Anthem Reports Third Quarter 2017 Results
- Net income was
$2.80 per share, including net positive adjustment items of$0.15 per share. Adjusted net income was$2.65 per share (refer to the GAAP reconciliation table). - Medical enrollment has increased by approximately 0.3 million members in 2017, or 0.8%, totaling approximately 40.3 million members as of
September 30, 2017 . - Company now expects medical enrollment to grow by nearly 100 - 300 thousand members for the full year 2017.
- Full year 2017 GAAP net income is now expected to in the range of
$10.80 -$10.90 per share. Full year adjusted net income is now expected to be in the range of$11.90 -$12.00 per share (refer to the GAAP reconciliation table). - Fourth quarter 2017 dividend of
$0.70 per share declared to shareholders.
Excluding the items noted in each period, adjusted net income was
“Our solid third quarter 2017 results reflect continued operating momentum across our Commercial and Government businesses and our focus on improving affordability and choice for our customers. We are committed to advancing our ability to improve the quality and affordability of healthcare," said
“We continue to be pleased with the execution of our business segments during 2017 and have increased our 2017 outlook to reflect the strong performance during the third quarter,” said
CONSOLIDATED HIGHLIGHTS
Membership: Medical enrollment totaled approximately 40.3 million members at
Medical enrollment declined by 130 thousand, or 0.3 percent, sequentially during the third quarter of 2017. The decrease reflected enrollment declines in the National, Medicaid, and Individual businesses, partially offset by growth in the
Operating Revenue: Operating revenue was
Benefit Expense Ratio: The benefit expense ratio was 87.0 percent in the third quarter of 2017, an increase of 150 basis points from 85.5 percent in the prior year quarter. The increase, as expected, was largely driven by the impact of the one year waiver of the health insurance tax in 2017. The increase was partially offset by the impact of a retroactive revenue adjustment in the Medicaid business and improved medical cost performance in the
Medical claims reserves established at
Medical Cost Trend: For the full year 2017, the Company now expects underlying Local Group medical cost trend to be in the range of 6.5% - 7.0%, with a bias toward the low end of the range.
Days in Claims Payable: Days in Claims Payable (“DCP”) was 40.5 days as of
SG&A Expense Ratio: The SG&A expense ratio was 13.6 percent in the third quarter of 2017, a decrease of 120 basis points from 14.8 percent in the third quarter of 2016. The decrease, as expected, was primarily driven by the impact of the one year waiver of the health insurance tax in 2017 and the impact of fixed cost leverage on operating revenue growth. These items were partially offset by the impact of increased spend to support growth initiatives during the current year quarter.
Operating Cash Flow: Operating cash flow was
Share Repurchase Program: During the third quarter of 2017, the Company repurchased 5.9 million shares of its common stock for
Cash Dividend: During the third quarter of 2017, the Company paid a quarterly dividend of
On
Investment Portfolio & Capital Position: During the third quarter of 2017, 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 |
Nine Months Ended |
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2017 | 2016 | Change | 2017 | 2016 | Change | |||||||||||||||
