UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended March 31, 2021

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                     to                     

Commission file number: 001-16751

ANTHEM, INC.

(Exact name of registrant as specified in its charter)

Indiana	35-2145715
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)

220 Virginia Avenue

Indianapolis, Indiana 46204

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: (800) 331-1476

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 par value	ANTM	New York Stock Exchange

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes ☒ No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act:

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No  ☒

As of April 15, 2021, 244,840,654 shares of the Registrant’s Common Stock were outstanding.

Anthem, Inc.

Quarterly Report on Form 10-Q

For the Period Ended March 31, 2021

Table of Contents

		Page
PART I. FINANCIAL INFORMATION
ITEM 1.	FINANCIAL STATEMENTS
	Consolidated Balance Sheets as of March 31, 2021 (Unaudited) and December 31, 2020	2
	Consolidated Statements of Income (Unaudited) for the Three Months Ended March 31, 2021 and 2020	3
	Consolidated Statements of Comprehensive Income (Unaudited) for the Three Months Ended March 31, 2021 and 2020	4
	Consolidated Statements of Cash Flows (Unaudited) for the Three Months Ended March 31, 2021 and 2020	5
	Consolidated Statements of Shareholders’ Equity (Unaudited) for the Three Months Ended March 31, 2021 and 2020	6
	Notes to Consolidated Financial Statements (Unaudited)	7
ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	38
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	54
ITEM 4.	CONTROLS AND PROCEDURES	54
PART II. OTHER INFORMATION
ITEM 1.	LEGAL PROCEEDINGS	54
ITEM 1A.	RISK FACTORS	54
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	55
ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	55
ITEM 4.	MINE SAFETY DISCLOSURES	55
ITEM 5.	OTHER INFORMATION	55
ITEM 6.	EXHIBITS	56
SIGNATURES		57

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PART I. FINANCIAL INFORMATION

ITEM 1.    FINANCIAL STATEMENTS

Anthem, Inc.

Consolidated Balance Sheets

	March 31, 2021		December 31, 2020
(In millions, except share data)	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	9,326	$	5,741
Fixed maturity securities (amortized cost of $23,808 and $22,222; allowance for credit losses of $8 and $7)	24,555		23,433
Equity securities	3,630		1,559
Premium receivables	6,111		5,279
Self-funded receivables	3,109		2,849
Other receivables	3,071		2,830
Other current assets	4,693		4,060
Total current assets	54,495		45,751
Long-term investments:
Fixed maturity securities (amortized cost of $537 and $532; allowance for credit losses of $0 and $0)	558		562
Other invested assets	4,474		4,285
Property and equipment, net	3,533		3,483
Goodwill	21,708		21,691
Other intangible assets	9,352		9,405
Other noncurrent assets	1,563		1,438
Total assets	$	95,683	$	86,615
Liabilities and equity
Liabilities
Current liabilities:
Medical claims payable	$	12,347	$	11,359
Other policyholder liabilities	5,075		4,590
Unearned income	1,139		1,259
Accounts payable and accrued expenses	5,329		5,493
Current portion of long-term debt	700		700
Other current liabilities	10,159		6,052
Total current liabilities	34,749		29,453
Long-term debt, less current portion	22,534		19,335
Reserves for future policy benefits	776		794
Deferred tax liabilities, net	1,961		2,019
Other noncurrent liabilities	1,745		1,815
Total liabilities	61,765		53,416
Commitments and contingencies – Note 11
Shareholders’ equity
Preferred stock, without par value, shares authorized – 100,000,000; shares issued and outstanding – none	—		—
Common stock, par value $0.01, shares authorized – 900,000,000; shares issued and outstanding – 244,938,635 and 245,401,430	2		3
Additional paid-in capital	9,253		9,244
Retained earnings	24,793		23,802
Accumulated other comprehensive (loss) income	(195)		150
Total shareholders’ equity	33,853		33,199
Noncontrolling interests	65		—
Total equity	33,918		33,199
Total liabilities and equity	$	95,683	$	86,615

See accompanying notes.

