019, but under current law is scheduled to resume for calendar year 2020.
|
•
|
Individual and Group Medicare Advantage membership increased 259,600 members, or 7.9%, in 2018 to 3,561,800 members December 31, 2018.
|
•
|
On January 30, 2019, after the stock market closed, the Centers for Medicare and Medicaid Services (CMS) issued its preliminary 2020 Medicare Advantage and Part D payment rates and proposed policy changes (collectively, the Advance Notice). CMS has invited public comment on the Advance Notice before publishing final rates on April 1, 2019 (the Final Notice). In the Advance Notice, CMS estimates Medicare Advantage plans across the sector will, on average, experience a 1.59 percent increase in benchmark funding based on proposals included therein. As indicated by CMS, its estimate excludes the impact of fee‐for‐service county rebasing/re‐pricing since the related impact is dependent upon finalization of certain data, which will be available with the publication of the Final Notice. Based on our preliminary analysis using the same factors CMS included in its estimate, the components of which are detailed on CMS’ website, we anticipate the proposals in the Advance Notice would result in a change to our benchmark funding relatively in line with CMS’ estimate. We will be drawing upon our program expertise to provide CMS formal commentary on the impact of the Advance Notice and the related impact upon Medicare beneficiaries’ quality of care and service to our members through the Medicare Advantage program.
|
•
|
On April 24, 2018, we received a Notice of Intent to be Awarded a Comprehensive Medicaid Contract under Florida’s Statewide Managed Medicaid Program in all 11 regions, including the South Florida, Tampa, Jacksonville, and Orlando metro areas. The comprehensive program combines the traditional Medicaid, or TANF, and Long-Term Care programs. Phase-in under the new contract began December 2018 and was fully implemented February 1, 2019.
|
•
|
In October 2018, CMS published its updated Star quality ratings for bonus year 2020. We received a 5-star rating on CMS' 5-star rating system for two MA contracts offered in Florida and Tennessee. In addition, we received a 4.5-star rating for two MA contracts offered in Florida, Illinois, Kentucky, Mississippi, North Carolina, and Oregon. We have 12 contracts rated 4-star or above and 3 million members in 4-star or above rated contracts to be offered in 2019, representing 84% of our MA membership as of July 2018. The achievement of a 5-star rating for two MA contracts in Florida and Tennessee provides us the ability to market for these contracts throughout the year, creating an opportunity for increased penetration in these important geographies. We cannot guarantee, however, our ability to maintain or improve our star ratings.
|
•
|
During 2018, we transitioned to the new, larger T2017 East Region contract increasing membership
2,846,800
or
92.4%
.The T2017 East Region contract is a consolidation of the former T3 North and South Regions, comprising thirty-two states and approximately 6 million TRICARE beneficiaries, under which delivery of health care services commenced on January 1, 2018. The T2017 East Region contract is a 5-year contract set
|
•
|
We continued to invest in our Healthcare Services segment necessary to drive effective care delivery and clinical outcomes with our acquisitions of MCCI and FPG and our 40% investment in Kindred at Home.
|
•
|
Medicare Advantage and dual demonstration program membership enrolled in a Humana chronic care management program was
716,000
at December 31, 2018, a
decrease
of
9.9%
from
794,900
at December 31, 2017.
These members may not be unique to each program since members have the ability to enroll in multiple programs.
We have undergone an optimization process that ensures the appropriate level of member interaction with clinicians to drive quality outcomes, which has resulted in improved Retail segment operating results.
|
|
|
|
|
Change
|
|||||||||||
|
|
2018
|
|
2017
|
|
Dollars
|
|
Percentage
|
|||||||
|
|
(dollars in millions, except per
common share results) |
|
|
|||||||||||
Revenues:
|
|
|
|
|
|
|
|
|
|||||||
Premiums:
|
|
|
|
|
|
|
|
|
|||||||
Retail
|
|
$
|
48,108
|
|
|
$
|
44,626
|
|
|
$
|
3,482
|
|
|
7.8
|
%
|
Group and Specialty
|
|
6,803
|
|
|
6,772
|
|
|
31
|
|
|
0.5
|
%
|
|||
Individual Commercial
|
|
8
|
|
|
947
|
|
|
(939
|
)
|
|
(99.2
|
)%
|
|||
Other Businesses
|
|
22
|
|
|
35
|
|
|
(13
|
)
|
|
(37.1
|
)%
|
|||
Total premiums
|
|
54,941
|
|
|
52,380
|
|
|
2,561
|
|
|
4.9
|
%
|
|||
Services:
|
|
|
|
|
|
|
|
|
|||||||
Retail
|
|
11
|
|
|
10
|
|
|
1
|
|
|
10.0
|
%
|
|||
Group and Specialty
|
|
835
|
|
|
626
|
|
|
209
|
|
|
33.4
|
%
|
|||
Healthcare Services
|
|
607
|
|
|
338
|
|
|
269
|
|
|
79.6
|
%
|
|||
Other Businesses
|
|
4
|
|
|
8
|
|
|
(4
|
)
|
|
(50.0
|
)%
|
|||
Total services
|
|
1,457
|
|
|
982
|
|
|
475
|
|
|
48.4
|
%
|
|||
Investment income
|
|
514
|
|
|
405
|
|
|
109
|
|
|
26.9
|
%
|
|||
Total revenues
|
|
56,912
|
|
|
53,767
|
|
|
3,145
|
|
|
5.8
|
%
|
|||
Operating expenses:
|
|
|
|
|
|
|
|
|
|||||||
Benefits
|
|
45,882
|
|
|
43,496
|
|
|
2,386
|
|
|
5.5
|
%
|
|||
Operating costs
|
|
7,525
|
|
|
6,567
|
|
|
958
|
|
|
14.6
|
%
|
|||
Merger termination fee and related costs, net
|
|
—
|
|
|
(936
|
)
|
|
936
|
|
|
(100.0
|
)%
|
|||
Depreciation and amortization
|
|
405
|
|
|
378
|
|
|
27
|
|
|
7.1
|
%
|
|||
Total operating expenses
|
|
53,812
|
|
|
49,505
|
|
|
4,307
|
|
|
8.7
|
%
|
|||
Income from operations
|
|
3,100
|
|
|
4,262
|
|
|
(1,162
|
)
|
|
(27.3
|
)%
|
|||
Loss on sale of business
|
|
786
|
|
|
—
|
|
|
786
|
|
|
100.0
|
%
|
|||
Interest expense
|
|
218
|
|
|
242
|
|
|
(24
|
)
|
|
(9.9
|
)%
|
|||
Other expense, net
|
|
33
|
|
|
—
|
|
|
33
|
|
|
100.0
|
%
|
|||
Income before income taxes and equity in net earnings
|
|
2,063
|
|
|
4,020
|
|
|
(1,957
|
)
|
|
(48.7
|
)%
|
|||
Provision for income taxes
|
|
391
|
|
|
1,572
|
|
|
(1,181
|
)
|
|
(75.1
|
)%
|
|||
Equity in net earnings of Kindred at Home
|
|
11
|
|
|
—
|
|
|
11
|
|
|
100.0
|
%
|
|||
Net income
|
|
$
|
1,683
|
|
|
$
|
2,448
|
|
|
$
|
(765
|
)
|
|
(31.3
|
)%
|
Diluted earnings per common share
|
|
$
|
12.16
|
|
|
$
|
16.81
|
|
|
$
|
(4.65
|
)
|
|
(27.7
|
)%
|
Benefit ratio (a)
|
|
83.5
|
%
|
|
83.0
|
%
|
|
|
|
0.5
|
%
|
||||
Operating cost ratio (b)
|
|
13.3
|
%
|
|
12.3
|
%
|
|
|
|
1.0
|
%
|
||||
Effective tax rate
|
|
18.9
|
%
|
|
39.1
|
%
|
|
|
|
(20.2
|
)%
|
(a)
|
Represents total benefits expense as a percentage of premiums revenue.
|
(b)
|
Represents total operating costs, excluding depreciation and amortization, as a percentage of total revenues less investment income.
|
|
|
|
|
Change
|
||||||||
|
|
2018
|
|
2017
|
|
Members
|
|
Percentage
|
||||
Membership:
|
|
|
|
|
|
|
|
|
||||
Medical membership:
|
|
|
|
|
|
|
|
|
||||
Individual Medicare Advantage
|
|
3,064,000
|
|
|
2,860,800
|
|
|
203,200
|
|
|
7.1
|
%
|
Group Medicare Advantage
|
|
497,800
|
|
|
441,400
|
|
|
56,400
|
|
|
12.8
|
%
|
Medicare stand-alone PDP
|
|
5,004,300
|
|
|
5,308,100
|
|
|
(303,800
|
)
|
|
(5.7
|
)%
|
Total Retail Medicare
|
|
8,566,100
|
|
|
8,610,300
|
|
|
(44,200
|
)
|
|
(0.5
|
)%
|
State-based Medicaid
|
|
341,100
|
|
|
360,100
|
|
|
(19,000
|
)
|
|
(5.3
|
)%
|
Medicare Supplement
|
|
254,300
|
|
|
235,900
|
|
|
18,400
|
|
|
7.8
|
%
|
Total Retail medical members
|
|
9,161,500
|
|
|
9,206,300
|
|
|
(44,800
|
)
|
|
(0.5
|
)%
|
|
|
|
|
Change
|
|||||||||||
|
|
2018
|
|
2017
|
|
Dollars
|
|
Percentage
|
|||||||
|
|
(in millions)
|
|
|
|||||||||||
Premiums and Services Revenue:
|
|
|
|
|
|
|
|
|
|||||||
Premiums:
|
|
|
|
|
|
|
|
|
|||||||
Individual Medicare Advantage
|
|
$
|
35,656
|
|
|
$
|
32,720
|
|
|
$
|
2,936
|
|
|
9.0
|
%
|
Group Medicare Advantage
|
|
6,103
|
|
|
5,155
|
|
|
948
|
|
|
18.4
|
%
|
|||
Medicare stand-alone PDP
|
|
3,584
|
|
|
3,702
|
|
|
(118
|
)
|
|
(3.2
|
)%
|
|||
Total Retail Medicare
|
|
45,343
|
|
|
41,577
|
|
|
3,766
|
|
|
9.1
|
%
|
|||
State-based Medicaid
|
|
2,255
|
|
|
2,571
|
|
|
(316
|
)
|
|
(12.3
|
)%
|
|||
Medicare Supplement
|
|
510
|
|
|
478
|
|
|
32
|
|
|
6.7
|
%
|
|||
Total premiums
|
|
48,108
|
|
|
44,626
|
|
|
3,482
|
|
|
7.8
|
%
|
|||
Services
|
|
11
|
|
|
10
|
|
|
1
|
|
|
10.0
|
%
|
|||
Total premiums and services revenue
|
|
$
|
48,119
|
|
|
$
|
44,636
|
|
|
$
|
3,483
|
|
|
7.8
|
%
|
Segment earnings
|
|
$
|
1,733
|
|
|
$
|
1,978
|
|
|
$
|
(245
|
)
|
|
(12.4
|
)%
|
Benefit ratio
|
|
85.1
|
%
|
|
85.6
|
%
|
|
|
|
(0.5
|
)%
|
||||
Operating cost ratio
|
|
11.1
|
%
|
|
9.6
|
%
|
|
|
|
1.5
|
%
|
•
|
Retail segment earnings were
$1.7 billion
in
2018
,
a decrease
of
$245 million
, or
12.4%
, compared to
2017
reflecting a higher operating cost ratio in 2018, partially offset by a lower benefit ratio.
|
•
|
Individual Medicare Advantage membership
increased
203,200
members, or
7.1%
, from December 31,
2017
to December 31,
2018
reflecting net membership additions associated with last year's Annual Election Period, or AEP, for Medicare beneficiaries. For full year 2019, we anticipate net membership growth in our individual Medicare Advantage offerings of 375,000 to 400,000.
|
•
|
Group Medicare Advantage membership
increased
56,400
members, or
12.8%
, from December 31,
2017
to December 31,
2018
reflecting increased sales to our existing group accounts during last year's AEP for Medicare beneficiaries. For full year 2019, we anticipate net membership growth in our group Medicare Advantage offerings of approximately 30,000.
|
•
|
Medicare stand-alone PDP membership
decreased
303,800
members, or
5.7%
, from December 31,
2017
to December 31,
2018
reflecting net declines during last year's AEP for Medicare beneficiaries. These declines primarily resulted from the previously disclosed loss of auto assigned members in Florida and South Carolina due to pricing over the CMS low income benchmark and continued membership declines in our Enhanced Plan. In addition, growth in our co-branded Walmart plan was significantly lower than historical levels due to the introduction of additional low-priced competitor offerings in many regions. For the full year 2019, we anticipate a net membership decline in our Medicare stand-alone PDP offerings of 700,000 to 750,000.
|
•
|
State-based Medicaid membership
decreased
19,000
members, or
5.3%
, from December 31,
2017
to December 31,
2018
, primarily driven by our election not to participate in Illinois' Medicaid Integrated Care Program and the Virginia Long Term Support Services contract that replaced the state's previous stand-alone dual eligible demonstration program in December 2017. Year-over-year decline was also impacted by lower membership associated with our Florida Medicaid contract due to overall strengthening economic conditions, partially offset by the addition of members associated with the new Florida Managed Medical Assistance program from the contract phase-in for certain regions that began December 1, 2018.
|
•
|
Retail segment premiums
increased
$3.5 billion
, or
7.8%
, from
2017
to
2018
primarily reflecting individual and group Medicare Advantage membership growth in last year's AEP as well as increased per-member premiums for certain of the segment's products, partially offset by declines in stand-alone PDP and state-based contracts revenues resulting from year-over-year membership declines discussed above. Average group and individual Medicare Advantage membership
increased
7.6%
in
2018
. Average membership is calculated by summing the ending membership for each month in a period and dividing the result by the number of months in a period. Premiums revenue reflects changes in membership and average per-member premiums. Items impacting average per-member premiums include changes in premium rates as well as changes in the geographic mix of membership, the mix of product offerings, and the mix of benefit plans selected by our membership.
|
•
|
The Retail segment benefit ratio of
85.1%
for
2018
decreased
50
basis points from
2017
primarily due to the reinstatement of the non-deductible health insurance industry fee in 2018 which was contemplated in the pricing and benefit design of our products, partially offset by the unfavorable impact from enhanced 2018 Medicare Advantage member benefits resulting from the investment of the better than expected 2017 individual Medicare Advantage pretax earnings. 2018 was also impacted by a more severe flu season.
|
•
|
The Retail segment’s benefits expense for
2018
included the beneficial effect of
$398 million
in favorable prior-year medical claims reserve development versus
$386 million
in
2017
. This favorable prior-year medical claims reserve development
decreased
the Retail segment benefit ratio by approximately
80
basis points in
2018
versus approximately
90
basis points in
2017
.
|
•
|
The Retail segment operating cost ratio of
11.1%
for
2018
increased
150
basis points from
2017
primarily due to the reinstatement of the health insurance industry fee in 2018 and increase in incentive compensation costs under the expanded program, resulting from the strategic investments made in 2018 as a result of the Tax Reform Law. These items were partially offset by significant operating cost efficiencies in 2018 driven by productivity initiatives implemented in 2017.
|
•
|
The non-deductible health insurance industry fee
increased
the operating cost ratio by approximately
190
basis points in
2018
.
|
|
|
|
|
Change
|
||||||||
|
|
2018
|
|
2017
|
|
Members
|
|
Percentage
|
||||
Membership:
|
|
|
|
|
|
|
|
|
||||
Medical membership:
|
|
|
|
|
|
|
|
|
||||
Fully-insured commercial group
|
|
1,004,700
|
|
|
1,097,700
|
|
|
(93,000
|
)
|
|
(8.5
|
)%
|
ASO
|
|
481,900
|
|
|
458,700
|
|
|
23,200
|
|
|
5.1
|
%
|
Military services
|
|
5,928,600
|
|
|
3,081,800
|
|
|
2,846,800
|
|
|
92.4
|
%
|
Total group medical members
|
|
7,415,200
|
|
|
4,638,200
|
|
|
2,777,000
|
|
|
59.9
|
%
|
Specialty membership (a)
|
|
6,072,300
|
|
|
6,986,000
|
|
|
(913,700
|
)
|
|
(13.1
|
)%
|
(a)
|
Specialty products include dental, vision, voluntary benefit products and other supplemental health benefits and financial protection products. Members included in these products may not be unique to each product since members have the ability to enroll in multiple products.
|
|
|
|
|
Change
|
|||||||||||
|
|
2018
|
|
2017
|
|
Dollars
|
|
Percentage
|
|||||||
|
|
(in millions)
|
|
|
|||||||||||
Premiums and Services Revenue:
|
|
|
|
|
|
|
|
|
|||||||
Premiums:
|
|
|
|
|
|
|
|
|
|||||||
Fully-insured commercial group
|
|
$
|
5,444
|
|
|
$
|
5,462
|
|
|
$
|
(18
|
)
|
|
(0.3
|
)%
|
Specialty
|
|
1,359
|
|
|
1,310
|
|
|
49
|
|
|
3.7
|
%
|
|||
Total premiums
|
|
6,803
|
|
|
6,772
|
|
|
31
|
|
|
0.5
|
%
|
|||
Services
|
|
835
|
|
|
626
|
|
|
209
|
|
|
33.4
|
%
|
|||
Total premiums and services revenue
|
|
$
|
7,638
|
|
|
$
|
7,398
|
|
|
$
|
240
|
|
|
3.2
|
%
|
Segment earnings
|
|
$
|
361
|
|
|
$
|
412
|
|
|
$
|
(51
|
)
|
|
(12.4
|
)%
|
Benefit ratio
|
|
79.7
|
%
|
|
79.2
|
%
|
|
|
|
0.5
|
%
|
||||
Operating cost ratio
|
|
23.6
|
%
|
|
21.4
|
%
|
|
|
|
2.2
|
%
|
•
|
Group and Specialty segment earnings were
$361 million
in
2018
, a
decrease
of
$51 million
, or
12.4%
, from
$412 million
in
2017
primarily reflecting higher benefit and operating cost ratios in 2018, partially offset by a favorable year-over-year earnings comparison for our group ASO commercial medical business.
|
•
|
Fully-insured commercial group medical membership
decreased
93,000
members, or
8.5%
from December 31,
2017
primarily reflecting lower membership in small group accounts due in part to more small group accounts selecting level-funded ASO products in 2018. The portion of group fully-insured commercial medical membership in small group accounts was approximately 61% at December 31, 2018 and 64% at December 31, 2017.
|
•
|
Group ASO commercial medical membership
increased
23,200
members, or
5.1%
, from December 31,
2017
to December 31,
2018
reflecting more small group accounts selecting level-funded ASO products in 2018, partially offset by the loss of certain large group accounts as a result of continued discipline in pricing of services for self-funded accounts amid a highly competitive environment.
|
•
|
Specialty membership
decreased
913,700
members, or
13.1%
, from December 31,
2017
to December 31,
2018
primarily resulted from the exit of our voluntary benefits and financial protection lines of business in connection
|
•
|
Group and Specialty segment premiums
increased
$31 million
, or
0.5%
, from
2017
to
2018
primarily due to higher stop-loss premiums related to our level funded ASO accounts resulting from membership growth in this product, and higher per-member premiums across the commercial fully-insured business, partially offset by the exit of our voluntary benefits and financial protection lines of business in connection with the sale of KMG, as well as declines in average group fully-insured commercial medical membership.
|
•
|
Group and Specialty segment services revenue
increased
$209 million
, or
33.4%
, from
2017
to
2018
as a result of the transition to the TRICARE T2017 East Region contract on January 1, 2018.
|
•
|
The Group and Specialty segment benefit ratio
increased
50
basis points from
79.2%
in
2017
to
79.7%
in
2018
primarily due to retroactive contractual rate adjustments, membership mix, including the continued migration of healthier groups to level funded ASO products in 2018, and the impact of the exit of our voluntary benefits and financial protection lines of business in connection with the sale of KMG, which carried a very low benefit ratio. These factors were partially offset by the reinstatement of the health insurance industry fee in 2018 which was contemplated in the pricing of our products, and higher favorable prior-period reserve development.
|
•
|
The Group and Specialty segment’s benefits expense included the beneficial effect of
$46 million
in favorable prior-year medical claims reserve development in
2018
versus
$40 million
in
2017
. This favorable prior-year medical claims reserve development
decreased
the Group and Specialty segment benefit ratio by approximately
70
basis points in
2018
versus approximately
60
basis points in
2017
.
|
•
|
The Group and Specialty segment operating cost ratio of
23.6%
for
2018
increased
220
basis points from
21.4%
for
2017
. These increases primarily were due to the reinstatement of the health insurance industry fee in 2018, growth in our military services business, which carries a higher operating cost ratio than other products within the segment, as a result of the transition to the TRICARE T2017 East Region contract, an increase in incentive compensation costs under the expanded program resulting from the strategic investments made in 2018 as a result of the Tax Reform Law. These items were partially offset by significant operating cost efficiencies driven by productivity initiatives implemented in 2017, and the impact of the exit of our voluntary benefits and financial protection lines of business in connection with the sale of KMG. The non-deductible health insurance industry fee
increased
the operating cost ratio by approximately
160
basis points in
2018
.
