☒
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QUARTERLY 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
|
|
(Exact name of registrant as specified in its charter)
|
|
Delaware
|
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61-0647538
|
(State or other jurisdiction of incorporation or organization)
|
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(I.R.S. Employer Identification No.)
|
Title of each class
|
Trading Symbol
|
Name of each exchange on which registered
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Common stock, $0.16 2/3 par value
|
HUM
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New York Stock Exchange
|
Large accelerated filer
|
☒
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Accelerated filer
|
☐
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Non-accelerated filer
|
☐
|
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Smaller reporting company
|
☐
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Emerging growth company
|
☐
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Class of Common Stock
|
Outstanding at September 30, 2019
|
$0.16 2/3 par value
|
132,426,045 shares
|
|
|
Page
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Part I: Financial Information
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Item 1.
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Financial Statements (Unaudited)
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Item 2.
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Item 3.
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Item 4.
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Item 1.
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Item 1A.
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Item 2.
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Item 3.
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Item 4.
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Item 5.
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Item 6.
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Certifications
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September 30,
2019 |
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December 31,
2018 |
||||
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(in millions, except share amounts)
|
||||||
ASSETS
|
|
|
|
||||
Current assets:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
5,527
|
|
|
$
|
2,343
|
|
Investment securities
|
10,430
|
|
|
10,026
|
|
||
Receivables, less allowance for doubtful accounts of $73 in 2019
and $79 in 2018 |
848
|
|
|
1,015
|
|
||
Other current assets
|
3,519
|
|
|
3,564
|
|
||
Total current assets
|
20,324
|
|
|
16,948
|
|
||
Property and equipment, net
|
1,864
|
|
|
1,735
|
|
||
Long-term investment securities
|
404
|
|
|
411
|
|
||
Equity method investment in Kindred at Home
|
1,061
|
|
|
1,047
|
|
||
Goodwill
|
3,922
|
|
|
3,897
|
|
||
Other long-term assets
|
1,605
|
|
|
1,375
|
|
||
Total assets
|
$
|
29,180
|
|
|
$
|
25,413
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
||||
Current liabilities:
|
|
|
|
||||
Benefits payable
|
$
|
6,220
|
|
|
$
|
4,862
|
|
Trade accounts payable and accrued expenses
|
3,640
|
|
|
3,067
|
|
||
Book overdraft
|
273
|
|
|
171
|
|
||
Unearned revenues
|
274
|
|
|
283
|
|
||
Short-term debt
|
699
|
|
|
1,694
|
|
||
Total current liabilities
|
11,106
|
|
|
10,077
|
|
||
Long-term debt
|
5,365
|
|
|
4,375
|
|
||
Future policy benefits payable
|
211
|
|
|
219
|
|
||
Other long-term liabilities
|
897
|
|
|
581
|
|
||
Total liabilities
|
17,579
|
|
|
15,252
|
|
||
Commitments and contingencies (Note 14)
|
|
|
|
||||
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;
198,628,992 shares issued at September 30, 2019 and 198,594,841 shares issued at December 31, 2018 |
33
|
|
|
33
|
|
||
Capital in excess of par value
|
2,608
|
|
|
2,535
|
|
||
Retained earnings
|
17,045
|
|
|
15,072
|
|
||
Accumulated other comprehensive income (loss)
|
177
|
|
|
(159
|
)
|
||
Treasury stock, at cost, 66,202,947 shares at September 30, 2019 and
63,028,169 shares at December 31, 2018 |
(8,262
|
)
|
|
(7,320
|
)
|
||
Total stockholders’ equity
|
11,601
|
|
|
10,161
|
|
||
Total liabilities and stockholders’ equity
|
$
|
29,180
|
|
|
$
|
25,413
|
|
|
Three months ended
September 30, |
|
Nine months ended
September 30, |
||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
|
(in millions, except per share results)
|
||||||||||||||
Revenues:
|
|
|
|
|
|
|
|
||||||||
Premiums
|
$
|
15,712
|
|
|
$
|
13,712
|
|
|
$
|
47,139
|
|
|
$
|
41,236
|
|
Services
|
393
|
|
|
381
|
|
|
1,103
|
|
|
1,090
|
|
||||
Investment income
|
136
|
|
|
113
|
|
|
351
|
|
|
418
|
|
||||
Total revenues
|
16,241
|
|
|
14,206
|
|
|
48,593
|
|
|
42,744
|
|
||||
Operating expenses:
|
|
|
|
|
|
|
|
||||||||
Benefits
|
13,357
|
|
|
11,243
|
|
|
40,168
|
|
|
34,449
|
|
||||
Operating costs
|
1,889
|
|
|
1,900
|
|
|
5,252
|
|
|
5,410
|
|
||||
Depreciation and amortization
|
127
|
|
|
102
|
|
|
343
|
|
|
302
|
|
||||
Total operating expenses
|
15,373
|
|
|
13,245
|
|
|
45,763
|
|
|
40,161
|
|
||||
Income from operations
|
868
|
|
|
961
|
|
|
2,830
|
|
|
2,583
|
|
||||
(Gain) loss on sale of business
|
—
|
|
|
(4
|
)
|
|
—
|
|
|
786
|
|
||||
Interest expense
|
62
|
|
|
53
|
|
|
184
|
|
|
159
|
|
||||
Other (income) expense, net
|
(82
|
)
|
|
11
|
|
|
(217
|
)
|
|
11
|
|
||||
Income before income taxes and equity in net earnings
|
888
|
|
|
901
|
|
|
2,863
|
|
|
1,627
|
|
||||
Provision for income taxes
|
200
|
|
|
266
|
|
|
684
|
|
|
308
|
|
||||
Equity in net earnings of Kindred at Home
|
1
|
|
|
9
|
|
|
16
|
|
|
9
|
|
||||
Net income
|
$
|
689
|
|
|
$
|
644
|
|
|
$
|
2,195
|
|
|
$
|
1,328
|
|
Basic earnings per common share
|
$
|
5.16
|
|
|
$
|
4.68
|
|
|
$
|
16.31
|
|
|
$
|
9.64
|
|
Diluted earnings per common share
|
$
|
5.14
|
|
|
$
|
4.65
|
|
|
$
|
16.24
|
|
|
$
|
9.58
|
|
|
Three months ended
September 30, |
|
Nine months ended
September 30, |
||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
|
(in millions)
|
||||||||||||||
Net income
|
$
|
689
|
|
|
$
|
644
|
|
|
$
|
2,195
|
|
|
$
|
1,328
|
|
Other comprehensive income:
|
|
|
|
|
|
|
|
||||||||
Change in gross unrealized investment
gains/losses |
87
|
|
|
(42
|
)
|
|
452
|
|
|
(254
|
)
|
||||
Effect of income taxes
|
(20
|
)
|
|
10
|
|
|
(105
|
)
|
|
64
|
|
||||
Total change in unrealized
investment gains/losses, net of tax |
67
|
|
|
(32
|
)
|
|
347
|
|
|
(190
|
)
|
||||
Reclassification adjustment for net
realized gains |
(1
|
)
|
|
3
|
|
|
(7
|
)
|
|
(49
|
)
|
||||
Effect of income taxes
|
—
|
|
|
(1
|
)
|
|
2
|
|
|
14
|
|
||||
Total reclassification adjustment, net
of tax |
(1
|
)
|
|
2
|
|
|
(5
|
)
|
|
(35
|
)
|
||||
Other comprehensive income (loss), net
of tax |
66
|
|
|
(30
|
)
|
|
342
|
|
|
(225
|
)
|
||||
Comprehensive loss attributable to equity method investment in Kindred at Home
|
(1
|
)
|
|
—
|
|
|
(6
|
)
|
|
—
|
|
||||
Comprehensive income
|
$
|
754
|
|
|
$
|
614
|
|
|
$
|
2,531
|
|
|
$
|
1,103
|
|
|
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)
|
|||||||||||||||||||||||||
Three months ended September 30, 2019
|
||||||||||||||||||||||||||
Balances, June 30, 2019
|
198,628
|
|
|
$
|
33
|
|
|
$
|
2,763
|
|
|
$
|
16,429
|
|
|
$
|
112
|
|
|
$
|
(7,465
|
)
|
|
$
|
11,872
|
|
Net income
|
|
|
|
|
|
|
689
|
|
|
|
|
|
|
689
|
|
|||||||||||
Other comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
65
|
|
|
|
|
|
65
|
|
||||||
Common stock repurchases
|
|
|
|
|
(200
|
)
|
|
|
|
|
|
|
(800
|
)
|
|
(1,000
|
)
|
|||||||||
Dividends and dividend
equivalents |
|
|
|
|
—
|
|
|
(73
|
)
|
|
|
|
|
|
|
(73
|
)
|
|||||||||
Stock-based compensation
|
|
|
|
|
43
|
|
|
|
|
|
|
|
|
|
43
|
|
||||||||||
Restricted stock unit vesting
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
—
|
|
|||||||
Stock option exercises
|
1
|
|
|
—
|
|
|
2
|
|
|
|
|
|
|
3
|
|
|
5
|
|
||||||||
Balances, September 30, 2019
|
198,629
|
|
|
$
|
33
|
|
|
$
|
2,608
|
|
|
$
|
17,045
|
|
|
$
|
177
|
|
|
$
|
(8,262
|
)
|
|
$
|
11,601
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Three months ended September 30, 2018
|
||||||||||||||||||||||||||
Balances, June 30, 2018
|
198,591
|
|
|
$
|
33
|
|
|
$
|
2,672
|
|
|
$
|
14,211
|
|
|
$
|
(176
|
)
|
|
$
|
(6,529
|
)
|
|
$
|
10,211
|
|
Net income
|
|
|
|
|
|
|
644
|
|
|
|
|
|
|
644
|
|
|||||||||||
Other comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
(30
|
)
|
|
|
|
|
(30
|
)
|
||||||
Common stock repurchases
|
|
|
|
|
—
|
|
|
|
|
|
|
|
(201
|
)
|
|
(201
|
)
|
|||||||||
Dividends and dividend
equivalents |
|
|
|
|
—
|
|
|
(69
|
)
|
|
|
|
|
|
|
(69
|
)
|
|||||||||
Stock-based compensation
|
|
|
|
|
35
|
|
|
|
|
|
|
|
|
|
35
|
|
||||||||||
Restricted stock unit vesting
|
—
|
|
|
—
|
|
|
(3
|
)
|
|
|
|
|
|
|
3
|
|
|
—
|
|
|||||||
Stock option exercises
|
2
|
|
|
—
|
|
|
3
|
|
|
|
|
|
|
—
|
|
|
3
|
|
||||||||
Balances, September 30, 2018
|
198,593
|
|
|
$
|
33
|
|
|
$
|
2,707
|
|
|
$
|
14,786
|
|
|
$
|
(206
|
)
|
|
$
|
(6,727
|
)
|
|
$
|
10,593
|
|
|
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)
|
|||||||||||||||||||||||||
Nine months ended September 30, 2019
|
||||||||||||||||||||||||||
Balances, December 31, 2018
|
198,595
|
|
|
$
|
33
|
|
|
$
|
2,535
|
|
|
$
|
15,072
|
|
|
$
|
(159
|
)
|
|
$
|
(7,320
|
)
|
|
$
|
10,161
|
|
Net income
|
|
|
|
|
|
|
2,195
|
|
|
|
|
|
|
2,195
|
|
|||||||||||
Other comprehensive income
|
|
|
|
|
|
|
|
|
|
—
|
|
|
336
|
|
|
|
|
|
336
|
|
||||||
Common stock repurchases
|
|
|
|
|
(50
|
)
|
|
|
|
|
|
|
(960
|
)
|
|
(1,010
|
)
|
|||||||||
Dividends and dividend
equivalents |
|
|
|
|
—
|
|
|
(222
|
)
|
|
|
|
|
.
