Anthem Reports Second Quarter 2018 Results Reflecting Strong Overall Enterprise-Wide Execution
- Second quarter net income was
$1.1 billion , growth of 23% over the prior year quarter. Adjusted net income of$4.25 per share grew by 26% year over year. - Benefit Expense Ratio was 83.4%, better than expected and driven by strong medical cost performance across all business segments.
- Medical enrollment totaled 39.5 million members as of
June 30, 2018 , a decline of 129 thousand members during the quarter. - Full year 2018 GAAP net income is now expected to be greater than
$14.20 per share. Full year 2018 adjusted net income is now expected to be greater than$15.40 per share. - Third quarter 2018 dividend of
$0.75 per share declared to shareholders.
"We are pleased with our second quarter 2018 financial performance, which demonstrates our ongoing commitment to delivering strong medical cost performance and innovative healthcare solutions to our members," said
Based on second quarter results and the business outlook for the remainder of the year,
* Refer to the GAAP reconciliation table.
CONSOLIDATED HIGHLIGHTS
Membership: Medical enrollment was approximately 39.5 million members at
Medical enrollment was down 129 thousand lives sequentially, reflecting declines in Medicaid, continued attrition in Individual, and declines in the Local Group business. The decline was partially offset by growth in Medicare enrollment.
Operating Revenue: Operating revenue was
Benefit Expense Ratio: The benefit expense ratio was 83.4 percent in the second quarter of 2018, a decrease of 270 basis points from 86.1 percent in the prior year quarter. The decrease was a result of the return of the health insurance tax in 2018 and enhanced medical cost performance across our business segments.
Medical claims reserves established at
Medical Cost Trend: Local Group medical cost trend for the full year 2018 is expected to be in the range of 6.0% +/- 50 basis points, unchanged from our previous outlook.
Days in Claims Payable: Days in Claims Payable (“DCP”) was 38.7 days as of
SG&A Expense Ratio: The SG&A expense ratio was 15.1 percent in the second quarter of 2018, an increase of 130 basis points from 13.8 percent in the second quarter of 2017. The increase, as expected, was primarily driven by the return of the health insurance tax in 2018 as well as the impact of increased investment spend in 2018 to support growth initiatives. The increase was partially offset by the 2015 cyber attack litigation settlement recorded in the second quarter of 2017.
Operating Cash Flow: Operating cash flow was
Share Repurchase Program: During the second quarter of 2018, the Company repurchased 1.7 million shares of its common stock at a weighted average price of
Cash Dividend: During the second quarter of 2018, the Company paid a quarterly dividend of
The Audit Committee declared a third quarter 2018 dividend to shareholders of
Investment Portfolio & Capital Position: During the second quarter of 2018, the Company recorded net realized gains on financial instruments totaling
As of
REPORTABLE SEGMENTS
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Reportable Segment Highlights | ||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||
(In millions) | Three Months Ended |
Six Months Ended |
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2018 | 2017 | Change | 2018 | 2017 | Change | |||||||||||||||
Operating Revenue | ||||||||||||||||||||
Commercial & Specialty Business | |
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(11.1 | )% | |
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(11.5 | )% | ||||||||||||
Government Business | 13,543.0 | 11,883.4 | 14.0 | % | 26,805.4 | 23,909.1 | 12.1 | % | ||||||||||||
Other | 8.9 | 5.8 | 53.4 | % | 22.4 | 10.0 | 124.0 | % | ||||||||||||
Total Operating Revenue1 | 22,714.8 | 22,198.0 | 2.3 | % | |
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1.2 | % | ||||||||||||
Operating Gain / (Loss) | ||||||||||||||||||||
Commercial & Specialty Business | |
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8.8 | % | |
|
8.4 | % | ||||||||||||
Government Business | 537.4 | 293.3 | 83.2 | % | 1,028.3 | 611.9 | 68.1 | % | ||||||||||||
Other | (31.2 | ) | (34.2 | ) | NM2 | (62.6 | ) | (69.8 | ) | NM2 | ||||||||||
Total Operating Gain1 | |
|
27.1 | % | |
|
21.8 | % | ||||||||||||
Operating Margin | ||||||||||||||||||||
Commercial & Specialty Business | 11.5 | % | 9.4 | % | 210 bp | 13.5 | % | 11.0 | % | 250 bp | ||||||||||
Government Business | 4.0 | % | 2.5 | % | 150 bp | 3.8 | % | 2.6 | % | 120 bp | ||||||||||
Total Operating Margin1 | 6.9 | % | 5.5 | % | 140 bp | 7.6 | % | 6.3 | % | 130 bp |
(1) See “Basis of Presentation.”
