☑
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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 or other jurisdiction of incorporation of organization)
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(I.R.S. Employer Identification No.)
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Title of each class
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Trading Symbol
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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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HUM
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New York Stock Exchange
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Large accelerated filer
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☑
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Accelerated filer
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☐
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Non-accelerated filer
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☐
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Smaller reporting company
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☐
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Emerging growth company
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☐
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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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43,128
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67.0
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%
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Group Medicare Advantage
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6,475
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10.1
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%
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Medicare stand-alone PDP
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3,165
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4.9
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%
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Total Retail Medicare
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52,768
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82.0
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%
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State-based Medicaid
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2,898
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4.5
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%
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Medicare Supplement
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588
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0.9
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%
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Total premiums
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56,254
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87.4
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%
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Services
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17
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—
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%
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Total premiums and services revenue
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$
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56,271
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87.4
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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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5,123
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8.0
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%
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Specialty
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1,571
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2.4
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%
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Total premiums
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6,694
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10.4
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%
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Services
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790
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1.2
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%
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Total premiums and services revenue
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$
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7,484
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11.6
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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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22,189
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n/a
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Provider services
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2,344
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n/a
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Clinical care services
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616
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n/a
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Total intersegment revenue
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$
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25,149
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External services revenue:
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Pharmacy solutions
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$
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186
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0.3
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%
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Provider services
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306
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0.5
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%
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Clinical care services
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140
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0.2
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%
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Total external services revenue
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$
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632
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1.0
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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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701.4
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10.2
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188.6
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16.5
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460.9
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145.4
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36.9
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—
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1,559.9
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9.4
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%
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Texas
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285.9
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244.5
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292.3
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19.5
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—
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140.8
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31.0
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—
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1,014.0
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6.1
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%
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Kentucky
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98.0
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65.6
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201.4
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6.1
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—
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106.6
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135.3
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—
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613.0
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3.7
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%
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California
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83.9
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0.7
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436.7
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20.7
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—
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—
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—
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—
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542.0
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3.3
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%
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Georgia
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144.4
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2.0
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113.3
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11.4
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—
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135.6
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71.3
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—
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478.0
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2.9
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%
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Illinois
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126.2
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25.0
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172.0
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7.7
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8.1
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36.8
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76.7
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—
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452.5
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2.7
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%
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Ohio
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150.3
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23.3
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153.2
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42.8
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—
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33.0
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31.4
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—
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434.0
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2.6
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%
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Missouri/Kansas
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98.1
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4.8
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189.0
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12.1
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—
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38.9
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26.0
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—
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368.9
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2.2
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%
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North Carolina
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179.2
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0.4
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148.6
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6.5
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—
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—
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—
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—
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334.7
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2.0
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%
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Tennessee
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153.9
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4.9
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|
104.8
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7.0
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—
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38.3
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14.0
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—
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322.9
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1.9
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%
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Louisiana
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167.3
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13.8
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55.5
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3.1
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—
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52.7
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19.4
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—
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311.8
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1.9
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%
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Wisconsin
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63.5
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5.7
|
|
104.6
|
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7.0
|
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—
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65.9
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32.9
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—
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279.6
|
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1.7
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%
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Indiana
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113.9
|
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7.1
|
|
121.9
|
|
10.2
|
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—
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|
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19.3
|
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11.8
|
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—
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284.2
|
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1.7
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%
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Virginia
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132.2
|
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3.8
|
|
139.5
|
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9.2
|
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—
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|
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—
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—
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—
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284.7
|
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1.7
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%
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Michigan
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70.9
|
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18.9
|
|
118.7
|
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4.7
|
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—
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|
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1.8
|
|
—
|
|
—
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215.0
|
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1.3
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%
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Arizona
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92.8
|
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0.4
|
|
88.0
|
|
7.4
|
|
—
|
|
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21.5
|
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8.1
|
|
—
|
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218.2
|
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1.3
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%
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Pennsylvania
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56.6
|
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2.2
|
|
139.4
|
|
5.6
|
|
—
|
|
|
—
|
|
—
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|
—
|
|
203.8
|
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1.1
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%
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South Carolina
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99.4
|
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0.5
|
|
59.0
|
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5.9
|
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—
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|
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—
|
|
—
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|
—
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164.8
|
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1.0
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%
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Military services
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
—
|
|
—
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|
5,984.3
|
|
5,984.3
|
|
35.9
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%
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Others
|
769.3
|
|
91.5
|
|
1,538.7
|
|
95.0
|
|
—
|
|
|
72.0
|
|
34.4
|
|
—
|
|
2,600.9
|
|
15.6
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%
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Totals
|
3,587.2
|
|
525.3
|
|
4,365.2
|
|
298.4
|
|
469.0
|
|
|
908.6
|
|
529.2
|
|
5,984.3
|
|
16,667.2
|
|
100.0
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%
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Name
|
|
Age
|
|
Position
|
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First
Elected
Officer
|
|
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Bruce D. Broussard
|
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57
|
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President and Chief Executive Officer, Director
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12/11
|
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(1)
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Vishal Agrawal, M.D.
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45
|
|
Chief Strategy and Corporate Development Officer
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12/18
|
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(2)
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Heather M. Carroll Cox
|
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49
|
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Chief Digital Health and Analytics Officer
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08/18
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(3)
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Sam M. Deshpande
|
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55
|
|
Chief Technology and Risk Officer
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07/17
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(4)
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Susan M. Diamond
|
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46
|
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Segment President, Home Business
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07/19
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(5)
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William K. Fleming, PharmD
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52
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Segment President, Clinical and Pharmacy Solutions
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03/17
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(6)
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Christopher H. Hunter
|
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51
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Segment President, Group and Military Business
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01/14
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(7)
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Timothy S. Huval
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53
|
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Chief Administrative Officer
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12/12
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(8)
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Brian A. Kane
|
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47
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Chief Financial Officer
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06/14
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(9)
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William H. Shrank, M.D., MSHS
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48
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Chief Medical and Corporate Affairs Officer
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04/19
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(10)
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Joseph C. Ventura
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43
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Chief Legal Officer
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02/19
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(11)
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T. Alan Wheatley
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52
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Segment President, Retail
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03/17
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(12)
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Cynthia H. Zipperle
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57
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Senior Vice President, Chief Accounting Officer and Controller
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12/14
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(13)
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(1)
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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.
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(2)
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Dr. Agrawal currently 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 organization in the U.S. from December of 2015 to October 2018. Prior to joining Ciox Health, Dr. Agrawal served as President of Harris Healthcare Solutions from January 2013 to December 2015.
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(3)
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Ms. Cox currently serves as Chief Digital Health and Analytics Officer, having joined the Company in August 2018. Prior to joining the Company, Ms. Cox served as Chief Technology and Digital Officer at USAA, where she led the teams responsible for designing and building personalized and digitally-enabled end-to-end experiences for USAA members. Prior to USAA, Heather was the CEO of Citi FinTech at Citigroup, Inc., helping the company adapt to a future dominated by mobile technology, and she headed Card Operations, reshaping customer and digital experience for Capital One.
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(4)
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Mr. Deshpande currently serves as Chief Technology and Risk Officer, having been elected to this position in August 2019, from his prior role as Chief Risk Officer. Before joining Humana in July 2017, 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.
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(5)
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Susan M. Diamond currently serves as Segment President, Home Business, having been elected to this position in July 2019. Ms. Diamond joined the Company in June 2004 and has spent the majority of her Humana career in various leadership roles in the Medicare business, with a particular passion and emphasis on growth and consumer segmentation strategies for the Company’s Individual Medicare Advantage and Stand Alone Part D offerings. Ms. Diamond also served for two and a half years as the Enterprise Vice President of Finance, where she was responsible for enterprise planning and forecasting, trend analytics and had responsibility for each of the Company’s line of business CFOs and controllers.
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(6)
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Dr. Fleming currently serves as Segment President, Clinical and Pharmacy Solutions, where he is responsible for Humana’s Clinical Solutions (strategy, quality, trend, and operations), Pharmacy Solutions (PBM, mail, specialty, retail), and Enterprise Clinical Operating Model, having held this position since December 2019. Prior to that, Dr. Fleming held positions of Segment President, Healthcare Services as well as President of the Company’s pharmacy business. Dr. Fleming joined the Company in 1994.
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(7)
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Mr. Hunter currently serves as Segment President, Group and Military Business, having been elected to this position in August 2018 after having previously served as the Company’s Chief Strategy Officer since January 2014. 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.
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(8)
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Mr. Huval currently serves as Chief Administrative Officer, having been elected to this position in July 2019, from his previous role as Chief Human Resources Officer. 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.
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(9)
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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.
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(10)
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Dr. Shrank currently serves as Chief Medical and Corporate Affairs Officer, having been elected to this position in July 2019, from his previous role as Chief Medical Officer. Before joining Humana in April 2019, Dr. Shrank served as Chief Medical Officer, Insurance Services Division at the University of Pittsburgh Medical Center, from 2016-2019, where he oversaw approximately $9 billion in annual health care expenditures for approximately 3.5 million members in Medicare, Medicaid, behavioral health, Managed Long Term Social Supports and commercial lines of business. He also developed and evaluated population health programs to further advance the medical center’s mission as an integrated delivery and financing system. Prior to that, Dr. Shrank served as Senior Vice President, Chief Scientific Officer, and Chief Medical Officer of Provider Innovation at CVS Health from 2013 to 2016. Prior to joining CVS Health, Dr. Shrank served as Director, Research and Rapid-Cycle Evaluation Group, for the Center for Medicare and Medicaid Innovation, part of CMS from 2011 to 2013, where he led the evaluation of all payment and health system delivery reform programs and developed the rapid-cycle strategy to promote continuous quality improvement. Dr. Shrank began his career as a practicing physician with Brigham and Women’s Hospital in Boston and as an Assistant Professor at Harvard
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(11)
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Mr. Ventura currently serves as Chief Legal Officer. 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.
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(12)
|
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.
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(13)
|
Mrs. Zipperle currently serves as Senior Vice President, Chief Accounting Officer and Controller, 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.
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•
|
increased use of medical facilities and services;
|
•
|
increased cost of such services;
|
•
|
increased use or cost of prescription drugs, including specialty prescription drugs;
|
•
|
the introduction of new or costly treatments, including new technologies;
|
•
|
our membership mix;
|
•
|
variances in actual versus estimated levels of cost associated with new products, benefits or lines of business, product changes or benefit level changes;
|
•
|
changes in the demographic characteristics of an account or market;
|
•
|
changes or reductions of our utilization management functions such as preauthorization of services, concurrent review or requirements for physician referrals;
|
•
|
changes in our pharmacy volume rebates received from drug manufacturers;
|
•
|
catastrophes, including acts of terrorism, public health epidemics, or severe weather (e.g. hurricanes and earthquakes);
|
•
|
medical cost inflation; and
|
•
|
government mandated benefits, member eligibility criteria, or other legislative, judicial, or regulatory changes, including any that result from the Health Care Reform Law.
|
•
|
claims relating to the methodologies for calculating premiums;
|
•
|
claims relating to the denial of health care benefit payments;
|
•
|
claims relating to the denial or rescission of insurance coverage;
|
•
|
challenges to the use of some software products used in administering claims;
|
•
|
claims relating to our administration of our Medicare Part D offerings;
|
•
|
medical malpractice actions based on our medical necessity decisions or brought against us on the theory that we are liable for providers' alleged malpractice;
|
•
|
claims arising from any adverse medical consequences resulting from our recommendations about the appropriateness of providers’ proposed medical treatment plans for patients;
|
•
|
allegations of anti-competitive and unfair business activities;
|
•
|
provider disputes over compensation or non-acceptance or termination of provider contracts;
|
•
|
disputes related to ASO business, including actions alleging claim administration errors;
|
•
|
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;
|
•
|
claims related to the failure to disclose some business practices;
|
•
|
claims relating to customer audits and contract performance;
|
•
|
claims relating to dispensing of drugs associated with our in-house dispensing pharmacies; and
|
•
|
professional liability claims arising out of the delivery of healthcare and related services to the public.
|
•
|
At December 31, 2019, under our contracts with CMS we provided health insurance coverage to approximately 701,400 individual Medicare Advantage members in Florida. These contracts accounted for approximately 15% of our total premiums and services revenue for the year ended December 31, 2019. The loss of these and other CMS contracts or significant changes in the Medicare program as a result of legislative or regulatory action, including reductions in premium payments to us or increases in member benefits or
|
•
|
At December 31, 2019, our military services business, which accounted for approximately 1% of our total premiums and services revenue for the year ended December 31, 2019, primarily consisted of the TRICARE T2017 East Region contract. 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.
|
•
|
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.
|
•
|
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.
|
•
|
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.
|
•
|
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 general, CMS, HHS-OIG, the Office of Personnel Management, the Department of Justice, the Department of Labor, and the Defense Contract Audit Agency. All of these activities could result in the loss of licensure or the right to participate in various programs, including a limitation on our ability to market or sell products, the imposition of fines, penalties and other civil and criminal sanctions, or changes in our business practices. The outcome of any current or future governmental or internal investigations cannot be accurately predicted, nor can we predict any resulting penalties, fines or other sanctions that may be imposed at the discretion of federal or state regulatory authorities. Nevertheless, it is reasonably possible that any such outcome of
|
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
|
|
12/31/2014
|
|
12/31/2015
|
|
12/31/2016
|
|
12/31/2017
|
|
12/31/2018
|
|
12/31/2019
|
||||||||||||
HUM
|
$
|
100
|
|
|
$
|
125
|
|
|
$
|
144
|
|
|
$
|
177
|
|
|
$
|
205
|
|
|
$
|
265
|
|
S&P 500
|
$
|
100
|
|
|
$
|
101
|
|
|
$
|
113
|
|
|
$
|
138
|
|
|
$
|
132
|
|
|
$
|
174
|
|
Peer Group
|
$
|
100
|
|
|
$
|
106
|
|
|
$
|
107
|
|
|
$
|
135
|
|
|
$
|
149
|
|
|
$
|
183
|
|
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 2019
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
$
|
2,000,000,000
|
|
November 2019
|
—
|
|
|
—
|
|
|
—
|
|
|
2,000,000,000
|
|
||
December 2019
|
—
|
|
|
—
|
|
|
—
|
|
|
2,000,000,000
|
|
||
Total
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
|
(1)
|
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 reflected 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 reflected the value of stock held back by Citi pending final settlement of the July 2019 ASR. Upon final settlement of the July 2019 ASR on December 26, 2019, we received an additional 0.7 million shares as determined by the average daily volume weighted-averages share price of our common stock during the term of the agreement, less a discount, of $296.19, bringing the total shares received under the July 2019 ASR to 3.4 million. In addition, upon settlement we reclassified the $200 million value of stock initially held back by Citi from capital in excess of par value to treasury stock.