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Anthem, Inc.

Consolidated Statements of Income

(Unaudited) 

	Three Months Ended   March 31
(In millions, except per share data)	2021		2020
Revenues
Premiums	$	27,676	$	25,517
Product revenue	2,737		2,344
Administrative fees and other revenue	1,685		1,587
Total operating revenue	32,098		29,448
Net investment income	291		254
Net realized losses on financial instruments	(4)		(81)
Total revenues	32,385		29,621
Expenses
Benefit expense	23,699		21,489
Cost of products sold	2,313		1,984
Selling, general and administrative expense	3,925		3,781
Interest expense	192		194
Amortization of other intangible assets	80		83
Loss on extinguishment of debt	—		1
Total expenses	30,209		27,532
Income before income tax expense	2,176		2,089
Income tax expense	509		566
Net income	1,667		1,523
Net income attributable to noncontrolling interests	(2)		—
Shareholders’ net income	$	1,665	$	1,523
Shareholders’ net income per share
Basic	$	6.80	$	6.03
Diluted	$	6.71	$	5.94
Dividends per share	$	1.13	$	0.95

See accompanying notes.

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Anthem, Inc.

Consolidated Statements of Comprehensive Income

(Unaudited) 

	Three Months Ended   March 31
(In millions)	2021		2020
Net income	$	1,667	$	1,523
Other comprehensive loss, net of tax:
Change in net unrealized losses/gains on investments	(362)		(689)
Change in non-credit component of impairment losses on investments	1		(32)
Change in net unrealized gains/losses on cash flow hedges	4		3
Change in net periodic pension and postretirement costs	10		7
Foreign currency translation adjustments	—		(1)
Other comprehensive loss	(347)		(712)
Net income attributable to noncontrolling interests	(2)		—
Other comprehensive loss attributable to noncontrolling interests	2		—
Total shareholders’ comprehensive income	$	1,320	$	811

See accompanying notes.

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Anthem, Inc.

Consolidated Statements of Cash Flows

(Unaudited)

	Three Months Ended   March 31
(In millions)	2021		2020
Operating activities
Net income	$	1,667	$	1,523
Adjustments to reconcile net income to net cash provided by operating activities:
Net realized losses on financial instruments	4		81
Depreciation and amortization	282		270
Deferred income taxes	31		57
Share-based compensation	64		67
Changes in operating assets and liabilities:
Receivables, net	(1,258)		(639)
Other invested assets	(20)		63
Other assets	(288)		(525)
Policy liabilities	1,455		692
Unearned income	(119)		(109)
Accounts payable and other liabilities	358		588
Income taxes	438		491
Other, net	(109)		(44)
Net cash provided by operating activities	2,505		2,515
Investing activities
Purchases of investments	(6,978)		(3,896)
Proceeds from sale of investments	4,650		2,728
Maturities, calls and redemptions from investments	998		597
Changes in securities lending collateral	(731)		(77)
Purchases of subsidiaries, net of cash acquired	(27)		(1,908)
Purchases of property and equipment	(204)		(204)
Other, net	(15)		(24)
Net cash used in investing activities	(2,307)		(2,784)
Financing activities
Net (repayments of) proceeds from commercial paper borrowings	(250)		905
Proceeds from long-term borrowings	3,462		300
Repayments of long-term borrowings	—		(52)
Proceeds from short-term borrowings	—		1,075
Repayments of short-term borrowings	—		(700)
Changes in securities lending payable	731		77
Repurchase and retirement of common stock	(447)		(529)
Cash dividends	(277)		(240)
Proceeds from issuance of common stock under employee stock plans	89		44
Taxes paid through withholding of common stock under employee stock plans	(91)		(107)
Other, net	171		(94)
Net cash provided by financing activities	3,388		679
Effect of foreign exchange rates on cash and cash equivalents	(1)		(2)
Change in cash and cash equivalents	3,585		408
Cash and cash equivalents at beginning of period	5,741		4,937
Cash and cash equivalents at end of period	$	9,326	$	5,345

See accompanying notes.

