[January 31, 2017] |
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Aetna Reports Fourth-Quarter and Full-Year 2016 Results
Aetna (NYSE: AET)
announced fourth-quarter 2016 net income(1) of $139 million,
or $0.39 per share. Full-year 2016 net income was $2.3 billion, or $6.41
per share. Operating earnings(2) for fourth-quarter 2016 were
$578 million, or $1.63 per share. Full-year 2016 operating earnings were
$2.9 billion, or $8.23 per share.
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(In millions, except per share data)
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Fourth-Quarter 2016
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Full-Year 2016
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Full-Year 2017
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Revenue
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Earnings
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EPS
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Revenue
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Earnings
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EPS
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Projected EPS
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GAAP
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$
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15,727
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$
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139
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$
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0.39
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$
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63,155
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$
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2,271
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$
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6.41
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At least $3.70
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Non-GAAP (Operating)
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$
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15,717
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$
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578
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$
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1.63
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$
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63,046
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$
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2,917
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$
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8.23
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At least $8.55
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Medical Membership totaled 23.1 million at December 31, 2016
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Aetna presents both GAAP and Non-GAAP financial measures in this
press release to provide investors with additional information.
Refer to footnotes (1) through (6) for
definitions of Non-GAAP financial measures used in this press
release and pages 10 through 13 for reconciliations of the most
directly comparable GAAP financial measures to Non-GAAP financial
measures.
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"Aetna's 2016 results exceeded previous projections despite continued
challenges in the public exchanges, and I have a great deal of
confidence in the company's future, including our long-term prospects
for growth," said Mark T. Bertolini, Aetna chairman and CEO. "As we
consider next steps in our proposed acquisition of Humana, we remain
focused on our core strategy to deliver innovative, consumer-centric
solutions that improve quality, affordability and the overall member
experience."
"We closed 2016 with a solid quarter driven by outperformance across
multiple businesses, which offset continued pressure from our individual
Commercial ACA-compliant products," said Shawn M. Guertin, Aetna
executive vice president and chief financial officer. "Our 2016 results
provide us with significant momentum and a positive outlook for the
company in 2017. From a balance sheet perspective our financial
position, capital structure, and liquidity all continue to be very
strong."
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Fourth-Quarter and Full-Year Financial Results at a Glance
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Fourth-Quarter
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Full-Year
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(Millions, except per share results)
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2016
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2015
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Change
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2016
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2015
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Change
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Total revenue
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$
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15,727
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$
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15,049
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5%
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$
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63,155
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$
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60,337
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5%
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Operating revenue(3)
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15,717
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15,090
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4%
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63,046
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60,292
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5%
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Net income(1)
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139
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321
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(57)%
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2,271
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2,390
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(5)%
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Operating earnings(2)
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578
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482
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20%
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2,917
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2,717
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7%
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Per share results:
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Net income(1)
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$
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0.39
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$
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0.91
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(57)%
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$
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6.41
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$
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6.78
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(5)%
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Operating earnings(2)
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1.63
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1.37
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19%
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8.23
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7.71
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7%
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Weighted average common shares - diluted
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354.9
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352.9
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354.3
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352.6
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Total Company Results
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Net income(1) was $139 million for
fourth-quarter 2016 compared with $321 million for fourth-quarter
2015. Full-year 2016 net income was $2.3 billion compared with $2.4
billion for full-year 2015. The decrease in net income during
fourth-quarter 2016 was primarily due to an increase in restructuring
costs, which include a $215 million ($330 million pre-tax) expense
recorded during fourth-quarter 2016 related to our previously
announced voluntary early retirement program, partially offset by the
increase in operating earnings described below. The decrease in net
income during full-year 2016 was primarily due to the increase in
restructuring costs described above, higher transaction and
integration-related costs and the favorable impact of
litigation-related proceeds recorded during 2015. The decrease was
partially offset by the increase in operating earnings described
below, net realized capital gains during 2016 compared with net
realized capital losses during 2015 and the favorable impact of the
2016 reduction of Aetna's reserve for anticipated future losses on
discontinued products.
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Operating earnings(2) were $578 million for
fourth-quarter 2016 compared with $482 million for fourth-quarter
2015. Full-year 2016 operating earnings were $2.9 billion compared
with $2.7 billion for full-year 2015. The increase in operating
earnings during fourth-quarter 2016 was primarily due to higher
underwriting margins and higher fees and other revenue in Aetna's
Health Care segment. The increase for full-year 2016 was primarily due
to higher fees and other revenue in Aetna's Health Care segment.
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Total revenue and operating revenue(3)
were each $15.7 billion for fourth-quarter 2016 and $15.0
billion and $15.1 billion for fourth-quarter 2015, respectively.
Full-year 2016 total revenue and operating revenue were $63.2 billion
and $63.0 billion, respectively, compared with $60.3 billion each for
full-year 2015. The increase in total revenue and operating revenue
during fourth-quarter and full-year 2016 was primarily due to higher
premiums in Aetna's Health Care segment.
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Total company expense ratio was 22.9 percent and 21.3 percent
for the fourth quarters of 2016 and 2015, respectively. The increase
for fourth-quarter 2016 was primarily due to higher restructuring
costs, which outpaced the increase in total revenue described above.
Aetna's total company expense ratio was 19.1 percent and 19.3 percent
for full-years 2016 and 2015, respectively. The decrease for full-year
2016 was primarily due to the increase in total revenue described
above and the execution of Aetna's expense management initiatives,
substantially offset by higher restructuring costs.
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Adjusted operating expense ratio(5) was 19.8
percent and 20.5 percent for the fourth quarters of 2016 and 2015,
respectively. Aetna's adjusted operating expense ratio was 18.1
percent and 18.9 percent for full-years 2016 and 2015, respectively.
The improvement for both periods was primarily due to the increase in
total revenue and operating revenue described above and the execution
of Aetna's expense management initiatives.
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After-tax net income margin was 0.9 percent and 2.1 percent for
the fourth quarters of 2016 and 2015, respectively. For full-years
2016 and 2015, the after-tax net income margin was 3.6 percent and 4.0
percent, respectively. The decrease in the after-tax net income margin
for fourth-quarter and full-year 2016 was primarily due to an increase
in restructuring costs and transaction and integration-related costs.
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Pretax operating margin(6) was 6.4
percent and 6.0 percent for the fourth quarters of 2016 and 2015,
respectively. For full-years 2016 and 2015, the pre-tax operating
margin was 8.3 percent and 8.4 percent, respectively.
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Total debt to consolidated capitalization ratio(7) was
53.6 percent at December 31, 2016 compared with 32.6 percent at
December 31, 2015. The total debt to consolidated capitalization ratio
at December 31, 2016 reflects the issuance during 2016 of $13 billion
of senior notes to partially fund the proposed acquisition (the
"Humana Acquisition") of Humana Inc. ("Humana").
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Effective tax rate was 53.5 percent for fourth-quarter 2016
compared with 45.0 percent for fourth-quarter 2015. The increase in
Aetna's effective tax rate for fourth-quarter 2016 was primarily due
to the decrease in pretax earnings compared with fourth-quarter 2015,
while the non-deductible health insurer fee remained relatively flat.
The increase in the effective tax rate was partially offset by the
favorable impact of the adoption of a new accounting standard in
second-quarter 2016 that requires excess tax benefits for employee
share based compensation to be recorded in earnings. The effective tax
rate was 43.5 percent for both full-years 2016 and 2015.
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:
-
Net income(1) was $215 million for fourth-quarter 2016
compared with $361 million for fourth-quarter 2015. The decrease in
net income primarily reflects an increase in restructuring costs
partially offset by an increase in operating earnings described below.
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Operating earnings(2) were $582 million for fourth-quarter
2016 compared with $493 million for fourth-quarter 2015. Operating
earnings increased primarily due to higher underwriting margins in
Aetna's Government business and higher fees and other revenue
primarily due to higher average fee yields. The increase was partially
offset by lower underwriting margins in Aetna's Commercial business,
primarily in Aetna's Individual Commercial products.
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Total revenue and operating revenue(3) were each $15.0
billion for fourth-quarter 2016 and $14.4 billion for fourth-quarter
2015. The increase in total revenue and operating revenue was
primarily due to higher premium yields and membership growth in
Aetna's Government business, partially offset by membership losses in
Aetna's Commercial Insured products.
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Medical membership remained flat at December 31, 2016 compared with
September 30, 2016, primarily reflecting declines in Aetna's
Commercial Insured products, offset by growth in Aetna's Commercial
ASC and Government Insured products.
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Medical benefit ratios ("MBRs") for fourth-quarter and full-year 2016
and 2015 were as follows:
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Fourth-Quarter
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Full-Year
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2016
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2015
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Change
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2016
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2015
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Change
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Commercial
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83.0
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%
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81.3
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%
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1.7
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pts.
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82.0
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%
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80.3
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%
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1.7
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pts.
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Government
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81.2
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%
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82.6
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%
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(1.4
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)
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pts.
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81.5
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%
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81.4
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%
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0.1
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pts.
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Total Health Care
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82.1
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%
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81.9
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%
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0.2
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pts.
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81.8
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%
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80.8
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%
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1.0
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pts.
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Aetna's fourth-quarter 2016 Commercial MBR increased over
fourth-quarter 2015 primarily due to higher medical costs in Aetna's
Individual Commercial products.
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Aetna's fourth-quarter 2016 Government MBR decreased compared to
fourth-quarter 2015 primarily due to higher favorable development of
prior-period health care cost estimates in 2016 in Aetna's Medicare
products.
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In fourth-quarter 2016, Aetna experienced favorable development of
prior-period health care cost estimates in its Commercial, Medicaid
and Medicare products, primarily attributable to third-quarter 2016
performance.
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Prior years' health care costs payable estimates developed favorably
by $764 million and $841 million during 2016 and 2015, respectively.
This development is reported on a basis consistent with the prior
years' development reported in the health care costs payable table in
Aetna's annual audited financial statements, and does not directly
correspond to an increase in 2016 operating results.
