Discontinued Operations

At December 31, 2015, Torchmark met the criteria to account for its Medicare Part D Prescription Drug Plan business as a discontinued operation. Historically, the business was a reportable segment. Effective July 1, 2016, Torchmark sold its Medicare Part D Prescription Drug Plan business to an unaffiliated third party.

The sale resulted in a net gain of $1.8 million ($1.2 million net of tax) in 2016. The operating results from discontinued operations are reflected in income for the nine months ended September 30, 2017. The remaining assets and liabilities reflected on the Torchmark balance sheet related to discontinued operations are receivables and payables associated with the 2016 and prior plan years that are expected to be settled in the ordinary course of business during 2017 and 2018.

The net assets related to discontinued operations at September 30, 2017 and December 31, 2016 were as follows:



	September 30, 2017		December 31, 2016
Assets:
Due premiums	$	3,945	$	8,840
Other receivables⁽¹⁾	64,627		118,692
Total assets related to discontinued operations	68,572		127,532

Liabilities:
Risk sharing payable	9,065		8,374
Current and deferred income taxes payable	1,630		3,820
Other⁽²⁾	38,633		15,230
Total liabilities related to discontinued operations	49,328		27,424

Net assets	$	19,244	$	100,108

(1) At September 30, 2017, other receivables included $65 million from the Centers for Medicare and Medicaid Services (CMS). At December 31, 2016, other receivables included $50 million from the Centers for Medicare and Medicaid Services (CMS) and $69 million from drug manufacturer rebates.

(2) At September 30, 2017, the balance included $35.8 million due to CMS. At December 31, 2016, the balance included a $3.6 million contingent purchase price reserve.

Income from discontinued operations for the three and nine months ended September 30, 2017 and 2016 was as follows:



	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
Revenue:
Health premium	$	(48	)	$	53,632		$	(343	)	$	165,105

Benefits and expenses:
Health policyholder benefits	(115		)	33,331			3,817			146,683
Amortization of deferred acquisition costs	—			1,018			—			2,958
Commissions, premium taxes, and non-deferred acquisition expenses	53			3,352			783			12,253
Other operating expense	32			1,222			809			4,512
Total benefits and expenses	(30		)	38,923			5,409			166,406

Income (loss) before income taxes for discontinued operations	(18		)	14,709			(5,752		)	(1,301		)
Gain from sale of discontinued operations	—			613			—			613
Income tax benefit (expense)	6			(5,363		)	2,013			241
Income (loss) from discontinued operations	$	(12	)	$	9,959		$	(3,739	)	$	(447	)

Operating cash flows of the discontinued operations for the nine months ended September 30, 2017 and 2016 were as follows:



	Nine Months Ended September 30,
	2017		2016
Net cash provided from (used for) discontinued operations	$	77,125	$	82,565