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Anthem, Inc.

Consolidated Statements of Shareholders’ Equity

(Unaudited)

	Common Stock			Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Noncontrolling Interests		Total Equity
(In millions)	Number of Shares	Par Value
January 1, 2021	245.4	$	3	$	9,244	$	23,802	$	150	$	—	$	33,199
Net income	—	—		—		1,665		—		2		1,667
Other comprehensive loss	—	—		—		—		(345)		(2)		(347)
Noncontrolling interests adjustment	—	—		—		—		—		65		65
Repurchase and retirement of common stock	(1.4)	(1)		(53)		(393)		—		—		(447)
Dividends and dividend equivalents	—	—		—		(281)		—		—		(281)
Issuance of common stock under employee stock plans, net of related tax benefits	0.9	—		62		—		—		—		62
March 31, 2021	244.9	$	2	$	9,253	$	24,793	$	(195)	$	65	$	33,918
December 31, 2019 (audited)	252.9	$	3	$	9,448	$	22,573	$	(296)	$	—	$	31,728
Adoption of Accounting Standards Update No. 2016-13	—	—		—		(35)		—		—		(35)
January 1, 2020	252.9	3		9,448		22,538		(296)		—		31,693
Net income	—	—		—		1,523		—		—		1,523
Other comprehensive loss	—	—		—		—		(712)		—		(712)
Repurchase and retirement of common stock	(1.9)	—		(71)		(458)		—		—		(529)
Dividends and dividend equivalents	—	—		—		(243)		—		—		(243)
Issuance of common stock under employee stock plans, net of related tax benefits	1.0	—		3		—		—		—		3
Convertible debenture repurchases and conversions	—	—		(42)		—		—		—		(42)
March 31, 2020	252.0	$	3	$	9,338	$	23,360	$	(1,008)	$	—	$	31,693

See accompanying notes.

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Anthem, Inc.

Notes to Consolidated Financial Statements

(Unaudited)

March 31, 2021

(In Millions, Except Per Share Data or As Otherwise Stated Herein)

1.     Organization

References to the terms “we,” “our,” “us” or “Anthem” used throughout these Notes to Consolidated Financial Statements refer to Anthem, Inc., an Indiana corporation, and unless the context otherwise requires, its direct and indirect subsidiaries. References to the “states” include the District of Columbia, unless the context otherwise requires.

We are one of the largest health benefits companies in the United States in terms of medical membership, serving nearly 44 medical members through our affiliated health plans as of March 31, 2021. We offer a broad spectrum of network-based managed care plans to Individual, Group, Medicaid and Medicare markets. Our managed care plans include: Preferred Provider Organizations (“PPOs”); Health Maintenance Organizations (“HMOs”); Point-of-Service plans; traditional indemnity plans and other hybrid plans, including Consumer-Driven Health Plans; and hospital only and limited benefit products. In addition, we provide a broad array of managed care services to fee-based customers, including claims processing, stop loss insurance, actuarial services, provider network access, medical cost management, disease management, wellness programs and other administrative services. We provide an array of specialty and other insurance products and services such as pharmacy benefits management (“PBM”), dental, vision, life and disability insurance benefits, radiology benefit management and analytics-driven personal healthcare. We also provide services to the federal government in connection with our Federal Health Products & Services business, which administers the Federal Employees Health Benefits (“FEHB”) Program.

We are an independent licensee of the Blue Cross and Blue Shield Association (“BCBSA”), an association of independent health benefit plans. We serve our members as the Blue Cross licensee for California and as the Blue Cross and Blue Shield (“BCBS”) licensee for Colorado, Connecticut, Georgia, Indiana, Kentucky, Maine, Missouri (excluding 30 counties in the Kansas City area), Nevada, New Hampshire, New York (in the New York City metropolitan area and upstate New York), Ohio, Virginia (excluding the Northern Virginia suburbs of Washington, D.C.) and Wisconsin. In a majority of these service areas, we do business as Anthem Blue Cross, Anthem Blue Cross and Blue Shield, and Empire Blue Cross Blue Shield or Empire Blue Cross. We also conduct business through arrangements with other BCBS licensees as well as other strategic partners. Through our subsidiaries, we also serve customers in numerous states across the country as AIM Specialty Health, Amerigroup, Aspire Health, Beacon, CareMore, Freedom Health, HealthLink, HealthSun, Optimum HealthCare, Simply Healthcare, and/or UniCare. Also, we provide PBM services through our IngenioRx, Inc. (“IngenioRx”) subsidiary. We are licensed to conduct insurance operations in all 50 states and the District of Columbia through our subsidiaries.

