Aetna Reports Second-Quarter 2017 Results
“Our strong second quarter results speak to our continued focus on disciplined pricing and execution of our targeted growth strategy,” said
“Our core businesses continued to outperform during the second quarter, carrying forward positive momentum from the start of the year,” said
(In millions, except per share data) |
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Second-Quarter 2017 | Full-Year 2017 | |||||||||||||||||
Revenue | Earnings | EPS | Projected EPS(4) | |||||||||||||||
GAAP | $ | 15,523 | $ | 1,203 | $ | 3.60 | |
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Non-GAAP (Adjusted) | $ | 15,498 | $ | 1,145 | $ | 3.42 | |
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Medical Membership totaled 22.1 million at |
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Second-Quarter Financial Results at a Glance | ||||||||||||||
Second-Quarter | ||||||||||||||
(Millions, except per common share data) | 2017 | 2016 | Change | |||||||||||
Total revenue | $ | 15,523 | $ | 15,953 | (3 | )% | ||||||||
Adjusted revenue(3) | 15,498 | 15,898 | (3 | )% | ||||||||||
Net income(1) | 1,203 | 791 | 52 | % | ||||||||||
Adjusted earnings(2) | 1,145 | 783 | 46 | % | ||||||||||
Per share results: | ||||||||||||||
Net income(1) | $ | 3.60 | $ | 2.23 | 61 | % | ||||||||
Adjusted earnings(2) | 3.42 | 2.21 | 55 | % | ||||||||||
Weighted average common shares - diluted | 334.5 | 354.1 | ||||||||||||
Total Company Results
- Net income(1) was
$1.2 billion for second-quarter 2017 compared with$791 million for second-quarter 2016. The significant increase in net income during second-quarter 2017 was primarily due to the increase in adjusted earnings described below and lower transaction and integration-related costs in 2017 compared to 2016. - Adjusted earnings(2) were
$1.1 billion for second-quarter 2017 compared with$783 million for second-quarter 2016. The substantial increase in adjusted earnings during second-quarter 2017 was primarily due to continued strong performance inAetna 's Health Care segment. The increase also reflects a larger decrease inAetna 's estimate of risk adjustment payables for the prior year for its individual and small group ACA compliant products in the second quarter of 2017 compared to the second quarter of 2016. - Total revenue and adjusted revenue(3) were both
$15.5 billion for the second-quarter 2017 and were$16.0 billion and$15.9 billion , respectively, for second-quarter 2016. The decrease in total revenue and adjusted revenue during second-quarter 2017 was primarily due to lower premiums inAetna 's Health Care segment, including lower membership inAetna 's ACA compliant individual and small group products, and the temporary suspension of the health insurer fee ("HIF") in 2017. - Total company expense ratio was 16.4 percent and 17.5 percent for the second quarters of 2017 and 2016, respectively. The adjusted expense ratio(5) was 16.5 percent and 17.1 percent for the second quarters of 2017 and 2016, respectively. The improvement in both ratios during 2017 was primarily due to the temporary suspension of the HIF in 2017 and the execution of
Aetna 's expense management initiatives, partially offset by targeted investment spending onAetna 's growth initiatives. The total company expense ratio also improved due to lower transaction and integration-related costs in second-quarter 2017 compared to 2016. - After-tax net income margin was 7.7 percent and 5.0 percent for second quarters of 2017 and 2016, respectively. The adjusted pre-tax margin(6) was 11.7 percent and 8.9 percent for the second quarters of 2017 and 2016, respectively. The improvement in both second-quarter 2017 ratios was primarily due to continued strong performance in
Aetna 's Health Care segment. The improvement in the adjusted pre-tax margin was partially offset by the negative impact of the temporary suspension of the HIF in 2017. - Total debt to consolidated capitalization ratio(7) was 37.3 percent at
June 30, 2017 compared with 53.6 percent atDecember 31, 2016 . The total debt to consolidated capitalization ratio atJune 30, 2017 reflects the repayment of approximately$11.6 billion aggregate principal amount ofAetna 's senior notes during 2017. - Effective tax rate was 35.0 percent for second-quarter 2017 compared with 41.4 percent for second-quarter 2016. The decrease in
Aetna 's effective tax rate for second-quarter 2017 was primarily due to the temporary suspension of the non-deductible HIF in 2017.
Health Care Segment Results
Health Care, which provides a full range of insured and self-insured medical, pharmacy, dental and behavioral health products and services, reported:
- Income before income taxes(1) of
$1.7 billion for second-quarter 2017 compared with$1.3 billion for second-quarter 2016. Pre-tax adjusted earnings(2) were$1.8 billion for the second-quarter 2017 compared with$1.3 billion for second-quarter 2016. The increase in both income before income taxes and pre-tax adjusted earnings was primarily due to continued strong performance acrossAetna 's core Health Care businesses. The increase also reflectsAetna 's updated estimate of risk adjustment payables for the prior year for individual and small group ACA compliant products described above. - Total revenue and adjusted revenue(3) were both
$14.8 billion for second-quarter 2017 and both$15.2 billion for second-quarter 2016. The decrease in total revenue and adjusted revenue was primarily due to lower membership inAetna 's ACA compliant individual and small group products and the temporary suspension of the HIF in 2017, partially offset by higher premium yields inAetna 's Commercial and Government businesses and membership growth inAetna 's Medicare products. - Medical membership at
June 30, 2017 decreased by 358 thousand compared withMarch 31, 2017 . The decrease primarily reflects declines inAetna 's Medicaid products primarily due to the exit of theMissouri Medicaid program during second-quarter 2017 and declines inAetna 's Commercial Insured products primarily due to lower membership inAetna 's ACA compliant individual and small group products. The decrease was partially offset by increases inAetna 's Commercial ASC and Medicare Insured products. - Medical benefit ratios ("MBRs") for the three and six months ended
June 30, 2017 and 2016 were as follows:
Three Months Ended |
Six Months Ended |
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2017 | 2016 | Change | 2017 | 2016 | Change | |||||||||||||||||||||
Commercial | 78.6 | % | 83.4 | % | (4.8 | ) | pts. | 79.0 | % | 80.6 | % | (1.6 | ) | pts. | ||||||||||||
Government | 81.3 | % | 81.4 | % | (0.1 | ) | pts. | 83.3 | % | 82.4 | % | 0.9 | pts. | |||||||||||||
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80.0 | % | 82.4 | % | (2.4 | ) | pts. | 81.3 | % | 81.5 | % | (0.2 | ) | pts. | ||||||||||||
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Aetna 's second-quarter 2017 Commercial MBR decreased compared with second-quarter 2016 primarily due to improved performance acrossAetna 's core Commercial business. The decrease also reflectsAetna 's updated estimate of risk adjustment payables for the prior year for individual and small group ACA compliant products described above. The decrease was partially offset by the unfavorable impact of the temporary suspension of the HIF in 2017. -
Aetna 's second-quarter 2017 Government MBR remained relatively flat compared with second-quarter 2016 primarily due to improved performance inAetna 's Government business, largely offset by the unfavorable impact of the temporary suspension of the HIF in 2017.