Operating Revenue | ||||||||||||||||||||
Commercial & Specialty Business | |
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4.1 | % | |
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5.5 | % | ||||||||||||
Government Business | 12,037.3 | 11,462.4 | 5.0 | % | 35,946.4 | 33,627.4 | 6.9 | % | ||||||||||||
Other | 7.3 | 6.0 | 21.7 | % | 17.3 | 16.8 | 3.0 | % | ||||||||||||
Total Operating Revenue1 | |
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4.6 | % | |
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6.2 | % | ||||||||||||
Operating Gain / (Loss) | ||||||||||||||||||||
Commercial & Specialty Business | |
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(16.2 | )% | |
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(6.7 | )% | ||||||||||||
Government Business | 457.5 | 478.9 | (4.5 | )% | 1,069.4 | 1,254.4 | (14.7 | )% | ||||||||||||
Other | (10.1 | ) | (38.5 | ) | NM2 | (79.9 | ) | (111.7 | ) | NM2 | ||||||||||
Total Operating Gain1 | |
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(8.9 | )% | |
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(8.5 | )% | ||||||||||||
Operating Margin | ||||||||||||||||||||
Commercial & Specialty Business | 5.3 | % | 6.6 | % | (130) bp | 9.2 | % | 10.3 | % | (110) bp | ||||||||||
Government Business | 3.8 | % | 4.2 | % | (40) bp | 3.0 | % | 3.7 | % | (70) bp | ||||||||||
Total Operating Margin1 | 4.4 | % | 5.1 | % | (70) bp | 5.7 | % | 6.6 | % | (90) bp | ||||||||||
(1) See “Basis of Presentation.” (2) "NM" = calculation not meaningful. |
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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 2017*:
- Net income is now expected to be in the range of
$10.80 -$10.90 per share, including approximately$1.10 per share of net unfavorable items. Excluding these items, adjusted net income is now expected to be in the range of$11.90 -$12.00 per share (refer to the GAAP reconciliation table). - Medical membership is now expected to be in the range of 40,000,000 - 40,200,000. Fully insured membership is now expected to be in the range of 15,100,000 - 15,200,000 and self-funded membership is now expected to be in the range of 24,900,000 - 25,000,000.
- Operating revenue is expected to be in the range of
$88.5 -$89.5 billion . - Benefit expense ratio is now expected to be in the range of 86.8% plus or minus 30 basis points.
- SG&A ratio is now expected to be in the range of 13.8% plus or minus 30 basis points.
- Operating cash flow is now expected to be greater than
$4.0 billion .
* This outlook includes the impact of the Penn Treaty assessments, 2015 cyber attack litigation settlement, and terminated Cigna acquisition transaction costs incurred during the first nine months of 2017, but does not include any transaction or legal costs associated with the terminated Cigna acquisition beyond those incurred in the first nine months of 2017.
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
800-230-1092 (Domestic) | 800-475-6701 (Domestic Replay) | ||||||||||
612-288-0337 (International) | 320-365-3844 (International Replay) | ||||||||||
An access code is not required for today’s conference call. The access code for the replay is 403160. The replay will be available from
About
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Membership Summary | |||||||||||||||||
(Unaudited and in Thousands) | |||||||||||||||||