|
(2)
|
Excludes 0.2 million shares repurchased in connection with employee stock plans.
|
|
2019
|
|
2018
|
|
2017 (a)
|
|
2016 (b)
|
|
2015
|
||||||||||
|
(dollars in millions, except per common share results)
|
||||||||||||||||||
Summary of Operating Results
|
|
|
|
|
|
|
|
|
|
||||||||||
Total revenues
|
$
|
64,888
|
|
|
$
|
56,912
|
|
|
$
|
53,767
|
|
|
$
|
54,379
|
|
|
$
|
54,289
|
|
Income from operations
|
3,192
|
|
|
3,100
|
|
|
4,262
|
|
|
1,741
|
|
|
2,347
|
|
|||||
Loss (gain) on Sale of Business
|
—
|
|
|
786
|
|
|
—
|
|
|
—
|
|
|
(270
|
)
|
|||||
Interest expense
|
242
|
|
|
218
|
|
|
242
|
|
|
189
|
|
|
186
|
|
|||||
Other (income) expense, net
|
(506
|
)
|
|
33
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Income before income taxes and equity in net earnings
|
3,456
|
|
|
2,063
|
|
|
4,020
|
|
|
1,552
|
|
|
2,431
|
|
|||||
Provision for income taxes
|
763
|
|
|
391
|
|
|
1,572
|
|
|
938
|
|
|
1,155
|
|
|||||
Equity in net earnings of Kindred at Home
|
14
|
|
|
11
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Net income
|
$
|
2,707
|
|
|
$
|
1,683
|
|
|
$
|
2,448
|
|
|
$
|
614
|
|
|
$
|
1,276
|
|
Basic earnings per common share
|
$
|
20.20
|
|
|
$
|
12.24
|
|
|
$
|
16.94
|
|
|
$
|
4.11
|
|
|
$
|
8.54
|
|
Diluted earnings per common share
|
$
|
20.10
|
|
|
$
|
12.16
|
|
|
$
|
16.81
|
|
|
$
|
4.07
|
|
|
$
|
8.44
|
|
Dividends declared per common share
|
$
|
2.20
|
|
|
$
|
2.00
|
|
|
$
|
1.60
|
|
|
$
|
1.16
|
|
|
$
|
1.15
|
|
Financial Position
|
|
|
|
|
|
|
|
|
|
||||||||||
Cash and investments
|
$
|
15,432
|
|
|
$
|
12,780
|
|
|
$
|
16,344
|
|
|
$
|
13,675
|
|
|
$
|
11,681
|
|
Total assets
|
29,074
|
|
|
25,413
|
|
|
27,178
|
|
|
25,396
|
|
|
24,678
|
|
|||||
Benefits payable
|
6,004
|
|
|
4,862
|
|
|
4,668
|
|
|
4,563
|
|
|
4,976
|
|
|||||
Debt
|
5,666
|
|
|
6,069
|
|
|
4,920
|
|
|
4,092
|
|
|
4,093
|
|
|||||
Stockholders’ equity
|
12,037
|
|
|
10,161
|
|
|
9,842
|
|
|
10,685
|
|
|
10,346
|
|
|||||
Cash flows from operations
|
$
|
5,284
|
|
|
$
|
2,173
|
|
|
$
|
4,051
|
|
|
$
|
1,936
|
|
|
$
|
868
|
|
Key Financial Indicators
|
|
|
|
|
|
|
|
|
|
||||||||||
Benefit ratio
|
85.6
|
%
|
|
83.5
|
%
|
|
83.0
|
%
|
|
84.9
|
%
|
|
84.5
|
%
|
|||||
Operating cost ratio
|
11.5
|
%
|
|
13.3
|
%
|
|
12.3
|
%
|
|
13.3
|
%
|
|
13.6
|
%
|
|||||
Membership
|
|
|
|
|
|
|
|
|
|
||||||||||
Total medical membership
|
16,667,200
|
|
|
16,576,700
|
|
|
14,003,100
|
|
|
14,230,200
|
|
|
14,222,800
|
|
|||||
Total specialty membership
|
5,425,900
|
|
|
6,072,300
|
|
|
6,986,000
|
|
|
6,961,200
|
|
|
7,221,800
|
|
(a)
|
Included in operating expenses is $936 million (or $4.31 per diluted common stock) associated with the merger termination fee and related costs, net. Under the terms of the Agreement and Plan of Merger with Aetna Inc., and certain wholly owned subsidiaries of Aetna Inc., which we collectively refer to as Aetna, we received a breakup fee of $1 billion from Aetna included in this amount.
|
(b)
|
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 2019 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, 2019, approximately 2,407,000 members, or 67%, of our individual Medicare Advantage members were in value-based relationships under our integrated care delivery model, as compared to 2,039,100 members, or 67%, at December 31, 2018. Medicare Advantage and dual demonstration program membership enrolled in a Humana chronic care management program was 868,800 at December 31, 2019, an increase of 21.3% from 716,000 at December 31, 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.
|
•
|
On February 5, 2020, after the stock market closed, the Centers for Medicare and Medicaid Services (“CMS”) issued Part II of the 2021 Advance Notice of Methodological Changes for Medicare Advantage Capitation Rates and Part C and Part D Payment Policies (the “Advance Notice”). CMS has invited public comment on the Advance Notice before publishing final rates on April 6, 2020 (the “Final Notice”).
|
•
|
Net income was $2.7 billion for 2019 compared to $1.7 billion in 2018 and earnings per diluted common share increased $7.94 from $12.16 earnings per diluted common share in 2018 to $20.10 earnings per diluted common share in 2019. This comparison was primarily impacted by higher segment earnings in our Retail and Healthcare Services segments, partially offset by lower Group and Specialty segment earnings. These changes were further favorably impacted by the put/call valuation adjustments associated with our investment in Kindred at Home and by a lower number of shares used to compute dilutive earnings per share, primarily reflecting share repurchases. In addition, year-over-year comparison to 2019 was impacted by the loss on the sale of KMG of $786 million recognized in 2018.
|
•
|
Contributing to our Retail segment revenue growth was our individual and group Medicare Advantage membership, which increased 550,700 members, or 15.5%, from 3,561,800 members at December 31, 2018 to 4,112,500 members at December 31, 2019.
|
•
|
Our operating cash flow of $5.3 billion for 2019 improved from $2.2 billion for 2018, reflecting the significant impact of increasing premiums and enrollment, as premiums generally are collected in advance of claim payments by a period of up to several months. The year-over-year comparison was further impacted by the timing of other working capital changes, higher earnings in 2019 versus 2018, and the negative impact on 2018 cash flows resulting from the funding of reinsurance transactions in connection with the sale of KMG.
|
•
|
In July 2019, the Board of Directors approved a $3.0 billion share repurchase authorization with an expiration date of June 30, 2022. We subsequently entered into an agreement with a third-party financial institution on July 31, 2019, to effect a $1.0 billion ASR program under the authorization. Under the terms of this program, which was completed in the fourth quarter of 2019, we repurchased approximately 3,376,200 shares at an average price, after a discount, of $296.19. Aside from the completion of the ASR program, we have not completed any open market stock repurchases. As of February 19, 2020, we had a remaining repurchase authorization of $2.0 billion.
|
•
|
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, were $987 million. We used the net proceeds from this offering, together with available cash, to repay the $650 million outstanding amount due under our term note in August 2019, and the $400 million aggregate principal amount of our 2.625% senior notes due on its maturity date of October 1, 2019.
|
•
|
In 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 $47 million, or $0.26 per diluted common share, on the corporate level, included
|
|
|
|
|
Change
|
|||||||||||
|
|
2019
|
|
2018
|
|
Dollars
|
|
Percentage
|
|||||||
|
|
(dollars in millions, except per
common share results) |
|
|
|||||||||||
Revenues:
|
|
|
|
|
|
|
|
|
|||||||
Premiums:
|
|
|
|
|
|
|
|
|
|||||||
Retail
|
|
$
|
56,254
|
|
|
$
|
48,108
|
|
|
$
|
8,146
|
|
|
16.9
|
%
|
Group and Specialty
|
|
6,694
|
|
|
6,803
|
|
|
(109
|
)
|
|
(1.6
|
)%
|
|||
Individual Commercial
|
|
—
|
|
|
8
|
|
|
(8
|
)
|
|
(100.0
|
)%
|
|||
Other Businesses
|
|
—
|
|
|
22
|
|
|
(22
|
)
|
|
(100.0
|
)%
|
|||
Total premiums
|
|
62,948
|
|
|
54,941
|
|
|
8,007
|
|
|
14.6
|
%
|
|||
Services:
|
|
|
|
|
|
|
|
|
|||||||
Retail
|
|
17
|
|
|
11
|
|
|
6
|
|
|
54.5
|
%
|
|||
Group and Specialty
|
|
790
|
|
|
835
|
|
|
(45
|
)
|
|
(5.4
|
)%
|
|||
Healthcare Services
|
|
632
|
|
|
607
|
|
|
25
|
|
|
4.1
|
%
|
|||
Other Businesses
|
|
—
|
|
|
4
|
|
|
(4
|
)
|
|
(100.0
|
)%
|
|||
Total services
|
|
1,439
|
|
|
1,457
|
|
|
(18
|
)
|
|
(1.2
|
)%
|
|||
Investment income
|
|
501
|
|
|
514
|
|
|
(13
|
)
|
|
(2.5
|
)%
|
|||
Total revenues
|
|
64,888
|
|
|
56,912
|
|
|
7,976
|
|
|
14.0
|
%
|
|||
Operating expenses:
|
|
|
|
|
|
|
|
|
|||||||
Benefits
|
|
53,857
|
|
|
45,882
|
|
|
7,975
|
|
|
17.4
|
%
|
|||
Operating costs
|
|
7,381
|
|
|
7,525
|
|
|
(144
|
)
|
|
(1.9
|
)%
|
|||
Depreciation and amortization
|
|
458
|
|
|
405
|
|
|
53
|
|
|
13.1
|
%
|
|||
Total operating expenses
|
|
61,696
|
|
|
53,812
|
|
|
7,884
|
|
|
14.7
|
%
|
|||
Income from operations
|
|
3,192
|
|
|
3,100
|
|
|
92
|
|
|
3.0
|
%
|
|||
Loss on sale of business
|
|
—
|
|
|
786
|
|
|
(786
|
)
|
|
(100.0
|
)%
|
|||
Interest expense
|
|
242
|
|
|
218
|
|
|
24
|
|
|
11.0
|
%
|
|||
Other (income) expense, net
|
|
(506
|
)
|
|
33
|
|
|
(539
|
)
|
|
(1633.3
|
)%
|
|||
Income before income taxes and equity in net earnings
|
|
3,456
|
|
|
2,063
|
|
|
1,393
|
|
|
67.5
|
%
|
|||
Provision for income taxes
|
|
763
|
|
|
391
|
|
|
372
|
|
|
95.1
|
%
|
|||
Equity in net earnings of Kindred at Home
|
|
14
|
|
|
11
|
|
|
3
|
|
|
27.3
|
%
|
|||
Net income
|
|
$
|
2,707
|
|
|
$
|
1,683
|
|
|
$
|
1,024
|
|
|
60.8
|
%
|
Diluted earnings per common share
|
|
$
|
20.10
|
|
|
$
|
12.16
|
|
|
$
|
7.94
|
|
|
65.3
|
%
|
Benefit ratio (a)
|
|
85.6
|
%
|
|
83.5
|
%
|
|
|
|
2.1
|
%
|
||||
Operating cost ratio (b)
|
|
11.5
|
%
|
|
13.3
|
%
|
|
|
|
(1.8
|
)%
|
||||
Effective tax rate
|
|
22.0
|
%
|
|
18.9
|
%
|
|
|
|
3.1
|
%
|
(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
|
||||||||
|
|
2019
|
|
2018
|
|
Members
|
|
Percentage
|
||||
Membership:
|
|
|
|
|
|
|
|
|
||||
Medical membership:
|
|
|
|
|
|
|
|
|
||||
Individual Medicare Advantage
|
|
3,587,200
|
|
|
3,064,000
|
|
|
523,200
|
|
|
17.1
|
%
|
Group Medicare Advantage
|
|
525,300
|
|
|
497,800
|
|
|
27,500
|
|
|
5.5
|
%
|
Medicare stand-alone PDP
|
|
4,365,200
|
|
|
5,004,300
|
|
|
(639,100
|
)
|
|
(12.8
|
)%
|
Total Retail Medicare
|
|
8,477,700
|
|
|
8,566,100
|
|
|
(88,400
|
)
|
|
(1.0
|
)%
|
State-based Medicaid
|
|
469,000
|
|
|
341,100
|
|
|
127,900
|
|
|
37.5
|
%
|
Medicare Supplement
|
|
298,400
|
|
|
254,300
|
|
|
44,100
|
|
|
17.3
|
%
|
Total Retail medical members
|
|
9,245,100
|
|
|
9,161,500
|
|
|
83,600
|
|
|
0.9
|
%
|
|
|
|
|
Change
|
|||||||||||
|
|
2019
|
|
2018
|
|
Dollars
|
|
Percentage
|
|||||||
|
|
(in millions)
|
|||||||||||||
Premiums and Services Revenue:
|
|
|
|
|
|
|
|
|
|||||||
Premiums:
|
|
|
|
|
|
|
|
|
|||||||
Individual Medicare Advantage
|
|
$
|
43,128
|
|
|
$
|
35,656
|
|
|
$
|
7,472
|
|
|
21.0
|
%
|
Group Medicare Advantage
|
|
6,475
|
|
|
6,103
|
|
|
372
|
|
|
6.1
|
%
|
|||
Medicare stand-alone PDP
|
|
3,165
|
|
|
3,584
|
|
|
(419
|
)
|
|
(11.7
|
)%
|
|||
Total Retail Medicare
|
|
52,768
|
|
|
45,343
|
|
|
7,425
|
|
|
16.4
|
%
|
|||
State-based Medicaid
|
|
2,898
|
|
|
2,255
|
|
|
643
|
|
|
28.5
|
%
|
|||
Medicare Supplement
|
|
588
|
|
|
510
|
|
|
78
|
|
|
15.3
|
%
|
|||
Total premiums
|
|
56,254
|
|
|
48,108
|
|
|
8,146
|
|
|
16.9
|
%
|
|||
Services
|
|
17
|
|
|
11
|
|
|
6
|
|
|
54.5
|
%
|
|||
Total premiums and services revenue
|
|
$
|
56,271
|
|
|
$
|
48,119
|
|
|
$
|
8,152
|
|
|
16.9
|
%
|
Segment earnings
|
|
$
|
2,235
|
|
|
$
|
1,733
|
|
|
$
|
502
|
|
|
29.0
|
%
|
Benefit ratio
|
|
86.4
|
%
|
|
85.1
|
%
|
|
|
|
1.3
|
%
|
||||
Operating cost ratio
|
|
9.4
|
%
|
|
11.1
|
%
|
|
|
|
(1.7
|
)%
|
•
|
Retail segment earnings were $2.2 billion in 2019, an increase of $502 million, or 29.0%, compared to $1.7 billion in 2018 primarily reflecting a 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 AEP had a muted impact on the segment's earnings in 2019. 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 clinical programs or appropriately documented under the CMS risk adjustment model, and accordingly, carry a higher benefit ratio.
