HUM-2015.03.31-10Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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ý | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended March 31, 2015
OR
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¨ | 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 1-5975
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HUMANA INC. (Exact name of registrant as specified in its charter) |
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Delaware | | 61-0647538 |
(State or other jurisdiction of incorporation or organization) | | (I.R.S. Employer Identification Number) |
500 West Main Street
Louisville, Kentucky 40202
(Address of principal executive offices, including zip code)
(502) 580-1000
(Registrant’s telephone number, including area code)
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 ý No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý No ¨
Indicate by checkmark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
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Large accelerated filer | ý | | Accelerated filer | ¨ |
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Non-accelerated filer | ¨ | | Smaller reporting company | ¨ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ¨ No ý
Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date.
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Class of Common Stock | Outstanding at
March 31, 2015 |
$0.16 2/3 par value | 149,781,272 shares |
Humana Inc.
FORM 10-Q
MARCH 31, 2015
INDEX
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Part I: Financial Information | |
Item 1. | Financial Statements (Unaudited) | |
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Item 2. | | |
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Item 3. | | |
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Item 4. | | |
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Item 1. | | |
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Item 1A. | | |
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Item 2. | | |
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Item 3. | | |
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Item 4. | | |
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Item 5. | | |
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Item 6. | | |
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| Certifications | |
Humana Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
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| | | | | | | |
| March 31,
2015 | | December 31,
2014 |
| (in millions, except share amounts) |
ASSETS | | | |
Current assets: | | | |
Cash and cash equivalents | $ | 1,946 |
| | $ | 1,935 |
|
Investment securities | 7,600 |
| | 7,598 |
|
Receivables, less allowance for doubtful accounts of $111 in 2015
and $97 in 2014: | 1,690 |
| | 1,053 |
|
Other current assets | 5,214 |
| | 4,007 |
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Assets held-for-sale | 952 |
| | 943 |
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Total current assets | 17,402 |
| | 15,536 |
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Property and equipment, net | 1,258 |
| | 1,228 |
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Long-term investment securities | 1,972 |
| | 1,949 |
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Goodwill | 3,231 |
| | 3,231 |
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Other long-term assets | 1,761 |
| | 1,583 |
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Total assets | $ | 25,624 |
| | $ | 23,527 |
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LIABILITIES AND STOCKHOLDERS’ EQUITY | | | |
Current liabilities: | | | |
Benefits payable | $ | 4,764 |
| | $ | 4,475 |
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Trade accounts payable and accrued expenses | 3,554 |
| | 2,095 |
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Book overdraft | 288 |
| | 334 |
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Unearned revenues | 378 |
| | 361 |
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Liabilities held-for-sale | 193 |
| | 206 |
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Total current liabilities | 9,177 |
| | 7,471 |
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Long-term debt | 3,824 |
| | 3,825 |
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Future policy benefits payable | 2,298 |
| | 2,349 |
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Other long-term liabilities | 281 |
| | 236 |
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Total liabilities | 15,580 |
| | 13,881 |
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Commitments and contingencies |
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Stockholders’ equity: | | | |
Preferred stock, $1 par; 10,000,000 shares authorized; none issued | — |
| | — |
|
Common stock, $0.16 2/3 par; 300,000,000 shares authorized;
198,223,040 shares issued at March 31, 2015 and 197,951,551 shares
issued at December 31, 2014 | 33 |
| | 33 |
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Capital in excess of par value | 2,465 |
| | 2,330 |
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Retained earnings | 10,302 |
| | 9,916 |
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Accumulated other comprehensive income | 227 |
| | 223 |
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Treasury stock, at cost, 48,441,768 shares at March 31, 2015 and
48,347,541 shares at December 31, 2014 | (2,983 | ) | | (2,856 | ) |
Total stockholders’ equity | 10,044 |
| | 9,646 |
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Total liabilities and stockholders’ equity | $ | 25,624 |
| | $ | 23,527 |
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See accompanying notes to condensed consolidated financial statements.
Humana Inc.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
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| | | | | | | |
| Three months ended
March 31, |
| 2015 | | 2014 |
| (in millions, except per share results) |
Revenues: | | | |
Premiums | $ | 13,248 |
| | $ | 11,083 |
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Services | 490 |
| | 538 |
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Investment income | 95 |
| | 91 |
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Total revenues | 13,833 |
| | 11,712 |
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Operating expenses: | | | |
Benefits | 11,005 |
| | 9,124 |
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Operating costs | 1,945 |
| | 1,785 |
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Depreciation and amortization | 93 |
| | 82 |
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Total operating expenses | 13,043 |
| | 10,991 |
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Income from operations | 790 |
| | 721 |
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Interest expense | 46 |
| | 35 |
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Income before income taxes | 744 |
| | 686 |
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Provision for income taxes | 314 |
| | 318 |
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Net income | $ | 430 |
| | $ | 368 |
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Basic earnings per common share | $ | 2.86 |
| | $ | 2.37 |
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Diluted earnings per common share | $ | 2.82 |
| | $ | 2.35 |
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Dividends declared per common share | $ | 0.28 |
| | $ | 0.27 |
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See accompanying notes to condensed consolidated financial statements.
Humana Inc.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
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| | | | | | | |
| Three months ended
March 31, |
| 2015 | | 2014 |
| (in millions) |
Net income | $ | 430 |
| | $ | 368 |
|
Other comprehensive income: | | | |
Change in gross unrealized investment
gains/losses | 14 |
| | 108 |
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Effect of income taxes | (5 | ) | | (39 | ) |
Total change in unrealized
investment gains/losses, net of tax | 9 |
| | 69 |
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Reclassification adjustment for net
realized gains included in
investment income | (9 | ) | | (1 | ) |
Effect of income taxes | 4 |
| | — |
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Total reclassification adjustment, net
of tax | (5 | ) | | (1 | ) |
Other comprehensive income, net
of tax | 4 |
| | 68 |
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Comprehensive income | $ | 434 |
| | $ | 436 |
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See accompanying notes to condensed consolidated financial statements.
Humana Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
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| | | | | | | |
| For the three months ended
March 31, |
| 2015 | | 2014 |
| (in millions) |
Cash flows from operating activities | | | |
Net income | $ | 430 |
| | $ | 368 |
|
Adjustments to reconcile net income to net cash provided by
operating activities: | | | |
Net realized capital gains | (9 | ) | | (1 | ) |
Stock-based compensation | 44 |
| | 33 |
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Depreciation | 88 |
| | 79 |
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Other intangible amortization | 26 |
| | 28 |
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Benefit for deferred income taxes | (58 | ) | | (26 | ) |
Changes in operating assets and liabilities, net of effect of
businesses acquired and dispositions: | | | |
Receivables | (644 | ) | | (524 | ) |
Other assets | (1,145 | ) | | (566 | ) |
Benefits payable | 289 |
| | 539 |
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Other liabilities | 1,051 |
| | 684 |
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Unearned revenues | 17 |
| | 57 |
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Other, net | 18 |
| | — |
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Net cash provided by operating activities | 107 |
| | 671 |
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Cash flows from investing activities | | | |
Acquisitions, net of cash acquired | — |
| | (6 | ) |
Proceeds from sale of business | — |
| | 72 |
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Purchases of property and equipment | (123 | ) | | (106 | ) |
Purchases of investment securities | (829 | ) | | (507 | ) |
Maturities of investment securities | 330 |
| | 258 |
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Proceeds from sales of investment securities | 528 |
| | 118 |
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Net cash used in investing activities | (94 | ) | | (171 | ) |
Cash flows from financing activities | | | |
Receipts (withdrawals) from contract deposits, net | 123 |
| | 220 |
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Change in book overdraft | (46 | ) | | (136 | ) |
Common stock repurchases | (66 | ) | | (49 | ) |
Dividends paid | (44 | ) | | (44 | ) |
Excess tax benefit from stock-based compensation | 13 |
| | 8 |
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Proceeds from stock option exercises and other | 18 |
| | 25 |
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Net cash (used in) provided by financing activities | (2 | ) | | 24 |
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Increase in cash and cash equivalents | 11 |
| | 524 |
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Cash and cash equivalents at beginning of period | 1,935 |
| | 1,138 |
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Cash and cash equivalents at end of period | $ | 1,946 |
| | $ | 1,662 |
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Supplemental cash flow disclosures: | | | |
Interest payments | $ | 9 |
| | $ | 10 |
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Income tax payments, net | $ | 26 |
| | $ | 12 |
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See accompanying notes to condensed consolidated financial statements.