|
|
(222
|
)
|
|||||||||
Stock-based compensation
|
|
|
|
|
119
|
|
|
|
|
|
|
|
|
|
119
|
|
||||||||||
Restricted stock unit vesting
|
32
|
|
|
—
|
|
|
(3
|
)
|
|
|
|
|
|
|
3
|
|
|
—
|
|
|||||||
Stock option exercises
|
2
|
|
|
—
|
|
|
7
|
|
|
|
|
|
|
15
|
|
|
22
|
|
||||||||
Balances, September 30, 2019
|
198,629
|
|
|
$
|
33
|
|
|
$
|
2,608
|
|
|
$
|
17,045
|
|
|
$
|
177
|
|
|
$
|
(8,262
|
)
|
|
$
|
11,601
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Nine months ended September 30, 2018
|
||||||||||||||||||||||||||
Balances, December 31, 2017
|
198,572
|
|
|
$
|
33
|
|
|
$
|
2,445
|
|
|
$
|
13,670
|
|
|
$
|
19
|
|
|
$
|
(6,325
|
)
|
|
$
|
9,842
|
|
Net income
|
|
|
|
|
|
|
1,328
|
|
|
|
|
|
|
1,328
|
|
|||||||||||
Other comprehensive loss
|
|
|
|
|
|
|
|
|
|
(4
|
)
|
|
(225
|
)
|
|
|
|
|
(229
|
)
|
||||||
Common stock repurchases
|
|
|
|
|
200
|
|
|
|
|
|
|
|
(494
|
)
|
|
(294
|
)
|
|||||||||
Dividends and dividend
equivalents |
|
|
|
|
—
|
|
|
(208
|
)
|
|
|
|
|
|
|
(208
|
)
|
|||||||||
Stock-based compensation
|
|
|
|
|
105
|
|
|
|
|
|
|
|
|
|
105
|
|
||||||||||
Restricted stock unit vesting
|
—
|
|
|
—
|
|
|
(92
|
)
|
|
|
|
|
|
|
92
|
|
|
—
|
|
|||||||
Stock option exercises
|
21
|
|
|
—
|
|
|
49
|
|
|
|
|
|
|
—
|
|
|
49
|
|
||||||||
Balances, September 30, 2018
|
198,593
|
|
|
$
|
33
|
|
|
$
|
2,707
|
|
|
$
|
14,786
|
|
|
$
|
(206
|
)
|
|
$
|
(6,727
|
)
|
|
$
|
10,593
|
|
|
For the nine months ended
September 30, |
||||||
|
2019
|
|
2018
|
||||
|
(in millions)
|
||||||
Cash flows from operating activities
|
|
|
|
||||
Net income
|
$
|
2,195
|
|
|
$
|
1,328
|
|
Adjustments to reconcile net income to net cash provided by
operating activities: |
|
|
|
||||
Loss on sale of business
|
—
|
|
|
786
|
|
||
Net realized capital gains
|
(23
|
)
|
|
(90
|
)
|
||
Equity in net earnings of Kindred at Home
|
(16
|
)
|
|
(9
|
)
|
||
Stock-based compensation
|
119
|
|
|
105
|
|
||
Depreciation
|
382
|
|
|
330
|
|
||
Amortization
|
53
|
|
|
70
|
|
||
(Benefit) provision for deferred income taxes
|
(21
|
)
|
|
165
|
|
||
Changes in operating assets and liabilities, net of effect of
businesses acquired and dispositions: |
|
|
|
||||
Receivables
|
179
|
|
|
(211
|
)
|
||
Other assets
|
334
|
|
|
(939
|
)
|
||
Benefits payable
|
1,358
|
|
|
410
|
|
||
Other liabilities
|
168
|
|
|
548
|
|
||
Unearned revenues
|
(9
|
)
|
|
(84
|
)
|
||
Other
|
53
|
|
|
97
|
|
||
Net cash provided by operating activities
|
4,772
|
|
|
2,506
|
|
||
Cash flows from investing activities
|
|
|
|
||||
Cash transferred in sale of business
|
—
|
|
|
(805
|
)
|
||
Acquisitions, net of cash acquired
|
—
|
|
|
(354
|
)
|
||
Acquisition, equity method investment in Kindred at Home
|
—
|
|
|
(1,095
|
)
|
||
Purchases of property and equipment
|
(506
|
)
|
|
(436
|
)
|
||
Purchases of investment securities
|
(4,130
|
)
|
|
(3,379
|
)
|
||
Maturities of investment securities
|
1,281
|
|
|
815
|
|
||
Proceeds from sales of investment securities
|
2,878
|
|
|
2,614
|
|
||
Net cash used in investing activities
|
(477
|
)
|
|
(2,640
|
)
|
||
Cash flows from financing activities
|
|
|
|
||||
Receipts from contract deposits, net
|
11
|
|
|
378
|
|
||
Proceeds from issuance of senior notes, net
|
987
|
|
|
—
|
|
||
(Repayments) proceeds from issuance of commercial paper, net
|
(358
|
)
|
|
240
|
|
||
Repayment of term loan
|
(650
|
)
|
|
—
|
|
||
Change in book overdraft
|
102
|
|
|
58
|
|
||
Common stock repurchases
|
(1,010
|
)
|
|
(294
|
)
|
||
Dividends paid
|
(216
|
)
|
|
(195
|
)
|
||
Proceeds from stock option exercises and other, net
|
23
|
|
|
47
|
|
||
Net cash (used in) provided by financing activities
|
(1,111
|
)
|
|
234
|
|
||
Increase in cash and cash equivalents
|
3,184
|
|
|
100
|
|
||
Cash and cash equivalents at beginning of period
|
2,343
|
|
|
4,042
|
|
||
Cash and cash equivalents at end of period
|
$
|
5,527
|
|
|
$
|
4,142
|
|
Supplemental cash flow disclosures:
|
|
|
|
||||
Interest payments
|
$
|
136
|
|
|
$
|
120
|
|
Income tax payments, net
|
$
|
578
|
|
|
$
|
511
|
|
|
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)
|
||||||||||||||||||||||
September 30, 2019
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
U.S. Treasury and other U.S.
government corporations and agencies: |
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
U.S. Treasury and agency
obligations |
$
|
31
|
|
|
$
|
—
|
|
|
$
|
21
|
|
|
$
|
(1
|
)
|
|
$
|
52
|
|
|
$
|
(1
|
)
|
Mortgage-backed
securities |
122
|
|
|
(1
|
)
|
|
269
|
|
|
(2
|
)
|
|
391
|
|
|
(3
|
)
|
||||||
Tax-exempt municipal
securities |
—
|
|
|
—
|
|
|
207
|
|
|
—
|
|
|
207
|
|
|
—
|
|
||||||
Mortgage-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Residential
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Commercial
|
24
|
|
|
—
|
|
|
55
|
|
|
—
|
|
|
79
|
|
|
—
|
|
||||||
Asset-backed securities
|
196
|
|
|
(1
|
)
|
|
420
|
|
|
(2
|
)
|
|
616
|
|
|
(3
|
)
|
||||||
Corporate debt securities
|
261
|
|
|
(1
|
)
|
|
191
|
|
|
(2
|
)
|
|
452
|
|
|
(3
|
)
|
||||||
Total debt securities
|
$
|
634
|
|
|
$
|
(3
|
)
|
|
$
|
1,163
|
|
|
$
|
(7
|
)
|
|
$
|
1,797
|
|
|
$
|
(10
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
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
|
)
|
|
Three months ended
September 30, |
|
Nine months ended
September 30, |
||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
|
(in millions)
|
||||||||||||||
Gross realized gains
|
$
|
41
|
|
|
$
|
10
|
|
|
$
|
59
|
|
|
$
|
105
|
|
Gross realized losses
|
(23
|
)
|
|
(2
|
)
|
|
(36
|
)
|
|
(15
|
)
|
||||
Net realized capital (losses) gains
|
$
|
18
|
|
|
$
|
8
|
|
|
$
|
23
|
|
|
$
|
90
|
|
|
Amortized
Cost |
|
Fair
Value |
||||
|
(in millions)
|
||||||
Due within one year
|
$
|
839
|
|
|
$
|
840
|
|
Due after one year through five years
|
2,277
|
|
|
2,312
|
|
||
Due after five years through ten years
|
1,730
|
|
|
1,789
|
|
||
Due after ten years
|
501
|
|
|
524
|
|
||
Mortgage and asset-backed securities
|
5,214
|
|
|
5,339
|
|
||
Total debt securities
|
$
|
10,561
|
|
|
$
|
10,804
|
|
|
Fair Value Measurements Using
|
||||||||||||||
|
Fair
Value |
|
Quoted Prices
in Active Markets (Level 1) |
|
Other
Observable Inputs (Level 2) |
|
Unobservable
Inputs (Level 3) |
||||||||
|
(in millions)
|
||||||||||||||
September 30, 2019
|
|
|
|
|
|
|
|
||||||||
Cash equivalents
|
$
|
5,015
|
|
|
$
|
5,015
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Debt securities:
|
|
|
|
|
|
|
|
||||||||
U.S. Treasury and other U.S. government
corporations and agencies: |
|
|
|
|
|
|
|
||||||||
U.S. Treasury and agency obligations
|
374
|
|
|
—
|
|
|
374
|
|
|
—
|
|
||||
Mortgage-backed securities
|
3,641
|
|
|
—
|
|
|
3,641
|
|
|
—
|
|
||||
Tax-exempt municipal securities
|
1,501
|
|
|
—
|
|
|
1,501
|
|
|
—
|
|
||||
Mortgage-backed securities:
|
|
|
|
|
|
|
|
||||||||
Residential
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Commercial
|
668
|
|
|
—
|
|
|
668
|
|
|
—
|
|
||||
Asset-backed securities
|
1,030
|
|
|
—
|
|
|
1,030
|
|
|
—
|
|
||||
Corporate debt securities
|
3,590
|
|
|
—
|
|
|
3,590
|
|
|
—
|
|
||||
Total debt securities
|
10,804
|
|
|
—
|
|
|
10,804
|
|
|
—
|
|
||||
Common stock
|
30
|
|
|
30
|
|
|
—
|
|
|
—
|
|
||||
Total invested assets
|
$
|
15,849
|
|
|
$
|
5,045
|
|
|
$
|
10,804
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
||||||||
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
|
|
|
$
|
—
|
|
|
September 30, 2019
|
|
December 31, 2018
|
||||||||||||
Risk
Corridor Settlement |
|
CMS
Subsidies/ Discounts |
|
Risk
Corridor Settlement |
|
CMS
Subsidies/ Discounts |
|||||||||
|
(in millions)
|
||||||||||||||
Other current assets
|
$
|
11
|
|
|
$
|
337
|
|
|
$
|
15
|
|
|
$
|
172
|
|
Trade accounts payable and accrued expenses
|
(49
|
)
|
|
(781
|
)
|
|
(103
|
)
|
|
(503
|
)
|
||||
Net current liability
|
(38
|
)
|
|
(444
|
)
|
|
(88
|
)
|
|
(331
|
)
|
||||
Other long-term assets
|
25
|
|
|
—
|
|
|
7
|
|
|
—
|
|
||||
Other long-term liabilities
|
(142
|
)
|
|
—
|
|
|
(89
|
)
|
|
—
|
|
||||
Net long-term liability
|
(117
|
)
|
|
—
|
|
|
(82
|
)
|
|
—
|
|
||||
Total net liability
|
$
|
(155
|
)
|
|
$
|
(444
|
)
|
|
$
|
(170
|
)
|
|
$
|
(331
|
)
|
|
Retail
|
|
Group and Specialty
|
|
Healthcare
Services |
|
Total
|
||||||||
|
(in millions)
|
||||||||||||||
Balance at January 1, 2019
|
$
|
1,535
|
|
|
$
|
261
|
|
|
$
|
2,101
|
|
|
$
|
3,897
|
|
Acquisitions
|
—
|
|
|
—
|
|
|
25
|
|
|
25
|
|
||||
Balance at September 30, 2019
|
$
|
1,535
|
|
|
$
|
261
|
|
|
$
|
2,126
|
|
|
$
|
3,922
|
|
|
|
|
September 30, 2019
|
|
December 31, 2018
|
||||||||||||||||||||
|
Weighted
Average Life |
|
Cost
|
|
Accumulated
Amortization |
|
Net
|
|
Cost
|
|
Accumulated
Amortization |
|
Net
|
||||||||||||
|
|
|