(2) "NM" = calculation not meaningful.
Commercial & Specialty Business: Operating gain in the Commercial & Specialty Business segment totaled
Government Business: Operating gain in the Government Business segment was
Other: The Company reported an operating loss of
OUTLOOK
Full Year 2018:
- Net income is now expected to be greater than
$14.20 per share, including approximately$1.20 per share of net unfavorable items. Excluding these items, adjusted net income is now expected to be greater than$15.40 per share (refer to the GAAP reconciliation table). - Medical membership is now expected to be in the range of 39,900,000 - 40,100,000. Fully-insured membership is now expected to be in the range of 14,600,000 - 14,700,000 and self-funded membership is expected to be in the range of 25,300,000 - 25,400,000.
- Operating revenue is expected to be in the range of
$91.0 -$92.0 billion . - Benefit expense ratio is expected to be in the range of 84.4% plus or minus 30 basis points.
- SG&A ratio is expected to be in the range of 15.4% plus or minus 30 basis points.
- Operating cash flow is expected to be greater than
$4.0 billion .
Basis of Presentation
- Operating revenue and operating gain are the key measures used by management to evaluate performance in each of its reporting segments, allocate resources, set incentive compensation targets and to forecast future operating performance. Operating gain is calculated as total operating revenue less benefit expense and selling, general and administrative expense. It does not include net investment income, net realized gains/losses on financial instruments, other-than-temporary impairment losses recognized in income, interest expense, amortization of other intangible assets, gains/losses on extinguishment of debt or income taxes, as these items are managed in a corporate shared service environment and are not the responsibility of operating segment management. Refer to the GAAP reconciliation tables.
- Operating margin is defined as operating gain divided by operating revenue.
Conference Call and Webcast
Management will host a conference call and webcast today at
800-230-1059 (Domestic) | 800-475-6701 (Domestic Replay) | ||||
612-234-9960 (International) | 320-365-3844 (International Replay) |
An access code is not required for today’s conference call. The access code for the replay is 432035. The replay will be available from
About
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Membership Summary | ||||||||||||||||
(Unaudited and in Thousands) | ||||||||||||||||
Change from | ||||||||||||||||
Medical Membership |
June 30,
2018 |
June 30,
2017 |
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June 30,
2017 |
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Customer Type | ||||||||||||||||
Local Group | 15,612 | 15,705 | 15,870 | (0.6 | )% | (1.6 | )% | |||||||||
Individual | 712 | 1,779 | 1,588 | (60.0 | )% | (55.2 | )% | |||||||||
National: | ||||||||||||||||
National Accounts | 7,833 | 7,760 | 7,683 | 0.9 | % | 2.0 | % | |||||||||
BlueCard® | 5,653 | 5,561 | 5,521 | 1.7 | % | 2.4 | % | |||||||||
Total National | 13,486 | 13,321 | 13,204 | 1.2 | % | 2.1 | % | |||||||||
Medicare | 1,738 | 1,484 | 1,545 | 17.1 | % | 12.5 | % | |||||||||
Medicaid | 6,391 | 6,529 | 6,475 | (2.1 | )% | (1.3 | )% | |||||||||
FEP® | 1,560 | 1,569 | 1,562 | (0.6 | )% | (0.1 | )% | |||||||||