- In second-quarter 2017,
Aetna experienced favorable development of prior-period health care cost estimates in its Medicare, Commercial and Medicaid products, primarily attributable to first-quarter 2017 performance.
- Prior year's health care costs payable estimates developed favorably by
$750 million and$709 million during the first six months of 2017 and 2016, respectively. This development is reported on a basis consistent with the prior years' development reported in the health care costs payable table inAetna 's annual audited financial statements, and does not directly correspond to an increase in 2017 operating results. - Days claims payable(7) was 54 days at
June 30, 2017 , a sequential increase of one day compared toMarch 31, 2017 and a decrease of two days compared withJune 30, 2016 . The year over year decrease was driven by a number of factors, including the operational maturation of new Medicaid contracts, decreased claims processing times and changes in business mix, primarily related to the decline inAetna 's individual Commercial product membership.
Group Insurance Segment Results
- Income before income taxes(1) of
$57 million for second-quarter 2017 compared with$74 million for second-quarter 2016. Pre-tax adjusted earnings(2) were$42 million for second-quarter 2017 compared with$57 million for second-quarter 2016. Income before income taxes and pre-tax adjusted earnings decreased primarily due to lower underwriting margins inAetna 's life products. - Total revenue of
$642 million and$647 million for the second quarters of 2017 and 2016, respectively. Adjusted revenue(3) was$627 million and$630 million for the second quarters of 2017 and 2016, respectively.
Large Case Pensions Segment Results
Large Case Pensions, which manages a variety of discontinued and other retirement and savings products, primarily for qualified pension plans, reported:
- Income before income taxes(1) of
$115 million for second-quarter 2017 compared with$135 million for second-quarter 2016. The decrease in income before income taxes was primarily due to a larger reduction ofAetna 's reserve for anticipated future losses on discontinued products in 2016 compared to 2017. - Pre-tax adjusted earnings(2) were
$3 million for both the second quarters of 2017 and 2016. - Total revenue of
$81 million for second-quarter 2017 compared with$82 million for second-quarter 2016. Adjusted revenue(3) was$78 million for both the second quarters of 2017 and 2016.
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Condensed Consolidated Balance Sheets | ||||||||
(Unaudited) | ||||||||
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(Millions) | 2017 | 2016 | ||||||
Assets: | ||||||||
Cash and short-term investments | $ | 6,508 | $ | 21,042 | ||||
Accounts receivable, net | 5,923 | 4,580 | ||||||
Other current assets | 3,070 | 2,827 | ||||||
Total current assets | 15,501 | 28,449 | ||||||
Long-term investments | 21,953 | 21,833 | ||||||
Other long-term assets | 19,260 | 18,864 | ||||||
Total assets | $ | 56,714 | $ | 69,146 | ||||
Liabilities and shareholders’ equity: | ||||||||
Health care costs payable | $ | 6,246 | $ | 6,558 | ||||
Current portion of long-term debt | 1,997 | 1,634 | ||||||
Other current liabilities | 11,497 | 10,502 | ||||||
Total current liabilities | 19,740 | 18,694 | ||||||
Long-term debt, less current portion | 7,175 | 19,027 | ||||||
Other long-term liabilities | 14,224 | 13,482 | ||||||
Total |
15,404 | 17,881 | ||||||
Non-controlling interests | 171 | 62 | ||||||
Total liabilities and equity | $ | 56,714 | $ | 69,146 | ||||
Consolidated Statements of Income | ||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||
Three Months Ended |
Six Months Ended |
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(Millions) | 2017 | 2016 | 2017 | 2016 | ||||||||||||||||
Revenue: | ||||||||||||||||||||
Health care premiums | $ | 13,223 | $ | 13,629 | $ | 26,442 | $ | 27,098 | ||||||||||||
Other premiums | 552 | 547 | 1,096 | 1,087 | ||||||||||||||||
Fees and other revenue | 1,486 | 1,474 | 2,961 | 2,941 | ||||||||||||||||
Net investment income | 237 | 251 | 497 | 469 | ||||||||||||||||
Net realized capital gains (losses) | 25 | 52 | (308 | ) | 51 | |||||||||||||||
Total revenue | 15,523 | 15,953 | 30,688 | 31,646 | ||||||||||||||||
Benefits and expenses: | ||||||||||||||||||||
Health care costs | 10,577 | 11,232 | 21,493 | 22,080 | ||||||||||||||||
Current and future benefits | 539 | 525 | 1,084 | 1,054 | ||||||||||||||||
Operating expenses: | ||||||||||||||||||||
Selling expenses | 402 | 416 | 823 | 837 | ||||||||||||||||
General and administrative expenses | 2,150 | 2,368 | 5,582 | 4,810 | ||||||||||||||||
Total operating expenses | 2,552 | 2,784 | 6,405 | 5,647 | ||||||||||||||||
Interest expense | 86 | 123 | 259 | 225 | ||||||||||||||||
Amortization of other acquired intangible assets | 58 | 64 | 118 | 126 | ||||||||||||||||
Loss on early extinguishment of long-term debt | — | — | 246 | — | ||||||||||||||||
Reduction of reserve for anticipated future losses on discontinued products | (109 | ) | (128 | ) | (109 | ) | (128 | ) | ||||||||||||
Total benefits and expenses | 13,703 | 14,600 | 29,496 | 29,004 | ||||||||||||||||
Income before income taxes | 1,820 | 1,353 | 1,192 | 2,642 | ||||||||||||||||
Income tax expense | 637 | 560 | 389 | 1,111 | ||||||||||||||||
Net income including non-controlling interests | 1,183 | 793 | 803 | 1,531 | ||||||||||||||||
Less: Net (loss) income attributable to non-controlling interests | (20 | ) | 2 | (19 | ) | 3 | ||||||||||||||
Net income attributable to |
$ | 1,203 | $ | 791 | $ | 822 | $ | 1,528 | ||||||||||||
Consolidated Statements of Cash Flows | ||||||||||||
(Unaudited) | ||||||||||||
Six Months Ended |
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(Millions) | 2017 | 2016 | ||||||||||
Cash flows from operating activities: | ||||||||||||
Net income including non-controlling interests | $ | 803 | $ | 1,531 | ||||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||
Net realized capital losses (gains) | 308 | (51 | ) | |||||||||
Depreciation and amortization | 339 | 343 | ||||||||||
Debt fair value amortization | (10 | ) | (15 | ) | ||||||||
Equity in earnings of affiliates, net | (60 | ) | (2 | ) | ||||||||
Stock-based compensation expense | 94 | 101 | ||||||||||
Reduction of reserve for anticipated future losses on discontinued products | (109 | ) | (128 | ) | ||||||||
Amortization of net investment premium | 37 | 39 | ||||||||||
Loss on early extinguishment of long-term debt | 246 | — | ||||||||||