Humana Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Unaudited
1. BASIS OF PRESENTATION
The accompanying condensed consolidated financial statements are presented in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the disclosures normally required by accounting principles generally accepted in the United States of America, or GAAP, or those normally made in an Annual Report on Form 10-K. The year-end condensed consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by GAAP. For further information, the reader of this Form 10-Q should refer to our Form 10-K for the year ended December 31, 2014, that was filed with the Securities and Exchange Commission, or the SEC, on February 18, 2015. We refer to the Form 10-K as the “2014 Form 10-K” in this document. References throughout this document to “we,” “us,” “our,” “Company,” and “Humana” mean Humana Inc. and its subsidiaries.
The preparation of our condensed consolidated financial statements in accordance with GAAP requires us to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. The areas involving the most significant use of estimates are the estimation of benefits payable, future policy benefits payable, the impact of risk adjustment provisions related to our Medicare contracts, the valuation and related impairment recognition of investment securities, and the valuation and related impairment recognition of long-lived assets, including goodwill. These estimates are based on knowledge of current events and anticipated future events, and accordingly, actual results may ultimately differ materially from those estimates. Refer to Note 2 to the consolidated financial statements included in our 2014 Form 10-K for information on accounting policies that we consider in preparing our consolidated financial statements.
The financial information has been prepared in accordance with our customary accounting practices and has not been audited. In our opinion, the information presented reflects all adjustments necessary for a fair statement of interim results. All such adjustments are of a normal and recurring nature.
Business Segment Reclassifications
On January 1, 2015, we realigned certain of our businesses among our reportable segments to correspond with internal management reporting changes and renamed our Employer Group segment to the Group segment. Our three reportable segments remain Retail, Group, and Healthcare Services. The more significant realignments included reclassifying Medicare benefits offered to groups to the Retail segment from the Group segment, bringing all of our Medicare offerings, which are now managed collectively, together in one segment, recognizing that in some instances we market directly to individuals that are part of a group Medicare account. In addition, we realigned our military services business, primarily consisting of our TRICARE South Region contract previously included in the Other Businesses category, to our Group segment as we consider this contract with the government to be a group account. Prior period segment financial information has been recast to conform to the 2015 presentation. See Note 14 for segment financial information.
2. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In April 2015, the Financial Accounting Standards Board, or FASB, issued new guidance to help entities determine whether a cloud computing arrangement contains a software license that should be accounted for as internal-use software or as a service contract. The guidance is effective for us beginning with interim and annual reporting periods in 2016, with early adoption permitted. Upon adoption, an entity has the option to apply the provisions either prospectively to all arrangements entered into or materially modified, or retrospectively. We are currently evaluating the impact, if any, on our results of operations, financial position, and cash flows.
In March 2015, the FASB issued new guidance which changes the presentation of debt issuance costs from an asset to a direct reduction of the related debt liability. The new guidance is effective for us beginning with annual and interim periods in 2016 with early adoption permitted. The adoption of the new guidance will not have a material impact on our results of operations, financial condition, or cash flows.
In February 2015, the FASB issued an amendment to current consolidation guidance that modifies the evaluation of whether limited partnerships and similar legal entities are variable interest entities or voting interest entities,
Humana Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Unaudited
eliminating the presumption that a general partner should consolidate a limited partnership, and affects the consolidation analysis of reporting entities that are involved with variable interest entities. The new guidance is effective for us beginning with interim and annual reporting periods in 2016, with early adoption permitted. All legal entities are subject to reevaluation under the revised consolidation model. We are currently evaluating the impact, if any, on our results of operations, financial position, and cash flows.
In May 2014, the FASB issued new guidance that amends the accounting for revenue recognition. The amendments are intended to provide a more robust framework for addressing revenue issues, improve comparability of revenue recognition practices, and improve disclosure requirements. Insurance contracts are not in the scope of this new guidance. The new guidance is effective for us beginning with annual and interim periods in 2017. We are currently evaluating the impact on our results of operations, financial condition, and cash flows.
There are no other recently issued accounting standards that apply to us or that are expected to have a material impact on our results of operations, financial condition, or cash flows.
3. ACQUISITIONS AND DIVESTITURES
On March 22, 2015, we signed a definitive agreement to sell our wholly-owned subsidiary, Concentra Inc., or Concentra, to MJ Acquisition Corporation, a joint venture between Select Medical Holdings Corporation and Welsh, Carson, Anderson & Stowe XII, L.P., a private equity fund, for approximately $1,055 million in cash, subject to customary adjustments. The agreement is subject to Hart-Scott-Rodino regulatory clearance and customary closing conditions and is expected to close in the second quarter of this year.
We classified Concentra as held-for-sale and aggregated Concentra’s assets and liabilities separately on the balance sheet, including a reclassification of the prior period balance sheet for comparative purposes. With the fair value exceeding the carrying value of Concentra’s net assets, the resulting gain will be recognized upon closing of the transaction. The ultimate gain recognized will reflect considerations for costs to sell, changes in the carrying value of net assets and the related tax effect.
During the three months ended March 31, 2015, Humana Inc., our parent company, recognized a deferred tax asset of approximately $53 million for the excess of the tax basis over the book basis of its Concentra subsidiary because realization of the asset in the foreseeable future was apparent with the classification as held-for-sale.
Concentra revenues and pretax earnings for the three months ended March 31, 2015 were $246 million and $7 million, respectively. Concentra revenues and pretax earnings for the year ended December 31, 2014 were $998 million and $22 million, respectively.
The assets and liabilities of Concentra that were classified as held-for-sale are as follows:
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| March 31, 2015 | | December 31, 2014 |
Assets | (in millions) |
Receivables, net | $ | 122 |
| | $ | 115 |
|
Property and equipment, net | 195 |
| | 191 |
|
Goodwill | 480 |
| | 480 |
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Other intangible assets, net | 127 |
| | 131 |
|
Other assets | 28 |
| | 26 |
|
Total assets held-for-sale | $ | 952 |
| | $ | 943 |
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Liabilities | | | |
Trade accounts payable and accrued expenses | $ | 80 |
| | $ | 90 |
|
Other liabilities | 113 |
| | 116 |
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Total liabilities held-for-sale | $ | 193 |
| | $ | 206 |
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Humana Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Unaudited
During 2014, we acquired health and wellness related businesses which, individually or in the aggregate, have not had a material impact on our results of operations, financial condition, or cash flows. The results of operations and financial condition of these businesses have been included in our condensed consolidated statements of income and condensed consolidated balance sheets from the acquisition dates. Acquisition-related costs recognized in 2014 were not material to our results of operations. The pro forma financial information assuming the acquisitions had occurred as of the beginning of the calendar year prior to the year of acquisition, as well as the revenues and earnings generated during the year of acquisition were not material for disclosure purposes.