Total Medical Membership | 39,499 | 40,387 | 40,244 | (2.2 | )% | (1.9 | )% | |||||||||
Funding Arrangement | ||||||||||||||||
Self-Funded | 25,273 | 24,938 | 24,966 | 1.3 | % | 1.2 | % | |||||||||
Fully-Insured | 14,226 | 15,449 | 15,278 | (7.9 | )% | (6.9 | )% | |||||||||
Total Medical Membership | 39,499 | 40,387 | 40,244 | (2.2 | )% | (1.9 | )% | |||||||||
Reportable Segment | ||||||||||||||||
Commercial & Specialty Business | 29,810 | 30,805 | 30,662 | (3.2 | )% | (2.8 | )% | |||||||||
Government Business | 9,689 | 9,582 | 9,582 | 1.1 | % | 1.1 | % | |||||||||
Total Medical Membership | 39,499 | 40,387 | 40,244 | (2.2 | )% | (1.9 | )% | |||||||||
Other Membership |
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Life and Disability Members | 4,673 | 4,705 | 4,700 | (0.7 | )% | (0.6 | )% | |||||||||
Dental Members | 5,788 | 5,818 | 5,864 | (0.5 | )% | (1.3 | )% | |||||||||
Dental Administration Members | 5,384 | 5,335 | 5,342 | 0.9 | % | 0.8 | % | |||||||||
Vision Members | 6,760 | 6,791 | 6,867 | (0.5 | )% | (1.6 | )% | |||||||||
Medicare Advantage Part D Members | 933 | 679 | 702 | 37.4 | % | 32.9 | % | |||||||||
Medicare Part D Standalone Members | 312 | 322 | 318 | (3.1 | )% | (1.9 | )% |
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Consolidated Statements of Income | |||||||||||
(Unaudited) | |||||||||||
(In millions, except per share data) | Three Months Ended |
||||||||||
2018 | 2017 | Change | |||||||||
Revenues | |||||||||||
Premiums | $ | 21,248.4 | $ | 20,813.1 | 2.1 | % | |||||
Administrative fees and other revenue | 1,466.4 | 1,384.9 | 5.9 | % | |||||||
Total operating revenue | 22,714.8 | 22,198.0 | 2.3 | % | |||||||
Net investment income | 229.3 | 200.2 | 14.5 | % | |||||||
Net realized gains on financial instruments | 4.0 | 16.2 | (75.3 | )% | |||||||
Other-than-temporary impairment losses on investments: | |||||||||||
Total other-than-temporary impairment losses on investments | (4.4 | ) | (7.3 | ) | (39.7 | )% | |||||
Portion of other-than-temporary impairment losses recognized in other comprehensive income | — | 0.1 | NM | ||||||||
Other-than-temporary impairment losses recognized in income | (4.4 | ) | (7.2 | ) | (38.9 | )% | |||||
Total revenues | 22,943.7 | 22,407.2 | 2.4 | % | |||||||
Expenses | |||||||||||
Benefit expense | 17,727.8 | 17,917.2 | (1.1 | )% | |||||||
Selling, general and administrative expense: | |||||||||||
Selling expense | 323.6 | 345.5 | (6.3 | )% | |||||||
General and administrative expense | 3,104.4 | 2,708.3 | 14.6 | % | |||||||
Total selling, general and administrative expense | 3,428.0 | 3,053.8 | 12.3 | % | |||||||
Interest expense | 191.7 | 189.9 | 0.9 | % | |||||||
Amortization of other intangible assets | 93.6 | 40.6 | 130.5 | % | |||||||
Gain on extinguishment of debt | (0.9 | ) | — | NM | |||||||
Total expenses | 21,440.2 | 21,201.5 | 1.1 | % | |||||||
Income before income tax expense | 1,503.5 | 1,205.7 | 24.7 | % | |||||||
Income tax expense | 450.1 | 350.4 | 28.5 | % | |||||||
Net income | $ | 1,053.4 | $ | 855.3 | 23.2 | % | |||||
Net income per diluted share | $ | 3.98 | $ | 3.16 | 25.9 | % | |||||
Diluted shares | 264.5 | 270.8 | (2.3 | )% | |||||||
Benefit expense as a percentage of premiums | 83.4 | % | 86.1 | % | (270 | )bp | |||||
Selling, general and administrative expense as a percentage of total operating revenue | 15.1 | % | 13.8 | % | 130 | bp | |||||