($ in millions)
|
||||||||||||||||||||||
Other intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Customer contracts/
relationships |
8.7 years
|
|
$
|
647
|
|
|
$
|
481
|
|
|
$
|
166
|
|
|
$
|
646
|
|
|
$
|
434
|
|
|
$
|
212
|
|
Trade names and
technology |
6.4 years
|
|
84
|
|
|
84
|
|
|
—
|
|
|
84
|
|
|
83
|
|
|
1
|
|
||||||
Provider contracts
|
11.8 years
|
|
69
|
|
|
42
|
|
|
27
|
|
|
68
|
|
|
37
|
|
|
31
|
|
||||||
Noncompetes and
other |
7.3 years
|
|
29
|
|
|
28
|
|
|
1
|
|
|
29
|
|
|
28
|
|
|
1
|
|
||||||
Total other intangible
assets |
8.7 years
|
|
$
|
829
|
|
|
$
|
635
|
|
|
$
|
194
|
|
|
$
|
827
|
|
|
$
|
582
|
|
|
$
|
245
|
|
Maturity of Lease Liabilities
|
|
September 30, 2019
|
||
|
|
(in millions)
|
||
2019 (excluding the nine months ended September 30, 2019)
|
|
$
|
36
|
|
2020
|
|
128
|
|
|
2021
|
|
110
|
|
|
2022
|
|
89
|
|
|
2023
|
|
45
|
|
|
After 2023
|
|
82
|
|
|
Total lease payments
|
|
490
|
|
|
Less: Interest
|
|
46
|
|
|
Present value of ROU lease liabilities
|
|
$
|
444
|
|
|
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
|
|
|
|
For the nine months ended September 30,
|
||||||
|
|
2019
|
|
2018
|
||||
|
|
(in millions)
|
||||||
Balances, beginning of period
|
|
$
|
4,862
|
|
|
$
|
4,668
|
|
Less: Reinsurance recoverables
|
|
(95
|
)
|
|
(70
|
)
|
||
Balances, beginning of period, net
|
|
4,767
|
|
|
4,598
|
|
||
Incurred related to:
|
|
|
|
|
||||
Current year
|
|
40,499
|
|
|
34,915
|
|
||
Prior years
|
|
(331
|
)
|
|
(467
|
)
|
||
Total incurred
|
|
40,168
|
|
|
34,448
|
|
||
Paid related to:
|
|
|
|
|
||||
Current year
|
|
(34,625
|
)
|
|
(30,204
|
)
|
||
Prior years
|
|
(4,158
|
)
|
|
(3,920
|
)
|
||
Total paid
|
|
(38,783
|
)
|
|
(34,124
|
)
|
||
Reinsurance recoverable
|
|
68
|
|
|
98
|
|
||
Balances, end of period
|
|
$
|
6,220
|
|
|
$
|
5,020
|
|
|
|
For the nine months ended September 30,
|
||||||
|
|
2019
|
|
2018
|
||||
|
|
(in millions)
|
||||||
Future policy benefits:
|
|
|
|
|
||||
Individual Commercial
|
|
$
|
—
|
|
|
$
|
(14
|
)
|
Other Businesses
|
|
—
|
|
|
15
|
|
||
Total future policy benefits
|
|
$
|
—
|
|
|
$
|
1
|
|
|
|
For the nine months ended September 30,
|
||||||
|
|
2019
|
|
2018
|
||||
|
|
(in millions)
|
||||||
Balances, beginning of period
|
|
$
|
4,338
|
|
|
$
|
3,963
|
|
Less: Reinsurance recoverables
|
|
(95
|
)
|
|
(70
|
)
|
||
Balances, beginning of period, net
|
|
4,243
|
|
|
3,893
|
|
||
Incurred related to:
|
|
|
|
|
||||
Current year
|
|
36,762
|
|
|
31,209
|
|
||
Prior years
|
|
(366
|
)
|
|
(367
|
)
|
||
Total incurred
|
|
36,396
|
|
|
30,842
|
|
||
Paid related to:
|
|
|
|
|
||||
Current year
|
|
(31,476
|
)
|
|
(27,062
|
)
|
||
Prior years
|
|
(3,634
|
)
|
|
(3,334
|
)
|
||
Total paid
|
|
(35,110
|
)
|
|
(30,396
|
)
|
||
Reinsurance recoverable
|
|
68
|
|
|
98
|
|
||
Balances, end of period
|
|
$
|
5,597
|
|
|
$
|
4,437
|
|
|
|
For the nine months ended September 30,
|
||||||
|
|
2019
|
|
2018
|
||||
|
|
(in millions)
|
||||||
Balances, beginning of period
|
|
$
|
517
|
|
|
$
|
568
|
|
Incurred related to:
|
|
|
|
|
||||
Current year
|
|
4,142
|
|
|
4,018
|
|
||
Prior years
|
|
35
|
|
|
(41
|
)
|
||
Total incurred
|
|
4,177
|
|
|
3,977
|
|
||
Paid related to:
|
|
|
|
|
||||
Current year
|
|
(3,547
|
)
|
|
(3,462
|
)
|
||
Prior years
|
|
(524
|
)
|
|
(509
|
)
|
||
Total paid
|
|
(4,071
|
)
|
|
(3,971
|
)
|
||
Balances, end of period
|
|
$
|
623
|
|
|
$
|
574
|
|
Reconciliation of the Disclosure of Incurred and Paid Claims Development to Benefits Payable, net of reinsurance
|
||||
|
September 30,
|
|||
|
2019
|
|||
Net outstanding liabilities
|
(in millions)
|
|||
Retail
|
$
|
5,529
|
|
|
Group and Specialty
|
623
|
|
||
Benefits payable, net of reinsurance
|
6,152
|
|
||
|
|
|||
Reinsurance recoverable on unpaid claims
|
|
|||
Retail
|
68
|
|
||
Total benefits payable, gross
|
$
|
6,220
|
|
|
Three months ended September 30,
|
|
Nine months ended September 30,
|
||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
|
(dollars in millions, except per common share results; number of shares in thousands)
|
||||||||||||||
Net income available for common stockholders
|
$
|
689
|
|
|
$
|
644
|
|
|
$
|
2,195
|
|
|
$
|
1,328
|
|
Weighted average outstanding shares of common stock
used to compute basic earnings per common share |
133,321
|
|
|
137,709
|
|
|
134,589
|
|
|
137,792
|
|
||||
Dilutive effect of:
|
|
|
|
|
|
|
|
||||||||
Employee stock options
|
101
|
|
|
186
|
|
|
99
|
|
|
199
|
|
||||
Restricted stock
|
603
|
|
|
783
|
|
|
501
|
|
|
704
|
|
||||
Shares used to compute diluted earnings per common share
|
134,025
|
|
|
138,678
|
|
|
135,189
|
|
|
138,695
|
|
||||
Basic earnings per common share
|
$
|
5.16
|
|
|
$
|
4.68
|
|
|
$
|
16.31
|
|
|
$
|
9.64
|
|
Diluted earnings per common share
|
$
|
5.14
|
|
|
$
|
4.65
|
|
|
$
|
16.24
|
|
|
$
|
9.58
|
|
Number of antidilutive stock options and restricted stock
excluded from computation |
302
|
|
|
36
|
|
|
589
|
|
|
284
|
|
Record
Date |
|
Payment
Date |
|
Amount
per Share |
|
Total
Amount |
||||
|
|
|
|
|
|
(in millions)
|
||||
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
|
|
2019 payments
|
|
|
|
|
|
|
||||
12/31/2018
|
|
1/25/2019
|
|
$
|
0.50
|
|
|
$
|
68
|
|
3/29/2019
|
|
4/26/2019
|
|
$
|
0.55
|
|
|
$
|
74
|
|
6/28/2019
|
|
7/26/2019
|
|
$
|
0.55
|
|
|
$
|
74
|
|
9/30/2019
|
|
10/25/2019
|
|
$
|
0.55
|
|
|
$
|
73
|
|
|
September 30, 2019
|
|
December 31, 2018
|
||||
|
(in millions)
|
||||||
Short-term debt:
|
|
|
|
||||
Commercial paper
|
$
|
299
|
|
|
$
|
645
|
|
Term note
|
—
|
|
|
650
|
|
||
Senior note:
|
|
|
|
||||
$400 million, 2.625% due October 1, 2019
|
400
|
|
|
399
|
|
||
Total short-term debt
|
$
|
699
|
|
|
$
|
1,694
|
|
|
|
|
|
||||
Long-term debt:
|
|
|
|
||||
Senior notes:
|
|
|
|
||||
$400 million, 2.50% due December 15, 2020
|
$
|
399
|
|
|
$
|
398
|
|
$400 million, 2.90% due December 15, 2022
|
397
|
|
|
396
|
|
||
$600 million, 3.15% due December 1, 2022
|
597
|
|
|
596
|
|
||
$600 million, 3.85% due October 1, 2024
|
597
|
|
|
597
|
|
||
$600 million, 3.95% due March 15, 2027
|
595
|
|
|
594
|
|
||
$500 million, 3.125% due August 15, 2029
|
495
|
|
|
—
|
|
||
$250 million, 8.15% due June 15, 2038
|
262
|
|
|
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
|
|
||
$500 million, 3.95% due August 15, 2049
|
492
|
|
|
—
|
|
||
Total long-term debt
|
$
|
5,365
|
|
|
$
|
4,375
|
|
|
Retail
|
|
Group and Specialty
|
|
Healthcare
Services |
|
Eliminations/
Corporate |
|
Consolidated
|
||||||||||
Three months ended September 30, 2019
|
(in millions)
|
||||||||||||||||||
External revenues
|
|
|
|
|
|
|
|
|
|||||||||||
Premiums:
|
|
|
|
|
|
|
|
|
|
||||||||||
Individual Medicare Advantage
|
$
|
10,752
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
10,752
|
|
Group Medicare Advantage
|
1,609
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,609
|
|
|||||
Medicare stand-alone PDP
|
781
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
781
|
|
|||||
Total Medicare
|
13,142
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
13,142
|
|
|||||
Fully-insured
|
150
|
|
|
1,278
|
|
|
—
|
|
|
—
|
|
|
1,428
|
|
|||||
Specialty
|
—
|
|
|
400
|
|
|
—
|
|
|
—
|
|
|
400
|
|
|||||
Medicaid and other
|
742
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
742
|
|
|||||
Total premiums
|
14,034
|
|
|
1,678
|
|
|
—
|
|
|
—
|
|
|
15,712
|
|
|||||
Services revenue:
|
|
|
|
|
|
|
|
|
|
||||||||||
Provider
|
—
|
|
|
—
|
|
|
136
|
|
|
—
|
|
|
136
|
|
|||||
ASO and other
|
4
|
|
|
200
|
|
|
—
|
|
|
—
|
|
|
204
|
|
|||||
Pharmacy
|
—
|
|
|
—
|
|
|
53
|
|
|
—
|
|
|
53
|
|
|||||
Total services revenue
|
4
|
|
|
200
|
|
|
189
|
|
|
—
|
|
|
393
|
|
|||||
Total external revenues
|
14,038
|
|
|
1,878
|
|
|
189
|
|
|
—
|
|
|
16,105
|
|
|||||
Intersegment revenues
|
|
|
|
|
|
|
|
|
|
||||||||||
Services
|
—
|
|
|
4
|
|
|
4,654
|
|
|
(4,658
|
)
|
|
—
|
|
|||||
Products
|
—
|
|
|
—
|
|
|
1,759
|
|
|
(1,759
|
)
|
|
—
|
|
|||||
Total intersegment revenues
|
—
|
|
|
4
|
|
|
6,413
|
|
|
(6,417
|
)
|
|
—
|
|
|||||
Investment income
|
50
|
|
|
7
|
|
|
—
|
|
|
79
|
|
|
136
|
|
|||||
Total revenues
|
14,088
|
|
|
1,889
|
|
|
6,602
|
|
|
(6,338
|
)
|
|
16,241
|
|
|||||
Operating expenses:
|
|
|
|
|
|
|
|
|
|
||||||||||
Benefits
|
12,050
|
|
|
1,448
|
|
|
—
|
|
|
(141
|
)
|
|
13,357
|
|
|||||
Operating costs
|
1,310
|
|
|
413
|
|
|
6,348
|
|
|
(6,182
|
)
|
|
1,889
|
|
|||||
Depreciation and amortization
|
89
|
|
|
24
|
|
|
43
|
|
|
(29
|
)
|
|
127
|
|
|||||
Total operating expenses
|
13,449
|
|
|
1,885
|
|
|
6,391
|
|
|
(6,352
|
)
|
|
15,373
|
|
|||||
Income from operations
|
639
|
|
|
4
|
|
|
211
|
|
|
14
|
|
|
868
|
|
|||||
Interest expense
|
—
|
|
|
—
|
|
|
—
|
|
|
62
|
|
|
62
|
|
|||||