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Days claims payable(7) was 54 days at December 31,
2016, a slight decrease compared to December 31, 2015 and a sequential
decrease of 3 days compared to September 30, 2016. The sequential
decrease was primarily due to decreased claim processing times and the
reduction of the 2016 premium deficiency reserve.
Full-years 2016 and 2015 net income(1) for Health Care were
each approximately $2.4 billion. Net income was relatively consistent
primarily as a result of an increase in restructuring costs in 2016 and
the favorable impact of litigation-related proceeds recorded in 2015,
substantially offset by the increase in operating earnings described
below and net realized capital gains during 2016 compared with net
realized capital losses during 2015. Full-year 2016 operating earnings(2)
for Health Care were $2.9 billion, compared with $2.7 billion in 2015.
Operating earnings increased primarily due to higher underwriting
margins in Aetna's Government business, higher fees and other revenue
primarily due to higher average fee yields and lower general and
administrative expenses. The increase was partially offset by lower
underwriting margins in Aetna's Commercial business.
Group Insurance Segment Results
Group Insurance, which includes group life, disability and long-term
care products, reported:
-
Net income(1) was $32 million for fourth-quarter 2016
compared with $18 million for fourth-quarter 2015. Operating earnings(2)
were $33 million for fourth-quarter 2016 compared with $22 million for
fourth-quarter 2015. Net income and operating earnings increased
primarily due to improved underwriting margins in Aetna's long-term
care products, partially offset by lower underwriting margins in
Aetna's life products.
-
Total revenue was $620 million for fourth-quarter 2016 compared with
$613 million for fourth-quarter 2015. Total revenue increased
primarily due to lower net realized capital losses. Operating revenue(3)
was $621 million for fourth-quarter 2016 compared with $619 million
for fourth-quarter 2015.
Full-year 2016 net income(1) for Group Insurance remained
relatively flat at $139 million, compared with $136 million in 2015.
Full-year 2016 operating earnings(2) for Group Insurance were
$124 million, compared with $136 million in 2015. Operating earnings
decreased primarily due to lower underwriting margins in Aetna's
disability products and higher operating expenses, partially offset by
improved underwriting margins in Aetna's long-term care products.
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:
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Net income(1) was $5 million for fourth-quarter 2016
compared with net loss of $1 million for fourth-quarter 2015.
Operating earnings(2) were $5 million for fourth-quarter
2016 compared with $4 million for fourth-quarter 2015.
-
Total revenue was $64 million and $60 million for the fourth-quarters
of 2016 and 2015, respectively. Operating revenue(3) was
$64 million and $67 million for the fourth-quarters of 2016 and 2015,
respectively.
Full-year 2016 net income(1) for Large Case Pensions was $104
million, compared with $8 million in 2015. Net income for 2016 increased
compared with 2015, primarily due to the 2016 reduction of Aetna's
reserve for anticipated future losses on discontinued products, which
was primarily due to favorable retirement experience as well as
favorable investment performance compared to assumptions we previously
made in estimating the reserve. Full-year 2016 operating earnings(2)
for Large Case Pensions were $14 million compared with $17 million for
2015.
Aetna's conference call to discuss fourth-quarter and full-year 2016
results will begin at 8:30 a.m. ET today. The public may access the
conference call through a live audio webcast available on Aetna's
Investor Information website at www.aetna.com/investor.
Financial, statistical and other information, including GAAP
reconciliations, related to the conference call also will be available
on Aetna's Investor Information website.
The conference call also can be accessed by dialing 1-877-709-8150,
or +1-201-689-8354 for international callers. The company suggests
participants dial in approximately 10 minutes before the call. No access
code is required. Individuals who dial in will be asked to identify
themselves and their affiliations.
A replay of the call may be accessed through Aetna's Investor
Information link on the Internet at www.aetna.com
or by dialing 1-877-660-6853, or +1-201-612-7415 for international
callers. The replay conference ID is 13651451. Telephone replays
will be available until 11 p.m. ET on February 14, 2017.
About Aetna Aetna is one of the nation's leading diversified
health care benefits companies, serving an estimated 46.7 million people
with information and resources to help them make better informed
decisions about their health care. Aetna offers a broad range of
traditional, voluntary and consumer-directed health insurance products
and related services, including medical, pharmacy, dental, behavioral
health, group life and disability plans, and medical management
capabilities, Medicaid health care management services, workers'
compensation administrative services and health information technology
products and services. Aetna's customers include employer groups,
individuals, college students, part-time and hourly workers, health
plans, health care providers, governmental units, government-sponsored
plans, labor groups and expatriates. For more information, see www.aetna.com
and learn
about how Aetna is helping to build a healthier world. @AetnaNews
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Condensed Consolidated Balance Sheets
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(Millions)
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At December 31, 2016
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At December 31, 2015
|
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(Unaudited)
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Assets:
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|
|
|
|
|
|
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Cash and short-term investments
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|
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$
|
21,042
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|
|
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$
|
5,539
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Accounts receivable, net
|
|
|
|
|
4,580
|
|
|
|
4,187
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Other current assets
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|
|
|
|
2,871
|
|
|
|
2,999
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Total current assets
|
|
|
|
|
28,493
|
|
|
|
12,725
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Long-term investments
|
|
|
|
|
21,833
|
|
|
|
21,665
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Other long-term assets
|
|
|
|
|
18,864
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|
|
|
19,119
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Total assets
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|
|
|
|
$
|
69,190
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|
|
|
$
|
53,509
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|
|
|
|
|
|
|
|
|
Liabilities and shareholders' equity:
|
|
|
|
|
|
|
|
|
Health care costs payable
|
|
|
|
|
$
|
6,558
|
|
|
|
$
|
6,306
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Current portion of long-term debt
|
|
|
|
|
1,634
|
|
|
|
-
|
Other current liabilities
|
|
|
|
|
10,502
|
|
|
|
9,303
|
Total current liabilities
|
|
|
|
|
18,694
|
|
|
|
15,609
|
Long-term debt, less current portion
|
|
|
|
|
19,027
|
|
|
|
7,785
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Other long-term liabilities
|
|
|
|
|
13,526
|
|
|
|
13,936
|
Total Aetna shareholders' equity
|
|
|
|
|
17,881
|
|
|
|
16,114
|
Non-controlling interests
|
|
|
|
|
62
|
|
|
|
65
|
Total liabilities and equity
|
|
|
|
|
$
|
69,190
|
|
|
|
$
|
53,509
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated Statements of Income
|
|
|
|
|
|
|
|
|
|
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|
|
|
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For the Three Months
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|
|
For the Year
|
|
|
|
|
|
Ended December 31,
|
|
|
Ended December 31,
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(Millions)
|
|
|
|
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
(unaudited)
|
|
|
(unaudited)
|
|
|
|
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Health care premiums
|
|
|
|
|
$
|
13,493
|
|
|
|
$
|
12,907
|
|
|
|
$
|
54,116
|
|
|
|
$
|
51,618
|
|
Other premiums
|
|
|
|
|
546
|
|
|
|
543
|
|
|
|
2,182
|
|
|
|
2,171
|
|
Fees and other revenue
|
|
|
|
|
1,465
|
|
|
|
1,417
|
|
|
|
5,861
|
|
|
|
5,696
|
|
Net investment income
|
|
|
|
|
223
|
|
|
|
223
|
|
|
|
910
|
|
|
|
917
|
|
Net realized capital gains (losses)
|
|
|
|
|
-
|
|
|
|
(41
|
)
|
|
|
86
|
|
|
|
(65
|
)
|
Total revenue
|
|
|
|
|
15,727
|
|
|
|
15,049
|
|
|
|
63,155
|
|
|
|
60,337
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefits and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Health care costs
|
|
|
|
|
11,083
|
|
|
|
10,566
|
|
|
|
44,255
|
|
|
|
41,712
|
|
Current and future benefits
|
|
|
|
|
512
|
|
|
|