Change from | |||||||||||||||||
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Medical Membership |
2017 | 2016 | 2016 | 2016 | 2016 | ||||||||||||
Customer Type | |||||||||||||||||
Local Group | 15,857 | 15,363 | 15,429 | 3.2 | % | 2.8 | % | ||||||||||
Individual | 1,696 | 1,757 | 1,664 | (3.5 | )% | 1.9 | % | ||||||||||
National: | |||||||||||||||||
National Accounts | 7,718 | 7,768 | 7,741 | (0.6 | )% | (0.3 | )% | ||||||||||
BlueCard® | 5,491 | 5,596 | 5,550 | (1.9 | )% | (1.1 | )% | ||||||||||
Total National | 13,209 | 13,364 | 13,291 | (1.2 | )% | (0.6 | )% | ||||||||||
Medicare | 1,498 | 1,437 | 1,438 | 4.2 | % | 4.2 | % | ||||||||||
Medicaid | 6,433 | 6,417 | 6,527 | 0.2 | % | (1.4 | )% | ||||||||||
FEP | 1,564 | 1,572 | 1,570 | (0.5 | )% | (0.4 | )% | ||||||||||
Total Medical Membership | 40,257 | 39,910 | 39,919 | 0.9 | % | 0.8 | % | ||||||||||
Funding Arrangement | |||||||||||||||||
Self-Funded | 24,945 | 24,671 | 24,688 | 1.1 | % | 1.0 | % | ||||||||||
Fully-Insured | 15,312 | 15,239 | 15,231 | 0.5 | % | 0.5 | % | ||||||||||
Total Medical Membership | 40,257 | 39,910 | 39,919 | 0.9 | % | 0.8 | % | ||||||||||
Reportable Segment | |||||||||||||||||
Commercial & Specialty Business | 30,762 | 30,484 | 30,384 | 0.9 | % | 1.2 | % | ||||||||||
Government Business | 9,495 | 9,426 | 9,535 | 0.7 | % | (0.4 | )% | ||||||||||
Total Medical Membership | 40,257 | 39,910 | 39,919 | 0.9 | % | 0.8 | % | ||||||||||
Other Membership |
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Life and Disability Members | 4,717 | 4,689 | 4,732 | 0.6 | % | (0.3 | )% | ||||||||||
Dental Members | 5,803 | 5,454 | 5,486 | 6.4 | % | 5.8 | % | ||||||||||
Dental Administration Members | 5,351 | 5,377 | 5,294 | (0.5 | )% | 1.1 | % | ||||||||||
Vision Members | 6,905 | 6,111 | 6,388 | 13.0 | % | 8.1 | % | ||||||||||
Medicare Advantage Part D Members | 693 | 619 | 629 | 12.0 | % | 10.2 | % | ||||||||||
Medicare Part D Standalone Members | 320 | 353 | 350 | (9.3 | )% | (8.6 | )% |
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Consolidated Statements of Income | |||||||||||
(Unaudited) | |||||||||||
(In millions, except per share data) | Three Months Ended |
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2017 | 2016 | Change | |||||||||
Revenues | |||||||||||
Premiums | $ | 20,797.0 | $ | 19,786.1 | 5.1 | % | |||||
Administrative fees | 1,289.2 | 1,330.0 | (3.1 | )% | |||||||
Other revenue | 10.5 | 9.1 | 15.4 | % | |||||||
Total operating revenue | 22,096.7 | 21,125.2 | 4.6 | % | |||||||
Net investment income | 220.2 | 200.9 | 9.6 | % | |||||||
Net realized gains on financial instruments | 114.7 | 88.8 | 29.2 | % | |||||||
Other-than-temporary impairment losses on investments: | |||||||||||
Total other-than-temporary impairment losses on investments | (5.6 | ) | (15.1 | ) | (62.9 | )% | |||||
Portion of other-than-temporary impairment losses recognized in other comprehensive income | — | 4.1 | (100.0 | )% | |||||||
Other-than-temporary impairment losses recognized in income | (5.6 | ) | (11.0 | ) | (49.1 | )% | |||||
Total revenues | 22,426.0 | 21,403.9 | 4.8 | % | |||||||
Expenses | |||||||||||
Benefit expense | 18,103.6 | 16,922.5 | 7.0 | % | |||||||
Selling, general and administrative expense: | |||||||||||
Selling expense | 347.9 | 338.5 | 2.8 | % | |||||||
General and administrative expense | 2,663.2 | 2,786.1 | (4.4 | )% | |||||||