4. INVESTMENT SECURITIES
Investment securities classified as current and long-term were as follows at March 31, 2015 and December 31, 2014, respectively:
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| Amortized Cost | | Gross Unrealized Gains | | Gross Unrealized Losses | | Fair Value |
| (in millions) |
March 31, 2015 | | | | | | | |
U.S. Treasury and other U.S. government
corporations and agencies: | | | | | | | |
U.S. Treasury and agency obligations | $ | 356 |
| | $ | 10 |
| | $ | — |
| | $ | 366 |
|
Mortgage-backed securities | 1,704 |
| | 56 |
| | (2 | ) | | 1,758 |
|
Tax-exempt municipal securities | 2,628 |
| | 132 |
| | (4 | ) | | 2,756 |
|
Mortgage-backed securities: | | | | | | | |
Residential | 16 |
| | — |
| | — |
| | 16 |
|
Commercial | 890 |
| | 21 |
| | (20 | ) | | 891 |
|
Asset-backed securities | 138 |
| | 1 |
| | — |
| | 139 |
|
Corporate debt securities | 3,318 |
| | 333 |
| | (5 | ) | | 3,646 |
|
Total debt securities | $ | 9,050 |
| | $ | 553 |
| | $ | (31 | ) | | $ | 9,572 |
|
December 31, 2014 | | | | | | | |
U.S. Treasury and other U.S. government
corporations and agencies: | | | | | | | |
U.S. Treasury and agency obligations | $ | 365 |
| | $ | 10 |
| | $ | (1 | ) | | $ | 374 |
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Mortgage-backed securities | 1,453 |
| | 50 |
| | (5 | ) | | 1,498 |
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Tax-exempt municipal securities | 2,931 |
| | 140 |
| | (3 | ) | | 3,068 |
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Mortgage-backed securities: | | | | | | | |
Residential | 17 |
| | — |
| | — |
| | 17 |
|
Commercial | 846 |
| | 16 |
| | (19 | ) | | 843 |
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Asset-backed securities | 28 |
| | 1 |
| | — |
| | 29 |
|
Corporate debt securities | 3,432 |
| | 299 |
| | (13 | ) | | 3,718 |
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Total debt securities | $ | 9,072 |
| | $ | 516 |
| | $ | (41 | ) | | $ | 9,547 |
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Humana Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Unaudited
Gross unrealized losses and fair values aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position were as follows at March 31, 2015 and December 31, 2014, respectively:
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| | | | | | | | | | | | | | | | | | | | | | | |
| Less than 12 months | | 12 months or more | | Total |
| Fair
Value | | Gross
Unrealized
Losses | | Fair
Value | | Gross
Unrealized
Losses | | Fair
Value | | Gross
Unrealized
Losses |
| (in millions) |
March 31, 2015 | | | | | | | | | | | |
U.S. Treasury and other U.S.
government corporations
and agencies: | | | | | | | | | | | |
U.S. Treasury and agency
obligations | $ | 47 |
| | $ | — |
| | $ | 24 |
| | $ | — |
| | $ | 71 |
| | $ | — |
|
Mortgage-backed
securities | 57 |
| | — |
| | 98 |
| | (2 | ) | | 155 |
| | (2 | ) |
Tax-exempt municipal
securities | 265 |
| | (3 | ) | | 30 |
| | (1 | ) | | 295 |
| | (4 | ) |
Mortgage-backed securities: | | | | | | | | | | | |
Residential | — |
| | — |
| | 5 |
| | — |
| | 5 |
| | — |
|
Commercial | 50 |
| | (1 | ) | | 262 |
| | (19 | ) | | 312 |
| | (20 | ) |
Asset-backed securities | 27 |
| | — |
| | — |
| | — |
| | 27 |
| | — |
|
Corporate debt securities | 173 |
| | (3 | ) | | 40 |
| | (2 | ) | | 213 |
| | (5 | ) |
Total debt securities | $ | 619 |
| | $ | (7 | ) | | $ | 459 |
| | $ | (24 | ) | | $ | 1,078 |
| | $ | (31 | ) |
| | | | | | | | | | | |
December 31, 2014 | | | | | | | | | | | |
U.S. Treasury and other U.S.
government corporations
and agencies: | | | | | | | | | | | |
U.S. Treasury and agency
obligations | $ | 79 |
| | $ | — |
| | $ | 80 |
| | $ | (1 | ) | | $ | 159 |
| | $ | (1 | ) |
Mortgage-backed
securities | 22 |
| | — |
| | 320 |
| | (5 | ) | | 342 |
| | (5 | ) |
Tax-exempt municipal
securities | 131 |
| | (1 | ) | | 118 |
| | (2 | ) | | 249 |
| | (3 | ) |
Mortgage-backed securities: | | | | | | | | | | | |
Residential | 1 |
| | — |
| | 4 |
| | — |
| | 5 |
| | — |
|
Commercial | 31 |
| | (1 | ) | | 267 |
| | (18 | ) | | 298 |
| | (19 | ) |
Asset-backed securities | 13 |
| | — |
| | — |
| | — |
| | 13 |
| | — |
|
Corporate debt securities | 219 |
| | (6 | ) | | 128 |
| | (7 | ) | | 347 |
| | (13 | ) |
Total debt securities | $ | 496 |
| | $ | (8 | ) | | $ | 917 |
| | $ | (33 | ) | | $ | 1,413 |
| | $ | (41 | ) |
Approximately 97% of our debt securities were investment-grade quality, with a weighted average credit rating of AA- by S&P at March 31, 2015. Most of the debt securities that were below investment-grade were rated BB, the higher end of the below investment-grade rating scale. At March 31, 2015, 7% of our tax-exempt municipal securities were pre-refunded, generally with U.S. government and agency securities. Tax-exempt municipal securities that were not pre-refunded were diversified among general obligation bonds of U.S. states and local municipalities as well as special revenue bonds. General obligation bonds, which are backed by the taxing power and full faith of the issuer, accounted for 35% of the tax-exempt municipals that were not pre-refunded in the portfolio. Special revenue bonds,
Humana Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Unaudited
issued by a municipality to finance a specific public works project such as utilities, water and sewer, transportation, or education, and supported by the revenues of that project, accounted for the remaining 65% of these municipals. Our general obligation bonds are diversified across the United States with no individual state exceeding 9%. In addition, 16% of our tax-exempt securities were insured by bond insurers and had an equivalent weighted average S&P credit rating of AA exclusive of the bond insurers’ guarantee. Our investment policy limits investments in a single issuer and requires diversification among various asset types.
The recoverability of our non-agency commercial mortgage-backed securities is supported by factors such as seniority, underlying collateral characteristics and credit enhancements. At March 31, 2015, these commercial mortgage-backed securities primarily were composed of senior tranches having high credit support. The weighted average credit rating of all commercial mortgage-backed securities was AA+ at March 31, 2015.
The percentage of corporate securities associated with the financial services industry was 22% at March 31, 2015 and 21% at December 31, 2014.