525
|
|
|
|
2,101
|
|
|
|
2,121
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling expenses
|
|
|
|
|
433
|
|
|
|
398
|
|
|
|
1,678
|
|
|
|
1,611
|
|
General and administrative expenses
|
|
|
|
|
3,175
|
|
|
|
2,801
|
|
|
|
10,407
|
|
|
|
10,033
|
|
Total operating expenses
|
|
|
|
|
3,608
|
|
|
|
3,199
|
|
|
|
12,085
|
|
|
|
11,644
|
|
Interest expense
|
|
|
|
|
189
|
|
|
|
111
|
|
|
|
604
|
|
|
|
369
|
|
Amortization of other acquired intangible assets
|
|
|
|
60
|
|
|
|
63
|
|
|
|
247
|
|
|
|
255
|
|
Reduction of reserve for anticipated future losses on discontinued
products
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(128
|
)
|
|
|
-
|
|
Total benefits and expenses
|
|
|
|
|
15,452
|
|
|
|
14,464
|
|
|
|
59,164
|
|
|
|
56,101
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
|
|
275
|
|
|
|
585
|
|
|
|
3,991
|
|
|
|
4,236
|
|
Income tax expense
|
|
|
|
|
147
|
|
|
|
263
|
|
|
|
1,735
|
|
|
|
1,841
|
|
Net income including non-controlling interests
|
|
|
|
|
128
|
|
|
|
322
|
|
|
|
2,256
|
|
|
|
2,395
|
|
Less: Net (loss) income attributable to non-controlling interests
|
|
|
|
(11
|
)
|
|
|
1
|
|
|
|
(15
|
)
|
|
|
5
|
|
Net income attributable to Aetna
|
|
|
|
|
$
|
139
|
|
|
|
$
|
321
|
|
|
|
$
|
2,271
|
|
|
|
$
|
2,390
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated Statements of Cash Flows
|
|
|
|
|
|
|
|
|
|
|
|
|
The Year Ended
|
|
|
|
|
December 31,
|
(Millions)
|
|
|
|
2016
|
|
|
2015
|
|
|
|
|
(unaudited)
|
|
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
Net income including non-controlling interests
|
|
|
|
$
|
2,256
|
|
|
|
$
|
2,395
|
|
Adjustments to reconcile net income to net cash provided by
operating activities:
|
|
|
|
|
|
|
Net realized capital (gains) losses
|
|
|
|
(86
|
)
|
|
|
65
|
|
Depreciation and amortization
|
|
|
|
681
|
|
|
|
671
|
|
Debt fair value amortization
|
|
|
|
(30
|
)
|
|
|
(30
|
)
|
Amortization of interest rate hedges
|
|
|
|
20
|
|
|
|
6
|
|
Equity in earnings of affiliates, net
|
|
|
|
(6
|
)
|
|
|
(31
|
)
|
Stock-based compensation expense
|
|
|
|
191
|
|
|
|
181
|
|
Reduction of reserve for anticipated future losses on discontinued
products
|
|
|
(128
|
)
|
|
|
-
|
|
Amortization of net investment premium
|
|
|
|
79
|
|
|
|
84
|
|
Changes in assets and liabilities:
|
|
|
|
|
|
|
|
Accrued investment income
|
|
|
|
(4
|
)
|
|
|
(4
|
)
|
Premiums due and other receivables
|
|
|
|
(153
|
)
|
|
|
(616
|
)
|
Income taxes
|
|
|
|
155
|
|
|
|
31
|
|
Other assets and other liabilities
|
|
|
|
653
|
|
|
|
644
|
|
Health care and insurance liabilities
|
|
|
|
91
|
|
|
|
470
|
|
Net cash provided by operating activities
|
|
|
|
3,719
|
|
|
|
3,866
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
Proceeds from sales and maturities of investments
|
|
|
|
14,741
|
|
|
|
12,299
|
|
Cost of investments
|
|
|
|
(14,852
|
)
|
|
|
(12,943
|
)
|
Additions to property, equipment and software
|
|
|
|
(270
|
)
|
|
|
(363
|
)
|
Cash used for acquisitions, net of cash acquired
|
|
|
|
-
|
|
|
|
(20
|
)
|
Net cash used for investing activities
|
|
|
|
(381
|
)
|
|
|
(1,027
|
)
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
Issuance of long-term debt
|
|
|
|
12,886
|
|
|
|
-
|
|
Repayment of long-term debt
|
|
|
|
-
|
|
|
|
(229
|
)
|
Net repayment of short-term debt
|
|
|
|
-
|
|
|
|
(500
|
)
|
Deposits and interest credited to investment contracts net of
(withdrawals)
|
|
|
1
|
|
|
|
(35
|
)
|
Common shares issued under benefit plans, net
|
|
|
|
(139
|
)
|
|
|
(143
|
)
|
Stock-based compensation tax benefits
|
|
|
|
-
|
|
|
|
53
|
|
Settlements from repurchase agreements
|
|
|
|
-
|
|
|
|
(202
|
)
|
Common shares repurchased
|
|
|
|
-
|
|
|
|
(296
|
)
|
Dividends paid to shareholders
|
|
|
|
(351
|
)
|
|
|
(349
|
)
|
Net payment on interest rate derivatives
|
|
|
|
(274
|
)
|
|
|
(25
|
)
|
Contributions (distributions), non-controlling interests
|
|
|
|
11
|
|
|
|
(9
|
)
|
Net cash provided by (used for) financing activities
|
|
|
|
12,134
|
|
|
|
(1,735
|
)
|
Net increase in cash and cash equivalents
|
|
|
|
15,472
|
|
|
|
1,104
|
|
Cash and cash equivalents, beginning of period
|
|
|
|
2,524
|
|
|
|
1,420
|
|
Cash and cash equivalents, end of period
|
|
|
|
$
|
17,996
|
|
|
|
$
|
2,524
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of the Most Directly Comparable GAAP Measure to
Certain Reported Amounts
|
|
|
|
|
For the Three Months Ended December 31, 2016
|
|
For the Three Months Ended December 31, 2015
|
(millions)
|
|
|
Health Care
|
|
Group Insurance
|
|
Large Case Pensions
|
|
Corporate Financing(8)
|
|
Total Company
|
|
Health Care
|
|
Group Insurance
|
|
Large Case Pensions
|
|
Corporate Financing(8)
|
|
Total Company
|
Reconciliation of total revenue to operating revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue (GAAP measure)
|
|
|
$
|
15,043
|
|
|
$
|
620
|
|
|
$
|
64
|
|
|
$
|
-
|
|
|
$
|
15,727
|
|
|
$
|
14,376
|
|
|
$
|
613
|
|
|
$
|
60
|
|
|
$
|
-
|
|
|
$
|
15,049
|
|
Interest income on proceeds of transaction-related debt
|
|
|
(10
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(10
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Net realized capital (gains) losses
|
|
|
(1
|
)
|
|
1
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
28
|
|
|
6
|
|
|
7
|
|
|
-
|
|
|
41
|
|
Operating revenue(3) (excludes net realized capital
(gains) losses and other items)
|
|
|
$
|
15,032
|
|
|
$
|
621
|
|
|
$
|
64
|
|
|
$
|
-
|
|
|
$
|
15,717
|
|
|
$
|
14,404
|
|
|
$
|
619
|
|
|
$
|
67
|
|
|
$
|
-
|
|
|
$
|
15,090
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of net income to operating earnings
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)(1) (GAAP measure)
|
|
|
$
|
215
|
|
|
$
|
32
|
|
|
$
|
5
|
|
|
$
|
(113
|
)
|
|
$
|
139
|
|
|
$
|
361
|
|
|
$
|
18
|
|
|
$
|
(1
|
)
|
|
$
|
(57
|
)
|
|
$
|
321
|
|
Transaction and integration-related costs
|
|
|
75
|
|
|
-
|
|
|
-
|
|
|
109
|
|
|
184
|
|
|
102
|
|
|
-
|
|
|
-
|
|
|
32
|
|
|
134
|
|
Restructuring costs
|
|
|
404
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
404
|
|
|
1
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
1
|
|
Amortization of other acquired intangible assets
|
|
|
60
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
60
|
|
|
63
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
63
|
|
Net realized capital (gains) losses
|
|
|
(1
|
)
|
|
1
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
28
|
|
|
6
|
|
|
7
|
|
|
-
|
|
|
41
|
|
Income tax benefit
|
|
|
(171
|
)
|
|
-
|
|
|
-
|
|
|
(38
|
)
|
|
(209
|
)
|
|
(62
|
)
|
|
(2
|
)
|
|
(2
|
)
|
|
(12
|
)
|
|
(78
|
)
|
Operating earnings (loss)(2)
|
|
|
$
|
582
|
|
|
$
|
33
|
|
|
$
|
5
|
|
|
$
|
(42
|
)
|
|
$
|
578
|
|
|
$
|
493
|
|
|
$
|
22
|
|
|
$
|
4
|
|
|
$
|
(37
|
)
|
|
$
|
482
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares - basic
|
|
|
|
|
|
|
|
|
|
|
351.7
|
|
|
|
|
|
|
|
|
|
|
349.5
|
|
Weighted average common shares - diluted
|
|
|
|
|
|
|
|
|
|
|
354.9
|
|
|
|
|
|
|
|
|
|
|
352.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per common share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income(1) (GAAP measure)
|
|
|
|
|
|
|
|
|
|
|
$
|
0.39
|
|
|
|
|
|
|
|
|
|
|
$
|
0.91
|
|
Transaction and integration-related costs
|
|
|
|
|
|
|
|
|
|
|
0.52
|
|
|
|
|
|
|
|
|
|
|
0.38
|
|
Restructuring costs
|
|
|
|
|
|
|
|
|
|
|
1.14
|
|
|
|
|
|
|
|
|
|
|
-
|
|
Amortization of other acquired intangible assets
|
|
|
|
|
|
|
|
|
|
|
0.17
|
|
|
|
|
|
|
|
|
|
|
0.18
|
|
Net realized capital (gains) losses
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
0.12
|
|
Income tax benefit
|
|
|
|
|
|
|
|
|
|
|
(0.59
|
)
|
|
|
|
|
|
|
|
|
|
(0.22
|
)
|
Operating earnings(2)
|
|
|
|
|
|
|
|
|
|
|
$
|
1.63
|
|
|
|
|
|
|
|
|
|
|
$
|
1.37
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of the Most Directly Comparable GAAP Measure to
Certain Reported Amounts
|
|
|
|
|
For the Year Ended December 31, 2016
|
|
|
For the Year Ended December 31, 2015
|
(millions)
|
|
|
Health Care
|
|
|
Group Insurance
|
|
|
Large Case Pensions
|
|
|
Corporate Financing(8)
|
|
|
Total Company
|
|
|
Health Care
|
|
|
Group Insurance
|
|
|
Large Case Pensions
|
|
|
Corporate Financing(8)
|
|
|
Total Company
|
Reconciliation of total revenue to operating revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue (GAAP measure)
|
|
|
$
|
60,370
|
|
|
|
$
|
2,501
|
|
|
|
$
|
284
|
|
|
|
$
|
-
|
|
|
|
$
|
63,155
|
|
|
|
$
|
57,561
|
|
|
|
$
|
2,478
|
|
|
|
$
|
298
|
|
|
|
$
|
-
|
|
|
|
$
|
60,337
|
|
Interest income on proceeds of transaction-related debt
|
|
|
(23
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(23
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Litigation-related proceeds
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(110
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(110
|
)
|
Net realized capital (gains) losses
|
|
|
(52
|
)
|
|
|
(24
|
)
|
|
|
(10
|
)
|
|
|
-
|
|
|
|
(86
|
)
|
|
|
50
|
|
|
|
-
|
|
|
|
15
|
|
|
|
-
|
|
|
|
65
|
|
Operating revenue(3) (excludes net realized capital
(gains) losses and other items)
|
|
|
$
|
60,295
|
|
|
|
$
|
2,477
|
|
|
|
$
|
274
|
|
|
|
$
|
-
|
|
|
|
$
|
63,046
|
|
|
|
$
|
57,501
|
|
|
|
$
|
2,478
|
|
|
|
$
|
313
|
|
|
|
$
|
-
|
|
|
|
$
|
60,292
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of net income to operating earnings
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)(1) (GAAP measure)
|
|
|
$
|
2,383
|
|
|
|
$
|
139
|
|
|
|
$
|
104
|