|
•
|
Individual Medicare Advantage membership increased 523,200 members, or 17.1%, from 3,064,000 members as of December 31, 2018 to 3,587,200 members as of December 31, 2019, primarily due to membership additions associated with the 2019 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 the conclusion of the OEP, enrollment 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 288,200 D-SNP members as of December 31, 2019, a net increase of 69,600, or 31.8%, from 218,600 December 31, 2018. For the full year 2020, we anticipate a net membership increase in our Individual Medicare Advantage offerings of 270,000 members to 330,000 members.
|
•
|
Group Medicare Advantage membership increased 27,500 members, or 5.5%, from 497,800 members as of December 31, 2018 to 525,300 members as of December 31, 2019, primarily due to net membership additions associated with the 2019 AEP for Medicare beneficiaries. For the full year 2020, we anticipate a net membership increase in our Group Medicare Advantage offerings of approximately 90,000 members.
|
•
|
Medicare stand-alone PDP membership decreased 639,100 members, or 12.8%, from 5,004,300 members as of December 31, 2018 to 4,365,200 members as of December 31, 2019, primarily reflecting net declines during the 2019 AEP for Medicare beneficiaries. The anticipated decline primarily was 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. For the full year 2020, we anticipate a net membership decline in our Medicare stand-alone PDP offerings of approximately 550,000 members.
|
•
|
State-based Medicaid membership increased 127,900 members, or 37.5%, from 341,100 members as of December 31, 2018 to 469,000 members as of December 31, 2019, primarily driven by the statewide award of a comprehensive contract under the Managed Medical Assistance, or MMA, program in Florida. Our January 31, 2020 state-based contracts membership was 608,000, representing growth of 139,000, or 30%, from December 31, 2019. This growth primarily reflects the impact of terminating the reinsurance agreement with CareSource effective January 1, 2020, which ceded all risk for our Kentucky Medicaid contract.
|
•
|
Retail segment premiums increased $8.1 billion, or 16.9%, from 2018 to 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 of 86.4% for 2019 increased 130 basis points from 85.1% in 2018 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, 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, lower than expected medical costs as compared to the assumptions used in the pricing of our individual Medicare Advantage business for 2019, and the impact of a less severe flu season experienced in the first quarter of 2019 compared to that in the first quarter of 2018.
|
•
|
The Retail segment’s benefits expense for 2019 included the beneficial effect of $386 million in favorable prior-year medical claims reserve development versus $398 million in 2018. This favorable prior-year medical claims reserve development decreased the Retail segment benefit ratio by approximately 70 basis points in 2019 versus approximately 80 basis points in 2018.
|
•
|
The Retail segment operating cost ratio of 9.4% for 2019 decreased 170 basis points from 11.1% in 2018 primarily 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 cost efficiencies in 2019 driven by previously implemented productivity initiatives. These improvements were partially offset by the strategic investments in our integrated care delivery model, the impact of higher compensation expense accruals in 2019 for the AIP as a result of our continued strong performance, and increased spending associated with the Medicare AEP.
|
•
|
The non-deductible health insurance industry fee increased the operating cost ratio by approximately 190 basis points in 2018.
|
|
|
|
|
Change
|
||||||||
|
|
2019
|
|
2018
|
|
Members
|
|
Percentage
|
||||
Membership:
|
|
|
|
|
|
|
|
|
||||
Medical membership:
|
|
|
|
|
|
|
|
|
||||
Fully-insured commercial group
|
|
908,600
|
|
|
1,004,700
|
|
|
(96,100
|
)
|
|
(9.6
|
)%
|
ASO
|
|
529,200
|
|
|
481,900
|
|
|
47,300
|
|
|
9.8
|
%
|
Military services
|
|
5,984,300
|
|
|
5,928,600
|
|
|
55,700
|
|
|
0.9
|
%
|
Total group medical members
|
|
7,422,100
|
|
|
7,415,200
|
|
|
6,900
|
|
|
0.1
|
%
|
Specialty membership (a)
|
|
5,425,900
|
|
|
6,072,300
|
|
|
(646,400
|
)
|
|
(10.6
|
)%
|
(a)
|
Specialty products include dental, vision, and other supplemental health products. Members included in these products may not be unique to each product since members have the ability to enroll in multiple products.
|
|
|
|
|
Change
|
|||||||||||
|
|
2019
|
|
2018
|
|
Dollars
|
|
Percentage
|
|||||||
|
|
(in millions)
|
|
|
|||||||||||
Premiums and Services Revenue:
|
|
|
|
|
|
|
|
|
|||||||
Premiums:
|
|
|
|
|
|
|
|
|
|||||||
Fully-insured commercial group
|
|
$
|
5,123
|
|
|
$
|
5,444
|
|
|
$
|
(321
|
)
|
|
(5.9
|
)%
|
Specialty
|
|
1,571
|
|
|
1,359
|
|
|
212
|
|
|
15.6
|
%
|
|||
Total premiums
|
|
6,694
|
|
|
6,803
|
|
|
(109
|
)
|
|
(1.6
|
)%
|
|||
Services
|
|
790
|
|
|
835
|
|
|
(45
|
)
|
|
(5.4
|
)%
|
|||
Total premiums and services revenue
|
|
$
|
7,484
|
|
|
$
|
7,638
|
|
|
$
|
(154
|
)
|
|
(2.0
|
)%
|
Segment earnings
|
|
$
|
28
|
|
|
$
|
361
|
|
|
$
|
(333
|
)
|
|
(92.2
|
)%
|
Benefit ratio
|
|
86.0
|
%
|
|
79.7
|
%
|
|
|
|
6.3
|
%
|
||||
Operating cost ratio
|
|
22.0
|
%
|
|
23.6
|
%
|
|
|
|
(1.6
|
)%
|
•
|
Group and Specialty segment earnings were $28 million in 2019, a decrease of $333 million, or 92.2%, from $361 million in 2018 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 96,100 members, or 9.6% from 1,004,700 members as of December 31, 2018 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 59% at December 31, 2019 and 61% at December 31, 2018.
|
•
|
Group ASO commercial medical membership increased 47,300 members, or 9.8%, from 481,900 members as of December 31, 2018 to 529,200 members as of December 31, 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
|
•
|
Military services membership increased 55,700 members, or 0.9%, from 5,928,600 members as of December 31, 2018 to 5,984,300 members as of December 31, 2019. Membership includes military service members, retirees, and their families to whom we provide healthcare services under the current T2017 TRICARE East Region contract. The current contract, which covers thirty-two states, became effective on January 1, 2018.
|
•
|
Specialty membership decreased 646,400 members, or 10.6%, from 6,072,300 as of December 31, 2018 to 5,425,900 members as of December 31, 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 decreased $109 million, or 1.6%, from $6.8 billion in 2018 to $6.7 billion in 2019, primarily due to a decline in our fully-insured group commercial and specialty membership as well as the exit of our voluntary benefit and financial protection products in connection with the sale of KMG in 2018. These decreases were partially offset by higher stop-loss revenues related to our level-funded ASO accounts resulting from membership growth in this product and higher per member premiums across the fully-insured business.
|
•
|
Group and Specialty segment services revenue decreased $45 million, or 5.4%, from 2018 to 2019 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 630 basis points from 79.7% in 2018 to 86.0% in 2019 primarily due to the impact of the continued migration of fully-insured group members to level-funded ASO products in 2019 resulting in a membership mix transformation, the suspension of the health insurance industry fee in 2019 which was contemplated in the pricing and benefit design of our products, and unfavorable prior-year medical claims reserve development driven by provider settlements. The benefit ratio was further negatively impacted by adjustments to dental network contracted rates resulting from dental network recontracting and expansion to position the business for the future.
|
•
|
The Group and Specialty segment’s benefits expense included the unfavorable effect of $50 million in prior-year medical claims reserve development in 2019 versus the beneficial effect of $46 million in favorable prior-year medical claims reserve development in 2018. This unfavorable prior-year medical claims reserve development increased the Group and Specialty segment benefit ratio by approximately 70 basis points in 2019 while the favorable prior-year medical claims reserve development decreased the Group and Specialty segment benefit ratio by approximately 70 basis points in 2018.
|
•
|
The Group and Specialty segment operating cost ratio of 22.0% for 2019 decreased 160 basis points from 23.6% for 2018, primarily due to the suspension of the health insurance industry fee in 2019, significant operating cost efficiencies in 2019 driven by previously implemented productivity initiatives, as well as 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. These improvements were offset by the higher compensation expense accruals in 2019 for the AIP as a result of our continued strong consolidated performance.
|
•
|
The non-deductible health insurance industry fee increased the operating cost ratio by approximately 160 basis points in 2018.
|
|
|
|
|
Change
|
|||||||||||
|
|
2019
|
|
2018
|
|
Dollars
|
|
Percentage
|
|||||||
|
|
(in millions)
|
|
|
|||||||||||
Revenues:
|
|
|
|
|
|
|
|
|
|||||||
Services:
|
|
|
|
|
|
|
|
|
|||||||
Clinical care services
|
|
$
|
140
|
|
|
$
|
176
|
|
|
$
|
(36
|
)
|
|
(20.5
|
)%
|
Pharmacy solutions
|
|
186
|
|
|
203
|
|
|
(17
|
)
|
|
(8.4
|
)%
|
|||
Provider services
|
|
306
|
|
|
228
|
|
|
78
|
|
|
34.2
|
%
|
|||
Total services revenues
|
|
632
|
|
|
607
|
|
|
25
|
|
|
4.1
|
%
|
|||
Intersegment revenues:
|
|
|
|
|
|
|
|
|
|||||||
Pharmacy solutions
|
|
22,189
|
|
|
20,514
|
|
|
1,675
|
|
|
8.2
|
%
|
|||
Provider services
|
|
2,344
|
|
|
1,994
|
|
|
350
|
|
|
17.6
|
%
|
|||
Clinical care services
|
|
616
|
|
|
662
|
|
|
(46
|
)
|
|
(6.9
|
)%
|
|||
Total intersegment revenues
|
|
25,149
|
|
|
23,170
|
|
|
1,979
|
|
|
8.5
|
%
|
|||
Total services and intersegment revenues
|
|
$
|
25,781
|
|
|
23,777
|
|
|
$
|
2,004
|
|
|
8.4
|
%
|
|
Segment earnings
|
|
$
|
789
|
|
|
$
|
754
|
|
|
$
|
35
|
|
|
4.6
|
%
|
Operating cost ratio
|
|
96.4
|
%
|
|
96.3
|
%
|
|
|
|
0.1
|
%
|
•
|
Healthcare Services segment earnings were $789 million in 2019, an increase of $35 million, or 4.6%, from 2018. This increase primarily was due to higher earnings from our pharmacy operations and clinical operations, and higher earnings from Kindred at Home operations. These factors were partially offset by additional investments in new clinical assets associated with our provider services business.
|
•
|
Humana Pharmacy Solutions® script volumes for the Retail and Group and Specialty segment membership increased to approximately 456 million in 2019, up 3.6% versus scripts of approximately 440 million in 2018. The increase primarily reflects growth associated with higher Medicare Advantage and state-based contracts membership, partially offset by the decline in stand-alone PDP membership.
|
•
|
Services revenue increased $25 million, or 4.1%, from 2018 to $632 million for 2019 primarily due to revenue growth from our provider services business.
|
•
|
Intersegment revenues increased $1.98 billion, or 8.5%, from 2018 to $25 billion for 2019 primarily due to strong Medicare Advantage membership growth, partially offset by the loss of intersegment revenues associated with the decline in stand-alone PDP membership. Intersegment revenues in 2019 were further impacted by higher revenues associated with our provider services business reflecting the previously disclosed acquisitions of MCCI and FPG.
|
•
|
The Healthcare Services segment operating cost ratio of 96.4% for 2019 was relatively unchanged from 96.3% for 2018.
|
|
2019
|
|
2018
|
|
2017
|
||||||
|
(in millions)
|
||||||||||
Net cash provided by operating activities
|
$
|
5,284
|
|
|
$
|
2,173
|
|
|
$
|
4,051
|
|
Net cash used in investing activities
|
(1,278
|
)
|
|
(3,087
|
)
|
|
(2,941
|
)
|
|||
Net cash used in financing activities
|
(2,295
|
)
|
|
(785
|
)
|
|
(945
|
)
|
|||
Increase (decrease) in cash and cash equivalents
|
$
|
1,711
|
|
|
$
|
(1,699
|
)
|
|
$
|
165
|
|
|
|
|
|
|
|
|
Change
|
||||||||||||
|
2019
|
|
2018
|
|
2017
|
|
2019
|
|
2018
|
||||||||||
|
(in millions)
|
||||||||||||||||||
IBNR (1)
|
$
|
4,150
|
|
|
$
|
3,361
|
|
|
$
|
3,154
|
|
|
$
|
789
|
|
|
$
|
207
|
|
Reported claims in process (2)
|
628
|
|
|
617
|
|
|
614
|
|
|
11
|
|
|
3
|
|
|||||
Other benefits payable (3)
|
1,226
|
|
|
884
|
|
|
900
|
|
|
342
|
|
|
(16
|
)
|
|||||
Total benefits payable
|
$
|
6,004
|
|
|
$
|
4,862
|
|
|
$
|
4,668
|
|
|
1,142
|
|
|
194
|
|
||
Payables from disposition
|
|
|
|
|
|
|
|
|
|
58
|
|
||||||||
Change in benefits payable per cash
flow statement resulting in cash from operations |
|
|
|
|
|
|
$
|
1,142
|
|
|
$
|
252
|
|
(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 include amounts owed to providers under capitated and risk sharing arrangements.