|
|
|
|
|
Change
|
|||||||||||
|
|
2018
|
|
2017
|
|
Dollars
|
|
Percentage
|
|||||||
|
|
(in millions)
|
|
|
|||||||||||
Revenues:
|
|
|
|
|
|
|
|
|
|||||||
Services:
|
|
|
|
|
|
|
|
|
|||||||
Clinical care services
|
|
$
|
176
|
|
|
$
|
181
|
|
|
$
|
(5
|
)
|
|
(2.8
|
)%
|
Pharmacy solutions
|
|
203
|
|
|
80
|
|
|
123
|
|
|
153.8
|
%
|
|||
Provider services
|
|
228
|
|
|
77
|
|
|
151
|
|
|
196.1
|
%
|
|||
Total services revenues
|
|
607
|
|
|
338
|
|
|
269
|
|
|
79.6
|
%
|
|||
Intersegment revenues:
|
|
|
|
|
|
|
|
|
|||||||
Pharmacy solutions
|
|
20,514
|
|
|
20,881
|
|
|
(367
|
)
|
|
(1.8
|
)%
|
|||
Provider services
|
|
1,994
|
|
|
1,593
|
|
|
401
|
|
|
25.2
|
%
|
|||
Clinical care services
|
|
662
|
|
|
1,111
|
|
|
(449
|
)
|
|
(40.4
|
)%
|
|||
Total intersegment revenues
|
|
23,170
|
|
|
23,585
|
|
|
(415
|
)
|
|
(1.8
|
)%
|
|||
Total services and intersegment revenues
|
|
$
|
23,777
|
|
|
$
|
23,923
|
|
|
$
|
(146
|
)
|
|
(0.6
|
)%
|
Segment earnings
|
|
$
|
754
|
|
|
$
|
967
|
|
|
$
|
(213
|
)
|
|
(22.0
|
)%
|
Operating cost ratio
|
|
96.3
|
%
|
|
95.5
|
%
|
|
|
|
0.8
|
%
|
•
|
Healthcare Services segment earnings were
$754 million
in
2018
, a
decrease
of
$213 million
, or
22.0%
, from
2017
primarily
due to the impact of the optimization process associated with our chronic care management programs and investments made in 2018 as a result of the Tax Reform Law, partially offset by the impact of Kindred at Home.
|
•
|
Humana Pharmacy Solutions
®
script volumes for the Retail and Group and Specialty segment membership increased to approximately
440 million
in
2018
,
up
2%
versus scripts of approximately
433 million
in
2017
. The increase primarily reflects growth associated with higher Individual Advantage Medicare membership, partially offset by the decline in stand-alone PDP and Individual Commercial membership.
|
•
|
Services revenue
increased
$269 million
, or
79.6%
, from
2017
to
$607 million
for
2018
primarily due to service revenue growth from our provider services and pharmacy solutions business.
|
•
|
Intersegment revenues
decreased
$415 million
, or
1.8%
, from
2017
to
$23.2 billion
for
2018
primarily due to a decline in pharmacy solutions revenue due to lower stand-alone PDP membership, the loss of intersegment revenues associated with our exit from the Individual commercial business, the result of improving the effectiveness of our chronic care management programs, and the impact to our provider services business of the lower Medicare rates year-over-year in geographies where our provider assets are primarily located. These declines were partially offset by Medicare Advantage membership growth as well as higher intersegment revenues associated with our provider services business reflecting our acquisition of MCCI.
|
•
|
The Healthcare Services segment operating cost ratio of
96.3%
for
2018
increased from
95.5%
for 2017 primarily due to an increase in incentive compensation costs under the expanded program resulting from the strategic investments made in 2018 as a result of the Tax Reform Law and the lag in operating cost reduction associated with improving the effectiveness of our chronic care management programs as compared to the timing of reduction in revenue. These items were partially offset by significant operating cost efficiencies in 2018 driven by productivity initiatives implemented in 2017.
|
•
|
In
2018
, our Individual Commercial segment pretax income was
$74 million
, a
decrease
of
$119 million
, from a pretax income of
$193 million
in
2017
primarily due to the impact of favorable prior-period reserve development from the run-out of this business. We exited this business effective January 1, 2018.
|
|
|
|
|
Change
|
|||||||||||
|
|
2017
|
|
2016
|
|
Dollars
|
|
Percentage
|
|||||||
|
|
(dollars in millions, except per
common share results)
|
|
|
|||||||||||
Revenues:
|
|
|
|
|
|
|
|
|
|||||||
Premiums:
|
|
|
|
|
|
|
|
|
|||||||
Retail
|
|
$
|
44,626
|
|
|
$
|
43,223
|
|
|
$
|
1,403
|
|
|
3.2
|
%
|
Group and Specialty
|
|
6,772
|
|
|
6,696
|
|
|
76
|
|
|
1.1
|
%
|
|||
Individual Commercial
|
|
947
|
|
|
3,064
|
|
|
(2,117
|
)
|
|
(69.1
|
)%
|
|||
Other Businesses
|
|
35
|
|
|
38
|
|
|
(3
|
)
|
|
(7.9
|
)%
|
|||
Total premiums
|
|
52,380
|
|
|
53,021
|
|
|
(641
|
)
|
|
(1.2
|
)%
|
|||
Services:
|
|
|
|
|
|
|
|
|
|||||||
Retail
|
|
10
|
|
|
6
|
|
|
4
|
|
|
66.7
|
%
|
|||
Group and Specialty
|
|
626
|
|
|
643
|
|
|
(17
|
)
|
|
(2.6
|
)%
|
|||
Healthcare Services
|
|
338
|
|
|
310
|
|
|
28
|
|
|
9.0
|
%
|
|||
Other Businesses
|
|
8
|
|
|
10
|
|
|
(2
|
)
|
|
(20.0
|
)%
|
|||
Total services
|
|
982
|
|
|
969
|
|
|
13
|
|
|
1.3
|
%
|
|||
Investment income
|
|
405
|
|
|
389
|
|
|
16
|
|
|
4.1
|
%
|
|||
Total revenues
|
|
53,767
|
|
|
54,379
|
|
|
(612
|
)
|
|
(1.1
|
)%
|
|||
Operating expenses:
|
|
|
|
|
|
|
|
|
|||||||
Benefits
|
|
43,496
|
|
|
45,007
|
|
|
(1,511
|
)
|
|
(3.4
|
)%
|
|||
Operating costs
|
|
6,567
|
|
|
7,173
|
|
|
(606
|
)
|
|
(8.4
|
)%
|
|||
Merger termination fee and related costs, net
|
|
(936
|
)
|
|
104
|
|
|
(1,040
|
)
|
|
(1,000.0
|
)%
|
|||
Depreciation and amortization
|
|
378
|
|
|
354
|
|
|
24
|
|
|
6.8
|
%
|
|||
Total operating expenses
|
|
49,505
|
|
|
52,638
|
|
|
(3,133
|
)
|
|
(6.0
|
)%
|
|||
Income from operations
|
|
4,262
|
|
|
1,741
|
|
|
2,521
|
|
|
144.8
|
%
|
|||
Interest expense
|
|
242
|
|
|
189
|
|
|
53
|
|
|
28.0
|
%
|
|||
Income before income taxes
|
|
4,020
|
|
|
1,552
|
|
|
2,468
|
|
|
159.0
|
%
|
|||
Provision for income taxes
|
|
1,572
|
|
|
938
|
|
|
634
|
|
|
67.6
|
%
|
|||
Net income
|
|
$
|
2,448
|
|
|
$
|
614
|
|
|
$
|
1,834
|
|
|
298.7
|
%
|
Diluted earnings per common share
|
|
$
|
16.81
|
|
|
$
|
4.07
|
|
|
$
|
12.74
|
|
|
313.0
|
%
|
Benefit ratio (a)
|
|
83.0
|
%
|
|
84.9
|
%
|
|
|
|
(1.9
|
)%
|
||||
Operating cost ratio (b)
|
|
12.3
|
%
|
|
13.3
|
%
|
|
|
|
(1.0
|
)%
|
||||
Effective tax rate
|
|
39.1
|
%
|
|
60.5
|
%
|
|
|
|
(21.4
|
)%
|
(a)
|
Represents total benefits expense as a percentage of premiums revenue.
|
(b)
|
Represents total operating costs, excluding depreciation and amortization, as a percentage of total revenues less investment income.
|
|
|
|
|
Change
|
||||||||
|
|
2017
|
|
2016
|
|
Members
|
|
Percentage
|
||||
Membership:
|
|
|
|
|
|
|
|
|
||||
Medical membership:
|
|
|
|
|
|
|
|
|
||||
Individual Medicare Advantage
|
|
2,860,800
|
|
|
2,837,600
|
|
|
23,200
|
|
|
0.8
|
%
|
Group Medicare Advantage
|
|
441,400
|
|
|
355,400
|
|
|
86,000
|
|
|
24.2
|
%
|
Medicare stand-alone PDP
|
|
5,308,100
|
|
|
4,951,400
|
|
|
356,700
|
|
|
7.2
|
%
|
Total Retail Medicare
|
|
8,610,300
|
|
|
8,144,400
|
|
|
465,900
|
|
|
5.7
|
%
|
State-based Medicaid
|
|
360,100
|
|
|
388,100
|
|
|
(28,000
|
)
|
|
(7.2
|
)%
|
Medicare Supplement
|
|
235,900
|
|
|
218,800
|
|
|
17,100
|
|
|
7.8
|
%
|
Total Retail medical members
|
|
9,206,300
|
|
|
8,751,300
|
|
|
455,000
|
|
|
5.2
|
%
|
|
|
|
|
Change
|
|||||||||||
|
|
2017
|
|
2016
|
|
Dollars
|
|
Percentage
|
|||||||
|
|
(in millions)
|
|
|
|||||||||||
Premiums and Services Revenue:
|
|
|
|
|
|
|
|
|
|||||||
Premiums:
|
|
|
|
|
|
|
|
|
|||||||
Individual Medicare Advantage
|
|
$
|
32,720
|
|
|
$
|
31,863
|
|
|
$
|
857
|
|
|
2.7
|
%
|
Group Medicare Advantage
|
|
5,155
|
|
|
4,283
|
|
|
872
|
|
|
20.4
|
%
|
|||
Medicare stand-alone PDP
|
|
3,702
|
|
|
4,009
|
|
|
(307
|
)
|
|
(7.7
|
)%
|
|||
Total Retail Medicare
|
|
41,577
|
|
|
40,155
|
|
|
1,422
|
|
|
3.5
|
%
|
|||
State-based Medicaid
|
|
2,571
|
|
|
2,640
|
|
|
(69
|
)
|
|
(2.6
|
)%
|
|||
Medicare Supplement
|
|
478
|
|
|
$
|
428
|
|
|
50
|
|
|
11.7
|
%
|
||
Total premiums
|
|
44,626
|
|
|
43,223
|
|
|
1,403
|
|
|
3.2
|
%
|
|||
Services
|
|
10
|
|
|
6
|
|
|
4
|
|
|
66.7
|
%
|
|||
Total premiums and services revenue
|
|
$
|
44,636
|
|
|
$
|
43,229
|
|
|
$
|
1,407
|
|
|
3.3
|
%
|
Segment earnings
|
|
$
|
1,978
|
|
|
$
|
1,690
|
|
|
$
|
288
|
|
|
17.0
|
%
|
Benefit ratio
|
|
85.6
|
%
|
|
85.1
|
%
|
|
|
|
0.5
|
%
|
||||
Operating cost ratio
|
|
9.6
|
%
|
|
10.8
|
%
|
|
|
|
(1.2
|
)%
|
•
|
Retail segment earnings were
$2.0 billion
in
2017
,
an increase
of
$288 million
, or
17.0%
, compared to
2016
primarily driven by the year-over-year improvement in our Medicare Advantage business.
|
•
|
Individual Medicare Advantage membership
increased
23,200
members, or
0.8%
, from December 31,
2016
to December 31,
2017
reflecting net membership additions for Medicare beneficiaries including the effect of planned market and product exits in 2017. We decided certain markets and/or products were not meeting long term strategic and financial objectives. Additionally, membership growth was muted due to competitive actions including the uncertainty associated with the then-pending Merger transaction during last year's AEP.
|
•
|
Group Medicare Advantage membership
increased
86,000
members, or
24.2%
, from December 31,
2016
to December 31,
2017
reflecting the addition of a large account in January 2017.
|
•
|
Medicare stand-alone PDP membership
increased
356,700
members, or
7.2%
, from December 31,
2016
to December 31,
2017
reflecting net membership additions, primarily for our Humana-Walmart plan offering, for the 2017 plan year.
|
•
|
State-based Medicaid membership
decreased
28,000
members, or
7.2%
, from December 31,
2016
to December 31,
2017
primarily driven by lower membership associated with our Florida contracts resulting from network realignments.
|
•
|
Retail segment premiums
increased
$1.4 billion
, or
3.2%
, from
2016
to
2017
primarily due to Medicare Advantage membership growth and increased per-member premiums for certain of the segment's products. Average group and individual Medicare Advantage membership increased 3.4% in 2017. Average membership is calculated by summing the ending membership for each month in a period and dividing the result by the number of months in a period. Premiums revenue reflects changes in membership and average per-member premiums. Items impacting average per-member premiums include changes in premium rates as well as changes in the geographic mix of membership, the mix of product offerings, and the mix of benefit plans selected by our membership.
|
•
|
The Retail segment benefit ratio of
85.6%
for
2017
increased
50
basis points from
2016
primarily due to the impact of the temporary suspension of the health insurance industry fee for calendar year 2017 which was contemplated in the pricing and benefit design of our products, margin compression associated with the competitive environment in the group Medicare Advantage business and slightly lower favorable prior-period medical claims reserve development. These increases were partially offset by the impact of planned exits from certain Medicare Advantage markets that carried a higher benefit ratio than other markets as well as lower than expected medical costs as compared to the assumptions used in the pricing of our individual Medicare Advantage business.
|
•
|
The Retail segment’s benefits expense for
2017
included the beneficial effect of
$386 million
in favorable prior-year medical claims reserve development versus
$429 million
in
2016
. This favorable prior-year medical claims reserve development
decreased
the Retail segment benefit ratio by approximately 90 basis points in 2017 versus approximately 100 basis points in 2016.
|
•
|
The Retail segment operating cost ratio of
9.6%
for
2017
decreased
120
basis points from
2016
primarily due to the temporary suspension of the health insurance industry fee for calendar year 2017, partially offset by increased spending associated with AEP, investments in our integrated care delivery model, and the increase in employee compensation costs resulting from the continued strong performance. The non-deductible health insurance industry fee increased the operating cost ratio by approximately 170 basis points in 2016.
|
|
|
|
|
Change
|
||||||||
|
|
2017
|
|
2016
|
|
Members
|
|
Percentage
|
||||
Membership:
|
|
|
|
|
|
|
|
|
||||
Medical membership:
|
|
|
|
|
|
|
|
|
||||
Fully-insured commercial group
|
|
1,097,700
|
|
|
1,136,000
|
|
|
(38,300
|
)
|
|
(3.4
|
)%
|
ASO
|
|
458,700
|
|
|
573,200
|
|
|
(114,500
|
)
|
|
(20.0
|
)%
|
Military services
|
|
3,081,800
|
|
|
3,084,100
|
|
|
(2,300
|
)
|
|
(0.1
|
)%
|
Total group medical members
|
|
4,638,200
|
|
|
4,793,300
|
|
|
(155,100
|
)
|
|
(3.2
|
)%
|
Specialty membership (a)
|
|
6,986,000
|
|
|
6,961,200
|
|
|
24,800
|
|
|
0.4
|
%
|
(a)
|
Specialty products include dental, vision, voluntary benefit products and other supplemental health and financial protection products. Members included in these products may not be unique to each product since members have the ability to enroll in multiple products.
|
|
|
|
|
Change
|
|||||||||||
|
|
2017
|
|
2016
|
|
Dollars
|
|
Percentage
|
|||||||
|
|
(in millions)
|
|
|
|||||||||||
Premiums and Services Revenue:
|
|
|
|
|
|
|
|
|
|||||||
Premiums:
|
|
|
|
|
|
|
|
|
|||||||
Fully-insured commercial group
|
|
$
|
5,462
|
|
|
$
|
5,405
|
|
|
$
|
57
|
|
|
1.1
|
%
|
Specialty
|
|
1,310
|
|
|
1,279
|
|
|
31
|
|
|
2.4
|
%
|
|||
Military services
|
|
—
|
|
|
12
|
|
|
(12
|
)
|
|
(100.0
|
)%
|
|||
Total premiums
|
|
6,772
|
|
|
6,696
|
|
|
76
|
|
|
1.0
|
%
|
|||
Services
|
|
626
|
|
|
643
|
|
|
(17
|
)
|
|
(2.6
|
)%
|
|||
Total premiums and services revenue
|
|
$
|
7,398
|
|
|
$
|
7,339
|
|
|
$
|
59
|
|
|
0.8
|
%
|
Income before income taxes
|
|
$
|
412
|
|
|
$
|
344
|
|
|
$
|
68
|
|
|
19.8
|
%
|
Benefit ratio
|
|
79.2
|
%
|
|
78.2
|
%
|
|
|
|
1.0
|
%
|
||||
Operating cost ratio
|
|
21.4
|
%
|
|
23.5
|
%
|
|
|
|
(2.1
|
)%
|
•
|
Group and Specialty segment earnings were
$412 million
in
2017
, an
increase
of
$68 million
, or
19.8%
, from
$344 million
in
2016
primarily reflecting the impact of higher pretax earnings associated with our fully-insured commercial business as well as higher earnings from our military services business resulting from higher performance incentives earned under the TRICARE contract.
|
•
|
Fully-insured commercial group medical membership
decreased
38,300
members, or
3.4%
from December 31,
2016
reflecting lower membership in small group accounts due in part to more small group accounts selecting ASO products in 2017.
|
•
|
Group ASO commercial medical membership
decreased
114,500
members, or
20.0%
, from December 31,
2016
to December 31,
2017
primarily due to the loss of certain large group accounts as a result of continued discipline in pricing of services for self-funded accounts amid a highly competitive environment, partially offset by more small group accounts selecting ASO products in 2017.
|
•
|
Specialty membership
increased
24,800
members, or
0.4%
, from December 31,
2016
to December 31,
2017
primarily due to strong growth in vision products marketed to employer groups.
|
•
|
Group and Specialty segment premiums
increased
$76 million
, or 1.1%, from
2016
to
2017
primarily due to an increase in group fully-insured commercial medical per-member premiums, partially offset by a decline in average group fully-insured commercial medical membership.
|
•
|
Group and Specialty segment services revenue
decreased
$17 million
, or
2.6%
, from
2016
to
2017
primarily due to a decline in revenue in our group ASO commercial medical business mainly due to membership declines partially offset by higher revenue from our military services business resulting from higher performance incentives earned under the TRICARE contract.
|
•
|
The Group and Specialty segment benefit ratio
increased
100
basis points from
78.2%
in
2016
to
79.2%
in
2017
primarily due to the impact of the temporary suspension of the health insurance industry fee for calendar year
2017
which was contemplated in the pricing of our products. The increase was further impacted by an increased proportion of small group members transitioning to community rated plans that carry a higher benefit ratio. These increases were partially offset by lower utilization for the fully-insured commercial medical business in
2017
, primarily associated with the large group business.
|
•
|
The Group and Specialty segment’s benefits expense included the beneficial effect of
$40 million
in favorable prior-year medical claims reserve development in
2017
versus
$46 million
in
2016
. This favorable prior-year medical claims reserve development
decreased
the Group and Specialty segment benefit ratio by approximately
60
basis points in
2017
versus approximately
70
basis points in
2016
.
|
•
|
The Group and Specialty segment operating cost ratio of
21.4%
for
2017
decreased
210
basis points from
23.5%
for
2016
, primarily due to the temporary suspension of the health insurance industry fee for calendar year
2017
as well as operating cost efficiencies, partially offset by an increase in employee compensation costs resulting from the continued strong performance. The non-deductible health insurance industry fee
increased
the operating cost ratio by approximately
150
basis points in
2016
.
|
|
|
|
|
Change
|
|||||||||||
|
|
2017
|
|
2016
|
|
Dollars
|
|
Percentage
|
|||||||
|
|
(in millions)
|
|
|
|||||||||||
Revenues:
|
|
|
|
|
|
|
|
|
|||||||
Services:
|
|
|
|
|
|
|
|
|
|||||||
Clinical care services
|
|
$
|
181
|
|
|
$
|
201
|
|
|
$
|
(20
|
)
|
|
(10.0
|
)%
|
Provider services
|
|
77
|
|
|
78
|
|
|
(1
|
)
|
|
(1.3
|
)%
|
|||
Pharmacy solutions
|
|
80
|
|
|
31
|
|
|
49
|
|
|
158.1
|
%
|
|||
Total services revenues
|
|
338
|
|
|
310
|
|
|
28
|
|
|
9.0
|
%
|
|||
Intersegment revenues:
|
|
|
|
|
|
|
|
|
|||||||
Pharmacy solutions
|
|
20,881
|
|
|
21,952
|
|
|
(1,071
|
)
|
|
(4.9
|
)%
|
|||
Provider services
|
|
1,593
|
|
|
1,677
|
|
|
(84
|
)
|
|
(5.0
|
)%
|
|||
Clinical care services
|
|
1,111
|
|
|
1,343
|
|
|
(232
|
)
|
|
(17.3
|
)%
|
|||
Total intersegment revenues
|
|
23,585
|
|
|
24,972
|
|
|
(1,387
|
)
|
|
(5.6
|
)%
|
|||
Total services and intersegment revenues
|
|
$
|
23,923
|
|
|
$
|
25,282
|
|
|
$
|
(1,359
|
)
|
|
(5.4
|
)%
|
Income before income taxes
|
|
$
|
967
|
|
|
$
|
1,096
|
|
|
$
|
(129
|
)
|
|
(11.8
|
)%
|
Operating cost ratio
|
|
95.5
|
%
|
|
95.2
|
%
|
|
|
|
0.3
|
%
|
•
|
Healthcare Services segment earnings of
$967 million
for
2017
, a decrease of
$129 million
, or
11.8%
, from
2016
primarily due to the impact of the optimization process associated with our chronic care management programs, as well as lower earnings in our provider services business reflecting lower Medicare rates year-over-year in geographies where our provider assets are primarily located. The reductions in pharmacy solutions intersegment revenues were offset by similar reductions in operating costs associated with the pharmacy solutions business.
|
•
|
Humana Pharmacy Solutions
®
script volumes for the Retail and Group and Specialty segment membership increased to approximately
433 million
in
2017
,
up
2%
versus scripts of approximately
426 million
in
2016
. The increase primarily reflects growth associated with higher Medicare membership for 2017 than in 2016, partially offset by the decline in Individual Commercial membership.
|
•
|
Services revenue
increased
$28 million
, or
9.0%
, from
2016
to
$338 million
for
2017
primarily due to service revenue growth from our pharmacy solutions business.