Changes in assets and liabilities: | ||||||||||||
Premiums due and other receivables | (1,335 | ) | (1,215 | ) | ||||||||
Income taxes | (222 | ) | 418 | |||||||||
Other assets and other liabilities | (432 | ) | 470 | |||||||||
Health care and insurance liabilities | 1,033 | 719 | ||||||||||
Net cash provided by operating activities | 692 | 2,210 | ||||||||||
Cash flows from investing activities: | ||||||||||||
Proceeds from sales and maturities of investments | 6,091 | 6,699 | ||||||||||
Cost of investments | (5,736 | ) | (6,534 | ) | ||||||||
Additions to property, equipment and software | (180 | ) | (129 | ) | ||||||||
Net cash provided by investing activities | 175 | 36 | ||||||||||
Cash flows from financing activities: | ||||||||||||
Issuance of long-term debt | — | 12,886 | ||||||||||
Repayment of long-term debt | (11,734 | ) | — | |||||||||
Common shares issued under benefit plans, net | (126 | ) | (88 | ) | ||||||||
Common shares repurchased | (3,300 | ) | — | |||||||||
Dividends paid to shareholders | (254 | ) | (175 | ) | ||||||||
Net payment on interest rate derivatives | — | (274 | ) | |||||||||
Contributions, non-controlling interests | 125 | — | ||||||||||
Net cash (used for) provided by financing activities | (15,289 | ) | 12,349 | |||||||||
Net (decrease) increase in cash and cash equivalents | (14,422 | ) | 14,595 | |||||||||
Cash and cash equivalents, beginning of period | 17,996 | 2,524 | ||||||||||
Cash and cash equivalents, end of period | $ | 3,574 | $ | 17,119 | ||||||||
Reconciliation of the Most Directly Comparable GAAP Measure to Certain Reported Amounts | ||||||||||||||||||||||||||||||||||||||||||||||||||
Three Months Ended |
Three Months Ended |
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(Millions, except per common share data)
Reconciliation of net income to adjusted earnings |
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Per Common Share | |
Per Common Share | ||||||||||||||||||||||||||||||||||||||||||||||
Net income(1) (GAAP measure) | $ | 1,203 | $ | 3.60 | $ | 791 | $ | 2.23 | ||||||||||||||||||||||||||||||||||||||||||
Transaction and integration-related costs | (10 | ) | (0.03 | ) | 103 | 0.29 | ||||||||||||||||||||||||||||||||||||||||||||
Reduction of reserve for anticipated future losses on discontinued products | (109 | ) | (0.33 | ) | (128 | ) | (0.36 | ) | ||||||||||||||||||||||||||||||||||||||||||
Amortization of other acquired intangible assets | 58 | 0.17 | 64 | 0.18 | ||||||||||||||||||||||||||||||||||||||||||||||
Net realized capital gains | (25 | ) | (0.08 | ) | (52 | ) | (0.14 | ) | ||||||||||||||||||||||||||||||||||||||||||
Income tax expense | 28 | 0.09 | 5 | 0.01 | ||||||||||||||||||||||||||||||||||||||||||||||
Adjusted earnings(2) | $ | 1,145 | $ | 3.42 | $ | 783 | $ | 2.21 | ||||||||||||||||||||||||||||||||||||||||||
Weighted average common shares - diluted | 334.5 | 354.1 | ||||||||||||||||||||||||||||||||||||||||||||||||
Three Months Ended |
Three Months Ended |
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(Millions)
Reconciliation of total revenue to adjusted revenue |
Health Care | |
Large Case Pensions | Corporate Financing(8) | |
Health Care | |
Large Case Pensions | Corporate Financing(8) | |
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Total revenue (GAAP measure) | $ | 14,800 | $ | 642 | $ | 81 | $ | — | $ | 15,523 | $ | 15,221 | $ | 647 | $ | 82 | $ | 3 | $ | 15,953 | ||||||||||||||||||||||||||||||
Interest income on proceeds of transaction-related debt | — | — | — | — | — | — | — | — | (3 | ) | (3 | ) | ||||||||||||||||||||||||||||||||||||||
Net realized capital gains | (7 | ) | (15 | ) | (3 | ) | — | (25 | ) | (31 | ) | (17 | ) | (4 | ) | — | (52 | ) | ||||||||||||||||||||||||||||||||
Adjusted revenue(3) (excludes net realized capital gains and an other item) | $ | 14,793 | $ | 627 | $ | 78 | $ | — | $ | 15,498 | $ | 15,190 | $ | 630 | $ | 78 | $ | — | $ | 15,898 | ||||||||||||||||||||||||||||||
Reconciliation of income before income taxes to pre-tax adjusted earnings | ||||||||||||||||||||||||||||||||||||||||||||||||||
Income (loss) before income taxes (GAAP measure) | $ | 1,698 | $ | 57 | $ | 115 | $ | (50 | ) | $ | 1,820 | $ | 1,310 | $ | 74 | $ | 136 | $ | (167 | ) | $ | 1,353 | ||||||||||||||||||||||||||||
Less: (Loss) income before income taxes attributable to non-controlling interests (GAAP measure) | (23 | ) | — | — | — | (23 | ) | 2 | — | 1 | — | 3 | ||||||||||||||||||||||||||||||||||||||
Income (loss) before income taxes attributable to |
1,721 | 57 | 115 | (50 | ) | 1,843 | 1,308 | 74 | 135 | (167 | ) | 1,350 | ||||||||||||||||||||||||||||||||||||||
Transaction and integration-related costs | — | — | — | (10 | ) | (10 | ) | — | — | — | 103 | 103 | ||||||||||||||||||||||||||||||||||||||
Reduction of reserve for anticipated future losses on discontinued products | — | — | (109 | ) | — | (109 | ) | — | — | (128 | ) | — | (128 | ) | ||||||||||||||||||||||||||||||||||||
Amortization of other acquired intangible assets | 58 | — | — | — | 58 | 64 | — | — | — | 64 | ||||||||||||||||||||||||||||||||||||||||
Net realized capital gains | (7 | ) | (15 | ) | (3 | ) | — | (25 | ) | (31 | ) | (17 | ) | (4 | ) | — | (52 | ) | ||||||||||||||||||||||||||||||||
Pre-tax adjusted earnings (loss)(2) | $ | 1,772 | $ | 42 | $ | 3 | $ | (60 | ) | $ | 1,757 | $ | 1,341 | $ | 57 | $ | 3 | $ | (64 | ) | $ | 1,337 | ||||||||||||||||||||||||||||
Reconciliation of the Most Directly Comparable GAAP Measure to Certain Reported Amounts | ||||||||||||||||||||||||||||||||||||||||||||||||||
Six Months Ended |
Six Months Ended |
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(Millions, except per common share data)
Reconciliation of net income to adjusted earnings |
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Per Common Share | |
Per Common Share | ||||||||||||||||||||||||||||||||||||||||||||||
Net income(1) (GAAP measure) | $ | 822 | $ | 2.42 | $ | 1,528 | $ | 4.32 | ||||||||||||||||||||||||||||||||||||||||||
Loss on early extinguishment of long-term debt | 246 | 0.72 | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
Penn Treaty-related guaranty fund assessments | 231 | 0.68 | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
Transaction and integration-related costs | 1,202 | 3.53 | 169 | 0.48 | ||||||||||||||||||||||||||||||||||||||||||||||
Reduction of reserve for anticipated future losses on discontinued products | (109 | ) | (0.32 | ) | (128 | ) | (0.37 | ) | ||||||||||||||||||||||||||||||||||||||||||
Amortization of other acquired intangible assets | 118 | 0.35 | 126 | 0.35 | ||||||||||||||||||||||||||||||||||||||||||||||