Total selling, general and administrative expense | 3,011.1 | 3,124.6 | (3.6 | )% | |||||||
Interest expense | 150.5 | 172.9 | (13.0 | )% | |||||||
Amortization of other intangible assets | 41.9 | 47.4 | (11.6 | )% | |||||||
Total expenses | 21,307.1 | 20,267.4 | 5.1 | % | |||||||
Income before income tax expense | 1,118.9 | 1,136.5 | (1.5 | )% | |||||||
Income tax expense | 372.0 | 518.7 | (28.3 | )% | |||||||
Net income | $ | 746.9 | $ | 617.8 | 20.9 | % | |||||
Net income per diluted share | $ | 2.80 | $ | 2.30 | 21.7 | % | |||||
Diluted shares | 267.0 | 268.1 | (0.4 | )% | |||||||
Benefit expense as a percentage of premiums | 87.0 | % | 85.5 | % | 150 | bp | |||||
Selling, general and administrative expense as a percentage of total operating revenue | 13.6 | % | 14.8 | % | (120 | )bp | |||||
Income before income taxes as a percentage of total revenue | 5.0 | % | 5.3 | % | (30 | )bp |
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Consolidated Statements of Income | |||||||||||
(Unaudited) | |||||||||||
(In millions, except per share data) | Nine Months Ended |
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2017 | 2016 | Change | |||||||||
Revenues | |||||||||||
Premiums | $ | 62,561.4 | $ | 58,723.0 | 6.5 | % | |||||
Administrative fees | 4,031.3 | 3,956.8 | 1.9 | % | |||||||
Other revenue | 21.5 | 29.3 | (26.6 | )% | |||||||
Total operating revenue | 66,614.2 | 62,709.1 | 6.2 | % | |||||||
Net investment income | 627.6 | 566.9 | 10.7 | % | |||||||
Net realized gains (losses) on financial instruments | 138.2 | (23.8 | ) |
NM1 |
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Other-than-temporary impairment losses on investments: | |||||||||||
Total other-than-temporary impairment losses on investments | (22.5 | ) | (134.1 | ) | (83.2 | )% | |||||
Portion of other-than-temporary impairment losses recognized in other comprehensive income | 1.6 | 30.5 | (94.8 | )% | |||||||
Other-than-temporary impairment losses recognized in income | (20.9 | ) | (103.6 | ) | (79.8 | )% | |||||
Total revenues | 67,359.1 | 63,148.6 | 6.7 | % | |||||||
Expenses | |||||||||||
Benefit expense | 53,563.6 | 49,266.5 | 8.7 | % | |||||||
Selling, general and administrative expense: | |||||||||||
Selling expense | 1,042.0 | 1,039.9 | 0.2 | % | |||||||
General and administrative expense | 8,214.2 | 8,254.0 | (0.5 | )% | |||||||
Total selling, general and administrative expense | 9,256.2 | 9,293.9 | (0.4 | )% | |||||||
Interest expense | 575.4 | 545.7 | 5.4 | % | |||||||
Amortization of other intangible assets | 124.3 | 145.7 | (14.7 | )% | |||||||
Total expenses | 63,519.5 | 59,251.8 | 7.2 | % | |||||||
Income before income tax expense | 3,839.6 | 3,896.8 | (1.5 | )% | |||||||
Income tax expense | 1,227.5 | 1,795.4 | (31.6 | )% | |||||||
Net income | $ | 2,612.1 | $ | 2,101.4 | 24.3 | % | |||||
Net income per diluted share | $ | 9.70 | $ | 7.84 | 23.7 | % | |||||
Diluted shares | 269.4 | 267.9 | 0.6 | % | |||||||
Benefit expense as a percentage of premiums | 85.6 | % | 83.9 | % | 170 | bp | |||||
Selling, general and administrative expense as a percentage of total operating revenue | 13.9 | % | 14.8 | % | (90 | )bp | |||||
Income before income taxes as a percentage of total revenue | 5.7 | % | 6.2 | % | (50 | )bp | |||||
(1) "NM" = calculation not meaningful |
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Consolidated Balance Sheets | |||||||||
(In millions) | 2017 |
2016 |