Other income, net
|
—
|
|
|
—
|
|
|
—
|
|
|
(82
|
)
|
|
(82
|
)
|
|||||
Income before income taxes and equity in net earnings
|
639
|
|
|
4
|
|
|
211
|
|
|
34
|
|
|
888
|
|
|||||
Equity in net earnings of Kindred at Home
|
—
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
1
|
|
|||||
Segment earnings
|
$
|
639
|
|
|
$
|
4
|
|
|
$
|
212
|
|
|
$
|
34
|
|
|
$
|
889
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Retail
|
|
Group and Specialty
|
|
Healthcare
Services |
|
Individual Commercial
|
|
Other
Businesses |
|
Eliminations/
Corporate |
|
Consolidated
|
||||||||||||||
|
(in millions)
|
||||||||||||||||||||||||||
Three months ended September 30, 2018
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
External revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Premiums:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Individual Medicare Advantage
|
$
|
8,912
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
8,912
|
|
Group Medicare Advantage
|
1,542
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,542
|
|
|||||||
Medicare stand-alone PDP
|
893
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
893
|
|
|||||||
Total Medicare
|
11,347
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
11,347
|
|
|||||||
Fully-insured
|
129
|
|
|
1,345
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
1,475
|
|
|||||||
Specialty
|
—
|
|
|
325
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
325
|
|
|||||||
Medicaid and other
|
561
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4
|
|
|
—
|
|
|
565
|
|
|||||||
Total premiums
|
12,037
|
|
|
1,670
|
|
|
—
|
|
|
1
|
|
|
4
|
|
|
—
|
|
|
13,712
|
|
|||||||
Services revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Provider
|
—
|
|
|
—
|
|
|
113
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
113
|
|
|||||||
ASO and other
|
1
|
|
|
215
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
216
|
|
|||||||
Pharmacy
|
—
|
|
|
—
|
|
|
52
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
52
|
|
|||||||
Total services revenue
|
1
|
|
|
215
|
|
|
165
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
381
|
|
|||||||
Total external revenues
|
12,038
|
|
|
1,885
|
|
|
165
|
|
|
1
|
|
|
4
|
|
|
—
|
|
|
14,093
|
|
|||||||
Intersegment revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Services
|
—
|
|
|
4
|
|
|
4,214
|
|
|
—
|
|
|
—
|
|
|
(4,218
|
)
|
|
—
|
|
|||||||
Products
|
—
|
|
|
—
|
|
|
1,576
|
|
|
—
|
|
|
—
|
|
|
(1,576
|
)
|
|
—
|
|
|||||||
Total intersegment revenues
|
—
|
|
|
4
|
|
|
5,790
|
|
|
—
|
|
|
—
|
|
|
(5,794
|
)
|
|
—
|
|
|||||||
Investment income
|
35
|
|
|
5
|
|
|
11
|
|
|
—
|
|
|
10
|
|
|
52
|
|
|
113
|
|
|||||||
Total revenues
|
12,073
|
|
|
1,894
|
|
|
5,966
|
|
|
1
|
|
|
14
|
|
|
(5,742
|
)
|
|
14,206
|
|
|||||||
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Benefits
|
10,020
|
|
|
1,347
|
|
|
—
|
|
|
(4
|
)
|
|
12
|
|
|
(132
|
)
|
|
11,243
|
|
|||||||
Operating costs
|
1,352
|
|
|
445
|
|
|
5,720
|
|
|
—
|
|
|
2
|
|
|
(5,619
|
)
|
|
1,900
|
|
|||||||
Depreciation and amortization
|
67
|
|
|
21
|
|
|
40
|
|
|
—
|
|
|
—
|
|
|
(26
|
)
|
|
102
|
|
|||||||
Total operating expenses
|
11,439
|
|
|
1,813
|
|
|
5,760
|
|
|
(4
|
)
|
|
14
|
|
|
(5,777
|
)
|
|
13,245
|
|
|||||||
Income from operations
|
634
|
|
|
81
|
|
|
206
|
|
|
5
|
|
|
—
|
|
|
35
|
|
|
961
|
|
|||||||
Gain on sale of business
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(4
|
)
|
|
(4
|
)
|
|||||||
Interest expense
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
53
|
|
|
53
|
|
|||||||
Other expense, net
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
11
|
|
|
11
|
|
|||||||
Income (loss) before income taxes and equity in net earnings
|
634
|
|
|
81
|
|
|
206
|
|
|
5
|
|
|
—
|
|
|
(25
|
)
|
|
901
|
|
|||||||
Equity in net earnings of Kindred at Home
|
—
|
|
|
—
|
|
|
9
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
9
|
|
|||||||
Segment earnings (loss)
|
$
|
634
|
|
|
$
|
81
|
|
|
$
|
215
|
|
|
$
|
5
|
|
|
$
|
—
|
|
|
$
|
(25
|
)
|
|
$
|
910
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
Retail
|
|
Group and Specialty
|
|
Healthcare
Services |
|
Eliminations/
Corporate |
|
Consolidated
|
||||||||||
|
(in millions)
|
||||||||||||||||||
Nine months ended September 30, 2019
|
|
|
|
|
|
|
|
|
|||||||||||
External revenues
|
|
|
|
|
|
|
|
|
|||||||||||
Premiums:
|
|
|
|
|
|
|
|
|
|
||||||||||
Individual Medicare Advantage
|
$
|
32,254
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
32,254
|
|
Group Medicare Advantage
|
4,867
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4,867
|
|
|||||
Medicare stand-alone PDP
|
2,408
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,408
|
|
|||||
Total Medicare
|
39,529
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
39,529
|
|
|||||
Fully-insured
|
434
|
|
|
3,873
|
|
|
—
|
|
|
—
|
|
|
4,307
|
|
|||||
Specialty
|
—
|
|
|
1,160
|
|
|
—
|
|
|
—
|
|
|
1,160
|
|
|||||
Medicaid and other
|
2,143
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,143
|
|
|||||
Total premiums
|
42,106
|
|
|
5,033
|
|
|
—
|
|
|
—
|
|
|
47,139
|
|
|||||
Services revenue:
|
|
|
|
|
|
|
|
|
|
||||||||||
Provider
|
—
|
|
|
—
|
|
|
367
|
|
|
—
|
|
|
367
|
|
|||||
ASO and other
|
14
|
|
|
587
|
|
|
—
|
|
|
—
|
|
|
601
|
|
|||||
Pharmacy
|
—
|
|
|
—
|
|
|
135
|
|
|
—
|
|
|
135
|
|
|||||
Total services revenue
|
14
|
|
|
587
|
|
|
502
|
|
|
—
|
|
|
1,103
|
|
|||||
Total external revenues
|
42,120
|
|
|
5,620
|
|
|
502
|
|
|
—
|
|
|
48,242
|
|
|||||
Intersegment revenues
|
|
|
|
|
|
|
|
|
|
||||||||||
Services
|
—
|
|
|
13
|
|
|
13,456
|
|
|
(13,469
|
)
|
|
—
|
|
|||||
Products
|
—
|
|
|
—
|
|
|
5,128
|
|
|
(5,128
|
)
|
|
—
|
|
|||||
Total intersegment revenues
|
—
|
|
|
13
|
|
|
18,584
|
|
|
(18,597
|
)
|
|
—
|
|
|||||
Investment income
|
139
|
|
|
17
|
|
|
1
|
|
|
194
|
|
|
351
|
|
|||||
Total revenues
|
42,259
|
|
|
5,650
|
|
|
19,087
|
|
|
(18,403
|
)
|
|
48,593
|
|
|||||
Operating expenses:
|
|
|
|
|
|
|
|
|
|
||||||||||
Benefits
|
36,396
|
|
|
4,177
|
|
|
—
|
|
|
(405
|
)
|
|
40,168
|
|
|||||
Operating costs
|
3,664
|
|
|
1,232
|
|
|
18,371
|
|
|
(18,015
|
)
|
|
5,252
|
|
|||||
Depreciation and amortization
|
239
|
|
|
67
|
|
|
121
|
|
|
(84
|
)
|
|
343
|
|
|||||
Total operating expenses
|
40,299
|
|
|
5,476
|
|
|
18,492
|
|
|
(18,504
|
)
|
|
45,763
|
|
|||||
Income from operations
|
1,960
|
|
|
174
|
|
|
595
|
|
|
101
|
|
|
2,830
|
|
|||||
Interest expense
|
—
|
|
|
—
|
|
|
—
|
|
|
184
|
|
|
184
|
|
|||||
Other income, net
|
—
|
|
|
—
|
|
|
—
|
|
|
(217
|
)
|
|
(217
|
)
|
|||||
Income before income taxes and equity in net earnings
|
1,960
|
|
|
174
|
|
|
595
|
|
|
134
|
|
|
2,863
|
|
|||||
Equity in net earnings of Kindred at Home
|
—
|
|
|
—
|
|
|
16
|
|
|
—
|
|
|
16
|
|
|||||
Segment earnings
|
$
|
1,960
|
|
|
$
|
174
|
|
|
$
|
611
|
|
|
$
|
134
|
|
|
$
|
2,879
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Retail
|
|
Group and Specialty
|
|
Healthcare
Services |
|
Individual Commercial
|
|
Other
Businesses |
|
Eliminations/
Corporate |
|
Consolidated
|
||||||||||||||
|
(in millions)
|
||||||||||||||||||||||||||
Nine months ended September 30, 2018
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
External Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Premiums:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Individual Medicare Advantage
|
$
|
26,790
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
26,790
|
|
Group Medicare Advantage
|
4,575
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4,575
|
|
|||||||
Medicare stand-alone PDP
|
2,703
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,703
|
|
|||||||
Total Medicare
|
34,068
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
34,068
|
|
|||||||
Fully-insured
|
379
|
|
|
4,083
|
|
|
—
|
|
|
6
|
|
|
—
|
|
|
—
|
|
|
4,468
|
|
|||||||
Specialty
|
—
|
|
|
1,014
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,014
|
|
|||||||
Medicaid and other
|
1,664
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
22
|
|
|
—
|
|
|
1,686
|
|
|||||||
Total premiums
|
36,111
|
|
|
5,097
|
|
|
—
|
|
|
6
|
|
|
22
|
|
|
—
|
|
|
41,236
|
|
|||||||
Services revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Provider
|
—
|
|
|
—
|
|
|
290
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
290
|
|
|||||||
ASO and other
|
6
|
|
|
642
|
|
|
—
|
|
|
—
|
|
|
4
|
|
|
—
|
|
|
652
|
|
|||||||
Pharmacy
|
—
|
|
|
—
|
|
|
148
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
148
|
|
|||||||
Total services revenue
|
6
|
|
|
642
|
|
|
438
|
|
|
—
|
|
|
4
|
|
|
—
|
|
|
1,090
|
|
|||||||
Total external revenues
|
36,117
|
|
|
5,739
|
|
|
438
|
|
|
6
|
|
|
26
|
|
|
—
|
|
|
42,326
|
|
|||||||