2.     Basis of Presentation and Significant Accounting Policies

Basis of Presentation: The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial reporting. Accordingly, they do not include all of the information and footnotes required by GAAP for annual financial statements. We have omitted certain footnote disclosures that would substantially duplicate the disclosures in our 2020 Annual Report on Form 10-K, unless the information contained in those disclosures materially changed or is required by GAAP. Certain prior year amounts have been reclassified to conform to the current year presentation. In the opinion of management, all adjustments, including normal recurring adjustments, necessary for a fair statement of the consolidated financial statements as of and for the three months ended March 31, 2021 and 2020 have been recorded. The results of operations for the three months ended March 31, 2021 are not necessarily indicative of the results that may be expected for the full year ending December 31, 2021, or any other period. These unaudited consolidated financial statements should be read in conjunction with our audited consolidated financial statements as of and for the year ended December 31, 2020 included in our 2020 Annual Report on Form 10-K.

Certain of our subsidiaries operate outside of the United States and have functional currencies other than the U.S. dollar (“USD”). We translate the assets and liabilities of those subsidiaries to USD using the exchange rate in effect at the end of the period. We translate the revenues and expenses of those subsidiaries to USD using the average exchange rates in effect during

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the period. The net effect of these translation adjustments is included in “Foreign currency translation adjustments” in our consolidated statements of comprehensive income.

Cash and Cash Equivalents: We control a number of bank accounts that are used exclusively to hold customer funds for the administration of customer benefits, and we have cash and cash equivalents on deposit to meet certain regulatory requirements. These amounts totaled $205 and $170 at March 31, 2021 and December 31, 2020, respectively, and are included in the cash and cash equivalents line on our consolidated balance sheets.

Investments: We classify fixed maturity securities in our investment portfolio as “available-for-sale” and report those securities at fair value. Certain fixed maturity securities are available to support current operations and, accordingly, we classify such investments as current assets without regard to their contractual maturity. Investments used to satisfy contractual, regulatory or other requirements are classified as long-term, without regard to contractual maturity.

If a fixed maturity security is in an unrealized loss position and we have the intent to sell the fixed maturity security, or it is more likely than not that we will have to sell the fixed maturity security before recovery of its amortized cost basis, we write down the fixed maturity security’s cost basis to fair value and record an impairment loss in our consolidated statements of income. For impaired fixed maturity securities that we do not intend to sell or if it is more likely than not that we will not have to sell such securities, but we expect that we will not fully recover the amortized cost basis, we recognize the credit component of the impairment as an allowance for credit loss in our consolidated balance sheets and record an impairment loss in our consolidated statements of income. The non-credit component of the impairment is recognized in accumulated other comprehensive loss. Furthermore, unrealized losses entirely caused by non-credit-related factors related to fixed maturity securities for which we expect to fully recover the amortized cost basis continue to be recognized in accumulated other comprehensive (loss) income.

The credit component of an impairment is determined primarily by comparing the net present value of projected future cash flows with the amortized cost basis of the fixed maturity security. The net present value is calculated by discounting our best estimate of projected future cash flows at the effective interest rate implicit in the fixed maturity security at the date of purchase. For mortgage-backed and asset-backed securities, cash flow estimates are based on assumptions regarding the underlying collateral, including prepayment speeds, vintage, type of underlying asset, geographic concentrations, default rates, recoveries and changes in value. For all other securities, cash flow estimates are driven by assumptions regarding probability of default, including changes in credit ratings and estimates regarding timing and amount of recoveries associated with a default.