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Assets | (Unaudited) | ||||||||
Current assets: | |||||||||
Cash and cash equivalents | $ | 6,097.2 | $ | 4,075.3 | |||||
Investments available-for-sale, at fair value: | |||||||||
Fixed maturity securities | 18,697.3 | 17,163.1 | |||||||
Equity securities | 1,452.6 | 1,468.5 | |||||||
Other invested assets, current | 16.9 | 15.8 | |||||||
Accrued investment income | 158.3 | 164.5 | |||||||
Premium and self-funded receivables | 5,692.0 | 5,860.8 | |||||||
Other receivables | 2,130.2 | 2,536.6 | |||||||
Income taxes receivable | — | 168.7 | |||||||
Securities lending collateral | 907.2 | 1,079.8 | |||||||
Other current assets | 1,822.0 | 1,781.8 | |||||||
Total current assets | 36,973.7 | 34,314.9 | |||||||
Long-term investments available-for-sale, at fair value: | |||||||||
Fixed maturity securities | 533.3 | 524.4 | |||||||
Equity securities | 32.3 | 31.4 | |||||||
Other invested assets, long-term | 2,442.1 | 2,240.5 | |||||||
Property and equipment, net | 2,049.2 | 1,977.9 | |||||||
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17,587.8 | 17,561.2 | |||||||
Other intangible assets | 7,840.6 | 7,964.9 | |||||||
Other noncurrent assets | 850.9 | 467.9 | |||||||
Total assets | $ | 68,309.9 | $ | 65,083.1 | |||||
Liabilities and shareholders’ equity | |||||||||
Liabilities | |||||||||
Current liabilities: | |||||||||
Policy liabilities: | |||||||||
Medical claims payable | $ | 7,963.9 | $ | 7,892.6 | |||||
Reserves for future policy benefits | 72.1 | 71.8 | |||||||
Other policyholder liabilities | 2,471.7 | 2,221.1 | |||||||
Total policy liabilities | 10,507.7 | 10,185.5 | |||||||
Unearned income | 1,950.2 | 971.9 | |||||||
Accounts payable and accrued expenses | 4,454.2 | 4,014.9 | |||||||
Income taxes payable | 187.5 | — | |||||||
Security trades pending payable | 164.7 | 93.5 | |||||||
Securities lending payable | 906.4 | 1,078.9 | |||||||
Short-term borrowings | 1,180.0 | 440.0 | |||||||
Current portion of long-term debt | 1,273.4 | 928.4 | |||||||
Other current liabilities | 3,788.4 | 3,581.3 | |||||||
Total current liabilities | 24,412.5 | 21,294.4 | |||||||
Long-term debt, less current portion | 13,777.3 | 14,358.5 | |||||||
Reserves for future policy benefits, noncurrent | 618.5 | 666.1 | |||||||
Deferred tax liabilities, net | 2,609.3 | 2,779.9 | |||||||
Other noncurrent liabilities | 944.0 | 883.8 | |||||||
Total liabilities | 42,361.6 | 39,982.7 | |||||||
Shareholders’ equity | |||||||||
Common stock | 2.6 | 2.6 | |||||||
Additional paid-in capital | 8,765.1 | 8,805.1 | |||||||
Retained earnings | 17,306.6 | 16,560.6 | |||||||
Accumulated other comprehensive loss | (126.0 | ) | (267.9 | ) | |||||
Total shareholders’ equity | 25,948.3 | 25,100.4 | |||||||
Total liabilities and shareholders’ equity | $ | 68,309.9 | $ | 65,083.1 |
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Consolidated Statements of Cash Flows | |||||||
(Unaudited) | |||||||
(In millions) | Nine Months Ended |
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2017 | 2016 | ||||||
Operating activities | |||||||
Net income | |
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Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Net realized (gains) losses on financial instruments | (138.2 | ) | 23.8 | ||||
Other-than-temporary impairment losses recognized in income | 20.9 | 103.6 | |||||
Loss on disposal of assets | 3.5 | 3.5 | |||||