|
|
|
|
|
|
|
|
Change
|
||||||||||||
|
2019
|
|
2018
|
|
2017
|
|
2019
|
|
2018
|
||||||||||
|
(in millions)
|
||||||||||||||||||
Medicare
|
$
|
835
|
|
|
$
|
836
|
|
|
$
|
511
|
|
|
$
|
(1
|
)
|
|
$
|
325
|
|
Commercial and other
|
162
|
|
|
135
|
|
|
273
|
|
|
27
|
|
|
(138
|
)
|
|||||
Military services
|
128
|
|
|
123
|
|
|
166
|
|
|
5
|
|
|
(43
|
)
|
|||||
Allowance for doubtful accounts
|
(69
|
)
|
|
(79
|
)
|
|
(96
|
)
|
|
10
|
|
|
17
|
|
|||||
Total net receivables
|
$
|
1,056
|
|
|
$
|
1,015
|
|
|
$
|
854
|
|
|
41
|
|
|
161
|
|
||
Reconciliation to cash flow statement:
|
|
|
|
|
|
|
|
|
|
||||||||||
Change in receivables from acquisition
|
|
|
|
|
|
|
(12
|
)
|
|
—
|
|
||||||||
Change in receivables disposed from sale of
business |
|
|
|
|
|
|
3
|
|
|
3
|
|
||||||||
Change in receivables per cash flow statement
resulting in cash used by operations |
|
|
|
|
|
|
$
|
32
|
|
|
$
|
164
|
|
|
|
Payments Due by Period
|
||||||||||||||||||
|
|
Total
|
|
Less than
1 Year |
|
1-3 Years
|
|
3-5 Years
|
|
More than
5 Years |
||||||||||
|
|
(in millions)
|
||||||||||||||||||
Debt
|
|
$
|
5,700
|
|
|
$
|
700
|
|
|
$
|
1,000
|
|
|
$
|
600
|
|
|
$
|
3,400
|
|
Interest (1)
|
|
3,348
|
|
|
226
|
|
|
418
|
|
|
349
|
|
|
2,355
|
|
|||||
Operating leases (2)
|
|
501
|
|
|
133
|
|
|
215
|
|
|
83
|
|
|
70
|
|
|||||
Purchase obligations (3)
|
|
2,503
|
|
|
922
|
|
|
1,136
|
|
|
346
|
|
|
99
|
|
|||||
Future policy benefits payable and other long-term liabilities (4)
|
|
478
|
|
|
26
|
|
|
226
|
|
|
65
|
|
|
161
|
|
|||||
Total
|
|
$
|
12,530
|
|
|
$
|
2,007
|
|
|
$
|
2,995
|
|
|
$
|
1,443
|
|
|
$
|
6,085
|
|
(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 10 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, 2019
|
|
Percentage
of Total
|
|
December 31, 2018
|
|
Percentage
of Total
|
||||||
|
(dollars in millions)
|
||||||||||||
IBNR
|
$
|
4,150
|
|
|
69.1
|
%
|
|
$
|
3,361
|
|
|
69.1
|
%
|
Reported claims in process
|
628
|
|
|
10.5
|
%
|
|
617
|
|
|
12.7
|
%
|
||
Other benefits payable
|
1,226
|
|
|
20.4
|
%
|
|
884
|
|
|
18.2
|
%
|
||
Total benefits payable
|
$
|
6,004
|
|
|
100.0
|
%
|
|
$
|
4,862
|
|
|
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%
|
|
$(308)
|
|
(3.00)%
|
|
$(270)
|
0.60%
|
|
$(264)
|
|
(2.75)%
|
|
$(248)
|
0.50%
|
|
$(220)
|
|
(2.50)%
|
|
$(225)
|
0.40%
|
|
$(176)
|
|
(2.25)%
|
|
$(203)
|
0.30%
|
|
$(132)
|
|
(2.00)%
|
|
$(180)
|
0.20%
|
|
$(88)
|
|
(1.75)%
|
|
$(158)
|
0.10%
|
|
$(44)
|
|
(1.50)%
|
|
$(135)
|
(a)
|
Reflects estimated potential changes in benefits payable at December 31, 2019 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, 2019 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.
|
|
|
2019
|
|
2018
|
|
2017
|
||||||
|
|
(in millions)
|
||||||||||
Balances at January 1
|
|
$
|
4,862
|
|
|
$
|
4,668
|
|
|
$
|
4,563
|
|
Less: Reinsurance recoverables
|
|
(95
|
)
|
|
(70
|
)
|
|
(76
|
)
|
|||
Balances at January 1, net
|
|
4,767
|
|
|
4,598
|
|
|
4,487
|
|
|||
Incurred related to:
|
|
|
|
|
|
|
||||||
Current year
|
|
54,193
|
|
|
46,385
|
|
|
44,001
|
|
|||
Prior years
|
|
(336
|
)
|
|
(503
|
)
|
|
(483
|
)
|
|||
Total incurred
|
|
53,857
|
|
|
45,882
|
|
|
43,518
|
|
|||
Paid related to:
|
|
|
|
|
|
|
||||||
Current year
|
|
(48,421
|
)
|
|
(41,736
|
)
|
|
(39,496
|
)
|
|||
Prior years
|
|
(4,267
|
)
|
|
(3,977
|
)
|
|
(3,911
|
)
|
|||
Total paid
|
|
(52,688
|
)
|
|
(45,713
|
)
|
|
(43,407
|
)
|
|||
Reinsurance recoverable
|
|
68
|
|
|
95
|
|
|
70
|
|
|||
Balances at December 31
|
|
$
|
6,004
|
|
|
$
|
4,862
|
|
|
$
|
4,668
|
|
|
Favorable Development by Changes in Key Assumptions
|
|||||||||||||||||||
|
2019
|
|
2018
|
|
2017
|
|||||||||||||||
|
Amount
|
|
Factor
Change (a) |
|
Amount
|
|
Factor
Change (a) |
|
Amount
|
|
Factor
Change (a) |
|||||||||
|
(dollars in millions)
|
|||||||||||||||||||
Trend factors
|
$
|
(233
|
)
|
|
(3.1
|
)%
|
|
$
|
(229
|
)
|
|
(3.3
|
)%
|
|
$
|
(279
|
)
|
|
(2.7
|
)%
|
Completion factors
|
(103
|
)
|
|
(0.3
|
)%
|
|
(274
|
)
|
|
(0.8
|
)%
|
|
(204
|
)
|
|
(0.7
|
)%
|
|||
Total
|
$
|
(336
|
)
|
|
|
|
$
|
(503
|
)
|
|
|
|
$
|
(483
|
)
|
|
|
(a)
|
The factor change indicated represents the percentage point change.
|
|
(Favorable) Unfavorable Medical Claims Reserve
Development |
|
Change
|
||||||||||||||||
|
2019
|
|
2018
|
|
2017
|
|
2019
|
|
2018
|
||||||||||
|
(in millions)
|
||||||||||||||||||
Retail Segment
|
$
|
(386
|
)
|
|
$
|
(398
|
)
|
|
$
|
(386
|
)
|
|
$
|
12
|
|
|
$
|
(12
|
)
|
Group and Specialty Segment
|
50
|
|
|
(46
|
)
|
|
(40
|
)
|
|
96
|
|
|
(6
|
)
|
|||||
Individual Commercial Segment
|
—
|
|
|
(57
|
)
|
|
(56
|
)
|
|
57
|
|
|
(1
|
)
|
|||||
Other Businesses
|
—
|
|
|
(2
|
)
|
|
(1
|
)
|
|
2
|
|
|
(1
|
)
|
|||||
Total
|
$
|
(336
|
)
|
|
$
|
(503
|
)
|
|
$
|
(483
|
)
|
|
$
|
167
|
|
|
$
|
(20
|
)
|
|
|
12/31/2019
|
|
Percentage
of Total |
|
12/31/2018
|
|
Percentage
of Total |
||||||
|
|
|
|
|
|
|
|
|
||||||
|
|
(dollars in millions)
|
||||||||||||
U.S. Treasury and other U.S. government corporations and agencies:
|
|
|
|
|
|
|
|
|
||||||
U.S. Treasury and agency obligations
|
|
$
|
354
|
|
|
3.1
|
%
|
|
$
|
417
|
|
|
4.0
|
%
|
Mortgage-backed securities
|
|
3,710
|
|
|
32.6
|
%
|
|
2,544
|
|
|
24.4
|
%
|
||
Tax-exempt municipal securities
|
|
1,463
|
|
|
12.9
|
%
|
|
2,771
|
|
|
26.5
|
%
|
||
Mortgage-backed securities:
|
|
|
|
|
|
|
|
|
||||||
Residential
|
|
—
|
|
|
—
|
%
|
|
55
|
|
|
0.5
|
%
|
||
Commercial
|
|
804
|
|
|
7.1
|
%
|
|
523
|
|
|
5.0
|
%
|
||
Asset-backed securities
|
|
1,093
|
|
|
9.6
|
%
|
|
985
|
|
|
9.4
|
%
|
||
Corporate debt securities
|
|
3,947
|
|
|
34.7
|
%
|
|
3,142
|
|
|
30.2
|
%
|
||
Total debt securities
|
|
$
|
11,371
|
|
|
100.0
|
%
|
|
$
|
10,437
|
|
|
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, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
U.S. Treasury and other U.S. government
corporations and agencies: |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
U.S. Treasury and agency obligations
|
$
|
48
|
|
|
$
|
—
|
|
|
$
|
23
|
|
|
$
|
—
|
|
|
$
|
71
|
|
|
$
|
—
|
|
|
Mortgage-backed securities
|
315
|
|
|
(1
|
)
|
|
204
|
|
|
(2
|
)
|
|
519
|
|
|
(3
|
)
|
|||||||
Tax-exempt municipal securities
|
58
|
|
|
—
|
|
|
75
|
|
|
—
|
|
|
133
|
|
|
—
|
|
|||||||
Mortgage-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Residential
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
Commercial
|
118
|
|
|
—
|
|
|
36
|
|
|
—
|
|
|
154
|
|
|
—
|
|
|||||||
Asset-backed securities
|
20
|
|
|
—
|
|
|
607
|
|
|
(3
|
)
|
|
627
|
|
|
(3
|
)
|
|||||||
Corporate debt securities
|
589
|
|
|
(2
|
)
|
|
155
|
|
|
—
|
|
|
744
|
|
|
(2
|
)
|
|||||||
Total debt securities
|
$
|
1,148
|
|
|
$
|
(3
|
)
|
|
$
|
1,100
|
|
|
$
|
(5
|
)
|
|
$
|
2,248
|
|
|
$
|
(8
|
)
|
|
|
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, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Investment income (a)
|
|
$
|
(150
|
)
|
|
$
|
(133
|
)
|
|
$
|
(79
|
)
|
|
$
|
78
|
|
|
$
|
157
|
|
|
$
|
235
|
|
Interest expense (b)
|
|
10
|
|
|
9
|
|
|
4
|
|
|
(4
|
)
|
|
(9
|
)
|
|
(13
|
)
|
||||||
Pretax
|
|
$
|
(140
|
)
|
|
$
|
(124
|
)
|
|
$
|
(75
|
)
|
|
$
|
74
|
|
|
$
|
148
|
|
|
$
|
222
|
|
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
|
|
(a)
|
As of December 31, 2019 and 2018, some of our investments had interest rates below 2% so the assumed hypothetical change in pretax earnings does not reflect the full 2% point reduction.
|
(b)
|
The interest rate under our senior notes is fixed. There were no borrowings outstanding under the credit agreement at December 31, 2019 or December 31, 2018. There was $300 million and $645 million outstanding under our commercial paper program at December 31, 2019 and 2018, respectively. As of December 31, 2019, our interest rate under our commercial paper program was less than 3% so the assumed hypothetical change in pretax earnings does not reflect the full 3% point reduction.