For asset-backed securities included in fixed maturity securities, we recognize income using an effective yield based on anticipated prepayments and the estimated economic life of the securities. When estimates of prepayments change, the effective yield is recalculated to reflect actual payments to date and anticipated future payments. The net investment in the securities is adjusted to the amount that would have existed had the new effective yield been applied since the purchase date of the securities. Such adjustments are reported within net investment income.

The changes in fair value of our marketable equity securities are recognized in our results of operations within net realized gains and losses on financial instruments.

We have corporate-owned life insurance policies on certain participants in our deferred compensation plans and other members of management. The cash surrender value of the corporate-owned life insurance policies is reported under the caption “Other invested assets” in our consolidated balance sheets.

We use the equity method of accounting for investments in companies in which our ownership interest may enable us to influence the operating or financial decisions of the investee company. Our proportionate share of equity in net income of these unconsolidated affiliates is reported within net investment income. The equity method investments are reported under the caption “Other invested assets” in our consolidated balance sheets.

Investment income is recorded when earned. All securities sold resulting in investment gains and losses are recorded on the trade date. Realized gains and losses are determined on the basis of the cost or amortized cost of the specific securities sold.

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We participate in securities lending programs whereby marketable securities in our investment portfolio are transferred to independent brokers or dealers in exchange for cash and securities collateral. We recognize the collateral as an asset, which is reported under the caption “Other current assets” in our consolidated balance sheets, and we record a corresponding liability for the obligation to return the collateral to the borrower, which is reported under the caption “Other current liabilities” in our consolidated balance sheets. The securities on loan are reported in the applicable investment category on our consolidated balance sheets. Unrealized gains or losses on securities lending collateral are included in accumulated other comprehensive (loss) income as a separate component of shareholders’ equity. The market value of loaned securities and that of the collateral pledged can fluctuate in non-synchronized fashions. To the extent the loaned securities’ value appreciates faster or depreciates slower than the value of the collateral pledged, we are exposed to the risk of the shortfall. As a primary mitigating mechanism, the loaned securities and collateral pledged are marked to market on a daily basis and the shortfall, if any, is collected accordingly. Secondarily, the collateral level is set at 102% of the value of the loaned securities, which provides a cushion before any shortfall arises. The investment of the cash collateral is subject to market risk, which is managed by limiting the investments to higher quality and shorter duration instruments.

Receivables: Receivables are reported net of amounts for expected credit losses. The allowance for doubtful accounts is based on historical collection trends, future forecasts and our judgment regarding the ability to collect specific accounts.

Premium receivables include the uncollected amounts from insured groups, individuals and government programs. Premium receivables are reported net of an allowance for doubtful accounts of $146 at each of March 31, 2021 and December 31, 2020.

Self-funded receivables include administrative fees, claims and other amounts due from self-funded customers. Self-funded receivables are reported net of an allowance for doubtful accounts of $51 and $54 at March 31, 2021 and December 31, 2020, respectively.

Other receivables include pharmacy rebates, provider advances, claims recoveries, reinsurance receivables, proceeds due from brokers on investment trades, accrued investment income, and other miscellaneous amounts due to us. These receivables are reported net of an allowance for doubtful accounts of $406 and $374 at March 31, 2021 and December 31, 2020, respectively.

Revenue Recognition: For our fee-based contracts, we had no material contract assets, contract liabilities or deferred contract costs recorded on our consolidated balance sheet at March 31, 2021. For the three months ended March 31, 2021, revenue recognized from performance obligations related to prior periods, such as due to changes in transaction price, was not material. For contracts that have an original expected duration of greater than one year, revenue expected to be recognized in future periods related to unfulfilled contractual performance obligations and contracts with variable consideration related to undelivered performance obligations is not material.