|
|
|
$
|
(355
|
)
|
|
|
$
|
2,271
|
|
|
|
$
|
2,427
|
|
|
|
$
|
136
|
|
|
|
$
|
8
|
|
|
|
$
|
(181
|
)
|
|
|
$
|
2,390
|
|
Transaction and integration-related costs
|
|
|
230
|
|
|
|
-
|
|
|
|
-
|
|
|
|
287
|
|
|
|
517
|
|
|
|
208
|
|
|
|
-
|
|
|
|
-
|
|
|
|
50
|
|
|
|
258
|
|
Restructuring costs
|
|
|
404
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
404
|
|
|
|
15
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
15
|
|
Reduction of reserve for anticipated future losses on discontinued
products
|
|
|
-
|
|
|
|
-
|
|
|
|
(128
|
)
|
|
|
-
|
|
|
|
(128
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Litigation-related proceeds
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(110
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(110
|
)
|
Amortization of other acquired intangible assets
|
|
|
247
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
247
|
|
|
|
255
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
255
|
|
Net realized capital (gains) losses
|
|
|
(52
|
)
|
|
|
(24
|
)
|
|
|
(10
|
)
|
|
|
-
|
|
|
|
(86
|
)
|
|
|
50
|
|
|
|
-
|
|
|
|
15
|
|
|
|
-
|
|
|
|
65
|
|
Income tax (benefit) expense
|
|
|
(264
|
)
|
|
|
9
|
|
|
|
48
|
|
|
|
(101
|
)
|
|
|
(308
|
)
|
|
|
(133
|
)
|
|
|
-
|
|
|
|
(6
|
)
|
|
|
(17
|
)
|
|
|
(156
|
)
|
Operating earnings (loss)(2)
|
|
|
$
|
2,948
|
|
|
|
$
|
124
|
|
|
|
$
|
14
|
|
|
|
$
|
(169
|
)
|
|
|
$
|
2,917
|
|
|
|
$
|
2,712
|
|
|
|
$
|
136
|
|
|
|
$
|
17
|
|
|
|
$
|
(148
|
)
|
|
|
$
|
2,717
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares - basic
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
351.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
349.3
|
|
Weighted average common shares - diluted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
354.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
352.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per common share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income(1) (GAAP measure)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
6.41
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
6.78
|
|
Transaction and integration-related costs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1.46
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.73
|
|
Restructuring costs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1.14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.04
|
|
Reduction of reserve for anticipated future losses on discontinued
products
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(0.36
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
Litigation-related proceeds
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(0.31
|
)
|
Amortization of other acquired intangible assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.70
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.72
|
|
Net realized capital (gains) losses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(0.25
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.19
|
|
Income tax benefit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(0.87
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(0.44
|
)
|
Operating earnings(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
8.23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
7.71
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Margins
|
|
|
|
|
For the Three Months
|
|
|
For the Year
|
|
|
|
Ended December 31,
|
|
|
Ended December 31,
|
(Millions)
|
|
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
Reconciliation of income before income taxes to operating
earnings before income taxes, excluding interest
expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes (GAAP measure)
|
|
|
$
|
275
|
|
|
|
$
|
585
|
|
|
|
$
|
3,991
|
|
|
|
$
|
4,236
|
|
Interest expense(9)
|
|
|
80
|
|
|
|
79
|
|
|
|
317
|
|
|
|
319
|
|
Transaction and integration-related costs
|
|
|
184
|
|
|
|
134
|
|
|
|
517
|
|
|
|
258
|
|
Restructuring costs
|
|
|
404
|
|
|
|
1
|
|
|
|
404
|
|
|
|
15
|
|
Reduction of reserve for anticipated future losses on discontinued
products
|
|
|
-
|
|
|
|
-
|
|
|
|
(128
|
)
|
|
|
-
|
|
Litigation-related proceeds
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(110
|
)
|
Amortization of other acquired intangible assets
|
|
|
60
|
|
|
|
63
|
|
|
|
247
|
|
|
|
255
|
|
Net realized capital (gains) losses
|
|
|
-
|
|
|
|
41
|
|
|
|
(86
|
)
|
|
|
65
|
|
Operating earnings(2) before income taxes, excluding
interest expense (A)
|
|
|
$
|
1,003
|
|
|
|
$
|
903
|
|
|
|
$
|
5,262
|
|
|
|
$
|
5,038
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of net income to operating earnings excluding
interest expense, net of tax:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (1) (GAAP measure) (B)
|
|
|
$
|
139
|
|
|
|
$
|
321
|
|
|
|
$
|
2,271
|
|
|
|
$
|
2,390
|
|
Interest expense(9)
|
|
|
80
|
|
|
|
79
|
|
|
|
317
|
|
|
|
319
|
|
Transaction and integration-related costs
|
|
|
184
|
|
|
|
134
|
|
|
|
517
|
|
|
|
258
|
|
Restructuring costs
|
|
|
404
|
|
|
|
1
|
|
|
|
404
|
|
|
|
15
|
|
Reduction of reserve for anticipated future losses on discontinued
products
|
|
|
-
|
|
|
|
-
|
|
|
|
(128
|
)
|
|
|
-
|
|
Litigation-related proceeds
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(110
|
)
|
Amortization of other acquired intangible assets
|
|
|
60
|
|
|
|
63
|
|
|
|
247
|
|
|
|
255
|
|
Net realized capital (gains) losses
|
|
|
-
|
|
|
|
41
|
|
|
|
(86
|
)
|
|
|
65
|
|
Income tax benefit
|
|
|
(237
|
)
|
|
|
(105
|
)
|
|
|
(419
|
)
|
|
|
(268
|
)
|
Operating earnings(2) excluding interest expense, net of
tax
|
|
|
$
|
630
|
|
|
|
$
|
534
|
|
|
|
$
|
3,123
|
|
|
|
$
|
2,924
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of total revenue to operating revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue (GAAP measure) (C)
|
|
|
$
|
15,727
|
|
|
|
$
|
15,049
|
|
|
|
$
|
63,155
|
|
|
|
$
|
60,337
|
|
Interest income on proceeds of transaction-related debt
|
|
|
(10
|
)
|
|
|
-
|
|
|
|
(23
|
)
|
|
|
-
|
|
Litigation-related proceeds
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(110
|
)
|
Net realized capital (gains) losses
|
|
|
-
|
|
|
|
41
|
|
|
|
(86
|
)
|
|
|
65
|
|
Operating revenue(3) (excludes net realized capital
(gains) losses and other items) (D)
|
|
|
$
|
15,717
|
|
|
|
$
|
15,090
|
|
|
|
$
|
63,046
|
|
|
|
$
|
60,292
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of total operating expenses to adjusted operating
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses (GAAP measure) (E)
|
|
|
$
|
3,608
|
|
|
|
$
|
3,199
|
|
|
|
$
|
12,085
|
|
|
|
$
|
11,644
|
|
Transaction and integration-related costs
|
|
|
(85
|
)
|
|
|
(102
|
)
|
|
|
(253
|
)
|
|
|
(208
|
)
|
Restructuring costs
|
|
|
(404
|
)
|
|
|
(1
|
)
|
|
|
(404
|
)
|
|
|
(15
|
)
|
Adjusted operating expenses (F)
|
|
|
$
|
3,119
|
|
|
|
$
|
3,096
|
|
|
|
$
|
11,428
|
|
|
|
$
|
11,421
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income and Operating Margins:
|
|
|
|
|
|
|
|
|
|
|
|
|
After-tax net income margin (B)/(C) (GAAP measure)
|
|
|
0.9
|
%
|
|
|
2.1
|
%
|
|
|
3.6
|
%
|
|
|
4.0
|
%
|
Pretax operating margin(6) (A)/(D)
|
|
|
6.4
|
%
|
|
|
6.0
|
%
|
|
|
8.3
|
%
|
|
|
8.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Expense Ratios:
|
|
|
|
|
|
|
|
|
|
|
|
|
Total company expense ratio (E)/(C) (GAAP measure)
|
|
|
22.9
|
%
|
|
|
21.3
|
%
|
|
|
19.1
|
%
|
|
|
19.3
|
%
|
Adjusted operating expense ratio(5) (F)/(D)
|
|
|
19.8
|
%
|
|
|
20.5
|
%
|
|
|
18.1
|
%
|
|
|
18.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Health Care, Group Insurance and Corporate Financing Operating
Cash Flow as a Percentage of Net Income and Operating Earnings
|
|
|
|
|
|
|
For the Year
|
|
|
|
|
|
Ended December 31,
|
(Millions)
|
|
|
|
|
2016
|
|
|
2015
|
Net cash provided by operating activities (GAAP measure)
|
|
|
|
|
$
|
3,719
|
|
|
|
$
|
3,866
|
|
Less: Net cash used for operating activities: Large Case Pensions
|
|
|
|
|
(269
|
)
|
|
|
(522
|
)
|
Net cash provided by operating activities: Health Care, Group
Insurance and Corporate Financing
|
|
|
(A)
|
|
3,988
|
|
|
|
4,388
|
|
Net income: Health Care, Group Insurance and Corporate Financing(1)
(GAAP Measure)
|
|
|
(B)
|
|
2,167
|
|
|
|
2,382
|
|
Transaction and integration-related costs
|
|
|
|
|
517
|
|
|
|
258
|
|
Restructuring costs
|
|
|
|
|
404
|
|
|
|
15
|
|
Litigation-related proceeds
|
|
|
|
|
-
|
|
|
|
(110
|
)
|
Amortization of other acquired intangible assets
|
|
|
|
|
247
|
|
|
|
255
|
|
Net realized capital (gains) losses
|
|
|
|
|
(76
|
)
|
|
|
50
|
|
Income tax benefit
|
|
|
|
|
(356
|
)
|
|
|
(150
|
)
|
Operating earnings(2): Health Care, Group Insurance and
Corporate Financing
|
|
|
(C)
|
|
$
|
2,903
|
|
|
|
$
|
2,700
|
|
|
|
|
|
|
|
|
|
|
Operating Cash Flow as a Percentage of Income Ratios:
|
|
|
|
|
|
|
|
|
Operating cash flow as a percentage of net income(1)
(GAAP Measure)
|
|
|
(A
|
)/(B)
|
|
184.0
|
%
|
|
|
184.2
|
%
|
Operating cash flow as a percentage of operating earnings(2)
|
|
|
(A
|
)/(C)
|
|
137.4
|
%
|
|
|
162.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Footnotes
(1) Net income (loss) refers to net income (loss)
attributable to Aetna reported in Aetna's Consolidated Statements of
Income in accordance with U.S. generally accepted accounting principles
("GAAP"). Unless otherwise indicated, all references in this press
release to net income (loss) and net income per share exclude amounts
attributable to non-controlling interests.