|
•
|
Intersegment revenues
decreased
$1.4 billion
, or
5.6%
, from
2016
to
$23.6 billion
for
2017
primarily due to care management programs discussed previously, as well as lower revenue in our provider services business reflecting lower Medicare rates year-over-year in geographies where our provider assets are primarily located. Our pharmacy solutions business revenues were impacted by improvements in net pharmacy costs driven by our pharmacy benefit manager and an increase in the generic dispensing rate. These items were partially offset by higher year-over-year script volume from growth in our Medicare Advantage and standalone PDP membership, partially offset by the impact of lower Individual Commercial membership. Our generic dispensing rate improved to 91.3% during 2017 from 90.5% during 2016. The higher generic dispensing rate
|
•
|
The Healthcare Services segment operating cost ratio of
95.5%
for
2017
was relatively unchanged from 95.2% for 2016.
|
•
|
As announced on February 14, 2017, we exited our Individual Commercial medical business January 1, 2018.
|
•
|
In 2017, our Individual Commercial segment pretax income was $193 million, an increase of $1.1 billion, from a pretax loss of $869 million in 2016 primarily due to the exit of certain markets in 2017, and per-member premium increases, as well as the reduction of premiums related to the write-off of receivables associated with the commercial risk corridor premium stabilization program.
|
•
|
Individual commercial medical membership decreased 526,000 members, or 80.3%, from December 31, 2016 to December 31, 2017 reflecting the decline in the number of counties we offered on-exchange coverage and the discontinuance of offering off-exchange products.
|
•
|
The Individual Commercial segment benefit ratio of
57.4%
for
2017
decreased
from
107.7%
in
2016
primarily due to the reduction of premiums related to the write-off of receivables associated with the commercial risk corridor premium stabilization program, as well as the planned exits in 2017 in certain markets that carried a higher benefit ratio and per-member premium increases.
|
•
|
The Individual Commercial segment operating cost ratio of
21.2%
for
2017
increased
160 basis points from 2016 primarily due to the loss of scale efficiency from market exits in 2017, partially offset by the write-off of receivables associated with the commercial risk corridor premium stabilization program and the temporary suspension of the health insurance industry fee for calendar year 2017.
|
|
2018
|
|
2017
|
|
2016
|
||||||
|
(in millions)
|
||||||||||
Net cash provided by operating activities
|
$
|
2,173
|
|
|
$
|
4,051
|
|
|
$
|
1,936
|
|
Net cash used in investing activities
|
(3,087
|
)
|
|
(2,941
|
)
|
|
(1,362
|
)
|
|||
Net cash (used in) provided by financing activities
|
(785
|
)
|
|
(945
|
)
|
|
732
|
|
|||
(Decrease) increase in cash and cash equivalents
|
$
|
(1,699
|
)
|
|
$
|
165
|
|
|
$
|
1,306
|
|
|
|
|
|
|
|
|
Change
|
||||||||||||||||
|
2018
|
|
2017
|
|
2016
|
|
2018
|
|
2017
|
|
2016
|
||||||||||||
|
(in millions)
|
|
|
||||||||||||||||||||
IBNR (1)
|
$
|
3,361
|
|
|
$
|
3,154
|
|
|
$
|
3,422
|
|
|
$
|
207
|
|
|
$
|
(268
|
)
|
|
$
|
(308
|
)
|
Reported claims in process (2)
|
617
|
|
|
614
|
|
|
654
|
|
|
3
|
|
|
(40
|
)
|
|
54
|
|
||||||
Premium deficiency reserve (3)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(176
|
)
|
||||||
Other benefits payable (4)
|
884
|
|
|
900
|
|
|
487
|
|
|
(16
|
)
|
|
413
|
|
|
17
|
|
||||||
Total benefits payable
|
$
|
4,862
|
|
|
$
|
4,668
|
|
|
$
|
4,563
|
|
|
194
|
|
|
105
|
|
|
(413
|
)
|
|||
Payables from disposition
|
|
|
|
|
|
|
58
|
|
|
—
|
|
|
—
|
|
|||||||||
Change in benefits payable per cash
flow statement resulting in cash from operations |
|
|
|
|
|
|
$
|
252
|
|
|
$
|
105
|
|
|
$
|
(413
|
)
|
(1)
|
IBNR represents an estimate of benefits payable for claims incurred but not reported (IBNR) at the balance sheet date and includes unprocessed claim inventories. The level of IBNR is primarily impacted by membership levels, medical claim trends and the receipt cycle time, which represents the length of time between when a claim is initially incurred and when the claim form is received (i.e. a shorter time span results in a lower IBNR).
|
(2)
|
Reported claims in process represents the estimated valuation of processed claims that are in the post claim adjudication process, which consists of administrative functions such as audit and check batching and handling, as well as amounts owed to our pharmacy benefit administrator which fluctuate due to bi-weekly payments and the month-end cutoff.
|
(3)
|
Premium deficiency reserve recognized for our individual commercial medical business compliant with the Health Care Reform Law associated with the 2016 coverage year.
|
(4)
|
Other benefits payable include amounts owed to providers under capitated and risk sharing arrangements.
|
|
|
|
|
|
|
|
Change
|
||||||||||||||||
|
2018
|
|
2017
|
|
2016
|
|
2018
|
|
2017
|
|
2016
|
||||||||||||
|
(in millions)
|
||||||||||||||||||||||
Medicare
|
$
|
836
|
|
|
$
|
511
|
|
|
$
|
787
|
|
|
$
|
325
|
|
|
$
|
(276
|
)
|
|
$
|
101
|
|
Commercial and other
|
135
|
|
|
273
|
|
|
579
|
|
|
(138
|
)
|
|
(306
|
)
|
|
39
|
|
||||||
Military services
|
123
|
|
|
166
|
|
|
32
|
|
|
(43
|
)
|
|
134
|
|
|
(29
|
)
|
||||||
Allowance for doubtful accounts
|
(79
|
)
|
|
(96
|
)
|
|
(118
|
)
|
|
17
|
|
|
22
|
|
|
(3
|
)
|
||||||
Total net receivables
|
$
|
1,015
|
|
|
$
|
854
|
|
|
$
|
1,280
|
|
|
161
|
|
|
(426
|
)
|
|
108
|
|
|||
Reconciliation to cash flow statement:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Provision for doubtful accounts
|
|
|
|
|
|
|
36
|
|
|
20
|
|
|
39
|
|
|||||||||
Change in receivables disposed
from sale of business |
|
|
|
|
|
|
3
|
|
|
—
|
|
|
11
|
|
|||||||||
Change in receivables per cash flow
statement resulting in cash from operations |
|
|
|
|
|
|
$
|
200
|
|
|
$
|
(406
|
)
|
|
$
|
158
|
|
|
|
Payments Due by Period
|
||||||||||||||||||
|
|
Total
|
|
Less than
1 Year |
|
1-3 Years
|
|
3-5 Years
|
|
More than
5 Years |
||||||||||
|
|
(in millions)
|
||||||||||||||||||
Debt
|
|
$
|
6,097
|
|
|
$
|
1,697
|
|
|
$
|
400
|
|
|
$
|
1,000
|
|
|
$
|
3,000
|
|
Interest (1)
|
|
8,955
|
|
|
1,926
|
|
|
1,161
|
|
|
914
|
|
|
4,954
|
|
|||||
Operating leases (2)
|
|
519
|
|
|
147
|
|
|
210
|
|
|
112
|
|
|
50
|
|
|||||
Purchase obligations (3)
|
|
736
|
|
|
240
|
|
|
337
|
|
|
159
|
|
|
—
|
|
|||||
Future policy benefits payable and other long-term liabilities (4)
|
|
724
|
|
|
53
|
|
|
444
|
|
|
68
|
|
|
159
|
|
|||||
Total
|
|
$
|
17,031
|
|
|
$
|
4,063
|
|
|
$
|
2,552
|
|
|
$
|
2,253
|
|
|
$
|
8,163
|
|
(1)
|
Interest includes the estimated contractual interest payments under our debt agreements.
|
(2)
|
We lease facilities, computer hardware, and other furniture and equipment under long-term operating leases that are noncancelable and expire on various dates through
2046
. We sublease facilities or partial facilities to third party tenants for space not used in our operations which partially mitigates our operating lease commitments. See also Note 16 to the consolidated financial statements included in Item 8. – Financial Statements and Supplementary Data.
|
(3)
|
Purchase obligations include agreements to purchase services, primarily information technology related services, or to make improvements to real estate, in each case that are enforceable and legally binding on us and that specify all significant terms, including: fixed or minimum levels of service to be purchased; fixed, minimum or variable price provisions; and the appropriate timing of the transaction. Purchase obligations exclude agreements that are cancelable without penalty.
|
(4)
|
Includes future policy benefits payable ceded to third parties through 100% coinsurance agreements as more fully described in Note 19 to the consolidated financial statements included in Item 8. – Financial Statements and Supplementary Data. We expect the assuming reinsurance carriers to fund these obligations and reflected these amounts as reinsurance recoverables included in other long-term assets on our consolidated balance sheet. Amounts payable in less than one year are included in trade accounts payable and accrued expenses in the consolidated balance sheet.
|
|
December 31, 2018
|
|
Percentage
of Total
|
|
December 31, 2017
|
|
Percentage
of Total
|
||||||
|
(dollars in millions)
|
||||||||||||
IBNR
|
$
|
3,361
|
|
|
69.1
|
%
|
|
$
|
3,154
|
|
|
67.6
|
%
|
Reported claims in process
|
617
|
|
|
12.7
|
%
|
|
614
|
|
|
13.1
|
%
|
||
Other benefits payable
|
884
|
|
|
18.2
|
%
|
|
900
|
|
|
19.3
|
%
|
||
Total benefits payable
|
$
|
4,862
|
|
|
100.0
|
%
|
|
$
|
4,668
|
|
|
100.0
|
%
|
Completion Factor (a):
|
|
Claims Trend Factor (b):
|
||||
Factor
Change (c) |
|
Decrease in
Benefits Payable |
|
Factor
Change (c) |
|
Decrease in
Benefits Payable |
(dollars in millions)
|
||||||
0.70%
|
|
$(258)
|
|
(3.00)%
|
|
$(224)
|
0.60%
|
|
$(222)
|
|
(2.75)%
|
|
$(206)
|
0.50%
|
|
$(185)
|
|
(2.50)%
|
|
$(187)
|
0.40%
|
|
$(148)
|
|
(2.25)%
|
|
$(168)
|
0.30%
|
|
$(111)
|
|
(2.00)%
|
|
$(150)
|
0.20%
|
|
$(74)
|
|
(1.75)%
|
|
$(131)
|
0.10%
|
|
$(37)
|
|
(1.50)%
|
|
$(112)
|
(a)
|
Reflects estimated potential changes in benefits payable at December 31,
2018
caused by changes in completion factors for incurred months prior to the most recent two months.
|
(b)
|
Reflects estimated potential changes in benefits payable at December 31,
2018
caused by changes in annualized claims trend used for the estimation of per member per month incurred claims for the most recent two months.
|
(c)
|
The factor change indicated represents the percentage point change.
|
|
|
2018
|
|
2017
|
|
2016
|
||||||
|
|
(in millions)
|
||||||||||
Balances at January 1
|
|
$
|
4,668
|
|
|
$
|
4,563
|
|
|
$
|
4,976
|
|
Less: Premium deficiency reserve
|
|
—
|
|
|
—
|
|
|
(176
|
)
|
|||
Less: Reinsurance recoverables
|
|
(70
|
)
|
|
(76
|
)
|
|
(85
|
)
|
|||
Balances at January 1, net
|
|
4,598
|
|
|
4,487
|
|
|
4,715
|
|
|||
Incurred related to:
|
|
|
|
|
|
|
||||||
Current year
|
|
46,385
|
|
|
44,001
|
|
|
45,318
|
|
|||
Prior years
|
|
(503
|
)
|
|
(483
|
)
|
|
(582
|
)
|
|||
Total incurred
|
|
45,882
|
|
|
43,518
|
|
|
44,736
|
|
|||
Paid related to:
|
|
|
|
|
|
|
||||||
Current year
|
|
(41,736
|
)
|
|
(39,496
|
)
|
|
(40,852
|
)
|
|||
Prior years
|
|
(3,977
|
)
|
|
(3,911
|
)
|
|
(4,112
|
)
|
|||
Total paid
|
|
(45,713
|
)
|
|
(43,407
|
)
|
|
(44,964
|
)
|
|||
Reinsurance recoverable
|
|
95
|
|
|
70
|
|
|
76
|
|
|||
Balances at December 31
|
|
$
|
4,862
|
|
|
$
|
4,668
|
|
|
$
|
4,563
|
|
|
Favorable Development by Changes in Key Assumptions
|
|||||||||||||||||||
|
2018
|
|
2017
|
|
2016
|
|||||||||||||||
|
Amount
|
|
Factor
Change (a) |
|
Amount
|
|
Factor
Change (a) |
|
Amount
|
|
Factor
Change (a) |
|||||||||
|
(dollars in millions)
|
|||||||||||||||||||
Trend factors
|
$
|
(229
|
)
|
|
(3.3
|
)%
|
|
$
|
(279
|
)
|
|
(2.7
|
)%
|
|
$
|
(316
|
)
|
|
(2.9
|
)%
|
Completion factors
|
(274
|
)
|
|
(0.8
|
)%
|
|
(204
|
)
|
|
(0.7
|
)%
|
|
(266
|
)
|
|
(0.9
|
)%
|
|||
Total
|
$
|
(503
|
)
|
|
|
|
$
|
(483
|
)
|
|
|
|
$
|
(582
|
)
|
|
|
(a)
|
The factor change indicated represents the percentage point change.
|
|
Favorable Medical Claims Reserve
Development |
|
Change
|
||||||||||||||||
|
2018
|
|
2017
|
|
2016
|
|
2018
|
|
2017
|
||||||||||
|
(in millions)
|
||||||||||||||||||
Retail Segment
|
$
|
(398
|
)
|
|
$
|
(386
|
)
|
|
$
|
(429
|
)
|
|
$
|
(12
|
)
|
|
$
|
43
|
|
Group and Specialty Segment
|
(46
|
)
|
|
(40
|
)
|
|
(46
|
)
|
|
(6
|
)
|
|
6
|
|
|||||
Individual Commercial Segment
|
(57
|
)
|
|
(56
|
)
|
|
(106
|
)
|
|
(1
|
)
|
|
50
|
|
|||||
Other Businesses
|
(2
|
)
|
|
(1
|
)
|
|
(1
|
)
|
|
(1
|
)
|
|
—
|
|
|||||
Total
|
$
|
(503
|
)
|
|
$
|
(483
|
)
|
|
$
|
(582
|
)
|
|
$
|
(20
|
)
|
|
$
|
99
|
|
|
2018
|
|
2017
|
|
2016
|
||||||
|
(in millions)
|
||||||||||
Premium deficiency reserve for short-duration policies
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(176
|
)
|
Military services
|
—
|
|
|
—
|
|
|
8
|
|
|||
Future policy benefits
|
—
|
|
|
(22
|
)
|
|
439
|
|
|||
Total
|
$
|
—
|
|
|
$
|
(22
|
)
|
|
$
|
271
|
|
|
|
12/31/2018
|
|
Percentage
of Total |
|
12/31/2017
|
|
Percentage
of Total |
||||||
|
|
|
|
|
|
|
|
|
||||||
|
|
(dollars in millions)
|
||||||||||||
U.S. Treasury and other U.S. government corporations and agencies:
|
|
|
|
|
|
|
|
|
||||||
U.S. Treasury and agency obligations
|
|
$
|
417
|
|
|
4.0
|
%
|
|
$
|
531
|
|
|
4.3
|
%
|
Mortgage-backed securities
|
|
2,544
|
|
|
24.4
|
%
|
|
1,610
|
|
|
13.1
|
%
|
||
Tax-exempt municipal securities
|
|
2,771
|
|
|
26.5
|
%
|
|
3,889
|
|
|
31.6
|
%
|
||
Mortgage-backed securities:
|
|
|
|
|
|
|
|
|
||||||
Residential
|
|
55
|
|
|
0.5
|
%
|
|
26
|
|
|
0.2
|
%
|
||
Commercial
|
|
523
|
|
|
5.0
|
%
|
|
456
|
|
|
3.7
|
%
|
||
Asset-backed securities
|
|
985
|
|
|
9.4
|
%
|
|
408
|
|
|
3.3
|
%
|
||
Corporate debt securities
|
|
3,142
|
|
|
30.2
|
%
|
|
5,382
|
|
|
43.8
|
%
|
||
Total debt securities
|
|
$
|
10,437
|
|
|
100.0
|
%
|
|
$
|
12,302
|
|
|
100.0
|
%
|
|
Less than 12 months
|
|
12 months or more
|
|
Total
|
|||||||||||||||||||
|
Fair
Value |
|
Gross
Unrealized Losses |
|
Fair
Value |
|
Gross
Unrealized Losses |
|
Fair
Value |
|
Gross
Unrealized Losses |
|||||||||||||
|
(in millions)
|
|||||||||||||||||||||||
December 31, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
U.S. Treasury and other U.S. government
corporations and agencies: |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
U.S. Treasury and agency obligations
|
$
|
179
|
|
|
$
|
(1
|
)
|
|
$
|
153
|
|
|
$
|
(2
|
)
|
|
$
|
332
|
|
|
$
|
(3
|
)
|
|
Mortgage-backed securities
|
956
|
|
|
(16
|
)
|
|
1,019
|
|
|
(38
|
)
|
|
1,975
|
|
|
(54
|
)
|
|||||||
Tax-exempt municipal securities
|
809
|
|
|
(9
|
)
|
|
1,648
|
|
|
(28
|
)
|
|
2,457
|
|
|
(37
|
)
|
|||||||
Mortgage-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Residential
|
—
|
|
|
—
|
|
|
15
|
|
|
—
|
|
|
15
|
|
|
—
|
|
|||||||
Commercial
|
372
|
|
|
(8
|
)
|
|
133
|
|
|
(6
|
)
|
|
505
|
|
|
(14
|
)
|
|||||||
Asset-backed securities
|
824
|
|
|
(7
|
)
|
|
40
|
|
|
—
|
|
|
864
|
|
|
(7
|
)
|
|||||||
Corporate debt securities
|
1,434
|
|
|
(35
|
)
|
|
1,439
|
|
|
(63
|
)
|
|
2,873
|
|
|
(98
|
)
|
|||||||
Total debt securities
|
$
|
4,574
|
|
|
$
|
(76
|
)
|
|
$
|
4,447
|
|
|
$
|
(137
|
)
|
|
$
|
9,021
|
|
|
$
|
(213
|
)
|
|
|
Increase (decrease) in
pretax earnings given an interest rate decrease of X basis points |
|
Increase (decrease) in
pretax earnings given an interest rate increase of X basis points |
||||||||||||||||||||
|
|
(300)
|
|
(200)
|
|
(100)
|
|
100
|
|
200
|
|
300
|
||||||||||||
|
|
(in millions)
|
||||||||||||||||||||||
As of December 31, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Investment income (a)
|
|
$
|
(154
|
)
|
|
$
|
(114
|
)
|
|
$
|
(57
|
)
|
|
$
|
58
|
|
|
$
|
116
|
|
|
$
|
175
|
|
Interest expense (b)
|
|
31
|
|
|
20
|
|
|
10
|
|
|
(10
|
)
|
|
(20
|
)
|
|
(31
|
)
|
||||||
Pretax
|
|
$
|
(123
|
)
|
|
$
|
(94
|
)
|
|
$
|
(47
|
)
|
|
$
|
48
|
|
|
$
|
96
|
|
|
$
|
144
|
|
As of December 31, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Investment income (a)
|
|
$
|
(87
|
)
|
|
$
|
(83
|
)
|
|
$
|
(67
|
)
|
|
$
|
67
|
|
|
$
|
134
|
|
|
$
|
202
|
|
Interest expense (b)
|
|
2
|
|
|
2
|
|
|
2
|
|
|
(2
|
)
|
|
(3
|
)
|
|
(5
|
)
|
||||||
Pretax
|
|
$
|
(85
|
)
|
|
$
|
(81
|
)
|
|
$
|
(65
|
)
|
|
$
|
65
|
|
|
$
|
131
|
|
|
$
|
197
|
|
(a)
|
As of
December 31, 2018
and
2017
, some of our investments had interest rates below 3% so the assumed hypothetical change in pretax earnings does not reflect the full 3% point reduction.
|
(b)
|
The interest rate under our senior notes is fixed. There were no borrowings outstanding under the credit agreement at
December 31, 2018
or
December 31, 2017
. There was
$645 million
and
$150 million
outstanding under our commercial paper program at
December 31, 2018
and 2017, respectively. As of
December 31, 2017
, our interest rate under our commercial paper program was less than 2% so the assumed hypothetical change in pretax earnings does not reflect the full 2% point reduction.