Net realized capital losses (gains) | 308 | 0.90 | (51 | ) | (0.14 | ) | ||||||||||||||||||||||||||||||||||||||||||||
Income tax benefit | (734 | ) | (2.16 | ) | (40 | ) | (0.11 | ) | ||||||||||||||||||||||||||||||||||||||||||
Adjusted earnings(2) | $ | 2,084 | $ | 6.12 | $ | 1,604 | $ | 4.53 | ||||||||||||||||||||||||||||||||||||||||||
Weighted average common shares - diluted | 340.3 | 354.0 | ||||||||||||||||||||||||||||||||||||||||||||||||
Six Months Ended |
Six Months Ended |
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(Millions)
Reconciliation of total revenue to adjusted revenue |
Health Care | |
Large Case Pensions | Corporate Financing(8) | |
Health Care | |
Large Case Pensions | Corporate Financing(8) | |
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Total revenue (GAAP measure) | $ | 29,583 | $ | 1,263 | $ | 167 | $ | (325 | ) | $ | 30,688 | $ | 30,235 | $ | 1,259 | $ | 149 | $ | 3 | $ | 31,646 | |||||||||||||||||||||||||||||
Interest income on proceeds of transaction-related debt | — | — | — | (11 | ) | (11 | ) | — | — | — | (3 | ) | (3 | ) | ||||||||||||||||||||||||||||||||||||
Net realized capital (gains) losses | (8 | ) | (17 | ) | (3 | ) | 336 | 308 | (25 | ) | (20 | ) | (6 | ) | — | (51 | ) | |||||||||||||||||||||||||||||||||
Adjusted revenue(3) (excludes net realized capital (gains) losses and an other item) | $ | 29,575 | $ | 1,246 | $ | 164 | $ | — | $ | 30,985 | $ | 30,210 | $ | 1,239 | $ | 143 | $ | — | $ | 31,592 | ||||||||||||||||||||||||||||||
Reconciliation of income before income taxes to pre-tax adjusted earnings | ||||||||||||||||||||||||||||||||||||||||||||||||||
Income (loss) before income taxes (GAAP measure) | $ | 2,886 | $ | 92 | $ | 120 | $ | (1,906 | ) | $ | 1,192 | $ | 2,701 | $ | 102 | $ | 137 | $ | (298 | ) | $ | 2,642 | ||||||||||||||||||||||||||||
Less: (Loss) income before income taxes attributable to non-controlling interests (GAAP measure) | (21 | ) | — | 1 | — | (20 | ) | 5 | — | (1 | ) | — | 4 | |||||||||||||||||||||||||||||||||||||
Income (loss) before income taxes attributable to |
2,907 | 92 | 119 | (1,906 | ) | 1,212 | 2,696 | 102 | 138 | (298 | ) | 2,638 | ||||||||||||||||||||||||||||||||||||||
Loss on early extinguishment of long-term debt | — | — | — | 246 | 246 | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||
Penn Treaty-related guaranty fund assessments | 231 | — | — | — | 231 | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||
Transaction and integration-related costs | — | — | — | 1,202 | 1,202 | — | — | — | 169 | 169 | ||||||||||||||||||||||||||||||||||||||||
Reduction of reserve for anticipated future losses on discontinued products | — | — | (109 | ) | — | (109 | ) | — | — | (128 | ) | — | (128 | ) | ||||||||||||||||||||||||||||||||||||
Amortization of other acquired intangible assets | 118 | — | — | — | 118 | 126 | — | — | — | 126 | ||||||||||||||||||||||||||||||||||||||||
Net realized capital (gains) losses | (8 | ) | (17 | ) | (3 | ) | 336 | 308 | (25 | ) | (20 | ) | (6 | ) | — | (51 | ) | |||||||||||||||||||||||||||||||||
Pre-tax adjusted earnings (loss)(2) | $ | 3,248 | $ | 75 | $ | 7 | $ | (122 | ) | $ | 3,208 | $ | 2,797 | $ | 82 | $ | 4 | $ | (129 | ) | $ | 2,754 | ||||||||||||||||||||||||||||
Margins and Ratios | |||||||||||||||||||||
Three Months Ended |
Six Months Ended |
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(Millions) | 2017 | 2016 | 2017 | 2016 | |||||||||||||||||
Reconciliation of income before income taxes to adjusted earnings before income taxes, excluding interest expense: | |||||||||||||||||||||
Income before income taxes (GAAP measure) | $ | 1,820 | $ | 1,353 | $ | 1,192 | $ | 2,642 | |||||||||||||
Interest expense(9) | 86 | 79 | 174 | 158 | |||||||||||||||||
Loss on early extinguishment of long-term debt | — | — | 246 | — | |||||||||||||||||
Penn Treaty-related guaranty fund assessments | — | — | 231 | — | |||||||||||||||||
Transaction and integration-related costs | (10 | ) | 103 | 1,202 | 169 | ||||||||||||||||
Reduction of reserve for anticipated future losses on discontinued products | (109 | ) | (128 | ) | (109 | ) | (128 | ) | |||||||||||||
Amortization of other acquired intangible assets | 58 | 64 | 118 | 126 | |||||||||||||||||
Net realized capital (gains) losses | (25 | ) | (52 | ) | 308 | (51 | ) | ||||||||||||||
Adjusted earnings(2) before income taxes, excluding interest expense | (A) | $ | 1,820 | $ | 1,419 | $ | 3,362 | $ | 2,916 | ||||||||||||
Reconciliation of net income to adjusted earnings excluding interest expense, net of tax: | |||||||||||||||||||||
Net income(1) (GAAP measure) | (B) | $ | 1,203 | $ | 791 | $ | 822 | $ | 1,528 | ||||||||||||
Interest expense(9) | 86 | 79 | 174 | 158 | |||||||||||||||||
Loss on early extinguishment of long-term debt | — | — | 246 | — | |||||||||||||||||
Penn Treaty-related guaranty fund assessments | — | — | 231 | — | |||||||||||||||||
Transaction and integration-related costs | (10 | ) | 103 | 1,202 | 169 | ||||||||||||||||
Reduction of reserve for anticipated future losses on discontinued products | (109 | ) | (128 | ) | (109 | ) | (128 | ) | |||||||||||||
Amortization of other acquired intangible assets | 58 | 64 | 118 | 126 | |||||||||||||||||
Net realized capital (gains) losses | (25 | ) | (52 | ) | 308 | (51 | ) | ||||||||||||||
Income tax benefit | (2 | ) | (22 | ) | (795 | ) | (95 | ) | |||||||||||||
Adjusted earnings(2) excluding interest expense, net of tax | $ | 1,201 | $ | 835 | $ | 2,197 | $ | 1,707 | |||||||||||||
Reconciliation of total revenue to adjusted revenue: | |||||||||||||||||||||
Total revenue (GAAP measure) | (C) | $ | 15,523 | $ | 15,953 | $ | 30,688 | $ | 31,646 | ||||||||||||
Interest income on proceeds of transaction-related debt | — | (3 | ) | (11 | ) | (3 | ) | ||||||||||||||
Net realized capital (gains) losses | (25 | ) | (52 | ) | 308 | (51 | ) | ||||||||||||||
Adjusted revenue(3) (excludes net realized capital (gains) losses and an other item) | (D) | $ | 15,498 | $ | 15,898 | $ | 30,985 | $ | 31,592 | ||||||||||||
Reconciliation of total operating expenses to adjusted operating expenses: | |||||||||||||||||||||
Total operating expenses (GAAP measure) | (E) | $ | 2,552 | $ | 2,784 | $ | 6,405 | $ | 5,647 | ||||||||||||
Penn Treaty-related guaranty fund assessments | — | — | (231 | ) | — | ||||||||||||||||
Transaction and integration-related costs | 10 | (62 | ) | (1,128 | ) | (104 | ) | ||||||||||||||
Adjusted operating expenses | (F) | $ | 2,562 | $ | 2,722 | $ | 5,046 | $ | 5,543 | ||||||||||||
Net income and adjusted pre-tax margins: | |||||||||||||||||||||