All issuers of securities we own that were trading at an unrealized loss at March 31, 2015 remain current on all contractual payments. After taking into account these and other factors previously described, we believe these unrealized losses primarily were caused by an increase in market interest rates in the current markets since the time the securities were purchased. At March 31, 2015, we did not intend to sell the securities with an unrealized loss position in accumulated other comprehensive income, and it is not likely that we will be required to sell these securities before recovery of their amortized cost basis. As a result, we believe that the securities with an unrealized loss were not other-than-temporarily impaired at March 31, 2015.
The detail of realized gains (losses) related to investment securities and included within investment income was as follows for the three months ended March 31, 2015 and 2014:
|
| | | | | | | |
| Three months ended
March 31, |
| 2015 | | 2014 |
| (in millions) |
Gross realized gains | $ | 17 |
| | $ | 1 |
|
Gross realized losses | (8 | ) | | — |
|
Net realized capital gains | $ | 9 |
| | $ | 1 |
|
There were no material other-than-temporary impairments for the three months ended March 31, 2015 or 2014.
The contractual maturities of debt securities available for sale at March 31, 2015, regardless of their balance sheet classification, are shown below. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
|
| | | | | | | |
| Amortized
Cost | | Fair
Value |
| (in millions) |
Due within one year | $ | 478 |
| | $ | 482 |
|
Due after one year through five years | 1,918 |
| | 2,033 |
|
Due after five years through ten years | 1,795 |
| | 1,906 |
|
Due after ten years | 2,111 |
| | 2,347 |
|
Mortgage and asset-backed securities | 2,748 |
| | 2,804 |
|
Total debt securities | $ | 9,050 |
| | $ | 9,572 |
|
Humana Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Unaudited
5. FAIR VALUE
Financial Assets
The following table summarizes our fair value measurements at March 31, 2015 and December 31, 2014, respectively, for financial assets measured at fair value on a recurring basis:
|
| | | | | | | | | | | | | | | |
| Fair Value Measurements Using |
| Fair
Value | | Quoted Prices
in Active
Markets
(Level 1) | | Other
Observable
Inputs
(Level 2) | | Unobservable
Inputs
(Level 3) |
| (in millions) |
March 31, 2015 | | | | | | | |
Cash equivalents | $ | 1,779 |
| | $ | 1,779 |
| | $ | — |
| | $ | — |
|
Debt securities: | | | | | | | |
U.S. Treasury and other U.S. government
corporations and agencies: | | | | | | | |
U.S. Treasury and agency obligations | 366 |
| | — |
| | 366 |
| | — |
|
Mortgage-backed securities | 1,758 |
| | — |
| | 1,758 |
| | — |
|
Tax-exempt municipal securities | 2,756 |
| | — |
| | 2,750 |
| | 6 |
|
Mortgage-backed securities: | | | | | | | |
Residential | 16 |
| | — |
| | 16 |
| | — |
|
Commercial | 891 |
| | — |
| | 891 |
| | — |
|
Asset-backed securities | 139 |
| | — |
| | 138 |
| | 1 |
|
Corporate debt securities | 3,646 |
| | — |
| | 3,641 |
| | 5 |
|
Total debt securities | 9,572 |
| | — |
| | 9,560 |
| | 12 |
|
Total invested assets | $ | 11,351 |
| | $ | 1,779 |
| | $ | 9,560 |
| | $ | 12 |
|
| | | | | | | |
December 31, 2014 | | | | | | | |
Cash equivalents | $ | 1,712 |
| | $ | 1,712 |
| | $ | — |
| | $ | — |
|
Debt securities: | | | | | | | |
U.S. Treasury and other U.S. government
corporations and agencies: | | | | | | | |
U.S. Treasury and agency obligations | 374 |
| | — |
| | 374 |
| | — |
|
Mortgage-backed securities | 1,498 |
| | — |
| | 1,498 |
| | — |
|
Tax-exempt municipal securities | 3,068 |
| | — |
| | 3,060 |
| | 8 |
|
Mortgage-backed securities: | | | | | | | |
Residential | 17 |
| | — |
| | 17 |
| | — |
|
Commercial | 843 |
| | — |
| | 843 |
| | — |
|
Asset-backed securities | 29 |
| | — |
| | 28 |
| | 1 |
|
Corporate debt securities | 3,718 |
| | — |
| | 3,695 |
| | 23 |
|
Total debt securities | 9,547 |
| | — |
| | 9,515 |
| | 32 |
|
Total invested assets | $ | 11,259 |
| | $ | 1,712 |
| | $ | 9,515 |
| | $ | 32 |
|
Humana Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Unaudited
There were no material transfers between Level 1 and Level 2 during the three months ended March 31, 2015 or March 31, 2014.
Our Level 3 assets had a fair value of $12 million at March 31, 2015, or 0.1% of our total invested assets. During the three months ended March 31, 2015 and 2014, the changes in the fair value of the assets measured using significant unobservable inputs (Level 3) were comprised of the following:
|
| | | | | | | | | | | | | | | | | | | | | | | |
| For the three months ended March 31, |
| 2015 | | 2014 |
| Private
Placements | | Auction
Rate
Securities | | Total | | Private
Placements | | Auction
Rate
Securities | | Total |
| (in millions) |
Beginning balance at January 1 | $ | 24 |
| | $ | 8 |
| | $ | 32 |
| | $ | 24 |
| | $ | 13 |
| | $ | 37 |
|
Total gains or losses: | | | | | | | | | | | |
Realized in earnings | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Unrealized in other
comprehensive income | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Purchases | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Sales | (18 | ) | | (2 | ) | | (20 | ) | | — |
| | — |
| | — |
|
Settlements | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Balance at March 31 | $ | 6 |
| | $ | 6 |
| | $ | 12 |
| | $ | 24 |
| | $ | 13 |
| | $ | 37 |
|
Financial Liabilities
Our long-term debt is recorded at carrying value in our consolidated balance sheets. The carrying value of our long-term debt outstanding was $3,824 million at March 31, 2015 and $3,825 million at December 31, 2014. The fair value of our long-term debt was $4,187 million at March 31, 2015 and $4,102 million at December 31, 2014. The fair value of our long-term debt is determined based on Level 2 inputs, including quoted market prices for the same or similar debt, or if no quoted market prices are available, on the current prices estimated to be available to us for debt with similar terms and remaining maturities.
Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis
As disclosed in Note 3, we completed the acquisition of certain health and wellness related businesses during 2014. The values of net tangible assets acquired and the resulting goodwill and other intangible assets were recorded at fair value using Level 3 inputs. The majority of the tangible assets acquired and liabilities assumed were recorded at their carrying values as of the respective dates of acquisition, as their carrying values approximated their fair values due to their short-term nature. The fair values of goodwill and other intangible assets acquired in these acquisitions were internally estimated primarily based on the income approach. The income approach estimates fair value based on the present value of the cash flows that the assets are expected to generate in the future. We developed internal estimates for the expected cash flows and discount rates used in the present value calculations. Other than assets acquired and liabilities assumed in these acquisitions, there were no material assets or liabilities measured at fair value on a nonrecurring basis during the three months ended March 31, 2015 or 2014.