Deferred income taxes | (237.5 | ) | 81.6 | ||||
Amortization, net of accretion | 581.2 | 601.7 | |||||
Depreciation expense | 81.7 | 77.7 | |||||
Share-based compensation | 130.7 | 124.3 | |||||
Excess tax benefits from share-based compensation | — | (48.7 | ) | ||||
Changes in operating assets and liabilities: | |||||||
Receivables, net | 611.6 | (176.2 | ) | ||||
Other invested assets | (26.2 | ) | (17.7 | ) | |||
Other assets | (517.0 | ) | (925.2 | ) | |||
Policy liabilities | 274.6 | (249.5 | ) | ||||
Unearned income | 969.8 | 467.9 | |||||
Accounts payable and accrued expenses | 563.7 | 86.9 | |||||
Other liabilities | 251.0 | 381.6 | |||||
Income taxes | 356.2 | 410.6 | |||||
Other, net | (52.1 | ) | (53.9 | ) | |||
Net cash provided by operating activities | 5,486.0 | 2,993.4 | |||||
Investing activities | |||||||
Purchases of fixed maturity securities | (10,270.5 | ) | (7,624.0 | ) | |||
Proceeds from sales and maturities of fixed maturity securities | 9,055.9 | 6,980.3 | |||||
Purchases of equity securities | (481.3 | ) | (1,178.3 | ) | |||
Proceeds from sales of equity securities | 620.8 | 1,210.4 | |||||
Purchases of other invested assets | (252.8 | ) | (348.3 | ) | |||
Proceeds from sales of other invested assets | 163.7 | 273.1 | |||||
Change in collateral and settlements of non-hedging derivatives | 64.9 | (21.0 | ) | ||||
Changes in securities lending collateral | 172.5 | (58.4 | ) | ||||
Purchases of subsidiaries, net of cash acquired | (33.9 | ) | — | ||||
Net purchases of property and equipment | (512.9 | ) | (415.6 | ) | |||
Other, net | 11.9 | (3.0 | ) | ||||
Net cash used in investing activities | (1,461.7 | ) | (1,184.8 | ) | |||
Financing activities | |||||||
Net proceeds from/(repayments of) commercial paper borrowings | 686.5 | (177.5 | ) | ||||
Net proceeds from/(repayments of) short-term borrowings | 740.0 | (100.0 | ) | ||||
Net repayments of long-term borrowings | (929.9 | ) | — | ||||
Changes in securities lending payable | (172.5 | ) | 58.4 | ||||
Changes in bank overdrafts | (126.5 | ) | 311.5 | ||||
Proceeds from sale of put options | 0.9 | — | |||||
Repurchase and retirement of common stock | (1,635.4 | ) | — | ||||
Change in collateral and settlements of debt-related derivatives | (175.6 | ) | (1,034.0 | ) | |||
Cash dividends | (525.4 | ) | (512.7 | ) | |||
Proceeds from issuance of common stock under employee stock plans | 177.6 | 91.2 | |||||
Taxes paid through withholding of common stock under employee stock plans | (46.0 | ) | (63.6 | ) | |||
Excess tax benefits from share-based compensation | — | 48.7 | |||||
Net cash used in financing activities | (2,006.3 | ) | (1,378.0 | ) | |||
Effect of foreign exchange rates on cash and cash equivalents | 3.9 | 1.9 | |||||
Change in cash and cash equivalents | 2,021.9 | 432.5 | |||||
Cash and cash equivalents at beginning of year | 4,075.3 | 2,113.5 | |||||
Cash and cash equivalents at end of period | |
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Reconciliation of Medical Claims Payable | ||||||||||||||||||||||
Nine Months Ended |
Years Ended |
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2017 | 2016 | 2016 | 2015 | 2014 | ||||||||||||||||||
(In millions) | (Unaudited) | (Unaudited) | ||||||||||||||||||||
Gross medical claims payable, beginning of period | $ | 7,892.6 | $ | 7,569.8 | $ | 7,569.8 | $ | 6,861.2 | $ | 6,127.2 | ||||||||||||