(2) Non-GAAP financial measures such as operating earnings,
operating earnings per share, adjusted operating expenses, operating
revenue, operating cash flow as a percentage of operating earnings,
adjusted operating expense ratio and pretax operating 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 reflect Aetna's underlying business performance.
Although the excluded items may recur, management believes that non-GAAP
financial measures Aetna discloses, including those described above,
provide a more useful comparison of Aetna's underlying business
performance from period to period. Operating earnings is the measure
reported to the Chief Executive Officer for purposes of assessing
financial performance and making operating decisions, such as the
allocation of resources among Aetna's business segments. The non-GAAP
financial measures Aetna discloses, including those described above,
should not be considered a substitute for, or superior to, financial
measures determined or calculated in accordance with GAAP.
For the periods covered in this press release, the following items are
excluded from operating earnings, adjusted operating expenses and
operating revenue, as applicable, because Aetna believes they neither
relate to the ordinary course of Aetna's business nor reflect Aetna's
underlying business performance:
-
Aetna incurred transaction and integration-related costs during the
three months and year ended December 31, 2016 and 2015 related to the
acquisitions of Coventry Health Care, Inc. ("Coventry") and bswift LLC
("bswift") and the Humana Acquisition. Transaction costs include
advisory, legal and other professional fees which are not deductible
for tax purposes and are reflected in Aetna's GAAP Consolidated
Statements of Income in general and administrative expenses, as well
as the cost of the Bridge Credit Agreement and the Term Loan Agreement
(each as defined in note (9)) executed in connection with
the Humana Acquisition, which are reflected in Aetna's GAAP
Consolidated Statements of Income in interest expense. Transaction
costs also include the negative cost of carry associated with the debt
financing that Aetna obtained in June 2016 for the Humana Acquisition.
Prior to the closing of the Humana Acquisition, the negative cost of
carry associated with the June 2016 debt financing is excluded from
operating earnings. The components of the negative cost of carry are
reflected in Aetna's GAAP Consolidated Statements of Income in
interest expense and net investment income. On and after the closing
of the Humana Acquisition, the interest expense and net investment
income associated with the June 2016 debt financing no longer will be
excluded from operating earnings.
-
Restructuring costs for the three months and year ended December 31,
2016 include costs related to Aetna's voluntary early retirement
program, severance and real estate consolidation costs associated with
Aetna's expense management and cost control initiatives and an accrual
for minimum volume commitments which require Aetna to make payments to
suppliers if the level of medical membership subject to the agreements
falls below specified levels. Aetna no longer expects to meet these
minimum volume commitments as a result of Aetna's previously announced
reduced participation on the ACA's individual public health insurance
exchanges in 2017. Restructuring costs for the three months and year
ended December 31, 2015 include severance costs associated with
Aetna's expense management and cost control initiatives. The 2016 and
2015 restructuring costs are reflected in the GAAP Consolidated
Statements of Income in general and administrative expenses.
-
In 1993, Aetna discontinued the sale of fully guaranteed large case
pensions products and established a reserve for anticipated future
losses on these products, which Aetna reviews quarterly. During the
year ended December 31, 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 operating earnings provides more useful
information as to Aetna'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 affect Aetna's
operating results.
-
In the year ended December 31, 2015, Aetna received proceeds, net of
legal costs, in connection with a litigation settlement. These net
proceeds were recorded in fees and other revenue in Aetna's GAAP
Consolidated Statements of Income.
-
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 of Aetna'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 operating earnings discussed above. The tax benefit or expense
was calculated utilizing the appropriate tax rate for each individual
item excluded from operating earnings.
For a reconciliation of financial measures calculated under GAAP to
these items, refer to the tables on pages 10 through 13 of this press
release.
(3) Operating revenue excludes net realized capital gains and
losses, litigation-related proceeds and interest income on the proceeds
of the transaction-related June 2016 debt as noted in (2)
above. Refer to the tables on pages 10 through 12 of this press release
for a reconciliation of total revenue calculated under GAAP to operating
revenue.
(4) Although Aetna is considering its options for responding
to the trial court's ruling in the Department of Justice litigation
relating to the Humana Acquisition, projected full-year 2017 net income
per share, full-year 2017 operating earnings per share and weighted
average diluted shares represent a standalone scenario that assumes the
termination of Aetna's merger agreement with Humana and Aetna's asset
purchase agreement with Molina Healthcare, Inc. ("Molina"). Projected
full-year 2017 net income and operating earnings per share reflect
approximately 344 million weighted average diluted shares. Projected
full-year 2017 operating earnings per share exclude from net income
projected transaction and integration-related costs (including projected
termination and litigation costs) primarily related to the Humana
Acquisition, the projected Penn Treaty-related guaranty fund assessment,
estimated amortization of other acquired intangible assets, projected
net realized capital gains and losses, other items, if any, that neither
relate to the ordinary course of Aetna's business nor reflect Aetna's
underlying business performance and the corresponding tax benefit or
expense related to the items excluded from operating earnings per share
discussed above. The projected Penn Treaty-related guaranty fund
assessment relates to the projected liquidation in 2017 of Penn Treaty
Network America Insurance Company and one of its subsidiaries, which
were placed in rehabilitation in 2009. This expense does not directly
relate to the underwriting or servicing of products for customers and is
not directly related to the core performance of Aetna's business
operations. Amortization of other acquired intangible assets relates to
Aetna's acquisition activities, including Coventry, InterGlobal and
bswift. Substantially all of the projected transaction and
integration-related costs in the table below are related to the assumed
termination of Aetna's merger agreement with Humana and Aetna's asset
purchase agreement with Molina. The table below reconciles projected
2017 net income per share to projected 2017 operating earnings per share:
|
Reconciliation of Projected 2017 Net Income Per Share to
Projected 2017 Operating Earnings Per Share
|
Projected net income per share (GAAP measure)
|
|
|
At least
|
|
|
$
|
3.70
|
|
Transaction and integration-related costs (including termination
costs)
|
|
|
|
|
|
5.39
|
|
Penn Treaty-related guaranty fund assessment
|
|
|
|
|
|
.67
|
|
Amortization of other acquired intangible assets
|
|
|
|
|
|
.68
|
|
Income tax benefit
|
|
|
|
|
|
(1.89
|
)
|
Projected operating earnings per share
|
|
|
At least
|
|
|
$
|
8.55
|
|
|
|
|
|
|
|
|
|
|
Aetna will experience net realized capital gains or net realized capital
losses during 2017, however Aetna cannot project the amount of such
future gains or losses. Therefore, Aetna has assumed no net realized
capital gains or losses for the year ended December 31, 2017 for
purposes of projecting net income and net income per share. Aetna's
annual net realized capital gains or losses ranged from a net realized
capital loss of $65 million to a net realized capital gain of $86
million during calendar years 2014 through 2016.
(5) The adjusted operating expense ratio excludes net
realized capital gains and losses and other items, if any, that are
excluded from operating 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 12 of this press release.
(6) In order to provide useful information regarding Aetna's
profitability on a basis comparable to others in the industry, without
regard to financing decisions, income taxes or amortization of other
acquired intangible assets (each of which may vary for reasons not
directly related to the performance of the underlying business), Aetna's
pretax operating margin is based on operating earnings excluding
interest expense and income taxes. Management also uses pretax operating
margin to assess Aetna's performance, including performance versus
competitors.
(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 Aetna
shareholders' equity.
(8) Aetna's Corporate Financing segment is not a business
segment. It is added to Aetna's business segments to reconcile segment
reporting to Aetna's consolidated results. The net loss of the Corporate
Financing segment includes interest expense on Aetna's outstanding debt
and the financing components of Aetna's pension and other postretirement
employee benefit plan expenses (benefits). As described in (2)
above, the operating earnings of the Corporate Financing segment exclude
other items, if any, that neither relate to the ordinary course of
Aetna's business nor reflect Aetna's underlying business performance.
(9) Interest expense included in the reconciliation to
operating earnings before income taxes, excluding interest expense and
the reconciliation to operating earnings excluding interest expense, net
of tax for the three months and year ended December 31, 2016 and 2015
exclude costs associated with the term loan credit agreement (the "Term
Loan Agreement") executed in connection with the Humana Acquisition.
Interest expense for the year ended December 31, 2016 and the three
months and year ended December 31, 2015 excludes costs associated with
bridge credit agreement (the "Bridge Credit Agreement") executed in
connection with the Humana Acquisition. Interest expense for the three
months and year ended December 31, 2016 also excludes the negative cost
of carry on transaction-related debt incurred in connection with the
Humana Acquisition. These costs are included within transaction and
integration-related costs.
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," "continue,"
"could," "estimate," "expect," "explore," "evaluate," "intend," "may,"
"might," "plan," "potential," "predict," "project," "seek," "should," 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 and Humana's control.