|
|
December 31,
|
||||||
|
2018
|
|
2017
|
||||
|
(in millions, except
share amounts)
|
||||||
ASSETS
|
|
|
|
||||
Current assets:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
2,343
|
|
|
$
|
4,042
|
|
Investment securities
|
10,026
|
|
|
9,557
|
|
||
Receivables, less allowance for doubtful accounts
of $79 in 2018 and $96 in 2017 |
1,015
|
|
|
854
|
|
||
Other current assets
|
3,564
|
|
|
2,949
|
|
||
Total current assets
|
16,948
|
|
|
17,402
|
|
||
Property and equipment, net
|
1,735
|
|
|
1,584
|
|
||
Long-term investment securities
|
411
|
|
|
2,745
|
|
||
Equity method investment in Kindred at Home
|
1,047
|
|
|
—
|
|
||
Goodwill
|
3,897
|
|
|
3,281
|
|
||
Other long-term assets
|
1,375
|
|
|
2,166
|
|
||
Total assets
|
$
|
25,413
|
|
|
$
|
27,178
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
||||
Current liabilities:
|
|
|
|
||||
Benefits payable
|
$
|
4,862
|
|
|
$
|
4,668
|
|
Trade accounts payable and accrued expenses
|
3,067
|
|
|
4,069
|
|
||
Book overdraft
|
171
|
|
|
141
|
|
||
Unearned revenues
|
283
|
|
|
378
|
|
||
Short-term debt
|
1,694
|
|
|
150
|
|
||
Total current liabilities
|
10,077
|
|
|
9,406
|
|
||
Long-term debt
|
4,375
|
|
|
4,770
|
|
||
Future policy benefits payable
|
219
|
|
|
2,923
|
|
||
Other long-term liabilities
|
581
|
|
|
237
|
|
||
Total liabilities
|
15,252
|
|
|
17,336
|
|
||
Commitments and contingencies (Note 16)
|
|
|
|
||||
Stockholders’ equity:
|
|
|
|
||||
Preferred stock, $1 par; 10,000,000 shares authorized; none issued
|
—
|
|
|
—
|
|
||
Common stock, $0.16 2/3 par; 300,000,000 shares authorized;
198,594,841 shares issued at December 31, 2018 and 198,572,458 shares issued at December 31, 2017 |
33
|
|
|
33
|
|
||
Capital in excess of par value
|
2,535
|
|
|
2,445
|
|
||
Retained earnings
|
15,072
|
|
|
13,670
|
|
||
Accumulated other comprehensive (loss) income
|
(159
|
)
|
|
19
|
|
||
Treasury stock, at cost, 63,028,169 shares at December 31, 2018
and 60,893,762 shares at December 31, 2017 |
(7,320
|
)
|
|
(6,325
|
)
|
||
Total stockholders’ equity
|
10,161
|
|
|
9,842
|
|
||
Total liabilities and stockholders’ equity
|
$
|
25,413
|
|
|
$
|
27,178
|
|
|
For the year ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
|
(in millions, except per share results)
|
||||||||||
Revenues:
|
|
|
|
|
|
||||||
Premiums
|
$
|
54,941
|
|
|
$
|
52,380
|
|
|
$
|
53,021
|
|
Services
|
1,457
|
|
|
982
|
|
|
969
|
|
|||
Investment income
|
514
|
|
|
405
|
|
|
389
|
|
|||
Total revenues
|
56,912
|
|
|
53,767
|
|
|
54,379
|
|
|||
Operating expenses:
|
|
|
|
|
|
||||||
Benefits
|
45,882
|
|
|
43,496
|
|
|
45,007
|
|
|||
Operating costs
|
7,525
|
|
|
6,567
|
|
|
7,173
|
|
|||
Merger termination fee and related costs, net
|
—
|
|
|
(936
|
)
|
|
104
|
|
|||
Depreciation and amortization
|
405
|
|
|
378
|
|
|
354
|
|
|||
Total operating expenses
|
53,812
|
|
|
49,505
|
|
|
52,638
|
|
|||
Income from operations
|
3,100
|
|
|
4,262
|
|
|
1,741
|
|
|||
Loss on sale of business
|
786
|
|
|
—
|
|
|
—
|
|
|||
Interest expense
|
218
|
|
|
242
|
|
|
189
|
|
|||
Other expense, net
|
33
|
|
|
—
|
|
|
—
|
|
|||
Income before income taxes and equity in net earnings
|
2,063
|
|
|
4,020
|
|
|
1,552
|
|
|||
Provision for income taxes
|
391
|
|
|
1,572
|
|
|
938
|
|
|||
Equity in net earnings of Kindred at Home
|
11
|
|
|
—
|
|
|
—
|
|
|||
Net income
|
$
|
1,683
|
|
|
$
|
2,448
|
|
|
$
|
614
|
|
Basic earnings per common share
|
$
|
12.24
|
|
|
$
|
16.94
|
|
|
$
|
4.11
|
|
Diluted earnings per common share
|
$
|
12.16
|
|
|
$
|
16.81
|
|
|
$
|
4.07
|
|
|
For the year ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
|
(in millions)
|
||||||||||
Net income
|
$
|
1,683
|
|
|
$
|
2,448
|
|
|
$
|
614
|
|
Other comprehensive income (loss):
|
|
|
|
|
|
||||||
Change in gross unrealized investment losses/gains
|
(189
|
)
|
|
149
|
|
|
(101
|
)
|
|||
Effect of income taxes
|
51
|
|
|
(55
|
)
|
|
38
|
|
|||
Total change in unrealized investment
gains/losses, net of tax |
(138
|
)
|
|
94
|
|
|
(63
|
)
|
|||
Reclassification adjustment for net realized
gains included in investment income |
(53
|
)
|
|
(14
|
)
|
|
(96
|
)
|
|||
Effect of income taxes
|
17
|
|
|
5
|
|
|
35
|
|
|||
Total reclassification adjustment, net of tax
|
(36
|
)
|
|
(9
|
)
|
|
(61
|
)
|
|||
Other comprehensive (loss) income, net of tax
|
(174
|
)
|
|
85
|
|
|
(124
|
)
|
|||
Comprehensive income attributable to our equity method
investment in Kindred at Home |
(4
|
)
|
|
—
|
|
|
—
|
|
|||
Comprehensive income
|
$
|
1,505
|
|
|
$
|
2,533
|
|
|
$
|
490
|
|
|
Common Stock
|
|
Capital In
Excess of
Par Value
|
|
Retained
Earnings
|
|
Accumulated
Other
Comprehensive
Income (Loss)
|
|
Treasury
Stock
|
|
Total
Stockholders’
Equity
|
|||||||||||||||
|
Issued
Shares
|
|
Amount
|
|
||||||||||||||||||||||
|
(dollars in millions, share amounts in thousands)
|
|||||||||||||||||||||||||
Balances, January 1, 2016
|
198,372
|
|
|
$
|
33
|
|
|
$
|
2,530
|
|
|
$
|
11,017
|
|
|
$
|
58
|
|
|
$
|
(3,292
|
)
|
|
$
|
10,346
|
|
Net income
|
|
|
|
|
|
|
614
|
|
|
|
|
|
|
614
|
|
|||||||||||
Other comprehensive loss
|
|
|
|
|
|
|
|
|
(124
|
)
|
|
|
|
(124
|
)
|
|||||||||||
Common stock repurchases
|
|
|
|
|
—
|
|
|
|
|
|
|
(104
|
)
|
|
(104
|
)
|
||||||||||
Dividends and dividend
equivalents |
|
|
|
|
—
|
|
|
(177
|
)
|
|
|
|
|
|
(177
|
)
|
||||||||||
Stock-based compensation
|
|
|
|
|
115
|
|
|
|
|
|
|
|
|
115
|
|
|||||||||||
Restricted stock unit vesting
|
13
|
|
|
—
|
|
|
(98
|
)
|
|
|
|
|
|
98
|
|
|
—
|
|
||||||||
Stock option exercises
|
110
|
|
|
—
|
|
|
13
|
|
|
|
|
|
|
|
|
13
|
|
|||||||||
Stock option and restricted
stock tax benefit |
|
|
|
|
2
|
|
|
|
|
|
|
|
|
2
|
|
|||||||||||
Balances, December 31, 2016
|
198,495
|
|
|
33
|
|
|
2,562
|
|
|
11,454
|
|
|
(66
|
)
|
|
(3,298
|
)
|
|
10,685
|
|
||||||
Net income
|
|
|
|
|
|
|
2,448
|
|
|
|
|
|
|
2,448
|
|
|||||||||||
Other comprehensive income
|
|
|
|
|
|
|
|
|
85
|
|
|
|
|
85
|
|
|||||||||||
Common stock repurchases
|
|
|
|
|
(200
|
)
|
|
|
|
|
|
(3,165
|
)
|
|
(3,365
|
)
|
||||||||||
Dividends and dividend
equivalents |
|
|
|
|
—
|
|
|
(232
|
)
|
|
|
|
|
|
(232
|
)
|
||||||||||
Stock-based compensation
|
|
|
|
|
157
|
|
|
|
|
|
|
|
|
157
|
|
|||||||||||
Restricted stock unit vesting
|
—
|
|
|
—
|
|
|
(138
|
)
|
|
|
|
|
|
138
|
|
|
—
|
|
||||||||
Stock option exercises
|
77
|
|
|
—
|
|
|
64
|
|
|
|
|
|
|
|
|
64
|
|
|||||||||
Balances, December 31, 2017
|
198,572
|
|
|
33
|
|
|
2,445
|
|
|
13,670
|
|
|
19
|
|
|
(6,325
|
)
|
|
9,842
|
|
||||||
Net income
|
|
|
|
|
|
|
1,683
|
|
|
|
|
|
|
1,683
|
|
|||||||||||
Other comprehensive loss
|
|
|
|
|
|
|
(4
|
)
|
|
(178
|
)
|
|
|
|
(182
|
)
|
||||||||||
Common stock repurchases
|
|
|
|
|
50
|
|
|
|
|
|
|
(1,140
|
)
|
|
(1,090
|
)
|
||||||||||
Dividends and dividend
equivalents |
|
|
|
|
—
|
|
|
(277
|
)
|
|
|
|
|
|
(277
|
)
|
||||||||||
Stock-based compensation
|
|
|
|
|
137
|
|
|
|
|
|
|
|
|
137
|
|
|||||||||||
Restricted stock unit vesting
|
—
|
|
|
—
|
|
|
(145
|
)
|
|
|
|
|
|
145
|
|
|
—
|
|
||||||||
Stock option exercises
|
23
|
|
|
—
|
|
|
48
|
|
|
|
|
|
|
|
|
48
|
|
|||||||||
Balances, December 31, 2018
|
198,595
|
|
|
$
|
33
|
|
|
$
|
2,535
|
|
|
$
|
15,072
|
|
|
$
|
(159
|
)
|
|
$
|
(7,320
|
)
|
|
$
|
10,161
|
|
|
For the year ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
|
(in millions)
|
||||||||||
Cash flows from operating activities
|
|
|
|
|
|
||||||
Net income
|
$
|
1,683
|
|
|
$
|
2,448
|
|
|
$
|
614
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
||||||
Loss on sale of business
|
786
|
|
|
—
|
|
|
—
|
|
|||
Net realized capital gains
|
(90
|
)
|
|
(14
|
)
|
|
(96
|
)
|
|||
Equity in net earnings of Kindred at Home
|
(11
|
)
|
|
—
|
|
|
—
|
|
|||
Stock-based compensation
|
137
|
|
|
157
|
|
|
115
|
|
|||
Depreciation
|
444
|
|
|
410
|
|
|
388
|
|
|||
Amortization
|
90
|
|
|
75
|
|
|
77
|
|
|||
Provision (benefit) for deferred income taxes
|
194
|
|
|
132
|
|
|
(71
|
)
|
|||
Provision for doubtful accounts
|
36
|
|
|
20
|
|
|
39
|
|
|||
Changes in operating assets and liabilities, net of effect of businesses acquired and dispositions:
|
|
|
|
|
|
||||||
Receivables
|
(200
|
)
|
|
406
|
|
|
(158
|
)
|
|||
Other assets
|
(484
|
)
|
|
(582
|
)
|
|
426
|
|
|||
Benefits payable
|
252
|
|
|
105
|
|
|
(413
|
)
|
|||
Other liabilities
|
(676
|
)
|
|
641
|
|
|
937
|
|
|||
Unearned revenues
|
(95
|
)
|
|
98
|
|
|
(84
|
)
|
|||
Other
|
107
|
|
|
155
|
|
|
162
|
|
|||
Net cash provided by operating activities
|
2,173
|
|
|
4,051
|
|
|
1,936
|
|
|||
Cash flows from investing activities
|
|
|
|
|
|
||||||
Acquisitions, net of cash acquired
|
(354
|
)
|
|
(31
|
)
|
|
(7
|
)
|
|||
Acquisition, equity method investment in Kindred at Home
|
(1,095
|
)
|
|
—
|
|
|
—
|
|
|||
Cash transferred in sale of business
|
(805
|
)
|
|
—
|
|
|
—
|
|
|||
Purchases of property and equipment
|
(612
|
)
|
|
(524
|
)
|
|
(527
|
)
|
|||
Purchases of investment securities
|
(4,687
|
)
|
|
(6,265
|
)
|
|
(6,566
|
)
|
|||
Maturities of investment securities
|
972
|
|
|
1,111
|
|
|
1,426
|
|
|||
Proceeds from sales of investment securities
|
3,494
|
|
|
2,768
|
|
|
4,312
|
|
|||
Net cash used in investing activities
|
(3,087
|
)
|
|
(2,941
|
)
|
|
(1,362
|
)
|
|||
Cash flows from financing activities
|
|
|
|
|
|
||||||
(Withdrawals) receipts from contract deposits, net
|
(640
|
)
|
|
1,823
|
|
|
1,093
|
|
|||
Proceeds from issuance of senior notes, net
|
—
|
|
|
1,779
|
|
|
—
|
|
|||
Proceeds from issuance (repayments) of commercial paper, net
|
485
|
|
|
(153
|
)
|
|
(2
|
)
|
|||
Proceeds from term loan
|
1,000
|
|
|
—
|
|
|
—
|
|
|||
Repayment of term loan
|
(350
|
)
|
|
—
|
|
|
—
|
|
|||
Repayment of long-term debt
|
—
|
|
|
(800
|
)
|
|
—
|
|
|||
Common stock repurchases
|
(1,090
|
)
|
|
(3,365
|
)
|
|
(104
|
)
|
|||
Dividends paid
|
(265
|
)
|
|
(220
|
)
|
|
(177
|
)
|
|||
Change in book overdraft
|
30
|
|
|
(71
|
)
|
|
(89
|
)
|
|||
Proceeds from stock option exercises and other, net
|
45
|
|
|
62
|
|
|
11
|
|
|||
Net cash (used in) provided by financing activities
|
(785
|
)
|
|
(945
|
)
|
|
732
|
|
|||
(Decrease) increase in cash and cash equivalents
|
(1,699
|
)
|
|
165
|
|
|
1,306
|
|
|||
Cash and cash equivalents at beginning of year
|
4,042
|
|
|
3,877
|
|
|
2,571
|
|
|||
Cash and cash equivalents at end of year
|
$
|
2,343
|
|
|
$
|
4,042
|
|
|
$
|
3,877
|
|
|
For the year ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
Supplemental cash flow disclosures:
|
(in millions)
|
||||||||||
Interest payments
|
$
|
195
|
|
|
$
|
216
|
|
|
$
|
185
|
|
Income tax payments, net
|
$
|
631
|
|
|
$
|
1,498
|
|
|
$
|
916
|
|
Details of businesses acquired in purchase transactions:
|
|
|
|
|
|
||||||
Fair value of assets acquired, net of cash acquired
|
$
|
392
|
|
|
$
|
31
|
|
|
$
|
7
|
|
Less: Fair value of liabilities assumed
|
(38
|
)
|
|
—
|
|
|
—
|
|
|||
Cash paid for acquired businesses, net of cash acquired
|
$
|
354
|
|
|
$
|
31
|
|
|
$
|
7
|
|
|
August 9, 2018
|
||
Assets
|
(in millions)
|
||
Cash and cash equivalents
|
$
|
805
|
|
Receivables, net
|
3
|
|
|
Investment securities
|
1,576
|
|
|
Other assets
|
1,085
|
|
|
Total assets disposed
|
$
|
3,469
|
|
Liabilities
|
|
||
Benefits payable
|
$
|
58
|
|
Trade accounts payable and accrued expenses
|
70
|
|
|
Future policy benefits payable
|
2,573
|
|
|
Total liabilities disposed
|
$
|
2,701
|
|
Balance sheet
|
December 31, 2018
|
||
|
(in millions)
|
||
Current assets
|
$
|
536
|
|
Non-current assets
|
4,955
|
|
|
Current liabilities
|
351
|
|
|
Non-current liabilities
|
2,708
|
|
|
Shareholders' equity
|
2,432
|
|
|
|
|
||
Statement of income
|
|
||
|
July 2, 2018 through December 31, 2018
|
||
|
(in millions)
|
||
Revenues
|
$
|
1,587
|
|
Expenses
|
1,451
|
|
|
Net income
|
27
|
|
|
Amortized
Cost |
|
Gross
Unrealized Gains |
|
Gross
Unrealized Losses |
|
Fair
Value |
||||||||
|
(in millions)
|
||||||||||||||
December 31, 2018
|
|
|
|
|
|
|
|
||||||||
U.S. Treasury and other U.S. government
corporations and agencies: |
|
|
|
|
|
|
|
||||||||
U.S. Treasury and agency obligations
|
$
|
419
|
|
|
$
|
1
|
|
|
$
|
(3
|
)
|
|
$
|
417
|
|
Mortgage-backed securities
|
2,595
|
|
|
3
|
|
|
(54
|
)
|
|
2,544
|
|
||||
Tax-exempt municipal securities
|
2,805
|
|
|
3
|
|
|
(37
|
)
|
|
2,771
|
|
||||
Mortgage-backed securities:
|
|
|
|
|
|
|
|
||||||||
Residential
|
55
|
|
|
—
|
|
|
—
|
|
|
55
|
|
||||
Commercial
|
537
|
|
|
—
|
|
|
(14
|
)
|
|
523
|
|
||||
Asset-backed securities
|
991
|
|
|
1
|
|
|
(7
|
)
|
|
985
|
|
||||
Corporate debt securities
|
3,239
|
|
|
1
|
|
|
(98
|
)
|
|
3,142
|
|
||||
Total debt securities
|
$
|
10,641
|
|
|
$
|
9
|
|
|
$
|
(213
|
)
|
|
$
|
10,437
|
|
December 31, 2017
|
|
|
|
|
|
|
|
||||||||
U.S. Treasury and other U.S. government
corporations and agencies: |
|
|
|
|
|
|
|
||||||||
U.S. Treasury and agency obligations
|
$
|
532
|
|
|
$
|
1
|
|
|
$
|
(2
|
)
|
|
$
|
531
|
|
Mortgage-backed securities
|
1,625
|
|
|
4
|
|
|
(19
|
)
|
|
1,610
|
|
||||
Tax-exempt municipal securities
|
3,884
|
|
|
33
|
|
|
(28
|
)
|
|
3,889
|
|
||||
Mortgage-backed securities:
|
|
|
|
|
|
|
|
||||||||
Residential
|
26
|
|
|
—
|
|
|
—
|
|
|
26
|
|
||||
Commercial
|
455
|
|
|
3
|
|
|
(2
|
)
|
|
456
|
|
||||
Asset-backed securities
|
407
|
|
|
1
|
|
|
—
|
|
|
408
|
|
||||
Corporate debt securities
|
5,175
|
|
|
244
|
|
|
(37
|
)
|
|
5,382
|
|
||||
Total debt securities
|
$
|
12,104
|
|
|
$
|
286
|
|
|
$
|
(88
|
)
|
|
$
|
12,302
|
|
|
Less than 12 months
|
|
12 months or more
|
|
Total
|
|||||||||||||||||||
|
Fair
Value |
|
Gross
Unrealized Losses |
|
Fair
Value |
|
Gross
Unrealized Losses |
|
Fair
Value |
|
Gross
Unrealized Losses |
|||||||||||||
|
(in millions)
|
|||||||||||||||||||||||
December 31, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
U.S. Treasury and other U.S. government
corporations and agencies: |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
U.S. Treasury and agency obligations
|
$
|
179
|
|
|
$
|
(1
|
)
|
|
$
|
153
|
|
|
$
|
(2
|
)
|
|
$
|
332
|
|
|
$
|
(3
|
)
|
|
Mortgage-backed securities
|
956
|
|
|
(16
|
)
|
|
1,019
|
|
|
(38
|
)
|
|
1,975
|
|
|
(54
|
)
|
|||||||
Tax-exempt municipal securities
|
809
|
|
|
(9
|
)
|
|
1,648
|
|
|
(28
|
)
|
|
2,457
|
|
|
(37
|
)
|
|||||||
Mortgage-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Residential
|
—
|
|
|
—
|
|
|
15
|
|
|
—
|
|
|
15
|
|
|
—
|
|
|||||||
Commercial
|
372
|
|
|
(8
|
)
|
|
133
|
|
|
(6
|
)
|
|
505
|
|
|
(14
|
)
|
|||||||
Asset-backed securities
|
824
|
|
|
(7
|
)
|
|
40
|
|
|
—
|
|
|
864
|
|
|
(7
|
)
|
|||||||
Corporate debt securities
|
1,434
|
|
|
(35
|
)
|
|
1,439
|
|
|
(63
|
)
|
|
2,873
|
|
|
(98
|
)
|
|||||||
Total debt securities
|
$
|
4,574
|
|
|
$
|
(76
|
)
|
|
$
|
4,447
|
|
|
$
|
(137
|
)
|
|
$
|
9,021
|
|
|
$
|
(213
|
)
|
|
December 31, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
U.S. Treasury and other U.S. government
corporations and agencies: |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
U.S. Treasury and agency obligations
|
$
|
273
|
|
|
$
|
(1
|
)
|
|
$
|
130
|
|
|
$
|
(1
|
)
|
|
$
|
403
|
|
|
$
|
(2
|
)
|
|
Mortgage-backed securities
|
581
|
|
|
(2
|
)
|
|
672
|
|
|
(17
|
)
|
|
1,253
|
|
|
(19
|
)
|
|||||||
Tax-exempt municipal securities
|
1,590
|
|
|
(16
|
)
|
|
661
|
|
|
(12
|
)
|
|
2,251
|
|
|
(28
|
)
|
|||||||
Mortgage-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Residential
|
20
|
|
|
—
|
|
|
3
|
|
|
—
|
|
|
23
|
|
|
—
|
|
|||||||
Commercial
|
131
|
|
|
(1
|
)
|
|
28
|
|
|
(1
|
)
|
|
159
|
|
|
(2
|
)
|
|||||||
Asset-backed securities
|
107
|
|
|
—
|
|
|
10
|
|
|
—
|
|
|
117
|
|
|
—
|
|
|||||||
Corporate debt securities
|
1,297
|
|
|
(10
|
)
|
|
804
|
|
|
(27
|
)
|
|
2,101
|
|
|
(37
|
)
|
|||||||
Total debt securities
|
$
|
3,999
|
|
|
$
|
(30
|
)
|
|
$
|
2,308
|
|
|
$
|
(58
|
)
|
|
$
|
6,307
|
|
|
$
|
(88
|
)
|
|
2018
|
|
2017
|
|
2016
|
||||||
|
(in millions)
|
||||||||||
Gross realized gains
|
$
|
106
|
|
|
$
|
35
|
|
|
$
|
120
|
|
Gross realized losses
|
(16
|
)
|
|
(21
|
)
|
|
(24
|
)
|
|||
Net realized capital gains