Income before income taxes as a percentage of total revenue | 6.6 | % | 5.4 | % | 120 | bp | |||||
(1) "NM" = calculation not meaningful |
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Consolidated Statements of Income | |||||||||||
(Unaudited) | |||||||||||
(In millions, except per share data) | Six Months Ended |
||||||||||
2018 | 2017 | Change | |||||||||
Revenues | |||||||||||
Premiums | $ | 42,151.2 | $ | 41,764.4 | 0.9 | % | |||||
Administrative fees and other revenue | 2,905.9 | 2,753.1 | 5.6 | % | |||||||
Total operating revenue | 45,057.1 | 44,517.5 | 1.2 | % | |||||||
Net investment income | 458.5 | 407.4 | 12.5 | % | |||||||
Net realized (losses)/gains on financial instruments | (22.1 | ) | 23.5 | NM | |||||||
Other-than-temporary impairment losses on investments: | |||||||||||
Total other-than-temporary impairment losses on investments | (12.3 | ) | (16.9 | ) | (27.2 | )% | |||||
Portion of other-than-temporary impairment losses recognized in other comprehensive income | — | 1.6 | NM | ||||||||
Other-than-temporary impairment losses recognized in income | (12.3 | ) | (15.3 | ) | (19.6 | )% | |||||
Total revenues | 45,481.2 | 44,933.1 | 1.2 | % | |||||||
Expenses | |||||||||||
Benefit expense | 34,773.7 | 35,460.0 | (1.9 | )% | |||||||
Selling, general and administrative expense: | |||||||||||
Selling expense | 641.8 | 694.1 | (7.5 | )% | |||||||
General and administrative expense | 6,214.7 | 5,551.0 | 12.0 | % | |||||||
Total selling, general and administrative expense | 6,856.5 | 6,245.1 | 9.8 | % | |||||||
Interest expense | 375.9 | 424.9 | (11.5 | )% | |||||||
Amortization of other intangible assets | 173.1 | 82.4 | 110.1 | % | |||||||
Loss on extinguishment of debt | 18.2 | — | NM | ||||||||
Total expenses | 42,197.4 | 42,212.4 | — | % | |||||||
Income before income tax expense | 3,283.8 | 2,720.7 | 20.7 | % | |||||||
Income tax expense | 917.9 | 855.5 | 7.3 | % | |||||||
Net income | $ | 2,365.9 | $ | 1,865.2 | 26.8 | % | |||||
Net income per diluted share | $ | 8.97 | $ | 6.89 | 30.2 | % | |||||
Diluted shares | 263.7 | 270.6 | (2.5 | )% | |||||||
Benefit expense as a percentage of premiums | 82.5 | % | 84.9 | % | (240 | )bp | |||||
Selling, general and administrative expense as a percentage of total operating revenue | 15.2 | % | 14.0 | % | 120 | bp | |||||
Income before income taxes as a percentage of total revenue | 7.2 | % | 6.1 | % | 110 | bp | |||||
(1) "NM" = calculation not meaningful |
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Consolidated Balance Sheets | |||||||
(In millions) | 2018 |
2017 |
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Assets | (Unaudited) | ||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 4,682.0 | $ | 3,608.9 | |||
Fixed maturity securities | 17,081.6 | 17,377.3 | |||||
Equity securities | 2,435.3 | 3,599.2 | |||||
Other invested assets, current | 23.8 | 17.2 | |||||
Accrued investment income | 161.6 | 162.5 | |||||
Premium receivables | 4,268.3 | 3,605.2 | |||||
Self-funded receivables | 2,650.0 | 2,579.7 | |||||
Other receivables | 2,182.6 | 2,266.5 | |||||
Income taxes receivable | 154.5 | 341.9 | |||||
Securities lending collateral | 624.6 | 455.1 | |||||
Other current assets | 3,106.1 | 2,249.3 | |||||
Total current assets | 37,370.4 | 36,262.8 | |||||
Long-term investments: | |||||||
Fixed maturity securities | 487.5 | 560.8 | |||||