Statements in this press release regarding Aetna that are
forward-looking, including Aetna's projections as to net income per
share, operating earnings per share, transaction and integration-related
costs, Penn Treaty-related guaranty fund assessment, amortization of
other acquired intangible assets, the income tax benefit related to
items excluded from operating earnings, weighted average diluted shares,
and future operating results, are based on management's estimates,
assumptions and projections, and are subject to significant
uncertainties and other factors, many of which are beyond Aetna's and
Humana's control. Important risk factors could cause actual future
results and other future events to differ materially from those
currently estimated by management, including, but not limited to:
adverse changes in federal or state government policies, legislation or
regulations (including legislative, judicial or regulatory measures that
would affect Aetna's and/or Humana's business model, repeal, restrict
funding for or amend various aspects of health care reform, limit
Aetna's and/or Humana's ability to price for the risk it assumes and/or
reflect reasonable costs or profits in its pricing, such as mandated
minimum medical benefit ratios, or eliminate or reduce ERISA pre-emption
of state laws (increasing Aetna's and/or Humana's potential litigation
exposure)); unanticipated increases in medical costs (including
increased intensity or medical utilization as a result of flu or
otherwise; changes in membership mix to higher cost or lower-premium
products or membership adverse selection; medical cost increases
resulting from unfavorable changes in contracting or re-contracting with
providers (including as a result of provider consolidation and/or
integration); increased pharmacy costs (including in Aetna's and/or
Humana's public health insurance exchange products)); the outcome of
Aetna's evaluation of its options for responding to the trial court's
ruling in the Department of Justice litigation relating to the Humana
Acquisition and the ultimate resolution of that litigation; the timing
to consummate the Humana Acquisition; the timing to consummate the
proposed divestitures of certain of Aetna's and Humana's Medicare
Advantage assets (collectively, the "Divestitures"); the risk that a
condition to closing of the Humana Acquisition and/or the Divestitures
may not be satisfied; the risk that a regulatory approval that may be
required for the Humana Acquisition and/or the Divestitures is delayed,
is not obtained or is obtained subject to conditions that are not
anticipated; the outcome of various litigation matters related to the
Humana Acquisition; Aetna's ability to achieve the synergies and value
creation projected to be realized following the completion of the Humana
Acquisition; Aetna's ability to promptly and effectively integrate
Humana's businesses; the diversion of management time on Humana
Acquisition-related and/or Divestiture-related issues; the profitability
of Aetna's and Humana's public health insurance exchange and ACA
compliant small group products, where membership has had and may
continue to have more adverse health status and/or higher medical
benefit utilization than Aetna and/or Humana projected; uncertainty
related to Aetna's and Humana's accruals for the ACA's reinsurance, risk
adjustment and risk corridor programs ("3R's"); uncertainty related to
the funding for and final reconciliations with respect to the ACA's risk
management and subsidy programs; the implementation of health care
reform legislation, including collection of ACA fees, assessments and
taxes through increased premiums; adverse legislative, regulatory and/or
judicial changes to or interpretations of existing health care reform
legislation and/or regulations (including those relating to minimum
medical loss ratio ("MLR") rebates); the implementation of public health
insurance exchanges; Aetna's and Humana's ability to offset Medicare
Advantage and PDP rate pressures; the timing and amount of and payment
methods for satisfying assessments for Penn Treaty Network America
Insurance Company and other insolvent payors under state guaranty fund
laws; and changes in Aetna's and Humana's future cash requirements,
capital requirements, results of operations, financial condition and/or
cash flows. As currently enacted, health care reform will continue to
significantly impact Aetna's business operations and financial results,
including Aetna's pricing and medical benefit ratios, and key components
of the legislation will continue to be phased in through 2020. Aetna
will be required to dedicate material resources and incur material
expenses during 2017 to implement health care reform. Significant parts
of the legislation, including aspects of nondiscrimination requirements,
continue to evolve through the promulgation of regulations and guidance.
In addition, pending efforts in the U.S. Congress to repeal, amend or
restrict funding for various aspects of health care reform and pending
litigation challenging aspects of the law continue to create additional
uncertainty about the ultimate impact of health care reform. As a
result, many of the impacts of health care reform are unknown. Other
important risk factors include: adverse and less predictable economic
conditions in the U.S. and abroad (including unanticipated levels of, or
increases in the rate of, unemployment); reputational or financial
issues arising from Aetna's and/or Humana's social media activities,
data security breaches, other cybersecurity risks or other causes;
Aetna's ability to diversify Aetna's sources of revenue and earnings
(including by developing and expanding Aetna's consumer business and
expanding Aetna's foreign operations), transform Aetna's business model,
develop new products and optimize Aetna's business platforms; the
success of Aetna's Accountable Care Solutions and health information
technology initiatives; adverse changes in size, product or geographic
mix or medical cost experience of membership; managing executive
succession and key talent retention, recruitment and development;
failure to achieve and/or delays in achieving desired rate increases
and/or profitable membership growth due to regulatory review or other
regulatory restrictions, the difficult economy and/or significant
competition, especially in key geographic areas where membership is
concentrated, including successful protests of business awarded to Aetna
and/or Humana; failure to adequately implement health care reform and/or
repeal of or changes in health care reform; the outcome of various
litigation and regulatory matters, including audits, challenges to
Aetna's and/or Humana's minimum MLR rebate methodology and/or reports,
intellectual property litigation and litigation concerning, and ongoing
reviews by various regulatory authorities of, certain of Aetna's and/or
Humana's payment practices with respect to out-of-network providers,
other providers and/or life insurance policies; Aetna's ability to
integrate, simplify, and enhance Aetna's existing products, processes
and information technology systems and platforms to keep pace with
changing customer and regulatory needs; Aetna's ability to successfully
integrate Aetna's businesses (including Humana and other businesses
Aetna may acquire in the future) and implement multiple strategic and
operational initiatives (including the Divestitures) simultaneously;
Aetna's and/or Humana's ability to manage health care and other benefit
costs; adverse program, pricing, funding or audit actions by federal or
state government payors, including as a result of sequestration and/or
changes to or curtailment or elimination of the Centers for Medicare &
Medicaid Services' ("CMS") star rating bonus payments; Aetna's and/or
Humana's ability to maintain and/or enhance its CMS star ratings;
Aetna's ability to reduce administrative expenses while maintaining
targeted levels of service and operating performance; failure by a
service provider to meet its obligations to Aetna or Humana; Aetna's and
Humana's ability to develop and maintain relationships (including joint
ventures or other collaborative risk-sharing agreements) with providers
while taking actions to reduce medical costs and/or expand the services
each company offers; Aetna's ability to demonstrate that Aetna's
products and processes lead to access to quality affordable care by
Aetna's members; Aetna's and/or Humana's ability to maintain their
relationships with third-party brokers, consultants and agents who sell
their products; increases in medical costs or Group Insurance claims
resulting from any epidemics, acts of terrorism or other extreme events;
changes in medical cost estimates due to the necessary extensive
judgment that is used in the medical cost estimation process, the
considerable variability inherent in such estimates, and the sensitivity
of such estimates to changes in medical claims payment patterns and
changes in medical cost trends; a downgrade in Aetna's financial
ratings; and adverse impacts from any failure to raise the U.S. Federal
government's debt ceiling or any sustained U.S. Federal government shut
down. For more discussion of important risk factors that may materially
affect Aetna, please see the risk factors contained in Aetna's 2015
Annual Report on Form 10-K ("Aetna's 2015 Annual Report") and Aetna's
Quarterly Report on Form 10-Q for the quarter ended September 30, 2016
("Aetna's Quarterly Report"), each on file with the Securities and
Exchange Commission ("SEC"), and Aetna's 2016 Annual Report on Form 10-K
("Aetna's 2016 Annual Report"), when filed with the SEC. For more
discussion of important risk factors that may materially affect Humana,
please see the risk factors contained in Humana's 2015 Annual Report on
Form 10-K ("Humana's 2015 Annual Report") and Humana's Quarterly Reports
on Form 10-Q and Current Reports on Form 8-K filed or furnished during
2016 and 2017, each on file with the SEC, and Humana's 2016 Annual
Report on Form 10-K ("Humana's 2016 Annual Report"), when filed with the
SEC. You should also read Aetna's 2015 Annual Report and Aetna's
Quarterly Report, each on file with the SEC, and Aetna's 2016 Annual
Report, when filed with the SEC, for a discussion of Aetna's historical
results of operations and financial condition. You should also read
Humana's 2015 Annual Report, Humana's Quarterly Report on Form 10-Q for
the quarter ended September 30, 2016, each on file with the SEC, and
Humana's 2016 Annual Report, when filed with the SEC, for a discussion
of Humana's historical results of operations and financial condition.