|
$
|
90
|
|
|
$
|
14
|
|
|
$
|
96
|
|
|
Amortized
Cost |
|
Fair
Value |
||||
|
(in millions)
|
||||||
Due within one year
|
$
|
943
|
|
|
$
|
941
|
|
Due after one year through five years
|
2,929
|
|
|
2,873
|
|
||
Due after five years through ten years
|
1,873
|
|
|
1,810
|
|
||
Due after ten years
|
718
|
|
|
706
|
|
||
Mortgage and asset-backed securities
|
4,178
|
|
|
4,107
|
|
||
Total debt securities
|
$
|
10,641
|
|
|
$
|
10,437
|
|
|
|
|
Fair Value Measurements Using
|
||||||||||||
|
Fair Value
|
|
Quoted Prices
in Active Markets (Level 1) |
|
Other
Observable Inputs (Level 2) |
|
Unobservable
Inputs (Level 3) |
||||||||
|
(in millions)
|
||||||||||||||
December 31, 2018
|
|
|
|
|
|
|
|
||||||||
Cash equivalents
|
$
|
2,024
|
|
|
$
|
2,024
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Debt securities:
|
|
|
|
|
|
|
|
||||||||
U.S. Treasury and other U.S. government corporations and agencies:
|
|
|
|
|
|
|
|
||||||||
U.S. Treasury and agency obligations
|
417
|
|
|
—
|
|
|
417
|
|
|
—
|
|
||||
Mortgage-backed securities
|
2,544
|
|
|
—
|
|
|
2,544
|
|
|
—
|
|
||||
Tax-exempt municipal securities
|
2,771
|
|
|
—
|
|
|
2,771
|
|
|
—
|
|
||||
Mortgage-backed securities:
|
|
|
|
|
|
|
|
||||||||
Residential
|
55
|
|
|
—
|
|
|
55
|
|
|
—
|
|
||||
Commercial
|
523
|
|
|
—
|
|
|
523
|
|
|
—
|
|
||||
Asset-backed securities
|
985
|
|
|
—
|
|
|
985
|
|
|
—
|
|
||||
Corporate debt securities
|
3,142
|
|
|
—
|
|
|
3,142
|
|
|
—
|
|
||||
Total debt securities
|
10,437
|
|
|
—
|
|
|
10,437
|
|
|
—
|
|
||||
Total invested assets
|
$
|
12,461
|
|
|
$
|
2,024
|
|
|
$
|
10,437
|
|
|
$
|
—
|
|
December 31, 2017
|
|
|
|
|
|
|
|
||||||||
Cash equivalents
|
$
|
4,564
|
|
|
$
|
4,564
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Debt securities:
|
|
|
|
|
|
|
|
||||||||
U.S. Treasury and other U.S. government corporations and agencies:
|
|
|
|
|
|
|
|
||||||||
U.S. Treasury and agency obligations
|
531
|
|
|
—
|
|
|
531
|
|
|
—
|
|
||||
Mortgage-backed securities
|
1,610
|
|
|
—
|
|
|
1,610
|
|
|
—
|
|
||||
Tax-exempt municipal securities
|
3,889
|
|
|
—
|
|
|
3,889
|
|
|
—
|
|
||||
Mortgage-backed securities:
|
|
|
|
|
|
|
|
||||||||
Residential
|
26
|
|
|
—
|
|
|
26
|
|
|
—
|
|
||||
Commercial
|
456
|
|
|
—
|
|
|
456
|
|
|
—
|
|
||||
Asset-backed securities
|
408
|
|
|
—
|
|
|
408
|
|
|
—
|
|
||||
Corporate debt securities
|
5,382
|
|
|
—
|
|
|
5,381
|
|
|
1
|
|
||||
Total debt securities
|
12,302
|
|
|
—
|
|
|
12,301
|
|
|
1
|
|
||||
Total invested assets
|
$
|
16,866
|
|
|
$
|
4,564
|
|
|
$
|
12,301
|
|
|
$
|
1
|
|
|
|
2018
|
|
2017
|
||||||||||||
|
|
Risk
Corridor Settlement |
|
CMS
Subsidies/ Discounts |
|
Risk
Corridor Settlement |
|
CMS
Subsidies/ Discounts |
||||||||
|
|
(in millions)
|
||||||||||||||
Other current assets
|
|
$
|
15
|
|
|
$
|
172
|
|
|
$
|
4
|
|
|
$
|
101
|
|
Trade accounts payable and accrued expenses
|
|
(103
|
)
|
|
(503
|
)
|
|
(255
|
)
|
|
(1,085
|
)
|
||||
Net current liability
|
|
(88
|
)
|
|
(331
|
)
|
|
(251
|
)
|
|
$
|
(984
|
)
|
|||
Other long-term assets
|
|
7
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Other long-term liabilities
|
|
(89
|
)
|
|
—
|
|
|
(28
|
)
|
|
—
|
|
||||
Net long-term liability
|
|
(82
|
)
|
|
—
|
|
|
(28
|
)
|
|
—
|
|
||||
Total net liability
|
|
$
|
(170
|
)
|
|
$
|
(331
|
)
|
|
$
|
(279
|
)
|
|
$
|
(984
|
)
|
|
|
2018
|
|
2017
|
||||
|
|
(in millions)
|
||||||
Land
|
|
$
|
20
|
|
|
$
|
20
|
|
Buildings and leasehold improvements
|
|
766
|
|
|
713
|
|
||
Equipment
|
|
890
|
|
|
824
|
|
||
Computer software
|
|
2,372
|
|
|
2,003
|
|
||
|
|
4,048
|
|
|
3,560
|
|
||
Accumulated depreciation
|
|
(2,313
|
)
|
|
(1,976
|
)
|
||
Property and equipment, net
|
|
$
|
1,735
|
|
|
$
|
1,584
|
|
|
|
Retail
|
|
Group and Specialty
|
|
Healthcare Services
|
|
Total
|
||||||||
|
|
(in millions)
|
||||||||||||||
Balance at January 1, 2017
|
|
$
|
1,059
|
|
|
$
|
261
|
|
|
$
|
1,952
|
|
|
$
|
3,272
|
|
Acquisitions
|
|
—
|
|
|
—
|
|
|
9
|
|
|
9
|
|
||||
Balance at December 31, 2017
|
|
1,059
|
|
|
261
|
|
|
1,961
|
|
|
3,281
|
|
||||
Acquisitions
|
|
476
|
|
|
—
|
|
|
140
|
|
|
616
|
|
||||
Balance at December 31, 2018
|
|
$
|
1,535
|
|
|
$
|
261
|
|
|
$
|
2,101
|
|
|
$
|
3,897
|
|
|
|
Weighted
Average Life |
|
2018
|
|
2017
|
||||||||||||||||||||
|
|
Cost
|
|
Accumulated
Amortization |
|
Net
|
|
Cost
|
|
Accumulated
Amortization |
|
Net
|
||||||||||||||
|
|
|
|
(in millions)
|
||||||||||||||||||||||
Other intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Customer contracts/relationships
|
|
8.7 years
|
|
$
|
646
|
|
|
$
|
434
|
|
|
$
|
212
|
|
|
$
|
566
|
|
|
$
|
401
|
|
|
$
|
165
|
|
Trade names and technology
|
|
6.4 years
|
|
84
|
|
|
83
|
|
|
1
|
|
|
104
|
|
|
84
|
|
|
20
|
|
||||||
Provider contracts
|
|
11.8 years
|
|
68
|
|
|
37
|
|
|
31
|
|
|
68
|
|
|
30
|
|
|
38
|
|
||||||
Noncompetes and other
|
|
7.3 years
|
|
29
|
|
|
28
|
|
|
1
|
|
|
32
|
|
|
29
|
|
|
3
|
|
||||||
Total other intangible assets
|
|
8.7 years
|
|
$
|
827
|
|
|
$
|
582
|
|
|
$
|
245
|
|
|
$
|
770
|
|
|
$
|
544
|
|
|
$
|
226
|
|
|
(in millions)
|
||
For the years ending December 31,
|
|
||
2019
|
$
|
70
|
|
2020
|
67
|
|
|
2021
|
34
|
|
|
2022
|
31
|
|
|
2023
|
18
|
|
|
|
2018
|
|
2017
|
|
2016
|
||||||
|
|
(in millions)
|
||||||||||
Balances at January 1
|
|
$
|
4,668
|
|
|
$
|
4,563
|
|
|
$
|
4,976
|
|
Less: Premium deficiency reserve
|
|
—
|
|
|
—
|
|
|
(176
|
)
|
|||
Less: Reinsurance recoverables
|
|
(70
|
)
|
|
(76
|
)
|
|
(85
|
)
|
|||
Balances at January 1, net
|
|
4,598
|
|
|
4,487
|
|
|
4,715
|
|
|||
Incurred related to:
|
|
|
|
|
|
|
||||||
Current year
|
|
46,385
|
|
|
44,001
|
|
|
45,318
|
|
|||
Prior years
|
|
(503
|
)
|
|
(483
|
)
|
|
(582
|
)
|
|||
Total incurred
|
|
45,882
|
|
|
43,518
|
|
|
44,736
|
|
|||
Paid related to:
|
|
|
|
|
|
|
||||||
Current year
|
|
(41,736
|
)
|
|
(39,496
|
)
|
|
(40,852
|
)
|
|||
Prior years
|
|
(3,977
|
)
|
|
(3,911
|
)
|
|
(4,112
|
)
|
|||
Total paid
|
|
(45,713
|
)
|
|
(43,407
|
)
|
|
(44,964
|
)
|
|||
Reinsurance recoverable
|
|
95
|
|
|
70
|
|
|
76
|
|
|||
Balances at December 31
|
|
$
|
4,862
|
|
|
$
|
4,668
|
|
|
$
|
4,563
|
|
|
Favorable Medical Claims Reserve
Development |
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
|
|
||||||||||
Retail Segment
|
$
|
(398
|
)
|
|
$
|
(386
|
)
|
|
$
|
(429
|
)
|
Group and Specialty Segment
|
(46
|
)
|
|
(40
|
)
|
|
(46
|
)
|
|||
Individual Commercial Segment
|
(57
|
)
|
|
(56
|
)
|
|
(106
|
)
|
|||
Other Businesses
|
(2
|
)
|
|
(1
|
)
|
|
(1
|
)
|
|||
Total
|
$
|
(503
|
)
|
|
$
|
(483
|
)
|
|
$
|
(582
|
)
|
|
|
2018
|
|
2017
|
|
2016
|
||||||
|
|
(in millions)
|
||||||||||
Premium deficiency reserve for short-duration policies
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(176
|
)
|
Military services
|
|
—
|
|
|
—
|
|
|
8
|
|
|||
Future policy benefits
|
|
—
|
|
|
(22
|
)
|
|
439
|
|
|||
Total
|
|
$
|
—
|
|
|
$
|
(22
|
)
|
|
$
|
271
|
|
|
|
2018
|
|
2017
|
|
2016
|
||||||
|
|
(in millions)
|
||||||||||
Balances at January 1
|
|
$
|
3,963
|
|
|
$
|
3,506
|
|
|
$
|
3,600
|
|
Less: Reinsurance recoverables
|
|
(70
|
)
|
|
(76
|
)
|
|
(85
|
)
|
|||
Balances at January 1, net
|
|
3,893
|
|
|
3,430
|
|
|
3,515
|
|
|||
Incurred related to:
|
|
|
|
|
|
|
||||||
Current year
|
|
41,323
|
|
|
38,604
|
|
|
37,212
|
|
|||
Prior years
|
|
(398
|
)
|
|
(386
|
)
|
|
(429
|
)
|
|||
Total incurred
|
|
40,925
|
|
|
38,218
|
|
|
36,783
|
|
|||
Paid related to:
|
|
|
|
|
|
|
||||||
Current year
|
|
(37,189
|
)
|
|
(34,781
|
)
|
|
(33,784
|
)
|
|||
Prior years
|
|
(3,386
|
)
|
|
(2,974
|
)
|
|
(3,084
|
)
|
|||
Total paid
|
|
(40,575
|
)
|
|
(37,755
|
)
|
|
(36,868
|
)
|
|||
Reinsurance recoverable
|
|
95
|
|
|
70
|
|
|
76
|
|
|||
Balances at December 31
|
|
$
|
4,338
|
|
|
$
|
3,963
|
|
|
$
|
3,506
|
|
|
|
Incurred Claims, Net of Reinsurance
|
||||||||||
|
|
For the Years Ended December 31,
|
||||||||||
Claims Incurred Year
|
|
2016
Unaudited |
|
2017
Unaudited |
|
2018
|
||||||
|
|
(in millions)
|
||||||||||
2016
|
|
$
|
37,212
|
|
|
$
|
36,891
|
|
|
$
|
36,811
|
|
2017
|
|
|
|
38,604
|
|
|
38,341
|
|
||||
2018
|
|
|
|
|
|
41,323
|
|
|||||
Total
|
|
|
|
|
|
$
|
116,475
|
|
|
|
Cumulative Paid Claims, Net of Reinsurance
|
||||||||||
|
|
For the Years Ended December 31,
|
||||||||||
Claims Incurred Year
|
|
2016
Unaudited |
|
2017
Unaudited |
|
2018
|
||||||
|
|
(in millions)
|
||||||||||
2016
|
|
$
|
33,784
|
|
|
$
|
36,841
|
|
|
$
|
36,811
|
|
2017
|
|
|
|
34,781
|
|
|
38,232
|
|
||||
2018
|
|
|
|
|
|
37,189
|
|
|||||
Total
|
|
|
|
|
|
$
|
112,232
|
|
||||
All outstanding benefit liabilities before 2015, net of reinsurance
|
|
N/A
|
|
|||||||||
Benefits payable, net of reinsurance
|
|
$
|
4,243
|
|
|
|
2018
|
|
2017
|
|
2016
|
||||||
|
|
(in millions)
|
||||||||||
Balances at January 1
|
|
$
|
568
|
|
|
$
|
579
|
|
|
$
|
616
|
|
Less: Reinsurance recoverables
|
|
—
|
|
|
—
|
|
|
—
|
|
|||
Balances at January 1, net
|
|
568
|
|
|
579
|
|
|
616
|
|
|||
Incurred related to:
|
|
|
|
|
|
|
||||||
Current year
|
|
5,466
|
|
|
5,403
|
|
|
5,271
|
|
|||
Prior years
|
|
(46
|
)
|
|
(40
|
)
|
|
(46
|
)
|
|||
Total incurred
|
|
5,420
|
|
|
5,363
|
|
|
5,225
|
|
|||
Paid related to:
|
|
|
|
|
|
|
||||||
Current year
|
|
(4,957
|
)
|
|
(4,843
|
)
|
|
(4,700
|
)
|
|||
Prior years
|
|
(514
|
)
|
|
(531
|
)
|
|
(562
|
)
|
|||
Total paid
|
|
(5,471
|
)
|
|
(5,374
|
)
|
|
(5,262
|
)
|
|||
Balances at December 31
|
|
$
|
517
|
|
|
$
|
568
|
|
|
$
|
579
|
|
|
|
Incurred Claims, Net of Reinsurance
|
||||||||||
|
|
For the Years Ended December 31,
|
||||||||||
Claims Incurred Year
|
|
2016
Unaudited |
|
2017
Unaudited |
|
2018
|
||||||
|
|
(in millions)
|
||||||||||
2016
|
|
$
|
5,271
|
|
|
$
|
5,234
|
|
|
$
|
5,235
|
|
2017
|
|
|
|
5,403
|
|
|
5,358
|
|
||||
2018
|
|
|
|
|
|
5,466
|
|
|||||
Total
|
|
|
|
|
|
$
|
16,059
|
|
|
|
Cumulative Paid Claims, Net of Reinsurance
|
||||||||||
|
|
For the Years Ended December 31,
|
||||||||||
Claims Incurred Year
|
|
2016
Unaudited |
|
2017
Unaudited |
|
2018
|
||||||
|
|
(in millions)
|
||||||||||
2016
|
|
$
|
4,700
|
|
|
$
|
5,226
|
|
|
$
|
5,234
|
|
2017
|
|
|
|
4,843
|
|
|
5,351
|
|
||||
2018
|
|
|
|
|
|
4,957
|
|
|||||
Total
|
|
|
|
|
|
|
$
|
15,542
|
|
|||
All outstanding benefit liabilities before 2015, net of reinsurance
|
|
N/A
|
|
|||||||||
Benefits payable, net of reinsurance
|
|
$
|
517
|
|
|
|
2018
|
|
2017
|
|
2016
|
||||||
|
|
(in millions)
|
||||||||||
Balances at January 1
|
|
$
|
101
|
|
|
$
|
454
|
|
|
$
|
741
|
|
Less: Premium deficiency reserve
|
|
—
|
|
|
—
|
|
|
(176
|
)
|
|||
Balances at January 1, net
|
|
101
|
|
|
454
|
|
|
565
|
|
|||
Incurred related to:
|
|
|
|
|
|
|
||||||
Current year
|
|
—
|
|
|
669
|
|
|
3,677
|
|
|||
Prior years
|
|
(56
|
)
|
|
(56
|
)
|
|
(106
|
)
|
|||
Total incurred
|
|
(56
|
)
|
|
613
|
|
|
3,571
|
|
|||
Paid related to:
|
|
|
|
|
|
|
||||||
Current year
|
|
—
|
|
|
(583
|
)
|
|
(3,233
|
)
|
|||
Prior years
|
|
(38
|
)
|
|
(383
|
)
|
|
(449
|
)
|
|||
Total paid
|
|
(38
|
)
|
|
(966
|
)
|
|
(3,682
|
)
|
|||
Balances at December 31
|
|
$
|
7
|
|
|
$
|
101
|
|
|
$
|
454
|
|
|
|
Incurred Claims, Net of Reinsurance
|
||||||||||
|
|
For the Years Ended December 31,
|
||||||||||
Claims Incurred Year
|
|
2016
Unaudited |
|
2017
Unaudited |
|
2018
|
||||||
|
|
(in millions)
|
||||||||||
2016
|
|
$
|
3,677
|
|
|
$
|
3,621
|
|
|
$
|
3,609
|
|
2017
|
|
|
|
669
|
|
|
627
|
|
||||
2018
|
|
|
|
|
|
—
|
|
|||||
Total
|
|
|
|
|
|
$
|
4,236
|
|
|
|
Cumulative Paid Claims, Net of Reinsurance
|
||||||||||
|
|
For the Years Ended December 31,
|
||||||||||
Claims Incurred Year
|
|
2016
Unaudited |
|
2017
Unaudited |
|
2018
|
||||||
|
|
(in millions)
|
||||||||||
2016
|
|
$
|
3,233
|
|
|
$
|
3,606
|
|
|
$
|
3,609
|
|
2017
|
|
|
|
583
|
|
|
620
|
|
||||
2018
|
|
|
|
|
|
—
|
|
|||||
Total
|
|
|
|
|
|
$
|
4,229
|
|
||||
All outstanding benefit liabilities before 2015, net of reinsurance
|
|
N/A
|
||||||||||
Benefits payable, net of reinsurance
|
|
$
|
7
|
|
|
December 31,
2018 |
||
Net outstanding liabilities
|
|
||
Retail
|
$
|
4,243
|
|
Group and Specialty
|
517
|
|
|
Individual Commercial
|
7
|
|
|
Benefits payable, net of reinsurance
|
4,767
|
|
|
Reinsurance recoverable on unpaid claims
|
|
||
Retail
|
95
|
|
|
Total benefits payable, gross
|
$
|
4,862
|
|
|
2018
|
|
2017
|
|
2016
|
||||||
|
(in millions)
|
||||||||||
Current provision:
|
|
|
|
|
|
||||||
Federal
|
$
|
139
|
|
|
$
|
1,324
|
|
|
$
|
921
|
|
States and Puerto Rico
|
58
|
|
|
116
|
|
|
88
|
|
|||
Total current provision
|
197
|
|
|
1,440
|
|
|
1,009
|
|
|||
Deferred expense (benefit)
|
194
|
|
|
132
|
|
|
(71
|
)
|
|||
Provision for income taxes
|
$
|
391
|
|
|
$
|
1,572
|
|
|
$
|
938
|
|
|
2018
|
|
2017
|
|
2016
|
||||||
|
(in millions)
|
||||||||||
Income tax provision at federal statutory rate
|
$
|
436
|
|
|
$
|
1,407
|
|
|
$
|
543
|
|
States, net of federal benefit, and Puerto Rico
|
42
|
|
|
80
|
|
|
41
|
|
|||
Tax exempt investment income
|
(11
|
)
|
|
(22
|
)
|
|
(20
|
)
|
|||
Health insurance industry fee
|
243
|
|
|
—
|
|
|
336
|
|
|||
Nondeductible executive compensation
|
17
|
|
|
36
|
|
|
30
|
|
|||
Tax reform
|
(39
|
)
|
|
133
|
|
|
—
|
|
|||
KMG sale
|
(272
|
)
|
|
—
|
|
|
—
|
|
|||
Other, net
|
(25
|
)
|
|
(62
|
)
|
|
8
|
|
|||
Provision for income taxes
|
$
|
391
|
|
|
$
|
1,572
|
|
|
$
|
938
|
|
|
Assets (Liabilities)
|
||||||
|
2018
|
|
2017
|
||||
|
(in millions)
|
||||||
Compensation and other accrued expense
|
$
|
89
|
|
|
$
|
138
|
|
Benefits payable
|
79
|
|
|
113
|
|
||
Investment securities
|
44
|
|
|
—
|
|
||
Net operating loss carryforward
|
38
|
|
|
53
|
|
||
Capital loss carryforward
|
15
|
|
|
—
|
|
||
Deferred acquisition costs
|
17
|
|
|
48
|
|
||
Unearned revenues
|
9
|
|
|
12
|
|
||
Other
|
8
|
|
|
1
|
|
||
Future policy benefits payable
|
—
|
|
|
231
|
|
||
Total deferred income tax assets
|
299
|
|
|
596
|
|
||
Valuation allowance
|
(54
|
)
|
|
(49
|
)
|
||
Total deferred income tax assets, net of valuation allowance
|
245
|
|
|
547
|
|
||
Depreciable property and intangible assets
|
(273
|
)
|
|
(237
|
)
|
||
Prepaid expenses
|
(52
|
)
|
|
(44
|
)
|
||
Future policy benefits payable
|
(5
|
)
|
|
—
|
|
||
Investment securities
|
—
|
|
|
(49
|
)
|
||
Total deferred income tax liabilities
|
(330
|
)
|
|
(330
|
)
|
||
Total net deferred income tax assets/(liabilities)
|
$
|
(85
|
)
|
|
$
|
217
|
|
|
2018
|
|
2017
|
||||
|
(in millions)
|
||||||
Short-term debt:
|
|
||||||
Commercial paper
|
$
|
645
|
|
|
150
|
|
|
Term note
|
650
|
|
|
—
|
|
||
Senior note:
|
|
|
|
||||
$400 million, 2.625% due October 1, 2019
|
399
|
|
|
—
|
|
||
Total short-term debt
|
$
|
1,694
|
|
|
$
|
150
|
|
|
|
||||||
Long-term debt:
|
|
||||||
Senior notes:
|
|
||||||
$400 million, 2.625% due October 1, 2019
|
$
|
—
|
|
|
$
|
399
|
|
$400 million, 2.50% due December 15, 2020
|
398
|
|
|
397
|
|
||
$400 million, 2.90% due December 15, 2022
|
396
|
|
|
396
|
|
||
$600 million, 3.15% due December 1, 2022
|
596
|
|
|
595
|
|
||
$600 million, 3.85% due October 1, 2024
|
597
|
|
|
595
|
|
||
$600 million, 3.95% due March 15, 2027
|
594
|
|
|
594
|
|
||
$250 million, 8.15% due June 15, 2038
|
263
|
|
|
263
|
|
||
$400 million, 4.625% due December 1, 2042
|
396
|
|
|
396
|
|
||
$750 million, 4.95% due October 1, 2044
|
739
|
|
|
739
|
|
||
$400 million, 4.80% due March 15, 2047
|
396
|
|
|
396
|
|
||
Total long-term debt
|
$
|
4,375
|
|
|
$
|
4,770
|
|
For the years ending December 31,
|
(in millions)
|
||
2019
|
$
|
1,697
|
|
2020
|
400
|
|
|
2021
|
—
|
|
|
2022
|
1,000
|
|
|
2023
|
—
|
|
|
Thereafter
|
3,000
|
|
|
2018
|
|
2017
|
|
2016
|
||||||
|
(in millions)
|
||||||||||
Stock-based compensation expense by type:
|
|
|
|
|
|
||||||
Restricted stock
|
$
|
124
|
|
|
$
|
145
|
|
|
$
|
106
|
|
Stock options
|
13
|
|
|
12
|
|
|
9
|
|
|||
Total stock-based compensation expense
|
137
|
|
|
157
|
|
|
115
|
|
|||
Tax benefit recognized
|
(21
|
)
|
|
(32
|
)
|
|
(20
|
)
|
|||
Stock-based compensation expense, net of tax
|
$