Recently Adopted Accounting Guidance: In January 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2021-01, Reference Rate Reform (Topic 848) (“ASU 2021-01”). The amendments in ASU 2021-01 provide optional expedients and exceptions for applying GAAP to contract modifications and hedging relationships, subject to meeting certain criteria, that reference the London Interbank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued because of the reference rate reform. The provisions must be applied at a Topic, Subtopic, or Industry Subtopic level for all transactions other than derivatives, which may be applied at a hedging relationship level. We adopted ASU 2021-01 on January 7, 2021 and the adoption did not have an impact on our consolidated financial position, results of operations or cash flows.

In October 2020, the FASB issued Accounting Standards Update No. 2020-08, Codification Improvements to Subtopic 310-20, Receivables—Nonrefundable Fees and Other Costs (“ASU 2020-08”). The amendments in ASU 2020-08 clarify when an entity should assess whether a callable debt security is within the scope of accounting guidance, which impacts the amortization period for nonrefundable fees and other costs. ASU 2020-08 became effective for interim and annual reporting periods beginning after December 15, 2020. The amendments are to be applied on a prospective basis as of the beginning of the period of adoption for existing or newly purchased callable debt securities. We adopted ASU 2020-08 on January 1, 2021, and the adoption did not have an impact on our consolidated financial position, results of operations or cash flows.

In December 2019, the FASB issued Accounting Standards Update No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”). The amendments in ASU 2019-12 remove certain exceptions to the

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general principles in Accounting Standards Codification Topic 740. The amendments also clarify and amend existing guidance to improve consistent application. The amendments became effective for our annual reporting periods beginning after December 15, 2020. The transition method (retrospective, modified retrospective, or prospective basis) related to the amendments depends on the applicable guidance, and all amendments for which there is no transition guidance specified are to be applied on a prospective basis. We adopted ASU 2019-12 on January 1, 2021, and the adoption did not have an impact on our consolidated financial position, results of operations or cash flows.

Recent Accounting Guidance Not Yet Adopted: In November 2020, the FASB issued Accounting Standards Update No. 2020-11, Financial Services—Insurance (Topic 944): Effective Date and Early Application (“ASU 2020-11”). The amendments in ASU 2020-11 make changes to the effective date and early application of Accounting Standards Update No. 2018-12, Financial Services—Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts (“ASU 2018-12”), which was issued in November 2018. The amendments in ASU 2020-11 have extended the original effective date by one year and now the amendments are required for our interim and annual reporting periods beginning after December 15, 2022. The amendments in ASU 2018-12 make changes to a variety of areas to simplify or improve the existing recognition, measurement, presentation and disclosure requirements for long-duration contracts issued by an insurance entity. The amendments require insurers to annually review the assumptions they make about their policyholders and update the liabilities for future policy benefits if the assumptions change. The amendments also simplify the amortization of deferred contract acquisition costs and add new disclosure requirements about the assumptions insurers use to measure their liabilities and how they may affect future cash flows. The amendments related to the liability for future policy benefits for traditional and limited-payment contracts and deferred acquisition costs are to be applied to contracts in force as of the beginning of the earliest period presented, with an option to apply such amendments retrospectively with a cumulative-effect adjustment to the opening balance of retained earnings as of the earliest period presented. The amendments for market risk benefits are to be applied retrospectively. We are currently evaluating the effects the adoption of ASU 2020-11 and ASU 2018-12 will have on our consolidated financial position, results of operations, cash flows, and related disclosures.

In August 2020, the FASB issued Accounting Standards Update No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”). The amendments eliminate two of the three accounting models that require separate accounting for convertible features of debt securities, simplify the contract settlement assessment for equity classification, require the use of the if-converted method for all convertible instruments in the diluted earnings per share calculation and expand disclosure requirements. The amendments are effective for our annual and interim reporting periods beginning after December 15, 2021, with early adoption permitted for reporting periods beginning after December 15, 2020. The guidance can be applied on a full retrospective basis to all periods presented or a modified retrospective basis with a cumulative effect adjustment to the opening balance of retained earnings during the period of adoption. We are currently evaluating the effects the adoption of ASU 2020-06 will have on our consolidated financial statements and disclosures.