Humana Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Unaudited
6. MEDICARE PART D
We cover prescription drug benefits in accordance with Medicare Part D under multiple contracts with the Centers for Medicare and Medicaid Services, or CMS. The accompanying condensed consolidated balance sheets include the following amounts associated with Medicare Part D at March 31, 2015 and December 31, 2014. The risk corridor settlement includes amounts classified as long-term because settlement associated with the 2015 provision will exceed 12 months at March 31, 2015.
|
| | | | | | | | | | | | | | | |
| March 31, 2015 | | December 31, 2014 |
Risk
Corridor
Settlement | | CMS
Subsidies/
Discounts | | Risk
Corridor
Settlement | | CMS
Subsidies/
Discounts |
| (in millions) |
Other current assets | $ | 116 |
| | $ | 1,960 |
| | $ | 105 |
| | $ | 1,690 |
|
Trade accounts payable and accrued expenses | (21 | ) | | (430 | ) | | (36 | ) | | (32 | ) |
Net current asset | 95 |
| | 1,530 |
| | 69 |
| | 1,658 |
|
Other long-term assets | 94 |
| | — |
| | — |
| | — |
|
Other long-term liabilities | (16 | ) | | — |
| | — |
| | — |
|
Net long-term asset | 78 |
| | — |
| | — |
| | — |
|
Total net asset | $ | 173 |
| | $ | 1,530 |
| | $ | 69 |
| | $ | 1,658 |
|
7. HEALTH CARE REFORM
The Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010 (which we collectively refer to as the Health Care Reform Law) established risk spreading premium stabilization programs including a permanent risk adjustment program and temporary risk corridor and reinsurance programs, which we collectively refer to as the 3Rs, effective January 1, 2014. The 3Rs are applicable to certain of our commercial medical insurance products as further discussed in Note 2 to our 2014 Form 10-K. The accompanying condensed consolidated balance sheets include the following amounts associated with the 3Rs at March 31, 2015 and December 31, 2014. Amounts related to the 2015 coverage year are classified as long-term because settlement will exceed 12 months at March 31, 2015.
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| March 31, 2015 | | December 31, 2014 |
| Risk Adjustment
Settlement | | Reinsurance
Recoverables | | Risk
Corridor
Settlement | | Risk Adjustment
Settlement | | Reinsurance
Recoverables | | Risk
Corridor
Settlement |
| (in millions) |
Premiums receivable | $ | 131 | | | $ | — |
| | $ | — |
| | $ | 131 | | | $ | — |
| | $ | — |
|
Other current assets | — | | | 535 |
| | 93 |
| | — | | | 586 |
| | 55 |
|
Trade accounts payable and
accrued expenses | (89 | ) | | — |
| | (2 | ) | | (89 | ) | | — |
| | (4 | ) |
Net current asset | 42 | | | 535 |
| | 91 |
| | 42 | | | 586 |
| | 51 |
|
Other long-term assets | 30 | | | 47 |
| | 21 |
| | — | | | — |
| | — |
|
Other long-term liabilities | (32 | ) | | — |
| | (2 | ) | | — | | | — |
| | — |
|
Net long-term (liability) asset | (2 | ) | | 47 |
| | 19 |
| | — | | | — |
| | — |
|
Total net asset | $ | 40 | | | $ | 582 |
| | $ | 110 |
| | $ | 42 | | | $ | 586 |
| | $ | 51 |
|
Humana Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Unaudited
In September 2015, we expect to pay the federal government approximately $882 million for the annual non-deductible health insurance industry fee attributed to calendar year 2015 in accordance with the Health Care Reform Law. We have recorded a liability for this fee in other current liabilities with a corresponding deferred cost in other current assets in our condensed consolidated financial statements. Amortization of the deferred cost resulted in operating cost expense of approximately $220 million for the three months ended March 31, 2015. For the three months ended March 31, 2014 there was approximately $137 million of operating cost expense resulting from the amortization of the 2014 annual health insurance fee. The remaining deferred cost asset balance was approximately $662 million at March 31, 2015.
8. GOODWILL AND OTHER INTANGIBLE ASSETS
The carrying amount of goodwill for our reportable segments has been retrospectively adjusted to conform to the 2015 presentation as discussed in Note 1. Excluding $480 million of goodwill reclassified as held-for-sale, the carrying amount of goodwill for our reportable segments at March 31, 2015, which was unchanged from December 31, 2014, was as follows:
|
| | | | | | | | | | | | | | | | | | | |
| Retail | | Group | | Healthcare
Services | | Other
Businesses | | Total |
| (in millions) |
Balance at March 31, 2015 | $ | 1,069 |
| | $ | 385 |
| | $ | 1,777 |
| | $ | — |
| | $ | 3,231 |
|
The following table presents details of our other intangible assets included in other long-term assets in the accompanying condensed consolidated balance sheets at March 31, 2015 and December 31, 2014 and excludes amounts classified as held-for-sale: |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | March 31, 2015 | | December 31, 2014 |
| Weighted
Average
Life | | Cost | | Accumulated
Amortization | | Net | | Cost | | Accumulated
Amortization | | Net |
| (in millions) |
Other intangible assets: | | | | | | | | | | | | | |
Customer contracts/
relationships | 9.9 yrs | | $ | 565 |
| | $ | 248 |
| | $ | 317 |
| | $ | 657 |
| | $ | 326 |
| | $ | 331 |
|
Trade names and
technology | 8.3 yrs | | 104 |
| | 43 |
| | 61 |
| | 115 |
| | 50 |
| | 65 |
|
Provider contracts | 15.0 yrs | | 51 |
| | 22 |
| | 29 |
| | 52 |
| | 21 |
| | 31 |
|
Noncompetes and
other | 8.0 yrs | | 34 |
| | 22 |
| | 12 |
| | 41 |
| | 28 |
| | 13 |
|
Total other intangible
assets | 10.0 yrs | | $ | 754 |
| | $ | 335 |
| | $ | 419 |
| | $ | 865 |
| | $ | 425 |
| | $ | 440 |
|
Humana Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Unaudited
Amortization expense for other intangible assets was approximately $26 million for the three months ended March 31, 2015 and $28 million for the three months ended March 31, 2014. The following table presents our estimate of amortization expense for 2015 and each of the five next succeeding years, exclusive of amortization expense associated with assets classified as held-for-sale:
|
| | | |
| (in millions) |
For the years ending December 31,: | |
2015 | $ | 88 |
|
2016 | 75 |
|
2017 | 70 |
|
2018 | 59 |
|
2019 | 51 |
|
2020 | 39 |
|
9. EARNINGS PER COMMON SHARE COMPUTATION
Detail supporting the computation of basic and diluted earnings per common share was as follows for the three months ended March 31, 2015 and 2014:
|
| | | | | | | |
| Three months ended March 31, |
| 2015 | | 2014 |
| (dollars in millions, except per common share results; number of shares in thousands) |
Net income available for common stockholders | $ | 430 |
| | $ | 368 |
|
Weighted average outstanding shares of common stock
used to compute basic earnings per common share | 150,490 |
| | 155,091 |
|
Dilutive effect of: | | | |
Employee stock options | 218 |
| | 268 |
|
Restricted stock | 1,641 |
| | 1,288 |
|
Shares used to compute diluted earnings per common share | 152,349 |
| | 156,647 |
|
Basic earnings per common share | $ | 2.86 |
| | $ | 2.37 |
|
Diluted earnings per common share | $ | 2.82 |
| | $ | 2.35 |
|
Number of antidilutive stock options and restricted stock
excluded from computation | 718 |
| | 972 |
|
Humana Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Unaudited
10. STOCKHOLDERS’ EQUITY
Dividends
The following table provides details of dividend payments, excluding dividend equivalent rights, in 2014 and 2015 under our Board approved quarterly cash dividend policy:
|
| | | | | | | | | | |
Record
Date | | Payment
Date | | Amount
per Share | | Total
Amount |
| | | | | | (in millions) |
2014 payments | | | | | | |
12/31/2013 | | 1/31/2014 | | $ | 0.27 |
| | $ | 42 |
|
3/31/2014 | | 4/25/2014 | | $ | 0.27 |
| | $ | 42 |
|
6/30/2014 | | 7/25/2014 | | $ | 0.28 |
| | $ | 43 |
|
9/30/2014 | | 10/31/2014 | | $ | 0.28 |
| | $ | 43 |
|
2015 payments | | | | | | |
12/31/2014 | | 1/30/2015 | | $ | 0.28 |
| | $ | 42 |
|
3/31/2015 | | 4/24/2015 | | $ | 0.28 |
| | $ | 42 |
|
In April 2015, our Board declared a cash dividend of $0.29 per share payable on July 31, 2015 to stockholders of record on June 30, 2015. Declaration and payment of future quarterly dividends is at the discretion of our Board and may be adjusted as business needs or market conditions change.