Equity securities | 32.9 | 32.8 | |||||
Other invested assets | 3,495.2 | 3,343.8 | |||||
Property and equipment, net | 2,392.2 | 2,174.9 | |||||
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20,414.5 | 19,231.2 | |||||
Other intangible assets | 9,224.3 | 8,368.4 | |||||
Other noncurrent assets | 950.4 | 565.3 | |||||
Total assets | $ | 74,367.4 | $ | 70,540.0 | |||
Liabilities and shareholders’ equity | |||||||
Liabilities | |||||||
Current liabilities: | |||||||
Policy liabilities: | |||||||
Medical claims payable | $ | 7,545.3 | $ | 7,991.5 | |||
Reserves for future policy benefits | 72.1 | 69.9 | |||||
Other policyholder liabilities | 3,009.8 | 2,950.3 | |||||
Total policy liabilities | 10,627.2 | 11,011.7 | |||||
Unearned income | 2,089.9 | 860.3 | |||||
Accounts payable and accrued expenses | 5,931.4 | 5,024.4 | |||||
Security trades pending payable | 159.9 | 112.6 | |||||
Securities lending payable | 624.3 | 454.4 | |||||
Short-term borrowings | 1,120.0 | 1,275.0 | |||||
Current portion of long-term debt | 650.2 | 1,274.6 | |||||
Other current liabilities | 3,302.8 | 3,343.0 | |||||
Total current liabilities | 24,505.7 | 23,356.0 | |||||
Long-term debt, less current portion | 17,515.4 | 17,382.2 | |||||
Reserves for future policy benefits, noncurrent | 644.7 | 647.3 | |||||
Deferred tax liabilities, net | 1,902.2 | 1,726.5 | |||||
Other noncurrent liabilities | 1,074.4 | 925.1 | |||||
Total liabilities | 45,642.4 | 44,037.1 | |||||
Shareholders’ equity | |||||||
Common stock | 2.6 | 2.6 | |||||
Additional paid-in capital | 9,747.9 | 8,547.4 | |||||
Retained earnings | 19,757.3 | 18,054.4 | |||||
Accumulated other comprehensive loss | (782.8 | ) | (101.5 | ) | |||
Total shareholders’ equity | 28,725.0 | 26,502.9 | |||||
Total liabilities and shareholders’ equity | $ | 74,367.4 | $ | 70,540.0 |
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Consolidated Statements of Cash Flows | |||||||
(Unaudited) | |||||||
(In millions) | Six Months Ended |
||||||
2018 | 2017 | ||||||
Operating activities | |||||||
Net income | |
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Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Net realized losses/(gains) on financial instruments | 22.1 | (23.5 | ) | ||||
Other-than-temporary impairment losses recognized in income | 12.3 | 15.3 | |||||
Loss on extinguishment of debt | 18.2 | — | |||||
Loss on disposal of assets | 0.5 | 0.4 | |||||
Deferred income taxes | 1.9 | (209.9 | ) | ||||
Amortization, net of accretion | 495.1 | 385.0 | |||||
Depreciation expense | 60.6 | 54.5 | |||||
Share-based compensation | 78.1 | 87.1 | |||||
Changes in operating assets and liabilities: | |||||||
Receivables, net | (570.1 | ) | (134.7 | ) | |||
Other invested assets | (11.0 | ) | (22.4 | ) | |||
Other assets | (445.2 | ) | (322.4 | ) | |||
Policy liabilities | (609.9 | ) | 254.0 | ||||
Unearned income | 1,157.6 | 865.9 | |||||
Accounts payable and accrued expenses | 28.8 | (53.0 | ) | ||||
Other liabilities | 70.1 | 81.5 | |||||
Income taxes | 187.4 | 281.7 | |||||
Other, net | (105.3 | ) | (43.4 | ) | |||
Net cash provided by operating activities | 2,757.1 | 3,081.3 | |||||
Investing activities | |||||||
Purchases of fixed maturity securities | (4,885.8 | ) | (7,637.0 | ) | |||
Proceeds from sales and maturities of fixed maturity securities | 4,881.1 | 6,119.3 | |||||