There were no other new accounting pronouncements that were issued or became effective since the issuance of our 2020 Annual Report on Form 10-K that had, or are expected to have, a material impact on our consolidated financial position, results of operations or cash flows.

3.    Business Acquisitions

Pending Acquisition of myNEXUS, Inc.

On March 24, 2021, we announced our entrance into an agreement with WindRose Health Investors to acquire myNEXUS, Inc. (“myNEXUS”). myNEXUS is a comprehensive home-based nursing management company for payors and delivers integrated clinical support services for Medicare Advantage members across twenty states. This acquisition aligns with our strategy to manage integrated, whole person multi-site care and support, by providing national, large-scale expertise to manage nursing services in the home and facilitate transitions of care. The acquisition is expected to close by the end of the second quarter of 2021 and is subject to standard closing conditions and customary approvals.

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Pending Acquisition of MMM Holdings LLC and Affiliates

On February 2, 2021, we announced our entrance into an agreement with InnovaCare Health, L.P. to acquire its Puerto Rico-based subsidiaries, including MMM Holdings, LLC (“MMM”), its Medicare Advantage plan, Medicaid plan and other affiliated companies. MMM is an integrated healthcare organization and seeks to provide its Medicare Advantage and Medicaid members with a whole health experience through its network of specialized clinics and wholly owned independent physician associations. This acquisition aligns with our vision to be an innovative, valuable and inclusive healthcare partner by providing care management programs that improve the lives of the people we serve. The acquisition is expected to close by the end of the second quarter of 2021 and is subject to standard closing conditions and customary approvals.

Beacon Health Options, Inc.

On February 28, 2020, we completed our acquisition of Beacon Health Options, Inc. (“Beacon”) which was the largest independently held behavioral health organization in the country. At the time of acquisition, Beacon served more than thirty-four million individuals across all fifty states. This acquisition aligned with our strategy to diversify into health services and deliver both integrated solutions and care delivery models that personalize care for people with complex and chronic conditions.

In accordance with FASB accounting guidance for business combinations, the consideration transferred was allocated to the fair value of Beacon’s assets acquired and liabilities assumed, including identifiable intangible assets. The excess of the consideration transferred over the fair value of net assets acquired resulted in preliminary goodwill of $1,072 at December 31, 2020, all of which was allocated to our Other segment. Preliminary goodwill recognized from the acquisition of Beacon primarily relates to the future economic benefits arising from the assets acquired and is consistent with our stated intentions and strategy. Goodwill was adjusted by $9 through the end of the measurement period in February 2021 related to finalization of income tax considerations, resulting in final goodwill of $1,081 as of March 31, 2021.

The fair value of the net assets acquired from Beacon includes $752 of other intangible assets at March 31, 2021, which primarily consist of finite-lived customer relationships with amortization periods ranging from 8 to 25 years. The results of operations of Beacon are included in our consolidated financial statements within our Other segment for the period following February 28, 2020. The pro forma effects of this acquisition for prior periods were not material to our consolidated results of operations.

4.    Business Optimization Initiatives

During 2020, management introduced enterprise-wide initiatives to optimize our business, including process automation and a reduction in our office space footprint and, as a result, we recognized a liability in 2020 for future payments for employee termination costs in connection with the repositioning and reskilling of our workforce. We believe these initiatives largely represent the next step forward in our progression towards becoming a more agile organization.

A summary of the activity related to the liability for the employee termination costs during the three months ended March 31, 2021, by reportable segment, is as follows:

	Commercial & Specialty Business		Government Business		IngenioRx		Other		Total
2020 Business Optimization Initiatives
Employee termination costs:
Liability for employee termination costs at January 1, 2021	$	92	$	88	$	1	$	6	$	187
Payments	(5)		(5)		—		(1)		(11)
Liability for employee termination costs at March 31, 2021	$	87	$	83	$	1	$	5	$	176

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5.     Investments

Fixed Maturity Securities

We evaluate our available-for-sale fixed maturity securities for declines based on qualitative and quantitative factors. We have established an allowance for credit loss and recorded credit loss expense as a reflection of our expected impairment losses. We continue to review our investment portfolios under our impairment review policy. Given the inherent uncertainty of changes in market conditions and the significant judgments involved, there is a continuing risk that declines in fair value may occur and additional material impairment losses on investments may be recorded in future periods.