Stock Repurchases
In September 2014, our Board of Directors replaced a previous share repurchase authorization of up to $1 billion (of which $816 million remained unused) with a new authorization for repurchases of up to $2 billion of our common shares exclusive of shares repurchased in connection with employee stock plans, expiring on December 31, 2016. Under the new share repurchase authorization, shares may be purchased from time to time at prevailing prices in the open market, by block purchases, through plans designed to comply with Rule 10b5-1 under the Securities Exchange Act of 1934, as amended, or in privately-negotiated transactions (including pursuant to accelerated share repurchase agreements with investment banks), subject to certain regulatory restrictions on volume, pricing, and timing.
On November 7, 2014, we announced that we had entered into an accelerated share repurchase agreement, or ASR Agreement, with Goldman, Sachs & Co., or Goldman Sachs, to repurchase $500 million of our common stock as part of the $2 billion share repurchase program authorized in September 2014. Under the ASR Agreement, on November 10, 2014, we made a payment of $500 million to Goldman Sachs from available cash on hand and received an initial delivery of 3.06 million shares of our common stock from Goldman Sachs based on the then current market price of Humana common stock. The payment to Goldman Sachs was recorded as a reduction to stockholders’ equity, consisting of a $400 million increase in treasury stock, which reflected the value of the initial 3.06 million shares received upon initial settlement, and a $100 million decrease in capital in excess of par value, which reflected the value of stock held back by Goldman Sachs pending final settlement of the ASR Agreement. Upon settlement of the ASR on March 13, 2015, we received an additional 0.36 million shares as determined by the average daily volume weighted-average share price of our common stock during the term of the ASR Agreement of $146.21, bringing the total shares received under this program to 3.42 million. In addition, upon settlement we reclassified the $100 million value of stock initially held back by Goldman Sachs from capital in excess of par value to treasury stock.
Humana Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Unaudited
Excluding the 0.36 million shares received in March 2015 upon final settlement of our ASR Agreement for which no cash was paid during the period, share repurchases were as follows during the three months ended March 31, 2015 and 2014:
|
| | | | | | | | | | | | | | | | | | |
| | | | Three months ended March 31, |
| | | | 2015 | | 2014 |
Authorization Date | | Purchase Not to Exceed | | Shares | | Cost | | Shares | | Cost |
| | (in millions) |
September 2014 | | $ | 2,000 |
| | 0.15 |
| | $ | 26 |
| | — |
| | $ | — |
|
April 2014 | | 1,000 |
| | — |
| | — |
| | — |
| | — |
|
April 2013 | | 1,000 |
| | — |
| | — |
| | 0.10 |
| | 11 |
|
Total repurchases | | | | 0.15 |
| | $ | 26 |
| | 0.10 |
| | $ | 11 |
|
Our remaining repurchase authorization was $1.23 billion as of April 28, 2015 after giving effect to 0.63 million additional shares repurchased under a Rule 10b5-1 compliant plan for $112 million in April 2015.
In connection with employee stock plans, we acquired 0.2 million common shares for $40 million and 0.4 million common shares for $38 million during the three months ended March 31, 2015 and 2014, respectively, which amounts are not included in the table above.
Treasury Stock Reissuance
We reissued 0.7 million shares of treasury stock during the three months ended March 31, 2015 at a cost of $39 million associated with restricted stock unit vestings and option exercises.
Accumulated Other Comprehensive Income
Accumulated other comprehensive income included, net of tax, net unrealized gains on our investment securities of $331 million at March 31, 2015 and $301 million at December 31, 2014. In addition, accumulated other comprehensive income included, net of tax, $104 million at March 31, 2015 and $78 million at December 31, 2014 for an additional liability that would exist on our closed block of long-term care insurance policies if unrealized gains on the sale of the investments backing such products had been realized and the proceeds reinvested at then current yields. Refer to Note 18 to the consolidated financial statements in our 2014 Form 10-K for further discussion of our long-term care insurance policies.
11. INCOME TAXES
The effective income tax rate was 42.2% for the three months ended March 31, 2015, compared to 46.4% for the three months ended March 31, 2014. The effective tax for the three months ended March 31, 2015 includes the beneficial effect of a deferred tax asset recorded in connection with the held-for-sale classification of our Concentra subsidiary, decreasing our effective tax rate by approximately 7 percentage points, partially offset by an increase in the non-deductible health insurance industry fee from 2014. Humana Inc., our parent company, recognized the deferred tax asset for the excess of the tax basis over the book basis of its Concentra subsidiary of approximately $53 million during the first quarter of 2015 because realization of the asset in the foreseeable future was apparent with the classification as held-for-sale.
Humana Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Unaudited
12. DEBT
The carrying value of long-term debt outstanding was as follows at March 31, 2015 and December 31, 2014:
|
| | | | | | | |
| March 31, 2015 | | December 31, 2014 |
| (in millions) |
| | | |
Senior notes: | | | |
$500 million, 7.20% due June 15, 2018 | 504 |
| | 504 |
|
$300 million, 6.30% due August 1, 2018 | 311 |
| | 312 |
|
$400 million, 2.625% due October 1, 2019 | 400 |
| | 400 |
|
$600 million, 3.15% due December 1, 2022 | 598 |
| | 598 |
|
$600 million, 3.85% due October 1, 2024 | 599 |
| | 599 |
|
$250 million, 8.15% due June 15, 2038 | 266 |
| | 266 |
|
$400 million, 4.625% due December 1, 2042 | 400 |
| | 400 |
|
$750 million, 4.95% due October 1, 2044 | 746 |
| | 746 |
|
Total long-term debt | $ | 3,824 |
| | $ | 3,825 |
|
Senior Notes
In September 2014, we issued $400 million of 2.625% senior notes due October 1, 2019, $600 million of 3.85% senior notes due October 1, 2024 and $750 million of 4.95% senior notes due October 1, 2044. Our net proceeds, reduced for the underwriters' discount and commission and offering expenses, were $1.73 billion. We used a portion of the net proceeds to redeem the 6.45% senior unsecured notes as discussed below.
In October 2014, we redeemed the $500 million 6.45% senior unsecured notes due June 1, 2016, at 100% of the principal amount plus applicable premium for early redemption and accrued and unpaid interest to the redemption date, for cash totaling approximately $560 million. We recognized a loss on extinguishment of debt of approximately $37 million in October 2014 for the redemption of these notes.
