Segment Information

9 Months Ended

Sep. 30, 2016

Segment Information [Abstract]

Segment Information [Text Block]

Note 15 ― Segment Information

The financial results of the Company's businesses are reported in the following segments:

Global Health Care aggregates the Commercial and Government operating segments due to their similar economic characteristics, products and services and regulatory environment:

• The Commercial operating segment encompasses both the U.S. commercial and certain international health care businesses serving employers and their employees, other groups and individuals. Products and services include medical, dental, behavioral health, vision, and prescription drug benefit plans, health advocacy programs and other products and services to insured and self-insured customers.

• The Government operating segment offers Medicare Advantage and Medicare Part D plans to seniors. This segment also offers Medicaid plans in selected markets.

Global Supplemental Benefits includes supplemental health, life and accident insurance products offered in selected international markets and in the U.S.

Group Disability and Life provides group long-term and short-term disability, group life, accident and specialty insurance products and related services.

Other Operations consist of:

• corporate-owned life insurance (“COLI”);
• run-off reinsurance business that is predominantly comprised of GMDB and GMIB business effectively exited through reinsurance with Berkshire in 2013;

• deferred gains recognized from the 1998 sale of the individual life insurance and annuity business and the 2004 sale of the retirement benefits business; and
• run-off settlement annuity business.

Corporate reflects amounts not allocated to operating segments, such as net interest expense (defined as interest on corporate debt less net investment income on investments not supporting segment operations), interest on uncertain tax positions, certain litigation matters, intersegment eliminations, compensation cost for stock options, expense associated with frozen pension plans andcertain costs for corporate projects, including overhead.

In the Company's segment disclosures, we present “operating revenues,” defined as total revenues excluding realized investment results. The Company excludes realized investment results from this measure because its portfolio managers may sell investments based on factors largely unrelated to the underlying business purposes of each segment. As a result, gains or losses created in this process may not be indicative of the past or future underlying performance of the business.

The Company uses “adjusted income (loss) from operations” as its principal financial measure of segment operating performance because management believes it best reflects the underlying results of business operations and permits analysis of trends in underlying revenue, expenses and profitability. Adjusted income from operations is defined as shareholders' net income (loss) excluding after-tax realized investment gains and losses, net amortization of other acquired intangible assets and special items. Income or expense amounts are excluded from adjusted income from operations for the following reasons:

• Realized investment results are excluded because, as noted above, the Company's portfolio managers may sell investments based on factors largely unrelated to the underlying business purposes of each segment.
• Net amortization of other intangible assets is excluded because it relates to costs incurred for acquisitions and, as a result, it does not relate to the core performance of the Company's business operations.
• Special items, if any, are excluded because management believes they are not representative of the underlying results of operations.

For the three months and nine months ended September 30, 2016, the Company reported special item chargesconsisting of $49million and $123 million of pre-tax costs ($46 millionand $108million after-tax) related to the proposed merger with Anthem. Management excludes these costs from adjusted income from operations because the size and nature of the Anthem merger is not comparable with the Company's previous acquisition activity. See Note 3for additional details.

For the three months and nine months ended September 30, 2016, the Company also reported special item chargesconsisting of $40million of pre-tax costs ($25million after-tax) related to litigation matters further described in Note 16. These charges are excluded from adjusted income from operations because Management believes that the nature and size of these matters are not representative of the underlying results of the Company's operations.

For the nine months ended September 30, 2015, the Company reported special item charges consisting of a $100 million pre-tax loss ($65 million after-tax) on the early extinguishment of debt described in more detail in Note 15 of the Company's 2015 Form 10-K. For the three months and nine months ended September 30, 2015, the Company reported special item chargesconsisting of $35million of pre-tax costs ($29 million after-tax) related to the proposed merger with Anthem as previously described.

In connection with adopting ASU 2016-09 effective January 1, 2016, the Company recognized $25 million in adjusted income from operations for Corporate for the nine months ended September 30, 2016 for certain income tax effects of stock-based compensation. See Note 2 for further discussion.