|
116
|
|
|
$
|
125
|
|
|
$
|
95
|
|
|
Shares
|
|
Weighted-
Average Grant-Date Fair Value |
|||
|
(shares in thousands)
|
|||||
Nonvested restricted stock at December 31, 2017
|
1,653
|
|
|
$
|
171.68
|
|
Granted
|
576
|
|
|
276.62
|
|
|
Vested
|
(1,045
|
)
|
|
185.82
|
|
|
Forfeited
|
(220
|
)
|
|
180.83
|
|
|
Nonvested restricted stock at December 31, 2018
|
964
|
|
|
$
|
213.99
|
|
|
2018
|
|
2017
|
|
2016
|
||||||
Weighted-average fair value at grant date
|
$
|
63.67
|
|
|
$
|
49.81
|
|
|
$
|
37.12
|
|
Expected option life (years)
|
4.1 years
|
|
|
4.1 years
|
|
|
4.2 years
|
|
|||
Expected volatility
|
26.1
|
%
|
|
27.1
|
%
|
|
27.6
|
%
|
|||
Risk-free interest rate at grant date
|
2.5
|
%
|
|
2.0
|
%
|
|
1.1
|
%
|
|||
Dividend yield
|
0.7
|
%
|
|
0.7
|
%
|
|
0.7
|
%
|
|
Shares Under
Option |
|
Weighted-Average
Exercise Price |
|||
|
(shares in thousands)
|
|||||
Options outstanding at December 31, 2017
|
863
|
|
|
$
|
181.44
|
|
Granted
|
143
|
|
|
276.01
|
|
|
Exercised
|
(320
|
)
|
|
157.44
|
|
|
Forfeited
|
(9
|
)
|
|
150.59
|
|
|
Options outstanding at December 31, 2018
|
677
|
|
|
$
|
213.17
|
|
Options exercisable at December 31, 2018
|
178
|
|
|
$
|
180.76
|
|
|
2018
|
|
2017
|
|
2016
|
||||||
|
(dollars in millions, except per
common share results, number of shares/options in thousands) |
||||||||||
Net income available for common stockholders
|
$
|
1,683
|
|
|
$
|
2,448
|
|
|
$
|
614
|
|
Weighted-average outstanding shares of common stock used to
compute basic earnings per common share |
137,486
|
|
|
144,493
|
|
|
149,375
|
|
|||
Dilutive effect of:
|
|
|
|
|
|
||||||
Employee stock options
|
194
|
|
|
172
|
|
|
219
|
|
|||
Restricted stock
|
723
|
|
|
920
|
|
|
1,323
|
|
|||
Shares used to compute diluted earnings per common share
|
138,403
|
|
|
145,585
|
|
|
150,917
|
|
|||
Basic earnings per common share
|
$
|
12.24
|
|
|
$
|
16.94
|
|
|
$
|
4.11
|
|
Diluted earnings per common share
|
$
|
12.16
|
|
|
$
|
16.81
|
|
|
$
|
4.07
|
|
Number of antidilutive stock options and restricted stock awards
excluded from computation |
223
|
|
|
539
|
|
|
748
|
|
Payment
Date |
|
Amount
per Share |
|
Total
Amount |
|
|
|
|
(in millions)
|
2016
|
|
$1.16
|
|
$172
|
2017
|
|
$1.49
|
|
$216
|
2018
|
|
$1.90
|
|
$262
|
|
|
|
|
|
|||||||||||||||||||||
|
|
|
|
2018
|
|
2017
|
|
2016
|
|
||||||||||||||||
Authorization Date
|
|
Purchase Not to Exceed
|
|
Shares
|
|
Cost
|
|
Shares
|
|
Cost
|
|
Shares
|
|
Cost
|
|
||||||||||
|
|
(in millions)
|
|
||||||||||||||||||||||
February 2017
|
|
2,250
|
|
|
—
|
|
|
—
|
|
|
9.71
|
|
|
2,250
|
|
|
—
|
|
|
—
|
|
|
|||
December 2017
|
|
3,000
|
|
|
3.07
|
|
|
1,024
|
|
|
3.28
|
|
|
800
|
|
|
—
|
|
|
—
|
|
|
|||
Total repurchases
|
|
|
|
3.07
|
|
|
$
|
1,024
|
|
|
12.99
|
|
|
$
|
3,050
|
|
|
—
|
|
|
$
|
—
|
|
|
|
2018
|
|
2017
|
|
2016
|
||||||
|
(in millions)
|
||||||||||
Rent expense
|
$
|
167
|
|
|
$
|
204
|
|
|
$
|
179
|
|
Sublease rental income
|
(32
|
)
|
|
(33
|
)
|
|
(26
|
)
|
|||
Net rent expense
|
$
|
135
|
|
|
$
|
171
|
|
|
$
|
153
|
|
|
Minimum
Lease Payments |
|
Sublease
Rental Receipts |
|
Net Lease
Commitments |
||||||
|
(in millions)
|
||||||||||
For the years ending December 31,:
|
|
|
|
|
|
||||||
2019
|
$
|
147
|
|
|
$
|
(13
|
)
|
|
$
|
134
|
|
2020
|
113
|
|
|
(12
|
)
|
|
101
|
|
|||
2021
|
96
|
|
|
(10
|
)
|
|
86
|
|
|||
2022
|
79
|
|
|
(9
|
)
|
|
70
|
|
|||
2023
|
34
|
|
|
(9
|
)
|
|
25
|
|
|||
Thereafter
|
50
|
|
|
(23
|
)
|
|
27
|
|
|||
Total
|
$
|
519
|
|
|
$
|
(76
|
)
|
|
$
|
443
|
|
|
Retail
|
|
Group and Specialty
|
|
Healthcare Services
|
|
Individual Commercial
|
|
Other Businesses
|
|
Eliminations/
Corporate |
|
Consolidated
|
||||||||||||||
|
(in millions)
|
||||||||||||||||||||||||||
2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
External revenues
|
|||||||||||||||||||||||||||
Premiums:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Individual Medicare Advantage
|
$
|
35,656
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
35,656
|
|
Group Medicare Advantage
|
6,103
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
6,103
|
|
|||||||
Medicare stand-alone PDP
|
3,584
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,584
|
|
|||||||
Total Medicare
|
45,343
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
45,343
|
|
|||||||
Fully-insured
|
510
|
|
|
5,444
|
|
|
—
|
|
|
8
|
|
|
—
|
|
|
—
|
|
|
5,962
|
|
|||||||
Specialty
|
—
|
|
|
1,359
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,359
|
|
|||||||
Medicaid and other
|
2,255
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
22
|
|
|
—
|
|
|
2,277
|
|
|||||||
Total premiums
|
48,108
|
|
|
6,803
|
|
|
—
|
|
|
8
|
|
|
22
|
|
|
—
|
|
|
54,941
|
|
|||||||
Services revenue:
|
|
|
|
|
|
|
|
||||||||||||||||||||
Provider
|
—
|
|
|
—
|
|
|
404
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
404
|
|
|||||||
ASO and other
|
11
|
|
|
835
|
|
|
—
|
|
|
—
|
|
|
4
|
|
|
—
|
|
|
850
|
|
|||||||
Pharmacy
|
—
|
|
|
—
|
|
|
203
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
203
|
|
|||||||
Total services revenue
|
11
|
|
|
835
|
|
|
607
|
|
|
—
|
|
|
4
|
|
|
—
|
|
|
1,457
|
|
|||||||
Total external revenues
|
48,119
|
|
|
7,638
|
|
|
607
|
|
|
8
|
|
|
26
|
|
|
—
|
|
|
56,398
|
|
|||||||
Intersegment revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Services
|
—
|
|
|
18
|
|
|
16,840
|
|
|
—
|
|
|
—
|
|
|
(16,858
|
)
|
|
—
|
|
|||||||
Products
|
—
|
|
|
—
|
|
|
6,330
|
|
|
—
|
|
|
—
|
|
|
(6,330
|
)
|
|
—
|
|
|||||||
Total intersegment revenues
|
—
|
|
|
18
|
|
|
23,170
|
|
|
—
|
|
|
—
|
|
|
(23,188
|
)
|
|
—
|
|
|||||||
Investment income
|
136
|
|
|
23
|
|
|
34
|
|
|
—
|
|
|
110
|
|
|
211
|
|
|
514
|
|
|||||||
Total revenues
|
48,255
|
|
|
7,679
|
|
|
23,811
|
|
|
8
|
|
|
136
|
|
|
(22,977
|
)
|
|
56,912
|
|
|||||||
Operating expenses:
|
|
|
|
|
|
|
|
||||||||||||||||||||
Benefits
|
40,925
|
|
|
5,420
|
|
|
—
|
|
|
(70
|
)
|
|
77
|
|
|
(470
|
)
|
|
45,882
|
|
|||||||
Operating costs
|
5,327
|
|
|
1,810
|
|
|
22,905
|
|
|
4
|
|
|
6
|
|
|
(22,527
|
)
|
|
7,525
|
|
|||||||
Depreciation and amortization
|
270
|
|
|
88
|
|
|
163
|
|
|
—
|
|
|
—
|
|
|
(116
|
)
|
|
405
|
|
|||||||
Total operating expenses
|
46,522
|
|
|
7,318
|
|
|
23,068
|
|
|
(66
|
)
|
|
83
|
|
|
(23,113
|
)
|
|
53,812
|
|
|||||||
Income from operations
|
1,733
|
|
|
361
|
|
|
743
|
|
|
74
|
|
|
53
|
|
|
136
|
|
|
3,100
|
|
|||||||
Loss on sale of business
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
786
|
|
|
786
|
|
|||||||
Interest expense
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
218
|
|
|
218
|
|
|||||||
Other expense, net
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
33
|
|
|
33
|
|
|||||||
Income (loss) before income taxes and equity in earnings
|
1,733
|
|
|
361
|
|
|
743
|
|
|
74
|
|
|
53
|
|
|
(901
|
)
|
|
2,063
|
|
|||||||
Equity in net earnings of Kindred at Home
|
—
|
|
|
—
|
|
|
11
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
11
|
|
|||||||
Segment earnings (losses)
|
$
|
1,733
|
|
|
$
|
361
|
|
|
$
|
754
|
|
|
$
|
74
|
|
|
$
|
53
|
|
|
$
|
(901
|
)
|
|
$
|
2,074
|
|
|
Retail
|
|
Group and Specialty
|
|
Healthcare Services
|
|
Individual Commercial
|
|
Other Businesses
|
|
Eliminations/
Corporate |
|
Consolidated
|
||||||||||||||
|
(in millions)
|
||||||||||||||||||||||||||
2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Revenues—external customers
|
|||||||||||||||||||||||||||
Premiums:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Individual Medicare Advantage
|
$
|
32,720
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
32,720
|
|
Group Medicare Advantage
|
5,155
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5,155
|
|
|||||||
Medicare stand-alone PDP
|
3,702
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,702
|
|
|||||||
Total Medicare
|
41,577
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
41,577
|
|
|||||||
Fully-insured
|
478
|
|
|
5,462
|
|
|
—
|
|
|
947
|
|
|
—
|
|
|
—
|
|
|
6,887
|
|
|||||||
Specialty
|
—
|
|
|
1,310
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,310
|
|
|||||||
Medicaid and other
|
2,571
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
35
|
|
|
—
|
|
|
2,606
|
|
|||||||
Total premiums
|
44,626
|
|
|
6,772
|
|
|
—
|
|
|
947
|
|
|
35
|
|
|
—
|
|
|
52,380
|
|
|||||||
Services revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Provider
|
—
|
|
|
—
|
|
|
258
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
258
|
|
|||||||
ASO and other
|
10
|
|
|
626
|
|
|
—
|
|
|
—
|
|
|
8
|
|
|
—
|
|
|
644
|
|
|||||||
Pharmacy
|
—
|
|
|
—
|
|
|
80
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
80
|
|
|||||||
Total services revenue
|
10
|
|
|
626
|
|
|
338
|
|
|
—
|
|
|
8
|
|
|
—
|
|
|
982
|
|
|||||||
Total revenues—external customers
|
44,636
|
|
|
7,398
|
|
|
338
|
|
|
947
|
|
|
43
|
|
|
—
|
|
|
53,362
|
|
|||||||
Intersegment revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Services
|
—
|
|
|
20
|
|
|
17,293
|
|
|
—
|
|
|
—
|
|
|
(17,313
|
)
|
|
—
|
|
|||||||
Products
|
—
|
|
|
—
|
|
|
6,292
|
|
|
—
|
|
|
—
|
|
|
(6,292
|
)
|
|
—
|
|
|||||||
Total intersegment revenues
|
—
|
|
|
20
|
|
|
23,585
|
|
|
—
|
|
|
—
|
|
|
(23,605
|
)
|
|
—
|
|
|||||||
Investment income
|
90
|
|
|
31
|
|
|
35
|
|
|
4
|
|
|
87
|
|
|
158
|
|
|
405
|
|
|||||||
Total revenues
|
44,726
|
|
|
7,449
|
|
|
23,958
|
|
|
951
|
|
|
130
|
|
|
(23,447
|
)
|
|
53,767
|
|
|||||||
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Benefits
|
38,218
|
|
|
5,363
|
|
|
—
|
|
|
544
|
|
|
131
|
|
|
(760
|
)
|
|
43,496
|
|
|||||||
Operating costs
|
4,292
|
|
|
1,590
|
|
|
22,848
|
|
|
201
|
|
|
12
|
|
|
(22,376
|
)
|
|
6,567
|
|
|||||||
Merger termination fee and related costs, net
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(936
|
)
|
|
(936
|
)
|
|||||||
Depreciation and amortization
|
238
|
|
|
84
|
|
|
143
|
|
|
13
|
|
|
—
|
|
|
(100
|
)
|
|
378
|
|
|||||||
Total operating expenses
|
42,748
|
|
|
7,037
|
|
|
22,991
|
|
|
758
|
|
|
143
|
|
|
(24,172
|
)
|
|
49,505
|
|
|||||||
Income (loss) from operations
|
1,978
|
|
|
412
|
|
|
967
|
|
|
193
|
|
|
(13
|
)
|
|
725
|
|
|
4,262
|
|
|||||||
Interest expense
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
242
|
|
|
242
|
|
|||||||
Income (loss) before income taxes and equity in earnings
|
1,978
|
|
|
412
|
|
|
967
|
|
|
193
|
|
|
(13
|
)
|
|
483
|
|
|
4,020
|
|
|||||||
Equity in net earnings of Kindred at Home
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
Segment earnings (losses)
|
$
|
1,978
|
|
|
$
|
412
|
|
|
$
|
967
|
|
|
$
|
193
|
|
|
$
|
(13
|
)
|
|
$
|
483
|
|
|
$
|
4,020
|
|
|
Retail
|
|
Group and Specialty
|
|
Healthcare Services
|
|
Individual Commercial
|
|
Other Businesses
|
|
Eliminations/
Corporate |
|
Consolidated
|
||||||||||||||
|
(in millions)
|
||||||||||||||||||||||||||
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Revenues—external customers
|
|||||||||||||||||||||||||||
Premiums:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Individual Medicare Advantage
|
$
|
31,863
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
31,863
|
|
Group Medicare Advantage
|
4,283
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4,283
|
|
|||||||
Medicare stand-alone PDP
|
4,009
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4,009
|
|
|||||||
Total Medicare
|
40,155
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
40,155
|
|
|||||||
Fully-insured
|
428
|
|
|
5,405
|
|
|
—
|
|
|
3,064
|
|
|
—
|
|
|
—
|
|
|
8,897
|
|
|||||||
Specialty
|
—
|
|
|
1,279
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,279
|
|
|||||||
Medicaid and other
|
2,640
|
|
|
12
|
|
|
—
|
|
|
—
|
|
|
38
|
|
|
—
|
|
|
2,690
|
|
|||||||
Total premiums
|
43,223
|
|
|
6,696
|
|
|
—
|
|
|
3,064
|
|
|
38
|
|
|
—
|
|
|
53,021
|
|
|||||||
Services revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Provider
|
—
|
|
|
—
|
|
|
278
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
278
|
|
|||||||
ASO and other
|
6
|
|
|
643
|
|
|
1
|
|
|
—
|
|
|
10
|
|
|
—
|
|
|
660
|
|
|||||||
Pharmacy
|
—
|
|
|
—
|
|
|
31
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
31
|
|
|||||||
Total services revenue
|
6
|
|
|
643
|
|
|
310
|
|
|
—
|
|
|
10
|
|
|
—
|
|
|
969
|
|
|||||||
Total revenues—external customers
|
43,229
|
|
|
7,339
|
|
|
310
|
|
|
3,064
|
|
|
48
|
|
|
—
|
|
|
53,990
|
|
|||||||
Intersegment revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Services
|
—
|
|
|
22
|
|
|
18,979
|
|
|
—
|
|
|
—
|
|
|
(19,001
|
)
|
|
—
|
|
|||||||
Products
|
—
|
|
|
—
|
|
|
5,993
|
|
|
—
|
|
|
—
|
|
|
(5,993
|
)
|
|
—
|
|
|||||||
Total intersegment revenues
|
—
|
|
|
22
|
|
|
24,972
|
|
|
—
|
|
|
—
|
|
|
(24,994
|
)
|
|
—
|
|
|||||||
Investment income
|
90
|
|
|
25
|
|
|
30
|
|
|
5
|
|
|
66
|
|
|
173
|
|
|
389
|
|
|||||||
Total revenues
|
43,319
|
|
|
7,386
|
|
|
25,312
|
|
|
3,069
|
|
|
114
|
|
|
(24,821
|
)
|
|
54,379
|
|
|||||||
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Benefits
|
36,783
|
|
|
5,233
|
|
|
—
|
|
|
3,301
|
|
|
617
|
|
|
(927
|
)
|
|
45,007
|
|
|||||||
Operating costs
|
4,650
|
|
|
1,727
|
|
|
24,073
|
|
|
601
|
|
|
16
|
|
|
(23,894
|
)
|
|
7,173
|
|
|||||||
Merger termination fee and related costs, net
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
104
|
|
|
104
|
|
|||||||
Depreciation and amortization
|
196
|
|
|
82
|
|
|
143
|
|
|
36
|
|
|
1
|
|
|
(104
|
)
|
|
354
|
|
|||||||
Total operating expenses
|
41,629
|
|
|
7,042
|
|
|
24,216
|
|
|
3,938
|
|
|
634
|
|
|
(24,821
|
)
|
|
52,638
|
|
|||||||
Income (loss) from operations
|
1,690
|
|
|
344
|
|
|
1,096
|
|
|
(869
|
)
|
|
(520
|
)
|
|
—
|
|
|
1,741
|
|
|||||||
Gain on sale of business
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
Interest expense
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
189
|
|
|
189
|
|
|||||||
Income (loss) before income taxes and equity in earnings
|
1,690
|
|
|
344
|
|
|
1,096
|
|
|
(869
|
)
|
|
(520
|
)
|
|
(189
|
)
|
|
1,552
|
|
|||||||
Equity in net earnings of Kindred at Home
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
Segment earnings (losses)
|
$
|
1,690
|
|
|
$
|
344
|
|
|
$
|
1,096
|
|
|
$
|
(869
|
)
|
|
$
|
(520
|
)
|
|
$
|
(189
|
)
|
|
$
|
1,552
|
|
|
2018
|
|
2017
|
||||||||||||
|
Deferred
acquisition costs |
|
Future policy
benefits payable |
|
Deferred
acquisition costs |
|
Future policy
benefits payable |
||||||||
|
(in millions)
|
||||||||||||||
Other long-term assets
|
$
|
36
|
|
|
$
|
—
|
|
|
$
|
103
|
|
|
$
|
—
|
|
Trade accounts payable and accrued expenses
|
—
|
|
|
—
|
|
|
—
|
|
|
(56
|
)
|
||||
Long-term liabilities
|
—
|
|
|
(219
|
)
|
|
—
|
|
|
(2,923
|
)
|
||||
Total asset (liability)
|
$
|
36
|
|
|
$
|
(219
|
)
|
|
$
|
103
|
|
|
$
|
(2,979
|
)
|
|
2018
|
||||||||||||||
|
First
|
|
Second
|
|
Third
|
|
Fourth
|
||||||||
|
(in millions, except per share results)
|
||||||||||||||
Total revenues
|
$
|
14,279
|
|
|
$
|
14,259
|
|
|
$
|
14,206
|
|
|
$
|
14,168
|
|
Income before income taxes and equity in net earnings
|
707
|
|
|
19
|
|
|
901
|
|
|
436
|
|
||||
Net income
|
491
|
|
|
193
|
|
|
644
|
|
|
355
|
|
||||
Basic earnings per common share
|
$
|
3.56
|
|
|
$
|
1.40
|
|
|
$
|
4.68
|
|
|
$
|
2.60
|
|
Diluted earnings per common share (1)
|
$
|
3.53
|
|
|
$
|
1.39
|
|
|
$
|
4.65
|
|
|
$
|
2.58
|
|
|
|
|
|
|
|
|
|
||||||||
|
2017
|
||||||||||||||
|
First
|
|
Second
|
|
Third
|
|
Fourth
|
||||||||
|
(in millions, except per share results)
|
||||||||||||||
Total revenues
|
$
|
13,762
|
|
|
$
|
13,534
|
|
|
$
|
13,282
|
|
|
$
|
13,189
|
|
Income before income taxes
|
1,689
|
|
|
1,042
|
|
|
799
|
|
|
490
|
|
||||
Net income
|
1,115
|
|
|
650
|
|
|
499
|
|
|
184
|
|
||||
Basic earnings per common share (1)
|
$
|
7.54
|
|
|
$
|
4.49
|
|
|
$
|
3.46
|
|
|
$
|
1.30
|
|
Diluted earnings per common share (1)
|
$
|
7.49
|
|
|
$
|
4.46
|
|
|
$
|
3.44
|
|
|
$
|
1.29
|
|
(1)
|
The calculation of earnings per common share is based on the weighted average shares outstanding during each quarter and, accordingly, the sum may not equal the total for the year.