Our senior notes, which are unsecured, may be redeemed at our option at any time at 100% of the principal amount plus accrued interest and a specified make-whole amount. The 7.20% and 8.15% senior notes are subject to an interest rate adjustment if the debt ratings assigned to the notes are downgraded (or subsequently upgraded). In addition, our senior notes (other than the 6.30% senior notes) contain a change of control provision that may require us to purchase the notes under certain circumstances.
Prior to 2009, we were parties to interest-rate swap agreements that exchanged the fixed interest rate under our senior notes for a variable interest rate based on LIBOR. As a result, the carrying value of the senior notes was adjusted to reflect changes in value caused by an increase or decrease in interest rates. During 2008, we terminated all of our swap agreements. The cumulative adjustment to the carrying value of our senior notes was $103 million as of the termination date which is being amortized as a reduction to interest expense over the remaining term of the senior notes. In October 2014, the redemption of our 6.45% senior notes reduced the unamortized carrying value adjustment by $12 million. The unamortized carrying value adjustment was $31 million as of March 31, 2015 and $32 million as of December 31, 2014.
Credit Agreement
Our 5-year $1.0 billion unsecured revolving credit agreement expires July 2018. Under the credit agreement, at our option, we can borrow on either a competitive advance basis or a revolving credit basis. The revolving credit portion bears interest at either LIBOR plus a spread or the base rate plus a spread. The LIBOR spread, currently 110 basis
Humana Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Unaudited
points, varies depending on our credit ratings ranging from 90.0 to 150.0 basis points. We also pay an annual facility fee regardless of utilization. This facility fee, currently 15 basis points, may fluctuate between 10.0 and 25.0 basis points, depending upon our credit ratings. The competitive advance portion of any borrowings will bear interest at market rates prevailing at the time of borrowing on either a fixed rate or a floating rate based on LIBOR, at our option.
The terms of the credit agreement include standard provisions related to conditions of borrowing, including a customary material adverse effect clause which could limit our ability to borrow additional funds. In addition, the credit agreement contains customary restrictive and financial covenants as well as customary events of default, including financial covenants regarding the maintenance of a minimum level of net worth of $8.1 billion at March 31, 2015 and a maximum leverage ratio of 3.0:1. We are in compliance with the financial covenants, with actual net worth of $10.0 billion and an actual leverage ratio of 1.3:1, as measured in accordance with the credit agreement as of March 31, 2015. In addition, the credit agreement includes an uncommitted $250 million incremental loan facility.
At March 31, 2015, we had no borrowings outstanding under the credit agreement and we had outstanding letters of credit of $4 million secured under the credit agreement. No amounts have been drawn on these letters of credit. Accordingly, as of March 31, 2015, we had $996 million of remaining borrowing capacity under the credit agreement, none of which would be restricted by our financial covenant compliance requirement. We have other customary, arms-length relationships, including financial advisory and banking, with some parties to the credit agreement.
Commercial Paper
In October 2014, we entered into a commercial paper program pursuant to which we may issue short-term, unsecured commercial paper notes privately placed on a discount basis through certain broker dealers. Amounts available under the program may be borrowed, repaid and re-borrowed from time to time, with the aggregate face or principal amount outstanding under the program at any time not to exceed $1 billion. The net proceeds of issuances have been and are expected to be used for general corporate purposes, including to repurchase shares of our common stock. The maximum principal amount outstanding at any one time during the three months ended March 31, 2015 was $75 million. There were no outstanding borrowings at March 31, 2015 or December 31, 2014.
13. GUARANTEES AND CONTINGENCIES
Government Contracts
Our Medicare products, which accounted for approximately 72% of our total premiums and services revenue for the three months ended March 31, 2015, primarily consisted of products covered under the Medicare Advantage and Medicare Part D Prescription Drug Plan contracts with the federal government. These contracts are renewed generally for a calendar year term unless CMS notifies us of its decision not to renew by May 1 of the calendar year in which the contract would end, or we notify CMS of our decision not to renew by the first Monday in June of the calendar year in which the contract would end. Our bids for the 2016 calendar year are due by June 1, 2015.
CMS uses a risk-adjustment model which apportions premiums paid to Medicare Advantage, or MA, plans according to health severity of covered members. The risk-adjustment model pays more for enrollees with predictably higher costs. Under this model, rates paid to MA plans are based on actuarially determined bids, which include a process whereby our prospective payments are based on a comparison of our beneficiaries’ risk scores, derived from medical diagnoses, to those enrolled in the government’s traditional fee-for-service Medicare program (referred to as "Medicare FFS"). Under the risk-adjustment methodology, all MA plans must collect and submit the necessary diagnosis code information from hospital inpatient, hospital outpatient, and physician providers to CMS within prescribed deadlines. The CMS risk-adjustment model uses the diagnosis data to calculate the risk-adjusted premium payment to MA plans, which CMS adjusts for coding pattern differences between the health plans and the government fee-for-service program. We generally rely on providers, including certain providers in our network who are our employees, to code their claim submissions with appropriate diagnoses, which we send to CMS as the basis for our payment received from CMS under the actuarial risk-adjustment model. We also rely on these providers to document appropriately all medical data, including the diagnosis data submitted with claims. In addition, we conduct medical record reviews as part of our data
Humana Inc.
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and payment accuracy compliance efforts, to more accurately reflect diagnosis conditions under the risk adjustment model. These compliance efforts include the internal contract level audits described in more detail below.
CMS is continuing to perform audits of various companies’ selected MA contracts related to this risk adjustment diagnosis data. We refer to these audits as Risk-Adjustment Data Validation Audits, or RADV audits. RADV audits review medical records in an attempt to validate provider medical record documentation and coding practices which influence the calculation of premium payments to MA plans.
In 2012, CMS released a “Notice of Final Payment Error Calculation Methodology for Part C Medicare Advantage Risk Adjustment Data Validation (RADV) Contract-Level Audits.” The payment error calculation methodology provides that, in calculating the economic impact of audit results for an MA contract, if any, the results of the audit sample will be extrapolated to the entire MA contract based upon a comparison to “benchmark” audit data in Medicare FFS (which we refer to as the "FFS Adjuster"). This comparison to the FFS Adjuster is necessary to determine the economic impact, if any, of audit results because the government program data set, including any attendant errors that are present in that data set, provides the basis for MA plans’ risk adjustment to payment rates. CMS already makes other adjustments to payment rates based on a comparison of coding pattern differences between MA plans and Medicare FFS data (such as for frequency of coding for certain diagnoses in MA plan data versus the government program data set).
The final methodology, including the first application of extrapolated audit results to determine audit settlements, is expected to be applied to the current round of RADV contract level audits being conducted on 2011 premium payments. Selected MA contracts will be notified of an audit at some point after the close of the final reconciliation for the payment year being audited. The final reconciliation occurs in August of the calendar year following the payment year. We have been notified that certain of our Medicare Advantage contracts have been selected for audit for contract year 2011.
Estimated audit settlements are recorded as a reduction of premiums revenue in our consolidated statements of income, based upon available information. We perform internal contract level audits based on the RADV audit methodology prescribed by CMS. Included in these internal contract level audits is an audit of our Private Fee-For-Service business which we used to represent a proxy of the FFS Adjuster which has not yet been released. We based our accrual of estimated audit settlements for contract years 2011 (the first year that application of extrapolated audit results is applicable) through 2015 on the results of these internal contract level audits and update our estimates as each audit is completed. Estimates derived from these results were not material to our results of operations, financial position, or cash flows. However, as indicated, we are awaiting additional guidance from CMS regarding the FFS Adjuster. Accordingly, we cannot determine whether such RADV audits will have a material adverse effect on our results of operations, financial position, or cash flows.