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 Aetna or Humana. Aetna does not
assume any duty to update or revise forward-looking statements, whether
as a result of new information, future events or otherwise, as of any
future date.
|
Supplementary Information
|
|
Membership
|
|
|
|
|
December 31, 2016
|
|
|
September 30, 2016
|
|
|
December 31, 2015
|
(Thousands)
|
|
|
Insured
|
|
|
ASC
|
|
|
Total
|
|
|
Insured
|
|
|
ASC
|
|
|
Total
|
|
|
Insured
|
|
|
ASC
|
|
|
Total
|
Medical Membership:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
5,457
|
|
|
|
13,132
|
|
|
|
18,589
|
|
|
|
5,596
|
|
|
|
13,064
|
|
|
|
18,660
|
|
|
|
5,777
|
|
|
|
13,593
|
|
|
|
19,370
|
Medicare Advantage
|
|
|
1,362
|
|
|
|
-
|
|
|
|
1,362
|
|
|
|
1,364
|
|
|
|
-
|
|
|
|
1,364
|
|
|
|
1,251
|
|
|
|
-
|
|
|
|
1,251
|
Medicare Supplement
|
|
|
685
|
|
|
|
-
|
|
|
|
685
|
|
|
|
667
|
|
|
|
-
|
|
|
|
667
|
|
|
|
566
|
|
|
|
-
|
|
|
|
566
|
Medicaid
|
|
|
1,668
|
|
|
|
806
|
|
|
|
2,474
|
|
|
|
1,629
|
|
|
|
801
|
|
|
|
2,430
|
|
|
|
1,529
|
|
|
|
771
|
|
|
|
2,300
|
Total Medical Membership
|
|
|
9,172
|
|
|
|
13,938
|
|
|
|
23,110
|
|
|
|
9,256
|
|
|
|
13,865
|
|
|
|
23,121
|
|
|
|
9,123
|
|
|
|
14,364
|
|
|
|
23,487
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dental Membership:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Dental Membership
|
|
|
6,086
|
|
|
|
8,386
|
|
|
|
14,472
|
|
|
|
5,940
|
|
|
|
8,393
|
|
|
|
14,333
|
|
|
|
6,243
|
|
|
|
8,391
|
|
|
|
14,634
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pharmacy Benefit Management Services Membership:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
|
|
|
|
|
|
9,400
|
|
|
|
|
|
|
|
|
|
9,610
|
|
|
|
|
|
|
|
|
|
10,237
|
Medicare Prescription Drug Plan (stand-alone)
|
|
|
|
|
|
|
|
|
2,067
|
|
|
|
|
|
|
|
|
|
2,031
|
|
|
|
|
|
|
|
|
|
1,466
|
Medicare Advantage Prescription Drug Plan
|
|
|
|
|
|
|
|
|
953
|
|
|
|
|
|
|
|
|
|
952
|
|
|
|
|
|
|
|
|
|
863
|
Medicaid
|
|
|
|
|
|
|
|
|
2,783
|
|
|
|
|
|
|
|
|
|
2,719
|
|
|
|
|
|
|
|
|
|
2,587
|
Total Pharmacy Benefit Management Services Membership
|
|
|
|
|
|
|
|
|
15,203
|
|
|
|
|
|
|
|
|
|
15,312
|
|
|
|
|
|
|
|
|
|
15,153
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Health Care MBR Ratios
|
|
|
|
|
|
|
|
For the Three Months
|
|
|
For the Year
|
|
|
|
|
|
|
Ended December 31,
|
|
|
Ended December 31,
|
(millions)
|
|
|
|
|
|
2016
|
|
2015
|
|
|
2016
|
|
2015
|
Premiums (GAAP measure)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
|
|
|
$
|
6,949
|
|
$
|
7,100
|
|
|
$
|
27,916
|
|
$
|
28,709
|
Government
|
|
|
|
|
|
6,544
|
|
5,807
|
|
|
26,200
|
|
22,909
|
Health Care
|
|
|
|
|
|
$
|
13,493
|
|
$
|
12,907
|
|
|
$
|
54,116
|
|
$
|
51,618
|
Health Care Costs (GAAP measure)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
|
|
|
$
|
5,768
|
|
$
|
5,770
|
|
|
$
|
22,896
|
|
$
|
23,057
|
Government
|
|
|
|
|
|
5,315
|
|
4,796
|
|
|
21,359
|
|
18,655
|
Health Care
|
|
|
|
|
|
$
|
11,083
|
|
$
|
10,566
|
|
|
$
|
44,255
|
|
$
|
41,712
|
Medical Benefit Ratios "MBR"
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
|
|
|
83.0%
|
|
81.3%
|
|
|
82.0%
|
|
80.3%
|
Government
|
|
|
|
|
|
81.2%
|
|
82.6%
|
|
|
81.5%
|
|
81.4%
|
Health Care
|
|
|
|
|
|
82.1%
|
|
81.9%
|
|
|
81.8%
|
|
80.8%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Statements of Income by Segment (Unaudited)
|
|
|
|
|
|
Health
|
|
|
Group
|
|
|
Large Case
|
|
|
Corporate
|
|
|
|
(Millions)
|
|
|
|
Care
|
|
|
Insurance
|
|
|
Pensions
|
|
|
Financing
|
|
|
Total
|
For the three months ended December 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Health care premiums
|
|
|
|
$
|
13,493
|
|
|
|
$
|
-
|
|
|
|
$
|
-
|
|
|
|
$
|
-
|
|
|
|
$
|
13,493
|
|
Other premiums
|
|
|
|
-
|
|
|
|
539
|
|
|
|
7
|
|
|
|
-
|
|
|
|
546
|
|
Fees and other revenue
|
|
|
|
1,435
|
|
|
|
28
|
|
|
|
2
|
|
|
|
-
|
|
|
|
1,465
|
|
Net investment income
|
|
|
|
114
|
|
|
|
54
|
|
|
|
55
|
|
|
|
-
|
|
|
|
223
|
|
Net realized capital gains (losses)
|
|
|
|
1
|
|
|
|
(1
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Total revenue
|
|
|
|
15,043
|
|
|
|
620
|
|
|
|
64
|
|
|
|
-
|
|
|
|
15,727
|
|
Benefits and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Health care costs
|
|
|
|
11,083
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
11,083
|
|
Current and future benefits
|
|
|
|
-
|
|
|
|
455
|
|
|
|
57
|
|
|
|
-
|
|
|
|
512
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling expenses
|
|
|
|
395
|
|
|
|
38
|
|
|
|
-
|
|
|
|
-
|
|
|
|
433
|
|
General and administrative expenses
|
|
|
|
3,096
|
|
|
|
91
|
|
|
|
3
|
|
|
|
(15
|
)
|
|
|
3,175
|
|
Total operating expenses
|
|
|
|
3,491
|
|
|
|
129
|
|
|
|
3
|
|
|
|
(15
|
)
|
|
|
3,608
|
|
Interest expense
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
189
|
|
|
|
189
|
|
Amortization of other acquired intangible assets
|
|
|
60
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
60
|
|
Total benefits and expenses
|
|
|
|
14,634
|
|
|
|
584
|
|
|
|
60
|
|
|
|
174
|
|
|
|
15,452
|
|
Income (loss) before income taxes
|
|
|
|
409
|
|
|
|
36
|
|
|
|
4
|
|
|
|
(174
|
)
|
|
|
275
|
|
Income tax expense (benefit)
|
|
|
|
206
|
|
|
|
4
|
|
|
|
(2
|
)
|
|
|
(61
|
)
|
|
|
147
|
|
Net income (loss) including non-controlling interests
|
|
|
203
|
|
|
|
32
|
|
|
|
6
|
|
|
|
(113
|
)
|
|
|
128
|
|
Less: Net loss attributable to non-controlling interests
|
|
(12
|
)
|
|
|
-
|
|
|
|
1
|
|
|
|
-
|
|
|
|
(11
|
)
|
Net income (loss) attributable to Aetna
|
|
|
|
$
|
215
|
|
|
|
$
|
32
|
|
|
|
$
|
5
|
|
|
|
$
|
(113
|
)
|
|
|
$
|
139
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended December 31, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Health care premiums
|
|
|
|
$
|
12,907
|
|
|
|
$
|
-
|
|
|
|
$
|
-
|
|
|
|
$
|
-
|
|
|
|
$
|
12,907
|
|
Other premiums
|
|
|
|
-
|
|
|
|
539
|
|
|
|
4
|
|
|
|
-
|
|
|
|
543
|
|
Fees and other revenue
|
|
|
|
1,391
|
|
|
|
24
|
|
|
|
2
|
|
|
|
-
|
|
|
|
1,417
|
|
Net investment income
|
|
|
|
106
|
|
|
|
56
|
|
|
|
61
|
|
|
|
-
|
|
|
|
223
|
|
Net realized capital losses
|
|
|
|
(28
|
)
|
|
|
(6
|
)
|
|
|
(7
|
)
|
|
|
-
|
|
|
|
(41
|
)
|
Total revenue
|
|
|
|
14,376
|
|
|
|
613
|
|
|
|
60
|
|
|
|
-
|
|
|
|
15,049
|
|
Benefits and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Health care costs
|
|
|
|
10,566
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
10,566
|
|
Current and future benefits
|
|
|
|
-
|
|
|
|
464
|
|
|
|
61
|
|
|
|
-
|
|
|
|
525
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling expenses
|
|
|
|
366
|
|
|
|
32
|
|
|
|
-
|
|
|
|
-
|
|
|
|
398
|
|
General and administrative expenses
|
|
|
|
2,727
|
|
|
|
94
|
|
|
|
3
|
|
|
|
(23
|
)
|
|
|
2,801
|
|
Total operating expenses
|
|
|
|
3,093
|
|
|
|
126
|
|
|
|
3
|
|
|
|
(23
|
)
|
|
|
3,199
|
|
Interest expense
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
111
|
|
|
|
111
|
|
Amortization of other acquired intangible assets
|
|
|
63
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
63
|
|
Total benefits and expenses
|
|
|
|
13,722
|
|
|
|
590
|
|
|
|
64
|
|
|
|
88
|
|
|
|
14,464
|
|
Income (loss) before income taxes
|
|
|
|
654
|
|
|
|
23
|
|
|
|
(4
|
)
|
|
|
(88
|
)
|
|
|
585
|
|
Income tax expense (benefit)
|
|
|
|
292
|
|
|
|
5
|
|
|
|
(3
|
)
|
|
|
(31
|
)
|
|
|
263
|
|
Net income (loss) including non-controlling interests
|
|
|
362
|
|
|
|
18
|
|
|
|
(1
|
)
|
|
|
(57
|
)
|
|
|
322
|
|
Less: Net income attributable to non-controlling interests
|
|
1
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1
|
|
Net income (loss) attributable to Aetna
|
|
|
|
$
|
361
|
|
|
|
$
|
18
|
|
|
|
$
|
(1
|
)
|
|
|
$
|
(57
|
)
|
|
|
$
|
321
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Statements of Income by Segment (Unaudited)
|
|
|
|
|
|
|
Health
|
|
|
Group
|
|
|
Large Case
|
|
|
Corporate
|
|
|