Summarized segment financial information was as follows:

(In millions)	Global Health Care		Global Supplemental Benefits		Group Disability and Life		Other Operations		Corporate		Total
Three Months Ended September 30, 2016
Premiums, fees and other revenues and mail order pharmacy revenues	$	7,636	$	837	$	1,026	$	28	$	(4)	$	9,523
Net investment income		77		29		85		87		4		282
Operating revenues	$	7,713	$	866	$	1,111	$	115	$	-	$	9,805
Total revenues	$	7,775	$	868	$	1,128	$	109	$	-	$	9,880
Shareholders' net income (loss)	$	413	$	77	$	65	$	9	$	(108)	$	456
After-tax adjustments to reconcile to adjusted income from operations:
Net realized investment (gains) losses		(42)		-		(12)		5		1		(48)
Amortization of other acquired intangible assets, net		20		4		-		-		-		24
Special Item:
Charges associated with litigation matters		25		-		-		-		-		25
Merger-related transaction costs		-		-		-		-		46		46
Total special items		25		-		-		-		46		71
Adjusted income (loss) from operations	$	416	$	81	$	53	$	14	$	(61)	$	503
Three Months Ended September 30, 2015
Premiums, fees and other revenues and mail order pharmacy revenues	$	7,323	$	767	$	980	$	28	$	(4)	$	9,094
Net investment income		85		26		84		90		-		285
Operating revenues	$	7,408	$	793	$	1,064	$	118	$	(4)	$	9,379
Total revenues	$	7,427	$	792	$	1,055	$	119	$	(4)	$	9,389
Shareholders' net income (loss)	$	475	$	58	$	78	$	17	$	(81)	$	547
After-tax adjustments to reconcile to adjusted income from operations:
Net realized investment (gains) losses		(14)		1		6		-		-		(7)
Amortization of other acquired intangible assets, net		21		3		-		-		-		24
Special Item:
Merger-related transaction costs		-		-		-		-		29		29
Adjusted income (loss) from operations	$	482	$	62	$	84	$	17	$	(52)	$	593

Nine Months Ended September 30, 2016
Premiums, fees and other revenues and mail order pharmacy revenues	$	23,207	$	2,425	$	3,065	$	83	$	(14)	$	28,766
Net investment income		230		82		253		270		13		848
Operating revenues	$	23,437	$	2,507	$	3,318	$	353	$	(1)	$	29,614
Total revenues	$	23,510	$	2,507	$	3,356	$	352	$	(1)	$	29,724
Shareholders' net income (loss)	$	1,414	$	214	$	81	$	53	$	(277)	$	1,485
After-tax adjustments to reconcile to adjusted income from operations:
Net realized investment (gains) losses		(49)		1		(25)		1		1		(71)
Amortization of other acquired intangible assets, net		56		16		-		-		-		72
Special Item:
Charges associated with litigation matters		25		-		-		-		-		25
Merger-related transaction costs		-		-		-		-		108		108
Total special items		25		-		-		-		108		133
Adjusted income (loss) from operations	$	1,446	$	231	$	56	$	54	$	(168)	$	1,619
(In millions)	Global Health Care		Global Supplemental Benefits		Group Disability and Life		Other Operations		Corporate		Total
Nine Months Ended September 30, 2015
Premiums, fees and other revenues and mail order pharmacy revenues	$	22,110	$	2,266	$	2,934	$	90	$	(14)	$	27,386
Net investment income		251		78		252		276		1		858
Operating revenues	$	22,361	$	2,344	$	3,186	$	366	$	(13)	$	28,244
Total revenues	$	22,437	$	2,344	$	3,207	$	373	$	(13)	$	28,348
Shareholders' net income (loss)	$	1,440	$	195	$	254	$	61	$	(282)	$	1,668
After-tax adjustments to reconcile to adjusted income from operations:
Net realized investment (gains) losses		(50)		1		(13)		(6)		-		(68)
Amortization of other acquired intangible assets, net		64		12		-		-		-		76
Special Items:
Debt extinguishment costs		-		-		-		-		65		65
Merger-related transaction costs		-		-		-		-		29		29
Total special items		-		-		-		-		94		94
Adjusted income (loss) from operations	$	1,454	$	208	$	241	$	55	$	(188)	$	1,770

The Company had receivables,net of allowances, from CMS of $1.2 billion as of September 30, 2016and $1.5 billion as of December 31, 2015. These amounts were included in the Consolidated Balance Sheet in premiums, accounts and notes receivable and reinsurance recoverables. Premiums from CMS were 20% of consolidated revenues for the nine months ended September 30, 2016and 21% for the nine months endedSeptember 30, 2015.