|
|
December 31,
|
||||||
|
2019
|
|
2018
|
||||
|
(in millions, except
share amounts)
|
||||||
ASSETS
|
|
|
|
||||
Current assets:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
4,054
|
|
|
$
|
2,343
|
|
Investment securities
|
10,972
|
|
|
10,026
|
|
||
Receivables, less allowance for doubtful accounts
of $69 in 2019 and $79 in 2018 |
1,056
|
|
|
1,015
|
|
||
Other current assets
|
3,806
|
|
|
3,564
|
|
||
Total current assets
|
19,888
|
|
|
16,948
|
|
||
Property and equipment, net
|
1,955
|
|
|
1,735
|
|
||
Long-term investment securities
|
406
|
|
|
411
|
|
||
Goodwill
|
3,928
|
|
|
3,897
|
|
||
Equity method investment in Kindred at Home
|
1,063
|
|
|
1,047
|
|
||
Other long-term assets
|
1,834
|
|
|
1,375
|
|
||
Total assets
|
$
|
29,074
|
|
|
$
|
25,413
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
||||
Current liabilities:
|
|
|
|
||||
Benefits payable
|
$
|
6,004
|
|
|
$
|
4,862
|
|
Trade accounts payable and accrued expenses
|
3,754
|
|
|
3,067
|
|
||
Book overdraft
|
225
|
|
|
171
|
|
||
Unearned revenues
|
247
|
|
|
283
|
|
||
Short-term debt
|
699
|
|
|
1,694
|
|
||
Total current liabilities
|
10,929
|
|
|
10,077
|
|
||
Long-term debt
|
4,967
|
|
|
4,375
|
|
||
Future policy benefits payable
|
206
|
|
|
219
|
|
||
Other long-term liabilities
|
935
|
|
|
581
|
|
||
Total liabilities
|
17,037
|
|
|
15,252
|
|
||
Commitments and contingencies (Note 17)
|
|
|
|
||||
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;
198,629,992 shares issued at December 31, 2019 and 198,594,841 shares issued at December 31, 2018 |
33
|
|
|
33
|
|
||
Capital in excess of par value
|
2,820
|
|
|
2,535
|
|
||
Retained earnings
|
17,483
|
|
|
15,072
|
|
||
Accumulated other comprehensive income (loss)
|
156
|
|
|
(159
|
)
|
||
Treasury stock, at cost, 66,524,771 shares at December 31, 2019
and 63,028,169 shares at December 31, 2018 |
(8,455
|
)
|
|
(7,320
|
)
|
||
Total stockholders’ equity
|
12,037
|
|
|
10,161
|
|
||
Total liabilities and stockholders’ equity
|
$
|
29,074
|
|
|
$
|
25,413
|
|
|
For the year ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
|
(in millions, except per share results)
|
||||||||||
Revenues:
|
|
|
|
|
|
||||||
Premiums
|
$
|
62,948
|
|
|
$
|
54,941
|
|
|
$
|
52,380
|
|
Services
|
1,439
|
|
|
1,457
|
|
|
982
|
|
|||
Investment income
|
501
|
|
|
514
|
|
|
405
|
|
|||
Total revenues
|
64,888
|
|
|
56,912
|
|
|
53,767
|
|
|||
Operating expenses:
|
|
|
|
|
|
||||||
Benefits
|
53,857
|
|
|
45,882
|
|
|
43,496
|
|
|||
Operating costs
|
7,381
|
|
|
7,525
|
|
|
6,567
|
|
|||
Merger termination fee and related costs, net
|
—
|
|
|
—
|
|
|
(936
|
)
|
|||
Depreciation and amortization
|
458
|
|
|
405
|
|
|
378
|
|
|||
Total operating expenses
|
61,696
|
|
|
53,812
|
|
|
49,505
|
|
|||
Income from operations
|
3,192
|
|
|
3,100
|
|
|
4,262
|
|
|||
Loss on sale of business
|
—
|
|
|
786
|
|
|
—
|
|
|||
Interest expense
|
242
|
|
|
218
|
|
|
242
|
|
|||
Other (income) expense, net
|
(506
|
)
|
|
33
|
|
|
—
|
|
|||
Income before income taxes and equity in net earnings
|
3,456
|
|
|
2,063
|
|
|
4,020
|
|
|||
Provision for income taxes
|
763
|
|
|
391
|
|
|
1,572
|
|
|||
Equity in net earnings of Kindred at Home
|
14
|
|
|
11
|
|
|
—
|
|
|||
Net income
|
$
|
2,707
|
|
|
$
|
1,683
|
|
|
$
|
2,448
|
|
Basic earnings per common share
|
$
|
20.20
|
|
|
$
|
12.24
|
|
|
$
|
16.94
|
|
Diluted earnings per common share
|
$
|
20.10
|
|
|
$
|
12.16
|
|
|
$
|
16.81
|
|
|
For the year ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
|
(in millions)
|
||||||||||
Net income
|
$
|
2,707
|
|
|
$
|
1,683
|
|
|
$
|
2,448
|
|
Other comprehensive income (loss):
|
|
|
|
|
|
||||||
Change in gross unrealized investment losses/gains
|
450
|
|
|
(189
|
)
|
|
149
|
|
|||
Effect of income taxes
|
(105
|
)
|
|
51
|
|
|
(55
|
)
|
|||
Total change in unrealized investment
gains/losses, net of tax |
345
|
|
|
(138
|
)
|
|
94
|
|
|||
Reclassification adjustment for net realized
gains included in investment income |
(34
|
)
|
|
(53
|
)
|
|
(14
|
)
|
|||
Effect of income taxes
|
8
|
|
|
17
|
|
|
5
|
|
|||
Total reclassification adjustment, net of tax
|
(26
|
)
|
|
(36
|
)
|
|
(9
|
)
|
|||
Other comprehensive income (loss), net of tax
|
319
|
|
|
(174
|
)
|
|
85
|
|
|||
Comprehensive income attributable to our equity method
investment in Kindred at Home |
(4
|
)
|
|
(4
|
)
|
|
—
|
|
|||
Comprehensive income
|
$
|
3,022
|
|
|
$
|
1,505
|
|
|
$
|
2,533
|
|
|
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, 2017
|
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
|
|
||||||
Net income
|
|
|
|
|
|
|
2,707
|
|
|
|
|
|
|
2,707
|
|
|||||||||||
Other comprehensive income
|
|
|
|
|
|
|
|
|
|
315
|
|
|
|
|
315
|
|
||||||||||
Common stock repurchases
|
|
|
|
|
150
|
|
|
|
|
|
|
(1,220
|
)
|
|
(1,070
|
)
|
||||||||||
Dividends and dividend
equivalents |
|
|
|
|
—
|
|
|
(296
|
)
|
|
|
|
|
|
(296
|
)
|
||||||||||
Stock-based compensation
|
|
|
|
|
163
|
|
|
|
|
|
|
|
|
163
|
|
|||||||||||
Restricted stock unit vesting
|
32
|
|
|
—
|
|
|
(48
|
)
|
|
|
|
|
|
48
|
|
|
—
|
|
||||||||
Stock option exercises
|
3
|
|
|
—
|
|
|
20
|
|
|
|
|
|
|
37
|
|
|
57
|
|
||||||||
Balances, December 31, 2019
|
198,630
|
|
|
$
|
33
|
|
|
$
|
2,820
|
|
|
$
|
17,483
|
|
|
$
|
156
|
|
|
$
|
(8,455
|
)
|
|
$
|
12,037
|
|
|
For the year ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
|
(in millions)
|
||||||||||
Cash flows from operating activities
|
|
|
|
|
|
||||||
Net income
|
$
|
2,707
|
|
|
$
|
1,683
|
|
|
$
|
2,448
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
||||||
Loss on sale of business
|
—
|
|
|
786
|
|
|
—
|
|
|||
Net realized capital gains
|
(62
|
)
|
|
(90
|
)
|
|
(14
|
)
|
|||
Equity in net earnings of Kindred at Home
|
(14
|
)
|
|
(11
|
)
|
|
—
|
|
|||
Stock compensation
|
163
|
|
|
137
|
|
|
157
|
|
|||
Depreciation
|
505
|
|
|
444
|
|
|
410
|
|
|||
Amortization
|
70
|
|
|
90
|
|
|
75
|
|
|||
Provision for deferred income taxes
|
162
|
|
|
194
|
|
|
132
|
|
|||
Changes in operating assets and liabilities, net of effect of businesses acquired and dispositions:
|
|
|
|
|
|
||||||
Receivables
|
(32
|
)
|
|
(164
|
)
|
|
426
|
|
|||
Other assets
|
118
|
|
|
(484
|
)
|
|
(582
|
)
|
|||
Benefits payable
|
1,142
|
|
|
252
|
|
|
105
|
|
|||
Other liabilities
|
471
|
|
|
(676
|
)
|
|
641
|
|
|||
Unearned revenues
|
(36
|
)
|
|
(95
|
)
|
|
98
|
|
|||
Other
|
90
|
|
|
107
|
|
|
155
|
|
|||
Net cash provided by operating activities
|
5,284
|
|
|
2,173
|
|
|
4,051
|
|
|||
Cash flows from investing activities
|
|
|
|
|
|
||||||
Acquisitions, net of cash acquired
|
—
|
|
|
(354
|
)
|
|
(31
|
)
|
|||
Purchase of equity method investment in Kindred at Home
|
—
|
|
|
(1,095
|
)
|
|
—
|
|
|||
Cash transferred in sale of business
|
—
|
|
|
(805
|
)
|
|
—
|
|
|||
Purchases of property and equipment
|
(736
|
)
|
|
(612
|
)
|
|
(524
|
)
|
|||
Purchases of investment securities
|
(6,361
|
)
|
|
(4,687
|
)
|
|
(6,265
|
)
|
|||
Maturities of investment securities
|
1,733
|
|
|
972
|
|
|
1,111
|
|
|||
Proceeds from sales of investment securities
|
4,086
|
|
|
3,494
|
|
|
2,768
|
|
|||
Net cash used in investing activities
|
(1,278
|
)
|
|
(3,087
|
)
|
|
(2,941
|
)
|
|||
Cash flows from financing activities
|
|
|
|
|
|
|
|
|
|||
(Receipts) withdrawals from contract deposits, net
|
(623
|
)
|
|
(640
|
)
|
|
1,823
|
|
|||
Proceeds from issuance of senior notes, net
|
987
|
|
|
—
|
|
|
1,779
|
|
|||
(Repayments) proceeds from issuance of commercial paper, net
|
(360
|
)
|
|
485
|
|
|
(153
|
)
|
|||
Proceeds from term loan
|
—
|
|
|
1,000
|
|
|
—
|
|
|||
Repayment of term loan
|
(650
|
)
|
|
(350
|
)
|
|
—
|
|
|||
Repayment of long-term debt
|
(400
|
)
|
|
—
|
|
|
(800
|
)
|
|||
Common stock repurchases
|
(1,070
|
)
|
|
(1,090
|
)
|
|
(3,365
|
)
|
|||
Dividends paid
|
(291
|
)
|
|
(265
|
)
|
|
(220
|
)
|
|||
Change in book overdraft
|
54
|
|
|
30
|
|
|
(71
|
)
|
|||
Proceeds from stock option exercises & other
|
58
|
|
|
45
|
|
|
62
|
|
|||
Net cash used in financing activities
|
(2,295
|
)
|
|
(785
|
)
|
|
(945
|
)
|
|||
Increase (decrease) in cash and cash equivalents
|
1,711
|
|
|
(1,699
|
)
|
|
165
|
|
|||
Cash and cash equivalents at beginning of period
|
2,343
|
|
|
4,042
|
|
|
3,877
|
|
|||
Cash and cash equivalents at end of period
|
$
|
4,054
|
|
|
$
|
2,343
|
|
|
$
|
4,042
|
|
|
For the year ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
Supplemental cash flow disclosures:
|
(in millions)
|
||||||||||
Interest payments
|
$
|
212
|
|
|
$
|
195
|
|
|
$
|
216
|
|
Income tax payments, net
|
$
|
518
|
|
|
$
|
631
|
|
|
$
|
1,498
|
|
Details of businesses acquired in purchase transactions:
|
|
|
|
|
|
||||||
Fair value of assets acquired, net of cash acquired
|
$
|
28
|
|
|
$
|
392
|
|
|
$
|
31
|
|
Less: Fair value of liabilities assumed
|
(28
|
)
|
|
(38
|
)
|
|
—
|
|
|||
Cash paid for acquired businesses, net of cash acquired
|
$
|
—
|
|
|
$
|
354
|
|
|
$
|
31
|
|
|
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 sheets
|
December 31, 2019
|
December 31, 2018
|
||||
|
(in millions)
|
|||||
Current assets
|
$
|
563
|
|
$
|
536
|
|
Non-current assets
|
4,967
|
|
4,955
|
|
||
Current liabilities
|
405
|
|
351
|
|
||
Non-current liabilities
|
2,637
|
|
2,708
|
|
||
Shareholders' equity
|
2,488
|
|
2,432
|
|
||
|
|
|
||||
Statements of income
|
|
|
||||
|
For the year ended December 31, 2019
|
July 2, 2018 through December 31, 2018
|
||||
|
(in millions)
|
|||||
Revenues
|
$
|
3,100
|
|
$
|
1,587
|
|
Expenses
|
2,835
|
|
1,451
|
|
||
Net income
|
54
|
|
27
|
|
|
Amortized
Cost |
|
Gross
Unrealized Gains |
|
Gross
Unrealized Losses |
|
Fair
Value |
||||||||
|
(in millions)
|
||||||||||||||
December 31, 2019
|
|
|
|
|
|
|
|
||||||||
U.S. Treasury and other U.S. government
corporations and agencies: |
|
|
|
|
|
|
|
||||||||
U.S. Treasury and agency obligations
|
$
|
353
|
|
|
$
|
1
|
|
|
$
|
—
|
|
|
$
|
354
|
|
Mortgage-backed securities
|
3,628
|
|
|
85
|
|
|
(3
|
)
|
|
3,710
|
|
||||
Tax-exempt municipal securities
|
1,433
|
|
|
30
|
|
|
—
|
|
|
1,463
|
|
||||
Mortgage-backed securities:
|
|
|
|
|
|
|
|
||||||||
Commercial
|
786
|
|
|
18
|
|
|
—
|
|
|
804
|
|
||||
Asset-backed securities
|
1,093
|
|
|
3
|
|
|
(3
|
)
|
|
1,093
|
|
||||
Corporate debt securities
|
3,867
|
|
|
82
|
|
|
(2
|
)
|
|
3,947
|
|
||||
Total debt securities
|
$
|
11,160
|
|
|
$
|
219
|
|
|
$
|
(8
|
)
|
|
$
|
11,371
|
|
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
|
|
|
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, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
U.S. Treasury and other U.S. government
corporations and agencies: |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
U.S. Treasury and agency obligations
|
$
|
48
|
|
|
$
|
—
|
|
|
$
|
23
|
|
|
$
|
—
|
|
|
$
|
71
|
|
|
$
|
—
|
|
|
Mortgage-backed securities
|
315
|
|
|
(1
|
)
|
|
204
|
|
|
(2
|
)
|
|
519
|
|
|