Purchases of equity securities | (657.9 | ) | (506.0 | ) | |||
Proceeds from sales of equity securities | 1,777.1 | 214.7 | |||||
Purchases of other invested assets | (246.7 | ) | (162.3 | ) | |||
Proceeds from sales of other invested assets | 197.8 | 121.8 | |||||
Change in collateral and settlements of non-hedging derivatives | — | (2.1 | ) | ||||
Changes in securities lending collateral | (170.0 | ) | (134.8 | ) | |||
Purchases of subsidiaries, net of cash acquired | (1,722.5 | ) | — | ||||
Net purchases of property and equipment | (532.5 | ) | (294.2 | ) | |||
Other, net | 15.2 | 11.8 | |||||
Net cash used in investing activities | (1,344.2 | ) | (2,268.8 | ) | |||
Financing activities | |||||||
Net (repayments of)/proceeds from commercial paper borrowings | (703.7 | ) | 1,347.8 | ||||
Net (repayments of)/proceeds from short-term borrowings | (155.0 | ) | 140.0 | ||||
Net proceeds from/(repayments of) long-term borrowings | 171.9 | (929.9 | ) | ||||
Changes in securities lending payable | 169.9 | 134.8 | |||||
Changes in bank overdrafts | 69.4 | (146.2 | ) | ||||
Proceeds from equity put options | 0.3 | — | |||||
Proceeds from issuance of common stock under Equity Unit contracts | 1,250.0 | — | |||||
Repurchase and retirement of common stock | (795.0 | ) | (509.0 | ) | |||
Change in collateral and settlements of debt-related derivatives | 21.9 | (128.4 | ) | ||||
Cash dividends | (388.3 | ) | (344.0 | ) | |||
Proceeds from issuance of common stock under employee stock plans | 94.8 | 151.0 | |||||
Taxes paid through withholding of common stock under employee stock plans | (75.6 | ) | (45.6 | ) | |||
Net cash (used in) financing activities | (339.4 | ) | (329.5 | ) | |||
Effect of foreign exchange rates on cash and cash equivalents | (0.4 | ) | 2.9 | ||||
Change in cash and cash equivalents | 1,073.1 | 485.9 | |||||
Cash and cash equivalents at beginning of year | 3,608.9 | 4,075.3 | |||||
Cash and cash equivalents at end of period | |
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Reconciliation of Medical Claims Payable | |||||||||||||||||||||
Six Months Ended |
Years Ended |
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2018 | 2017 | 2017 | 2016 | 2015 | |||||||||||||||||
(In millions) | (Unaudited) | (Unaudited) | |||||||||||||||||||
Gross medical claims payable, beginning of period | $ | 7,991.5 | $ | 7,892.6 | $ | 7,892.6 | $ | 7,569.8 | $ | 6,861.2 | |||||||||||
Ceded medical claims payable, beginning of period | (104.9 | ) | (539.1 | ) | (539.1 | ) | (645.6 | ) | (767.4 | ) | |||||||||||
Net medical claims payable, beginning of period | 7,886.6 | 7,353.5 | 7,353.5 | 6,924.2 | 6,093.8 | ||||||||||||||||
Business combinations and purchase adjustments | 199.2 | — | 75.8 | — | 121.8 | ||||||||||||||||
Net incurred medical claims: | |||||||||||||||||||||
Current year | 34,733.8 | 35,686.5 | 71,872.3 | 66,371.4 | 60,708.4 | ||||||||||||||||
Prior years redundancies(1) | (804.5 | ) | (951.0 | ) | (1,164.6 | ) | (850.4 | ) | (800.2 | ) | |||||||||||
Total net incurred medical claims | 33,929.3 | 34,735.5 | 70,707.7 | 65,521.0 | 59,908.2 | ||||||||||||||||
Net payments attributable to: | |||||||||||||||||||||
Current year medical claims | 28,146.4 | 28,540.4 | 64,249.7 | 59,156.6 | 54,067.7 | ||||||||||||||||
Prior years medical claims | 6,358.2 | 6,070.9 | 6,000.7 | 5,935.1 | 5,131.9 | ||||||||||||||||