|
(Millions)
|
|
|
|
|
Care
|
|
|
Insurance
|
|
|
Pensions
|
|
|
Financing
|
|
|
Total
|
For the year ended December 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Health care premiums
|
|
|
|
|
$
|
54,116
|
|
|
|
$
|
-
|
|
|
|
$
|
-
|
|
|
|
$
|
-
|
|
|
|
$
|
54,116
|
|
Other premiums
|
|
|
|
|
-
|
|
|
|
2,143
|
|
|
|
39
|
|
|
|
-
|
|
|
|
2,182
|
|
Fees and other revenue
|
|
|
|
|
5,744
|
|
|
|
108
|
|
|
|
9
|
|
|
|
-
|
|
|
|
5,861
|
|
Net investment income
|
|
|
|
|
458
|
|
|
|
226
|
|
|
|
226
|
|
|
|
-
|
|
|
|
910
|
|
Net realized capital gains
|
|
|
|
|
52
|
|
|
|
24
|
|
|
|
10
|
|
|
|
-
|
|
|
|
86
|
|
Total revenue
|
|
|
|
|
60,370
|
|
|
|
2,501
|
|
|
|
284
|
|
|
|
-
|
|
|
|
63,155
|
|
Benefits and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Health care costs
|
|
|
|
|
44,255
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
44,255
|
|
Current and future benefits
|
|
|
|
|
-
|
|
|
|
1,850
|
|
|
|
251
|
|
|
|
-
|
|
|
|
2,101
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling expenses
|
|
|
|
|
1,545
|
|
|
|
133
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,678
|
|
General and administrative expenses
|
|
|
|
|
10,099
|
|
|
|
353
|
|
|
|
13
|
|
|
|
(58
|
)
|
|
|
10,407
|
|
Total operating expenses
|
|
|
|
|
11,644
|
|
|
|
486
|
|
|
|
13
|
|
|
|
(58
|
)
|
|
|
12,085
|
|
Interest expense
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
604
|
|
|
|
604
|
|
Amortization of other acquired intangible assets
|
|
|
|
247
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
247
|
|
Reduction of reserve for anticipated future losses on discontinued
products
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(128
|
)
|
|
|
-
|
|
|
|
(128
|
)
|
Total benefits and expenses
|
|
|
|
|
56,146
|
|
|
|
2,336
|
|
|
|
136
|
|
|
|
546
|
|
|
|
59,164
|
|
Income (loss) before income taxes
|
|
|
|
|
4,224
|
|
|
|
165
|
|
|
|
148
|
|
|
|
(546
|
)
|
|
|
3,991
|
|
Income tax expense (benefit)
|
|
|
|
|
1,856
|
|
|
|
26
|
|
|
|
44
|
|
|
|
(191
|
)
|
|
|
1,735
|
|
Net income (loss) including non-controlling interests
|
|
|
|
2,368
|
|
|
|
139
|
|
|
|
104
|
|
|
|
(355
|
)
|
|
|
2,256
|
|
Less: Net loss attributable to non-controlling interests
|
|
|
(15
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(15
|
)
|
Net income (loss) attributable to Aetna
|
|
|
|
|
$
|
2,383
|
|
|
|
$
|
139
|
|
|
|
$
|
104
|
|
|
|
$
|
(355
|
)
|
|
|
$
|
2,271
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the year ended December 31, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Health care premiums
|
|
|
|
|
$
|
51,618
|
|
|
|
$
|
-
|
|
|
|
$
|
-
|
|
|
|
$
|
-
|
|
|
|
$
|
51,618
|
|
Other premiums
|
|
|
|
|
-
|
|
|
|
2,139
|
|
|
|
32
|
|
|
|
-
|
|
|
|
2,171
|
|
Fees and other revenue
|
|
|
|
|
5,585
|
|
|
|
101
|
|
|
|
10
|
|
|
|
-
|
|
|
|
5,696
|
|
Net investment income
|
|
|
|
|
408
|
|
|
|
238
|
|
|
|
271
|
|
|
|
-
|
|
|
|
917
|
|
Net realized capital losses
|
|
|
|
|
(50
|
)
|
|
|
-
|
|
|
|
(15
|
)
|
|
|
-
|
|
|
|
(65
|
)
|
Total revenue
|
|
|
|
|
57,561
|
|
|
|
2,478
|
|
|
|
298
|
|
|
|
-
|
|
|
|
60,337
|
|
Benefits and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Health care costs
|
|
|
|
|
41,712
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
41,712
|
|
Current and future benefits
|
|
|
|
|
-
|
|
|
|
1,837
|
|
|
|
284
|
|
|
|
-
|
|
|
|
2,121
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling expenses
|
|
|
|
|
1,490
|
|
|
|
121
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,611
|
|
General and administrative expenses
|
|
|
|
|
9,766
|
|
|
|
346
|
|
|
|
13
|
|
|
|
(92
|
)
|
|
|
10,033
|
|
Total operating expenses
|
|
|
|
|
11,256
|
|
|
|
467
|
|
|
|
13
|
|
|
|
(92
|
)
|
|
|
11,644
|
|
Interest expense
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
369
|
|
|
|
369
|
|
Amortization of other acquired intangible assets
|
|
|
|
255
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
255
|
|
Total benefits and expenses
|
|
|
|
|
53,223
|
|
|
|
2,304
|
|
|
|
297
|
|
|
|
277
|
|
|
|
56,101
|
|
Income (loss) before income taxes
|
|
|
|
|
4,338
|
|
|
|
174
|
|
|
|
1
|
|
|
|
(277
|
)
|
|
|
4,236
|
|
Income tax expense (benefit)
|
|
|
|
|
1,908
|
|
|
|
38
|
|
|
|
(9
|
)
|
|
|
(96
|
)
|
|
|
1,841
|
|
Net income (loss) including non-controlling interests
|
|
|
|
2,430
|
|
|
|
136
|
|
|
|
10
|
|
|
|
(181
|
)
|
|
|
2,395
|
|
Less: Net income attributable to non-controlling interests
|
|
|
3
|
|
|
|
-
|
|
|
|
2
|
|
|
|
-
|
|
|
|
5
|
|
Net income (loss) attributable to Aetna
|
|
|
|
|
$
|
2,427
|
|
|
|
$
|
136
|
|
|
|
$
|
8
|
|
|
|
$
|
(181
|
)
|
|
|
$
|
2,390
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Roll Forward of Health Care Costs Payable
|
(Unaudited)
|
|
|
|
|
|
For the Year Ended
|
|
|
|
|
December 31,
|
(Millions)
|
|
|
|
2016
|
|
|
2015
|
Health care costs payable, beginning of period
|
|
|
|
$
|
6,306
|
|
|
|
$
|
5,621
|
|
Less: reinsurance recoverables
|
|
|
|
4
|
|
|
|
6
|
|
Health care costs payable, beginning of period, net
|
|
|
|
6,302
|
|
|
|
5,615
|
|
Add: Components of incurred health care costs:
|
|
|
|
|
|
|
|
Current year
|
|
|
|
45,019
|
|
|
|
42,553
|
|
Prior years(a)
|
|
|
|
(764
|
)
|
|
|
(841
|
)
|
Total incurred health care costs
|
|
|
|
44,255
|
|
|
|
41,712
|
|
|
|
|
|
|
|
|
|
Less: Claims paid
|
|
|
|
|
|
|
|
Current year
|
|
|
|
38,700
|
|
|
|
36,389
|
|
Prior years
|
|
|
|
5,304
|
|
|
|
4,636
|
|
Total claims paid
|
|
|
|
44,004
|
|
|
|
41,025
|
|
|
|
|
|
|
|
|
|
Health care costs payable, end of period, net
|
|
|
|
6,553
|
|
|
|
6,302
|
|
Add: reinsurance recoverables
|
|
|
|
5
|
|
|
|
4
|
|
Health care costs payable, end of period
|
|
|
|
$
|
6,558
|
|
|
|
$
|
6,306
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) Negative amounts reported for incurred health care costs
related to prior years result from claims being settled for less than
originally estimated.
|
Days Claims Payable
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
|
September 30, 2016
|
|
|
June 30, 2016
|
|
|
March 31, 2016
|
|
|
December 31, 2015
|
Days Claims Payable
|
|
|
|
54
|
|
|
57
|
|
|
56
|
|
|
57
|
|
|
55
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Health Care Reform's Reinsurance, Risk Adjustment and Risk
Corridor (the "3Rs")(a)
|
Net Receivable (Payable)
|
|
|
|
|
|
At December 31, 2016
|
|
|
At December 31, 2015
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
(Millions)
|
|
|
|
Reinsurance
|
|
Risk Adjustment
|
|
Risk Corridor(b)
|
|
|
Reinsurance
|
|
Risk Adjustment
|
|
Risk Corridor
|
Total current net receivable (payable)
|
|
$
|
202
|
|
|
$
|
(690
|
)
|
|
$
|
(10
|
)
|
|
|
$
|
395
|
|
|
$
|
(710
|
)
|
|
$
|
(8
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) Aetna participates in certain public health insurance
exchanges established pursuant to the Patient Protection and Affordable
Care Act and the Health Care and Education Reconciliation Act of 2010
(as amended, collectively, "Health Care Reform" or the "ACA"). Under
regulations established by the U.S. Department of Health and Human
Services ("HHS"), HHS pays Aetna a portion of the premium and a portion
of the health care costs for low-income individual Public Exchange
members. In addition, HHS administers the 3Rs risk management programs. (b)
At December 31, 2016, Aetna estimates that it is entitled to
receive a total of $465 million from HHS under the three-year ACA risk
corridor program for the 2014 through 2016 program years. At December
31, 2016, Aetna did not record any ACA risk corridor receivables related
to the 2016 or 2015 program years or any amount in excess of HHS's
announced prorated funding amount for the 2014 program year, because
payments from HHS are uncertain.
View source version on businesswire.com: http://www.businesswire.com/news/home/20170131005596/en/
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