(3
|
)
|
|||||||
Tax-exempt municipal securities
|
58
|
|
|
—
|
|
|
75
|
|
|
—
|
|
|
133
|
|
|
—
|
|
|||||||
Mortgage-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Commercial
|
118
|
|
|
—
|
|
|
36
|
|
|
—
|
|
|
154
|
|
|
—
|
|
|||||||
Asset-backed securities
|
20
|
|
|
—
|
|
|
607
|
|
|
(3
|
)
|
|
627
|
|
|
(3
|
)
|
|||||||
Corporate debt securities
|
589
|
|
|
(2
|
)
|
|
155
|
|
|
—
|
|
|
744
|
|
|
(2
|
)
|
|||||||
Total debt securities
|
$
|
1,148
|
|
|
$
|
(3
|
)
|
|
$
|
1,100
|
|
|
$
|
(5
|
)
|
|
$
|
2,248
|
|
|
$
|
(8
|
)
|
|
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
|
)
|
|
2019
|
|
2018
|
|
2017
|
||||||
|
(in millions)
|
||||||||||
Gross realized gains
|
$
|
129
|
|
|
$
|
106
|
|
|
$
|
35
|
|
Gross realized losses
|
(67
|
)
|
|
(16
|
)
|
|
(21
|
)
|
|||
Net realized capital gains
|
$
|
62
|
|
|
$
|
90
|
|
|
$
|
14
|
|
|
Amortized
Cost |
|
Fair
Value |
||||
|
(in millions)
|
||||||
Due within one year
|
$
|
1,316
|
|
|
$
|
1,317
|
|
Due after one year through five years
|
1,974
|
|
|
2,013
|
|
||
Due after five years through ten years
|
1,724
|
|
|
1,780
|
|
||
Due after ten years
|
639
|
|
|
654
|
|
||
Mortgage and asset-backed securities
|
5,507
|
|
|
5,607
|
|
||
Total debt securities
|
$
|
11,160
|
|
|
$
|
11,371
|
|
|
|
|
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, 2019
|
|
|
|
|
|
|
|
||||||||
Cash equivalents
|
$
|
3,660
|
|
|
$
|
3,660
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Debt securities:
|
|
|
|
|
|
|
|
||||||||
U.S. Treasury and other U.S. government corporations and agencies:
|
|
|
|
|
|
|
|
||||||||
U.S. Treasury and agency obligations
|
354
|
|
|
—
|
|
|
354
|
|
|
—
|
|
||||
Mortgage-backed securities
|
3,710
|
|
|
—
|
|
|
3,710
|
|
|
—
|
|
||||
Tax-exempt municipal securities
|
1,463
|
|
|
—
|
|
|
1,463
|
|
|
—
|
|
||||
Mortgage-backed securities:
|
|
|
|
|
|
|
|
||||||||
Commercial
|
804
|
|
|
—
|
|
|
804
|
|
|
—
|
|
||||
Asset-backed securities
|
1,093
|
|
|
—
|
|
|
1,093
|
|
|
—
|
|
||||
Corporate debt securities
|
3,947
|
|
|
—
|
|
|
3,947
|
|
|
—
|
|
||||
Total debt securities
|
11,371
|
|
|
—
|
|
|
11,371
|
|
|
—
|
|
||||
Common stock
|
7
|
|
|
7
|
|
|
—
|
|
|
—
|
|
||||
Total invested assets
|
$
|
15,038
|
|
|
$
|
3,667
|
|
|
$
|
11,371
|
|
|
$
|
—
|
|
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
|
|
|
$
|
—
|
|
|
|
2019
|
|
2018
|
||||||||||||
|
|
Risk
Corridor Settlement |
|
CMS
Subsidies/ Discounts |
|
Risk
Corridor Settlement |
|
CMS
Subsidies/ Discounts |
||||||||
|
|
(in millions)
|
||||||||||||||
Other current assets
|
|
$
|
5
|
|
|
$
|
585
|
|
|
$
|
15
|
|
|
$
|
172
|
|
Trade accounts payable and accrued expenses
|
|
(120
|
)
|
|
(356
|
)
|
|
(103
|
)
|
|
(503
|
)
|
||||
Net current (liability) asset
|
|
(115
|
)
|
|
229
|
|
|
(88
|
)
|
|
(331
|
)
|
||||
Other long-term assets
|
|
6
|
|
|
—
|
|
|
7
|
|
|
—
|
|
||||
Other long-term liabilities
|
|
(61
|
)
|
|
—
|
|
|
(89
|
)
|
|
—
|
|
||||
Net long-term liability
|
|
(55
|
)
|
|
—
|
|
|
(82
|
)
|
|
—
|
|
||||
Total net (liability) asset
|
|
$
|
(170
|
)
|
|
$
|
229
|
|
|
$
|
(170
|
)
|
|
$
|
(331
|
)
|
|
|
2019
|
|
2018
|
||||
|
|
(in millions)
|
||||||
Land
|
|
$
|
20
|
|
|
$
|
20
|
|
Buildings and leasehold improvements
|
|
874
|
|
|
766
|
|
||
Equipment
|
|
922
|
|
|
890
|
|
||
Computer software
|
|
2,799
|
|
|
2,372
|
|
||
|
|
4,615
|
|
|
4,048
|
|
||
Accumulated depreciation
|
|
(2,660
|
)
|
|
(2,313
|
)
|
||
Property and equipment, net
|
|
$
|
1,955
|
|
|
$
|
1,735
|
|
|
|
Retail
|
|
Group and Specialty
|
|
Healthcare Services
|
|
Total
|
||||||||
|
|
(in millions)
|
||||||||||||||
Balance at January 1, 2018
|
|
$
|
1,059
|
|
|
$
|
261
|
|
|
$
|
1,961
|
|
|
$
|
3,281
|
|
Acquisitions
|
|
476
|
|
|
—
|
|
|
140
|
|
|
616
|
|
||||
Balance at December 31, 2018
|
|
1,535
|
|
|
261
|
|
|
2,101
|
|
|
3,897
|
|
||||
Acquisitions
|
|
—
|
|
|
—
|
|
|
31
|
|
|
31
|
|
||||
Balance at December 31, 2019
|
|
$
|
1,535
|
|
|
$
|
261
|
|
|
$
|
2,132
|
|
|
$
|
3,928
|
|
|
|
Weighted
Average Life |
|
2019
|
|
2018
|
||||||||||||||||||||
|
|
Cost
|
|
Accumulated
Amortization |
|
Net
|
|
Cost
|
|
Accumulated
Amortization |
|
Net
|
||||||||||||||
|
|
|
|
(in millions)
|
||||||||||||||||||||||
Other intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Customer contracts/relationships
|
|
8.7 years
|
|
$
|
646
|
|
|
$
|
496
|
|
|
$
|
150
|
|
|
$
|
646
|
|
|
$
|
434
|
|
|
$
|
212
|
|
Trade names and technology
|
|
6.4 years
|
|
84
|
|
|
84
|
|
|
—
|
|
|
84
|
|
|
83
|
|
|
1
|
|
||||||
Provider contracts
|
|
11.8 years
|
|
70
|
|
|
44
|
|
|
26
|
|
|
68
|
|
|
37
|
|
|
31
|
|
||||||
Noncompetes and other
|
|
7.3 years
|
|
29
|
|
|
28
|
|
|
1
|
|
|
29
|
|
|
28
|
|
|
1
|
|
||||||
Total other intangible assets
|
|
8.7 years
|
|
$
|
829
|
|
|
$
|
652
|
|
|
$
|
177
|
|
|
$
|
827
|
|
|
$
|
582
|
|
|
$
|
245
|
|
Maturity of Lease Liabilities
|
|
December 31, 2019
|
||
|
|
(in millions)
|
||
2020
|
|
$
|
133
|
|
2021
|
|
117
|
|
|
2022
|
|
97
|
|
|
2023
|
|
52
|
|
|
2024
|
|
31
|
|
|
After 2024
|
|
70
|
|
|
Total lease payments
|
|
500
|
|
|
Less: Interest
|
|
52
|
|
|
Present value of lease liabilities
|
|
$
|
448
|
|
|
2018
|
|
2017
|
||||
|
(in millions)
|
||||||
Rent expense
|
$
|
167
|
|
|
$
|
204
|
|
Sublease rental income
|
(32
|
)
|
|
(33
|
)
|
||
Net rent expense
|
$
|
135
|
|
|
$
|
171
|
|
|
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
|
|
|
|
2019
|
|
2018
|
|
2017
|
||||||
|
|
(in millions)
|
||||||||||
Balances at January 1
|
|
$
|
4,862
|
|
|
$
|
4,668
|
|
|
$
|
4,563
|
|
Less: Reinsurance recoverables
|
|
(95
|
)
|
|
(70
|
)
|
|
(76
|
)
|
|||
Balances at January 1, net
|
|
4,767
|
|
|
4,598
|
|
|
4,487
|
|
|||
Incurred related to:
|
|
|
|
|
|
|
||||||
Current year
|
|
54,193
|
|
|
46,385
|
|
|
44,001
|
|
|||
Prior years
|
|
(336
|
)
|
|
(503
|
)
|
|
(483
|
)
|
|||
Total incurred
|
|
53,857
|
|
|
45,882
|
|
|
43,518
|
|
|||
Paid related to:
|
|
|
|
|
|
|
||||||
Current year
|
|
(48,421
|
)
|
|
(41,736
|
)
|
|
(39,496
|
)
|
|||
Prior years
|
|
(4,267
|
)
|
|
(3,977
|
)
|
|
(3,911
|
)
|
|||
Total paid
|
|
(52,688
|
)
|
|
(45,713
|
)
|
|
(43,407
|
)
|
|||
Reinsurance recoverable
|
|
68
|
|
|
95
|
|
|
70
|
|
|||
Balances at December 31
|
|
$
|
6,004
|
|
|
$
|
4,862
|
|
|
$
|
4,668
|
|
|
(Favorable) Unfavorable Medical Claims Reserve
Development |
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
|
|
||||||||||
Retail Segment
|
$
|
(386
|
)
|
|
$
|
(398
|
)
|
|
$
|
(386
|
)
|
Group and Specialty Segment
|
50
|
|
|
(46
|
)
|
|
(40
|
)
|
|||
Individual Commercial Segment
|
—
|
|
|
(57
|
)
|
|
(56
|
)
|
|||
Other Businesses
|
—
|
|
|
(2
|
)
|
|
(1
|
)
|
|||
Total
|
$
|
(336
|
)
|
|
$
|
(503
|
)
|
|
$
|
(483
|
)
|
|
|
2019
|
|
2018
|
|
2017
|
||||||
|
|
(in millions)
|
||||||||||
Balances at January 1
|
|
$
|
4,338
|
|
|
$
|
3,963
|
|
|
$
|
3,506
|
|
Less: Reinsurance recoverables
|
|
(95
|
)
|
|
(70
|
)
|
|
(76
|
)
|
|||
Balances at January 1, net
|
|
4,243
|
|
|
3,893
|
|
|
3,430
|
|
|||
Incurred related to:
|
|
|
|
|
|
|
||||||
Current year
|
|
48,983
|
|
|
41,323
|
|
|
38,604
|
|
|||
Prior years
|
|
(386
|
)
|
|
(398
|
)
|
|
(386
|
)
|
|||
Total incurred
|
|
48,597
|
|
|
40,925
|
|
|
38,218
|
|
|||
Paid related to:
|
|
|
|
|
|
|
||||||
Current year
|
|
(43,831
|
)
|
|
(37,189
|
)
|
|
(34,781
|
)
|
|||
Prior years
|
|
(3,714
|
)
|
|
(3,386
|
)
|
|
(2,974
|
)
|
|||
Total paid
|
|
(47,545
|
)
|
|
(40,575
|
)
|
|
(37,755
|
)
|
|||
Reinsurance recoverable
|
|
68
|
|
|
95
|
|
|
70
|
|
|||
Balances at December 31
|
|
$
|
5,363
|
|
|
$
|
4,338
|
|
|
$
|
3,963
|
|
|
|
Incurred Claims, Net of Reinsurance
|
||||||||||
|
|
For the Years Ended December 31,
|
||||||||||
Claims Incurred Year
|
|
2017
Unaudited |
|
2018
Unaudited |
|
2019
|
||||||
|
|
(in millions)
|
||||||||||
2017
|
|
$
|
38,604
|
|
|
$
|
38,341
|
|
|
$
|
38,310
|
|
2018
|
|
|
|
41,323
|
|
|
40,984
|
|
||||
2019
|
|
|
|
|
|
48,983
|
|
|||||
Total
|
|
|
|
|
|
$
|
128,277
|
|
|
|
Cumulative Paid Claims, Net of Reinsurance
|
||||||||||
|
|
For the Years Ended December 31,
|
||||||||||
Claims Incurred Year
|
|
2017
Unaudited |
|
2018
Unaudited |
|
2019
|
||||||
|
|
(in millions)
|
||||||||||
2017
|
|
$
|
34,781
|
|
|
$
|
38,232
|
|
|
$
|
38,310
|
|
2018
|
|
|
|
37,189
|
|
|
40,841
|
|
||||
2019
|
|
|
|
|
|
43,831
|
|
|||||
Total
|
|
|
|
|
|
$
|
122,982
|
|
||||
All outstanding benefit liabilities before 2017, net of reinsurance
|
|
N/A
|
|
|||||||||
Benefits payable, net of reinsurance
|
|
$
|
5,295
|
|
|
|
2019
|
|
2018
|
|
2017
|
||||||
|
|
(in millions)
|
||||||||||
Balances at January 1
|
|
$
|
517
|
|
|
$
|
568
|
|
|
$
|
579
|
|
Incurred related to:
|
|
|
|
|
|
|
||||||
Current year
|
|
5,708
|
|
|
5,466
|
|
|
5,403
|
|
|||
Prior years
|
|
50
|
|
|
(46
|
)
|
|
(40
|
)
|
|||
Total incurred
|
|
5,758
|
|
|
5,420
|
|
|
5,363
|
|
|||
Paid related to:
|
|
|
|
|
|
|
||||||
Current year
|
|
(5,081
|
)
|
|
(4,957
|
)
|
|
(4,843
|
)
|
|||
Prior years
|
|
(553
|
)
|
|
(514
|
)
|
|
(531
|
)
|
|||
Total paid
|
|
(5,634
|
)
|
|
(5,471
|
)
|
|
(5,374
|
)
|
|||
Balances at December 31
|
|
$
|
641
|
|
|
$
|
517
|
|
|
$
|
568
|
|
|
|
Incurred Claims, Net of Reinsurance
|
||||||||||
|
|
For the Years Ended December 31,
|
||||||||||
Claims Incurred Year
|
|
2017
Unaudited |
|
2018
Unaudited |
|
2019
|
||||||
|
|
(in millions)
|
||||||||||
2017
|
|
$
|
5,403
|
|
|
$
|
5,358
|
|
|
$
|
5,372
|
|
2018
|
|
|
|
5,466
|
|
|
5,501
|
|
||||
2019
|
|
|
|
|
|
5,708
|
|
|||||
Total
|
|
|
|
|
|
$
|
16,581
|
|
|
|
Cumulative Paid Claims, Net of Reinsurance
|
||||||||||
|
|
For the Years Ended December 31,
|
||||||||||
Claims Incurred Year
|
|
2017
Unaudited |
|
2018
Unaudited |
|
2019
|
||||||
|
|
(in millions)
|
||||||||||
2017
|
|
$
|
4,843
|
|
|
$
|
5,351
|
|
|
$
|
5,372
|
|
2018
|
|
|
|
4,957
|
|
|
5,487
|
|
||||
2019
|
|
|
|
|
|
5,081
|
|
|||||
Total
|
|
|
|
|
|
|
$
|
15,940
|
|
|||
All outstanding benefit liabilities before 2017, net of reinsurance
|
|
N/A
|
|
|||||||||
Benefits payable, net of reinsurance
|
|
$
|
641
|
|
|
December 31,
2019 |
||
Net outstanding liabilities
|
|
||
Retail
|
$
|
5,295
|
|
Group and Specialty
|
641
|
|
|
Benefits payable, net of reinsurance
|
5,936
|
|
|
Reinsurance recoverable on unpaid claims
|
|
||
Retail
|
68
|
|
|
Total benefits payable, gross
|
$
|
6,004
|
|
|
2019
|
|
2018
|
|
2017
|
||||||
|
(in millions)
|
||||||||||
Current provision:
|
|
|
|
|
|
||||||
Federal
|
$
|
560
|
|
|
$
|
139
|
|
|
$
|
1,324
|
|
States and Puerto Rico
|
41
|
|
|
58
|
|
|
116
|
|
|||
Total current provision
|
601
|
|
|
197
|
|
|
1,440
|
|
|||
Deferred expense
|
162
|
|
|
194
|
|
|
132
|
|
|||
Provision for income taxes
|
$
|
763
|
|
|
$
|
391
|
|
|
$
|
1,572
|
|
|
2019
|
|
2018
|
|
2017
|
||||||
|
(in millions)
|
||||||||||
Income tax provision at federal statutory rate
|
$
|
729
|
|
|
$
|
436
|
|
|
$
|
1,407
|
|
States, net of federal benefit, and Puerto Rico
|
49
|
|