After-tax net income margin (GAAP measure) | (B)/(C) | 7.7 | % | 5.0 | % | 2.7 | % | 4.8 | % | ||||||||||||
Adjusted pre-tax margin(6) | (A)/(D) | 11.7 | % | 8.9 | % | 10.9 | % | 9.2 | % | ||||||||||||
Expense ratios: | |||||||||||||||||||||
Total company expense ratio (GAAP measure) | (E)/(C) | 16.4 | % | 17.5 | % | 20.9 | % | 17.8 | % | ||||||||||||
Adjusted expense ratio(5) | (F)/(D) | 16.5 | % | 17.1 | % | 16.3 | % | 17.6 | % | ||||||||||||
Health Care, Group Insurance and Corporate Financing Operating Cash Flow as a Percentage of Net Income | |||||||||||
Six Months Ended |
|||||||||||
(Millions) | 2017 | 2016 | |||||||||
Net cash provided by operating activities (GAAP measure) | $ | 692 | $ | 2,210 | |||||||
Less: Net cash used for operating activities: Large Case Pensions | (128 | ) | (117 | ) | |||||||
Net cash provided by operating activities: |
(A) | 820 | 2,327 | ||||||||
Net income(1) (GAAP Measure) | 822 | 1,528 | |||||||||
Less: Net income: Large Case Pensions | 81 | 92 | |||||||||
Net income: Health Care, Group Insurance and Corporate Financing | (B) | $ | 741 | $ | 1,436 | ||||||
Operating cash flow as a percentage of net income: | |||||||||||
Operating cash flow as a percentage of net income(1) (GAAP Measure) | (A)/(B) | 110.7 | % | 162.0 | % | ||||||
Footnotes
(1) Net income refers to net income attributable to
(2) Non-GAAP financial measures such as adjusted earnings, adjusted earnings per share, pre-tax adjusted earnings, adjusted operating expenses, adjusted revenue, adjusted expense ratio and adjusted pre-tax margin exclude from the relevant GAAP metrics, as applicable:
- Amortization of other acquired intangible assets;
- Net realized capital gains or losses; and
- Other items, if any, that neither relate to the ordinary course of
Aetna 's business nor reflectAetna 's underlying business performance.
Although the excluded items may recur, management believes the non-GAAP financial measures
For the periods covered in this press release, the following items are excluded from the non-GAAP financial measures described above, as applicable, because
- During the six months ended
June 30, 2017 ,Aetna incurred losses on the early extinguishment of long-term debt due to (a) the mandatory redemption of$10.2 billion aggregate principal amount of certain of its senior notes issued inJune 2016 (collectively, the "SMR Notes") following the termination of the definitive agreement (the "Humana Merger Agreement") to acquire Humana Inc. ("Humana") and (b) the early redemption of$750 million aggregate principal amount of its outstanding senior notes due 2020. - During the six months ended
June 30, 2017 ,Aetna recorded an expense for estimated future guaranty fund assessments related toPenn Treaty Network America Insurance Company and one of its subsidiaries (collectively, "Penn Treaty"), which was placed in rehabilitation in 2009 and placed in liquidation inMarch 2017 . This expense does not directly relate to the underwriting or servicing of products for customers and is not directly related to the core performance ofAetna 's business operations. -
Aetna recorded transaction and integration-related costs during the three and six months endedJune 30, 2017 and 2016 primarily related to its proposed acquisition of Humana (the "Humana Transaction"). The negative transaction costs for the three months endedJune 30, 2017 reflect the release of previously accrued expenses upon reconciliation to the final actual expenses incurred related to the Humana Transaction. Transaction costs include costs associated with the termination of the Humana Merger Agreement, the termination ofAetna 's agreement to sell certain assets to Molina Healthcare, Inc. and advisory, legal and other professional fees which are reflected inAetna 's GAAP Consolidated Statements of Income in general and administrative expenses. Transaction costs also include the negative cost of carry associated with the debt financing thatAetna obtained inJune 2016 for the Humana Transaction. Prior to the mandatory redemption of the SMR Notes, the negative cost of carry associated with these senior notes was excluded from adjusted earnings and pre-tax adjusted earnings. The negative cost of carry associated with the$2.8 billion aggregate principal amount ofAetna 's senior notes issued inJune 2016 that are not subject to mandatory redemption (the "Other 2016 Senior Notes") was excluded from adjusted earnings and pre-tax adjusted earnings through the date of the termination of the Humana Merger Agreement. The components of the negative cost of carry are reflected inAetna 's GAAP Consolidated Statements of Income in interest expense and net investment income. Subsequent to the termination of the Humana Merger Agreement, the interest expense and net investment income associated with the Other 2016 Senior Notes were no longer excluded from adjusted earnings and pre-tax adjusted earnings. - In 1993,
Aetna discontinued the sale of fully guaranteed large case pensions products and established a reserve for anticipated future losses on these products, whichAetna reviews quarterly. During both the three months endedJune 30, 2017 and 2016,Aetna reduced the reserve for anticipated future losses on discontinued products.Aetna believes excluding any changes in the reserve for anticipated future losses on discontinued products from adjusted earnings provides more useful information as toAetna 's continuing products and is consistent with the treatment of the operating results of these discontinued products, which are credited or charged to the reserve and do not affectAetna 's operating results. - Other acquired intangible assets relate to
Aetna 's acquisition activities and are amortized over their useful lives. However, this amortization does not directly relate to the underwriting or servicing of products for customers and is not directly related to the core performance ofAetna 's business operations. - Net realized capital gains and losses arise from various types of transactions, primarily in the course of managing a portfolio of assets that support the payment of liabilities. However, these transactions do not directly relate to the underwriting or servicing of products for customers and are not directly related to the core performance of
Aetna 's business operations. - The corresponding tax benefit or expense related to the items excluded from adjusted earnings discussed above. The tax benefit or expense was calculated utilizing the appropriate tax rate for each individual item excluded from adjusted earnings.