A summary of current and long-term fixed maturity securities, available-for-sale, at March 31, 2021 and December 31, 2020 is as follows:

	Cost or Amortized Cost												Non-Credit Component of Impairment Recognized in Accumulated Other Comprehensive Loss
			Gross Unrealized Gains		Gross Unrealized Losses				Allowance For Credit Losses		Estimated Fair Value
					Less than 12 Months		12 Months or Greater
March 31, 2021
Fixed maturity securities:
United States Government securities	$	898	$	4	$	(22)	$	—	$	—	$	880	$	—
Government sponsored securities	71		4		—		—		—		75		—
Foreign government securities	341		5		(9)		(1)		—		336		—
States, municipalities and political subdivisions	5,253		327		(13)		(1)		—		5,566		—
Corporate securities	11,228		466		(76)		(13)		(6)		11,599		(1)
Residential mortgage-backed securities	4,258		117		(25)		(9)		(2)		4,339		—
Commercial mortgage-backed securities	70		3		—		(3)		—		70		—
Other securities	2,226		30		(2)		(6)		—		2,248		—
Total fixed maturity securities	$	24,345	$	956	$	(147)	$	(33)	$	(8)	$	25,113	$	(1)
December 31, 2020
Fixed maturity securities:
United States Government securities	$	765	$	11	$	(2)	$	—	$	—	$	774	$	—
Government sponsored securities	63		6		—		—		—		69		—
Foreign government securities	290		17		(2)		—		—		305		—
States, municipalities and political subdivisions	5,185		395		(1)		—		—		5,579		—
Corporate securities	10,233		697		(20)		(11)		(7)		10,892		(1)
Residential mortgage-backed securities	4,208		154		(8)		(9)		—		4,345		(2)
Commercial mortgage-backed securities	73		3		(1)		(3)		—		72		—
Other securities	1,937		33		(5)		(6)		—		1,959		—
Total fixed maturity securities	$	22,754	$	1,316	$	(39)	$	(29)	$	(7)	$	23,995	$	(3)

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For fixed maturity securities in an unrealized loss position at March 31, 2021 and December 31, 2020, the following table summarizes the aggregate fair values and gross unrealized losses by length of time those securities have continuously been in an unrealized loss position: 

	Less than 12 Months					12 Months or Greater
(Securities are whole amounts)	Number of Securities	Estimated Fair Value		Gross Unrealized Loss		Number of Securities	Estimated Fair Value		Gross Unrealized Loss
March 31, 2021
Fixed maturity securities:
United States Government securities	51	$	654	$	(22)	—	$	—	$	—
Government sponsored securities	2	2		—		—	—		—
Foreign government securities	202	177		(9)		26	17		(1)
States, municipalities and political subdivisions	242	495		(13)		7	13		(1)
Corporate securities	1,735	2,707		(76)		241	291		(13)
Residential mortgage-backed securities	363	1,489		(25)		125	156		(9)
Commercial mortgage-backed securities	1	2		—		6	13		(3)
Other securities	160	456		(2)		70	149		(6)
Total fixed maturity securities	2,756	$	5,982	$	(147)	475	$	639	$	(33)
December 31, 2020
Fixed maturity securities:
United States Government securities	27	$	301	$	(2)	—	$	—	$	—
Government sponsored securities	—	—		—		1	—		—
Foreign government securities	55	35		(2)		9	4		—
States, municipalities and political subdivisions	36	57		(1)		1	3		—
Corporate securities	646	765		(20)		150	169		(11)
Residential mortgage-backed securities	224	442		(8)		90	110		(9)
Commercial mortgage-backed securities	6	16		(1)		3	4		(3)
Other securities	207	509		(5)		79	179		(6)
Total fixed maturity securities	1,201	$	2,125	$	(