Total net payments | 34,504.6 | 34,611.3 | 70,250.4 | 65,091.7 | 59,199.6 | ||||||||||||||||
Net medical claims payable, end of period | 7,510.5 | 7,477.7 | 7,886.6 | 7,353.5 | 6,924.2 | ||||||||||||||||
Ceded medical claims payable, end of period | 34.8 | 491.8 | 104.9 | 539.1 | 645.6 | ||||||||||||||||
Gross medical claims payable, end of period | $ | 7,545.3 | $ | 7,969.5 | $ | 7,991.5 | $ | 7,892.6 | $ | 7,569.8 | |||||||||||
Current year medical claims paid as a percentage of current year net incurred medical claims | 81.0 | % | 80.0 | % | 89.4 | % | 89.1 | % | 89.1 | % | |||||||||||
Prior year redundancies in the current year as a percentage of prior year net medical claims payable less prior year redundancies in the current year | 11.4 | % | 14.9 | % | 18.8 | % | 14.0 | % | 15.1 | % | |||||||||||
Prior year redundancies in the current year as a percentage of prior year net incurred medical claims | 1.1 | % | 1.5 | % | 1.8 | % | 1.4 | % | 1.4 | % | |||||||||||
(1) Negative amounts reported for net incurred medical claims related to prior years result from claims being settled for amounts less than originally estimated. |
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GAAP Reconciliation
(Unaudited)
Three Months Ended |
Six Months Ended |
|||||||||||||||||||||||
(In millions, except per share data) | 2018 | 2017 | Change | 2018 | 2017 | Change | ||||||||||||||||||
Net income | $ | 1,053.4 | $ | 855.3 | 23.2 | % | $ | 2,365.9 | $ | 1,865.2 | 26.8 | % | ||||||||||||
Add / (Subtract): | ||||||||||||||||||||||||
Net realized losses/(gains) on financial instruments | (4.0 | ) | (16.2 | ) | 22.1 | (23.5 | ) | |||||||||||||||||
Amortization of other intangible assets | 93.6 | 40.6 | 173.1 | 82.4 | ||||||||||||||||||||
Other-than-temporary impairment losses recognized in income | 4.4 | 7.2 | 12.3 | 15.3 | ||||||||||||||||||||
(Gain)/Loss on extinguishment of debt | (0.9 | ) | — | 18.2 | — | |||||||||||||||||||
2015 cyber attack litigation | — | 115.0 | — | 115.0 | ||||||||||||||||||||
Transaction related costs | — | 51.2 | 9.0 | 150.9 | ||||||||||||||||||||
Penn Treaty assessment costs | — | — | — | — | 253.8 | |||||||||||||||||||
Income tax true-up of prior transaction costs | — | (69.3 | ) | — | (69.3 | ) | ||||||||||||||||||
Tax impact of non-GAAP adjustments | (22.6 | ) | (71.4 | ) | (55.9 | ) | (212.0 | ) | ||||||||||||||||
Net adjustment items | 70.5 | 57.1 | 178.8 | 312.6 | ||||||||||||||||||||
Adjusted net income | $ | 1,123.9 | $ | 912.4 | 23.2 | % | $ | 2,544.7 | $ | 2,177.8 | 16.8 | % | ||||||||||||
Net income per diluted share | $ | 3.98 | $ | 3.16 | 25.9 | % | $ | 8.97 | $ | 6.89 | 30.2 | % | ||||||||||||
Add / (Subtract): | ||||||||||||||||||||||||
Net realized losses/(gains) on financial instruments | (0.02 | ) | (0.06 | ) | 0.08 | (0.09 | ) | |||||||||||||||||
Amortization of other intangible assets | 0.35 | 0.15 | 0.66 | 0.30 | ||||||||||||||||||||
Other-than-temporary impairment losses recognized in income | 0.02 | 0.03 | 0.05 | 0.06 | ||||||||||||||||||||
Loss on extinguishment of debt | — | — | 0.07 | — | ||||||||||||||||||||
2015 cyber attack litigation | — | 0.42 | — | 0.42 | ||||||||||||||||||||
Transaction related costs | — | 0.19 | 0.03 | 0.56 | ||||||||||||||||||||
Penn Treaty assessment costs | — | — | — | 0.94 | ||||||||||||||||||||
Income tax true-up of prior transaction costs | — | (0.26 | ) | — | (0.26 | ) | ||||||||||||||||||