Intersegment revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Services
|
—
|
|
|
13
|
|
|
12,426
|
|
|
—
|
|
|
—
|
|
|
(12,439
|
)
|
|
—
|
|
|||||||
Products
|
—
|
|
|
—
|
|
|
4,722
|
|
|
—
|
|
|
—
|
|
|
(4,722
|
)
|
|
—
|
|
|||||||
Total intersegment revenues
|
—
|
|
|
13
|
|
|
17,148
|
|
|
—
|
|
|
—
|
|
|
(17,161
|
)
|
|
—
|
|
|||||||
Investment income
|
102
|
|
|
18
|
|
|
34
|
|
|
—
|
|
|
110
|
|
|
154
|
|
|
418
|
|
|||||||
Total revenues
|
36,219
|
|
|
5,770
|
|
|
17,620
|
|
|
6
|
|
|
136
|
|
|
(17,007
|
)
|
|
42,744
|
|
|||||||
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Benefits
|
30,842
|
|
|
3,977
|
|
|
—
|
|
|
(73
|
)
|
|
77
|
|
|
(374
|
)
|
|
34,449
|
|
|||||||
Operating costs
|
3,784
|
|
|
1,355
|
|
|
16,910
|
|
|
3
|
|
|
6
|
|
|
(16,648
|
)
|
|
5,410
|
|
|||||||
Depreciation and amortization
|
199
|
|
|
66
|
|
|
125
|
|
|
—
|
|
|
—
|
|
|
(88
|
)
|
|
302
|
|
|||||||
Total operating expenses
|
34,825
|
|
|
5,398
|
|
|
17,035
|
|
|
(70
|
)
|
|
83
|
|
|
(17,110
|
)
|
|
40,161
|
|
|||||||
Income from operations
|
1,394
|
|
|
372
|
|
|
585
|
|
|
76
|
|
|
53
|
|
|
103
|
|
|
2,583
|
|
|||||||
Loss on sale of business
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
786
|
|
|
786
|
|
|||||||
Interest expense
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
159
|
|
|
159
|
|
|||||||
Other expense, net
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
11
|
|
|
11
|
|
|||||||
Income (loss) before income taxes and equity in net earnings
|
1,394
|
|
|
372
|
|
|
585
|
|
|
76
|
|
|
53
|
|
|
(853
|
)
|
|
1,627
|
|
|||||||
Equity in net earnings of Kindred at Home
|
—
|
|
|
—
|
|
|
9
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
9
|
|
|||||||
Segment earnings (loss)
|
$
|
1,394
|
|
|
$
|
372
|
|
|
$
|
594
|
|
|
$
|
76
|
|
|
$
|
53
|
|
|
$
|
(853
|
)
|
|
$
|
1,636
|
|
•
|
Our strategy offers 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 September 30, 2019, approximately 2,340,600 members, or 66%, of our individual Medicare Advantage members were in value-based relationships under our integrated care delivery model, as compared to 2,010,800 members, or 66%, at September 30, 2018. Medicare Advantage and dual demonstration program membership enrolled in a Humana chronic care management program was 882,800 at September 30, 2019, an increase of 23.8% from 713,300 at September 30, 2018. These members may not be unique to each program since members have the ability to enroll in multiple programs. The increase is driven by our improved process for identifying and enrolling members in the appropriate program at the right time, coupled with growth in Special Needs Plans, or SNP, membership.
|
•
|
In October 2019, the Centers for Medicare and Medicaid Services published its updated Medicare Star Ratings for bonus year 2021. We have 3.7 million members, or 92% of our Medicare Advantage membership as of August 2019, enrolled in 18 contracts that received a 4-star rating or above. In addition, we received a 5 out of 5-star rating for our CarePlus Health Plans, Inc. contract in Florida, and received a 4.5-star rating for six Medicare Advantage contracts offered in 19 states, which cover approximately 1.2 million members. The continued improvement in our Star ratings reflects our enterprise-wide focus on driving quality and improved health outcomes.
|
•
|
Net income increased $867 million from $1.3 billion in 2018 to $2.2 billion in 2019 and earnings per diluted common share increased $6.66 from $9.58 earnings per diluted common share in 2018 to $16.24 earnings per diluted common share in 2019. This comparison was primarily impacted by our Medicare Advantage business and Healthcare Services segment, as well as by previously implemented productivity initiatives that led to significant operating cost efficiencies in 2019. These impacts were partially offset by strategic investments in our integrated care delivery model, the impact of higher compensation accruals for the Annual Incentive Plan, or AIP, offered to employees across all levels of the company, lower Group and Specialty segment earnings, and the impact of workforce optimization. These changes were further favorably impacted by the suspension of the health industry insurance fee in 2019 and by a lower number of shares used to compute dilutive earnings per share, primarily reflecting share repurchases. In addition, the 2019 period was impacted by the loss on the sale of KMG recognized in 2018.
|
•
|
Contributing to our Retail segment revenue growth was our individual Medicare Advantage membership, which increased 508,700 members, or 16.7%, from September 30, 2018 to September 30, 2019.
|
•
|
Our operating cash flow of $4.8 billion for 2019 improved primarily from the timing of working capital changes, higher earnings, and the impact of an approximately $245 million payment related to reinsuring certain voluntary benefit and financial protection products to a third party in connection with the sale of KMG in 2018.
|
•
|
On July 31, 2019, we entered into an accelerated stock repurchase agreement, the July 2019 ASR, with Citibank, N.A., or Citi, to repurchase $1 billion of our common stock. On August 2, 2019, we made a payment of $1 billion to Citi and received an initial delivery of 2.7 million shares of our common stock. We expect final settlement under the agreement to occur during the fourth quarter of 2019.
|
•
|
In August 2019, we issued $500 million of 3.125% senior notes due August 15, 2029 and $500 million of 3.950% senior notes due August 15, 2049. Our net proceeds, reduced for the underwriters discount and commission and offering expenses paid as of September 30, 2019, were $987 million.
|
•
|
During the third quarter of 2019, we initiated an involuntary workforce optimization program that will allow us to promote operational excellence, accelerate our strategy, fund critical initiatives and advance our growth objectives. As a result we recorded estimated charges of $46 million, or $0.26 per diluted common share, on the corporate level, included with operating costs in the condensed consolidated statements of income. We expect this liability to be primarily paid within 12 months and classified it as a current liability, included in trade accounts payable and accrued expenses.
|
|
For the three months ended September 30,
|
|
Change
|
|||||||||||
|
2019
|
|
2018
|
|
Dollars
|
|
Percentage
|
|||||||
|
(dollars in millions, except per common share results)
|
|||||||||||||
Revenues:
|
|
|
|
|
|
|
|
|||||||
Premiums:
|
|
|
|
|
|
|
|
|||||||
Retail
|
$
|
14,034
|
|
|
$
|
12,037
|
|
|
$
|
1,997
|
|
|
16.6
|
%
|
Group and Specialty
|
1,678
|
|
|
1,670
|
|
|
8
|
|
|
0.5
|
%
|
|||
Individual Commercial
|
—
|
|
|
1
|
|
|
(1
|
)
|
|
(100.0
|
)%
|
|||
Other Businesses
|
—
|
|
|
4
|
|
|
(4
|
)
|
|
(100.0
|
)%
|
|||
Total premiums
|
15,712
|
|
|
13,712
|
|
|
2,000
|
|
|
14.6
|
%
|
|||
Services:
|
|
|
|
|
|
|
|
|||||||
Retail
|
4
|
|
|
1
|
|
|
3
|
|
|
300.0
|
%
|
|||
Group and Specialty
|
200
|
|
|
215
|
|
|
(15
|
)
|
|
(7.0
|
)%
|
|||
Healthcare Services
|
189
|
|
|
165
|
|
|
24
|
|
|
14.5
|
%
|
|||
Total services
|
393
|
|
|
381
|
|
|
12
|
|
|
3.1
|
%
|
|||
Investment income
|
136
|
|
|
113
|
|
|
23
|
|
|
20.4
|
%
|
|||
Total revenues
|
16,241
|
|
|
14,206
|
|
|
2,035
|
|
|
14.3
|
%
|
|||
Operating expenses:
|
|
|
|
|
|
|
|
|||||||
Benefits
|
13,357
|
|
|
11,243
|
|
|
2,114
|
|
|
18.8
|
%
|
|||
Operating costs
|
1,889
|
|
|
1,900
|
|
|
(11
|
)
|
|
(0.6
|
)%
|
|||
Depreciation and amortization
|
127
|
|
|
102
|
|
|
25
|
|
|
24.5
|
%
|
|||
Total operating expenses
|
15,373
|
|
|
13,245
|
|
|
2,128
|
|
|
16.1
|
%
|
|||
Income from operations
|
868
|
|
|
961
|
|
|
(93
|
)
|
|
(9.7
|
)%
|
|||
Gain on sale of business
|
—
|
|
|
(4
|
)
|
|
4
|
|
|
(100.0
|
)%
|
|||
Interest expense
|
62
|
|
|
53
|
|
|
9
|
|
|
17.0
|
%
|
|||
Other (income) expense, net
|
(82
|
)
|
|
11
|
|
|
(93
|
)
|
|
(845.5
|
)%
|
|||
Income before income taxes and equity in net earnings
|
888
|
|
|
901
|
|
|
(13
|
)
|
|
(1.4
|
)%
|
|||
Provision for income taxes
|
200
|
|
|
266
|
|
|
(66
|
)
|
|
(24.8
|
)%
|
|||
Equity in net earnings of Kindred at Home
|
1
|
|
|
9
|
|
|
(8
|
)
|
|
(88.9
|
)%
|
|||
Net income
|
$
|
689
|
|
|
$
|
644
|
|
|
$
|
45
|
|
|
7.0
|
%
|
Diluted earnings per common share
|
$
|
5.14
|
|
|
$
|
4.65
|
|
|
$
|
0.49
|
|
|
10.5
|
%
|
Benefit ratio (a)
|
85.0
|
%
|
|
82.0
|
%
|
|
|
|
3.0
|
%
|
||||
Operating cost ratio (b)
|
11.7
|
%
|
|
13.5
|
%
|
|
|
|
(1.8
|
)%
|
||||
Effective tax rate
|
22.5
|
%
|
|
29.1
|
%
|
|
|
|
(6.6
|
)%
|
(a)
|
Represents benefits expense as a percentage of premiums revenue.
|
(b)
|
Represents operating costs as a percentage of total revenues less investment income.