Ceded medical claims payable, beginning of period | (539.1 | ) | (645.6 | ) | (645.6 | ) | (767.4 | ) | (23.4 | ) | ||||||||||||
Net medical claims payable, beginning of period | 7,353.5 | 6,924.2 | 6,924.2 | 6,093.8 | 6,103.8 | |||||||||||||||||
Business combinations and purchase adjustments | — | — | — | 121.8 | — | |||||||||||||||||
Net incurred medical claims: | ||||||||||||||||||||||
Current year | 53,505.6 | 49,091.4 | 66,371.4 | 60,708.4 | 56,305.8 | |||||||||||||||||
Prior years redundancies(1) | (1,066.3 | ) | (772.8 | ) | (850.4 | ) | (800.2 | ) | (541.9 | ) | ||||||||||||
Total net incurred medical claims | 52,439.3 | 48,318.6 | 65,521.0 | 59,908.2 | 55,763.9 | |||||||||||||||||
Net payments attributable to: | ||||||||||||||||||||||
Current year medical claims | 45,998.2 | 42,331.9 | 59,156.6 | 54,067.7 | 50,353.9 | |||||||||||||||||
Prior years medical claims | 5,932.1 | 5,835.5 | 5,935.1 | 5,131.9 | 5,420.0 | |||||||||||||||||
Total net payments | 51,930.3 | 48,167.4 | 65,091.7 | 59,199.6 | 55,773.9 | |||||||||||||||||
Net medical claims payable, end of period | 7,862.5 | 7,075.4 | 7,353.5 | 6,924.2 | 6,093.8 | |||||||||||||||||
Ceded medical claims payable, end of period | 101.4 | 397.5 | 539.1 | 645.6 | 767.4 | |||||||||||||||||
Gross medical claims payable, end of period | $ | 7,963.9 | $ | 7,472.9 | $ | 7,892.6 | $ | 7,569.8 | $ | 6,861.2 | ||||||||||||
Current year medical claims paid as a percentage of current year net incurred medical claims | 86.0 | % | 86.2 | % | 89.1 | % | 89.1 | % | 89.4 | % | ||||||||||||
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 | 17.0 | % | 12.6 | % | 14.0 | % | 15.1 | % | 9.7 | % | ||||||||||||
Prior year redundancies in the current year as a percentage of prior year net incurred medical claims | 1.6 | % | 1.3 | % | 1.4 | % | 1.4 | % | 1.0 | % | ||||||||||||
(1) Negative amounts reported for net incurred medical claims related to prior years result from claims being settled for amounts less than originally estimated. |
||||||||||||||||||||||
GAAP Reconciliation
(Unaudited)
Three Months Ended |
Nine Months Ended |
|||||||||||||||||||||||
(In millions, except per share data) | 2017 | 2016 | Change | 2017 | 2016 | Change | ||||||||||||||||||
Net income | $ | 746.9 | $ | 617.8 | 20.9 | % | $ | 2,612.1 | $ | 2,101.4 | 24.3 | % | ||||||||||||
Add / (Subtract): | ||||||||||||||||||||||||
Net realized (gains)/losses on financial instruments | (114.7 | ) | (88.8 | ) | (138.2 | ) | 23.8 | |||||||||||||||||
Other-than-temporary impairment losses recognized in income | 5.6 | 11.0 | 20.9 | 103.6 | ||||||||||||||||||||
Transaction related costs | 6.3 | 71.6 | 157.2 | 246.2 | ||||||||||||||||||||
Income tax true-up of prior transaction costs | — | — | (69.3 | ) | — | |||||||||||||||||||
2015 cyber attack litigation settlement | — | — | 115.0 | — | ||||||||||||||||||||
Amortization of other intangible assets | 41.9 | 47.4 | 124.3 | 145.7 | ||||||||||||||||||||
Penn Treaty assessment costs | — | — | 253.8 | — | ||||||||||||||||||||
Deferred tax asset write-off from |
— | — | — | 20.7 | ||||||||||||||||||||
Tax impact of non-GAAP adjustments | 21.6 | (2.2 | ) | (190.4 | ) | (166.1 | ) | |||||||||||||||||
Net adjustment items | (39.3 | ) | 39.0 | 273.3 | 373.9 | |||||||||||||||||||
Adjusted net income | $ | 707.6 | $ | 656.8 | 7.7 | % | $ | 2,885.4 | $ | 2,475.3 | 16.6 | % | ||||||||||||
Net income per diluted share | $ | 2.80 | $ | 2.30 | 21.7 | % | $ | 9.70 | $ | 7.84 | 23.7 | % | ||||||||||||