|
Name
|
|
Age
|
|
Position
|
|
First
Elected
Officer
|
|
|
Bruce D. Broussard
|
|
56
|
|
President and Chief Executive Officer, Director
|
|
12/11
|
|
(1)
|
|
|
|
|
|
|
|
|
|
Vishal Agrawal, M.D.
|
|
44
|
|
Chief Strategy and Corporate Development Officer
|
|
12/18
|
|
(2)
|
|
|
|
|
|
|
|
|
|
Roy A. Beveridge, M.D.
|
|
61
|
|
Chief Medical Officer
|
|
06/13
|
|
(3)
|
|
|
|
|
|
|
|
|
|
Elizabeth D. Bierbower
|
|
60
|
|
Segment President
|
|
03/17
|
|
(4)
|
|
|
|
|
|
|
|
|
|
Jody L. Bilney
|
|
57
|
|
Chief Consumer Officer
|
|
04/13
|
|
(5)
|
|
|
|
|
|
|
|
|
|
Sam M. Deshpande
|
|
54
|
|
Chief Risk Officer
|
|
07/17
|
|
(6)
|
|
|
|
|
|
|
|
|
|
William K. Fleming, PharmD
|
|
51
|
|
Segment President, Healthcare Services
|
|
03/17
|
|
(7)
|
|
|
|
|
|
|
|
|
|
Christopher H. Hunter
|
|
50
|
|
Segment President, Group Business
|
|
01/14
|
|
(8)
|
|
|
|
|
|
|
|
|
|
Timothy S. Huval
|
|
52
|
|
Chief Human Resources Officer
|
|
12/12
|
|
(9)
|
|
|
|
|
|
|
|
|
|
Brian A. Kane
|
|
46
|
|
Chief Financial Officer
|
|
06/14
|
|
(10)
|
|
|
|
|
|
|
|
|
|
Brian P. LeClaire
|
|
58
|
|
Chief Information Officer
|
|
08/11
|
|
(11)
|
|
|
|
|
|
|
|
|
|
Joseph C. Ventura
|
|
42
|
|
Chief Legal Officer and Corporate Secretary
|
|
02/19
|
|
(12)
|
|
|
|
|
|
|
|
|
|
T. Alan Wheatley
|
|
51
|
|
Segment President, Retail
|
|
03/17
|
|
(13)
|
|
|
|
|
|
|
|
|
|
Cynthia H. Zipperle
|
|
56
|
|
Senior Vice President and Chief Accounting Officer
|
|
12/14
|
|
(14)
|
(1)
|
Mr. Broussard currently serves as Director, President and Chief Executive Officer (Principal Executive Officer), having held these positions since January 1, 2013. Mr. Broussard was elected President upon joining the Company in December 2011 and served in that capacity through December 2012. Prior to joining the Company, Mr. Broussard was Chief Executive Officer of McKesson Specialty/US Oncology, Inc. US Oncology was purchased by McKesson in December 2010. At US Oncology, Mr. Broussard served in a number of senior executive roles, including Chief Financial Officer, Chief Executive Officer, and Chairman of the Board.
|
(2)
|
Dr. Agrawal serves as Chief Strategy and Corporate Development Officer, having joined the company in December 2018. Prior to joining the company, Dr. Agrawal was Senior Advisor for The Carlyle Group L.P., having held that position from October 2017 to December 2018. Previously, Dr. Agrawal was President and Chief Growth Officer of Ciox Health, the largest health information exchange and release of information services
|
(3)
|
Dr. Beveridge currently serves as Chief Medical Officer, having held this position since joining the Company in June 2013. Prior to joining the Company, Dr. Beveridge served as Chief Medical Officer for McKesson Specialty Health from December 2010 until June 2013. Prior to McKesson’s acquisition of US Oncology, Dr. Beveridge served as the Executive Vice President and Medical Director at US Oncology from September 2009 through December 2010.
|
(4)
|
Ms. Bierbower currently serves as Segment President, having held this position since August 2018. She is responsible for creating a new operating model and member experience that reduces friction in the system and helps members engage in and manage their health. Prior to that, she served as the Segment President, Group Business, and also previously led the Company’s Specialty Benefits area, including dental, vision, life, disability and workplace voluntary benefits. Ms. Bierbower joined the Company in 2001.
|
(5)
|
Ms. Bilney currently serves as Chief Consumer Officer, having held this position since joining the Company in April 2013. Prior to joining the Company, Ms. Bilney served as Executive Vice President and Chief Brand Officer for Bloomin’ Brands, Inc. from 2006 until April 2013.
|
(6)
|
Mr. Deshpande currently serves as Chief Risk Officer, having held this position since joining the Company in July 2017. Before joining Humana, Mr. Deshpande spent 17 years at Capital One in key leadership positions, most recently as Business Chief Risk Officer for the U.S. and international card business. He previously served as the Business Chief Risk Officer and Head of Enterprise Services for the Financial Services Division, responsible for Business Risk, Data Science, Data Quality, Process Excellence and Project Management. He also led marketing and analysis for the Home Loans, Auto Finance, and Credit Card businesses, with responsibilities for business strategy, credit, product and marketing.
|
(7)
|
Mr. Fleming currently serves as Segment President, Healthcare Services, where he is responsible for Humana’s clinical and pharmacy businesses that service all Humana segments, having held this position since March of 2017. Prior to that, he served as President of the Company’s pharmacy business. Mr. Fleming joined the Company in 1994.
|
(8)
|
Mr. Hunter currently serves as Segment President, Group Business, having held this position since August 2018. Prior to that, he served as Chief Strategy Officer from joining the company in January 2014 until August 2018. Prior to joining the Company, Mr. Hunter served as President of Provider Markets at The TriZetto Group, Inc. from July 2012 until December 2013, and as Senior Vice President, Emerging Markets at BlueCross BlueShield of Tennessee from 2009 through July 2012. While at BlueCross BlueShield of Tennessee, Mr. Hunter was simultaneously President and Chief Executive Officer of Onlife Health, a national health and wellness subsidiary of BlueCross BlueShield of Tennessee.
|
(9)
|
Mr. Huval currently serves as Chief Human Resources Officer, having been elected to this position in December 2012. Prior to joining the Company, Mr. Huval spent 10 years at Bank of America in multiple senior-level roles, including Human Resources executive and Chief Information Officer for Global Wealth & Investment Management, as well as Human Resources executive for both Global Treasury Services and Technology & Global Operations.
|
(10)
|
Mr. Kane currently serves as Chief Financial Officer, having been elected to this position in June 2014. Prior to joining the Company, Mr. Kane spent nearly 17 years at Goldman, Sachs & Co. As a managing director, he was responsible for client relationships as well as for leading strategic and financing transactions for a number of companies in multiple industries.
|
(11)
|
Mr. LeClaire currently serves as Chief Information Officer, having held this position since January 2014. Prior to that, he served as Senior Vice President and Chief Service and Information Officer from August 2011 to January 2014, and as Chief Technology Officer from 2002 to August 2011. Mr. LeClaire joined the Company in August 1999.
|
(12)
|
Mr. Ventura currently serves as Chief Legal Officer and Corporate Secretary. He joined the Company in January 2009 and since then has held various positions of increasing responsibility in the Company's Law Department, including most recently, Senior Vice President, Associate General Counsel & Corporate Secretary from July 2017 until February 2019.
|
(13)
|
Mr. Wheatley currently serves as Segment President, Retail, having held this position since March 2017. During his 25-year career with the Company, Mr. Wheatley has served in a number of key leadership roles, including Vice President of Medicare Service Operations and President of the East Region, one of the Company’s key Medicare geographies.
|
(14)
|
Mrs. Zipperle currently serves as Senior Vice President, Chief Accounting Officer, having held this position since December 2014. Mrs. Zipperle previously served as the Vice President - Finance from January 2013 until her election to her current role, and as the Assistant Controller from January 1998 until January 2013.
|
•
|
a determination of independence for each member of our Board of Directors;
|
•
|
the name, membership, role, and charter of each of the various committees of our Board of Directors;
|
•
|
the name(s) of the directors designated as a financial expert under rules and regulations promulgated by the SEC;
|
•
|
the responsibility of the Company’s Lead Independent Director, if applicable, to convene, set the agenda for, and lead executive sessions of the non-management directors;
|
•
|
the pre-approval process of non-audit services provided by our independent accountants;
|
•
|
our by-laws and Certificate of Incorporation;
|
•
|
our Majority Vote policy;
|
•
|
our Related Persons Transaction Policy;
|
•
|
the process by which interested parties can communicate with directors;
|
•
|
the process by which stockholders can make director nominations (pursuant to our By-laws);
|
•
|
our Corporate Governance Guidelines;
|
•
|
our Policy Regarding Transactions in Company Securities, Inside Information and Confidentiality;
|
•
|
Stock Ownership Guidelines for directors and for executive officers;
|
•
|
the Humana Inc. Ethics Every Day and any waivers thereto; and
|
•
|
the Code of Conduct for the Chief Executive Officer and Senior Financial Officers and any waivers thereto.
|
Plan category
|
(a)
Number of securities
to be issued upon
exercise of outstanding
options, warrants
and rights
|
|
(b)
Weighted-average
exercise price of
outstanding
options, warrants
and rights
|
|
(c)
Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column(a)) |
|
|
||||
Equity compensation plans approved by
security holders (1)
|
677,648
|
|
|
$
|
213.171
|
|
|
4,673,360
|
|
|
(2)(3)
|
Equity compensation plans not approved
by security holders
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
Total
|
677,648
|
|
|
$
|
213.171
|
|
|
4,673,360
|
|
|
|
(1)
|
The above table does not include awards of shares of restricted stock or restricted stock units. For information concerning these awards, see Note 13.
|
(2)
|
The Humana Inc. 2011 Stock Incentive Plan was approved by stockholders at the Annual Meeting held on April 21, 2011. On July 5, 2011, 18.5 million shares were registered with the Securities and Exchange Commission on Form S-8.
|
(3)
|
Of the number listed above,
2,040,768
can be issued as restricted stock at
December 31, 2018
(giving effect to the provision that one restricted share is equivalent to 2.29 stock options in the 2011 Plan).
|
(3)
|
Exhibits:
|
3(a)
|
Restated Certificate of Incorporation of Humana Inc. filed with the Secretary of State of Delaware on November 9, 1989, as restated to incorporate the amendment of January 9, 1992, and the correction of March 23, 1992 (incorporated herein by reference to Exhibit 4(i) to Humana Inc.’s Post-Effective Amendment No.1 to the Registration Statement on Form S-8 (Reg. No. 33-49305) filed February 2, 1994).
|
|
|
Humana Inc. Amended and Restated By-Laws of Humana Inc., effective as of December 14, 2017 (incorporated herein by reference to Exhibit 3(b) to Humana Inc.’s Current Report on Form 8-K filed on December 14, 2017).
|
|
|
|
Indenture, dates as of August 5, 2003, by and between Humana Inc. and The Bank of New York, as trustee (incorporated herein by reference to Exhibit 4.1 to Humana Inc.'s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003, File No. 001-05975).
|
|
|
|
First Supplemental Indenture, dated as of August 5, 2003, by and between Humana Inc. and The Bank of New York, as trustee (incorporated herein by reference to Exhibit 4.2 to Humana Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003, File No. 001-05975).
|
|
|
|
Second Supplemental Indenture, dated as of May 31, 2006, by and between Humana Inc. and The Bank of New York Trust Company, N.A., as trustee (incorporated herein by reference to Exhibit 4.1 to Humana Inc.’s Current Report on Form 8-K filed on May 31, 2006, File No.001-05975).
|
|
|
|
Third Supplemental Indenture, dated as of June 5, 2008, by and between Humana Inc. and The Bank of New York Trust Company, N.A., as trustee (incorporated herein by reference to Exhibit 4.1 to Humana Inc.’s Current Report on Form 8-K filed on June 5, 2008).
|
|
|
|
Fourth Supplemental Indenture, dated as of June 5, 2008, by and between Humana Inc. and The Bank of New York Trust Company, N.A., as trustee (incorporated herein by reference to Exhibit 4.3 to Humana Inc.’s Current Report on Form 8-K filed on June 5, 2008).
|
|
|
|
Indenture, dated as of March 30, 2006, by and between Humana Inc. and The Bank of New York Trust Company, N.A., as trustee (incorporated herein by reference to Exhibit 4.2 to Humana Inc.’s Registration Statement on Form S-3 filed on March 31, 2006, Req. No. 333-132878).
|
|
|
|
(g)
|
There are no instruments defining the rights of holders with respect to long-term debt in excess of 10 percent of the total assets of Humana Inc. on a consolidated basis. Other long-term indebtedness of Humana Inc. is described herein in Note 12 to Consolidated Financial Statements. Humana Inc. agrees to furnish copies of all such instruments defining the rights of the holders of such indebtedness not otherwise filed as an Exhibit to this Annual Report on Form 10-K to the Commission upon request.
|
|
|
Fifth Supplemental Indenture, dated as of December 10, 2012, by and between Humana Inc. and The Bank of New York Mellon Trust Company, N.A., as trustee (incorporated herein by reference to Exhibit 4.1 to Humana Inc.’s Current Report on Form 8-K filed on December 10, 2012).
|
|
|
|
Sixth Supplemental Indenture, dated as of December 10, 2012, by and between Humana Inc. and The Bank of New York Mellon Trust Company, N.A., as trustee (incorporated herein by reference to Exhibit 4.3 to Humana Inc.’s Current Report on Form 8-K filed on December 10, 2012).
|
|
|
|
Seventh Supplemental Indenture, dated as of September 19, 2014, by and between Humana Inc. and The Bank of New York, Mellon Trust Company, N.A., as trustee (incorporated herein by reference to Exhibit 4.2 to Humana Inc.’s Current Report on Form 8-K filed on September 19, 2014).
|
|
|
|
Eighth Supplemental Indenture, dated as of September 19, 2014, by and between Humana Inc. and The Bank of New York Mellon Trust Company, N.A., as trustee (incorporated herein by reference to Exhibit 4.4 to Humana Inc.’s Current Report on Form 8-K filed on September 19, 2014).
|
|
|
|
Ninth Supplemental Indenture, dated as of September 19, 2014, by and between Humana Inc. and The Bank of New York Mellon Trust Company, N.A., as trustee (incorporated herein by reference to Exhibit 4.6 to Humana Inc.’s Current Report on Form 8-K filed on September 19, 2014).
|
|
|
|
Tenth Supplemental Indenture, dated March 16, 2017, between Humana Inc. and The Bank of New York Mellon Trust Company, N.A., as trustee (incorporated herein by reference to Exhibit 4.2 to Humana Inc.’s Current Report on Form 8-K filed on March 16, 2017.
|
|
|
|
Eleventh Supplemental Indenture, dated March 16, 2017, between Humana Inc. and The Bank of New York Mellon Trust Company, N.A., as trustee (incorporated herein by reference to Exhibit 4.4 to Humana Inc.’s Current Report on Form 8-K filed on March 16, 2017.
|
|
|
|
Twelfth Supplemental Indenture, dated December 21, 2017, between Humana Inc. and The Bank of New York Mellon Trust Company, N.A., as trustee (incorporated herein by reference to Exhibit 4.2 to Humana Inc.’s Current Report on Form 8-K filed on December 21, 2017.
|
|
|
|
Thirteenth Supplemental Indenture, dated December 21, 2017, between Humana Inc. and The Bank of New York Mellon Trust Company, N.A., as trustee (incorporated herein by reference to Exhibit 4.4 to Humana Inc.’s Current Report on Form 8-K filed on December 21, 2017.
|
|
|
|
Form of Company’s Restricted Stock Unit Agreement and Agreement not to Compete or Solicit under the 2011 Stock Incentive Plan (with retirement provisions) (incorporated herein by reference to Exhibit 10(a) to Humana Inc.’s Annual Report on Form 10-K for the fiscal year ended December 31, 2015).
|
|
|
|
Form of Company’s Restricted Stock Unit Agreement and Agreement not to Compete or Solicit under the 2011 Stock Incentive Plan (without retirement provisions) (incorporated herein by reference to Exhibit 10(b) to Humana Inc.’s Annual Report on Form 10-K for the fiscal year ended December 31, 2015).
|
|
|
|
(c)*
|
Humana Inc. Executive Management Incentive Compensation Plan, as amended and restated February 21, 2008 (incorporated herein by reference to Appendix A to Humana Inc.’s Proxy Statement with respect to the Annual Meeting of Stockholders held on April 24, 2008).
|
|
|
(d)*
|
Trust under Humana Inc. Deferred Compensation Plans (incorporated herein by reference to Exhibit 10(p) to Humana Inc.’s Annual Report on Form 10-K for the fiscal year ended December 31, 1999, File No. 001-05975).
|
|
|
The Humana Inc. Deferred Compensation Plan for Non-Employee Directors (as amended on October 18, 2012) (incorporated herein by reference to Exhibit 10(m) to Humana Inc.’s Annual Report on Form 10-K for the fiscal year ended December 31, 2012).
|
Explanatory Note regarding Medicare Prescription Drug Plan Contracts between Humana and CMS (incorporated herein by reference to Exhibit 10(nn) to Humana Inc.’s Annual Report on Form 10-K for the fiscal year ended December 31, 2005, File No. 001-05975).
|
|
|
|
(w)*
|
Humana Inc. 2011 Stock Incentive Plan (incorporated herein by reference to Appendix A to Humana Inc.’s Proxy Statement with respect to the Annual Meeting of Stockholders held on April 21, 2011).
|
|
|
Amended and Restated Employment Agreement, dated as of February 27, 2014, by and between Humana Inc. and Bruce D. Broussard (incorporated herein by reference to Exhibit 10.1 to Humana Inc.’s current report on Form 8-K filed on February 28, 2014).
|
|
|
|
Amendment to the Amended and Restated Employment Agreement between Humana Inc. and Bruce D. Broussard, dated July 2, 2015 (incorporated herein by reference to Exhibit 10.1 to Humana Inc.’s current report on Form 8-K filed on July 9, 2015).
|
|
|
|
Amendment No. 2, dated as of August 16, 2018, to the Amended and Restated Employment Agreement between Humana Inc. and Bruce D. Broussard, dated as of February 27, 2014 (incorporated herein by reference to Exhibit 10.1 to Humana Inc.s Current Report on Form 8-K, filed on August 20, 2018).
|
|
|
|
Humana Inc. Change in Control Policy, effective March 1, 2019.
|
|
|
|
Form of Commercial Paper Dealer Agreement between Humana Inc., as Issuer, and the Dealer party thereto (incorporated herein by reference to Exhibit 10.1 to Humana Inc.’s current report on Form 8-K filed on October 7, 2014).
|
|
|
|
Form of Company's Stock Option Agreement under the 2011 Stock Incentive Plan (Incentive Stock Options) (incorporated herein by reference to Exhibit 10(jj) to Humana Inc.’s Annual Report on Form 10-K for the fiscal year ended December 31, 2015).
|
|
|
|
Form of Company's Stock Option Agreement under the 2011 Stock Incentive Plan (Non-Qualified Stock Options with Non-Compete/Non-Solicit) (incorporated herein by reference to Exhibit 10(kk) to Humana Inc.’s Annual Report on Form 10-K for the fiscal year ended December 31, 2015).
|
|
|
|
Form of Company's Restricted Stock Unit Agreement with Performance Vesting and Agreement
not to Compete or Solicit under the 2011 Stock Incentive Plan (incorporated herein by reference to Exhibit 10(nn) to Humana Inc.’s Annual Report on Form 10-K filed on February 16, 2018).