|
|
|
|
|
|
|
|
|
|||||||
|
For the nine months ended
September 30, |
|
Change
|
|||||||||||
|
2019
|
|
2018
|
|
Dollars
|
|
Percentage
|
|||||||
|
(dollars in millions, except per common share results)
|
|||||||||||||
Revenues:
|
|
|
|
|
|
|
|
|||||||
Premiums:
|
|
|
|
|
|
|
|
|||||||
Retail
|
$
|
42,106
|
|
|
$
|
36,111
|
|
|
$
|
5,995
|
|
|
16.6
|
%
|
Group and Specialty
|
5,033
|
|
|
5,097
|
|
|
(64
|
)
|
|
(1.3
|
)%
|
|||
Individual Commercial
|
—
|
|
|
6
|
|
|
(6
|
)
|
|
(100.0
|
)%
|
|||
Other Businesses
|
—
|
|
|
22
|
|
|
(22
|
)
|
|
(100.0
|
)%
|
|||
Total premiums
|
47,139
|
|
|
41,236
|
|
|
5,903
|
|
|
14.3
|
%
|
|||
Services:
|
|
|
|
|
|
|
|
|||||||
Retail
|
14
|
|
|
6
|
|
|
8
|
|
|
133.3
|
%
|
|||
Group and Specialty
|
587
|
|
|
642
|
|
|
(55
|
)
|
|
(8.6
|
)%
|
|||
Healthcare Services
|
502
|
|
|
438
|
|
|
64
|
|
|
14.6
|
%
|
|||
Other Businesses
|
—
|
|
|
4
|
|
|
(4
|
)
|
|
(100.0
|
)%
|
|||
Total services
|
1,103
|
|
|
1,090
|
|
|
13
|
|
|
1.2
|
%
|
|||
Investment income
|
351
|
|
|
418
|
|
|
(67
|
)
|
|
(16.0
|
)%
|
|||
Total revenues
|
48,593
|
|
|
42,744
|
|
|
5,849
|
|
|
13.7
|
%
|
|||
Operating expenses:
|
|
|
|
|
|
|
|
|||||||
Benefits
|
40,168
|
|
|
34,449
|
|
|
5,719
|
|
|
16.6
|
%
|
|||
Operating costs
|
5,252
|
|
|
5,410
|
|
|
(158
|
)
|
|
(2.9
|
)%
|
|||
Depreciation and amortization
|
343
|
|
|
302
|
|
|
41
|
|
|
13.6
|
%
|
|||
Total operating expenses
|
45,763
|
|
|
40,161
|
|
|
5,602
|
|
|
13.9
|
%
|
|||
Income from operations
|
2,830
|
|
|
2,583
|
|
|
247
|
|
|
9.6
|
%
|
|||
Loss on sale of business
|
—
|
|
|
786
|
|
|
(786
|
)
|
|
(100.0
|
)%
|
|||
Interest expense
|
184
|
|
|
159
|
|
|
25
|
|
|
15.7
|
%
|
|||
Other (income) expense, net
|
(217
|
)
|
|
11
|
|
|
(228
|
)
|
|
(2,072.7
|
)%
|
|||
Income before income taxes and equity in net earnings
|
2,863
|
|
|
1,627
|
|
|
1,236
|
|
|
76.0
|
%
|
|||
Provision for income taxes
|
684
|
|
|
308
|
|
|
376
|
|
|
122.1
|
%
|
|||
Equity in net earnings of Kindred at Home
|
16
|
|
|
9
|
|
|
7
|
|
|
77.8
|
%
|
|||
Net income
|
$
|
2,195
|
|
|
$
|
1,328
|
|
|
$
|
867
|
|
|
65.3
|
%
|
Diluted earnings per common share
|
$
|
16.24
|
|
|
$
|
9.58
|
|
|
$
|
6.66
|
|
|
69.5
|
%
|
Benefit ratio (a)
|
85.2
|
%
|
|
83.5
|
%
|
|
|
|
1.7
|
%
|
||||
Operating cost ratio (b)
|
10.9
|
%
|
|
12.8
|
%
|
|
|
|
(1.9
|
)%
|
||||
Effective tax rate
|
23.8
|
%
|
|
18.8
|
%
|
|
|
|
5.0
|
%
|
(a)
|
Represents benefits expense as a percentage of premiums revenue.
|
(b)
|
Represents operating costs as a percentage of total revenues less investment income.
|
|
September 30,
|
|
Change
|
||||||||
|
2019
|
|
2018
|
|
Members
|
|
Percentage
|
||||
Membership:
|
|
|
|
|
|
|
|
||||
Medical membership:
|
|
|
|
|
|
|
|
||||
Individual Medicare Advantage
|
3,552,500
|
|
|
3,043,800
|
|
|
508,700
|
|
|
16.7
|
%
|
Group Medicare Advantage
|
523,900
|
|
|
496,800
|
|
|
27,100
|
|
|
5.5
|
%
|
Medicare stand-alone PDP
|
4,379,800
|
|
|
5,015,900
|
|
|
(636,100
|
)
|
|
(12.7
|
)%
|
Total Retail Medicare
|
8,456,200
|
|
|
8,556,500
|
|
|
(100,300
|
)
|
|
(1.2
|
)%
|
State-based Medicaid
|
469,000
|
|
|
323,800
|
|
|
145,200
|
|
|
44.8
|
%
|
Medicare Supplement
|
286,600
|
|
|
246,600
|
|
|
40,000
|
|
|
16.2
|
%
|
Total Retail medical members
|
9,211,800
|
|
|
9,126,900
|
|
|
84,900
|
|
|
0.9
|
%
|
|
|
|
|
|
|
|
|
|||||||
|
For the three months ended September 30,
|
|
Change
|
|||||||||||
|
2019
|
|
2018
|
|
Dollars
|
|
Percentage
|
|||||||
|
(in millions)
|
|
|
|||||||||||
Premiums and Services Revenue:
|
|
|
|
|
|
|
|
|||||||
Premiums:
|
|
|
|
|
|
|
|
|||||||
Individual Medicare Advantage
|
$
|
10,752
|
|
|
$
|
8,912
|
|
|
$
|
1,840
|
|
|
20.6
|
%
|
Group Medicare Advantage
|
1,609
|
|
|
1,542
|
|
|
67
|
|
|
4.3
|
%
|
|||
Medicare stand-alone PDP
|
781
|
|
|
893
|
|
|
(112
|
)
|
|
(12.5
|
)%
|
|||
Total Retail Medicare
|
13,142
|
|
|
11,347
|
|
|
1,795
|
|
|
15.8
|
%
|
|||
State-based Medicaid
|
742
|
|
|
561
|
|
|
181
|
|
|
32.3
|
%
|
|||
Medicare Supplement
|
150
|
|
|
129
|
|
|
21
|
|
|
16.3
|
%
|
|||
Total premiums
|
14,034
|
|
|
12,037
|
|
|
1,997
|
|
|
16.6
|
%
|
|||
Services
|
4
|
|
|
1
|
|
|
3
|
|
|
300.0
|
%
|
|||
Total premiums and services revenue
|
$
|
14,038
|
|
|
$
|
12,038
|
|
|
$
|
2,000
|
|
|
16.6
|
%
|
Segment earnings
|
$
|
639
|
|
|
$
|
634
|
|
|
$
|
5
|
|
|
0.8
|
%
|
Benefit ratio
|
85.9
|
%
|
|
83.2
|
%
|
|
|
|
2.7
|
%
|
||||
Operating cost ratio
|
9.3
|
%
|
|
11.2
|
%
|
|
|
|
(1.9
|
)%
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
|
For the nine months ended
September 30, |
|
Change
|
|||||||||||
|
2019
|
|
2018
|
|
Dollars
|
|
Percentage
|
|||||||
|
(in millions)
|
|
|
|||||||||||
Premiums and Services Revenue:
|
|
|
|
|
|
|
|
|||||||
Premiums:
|
|
|
|
|
|
|
|
|||||||
Individual Medicare Advantage
|
$
|
32,254
|
|
|
$
|
26,790
|
|
|
$
|
5,464
|
|
|
20.4
|
%
|
Group Medicare Advantage
|
4,867
|
|
|
4,575
|
|
|
292
|
|
|
6.4
|
%
|
|||
Medicare stand-alone PDP
|
2,408
|
|
|
2,703
|
|
|
(295
|
)
|
|
(10.9
|
)%
|
|||
Total Retail Medicare
|
39,529
|
|
|
34,068
|
|
|
5,461
|
|
|
16.0
|
%
|
|||
State-based Medicaid
|
2,143
|
|
|
1,664
|
|
|
479
|
|
|
28.8
|
%
|
|||
Medicare Supplement
|
434
|
|
|
379
|
|
|
55
|
|
|
14.5
|
%
|
|||
Total premiums
|
42,106
|
|
|
36,111
|
|
|
5,995
|
|
|
16.6
|
%
|
|||
Services
|
14
|
|
|
6
|
|
|
8
|
|
|
133.3
|
%
|
|||
Total premiums and services revenue
|
$
|
42,120
|
|
|
$
|
36,117
|
|
|
$
|
6,003
|
|
|
16.6
|
%
|
Segment earnings
|
$
|
1,960
|
|
|
$
|
1,394
|
|
|
$
|
566
|
|
|
40.6
|
%
|
Benefit ratio
|
86.4
|
%
|
|
85.4
|
%
|
|
|
|
1.0
|
%
|
||||
Operating cost ratio
|
8.7
|
%
|
|
10.5
|
%
|
|
|
|
(1.8
|
)%
|
•
|
Retail segment earnings increased $5 million, or 0.8%, from $634 million in the 2018 quarter to $639 million in the 2019 quarter. Retail segment earnings increased $566 million, or 40.6%, from $1.4 billion in the 2018 period to $2.0 billion in the 2019 period. These increases primarily reflect the lower operating cost ratio, partially offset by the higher benefit ratio as more fully described below. As expected, the higher-than-anticipated individual Medicare Advantage membership growth during the previous Annual Election Period, or AEP, had a muted impact on the segment's earnings in the 2019 period. While new Medicare Advantage members increase revenue, on average, they have a break even impact on segment earnings in the first year as they were not previously engaged in a clinical programs or appropriately documented under the CMS risk-adjustment model, and accordingly, carry a higher benefit ratio.
|
•
|
Individual Medicare Advantage membership increased 508,700 members, or 16.7%, from September 30, 2018 to September 30, 2019, primarily due to membership additions associated with the previous AEP and Open Election Period, or OEP, for Medicare beneficiaries. The OEP sales period, which ran from January 1 to March 31, added approximately 43,700 members. Since March 31, 2019, enrollment has continued to increase due to strong sales to age-ins and those eligible for Dual Eligible Special Need Plans, or D-SNP. Individual Medicare Advantage membership includes 280,700 D-SNP members as of September 30, 2019, a net increase of 69,300, or 32.8%, from 211,400 as of September 30, 2018.
|
•
|
Group Medicare Advantage membership increased 27,100, or 5.5%, from September 30, 2018 to September 30, 2019, primarily due to net membership additions associated with the previous AEP for Medicare beneficiaries.
|
•
|
Medicare stand-alone PDP membership decreased 636,100 members, or 12.7%, from September 30, 2018 to September 30, 2019 reflecting net declines during the previous AEP for Medicare beneficiaries. These anticipated declines were primarily due to the competitive nature of the industry and the pricing discipline we have employed, which resulted in us no longer being the low cost plan in any market for 2019.
|
•
|
State-based Medicaid membership increased 145,200 members, or 44.8%, from September 30, 2018 to September 30, 2019, primarily driven by the statewide award of a comprehensive contract under the Managed Medical Assistance, or MMA, program in Florida.
|
•
|
Retail segment premiums increased $2.0 billion, or 16.6%, from the 2018 quarter to the 2019 quarter and increased $6.0 billion, or 16.6%, from the 2018 period to the 2019 period primarily due to Medicare Advantage membership growth and higher per member premiums, as well as increased state-based contracts membership. These favorable items were partially offset by the decline in membership in our stand-alone PDP offerings.
|
•
|
The Retail segment benefit ratio increased 270 basis points from 83.2% in the 2018 quarter to 85.9% in the 2019 quarter primarily due to the suspension of the health insurance industry fee in 2019 which was contemplated in the pricing and benefit design of our products, the significant unfavorable impact in the 2019 quarter of weekday seasonality, lower favorable prior-period medical claims reserve development, as well as the shift in Medicare membership mix due to the loss of stand-alone PDP members and the significant growth in Medicare Advantage members. These increases were partially offset by engaging our Medicare Advantage members in clinical programs as well as ensuring they are appropriately documented under the CMS risk-adjustment model, and lower than expected medical costs as compared to the assumptions used in the pricing of our individual Medicare Advantage business for 2019. The Retail segment benefit ratio increased 100 basis points from 85.4% in the 2018 period to 86.4% in the 2019 period, primarily reflecting the same factors that affected the 2019 quarter described above, but excluding the impact of weekday seasonality. These factors were partially offset by the impact of a less severe flu season in the 2019 period.