For a reconciliation of financial measures calculated under GAAP to these items, refer to the tables on pages 9 through 11 of this press release.
(3) Adjusted revenue excludes net realized capital gains and losses and interest income on the proceeds of
(4) Projected full-year 2017 net income per share and adjusted earnings per share reflect a range of 334 million to 335 million weighted average diluted shares. Projected full-year 2017 adjusted earnings per share exclude from projected full-year 2017 net income per share the loss on early extinguishment of long-term debt, the projected Penn Treaty-related guaranty fund assessments, projected transaction and integration-related costs (including termination costs) primarily related to the Humana Transaction, the reduction of the reserve for anticipated future losses on discontinued products, estimated amortization of other acquired intangible assets, net realized capital gains and losses, other items, if any, that neither relate to the ordinary course of
Reconciliation of Projected 2017 Net Income Per Share to Projected 2017 Adjusted Earnings Per Share | ||||
Projected net income per share (GAAP measure) | |
|||
Loss on early extinguishment of long-term debt | .74 | |||
Penn Treaty-related guaranty fund assessments | .69 | |||
Transaction and integration-related costs (including termination costs) | 3.59 | |||
Reduction of reserve for anticipated future losses on discontinued products | (.33 | ) | ||
Amortization of other acquired intangible assets | .70 | |||
Net realized capital losses | .92 | |||
Income tax benefit | (2.32 | ) | ||
Projected adjusted earnings per share | |
|||
(5) The adjusted expense ratio excludes net realized capital gains and losses and other items, if any, that are excluded from adjusted revenue or adjusted operating expenses, as noted in (2) above. For a reconciliation of the comparable GAAP measure to this metric for the periods covered by this press release, refer to page 11 of this press release.
(6) In order to provide useful information regarding
(7) Days claims payable is calculated by dividing the health care costs payable at each quarter end by the average health care costs per day in each respective quarter. The total debt to consolidated capitalization ratio is calculated by dividing total long-term debt and short-term debt ("Total Debt") by the sum of Total Debt and total
(8)
(9) Interest expense included in the reconciliation to adjusted earnings before income taxes, excluding interest expense and the reconciliation to adjusted earnings excluding interest expense, net of tax for the six months ended
Cautionary Statement Regarding Forward-Looking Statements
This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. You can generally identify forward-looking statements by the use of forward-looking terminology such as “anticipate,” “believe,” “can,” “continue,” “could,” “estimate,” “evaluate,” “expect,” “explore,” “forecast,” “guidance,” “intend,” “likely,” “may,” “might,” “outlook,” “plan,” “potential,” “predict,” “probable,” “project,” “seek,” “should,” “view,” or “will,” or the negative thereof or other variations thereon or comparable terminology. These forward-looking statements are only predictions and involve known and unknown risks and uncertainties, many of which are beyond Aetna’s control.
Statements in this press release regarding
No assurances can be given that any of the events anticipated by the forward-looking statements will transpire or occur, or if any of them do occur, what impact they will have on the results of operations, financial condition or cash flows of
Supplementary Information |
|||||||||||||||||||||||||
Statements of Income Before Income Taxes Attributable to |
|||||||||||||||||||||||||
Health | Group | Large Case | Corporate | ||||||||||||||||||||||
(Millions) | Care | Insurance | Pensions | Financing | Total | ||||||||||||||||||||
Three Months Ended |
|||||||||||||||||||||||||
Revenue: | |||||||||||||||||||||||||
Health care premiums | $ | 13,223 | $ | — | $ | — | $ | — | $ | 13,223 | |||||||||||||||
Other premiums | — | 539 | 13 | — | 552 | ||||||||||||||||||||
Fees and other revenue | 1,457 | 27 | 2 | — | 1,486 | ||||||||||||||||||||
Net investment income | 113 | 61 | 63 | — | 237 | ||||||||||||||||||||
Net realized capital gains | 7 | 15 | 3 | — | 25 | ||||||||||||||||||||
Total revenue | 14,800 | 642 | 81 | — | 15,523 | ||||||||||||||||||||
Benefits and expenses: | |||||||||||||||||||||||||
Health care costs | 10,577 | — | — | — | 10,577 | ||||||||||||||||||||
Current and future benefits | — | 466 | 73 | — | 539 | ||||||||||||||||||||
Operating expenses: | |||||||||||||||||||||||||
Selling expenses | 366 | 36 | — | — | 402 | ||||||||||||||||||||
General and administrative expenses | 2,101 | 83 | 2 | (36 | ) | 2,150 | |||||||||||||||||||
Total operating expenses | 2,467 | 119 | 2 | (36 | ) | 2,552 | |||||||||||||||||||
Interest expense | — | — | — | 86 | 86 | ||||||||||||||||||||
Amortization of other acquired intangible assets | 58 | — | — | — | 58 | ||||||||||||||||||||
Reduction of reserve for anticipated future losses on discontinued products | — | — | (109 | ) | — | (109 | ) | ||||||||||||||||||
Total benefits and expenses | 13,102 | 585 | (34 | ) | 50 | 13,703 | |||||||||||||||||||
Income (loss) before income taxes including non-controlling interests | 1,698 | 57 | 115 | (50 | ) | 1,820 | |||||||||||||||||||
Less: Loss before income taxes attributable to non-controlling interests | (23 | ) | — | — | — | (23 | ) | ||||||||||||||||||