|
|
|
|
|
Form of Company’s Restricted Stock Unit Agreement and Agreement not to Compete or Solicit under the 2011 Stock Incentive Plan (with retirement provisions).
|
|
|
|
Form of Company's Restricted Stock Unit Agreement with Performance Vesting and Agreement not to Compete or Solicit under the 2011 Stock Incentive Plan.
|
|
|
|
Form of Company’s Incentive Stock Option Agreement and Agreement not to Compete or Solicit under the 2011 Stock Incentive Plan.
|
|
|
|
Form of Company’s Stock Option Agreement and Agreement not to Compete or Solicit under the 2011 Stock Incentive Plan (Non-Qualified Stock Options).
|
|
|
Humana Inc. Compensation Recoupment Policy, effective February 21, 2019.
|
|
|
|
|
|
Code of Conduct for Chief Executive Officer & Senior Financial Officers (incorporated herein by reference to Exhibit 14 to Humana Inc.’s Annual Report on Form 10-K for the fiscal year ended December 31, 2003).
|
|
|
|
List of subsidiaries.
|
|
|
|
Consent of PricewaterhouseCoopers LLP.
|
|
|
|
CEO certification pursuant to Rule 13a-14(a)/15d-14(a).
|
101
|
The following materials from Humana Inc.'s Annual Report on Form 10-K formatted in XBRL (Extensible Business Reporting Language): (i) the Consolidated Balance Sheets at
December 31, 2018
and
2017
; (ii) the Consolidated Statements of Income for the years ended
December 31, 2018
,
2017
and
2016
; (iii) the Consolidated Statements of Comprehensive Income for the years ended
December 31, 2018
,
2017
and
2016
; (iv) the Consolidated Statements of Stockholders’ Equity as of
December 31, 2018
,
2017
, and
2016
; (v) the Consolidated Statements of Cash Flows for the years ended
December 31, 2018
,
2017
and
2016
; and (vi) Notes to Consolidated Financial Statements.
|
|
December 31,
|
||||||
|
2018
|
|
2017
|
||||
|
(in millions, except share
amounts) |
||||||
ASSETS
|
|
|
|
||||
Current assets:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
265
|
|
|
$
|
383
|
|
Investment securities
|
313
|
|
|
305
|
|
||
Receivable from operating subsidiaries
|
1,306
|
|
|
1,042
|
|
||
Other current assets
|
628
|
|
|
245
|
|
||
Total current assets
|
2,512
|
|
|
1,975
|
|
||
Property and equipment, net
|
1,209
|
|
|
1,091
|
|
||
Investments in subsidiaries
|
16,951
|
|
|
16,810
|
|
||
Equity method investment in Kindred at Home
|
1,047
|
|
|
—
|
|
||
Other long-term assets
|
359
|
|
|
426
|
|
||
Total assets
|
$
|
22,078
|
|
|
$
|
20,302
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
||||
Current liabilities:
|
|
|
|
||||
Payable to operating subsidiaries
|
$
|
4,487
|
|
|
$
|
4,311
|
|
Current portion of notes payable to operating subsidiaries
|
28
|
|
|
28
|
|
||
Book overdraft
|
38
|
|
|
41
|
|
||
Short-term debt
|
1,694
|
|
|
150
|
|
||
Other current liabilities
|
791
|
|
|
896
|
|
||
Total current liabilities
|
7,038
|
|
|
5,426
|
|
||
Long-term debt
|
4,375
|
|
|
4,770
|
|
||
Other long-term liabilities
|
504
|
|
|
264
|
|
||
Total liabilities
|
11,917
|
|
|
10,460
|
|
||
Commitments and contingencies
|
|
|
|
||||
Stockholders’ equity:
|
|
|
|
||||
Preferred stock, $1 par; 10,000,000 shares authorized; none issued
|
—
|
|
|
—
|
|
||
Common stock, $0.16 2/3 par; 300,000,000 shares authorized;
198,594,841 shares issued at December 31, 2018 and 198,572,458 shares issued at December 31, 2017 |
33
|
|
|
33
|
|
||
Capital in excess of par value
|
2,535
|
|
|
2,445
|
|
||
Retained earnings
|
15,072
|
|
|
13,670
|
|
||
Accumulated other comprehensive income (loss)
|
(159
|
)
|
|
19
|
|
||
Treasury stock, at cost, 63,028,169 shares at December 31, 2018
and 60,893,762 shares at December 31, 2017 |
(7,320
|
)
|
|
(6,325
|
)
|
||
Total stockholders’ equity
|
10,161
|
|
|
9,842
|
|
||
Total liabilities and stockholders’ equity
|
$
|
22,078
|
|
|
$
|
20,302
|
|
|
For the year ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
|
(in millions)
|
||||||||||
Revenues:
|
|
|
|
|
|
||||||
Management fees charged to operating subsidiaries
|
$
|
1,666
|
|
|
$
|
1,864
|
|
|
$
|
1,683
|
|
Investment and other income, net
|
30
|
|
|
57
|
|
|
42
|
|
|||
|
1,696
|
|
|
1,921
|
|
|
1,725
|
|
|||
Expenses:
|
|
|
|
|
|
||||||
Operating costs
|
1,468
|
|
|
1,801
|
|
|
1,519
|
|
|||
Merger termination fee and related costs, net
|
—
|
|
|
(936
|
)
|
|
104
|
|
|||
Depreciation
|
342
|
|
|
332
|
|
|
302
|
|
|||
Interest
|
218
|
|
|
243
|
|
|
189
|
|
|||
|
2,028
|
|
|
1,440
|
|
|
2,114
|
|
|||
Other expense, net
|
33
|
|
|
—
|
|
|
—
|
|
|||
Loss on sale of business
|
782
|
|
|
—
|
|
|
—
|
|
|||
(Loss) income before income taxes and equity in net earnings of subsidiaries
|
(1,147
|
)
|
|
481
|
|
|
(389
|
)
|
|||
(Benefit) provision for income taxes
|
(542
|
)
|
|
61
|
|
|
(107
|
)
|
|||
(Loss) income before equity in net earnings of subsidiaries
|
(605
|
)
|
|
420
|
|
|
(282
|
)
|
|||
Equity in net earnings of subsidiaries
|
2,277
|
|
|
2,028
|
|
|
896
|
|
|||
Equity in net earnings of Kindred at Home
|
11
|
|
|
—
|
|
|
—
|
|
|||
Net income
|
$
|
1,683
|
|
|
$
|
2,448
|
|
|
$
|
614
|
|
|
For the year ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
|
(in millions)
|
||||||||||
Net income
|
$
|
1,683
|
|
|
$
|
2,448
|
|
|
$
|
614
|
|
Other comprehensive income (loss):
|
|
|
|
|
|
||||||
Change in gross unrealized investment losses/gains
|
(189
|
)
|
|
149
|
|
|
(101
|
)
|
|||
Effect of income taxes
|
51
|
|
|
(55
|
)
|
|
38
|
|
|||
Total change in unrealized investment
gains/losses, net of tax |
(138
|
)
|
|
94
|
|
|
(63
|
)
|
|||
Reclassification adjustment for net realized
gains included in investment income |
(53
|
)
|
|
(14
|
)
|
|
(96
|
)
|
|||
Effect of income taxes
|
17
|
|
|
5
|
|
|
35
|
|
|||
Total reclassification adjustment, net of tax
|
(36
|
)
|
|
(9
|
)
|
|
(61
|
)
|
|||
Other comprehensive (loss) income, net of tax
|
(174
|
)
|
|
85
|
|
|
(124
|
)
|
|||
Comprehensive income attributable to our equity method
investment in Kindred at Home |
(4
|
)
|
|
—
|
|
|
—
|
|
|||
Comprehensive income
|
$
|
1,505
|
|
|
$
|
2,533
|
|
|
$
|
490
|
|
|
For the year ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
|
(in millions)
|
||||||||||
Net cash provided by operating activities
|
$
|
2,719
|
|
|
$
|
2,423
|
|
|
$
|
1,848
|
|
Cash flows from investing activities:
|
|
|
|
|
|
||||||
Acquisitions, net of cash acquired
|
(354
|
)
|
|
—
|
|
|
—
|
|
|||
Acquisitions, equity method investment in Kindred at Home
|
(1,095
|
)
|
|
—
|
|
|
—
|
|
|||
Capital contributions to operating subsidiaries
|
(697
|
)
|
|
(695
|
)
|
|
(895
|
)
|
|||
Purchases of investment securities
|
(145
|
)
|
|
(53
|
)
|
|
(151
|
)
|
|||
Proceeds from sale of investment securities
|
35
|
|
|
—
|
|
|
25
|
|
|||
Maturities of investment securities
|
59
|
|
|
51
|
|
|
143
|
|
|||
Purchases of property and equipment, net
|
(465
|
)
|
|
(359
|
)
|
|
(382
|
)
|
|||
Net cash used in investing activities
|
(2,662
|
)
|
|
(1,056
|
)
|
|
(1,260
|
)
|
|||
Cash flows from financing activities:
|
|
|
|
|
|
||||||
Proceeds from issuance of senior notes, net
|
—
|
|
|
1,779
|
|
|
—
|
|
|||
Proceeds from issuance (repayments) of commercial paper, net
|
485
|
|
|
(153
|
)
|
|
(2
|
)
|
|||
Proceeds from term loan
|
1,000
|
|
|
—
|
|
|
—
|
|
|||
Repayment of term loan
|
(350
|
)
|
|
—
|
|
|
—
|
|
|||
Repayment of long-term debt
|
—
|
|
|
(800
|
)
|
|
—
|
|
|||
Change in book overdraft
|
(3
|
)
|
|
3
|
|
|
5
|
|
|||
Common stock repurchases
|
(1,090
|
)
|
|
(3,365
|
)
|
|
(104
|
)
|
|||
Dividends paid
|
(265
|
)
|
|
(220
|
)
|
|
(177
|
)
|
|||
Proceeds from stock option exercises and other
|
48
|
|
|
62
|
|
|
11
|
|
|||
Net cash used in financing activities
|
(175
|
)
|
|
(2,694
|
)
|
|
(267
|
)
|
|||
(Decrease) increase in cash and cash equivalents
|
(118
|
)
|
|
(1,327
|
)
|
|
321
|
|
|||
Cash and cash equivalents at beginning of year
|
383
|
|
|
1,710
|
|
|
1,389
|
|
|||
Cash and cash equivalents at end of year
|
$
|
265
|
|
|
$
|
383
|
|
|
$
|
1,710
|
|
|
|
|
|
|
|
Additions
|
|
|
|
|
||||||||||||||
|
|
Balance at
Beginning of Period |
|
Acquired/(Disposed)
Balances |
|
Charged
(Credited) to Costs and Expenses |
|
Charged to
Other Accounts (1) |
|
Deductions
or Write-offs |
|
Balance at
End of Period |
||||||||||||
Allowance for loss on receivables:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
2018
|
|
$
|
96
|
|
|
$
|
—
|
|
|
$
|
36
|
|
|
$
|
(29
|
)
|
|
$
|
(24
|
)
|
|
$
|
79
|
|
2017
|
|
118
|
|
|
—
|
|
|
20
|
|
|
(10
|
)
|
|
(32
|
)
|
|
96
|
|
||||||
2016
|
|
101
|
|
|
—
|
|
|
39
|
|
|
19
|
|
|
(41
|
)
|
|
118
|
|
||||||
Deferred tax asset valuation allowance:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
2018
|
|
(49
|
)
|
|
—
|
|
|
(5
|
)
|
|
—
|
|
|
—
|
|
|
(54
|
)
|
||||||
2017
|
|
(49
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(49
|
)
|
||||||
2016
|
|
(42
|
)
|
|
—
|
|
|
(7
|
)
|
|
—
|
|
|
—
|
|
|
(49
|
)
|
(1)
|
Represents changes in retroactive membership adjustments to premiums revenue and contractual allowances adjustments to services revenue as more fully described in Note 2 to the consolidated financial statements included in this annual report on Form 10-K.
|
|
H
UMANA
I
NC
.
|
||
|
|
|
|
|
By:
|
|
/s/ BRIAN A. KANE
|
|
|
|
Brian A. Kane
|
|
|
|
Chief Financial Officer
(Principal Financial Officer)
|
|
|
|
|
|
Date:
|
|
February 21, 2019
|
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
/s/ BRIAN A. KANE
|
|
Chief Financial Officer
(Principal Financial Officer) |
|
February 21, 2019
|
Brian A. Kane
|
|
|
|
|
|
|
|
|
|
/s/ CYNTHIA H. ZIPPERLE
|
|
Senior Vice President and Chief Accounting Officer (Principal Accounting Officer)
|
|
February 21, 2019
|
Cynthia H. Zipperle
|
|
|
|
|
|
|
|
|
|
/s/ BRUCE D. BROUSSARD
|
|
President and Chief Executive Officer,
Director (Principal Executive Officer)
|
|
February 21, 2019
|
Bruce D. Broussard
|
|
|
|
|
|
|
|
|
|
/s/ KURT J. HILZINGER
|
|
Chairman of the Board
|
|
February 21, 2019
|
Kurt J. Hilzinger
|
|
|
|
|
|
|
|
|
|
/s/ FRANK BISIGNANO
|
|
Director
|
|
February 21, 2019
|
Frank Bisignano
|
|
|
|
|
|
|
|
|
|
/s/ KAREN DESALVO MD, MPH, MSc
|
|
Director
|
|
February 21, 2019
|
Karen DeSalvo, MD, MPH, MSc
|
|
|
|
|
|
|
|
|
|
/s/ FRANK A. D’AMELIO
|
|
Director
|
|
February 21, 2019
|
Frank A. D’Amelio
|
|
|
|
|
|
|
|
|
|
/s/ W. ROY DUNBAR
|
|
Director
|
|
February 21, 2019
|
W. Roy Dunbar
|
|
|
|
|
|
|
|
|
|
/s/ DAVID A. JONES, JR.
|
|
Director
|
|
February 21, 2019
|
David A. Jones, Jr.
|
|
|
|
|
|
|
|
|
|
/s/ WILLIAM J. MCDONALD
|
|
Director
|
|
February 21, 2019
|
William J. McDonald
|
|
|
|
|
|
|
|
|
|
/s/ WILLIAM E. MITCHELL
|
|
Director
|
|
February 21, 2019
|
William E. Mitchell
|
|
|
|
|
|
|
|
|
|
/s/ DAVID B. NASH, M.D.
|
|
Director
|
|
February 21, 2019
|
David B. Nash, M.D.
|
|
|
|
|
|
|
|
|
|
/s/ JAMES J. O’BRIEN
|
|
Director
|
|
February 21, 2019
|
James J. O’Brien
|
|
|
|
|
|
|
|
|
|
/s/ MARISSA T. PETERSON
|
|
Director
|
|
February 21, 2019
|
Marissa T. Peterson
|
|
|
|
1.
|
Humana Regional Health Plan, Inc.
|
1.
|
Humana EAP and Work-Life Services of California, Inc.
|
2.
|
Humana Health Plan of California, Inc.
|
1.
|
SeniorBridge Family Companies (CT), Inc.
|
1.
|
Atlantis Physician Group, LLC
|
2.
|
CDO 1, LLC
|
3.
|
CDO 2, LLC
|
4.
|
CompBenefits Corporation
|
5.
|
CompBenefits Direct, Inc.
|
6.
|
Emphesys, Inc.
|
7.
|
Go365, LLC
|
8.
|
Health Value Management, Inc.
|
9.
|
HUM Provider Holdings, LLC
|
10.
|
Humana at Home, Inc.
|
11.
|
Humana Digital Health and Analytics Platform Services, Inc.
|
12.
|
Humana Government Business, Inc.
|
13.
|
Humana Inc.
|
14.
|
Humana Innovation Enterprises, Inc.
|
15.
|
Humana Pharmacy, Inc.
|
16.
|
Humana Veterans Healthcare Services, Inc.
|
17.
|
Humana WellWorks LLC
|
18.
|
HumanaDental, Inc.
|
19.
|
MCCI Group Holdings, LLC
|
20.
|
MCCI Holdings, LLC
|
21.
|
North Region Providers, LLC
|
22.
|
Primary Care Holdings, Inc.
|
23.
|
Primary Care Holdings II, LLC
|
24.
|
Primary Care Specialists of the Palm Beaches, LLC
|
25.
|
Transcend Population Health Management, LLC
|
26.
|
Transcend Population Health Management II, LLC
|
1.
|
154th Street Medical Plaza, Inc.
|
2.
|
54th Street Medical Plaza, Inc.
|
3.
|
American Eldercare of North Florida, LLC
|
4.
|
American Eldercare, Inc.
|
5.
|
CAC Medical Center Holdings, Inc.
|
6.
|
CAC-Florida Medical Centers, LLC
|
7.
|
Care Partners Home Care, LLC
|
8.
|
CarePlus Health Plans, Inc.
|
9.
|
CompBenefits Company
|
10.
|
Complex Clinical Management, Inc.
|
11.
|
Continucare Corporation
|
12.
|
Continucare MDHC, LLC
|
13.
|
Continucare Medical Management, Inc.
|
14.
|
Continucare MSO, Inc.
|
15.
|
Family Physicians of Winter Park, Inc.
|
16.
|
FPG Acquisition Corp.
|
17.
|
FPG Acquisition Holdings Corp.
|
18.
|
FPG Holding Company, LLC
|
19.
|
FPG Senior Services, LLC
|
20.
|
HUM-e-FL, Inc.
|
21.
|
Humana At Home 1, Inc.
|
22.
|
Humana Dental Company
|
23.
|
Humana Health Insurance Company of Florida, Inc.
|
24.
|
Humana Medical Plan, Inc.
|
25.
|
MCCI Specialty, LLC
|
26.
|
MCCI/Lifetime of Aventura, LLC
|
27.
|
METCARE of Florida, Inc.
|
28.
|
Metropolitan Health Networks, Inc.
|
29.
|
Naples Health Care Specialists, LLC
|
30.
|
Nursing Solutions, LLC
|
31.
|
Partners in Integrated Care, Inc.
|
32.
|
RMA Medical Centers of Florida, LLC
|
33.
|
RMA Medical Group of Florida, LLC
|
34.
|
SeniorBridge Family Companies (FL), Inc.
|
35.
|
SeniorBridge-Florida, LLC
|
1.
|
Humana Employers Health Plan of Georgia, Inc.
|
1.
|
CompBenefits Dental, Inc.
|
2.
|
Dental Care Plus Management, Corp.
|
3.
|
Humana Benefit Plan of Illinois, Inc.
|
4.
|
Humana Healthcare Research, Inc.
|
1.
|
SeniorBridge Family Companies (IN), Inc.
|
1.
|
516-526 West Main Street Condominium Council of Co-Owners, Inc.
|
2.
|
CHA HMO, Inc.
|
3.
|
CHA Service Company
|
4.
|
Humana Active Outlook, Inc.
|
5.
|
Humana Health Plan, Inc.
|
6.
|
Humana Insurance Company of Kentucky
|
7.
|
Humana MarketPOINT, Inc.
|
8.
|
Humana Pharmacy Solutions, Inc.
|
9.
|
Humco, Inc.
|
10.
|
Preservation on Main, Inc.
|
11.
|
The Dental Concern, Inc.
|
1.
|
Humana Health Benefit Plan of Louisiana, Inc.
|
1.
|
Humana Medical Plan of Michigan, Inc.
|
1.
|
SeniorBridge Family Companies (MO), Inc.
|
1.
|
Harris, Rothenberg International Inc.
|
2.
|
Humana Health Company of New York, Inc.
|
3.
|
Humana Insurance Company of New York
|
4.
|
SeniorBridge Family Companies (NY), Inc.
|
1.
|
Humana Health Plan of Ohio, Inc.
|
2.
|
Hummingbird Coaching Systems LLC
|
1.
|
Humana Medical Plan of Pennsylvania, Inc.
|
1.
|
Humana Health Plans of Puerto Rico, Inc.
|
2.
|
Humana Insurance of Puerto Rico, Inc.
|
3.
|
Humana Management Services of Puerto Rico, Inc.
|
4.
|
Humana MarketPOINT of Puerto Rico, Inc.
|
1.
|
Cariten Health Plan Inc.
|
2.
|
PHP Companies, Inc.
|
3.
|
Preferred Health Partnership, Inc.
|
1.
|
CompBenefits Insurance Company
|
2.
|
DentiCare, Inc.
|
3.
|
Emphesys Insurance Company
|
4.
|
Humana At Home (Dallas), Inc.
|
5.
|
Humana At Home (Houston), Inc.
|
6.
|
Humana At Home (San Antonio), Inc.
|
7.
|
Humana At Home (TLC), Inc.
|
8.
|
Humana Behavioral Health, Inc.
|
9.
|
Humana Health Plan of Texas, Inc.
|
10.
|
Medical Care Consortium Incorporated of Texas
|
11.
|
ROHC, L.L.C.
|
12.
|
Texas Dental Plans, Inc.
|
1.
|
Humana Medical Plan of Utah, Inc.
|
1.
|
Managed Care Indemnity, Inc.
|
1.
|
Arcadian Health Plan, Inc.
|
1.
|
CareNetwork, Inc.
|
2.
|
Humana Insurance Company
|
3.
|
Humana Wisconsin Health Organization Insurance Corporation
|
4.
|
HumanaDental Insurance Company
|
5.
|
Independent Care Health Plan
|
1.
|
I have reviewed this annual report on Form 10-K of Humana Inc.;
|
2.
|
Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
5.
|
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
Date:
|
|
February 21, 2019
|
|
|
|
|
|
Signature:
|
|
/s/ BRUCE D. BROUSSARD
|
|
|
|
Bruce D. Broussard
Principal Executive Officer
|
|
1.
|
I have reviewed this annual report on Form 10-K of Humana Inc.;
|
2.
|
Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
5.
|
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
Date:
|
|
February 21, 2019
|
|
|
|
|
|
Signature:
|
|
/s/ BRIAN A. KANE
|
|
|
|
Brian A. Kane
Principal Financial Officer
|
|
/s/ BRUCE D. BROUSSARD
|
|
Bruce D. Broussard
President and Chief Executive Officer,
Director (Principal Executive Officer)
|
|
/s/ BRIAN A. KANE
|
|
Brian A. Kane
Chief Financial Officer
(Principal Financial Officer) |
|