|
•
|
The Retail segment's benefits expense for the 2019 quarter included $55 million in favorable prior-period medical claims reserve development versus $120 million in the 2018 quarter. For the 2019 period, the benefits expense includes the beneficial effect of $366 million in favorable prior-period medical claims reserve development versus $367 million in the 2018 period. Prior-period medical claims reserve development decreased the Retail segment benefit ratio by approximately 40 basis points in the 2019 quarter versus approximately 100 basis points in the 2018 quarter. Favorable prior-period medical claims reserve development decreased the Retail segment benefit ratio by approximately 90 basis points in the 2019 period versus approximately 100 basis points in the 2018 period.
|
•
|
The Retail segment operating cost ratio of 9.3% for the 2019 quarter decreased 190 basis points from 11.2% for the 2018 quarter. The Retail segment operating cost ratio of 8.7% for the 2019 period decreased 180 basis points from 10.5% for the 2018 period. These decreases primarily were due to the suspension of the health insurance industry fee in 2019, as well as scale efficiencies associated with growth in our Medicare Advantage membership, and significant operating costs efficiencies in 2019 driven by previously implemented productivity initiatives. These decreases were partially offset by the strategic investments in our integrated care delivery model and the impact of higher compensation expense accruals in 2019 for the AIP as a result of our continued strong performance. The non-deductible health insurance industry fee impacted the operating cost ratio by 190 basis points in the 2018 quarter and period.
|
|
September 30,
|
|
Change
|
||||||||
|
2019
|
|
2018
|
|
Members
|
|
Percentage
|
||||
Membership:
|
|
|
|
|
|
|
|
||||
Medical membership:
|
|
|
|
|
|
|
|
||||
Fully-insured commercial group
|
927,400
|
|
|
1,029,100
|
|
|
(101,700
|
)
|
|
(9.9
|
)%
|
ASO
|
516,800
|
|
|
449,900
|
|
|
66,900
|
|
|
14.9
|
%
|
Military services
|
5,998,700
|
|
|
5,927,400
|
|
|
71,300
|
|
|
1.2
|
%
|
Total group and specialty medical members
|
7,442,900
|
|
|
7,406,400
|
|
|
36,500
|
|
|
0.5
|
%
|
Specialty membership (a)
|
5,411,400
|
|
|
6,116,300
|
|
|
(704,900
|
)
|
|
(11.5
|
)%
|
(a)
|
Specialty products include dental, vision, voluntary benefit products and other supplemental health. Members included in these products may not be unique to each product since members have the ability to enroll in multiple products.
|
|
|
|
|
|
|
|
|
|||||||
|
For the three months ended September 30,
|
|
Change
|
|||||||||||
|
2019
|
|
2018
|
|
Dollars
|
|
Percentage
|
|||||||
|
(in millions)
|
|
|
|||||||||||
Premiums and Services Revenue:
|
|
|
|
|
|
|
|
|||||||
Premiums:
|
|
|
|
|
|
|
|
|||||||
Fully-insured commercial group
|
$
|
1,278
|
|
|
$
|
1,345
|
|
|
$
|
(67
|
)
|
|
(5.0
|
)%
|
Group specialty
|
400
|
|
|
325
|
|
|
75
|
|
|
23.1
|
%
|
|||
Total premiums
|
1,678
|
|
|
1,670
|
|
|
8
|
|
|
0.5
|
%
|
|||
Services
|
200
|
|
|
215
|
|
|
(15
|
)
|
|
(7.0
|
)%
|
|||
Total premiums and services revenue
|
$
|
1,878
|
|
|
$
|
1,885
|
|
|
$
|
(7
|
)
|
|
(0.4
|
)%
|
Segment earnings
|
$
|
4
|
|
|
$
|
81
|
|
|
$
|
(77
|
)
|
|
(95.1
|
)%
|
Benefit ratio
|
86.3
|
%
|
|
80.7
|
%
|
|
|
|
5.6
|
%
|
||||
Operating cost ratio
|
21.9
|
%
|
|
23.6
|
%
|
|
|
|
(1.7
|
)%
|
|
|
|
|
|
|
|
|
|||||||
|
For the nine months ended
September 30, |
|
Change
|
|||||||||||
|
2019
|
|
2018
|
|
Dollars
|
|
Percentage
|
|||||||
|
(in millions)
|
|
|
|||||||||||
Premiums and Services Revenue:
|
|
|
|
|
|
|
|
|||||||
Premiums:
|
|
|
|
|
|
|
|
|||||||
Fully-insured commercial group
|
$
|
3,873
|
|
|
$
|
4,083
|
|
|
$
|
(210
|
)
|
|
(5.1
|
)%
|
Group specialty
|
1,160
|
|
|
1,014
|
|
|
146
|
|
|
14.4
|
%
|
|||
Total premiums
|
5,033
|
|
|
5,097
|
|
|
(64
|
)
|
|
(1.3
|
)%
|
|||
Services
|
587
|
|
|
642
|
|
|
(55
|
)
|
|
(8.6
|
)%
|
|||
Total premiums and services revenue
|
$
|
5,620
|
|
|
$
|
5,739
|
|
|
$
|
(119
|
)
|
|
(2.1
|
)%
|
Segment earnings
|
$
|
174
|
|
|
$
|
372
|
|
|
$
|
(198
|
)
|
|
(53.2
|
)%
|
Benefit ratio
|
83.0
|
%
|
|
78.0
|
%
|
|
|
|
5.0
|
%
|
||||
Operating cost ratio
|
21.9
|
%
|
|
23.6
|
%
|
|
|
|
(1.7
|
)%
|
•
|
Group and Specialty segment earnings decreased $77 million, or 95.1%, from $81 million in the 2018 quarter to $4 million in the 2019 quarter. Group and Specialty segment earnings decreased $198 million, or 53.2%, from $372 million in the 2018 period to $174 million in the 2019 period. These decreases were primarily due to a higher benefit ratio, along with lower military services business earnings. Earnings comparisons related to the military services business were unfavorably impacted by the receipt of certain contractual incentives and adjustments in 2018 related to the previous TRICARE contract which did not recur in 2019. These decreases were partially offset by the improvement in the operating cost ratio as more fully described below.
|
•
|
Fully-insured commercial group medical membership decreased 101,700 members, or 9.9%, from September 30, 2018 to September 30, 2019 primarily reflecting lower membership in small group accounts due in part to more small group accounts selecting level-funded ASO products in 2019, as well as the loss of certain large group accounts due to the competitive pricing environment. The portion of group fully-insured commercial medical membership in small group accounts was approximately 60% at September 30, 2019 and 62% at September 30, 2018.
|
•
|
Group ASO commercial medical membership increased 66,900 members, or 14.9%, from September 30, 2018 to September 30, 2019 reflecting more small group accounts selecting level-funded ASO products in 2019, 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.
|
•
|
Military services membership increased 71,300 members, or 1.2%, from September 30, 2018 to September 30, 2019. Membership includes military service members, retirees, and their families to whom the company provides healthcare services under the current T2017 TRICARE East Region contract. The current contract, which covers 32 states, became effective on January 1, 2018.
|
•
|
Specialty membership decreased 704,900 members, or 11.5%, from September 30, 2018 to September 30, 2019 primarily due to the loss of certain group accounts, including one jumbo account, offering stand-alone dental and vision products.
|
•
|
Group and Specialty segment premiums were relatively unchanged increasing $8 million, or 0.5%, from the 2018 quarter to $1.7 billion for the 2019 quarter. Group and Specialty segment premiums decreased $64 million, or 1.3%, from the 2018 period to $5.0 billion for the 2019 period, primarily due to a decline in our fully-insured group commercial and specialty membership. This decrease was partially offset by higher stop-loss revenues related to our level-funded ASO accounts resulting from membership growth in this product, higher per member premiums across the fully-insured business, and lower unfavorable commercial risk adjustment, or CRA, payable estimate in 2019 as compared to 2018, which resulted in higher small group fully-insured commercial revenues. The 2019 period was further negatively impacted by the exit of our voluntary benefit and financial protection products in connection with the sale of KMG in 2018.
|
•
|
Group and Specialty segment services revenue decreased $15 million, or 7.0%, from the 2018 quarter to $200 million for the 2019 quarter and decreased $55 million, or 8.6%, from the 2018 period to $587 million for the 2019 period primarily due to the impact of certain contractual incentives and adjustments related to the previous TRICARE contract received in 2018, which did not recur in 2019.
|
•
|
The Group and Specialty segment benefit ratio increased 560 basis points from 80.7% in the 2018 quarter to 86.3% in the 2019 quarter. The Group and Specialty segment benefit ratio increased 500 basis points from 78.0% in the 2018 period to 83.0% in the 2019 period. These increases primarily were due to the significant unfavorable impact in the 2019 quarter of weekday seasonality, the suspension of the health insurance industry fee in 2019 which was contemplated in the pricing and benefit design of our products, as well as the meaningful impact of the continued migration of fully-insured group members to level-funded ASO products in 2019 resulting in a membership mix transformation. In addition, the impact of adjustments to dental network contracted rates resulting from dental network re-contracting and expansion to position the business for the future, and lower prior-period medical claims reserve development unfavorably impacted the 2019 quarter and period ratio. These items were partially offset by the smaller unfavorable premium adjustment in 2019 as compared to 2018 related to our CRA accrual associated with the ACA-compliant business as a result of the release of CMS's final 2018 CRA data.
|
•
|
The Group and Specialty segment's benefits expense included $1 million in favorable prior-period medical claims reserve development in the 2019 quarter versus $7 million in the 2018 quarter. This favorable prior-period medical claims reserve development decreased the Group and Specialty segment benefit ratio by approximately 10 basis points in the 2019 quarter and approximately 40 basis points in the 2018 quarter. The Group and Specialty segment's benefits expense included the effect of an unfavorable prior-period medical claims reserve development of $35 million in the 2019 period versus favorable prior-period medical claims reserve development of $41 million in the 2018 period. The unfavorable prior-period medical claims reserve development for the 2019 period increased the Group and Specialty segment benefit ratio by approximately 70 basis points and the favorable prior-period medical claims reserve development for the 2018 period decreased the Group and Specialty segment benefit ratio 80 basis points.