|
42
|
|
|
80
|
|
|||
Tax exempt investment income
|
(6
|
)
|
|
(11
|
)
|
|
(22
|
)
|
|||
Health insurance industry fee
|
—
|
|
|
243
|
|
|
—
|
|
|||
Nondeductible executive compensation
|
25
|
|
|
17
|
|
|
36
|
|
|||
Tax reform
|
—
|
|
|
(39
|
)
|
|
133
|
|
|||
KMG sale
|
—
|
|
|
(272
|
)
|
|
—
|
|
|||
Other, net
|
(34
|
)
|
|
(25
|
)
|
|
(62
|
)
|
|||
Provision for income taxes
|
$
|
763
|
|
|
$
|
391
|
|
|
$
|
1,572
|
|
|
Assets (Liabilities)
|
||||||
|
2019
|
|
2018
|
||||
|
(in millions)
|
||||||
Compensation and other accrued expense
|
$
|
111
|
|
|
$
|
89
|
|
Benefits payable
|
89
|
|
|
79
|
|
||
Net operating loss carryforward
|
42
|
|
|
38
|
|
||
Deferred acquisition costs
|
22
|
|
|
17
|
|
||
Unearned revenues
|
8
|
|
|
9
|
|
||
Other
|
8
|
|
|
8
|
|
||
Capital loss carryforward
|
1
|
|
|
15
|
|
||
Investment securities
|
—
|
|
|
44
|
|
||
Total deferred income tax assets
|
281
|
|
|
299
|
|
||
Valuation allowance
|
(45
|
)
|
|
(54
|
)
|
||
Total deferred income tax assets, net of valuation allowance
|
236
|
|
|
245
|
|
||
Depreciable property and intangible assets
|
(329
|
)
|
|
(273
|
)
|
||
Investment securities
|
(181
|
)
|
|
—
|
|
||
Prepaid expenses
|
(64
|
)
|
|
(52
|
)
|
||
Future policy benefits payable
|
(3
|
)
|
|
(5
|
)
|
||
Total deferred income tax liabilities
|
(577
|
)
|
|
(330
|
)
|
||
Total net deferred income tax liabilities
|
$
|
(341
|
)
|
|
$
|
(85
|
)
|
|
2019
|
|
2018
|
||||
|
(in millions)
|
||||||
Short-term debt:
|
|
||||||
Commercial paper
|
$
|
300
|
|
|
$
|
645
|
|
Term note
|
—
|
|
|
650
|
|
||
Senior notes:
|
|
|
|
||||
$400 million, 2.625% due October 1, 2019
|
—
|
|
|
399
|
|
||
$400 million, 2.50% due December 15, 2020
|
399
|
|
|
—
|
|
||
Total short-term debt
|
$
|
699
|
|
|
$
|
1,694
|
|
|
|
||||||
Long-term debt:
|
|
||||||
Senior notes:
|
|
||||||
$400 million, 2.50% due December 15, 2020
|
$
|
—
|
|
|
$
|
398
|
|
$600 million, 3.15% due December 1, 2022
|
598
|
|
|
596
|
|
||
$400 million, 2.90% due December 15, 2022
|
397
|
|
|
396
|
|
||
$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
|
$
|
4,967
|
|
|
$
|
4,375
|
|
For the years ending December 31,
|
(in millions)
|
||
2020
|
$
|
700
|
|
2021
|
—
|
|
|
2022
|
1,000
|
|
|
2023
|
—
|
|
|
2024
|
600
|
|
|
Thereafter
|
3,400
|
|
|
2019
|
|
2018
|
|
2017
|
||||||
|
(in millions)
|
||||||||||
Stock-based compensation expense by type:
|
|
|
|
|
|
||||||
Restricted stock
|
$
|
152
|
|
|
$
|
124
|
|
|
$
|
145
|
|
Stock options
|
11
|
|
|
13
|
|
|
12
|
|
|||
Total stock-based compensation expense
|
163
|
|
|
137
|
|
|
157
|
|
|||
Tax benefit recognized
|
(35
|
)
|
|
(21
|
)
|
|
(32
|
)
|
|||
Stock-based compensation expense, net of tax
|
$
|
128
|
|
|
$
|
116
|
|
|
$
|
125
|
|
|
Shares
|
|
Weighted-
Average Grant-Date Fair Value |
|||
|
(shares in thousands)
|
|||||
Nonvested restricted stock at December 31, 2018
|
964
|
|
|
$
|
213.99
|
|
Granted
|
503
|
|
|
302.09
|
|
|
Vested
|
(421
|
)
|
|
239.42
|
|
|
Forfeited
|
(70
|
)
|
|
269.06
|
|
|
Nonvested restricted stock at December 31, 2019
|
976
|
|
|
$
|
245.21
|
|
|
2019
|
|
2018
|
|
2017
|
||||||
Weighted-average fair value at grant date
|
$
|
68.53
|
|
|
$
|
63.67
|
|
|
$
|
49.81
|
|
Expected option life (years)
|
4.1 years
|
|
|
4.1 years
|
|
|
4.1 years
|
|
|||
Expected volatility
|
25.5
|
%
|
|
26.1
|
%
|
|
27.1
|
%
|
|||
Risk-free interest rate at grant date
|
2.4
|
%
|
|
2.5
|
%
|
|
2.0
|
%
|
|||
Dividend yield
|
0.7
|
%
|
|
0.7
|
%
|
|
0.7
|
%
|
|
Shares Under
Option |
|
Weighted-Average
Exercise Price |
|||
|
(shares in thousands)
|
|||||
Options outstanding at December 31, 2018
|
677
|
|
|
$
|
213.17
|
|
Granted
|
121
|
|
|
304.59
|
|
|
Exercised
|
(305
|
)
|
|
189.24
|
|
|
Forfeited
|
—
|
|
|
—
|
|
|
Options outstanding at December 31, 2019
|
493
|
|
|
$
|
250.46
|
|
Options exercisable at December 31, 2019
|
109
|
|
|
$
|
216.49
|
|
|
2019
|
|
2018
|
|
2017
|
||||||
|
(dollars in millions, except per
common share results, number of shares/options in thousands) |
||||||||||
Net income available for common stockholders
|
$
|
2,707
|
|
|
$
|
1,683
|
|
|
$
|
2,448
|
|
Weighted-average outstanding shares of common stock used to
compute basic earnings per common share |
134,055
|
|
|
137,486
|
|
|
144,493
|
|
|||
Dilutive effect of:
|
|
|
|
|
|
||||||
Employee stock options
|
107
|
|
|
194
|
|
|
172
|
|
|||
Restricted stock
|
565
|
|
|
723
|
|
|
920
|
|
|||
Shares used to compute diluted earnings per common share
|
134,727
|
|
|
138,403
|
|
|
145,585
|
|
|||
Basic earnings per common share
|
$
|
20.20
|
|
|
$
|
12.24
|
|
|
$
|
16.94
|
|
Diluted earnings per common share
|
$
|
20.10
|
|
|
$
|
12.16
|
|
|
$
|
16.81
|
|
Number of antidilutive stock options and restricted stock awards
excluded from computation |
478
|
|
|
223
|
|
|
539
|
|
Payment
Date |
|
Amount
per Share |
|
Total
Amount |
|
|
|
|
(in millions)
|
2017
|
|
$1.49
|
|
$216
|
2018
|
|
$1.90
|
|
$262
|
2019
|
|
$2.15
|
|
$289
|
|
|
|
|
|
||||||||||||||||||||
|
|
|
|
2019
|
|
2018
|
|
2017
|
||||||||||||||||
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
|
|
|||
July 2019
|
|
3,000
|
|
|
3.40
|
|
|
1,000
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||
Total repurchases
|
|
|
|
3.40
|
|
|
$
|
1,000
|
|
|
3.07
|
|
|
$
|
1,024
|
|
|
12.99
|
|
|
$
|
3,050
|
|
|
Retail
|
|
Group and Specialty
|
|
Healthcare Services
|
|
Eliminations/
Corporate |
|
Consolidated
|
||||||||||
|
(in millions)
|
||||||||||||||||||
2019
|
|
|
|
|
|
|
|
|
|
||||||||||
External revenues
|
|
|
|
|
|
|
|
|
|
||||||||||
Premiums:
|
|
|
|
|
|
|
|
|
|
||||||||||
Individual Medicare Advantage
|
$
|
43,128
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
43,128
|
|
Group Medicare Advantage
|
6,475
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
6,475
|
|
|||||
Medicare stand-alone PDP
|
3,165
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,165
|
|
|||||
Total Medicare
|
52,768
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
52,768
|
|
|||||
Fully-insured
|
588
|
|
|
5,123
|
|
|
—
|
|
|
—
|
|
|
5,711
|
|
|||||
Specialty
|
—
|
|
|
1,571
|
|
|
—
|
|
|
—
|
|
|
1,571
|
|
|||||
Medicaid and other
|
2,898
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,898
|
|
|||||
Total premiums
|
56,254
|
|
|
6,694
|
|
|
—
|
|
|
—
|
|
|
62,948
|
|
|||||
Services revenue:
|
|
|
|
|
|
|
|
|
|
||||||||||
Provider
|
—
|
|
|
—
|
|
|
446
|
|
|
—
|
|
|
446
|
|
|||||
ASO and other
|
17
|
|
|
790
|
|
|
—
|
|
|
—
|
|
|
807
|
|
|||||
Pharmacy
|
—
|
|
|
—
|
|
|
186
|
|
|
—
|
|
|
186
|
|
|||||
Total services revenue
|
17
|
|
|
790
|
|
|
632
|
|
|
—
|
|
|
1,439
|
|
|||||
Total external revenues
|
56,271
|
|
|
7,484
|
|
|
632
|
|
|
—
|
|
|
64,387
|
|
|||||
Intersegment revenues
|
|
|
|
|
|
|
|
|
|
||||||||||
Services
|
—
|
|
|
18
|
|
|
18,255
|
|
|
(18,273
|
)
|
|
—
|
|
|||||
Products
|
—
|
|
|
—
|
|
|
6,894
|
|
|
(6,894
|
)
|
|
—
|
|
|||||
Total intersegment revenues
|
—
|
|
|
18
|
|
|
25,149
|
|
|
(25,167
|
)
|
|
—
|
|
|||||
Investment income
|
195
|
|
|
23
|
|
|
2
|
|
|
281
|
|
|
501
|
|
|||||
Total revenues
|
56,466
|
|
|
7,525
|
|
|
25,783
|
|
|
(24,886
|
)
|
|
64,888
|
|
|||||
Operating expenses:
|
|
|
|
|
|
|
|
|
|
||||||||||
Benefits
|
48,602
|
|
|
5,758
|
|
|
—
|
|
|
(503
|
)
|
|
53,857
|
|
|||||
Operating costs
|
5,306
|
|
|
1,651
|
|
|
24,852
|
|
|
(24,428
|
)
|
|
7,381
|
|
|||||
Depreciation and amortization
|
323
|
|
|
88
|
|
|
156
|
|
|
(109
|
)
|
|
458
|
|
|||||
Total operating expenses
|
54,231
|
|
|
7,497
|
|
|
25,008
|
|
|
(25,040
|
)
|
|
61,696
|
|
|||||
Income from operations
|
2,235
|
|
|
28
|
|
|
775
|
|
|
154
|
|
|
3,192
|
|
|||||
Interest expense
|
—
|
|
|
—
|
|
|
—
|
|
|
242
|
|
|
242
|
|
|||||
Other income, net
|
—
|
|
|
—
|
|
|
—
|
|
|
(506
|
)
|
|
(506
|
)
|
|||||
Income before income taxes and equity in net earnings
|
2,235
|
|
|
28
|
|
|
775
|
|
|
418
|
|
|
3,456
|
|
|||||
Equity in net earnings of Kindred at Home
|
—
|
|
|
—
|
|
|
14
|
|
|
—
|
|
|
14
|
|
|||||
Segment earnings
|
$
|
2,235
|
|
|
$
|
28
|
|
|
$
|
789
|
|
|
$
|
418
|
|
|
$
|
3,470
|
|
|
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 net 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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
External revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
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 external revenues
|
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 net 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
|
|
|
2019
|
||||||||||||||
|
First
|
|
Second
|
|
Third
|
|
Fourth
|
||||||||
|
(in millions, except per share results)
|
||||||||||||||
Total revenues
|
$
|
16,107
|
|
|
$
|
16,245
|
|
|
$
|
16,241
|
|
|
$
|
16,295
|
|
Income before income taxes and equity in net earnings
|
746
|
|
|
1,229
|
|
|
888
|
|
|
593
|
|
||||
Net income
|
566
|
|
|
940
|
|
|
689
|
|
|
512
|
|
||||
Basic earnings per common share (1)
|
$
|
4.18
|
|
|
$
|
6.96
|
|
|
$
|
5.16
|
|
|
$
|
3.87
|
|
Diluted earnings per common share (1)
|
$
|
4.16
|
|
|
$
|
6.94
|
|
|
$
|
5.14
|
|
|
$
|
3.84
|
|
|
|
|
|
|
|
|
|
||||||||
|
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 (1)
|
$
|
3.56
|
|
|
$
|
1.40
|
|
|
$
|
4.68
|
|
|
$
|
2.60
|
|
Diluted earnings per common share (1)
|
$
|
3.53
|
|
|
$
|
1.39
|
|
|
$
|
4.65
|
|
|
$
|
2.58
|
|
(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.
|
•
|
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)
|
493,723
|
|
|
$
|
250.460
|
|
|
19,627,620
|
|
|
(2)(3)(4)
|
Equity compensation plans not approved
by security holders
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
Total
|
493,723
|
|
|
$
|
250.460
|
|
|
19,627,620
|
|
|
|
(1)
|
The above table does not include awards of shares of restricted stock or restricted stock units. For information concerning these awards, see Note 14.
|
(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)
|
The Humana Inc. Amended and Restated Stock Incentive Plan was approved by stockholders at the Annual Meeting held on April 18, 2019. On May 1, 2019, 16 million shares were registered with the Securities and Exchange Commission on Form S-8.
|
(4)
|
Of the number listed above, 6,388,331 (1,672,918 from the 2011 Plan and 4,715,413 from the Amended and Restated Plan) can be issued as restricted stock at December 31, 2019 (giving effect to the provision that one restricted share is equivalent to 2.29 stock options in the 2011 Plan and 3.35 stock options in the Amended and Restated 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).
|
|
|
|
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).
|
|
|
|
(d)
|
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 13 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).
|
|
|
|
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).
|
|
|
|
Fourteenth Supplemental Indenture, dated August 15, 2019, 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 August 15, 2019).