Income (loss) before income taxes attributable to |
$ | 1,721 | $ | 57 | $ | 115 | $ | (50 | ) | $ | 1,843 | ||||||||||||||
Three Months Ended |
|||||||||||||||||||||||||
Revenue: | |||||||||||||||||||||||||
Health care premiums | $ | 13,629 | $ | — | $ | — | $ | — | $ | 13,629 | |||||||||||||||
Other premiums | — | 542 | 5 | — | 547 | ||||||||||||||||||||
Fees and other revenue | 1,445 | 26 | 3 | — | 1,474 | ||||||||||||||||||||
Net investment income | 116 | 62 | 70 | 3 | 251 | ||||||||||||||||||||
Net realized capital gains | 31 | 17 | 4 | — | 52 | ||||||||||||||||||||
Total revenue | 15,221 | 647 | 82 | 3 | 15,953 | ||||||||||||||||||||
Benefits and expenses: | |||||||||||||||||||||||||
Health care costs | 11,232 | — | — | — | 11,232 | ||||||||||||||||||||
Current and future benefits | — | 454 | 71 | — | 525 | ||||||||||||||||||||
Operating expenses: | |||||||||||||||||||||||||
Selling expenses | 383 | 33 | — | — | 416 | ||||||||||||||||||||
General and administrative expenses | 2,232 | 86 | 3 | 47 | 2,368 | ||||||||||||||||||||
Total operating expenses | 2,615 | 119 | 3 | 47 | 2,784 | ||||||||||||||||||||
Interest expense | — | — | — | 123 | 123 | ||||||||||||||||||||
Amortization of other acquired intangible assets | 64 | — | — | — | 64 | ||||||||||||||||||||
Reduction of reserve for anticipated future losses on discontinued products | — | — | (128 | ) | — | (128 | ) | ||||||||||||||||||
Total benefits and expenses | 13,911 | 573 | (54 | ) | 170 | 14,600 | |||||||||||||||||||
Income (loss) before income taxes including non-controlling interests | 1,310 | 74 | 136 | (167 | ) | 1,353 | |||||||||||||||||||
Less: Income before income taxes attributable to non-controlling interests | 2 | — | 1 | — | 3 | ||||||||||||||||||||
Income (loss) before income taxes attributable to |
$ | 1,308 | $ | 74 | $ | 135 | $ | (167 | ) | $ | 1,350 | ||||||||||||||
Statements of Income Before Income Taxes Attributable to |
|||||||||||||||||||||||||
Health | Group | Large Case | Corporate | ||||||||||||||||||||||
(Millions) | Care | Insurance | Pensions | Financing | Total | ||||||||||||||||||||
Six Months Ended |
|||||||||||||||||||||||||
Revenue: | |||||||||||||||||||||||||
Health care premiums | $ | 26,442 | $ | — | $ | — | $ | — | $ | 26,442 | |||||||||||||||
Other premiums | — | 1,070 | 26 | — | 1,096 | ||||||||||||||||||||
Fees and other revenue | 2,905 | 52 | 4 | — | 2,961 | ||||||||||||||||||||
Net investment income | 228 | 124 | 134 | 11 | 497 | ||||||||||||||||||||
Net realized capital gains (losses) | 8 | 17 | 3 | (336 | ) | (308 | ) | ||||||||||||||||||
Total revenue | 29,583 | 1,263 | 167 | (325 | ) | 30,688 | |||||||||||||||||||
Benefits and expenses: | |||||||||||||||||||||||||
Health care costs | 21,493 | — | — | — | 21,493 | ||||||||||||||||||||
Current and future benefits | — | 933 | 151 | — | 1,084 | ||||||||||||||||||||
Operating expenses: | |||||||||||||||||||||||||
Selling expenses | 750 | 73 | — | — | 823 | ||||||||||||||||||||
General and administrative expenses | 4,336 | 165 | 5 | 1,076 | 5,582 | ||||||||||||||||||||
Total operating expenses | 5,086 | 238 | 5 | 1,076 | 6,405 | ||||||||||||||||||||
Interest expense | — | — | — | 259 | 259 | ||||||||||||||||||||
Amortization of other acquired intangible assets | 118 | — | — | — | 118 | ||||||||||||||||||||
Loss on early extinguishment of long-term debt |
— |
— |
— |
246 | 246 | ||||||||||||||||||||
Reduction of reserve for anticipated future losses on discontinued products |
— |
— | (109 | ) | — | (109 | ) | ||||||||||||||||||
Total benefits and expenses | 26,697 | 1,171 | 47 | 1,581 | 29,496 | ||||||||||||||||||||
Income (loss) before income taxes including non-controlling interests | 2,886 | 92 | 120 | (1,906 | ) | 1,192 | |||||||||||||||||||
Less: (Loss) income before income taxes attributable to non-controlling interests | (21 | ) | — | 1 | — | (20 | ) | ||||||||||||||||||
Income (loss) before income taxes attributable to |
$ | 2,907 | $ | 92 | $ | 119 | $ | (1,906 | ) | $ | 1,212 | ||||||||||||||
Six Months Ended |
|||||||||||||||||||||||||
Revenue: | |||||||||||||||||||||||||
Health care premiums | $ | 27,098 | $ | — | $ | — | $ | — | $ | 27,098 | |||||||||||||||
Other premiums | — | 1,067 | 20 | — | 1,087 | ||||||||||||||||||||
Fees and other revenue | 2,884 | 52 | 5 | — | 2,941 | ||||||||||||||||||||
Net investment income | 228 | 120 | 118 | 3 | 469 | ||||||||||||||||||||
Net realized capital gains | 25 | 20 | 6 | — | 51 | ||||||||||||||||||||
Total revenue | 30,235 | 1,259 | 149 | 3 | 31,646 | ||||||||||||||||||||
Benefits and expenses: | |||||||||||||||||||||||||
Health care costs | 22,080 | — | — | — | 22,080 | ||||||||||||||||||||
Current and future benefits | — | 920 | 134 | — | 1,054 | ||||||||||||||||||||
Operating expenses: | |||||||||||||||||||||||||
Selling expenses | 773 | 64 | — | — | 837 | ||||||||||||||||||||
General and administrative expenses | 4,555 | 173 | 6 | 76 | 4,810 | ||||||||||||||||||||
Total operating expenses | 5,328 | 237 | 6 | 76 | 5,647 | ||||||||||||||||||||
Interest expense | — | — | — | 225 | 225 | ||||||||||||||||||||
Amortization of other acquired intangible assets | 126 | — | — | — | 126 | ||||||||||||||||||||
Reduction of reserve for anticipated future losses on discontinued products | — | — | (128 | ) | — | (128 | ) | ||||||||||||||||||
Total benefits and expenses | 27,534 | 1,157 | 12 | 301 | 29,004 | ||||||||||||||||||||
Income (loss) before income taxes including non-controlling interests | 2,701 | 102 | 137 | (298 | ) | 2,642 | |||||||||||||||||||