|
•
|
The Group and Specialty segment operating cost ratio of 21.9% for the 2019 quarter decreased 170 basis points from 23.6% for the 2018 quarter. For the 2019 period, the Group and Specialty segment operating cost ratio of 21.9% decreased 170 basis points from 23.6% for the 2018 period. These decreases primarily were due to the suspension of the health insurance industry fee in 2019, as well as significant operating cost efficiencies in the 2019 quarter driven by previously implemented productivity initiatives. These improvements were offset by the higher compensation expense accruals in 2019 for the AIP as a result of our continued strong performance. The 2019 period was further impacted by the exit of our voluntary benefit and financial protection products in connection with the sale of KMG in 2018, which carried a higher operating cost ratio. The non-
|
|
|
|
|
|
|
|
|
|||||||
|
For the three months ended September 30,
|
|
Change
|
|||||||||||
|
2019
|
|
2018
|
|
Dollars
|
|
Percentage
|
|||||||
|
(in millions)
|
|
|
|||||||||||
Revenues:
|
|
|
|
|
|
|
|
|||||||
Services:
|
|
|
|
|
|
|
|
|||||||
Provider services
|
$
|
104
|
|
|
$
|
70
|
|
|
$
|
34
|
|
|
48.6
|
%
|
Pharmacy solutions
|
53
|
|
|
52
|
|
|
1
|
|
|
1.9
|
%
|
|||
Clinical care services
|
32
|
|
|
43
|
|
|
(11
|
)
|
|
(25.6
|
)%
|
|||
Total services revenues
|
189
|
|
|
165
|
|
|
24
|
|
|
14.5
|
%
|
|||
Intersegment revenues:
|
|
|
|
|
|
|
|
|||||||
Pharmacy solutions
|
5,673
|
|
|
5,092
|
|
|
581
|
|
|
11.4
|
%
|
|||
Provider services
|
591
|
|
|
537
|
|
|
54
|
|
|
10.1
|
%
|
|||
Clinical care services
|
149
|
|
|
161
|
|
|
(12
|
)
|
|
(7.5
|
)%
|
|||
Total intersegment revenues
|
6,413
|
|
|
5,790
|
|
|
623
|
|
|
10.8
|
%
|
|||
Total services and intersegment revenues
|
$
|
6,602
|
|
|
$
|
5,955
|
|
|
$
|
647
|
|
|
10.9
|
%
|
Segment earnings
|
$
|
212
|
|
|
$
|
215
|
|
|
$
|
(3
|
)
|
|
(1.4
|
)%
|
Operating cost ratio
|
96.2
|
%
|
|
96.1
|
%
|
|
|
|
0.1
|
%
|
|
|
|
|
|
|
|
|
|||||||
|
For the nine months ended
September 30, |
|
Change
|
|||||||||||
|
2019
|
|
2018
|
|
Dollars
|
|
Percentage
|
|||||||
|
(in millions)
|
|
|
|||||||||||
Revenues:
|
|
|
|
|
|
|
|
|||||||
Services:
|
|
|
|
|
|
|
|
|||||||
Provider services
|
$
|
265
|
|
|
$
|
158
|
|
|
$
|
107
|
|
|
67.7
|
%
|
Pharmacy solutions
|
134
|
|
|
148
|
|
|
(14
|
)
|
|
(9.5
|
)%
|
|||
Clinical care services
|
103
|
|
|
132
|
|
|
(29
|
)
|
|
(22.0
|
)%
|
|||
Total services revenues
|
502
|
|
|
438
|
|
|
64
|
|
|
14.6
|
%
|
|||
Intersegment revenues:
|
|
|
|
|
|
|
|
|
||||||
Pharmacy solutions
|
16,335
|
|
|
15,181
|
|
|
1,154
|
|
|
7.6
|
%
|
|||
Provider services
|
1,792
|
|
|
1,456
|
|
|
336
|
|
|
23.1
|
%
|
|||
Clinical care services
|
457
|
|
|
511
|
|
|
(54
|
)
|
|
(10.6
|
)%
|
|||
Total intersegment revenues
|
18,584
|
|
|
17,148
|
|
|
1,436
|
|
|
8.4
|
%
|
|||
Total services and intersegment revenues
|
$
|
19,086
|
|
|
$
|
17,586
|
|
|
$
|
1,500
|
|
|
8.5
|
%
|
Segment earnings
|
$
|
611
|
|
|
$
|
594
|
|
|
$
|
17
|
|
|
2.9
|
%
|
Operating cost ratio
|
96.3
|
%
|
|
96.2
|
%
|
|
|
|
0.1
|
%
|
•
|
Healthcare Services segment earnings of $212 million for the 2019 quarter was relatively unchanged, decreasing $3 million, or 1.4%, from $215 million in the 2018 quarter. The decrease primarily resulted from
|
•
|
Humana Pharmacy Solutions script volumes on an adjusted 30-day equivalent basis increased to approximately 116 million in the 2019 quarter, up 5.5%, versus scripts of approximately 110 million in the 2018 quarter. For the 2019 period, script volumes increased to approximately 339 million, up 3.4%, versus scripts of approximately 328 million in the 2018 period. These increases primarily reflect growth associated with higher individual Medicare Advantage membership, partially offset by the decline in stand-alone PDP membership.
|
•
|
Services revenues increased $24 million, or 14.5%, from the 2018 quarter to $189 million for the 2019 quarter and increased $64 million, or 14.6%, from the 2018 period to $502 million for the 2019 period primarily due to revenue growth from our provider services business.
|
•
|
Intersegment revenues increased $623 million, or 10.8%, from the 2018 quarter to $6.4 billion for the 2019 quarter and increased $1.4 billion, or 8.4%, from the 2018 period to $18.6 billion for the 2019 period. These increases primarily were due to strong Medicare Advantage membership growth, partially offset by the loss of intersegment revenues associated with the decline in stand-alone PDP membership. The 2019 period was further impacted by higher revenues associated with our provider services business reflecting the previously disclosed acquisition of MCCI and FPG.
|
•
|
The Healthcare Services segment operating cost ratio of 96.2% and 96.3% for the 2019 quarter and period, respectively, were relatively unchanged from 96.1% and 96.2% in the 2018 quarter and period, respectively.
|
|
Nine Months Ended
|
||||||
|
2019
|
|
2018
|
||||
|
(in millions)
|
||||||
Net cash provided by operating activities
|
$
|
4,772
|
|
|
$
|
2,506
|
|
Net cash used in investing activities
|
(477
|
)
|
|
(2,640
|
)
|
||
Net cash (used in) provided by financing activities
|
(1,111
|
)
|
|
234
|
|
||
Increase in cash and cash equivalents
|
$
|
3,184
|
|
|
$
|
100
|
|
|
September 30, 2019
|
|
December 31, 2018
|
|
2019
Period Change |
|
2018
Period Change |
||||||||
|
(in millions)
|
||||||||||||||
IBNR (1)
|
$
|
4,017
|
|
|
$
|
3,361
|
|
|
$
|
656
|
|
|
$
|
145
|
|
Reported claims in process (2)
|
1,084
|
|
|
617
|
|
|
467
|
|
|
169
|
|
||||
Other benefits payable (3)
|
1,119
|
|
|
884
|
|
|
235
|
|
|
38
|
|
||||
Total benefits payable
|
$
|
6,220
|
|
|
$
|
4,862
|
|
|
$
|
1,358
|
|
|
$
|
352
|
|
Payables from divestiture
|
|
|
|
|
—
|
|
|
58
|
|
||||||
Change in benefits payable per cash flow
statement resulting in cash from operations |
|
|
|
|
$
|
1,358
|
|
|
$
|
410
|
|
(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 and processed (i.e. a shorter time span results in a lower IBNR). IBNR includes unprocessed claims inventories.
|
(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)
|
Other benefits payable primarily include amounts owed to providers under capitated and risk sharing arrangements.
|
|
September 30, 2019
|
|
December 31, 2018
|
|
2019
Period Change |
|
2018
Period Change |
||||||||
|
(in millions)
|
||||||||||||||
Medicare
|
$
|
638
|
|
|
$
|
836
|
|
|
$
|
(198
|
)
|
|
$
|
233
|
|
Commercial and other
|
152
|
|
|
135
|
|
|
17
|
|
|
19
|
|
||||
Military services
|
131
|
|
|
123
|
|
|
8
|
|
|
(48
|
)
|
||||
Allowance for doubtful accounts
|
(73
|
)
|
|
(79
|
)
|
|
6
|
|
|
4
|
|
||||
Total net receivables
|
$
|
848
|
|
|
$
|
1,015
|
|
|
$
|
(167
|
)
|
|
$
|
208
|
|
Reconciliation to cash flow statement:
|
|
|
|
|
|
|
|
||||||||
Receivables from acquisition of business
|
|
|
|
|
(12
|
)
|
|
3
|
|
||||||
Change in receivables per cash flow
statement resulting in cash from operations |
|
|
|
|
$
|
(179
|
)
|
|
$
|
211
|
|
Item 2:
|
Unregistered Sales of Equity Securities and Use of Proceeds
|
(a)
|
None.
|
(b)
|
N/A
|
(c)
|
The following table provides information about our purchases of equity securities that are registered by us pursuant to Section 12 of the Securities Exchange Act of 1934, as amended, during the three months ended September 30, 2019:
|
Period
|
Total Number
of Shares Purchased (1)(2) |
|
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) |
||||||
July 2019
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
$
|
3,000,000,000
|
|
August 2019
|
2,695,872
|
|
|
296.75
|
|
|
2,695,872
|
|
|
2,000,000,000
|
|
||
September 2019
|
—
|
|
|
—
|
|
|
—
|
|
|
2,000,000,000
|
|
||
Total
|
2,695,872
|
|
|
$
|
—
|
|
|
2,695,872
|
|
|
|
(1)
|
On July 30, 2019, the Board of Directors replaced a previous share repurchase authorization of up to $3 billion (of which approximately $1.03 billion remained unused) with a new authorization for repurchases of up to $3 billion of our common shares exclusive of shares repurchased in connection with employee stock plans, expiring on June 30, 2022. On July 31, 2019, we entered into an accelerated stock repurchase agreement, the July 2019 ASR, with Citibank, N.A., or Citi, to repurchase $1 billion of our common stock. On August 2, 2019, we made a payment of $1 billion to Citi and received an initial delivery of 2.7 million shares of our common stock. We recorded the payment to Citi as a reduction to stockholders’ equity, consisting of an $800 million increase in treasury stock, which reflects the value of the initial 2.7 million shares received upon initial settlement, and a $200 million decrease in capital in excess of par value, which reflects the value of stock held back by Citi pending final settlement of the agreement. The final number of shares that we may receive, or be required to remit, under the agreement, will be determined based on the daily volume-weighted average share price of our common stock over the term of the July 2019 ASR, less a discount and subject to adjustments pursuant to the terms and conditions of the July 2019 ASR. We expect final settlement under the July 2019 ASR to occur during the fourth quarter of 2019.
|
(2)
|
Excludes 35,000 shares repurchased in connection with employee stock plans.
|
Item 3:
|
Defaults Upon Senior Securities
|
Item 4:
|
Mine Safety Disclosures
|
Item 5:
|
Other Information
|
3(i)
|
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).
|
By-Laws of Humana Inc., as amended on December 14, 2017 (incorporated herein by reference to Exhibit 3(b) to Humana Inc.’s Current Report on Form 8-K, filed December 14, 2017).
|
|
Amended and Restated Humana Inc. Executive Incentive Compensation Plan, effective January 1, 2020.
|
|
Principal Executive Officer certification pursuant to Section 302 of Sarbanes–Oxley Act of 2002.
|
|
Principal Financial Officer certification pursuant to Section 302 of Sarbanes–Oxley Act of 2002.
|
|
Principal Executive Officer and Principal Financial Officer certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
101
|
The following materials from Humana Inc.'s Quarterly Report on Form 10-Q formatted in iXBRL (Inline Extensible Business Reporting Language): (i) the Condensed Consolidated Balance Sheets at September 30, 2019 and December 31, 2018; (ii) the Condensed Consolidated Statements of Income for the three and nine months ended September 30, 2019 and 2018; (iii) the Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2019 and 2018; (iv) the Consolidated Statements of Equity for the three and nine months ended September 30, 2019 and 2018; (v) the Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2019 and 2018; and (vi) Notes to Condensed Consolidated Financial Statements. The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
|
104
|
Cover Page Interactive Data File formatted in Inline XBRL and contained in Exhibit 101.
|
|
|
HUMANA INC.
|
|
|
|
(Registrant)
|
|
|
|
|
|
Date:
|
November 6, 2019
|
By:
|
/s/ CYNTHIA H. ZIPPERLE
|
|
|
|
Cynthia H. Zipperle
|
|
|
|
Senior Vice President, Chief Accounting Officer and Controller (Principal Accounting Officer)
|
|
|
|
|
Date:
|
November 6, 2019
|
|
|
Signature:
|
/s/ Bruce D. Broussard
|
|
Bruce D. Broussard
Principal Executive Officer
|
|
|
|
Date:
|
|
November 6, 2019
|
|
|
|
Signature:
|
|
/s/ Brian A. Kane
|
|
|
Brian A. Kane
Principal Financial Officer
|
/s/ Bruce D. Broussard
|
Bruce D. Broussard
Principal Executive Officer
|
|
November 6, 2019
|
|
/s/ Brian A. Kane
|
Brian A. Kane
Principal Financial Officer
|
|
November 6, 2019
|