|
|
|
|
Fifteenth Supplemental Indenture, dated August 15, 2019, 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 August 15, 2019).
|
|
|
|
|
Description of Securities.
|
|
|
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).
|
|
|
|
Humana Inc. Executive Incentive Compensation Plan, as amended and restated January 1, 2020 (incorporated herein by reference to Exhibit 10.1 to Humana Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2019.
|
|
|
|
(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).
|
|
|
|
Humana Inc. Executive Severance Policy, effective as of March 1, 2019 (incorporated herein by reference to Exhibit 10(f) to Humana Inc.’s Annual Report on Form 10-K filed on February 21, 2019).
|
|
|
|
Humana Inc. Deferred Compensation Plan (incorporated herein by reference to Exhibit 4.1 to the Company’s Registration Statement on Form S-8 (Reg. No. 333-171616), filed on January 7, 2011).
|
|
|
|
101
|
The following materials from Humana Inc.'s Annual Report on Form 10-K formatted in iXBRL (Inline Extensible Business Reporting Language): (i) the Consolidated Balance Sheets at December 31, 2019 and 2018; (ii) the Consolidated Statements of Income for the years ended December 31, 2019, 2018 and 2017; (iii) the Consolidated Statements of Comprehensive Income for the years ended December 31, 2019, 2018 and 2017; (iv) the Consolidated Statements of Stockholders’ Equity as of December 31, 2019, 2018, and 2017; (v) the Consolidated Statements of Cash Flows for the years ended December 31, 2019, 2018 and 2017; and (vi) Notes to 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.
|
|
December 31,
|
||||||
|
2019
|
|
2018
|
||||
|
(in millions, except share
amounts) |
||||||
ASSETS
|
|
|
|
||||
Current assets:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
1,006
|
|
|
$
|
265
|
|
Investment securities
|
355
|
|
|
313
|
|
||
Receivable from operating subsidiaries
|
1,248
|
|
|
1,306
|
|
||
Other current assets
|
778
|
|
|
628
|
|
||
Total current assets
|
3,387
|
|
|
2,512
|
|
||
Property and equipment, net
|
1,403
|
|
|
1,209
|
|
||
Investments in subsidiaries
|
14,763
|
|
|
16,951
|
|
||
Equity method investment in Kindred at Home
|
1,063
|
|
|
1,047
|
|
||
Other long-term assets
|
778
|
|
|
359
|
|
||
Total assets
|
$
|
21,394
|
|
|
$
|
22,078
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
||||
Current liabilities:
|
|
|
|
||||
Payable to operating subsidiaries
|
$
|
1,975
|
|
|
$
|
4,487
|
|
Current portion of notes payable to operating subsidiaries
|
36
|
|
|
28
|
|
||
Book overdraft
|
40
|
|
|
38
|
|
||
Short-term debt
|
699
|
|
|
1,694
|
|
||
Other current liabilities
|
1,128
|
|
|
791
|
|
||
Total current liabilities
|
3,878
|
|
|
7,038
|
|
||
Long-term debt
|
4,967
|
|
|
4,375
|
|
||
Other long-term liabilities
|
512
|
|
|
504
|
|
||
Total liabilities
|
9,357
|
|
|
11,917
|
|
||
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;
198,629,992 shares issued at December 31, 2019 and 198,594,841 shares issued at December 31, 2018 |
33
|
|
|
33
|
|
||
Capital in excess of par value
|
2,820
|
|
|
2,535
|
|
||
Retained earnings
|
17,483
|
|
|
15,072
|
|
||
Accumulated other comprehensive income (loss)
|
156
|
|
|
(159
|
)
|
||
Treasury stock, at cost, 66,524,771 shares at December 31, 2019
and 63,028,169 shares at December 31, 2018 |
(8,455
|
)
|
|
(7,320
|
)
|
||
Total stockholders’ equity
|
12,037
|
|
|
10,161
|
|
||
Total liabilities and stockholders’ equity
|
$
|
21,394
|
|
|
$
|
22,078
|
|
|
For the year ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
|
(in millions)
|
||||||||||
Revenues:
|
|
|
|
|
|
||||||
Management fees charged to operating subsidiaries
|
$
|
1,789
|
|
|
$
|
1,666
|
|
|
$
|
1,864
|
|
Investment and other income, net
|
28
|
|
|
30
|
|
|
57
|
|
|||
|
1,817
|
|
|
1,696
|
|
|
1,921
|
|
|||
Expenses:
|
|
|
|
|
|
||||||
Operating costs
|
1,578
|
|
|
1,468
|
|
|
1,801
|
|
|||
Merger termination fee and related costs, net
|
—
|
|
|
—
|
|
|
(936
|
)
|
|||
Depreciation
|
387
|
|
|
342
|
|
|
332
|
|
|||
Interest
|
242
|
|
|
218
|
|
|
243
|
|
|||
|
2,207
|
|
|
2,028
|
|
|
1,440
|
|
|||
Other (income) expense, net
|
(507
|
)
|
|
33
|
|
|
—
|
|
|||
Loss on sale of business
|
—
|
|
|
782
|
|
|
—
|
|
|||
Income (loss) before income taxes and equity in net earnings of subsidiaries
|
117
|
|
|
(1,147
|
)
|
|
481
|
|
|||
Provision (benefit) for income taxes
|
27
|
|
|
(542
|
)
|
|
61
|
|
|||
Income (loss) before equity in net earnings of subsidiaries
|
90
|
|
|
(605
|
)
|
|
420
|
|
|||
Equity in net earnings of subsidiaries
|
2,603
|
|
|
2,277
|
|
|
2,028
|
|
|||
Equity in net earnings of Kindred at Home
|
14
|
|
|
11
|
|
|
—
|
|
|||
Net income
|
$
|
2,707
|
|
|
$
|
1,683
|
|
|
$
|
2,448
|
|
|
For the year ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
|
(in millions)
|
||||||||||
Net income
|
$
|
2,707
|
|
|
$
|
1,683
|
|
|
$
|
2,448
|
|
Other comprehensive income (loss):
|
|
|
|
|
|
||||||
Change in gross unrealized investment losses/gains
|
450
|
|
|
(189
|
)
|
|
149
|
|
|||
Effect of income taxes
|
(105
|
)
|
|
51
|
|
|
(55
|
)
|
|||
Total change in unrealized investment
gains/losses, net of tax |
345
|
|
|
(138
|
)
|
|
94
|
|
|||
Reclassification adjustment for net realized
gains included in investment income |
(34
|
)
|
|
(53
|
)
|
|
(14
|
)
|
|||
Effect of income taxes
|
8
|
|
|
17
|
|
|
5
|
|
|||
Total reclassification adjustment, net of tax
|
(26
|
)
|
|
(36
|
)
|
|
(9
|
)
|
|||
Other comprehensive income (loss), net of tax
|
319
|
|
|
(174
|
)
|
|
85
|
|
|||
Comprehensive income attributable to our equity method
investment in Kindred at Home |
(4
|
)
|
|
(4
|
)
|
|
—
|
|
|||
Comprehensive income
|
$
|
3,022
|
|
|
$
|
1,505
|
|
|
$
|
2,533
|
|
|
For the year ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
|
(in millions)
|
||||||||||
Net cash provided by operating activities
|
$
|
3,529
|
|
|
$
|
2,719
|
|
|
$
|
2,423
|
|
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
|
(423
|
)
|
|
(697
|
)
|
|
(695
|
)
|
|||
Purchases of investment securities
|
(204
|
)
|
|
(145
|
)
|
|
(53
|
)
|
|||
Proceeds from sale of investment securities
|
15
|
|
|
35
|
|
|
—
|
|
|||
Maturities of investment securities
|
134
|
|
|
59
|
|
|
51
|
|
|||
Purchases of property and equipment, net
|
(585
|
)
|
|
(465
|
)
|
|
(359
|
)
|
|||
Net cash used in investing activities
|
(1,063
|
)
|
|
(2,662
|
)
|
|
(1,056
|
)
|
|||
Cash flows from financing activities:
|
|
|
|
|
|
||||||
Proceeds from issuance of senior notes, net
|
987
|
|
|
—
|
|
|
1,779
|
|
|||
(Repayments) proceeds from issuance of commercial paper, net
|
(360
|
)
|
|
485
|
|
|
(153
|
)
|
|||
Proceeds from term loan
|
—
|
|
|
1,000
|
|
|
—
|
|
|||
Repayment of term loan
|
(650
|
)
|
|
(350
|
)
|
|
—
|
|
|||
Repayment of long-term debt
|
(400
|
)
|
|
—
|
|
|
(800
|
)
|
|||
Change in book overdraft
|
2
|
|
|
(3
|
)
|
|
3
|
|
|||
Common stock repurchases
|
(1,070
|
)
|
|
(1,090
|
)
|
|
(3,365
|
)
|
|||
Dividends paid
|
(291
|
)
|
|
(265
|
)
|
|
(220
|
)
|
|||
Proceeds from stock option exercises and other
|
57
|
|
|
48
|
|
|
62
|
|
|||
Net cash used in financing activities
|
(1,725
|
)
|
|
(175
|
)
|
|
(2,694
|
)
|
|||
Increase (decrease) in cash and cash equivalents
|
741
|
|
|
(118
|
)
|
|
(1,327
|
)
|
|||
Cash and cash equivalents at beginning of year
|
265
|
|
|
383
|
|
|
1,710
|
|
|||
Cash and cash equivalents at end of year
|
$
|
1,006
|
|
|
$
|
265
|
|
|
$
|
383
|
|
|
|
|
|
|
|
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:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
2019
|
|
$
|
79
|
|
|
$
|
—
|
|
|
$
|
(1
|
)
|
|
$
|
—
|
|
|
$
|
(9
|
)
|
|
$
|
69
|
|
2018
|
|
96
|
|
|
—
|
|
|
36
|
|
|
(29
|
)
|
|
(24
|
)
|
|
79
|
|
||||||
2017
|
|
118
|
|
|
—
|
|
|
20
|
|
|
(10
|
)
|
|
(32
|
)
|
|
96
|
|
||||||
Deferred tax asset valuation allowance:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
2019
|
|
(54
|
)
|
|
—
|
|
|
9
|
|
|
—
|
|
|
—
|
|
|
(45
|
)
|
||||||
2018
|
|
(49
|
)
|
|
—
|
|
|
(5
|
)
|
|
—
|
|
|
—
|
|
|
(54
|
)
|
||||||
2017
|
|
(49
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(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.
|
|
HUMANA INC.
|
||
|
|
|
|
|
By:
|
|
/s/ BRIAN A. KANE
|
|
|
|
Brian A. Kane
|
|
|
|
Chief Financial Officer
(Principal Financial Officer)
|
|
|
|
|
|
Date:
|
|
February 20, 2020
|
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
/s/ BRIAN A. KANE
|
|
Chief Financial Officer
(Principal Financial Officer) |
|
February 20, 2020
|
Brian A. Kane
|
|
|
|
|
|
|
|
|
|
/s/ CYNTHIA H. ZIPPERLE
|
|
Senior Vice President and Chief Accounting Officer (Principal Accounting Officer)
|
|
February 20, 2020
|
Cynthia H. Zipperle
|
|
|
|
|
|
|
|
|
|
/s/ BRUCE D. BROUSSARD
|
|
President and Chief Executive Officer,
Director (Principal Executive Officer)
|
|
February 20, 2020
|
Bruce D. Broussard
|
|
|
|
|
|
|
|
|
|
/s/ KURT J. HILZINGER
|
|
Chairman of the Board
|
|
February 20, 2020
|
Kurt J. Hilzinger
|
|
|
|
|
|
|
|
|
|
/s/ FRANK BISIGNANO
|
|
Director
|
|
February 20, 2020
|
Frank Bisignano
|
|
|
|
|
|
|
|
|
|
/s/ FRANK A. D’AMELIO
|
|
Director
|
|
February 20, 2020
|
Frank A. D’Amelio
|
|
|
|
|
|
|
|
|
|
/s/ W. ROY DUNBAR
|
|
Director
|
|
February 20, 2020
|
W. Roy Dunbar
|
|
|
|
|
|
|
|
|
|
/s/ WAYNE A. I. FREDERICK, M.D.
|
|
Director
|
|
February 20, 2020
|
Wayne A. I. Frederick, M.D.
|
|
|
|
|
|
|
|
|
|
/s/ JOHN W. GARRATT
|
|
Director
|
|
February 20, 2020
|
John W. Garratt
|
|
|
|
|
|
|
|
|
|
/s/ DAVID A. JONES, JR.
|
|
Director
|
|
February 20, 2020
|
David A. Jones, Jr.
|
|
|
|
|
|
|
|
|
|
/s/ KAREN W. KATZ
|
|
Director
|
|
February 20, 2020
|
Karen W. Katz
|
|
|
|
|
|
|
|
|
|
/s/ WILLIAM J. MCDONALD
|
|
Director
|
|
February 20, 2020
|
William J. McDonald
|
|
|
|
|
|
|
|
|
|
/s/ JAMES J. O’BRIEN
|
|
Director
|
|
February 20, 2020
|
James J. O’Brien
|
|
|
|
|
|
|
|
|
|
/s/ MARISSA T. PETERSON
|
|
Director
|
|
February 20, 2020
|
Marissa T. Peterson
|
|
|
|
•
|
adopt any agreement for the merger or consolidation of us with or into a related company or an affiliate of a related company;
|
•
|
authorize the sale or lease of all or substantially all of our assets to a related company or affiliate of a related company; or
|
•
|
authorize the sale or lease to us or any of our subsidiaries of any assets of a related company or an affiliate of a related company in exchange for our equity securities.
|
•
|
a “related company” in respect of any given transaction is any company, person or other entity which by itself or together with its affiliates and associates is the beneficial owner, directly or indirectly, of more than 5% of any class of our equity securities as of the record date for the determination of stockholders entitled to vote on such transactions;
|
•
|
an “affiliate” of a related company is any company, person or other entity which, directly or indirectly, through one or more intermediaries, controls or is controlled by, or is under common control with, the related company; and
|
•
|
an “associate” of a related company is any officer, director or beneficial owner, directly or indirectly, of 5% or more of any class of equity securities of such related company or any of its affiliates.
|
1.
|
Humana Employers Health Plan of Georgia, Inc.
|
1.
|
516-526 West Main Street Condominium Council of Co-Owners, Inc.
|
2.
|
CHA HMO, Inc.
|
1.
|
Humana Benefit Plan of South Carolina, Inc.
|
1.
|
Cariten Health Plan Inc.
|
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 20, 2020
|
|
|
|
|
|
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 20, 2020
|
|
|
|
|
|
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) |
|