Add / (Subtract): | ||||||||||||||||||||||||
Net realized (gains)/losses on financial instruments | (0.43 | ) | (0.33 | ) | (0.51 | ) | 0.09 | |||||||||||||||||
Other-than-temporary impairment losses recognized in income | 0.02 | 0.04 | 0.08 | 0.39 | ||||||||||||||||||||
Transaction related costs | 0.02 | 0.27 | 0.58 | 0.92 | ||||||||||||||||||||
Income tax true-up of prior transaction costs | — | — | (0.26 | ) | — | |||||||||||||||||||
2015 cyber attack litigation settlement | — | — | 0.43 | — | ||||||||||||||||||||
Amortization of other intangible assets | 0.16 | 0.18 | 0.46 | 0.54 | ||||||||||||||||||||
Penn Treaty assessment costs | — | — | 0.94 | — | ||||||||||||||||||||
Deferred tax asset write-off from |
— | — | — | 0.08 | ||||||||||||||||||||
Tax impact of non-GAAP adjustments | 0.08 | (0.01 | ) | (0.71 | ) | (0.62 | ) | |||||||||||||||||
Rounding Impact | — | — | — | — | ||||||||||||||||||||
Net adjustment items | (0.15 | ) | 0.15 | 1.01 | 1.40 | |||||||||||||||||||
Adjusted net income per diluted share | $ | 2.65 | $ | 2.45 | 8.2 | % | $ | 10.71 | $ | 9.24 | 15.9 | % | ||||||||||||
Full Year 2017 Outlook | ||||||||||||||||||||||||
Net income per diluted share | |
|||||||||||||||||||||||
Add / (Subtract): | ||||||||||||||||||||||||
Net realized (gains)/losses on financial instruments | (0.51 | ) | ||||||||||||||||||||||
Other-than-temporary impairment losses recognized in income | 0.08 | |||||||||||||||||||||||
Transaction related costs | 0.58 | |||||||||||||||||||||||
Income tax true-up of prior transaction costs | (0.26 | ) | ||||||||||||||||||||||
2015 cyber attack litigation settlement | 0.43 | |||||||||||||||||||||||
Penn Treaty assessment costs | 0.94 | |||||||||||||||||||||||
Amortization of other intangible assets | Approximately |
|||||||||||||||||||||||
Tax impact of non-GAAP adjustments | Approximately ( |
|||||||||||||||||||||||
Net adjustment items | Approximately |
|||||||||||||||||||||||
Adjusted net income per diluted share | |
|||||||||||||||||||||||
Three Months Ended |
Nine Months Ended |
|||||||||||||||||||||||
(In millions) | 2017 | 2016 | Change | 2017 | 2016 | Change | ||||||||||||||||||
Reportable segments operating gain | $ | 982.0 | $ | 1,078.1 | (8.9 | )% | $ | 3,794.4 | $ | 4,148.7 | (8.5 | )% | ||||||||||||
Net investment income | 220.2 | 200.9 | 627.6 | 566.9 | ||||||||||||||||||||
Net realized gains/(losses) on financial instruments | 114.7 | 88.8 | 138.2 | (23.8 | ) | |||||||||||||||||||
Other-than-temporary impairment losses recognized in income | (5.6 | ) | (11.0 | ) | (20.9 | ) | (103.6 | ) | ||||||||||||||||
Interest expense | (150.5 | ) | (172.9 | ) | (575.4 | ) | (545.7 | ) | ||||||||||||||||
Amortization of other intangible assets | (41.9 | ) | (47.4 | ) | (124.3 | ) | (145.7 | ) | ||||||||||||||||
Income from continuing operations before income tax expense | $ | 1,118.9 | $ | 1,136.5 | (1.5 | )% | $ | 3,839.6 | $ | 3,896.8 | (1.5 | )% | ||||||||||||
Forward-Looking Statements
This document contains certain forward-looking information about us that is intended to be covered by the safe harbor for “forward-looking statements” provided by the Private Securities Litigation Reform Act of 1995. Forward-looking statements 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. These risks and uncertainties include: those discussed and identified in our public filings with the
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