Less: Income (loss) before income taxes attributable to non-controlling interests | 5 | — | (1 | ) | — | 4 | |||||||||||||||||||
Income (loss) before income taxes attributable to |
$ | 2,696 | $ | 102 | $ | 138 | $ | (298 | ) | $ | 2,638 | ||||||||||||||
Membership | |||||||||||||||||||||||||||||||||||||||||||||||
June 30, 2017 | March 31, 2017 | December 31, 2016 | June 30, 2016 | ||||||||||||||||||||||||||||||||||||||||||||
(Thousands) | Insured | ASC | Total | Insured | ASC | Total | Insured | ASC | Total | Insured | ASC | Total | |||||||||||||||||||||||||||||||||||
Medical Membership: | |||||||||||||||||||||||||||||||||||||||||||||||
Commercial | 4,407 | 13,375 | 17,782 | 4,557 | 13,351 | 17,908 | 5,457 | 13,132 | 18,589 | 5,667 | 12,947 | 18,614 | |||||||||||||||||||||||||||||||||||
|
1,453 | — | 1,453 | 1,443 | — | 1,443 | 1,362 | — | 1,362 | 1,344 | — | 1,344 | |||||||||||||||||||||||||||||||||||
Medicare Supplement | 724 | — | 724 | 711 | — | 711 | 685 | — | 685 | 637 | — | 637 | |||||||||||||||||||||||||||||||||||
Medicaid | 1,307 | 822 | 2,129 | 1,570 | 814 | 2,384 | 1,668 | 806 | 2,474 | 1,592 | 791 | 2,383 | |||||||||||||||||||||||||||||||||||
Total Medical Membership | 7,891 | 14,197 | 22,088 | 8,281 | 14,165 | 22,446 | 9,172 | 13,938 | 23,110 | 9,240 | 13,738 | 22,978 | |||||||||||||||||||||||||||||||||||
Dental Membership: | |||||||||||||||||||||||||||||||||||||||||||||||
Total Dental Membership | 5,534 | 8,078 | 13,612 | 5,898 | 8,116 | 14,014 | 6,086 | 8,386 | 14,472 | 5,926 | 8,393 | 14,319 | |||||||||||||||||||||||||||||||||||
Pharmacy Benefit Management Services Membership: | |||||||||||||||||||||||||||||||||||||||||||||||
Commercial | 8,087 | 8,217 | 9,400 | 9,598 | |||||||||||||||||||||||||||||||||||||||||||
Medicare Prescription Drug Plan (stand-alone) | 2,062 | 2,064 | 2,067 | 1,967 | |||||||||||||||||||||||||||||||||||||||||||
Medicare Advantage Prescription Drug Plan | 1,116 | 1,106 | 953 | 943 | |||||||||||||||||||||||||||||||||||||||||||
Medicaid | 2,832 | 2,817 | 2,783 | 2,657 | |||||||||||||||||||||||||||||||||||||||||||
Total Pharmacy Benefit Management Services Membership | 14,097 | 14,204 | 15,203 | 15,165 | |||||||||||||||||||||||||||||||||||||||||||
Health Care Medical Benefit Ratios | ||||||||||||||||||||
Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||||||
(Millions) | 2017 | 2016 | 2017 | 2016 | ||||||||||||||||
Premiums (GAAP measure) | ||||||||||||||||||||
Commercial | $ | 6,267 | $ | 7,050 | $ | 12,376 | $ | 14,015 | ||||||||||||
Government | 6,956 | 6,579 | 14,066 | 13,083 | ||||||||||||||||
Health Care | $ | 13,223 | $ | 13,629 | $ | 26,442 | $ | 27,098 | ||||||||||||
Health Care Costs (GAAP measure) | ||||||||||||||||||||
Commercial | $ | 4,924 | $ | 5,879 | $ | 9,771 | $ | 11,299 | ||||||||||||
Government | 5,653 | 5,353 | 11,722 | 10,781 | ||||||||||||||||
Health Care | $ | 10,577 | $ | 11,232 | $ | 21,493 | $ | 22,080 | ||||||||||||
Medical Benefit Ratios "MBRs" | ||||||||||||||||||||
Commercial | 78.6 | % | 83.4 | % | 79.0 | % | 80.6 | % | ||||||||||||
Government | 81.3 | % | 81.4 | % | 83.3 | % | 82.4 | % | ||||||||||||
Health Care | 80.0 | % | 82.4 | % | 81.3 | % | 81.5 | % | ||||||||||||
Roll Forward of Health Care Costs Payable | ||||||||||
(Unaudited) | ||||||||||
Six Months Ended June 30, |
||||||||||
(Millions) | 2017 | 2016 | ||||||||
Health care costs payable, beginning of period | $ | 6,558 | $ | 6,306 | ||||||
Less: reinsurance recoverables | 5 | 4 | ||||||||
Health care costs payable, beginning of period, net | 6,553 | 6,302 | ||||||||
Add: Components of incurred health care costs: | ||||||||||
Current year | 22,123 | 22,725 | ||||||||
Prior years(a) | (750 | ) | (709 | ) | ||||||
Total incurred health care costs (b) | 21,373 | 22,016 | ||||||||
Less: Claims paid | ||||||||||
Current year | 16,580 | 16,601 | ||||||||
Prior years | 5,224 | 4,841 | ||||||||
Total claims paid | 21,804 | 21,442 | ||||||||
Health care costs payable, end of period, net | 6,122 | 6,876 | ||||||||
Add: premium deficiency reserve | 120 | 64 | ||||||||
Add: reinsurance recoverables | 4 | 3 | ||||||||
Health care costs payable, end of period | $ | 6,246 | $ | 6,943 |
(a) Negative amounts reported for incurred health care costs related to prior years result from claims being settled for amounts less than originally estimated.
(b) Total incurred health care costs exclude from the table above $120 million and $64 million, respectively, related to the premium deficiency reserve recorded during the six months ended June 30, 2017 and 2016, respectively, for the 2017 and 2016 coverage years, respectively, on
Days Claims Payable (Unaudited) | |||||||||||||||
June 30, 2017 | March 31, 2017 | December 31, 2016 | September 30, 2016 | June 30, 2016 | |||||||||||
Days Claims Payable | 54 | 53 | 54 | 57 | 56 |
Health Care Reform's Reinsurance, Risk Adjustment and Risk Corridor (the “3Rs”)(a) Net Receivable (Payable) | ||||||||||||||||||||||||||||||
June 30, 2017 | December 31, 2016 | |||||||||||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||||||||||||
(Millions) | Reinsurance | Risk Adjustment | Risk Corridor(b) | Reinsurance | Risk Adjustment | Risk Corridor | ||||||||||||||||||||||||
Current | $ | 202 | $ | (512 | ) | $ | — | $ | 202 | $ | (690 | ) | $ | (10 | ) | |||||||||||||||
Long-term | 15 | (40 | ) | — | — | — | — | |||||||||||||||||||||||
Total net receivable (payable) | $ | 217 | $ | (552 | ) | $ | — | $ | 202 | $ | (690 | ) | $ | (10 | ) |
(a)
(b)
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