Tax impact of non-GAAP adjustments | (0.09 | ) | (0.26 | ) | (0.21 | ) | (0.78 | ) | ||||||||||||||||
Rounding Impact | 0.01 | — | — | 0.01 | ||||||||||||||||||||
Net adjustment items | 0.27 | 0.21 | 0.68 | 1.16 | ||||||||||||||||||||
Adjusted net income per diluted share | $ | 4.25 | $ | 3.37 | 26.1 | % | $ | 9.65 | $ | 8.05 | 19.9 | % | ||||||||||||
Full Year 2018 Outlook | ||||||||||||||||||||||||
Net income per diluted share | Greater than |
|||||||||||||||||||||||
Add / (Subtract): | ||||||||||||||||||||||||
Net realized losses on financial instruments | 0.08 | |||||||||||||||||||||||
Other-than-temporary impairment losses recognized in income | 0.05 | |||||||||||||||||||||||
Loss on extinguishment of debt | 0.07 | |||||||||||||||||||||||
Transaction related costs | 0.03 | |||||||||||||||||||||||
Amortization of other intangible assets | Approximately |
|||||||||||||||||||||||
Tax impact of non-GAAP adjustments | Approximately ( |
|||||||||||||||||||||||
Net adjustment items | Approximately |
|||||||||||||||||||||||
Adjusted net income per diluted share | Greater than |
|||||||||||||||||||||||
Three Months Ended |
Six Months Ended |
|||||||||||||||||||||||
(In millions) | 2018 | 2017 | Change | 2018 | 2017 | Change | ||||||||||||||||||
Reportable segments operating gain | $ | 1,559.0 | $ | 1,227.0 | 27.1 | % | $ | 3,426.9 | $ | 2,812.4 | 21.8 | % | ||||||||||||
Net investment income | 229.3 | 200.2 | 458.5 | 407.4 | ||||||||||||||||||||
Net realized gains/(losses) on financial instruments | 4.0 | 16.2 | (22.1 | ) | 23.5 | |||||||||||||||||||
Other-than-temporary impairment losses recognized in income | (4.4 | ) | (7.2 | ) | (12.3 | ) | (15.3 | ) | ||||||||||||||||
Interest expense | (191.7 | ) | (189.9 | ) | (375.9 | ) | (424.9 | ) | ||||||||||||||||
Amortization of other intangible assets | (93.6 | ) | (40.6 | ) | (173.1 | ) | (82.4 | ) | ||||||||||||||||
Loss on extinguishment of debt | 0.9 | — | (18.2 | ) | — | |||||||||||||||||||
Income before income tax expense | $ | 1,503.5 | $ | 1,205.7 | 24.7 | % | $ | 3,283.8 | $ | 2,720.7 | 20.7 | % | ||||||||||||
Forward-Looking Statements
This document contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements reflect our views about future events and financial performance and are generally not historical facts. Words such as “expect,” “feel,” “believe,” “will,” “may,” “should,” “anticipate,” “intend,” “estimate,” “project,” “forecast,” “plan” and similar expressions are intended to identify forward-looking statements. These statements include, but are not limited to: financial projections and estimates and their underlying assumptions; statements regarding plans, objectives and expectations with respect to future operations, products and services; and statements regarding future performance. Such statements are subject to certain risks and uncertainties, many of which are difficult to predict and generally beyond our control, that could cause actual results to differ materially from those expressed in, or implied or projected by, the forward-looking statements. You are cautioned not to place undue reliance on these forward-looking statements that speak only as of the date hereof. You are also urged to carefully review and consider the various risks and other disclosures discussed in our reports filed with the
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