In addition, CMS' comments in formalized guidance regarding “overpayments” to MA plans appear to be inconsistent with CMS' prior RADV audit guidance. These statements, contained in the preamble to CMS’ final rule release regarding Medicare Advantage and Part D prescription drug benefit program regulations for Contract Year 2015, appear to equate each Medicare Advantage risk adjustment data error with an “overpayment” without reconciliation to the principles underlying the FFS Adjuster referenced above. We will continue to work with CMS to ensure that MA plans are paid accurately and that payment model principles are in accordance with the requirements of the Social Security Act, which, if not implemented correctly could have a material adverse effect on our results of operations, financial position, or cash flows.
At March 31, 2015, our military services business, which accounted for approximately 1% of our total premiums and services revenue for the three months ended March 31, 2015, primarily consisted of the TRICARE South Region contract. The current 5-year South Region contract, which expires March 31, 2017, is subject to annual renewals on April 1 of each year during its term at the government’s option. On March 31, 2015, the Defense Health Agency, or DHA, exercised its option to extend the TRICARE South Region contract through March 31, 2016. On April 24, 2015, a request for proposal was issued for the next generation of TRICARE contracts for the period beginning April 1, 2017 with bids due June 23, 2015. The proposal provides for the consolidation of three regions into two - East and West. The current North and South regions are to be combined to form the East region.
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The loss of any of the contracts above or significant changes in these programs as a result of legislative or regulatory action, including reductions in premium payments to us, regulatory restrictions on profitability, including by comparison of our Medicare Advantage profitability to our non-Medicare Advantage business profitability and a requirement that they remain within certain ranges of each other, or increases in member benefits without corresponding increases in premium payments to us, may have a material adverse effect on our results of operations, financial position, and cash flows.
Our state-based Medicaid business accounted for approximately 4% of our total premiums and services revenue for the three months ended March 31, 2015. In addition to our state-based Medicaid contracts in Florida and Kentucky, we have contracts in Illinois and Virginia for stand-alone dual eligible demonstration programs serving individuals dually eligible for both the federal Medicare program and the applicable state-based Medicaid program. We began serving members in Illinois in the first quarter of 2014 and in Virginia in the second quarter of 2014. In addition, we began serving members in Long-Term Support Services (LTSS) regions in Florida at various effective dates ranging from the second half of 2013 through the first quarter of 2014.
Legal Proceedings and Certain Regulatory Matters
Florida Matters
On January 6, 2012, the Civil Division of the United States Attorney’s Office for the Southern District of Florida advised us that it is seeking documents and information from us and several of our affiliates relating to several matters including the coding of medical claims by one or more South Florida medical providers, and loans to physician practices. On May 1, 2014, the U.S. Attorney's Office filed a Notice of Non-Intervention in connection with a civil qui tam suit related to one of these matters captioned United States of America ex rel. Olivia Graves v. Plaza Medical Centers, et al., and the Court ordered the complaint unsealed. Subsequently, the individual plaintiff amended the complaint and served the Company, opting to continue to pursue the action. After the Court dismissed her complaint, the individual plaintiff filed a second amended complaint on October 23, 2014, which all defendants answered and moved to dismiss. A Magistrate Judge recommended on March 26, 2015, that the Court deny the defendants' motions to dismiss, and the defendants filed objections to that recommendation with the Court, which are pending. We continue to cooperate with and respond to information requests from the U.S. Attorney’s office. These matters could result in additional qui tam litigation.
As previously disclosed, the Civil Division of the United States Department of Justice had provided us with an information request, separate from but related to the Plaza Medical matter, concerning our Medicare Part C risk adjustment practices. The request relates to our oversight and submission of risk adjustment data generated by providers in our Medicare Advantage network, including the providers identified in the Plaza Medical matter, as well as to our business and compliance practices related to risk adjustment data generated by our providers and by us, including medical record reviews conducted as part of our data and payment accuracy compliance efforts, the use of health and well-being assessments, and our fraud detection efforts. We believe that this request for information is in connection with a wider review of Medicare Risk Adjustment generally that includes a number of Medicare Advantage plans, providers, and vendors. We continue to cooperate with and voluntarily respond to the information requests from the Department of Justice and the U.S. Attorney’s Office.
Other Lawsuits and Regulatory Matters
Our current and past business practices are subject to review or other investigations by various state insurance and health care regulatory authorities and other state and federal regulatory authorities. These authorities regularly scrutinize the business practices of health insurance, health care delivery and benefits companies. These reviews focus on numerous facets of our business, including claims payment practices, provider contracting, risk adjustment, competitive practices, commission payments, privacy issues, utilization management practices, pharmacy benefits, access to care, and sales practices, among others. Some of these reviews have historically resulted in fines imposed on us and some have required changes to some of our practices. We continue to be subject to these reviews, which could result in additional fines or other sanctions being imposed on us or additional changes in some of our practices.
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We also are involved in various other lawsuits that arise, for the most part, in the ordinary course of our business operations, certain of which may be styled as class-action lawsuits. Among other matters, this litigation may include employment matters, claims of medical malpractice, bad faith, nonacceptance or termination of providers, anticompetitive practices, improper rate setting, provider contract rate disputes, failure to disclose network discounts and various other provider arrangements, general contractual matters, intellectual property matters, and challenges to subrogation practices. For example, a number of hospitals and other providers have asserted that, under their network provider contracts, we are not entitled to reduce Medicare Advantage payments to these providers in connection with changes in Medicare payment systems and in accordance with the Balanced Budget and Emergency Deficit Control Act of 1985, as amended (commonly referred to as “sequestration”). Those challenges have led and could lead to arbitration demands or other litigation. Also, under state guaranty assessment laws, we may be assessed (up to prescribed limits) for certain obligations to the policyholders and claimants of insolvent insurance companies that write the same line or lines of business as we do.
As a government contractor, we may also be subject to qui tam litigation brought by individuals who seek to sue on behalf of the government, alleging that the government contractor submitted false claims to the government including, among other allegations, those resulting from coding and review practices under the Medicare risk adjustment model. Qui tam litigation is filed under seal to allow the government an opportunity to investigate and to decide if it wishes to intervene and assume control of the litigation. If the government does not intervene, the lawsuit is unsealed, and the individual may continue to prosecute the action on his or her own, on behalf of the government. We also are subject to other allegations of non-performance of contractual obligations to providers, members, and others, including failure to properly pay claims, improper policy terminations, challenges to our implementation of the Medicare Part D prescription drug program and other litigation.
A limited number of the claims asserted against us are subject to insurance coverage. Personal injury claims, claims for extracontractual damages, care delivery malpractice, and claims arising from medical benefit denials are covered by insurance from our wholly owned captive insurance subsidiary and excess carriers, except to the extent that claimants seek punitive damages, which may not be covered by insurance in certain states in which insurance coverage for punitive damages is not permitted. In addition, insurance coverage for all or certain forms of liability has become increasingly costly and may become unavailable or prohibitively expensive in the future.
We record accruals for the contingencies discussed in both sections above to the extent that we conclude it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. No estimate of the possible loss or range of loss in excess of amounts accrued, if any, can be made at this time regarding the matters specifically described above because of the inherently unpredictable nature of legal proceedings, which also may be exacerbated by various factors, including: (i) the damages sought in the proceedings are unsubstantiated or indeterminate; (ii) discovery is not complete; (iii) the proceeding is in its early stages; (iv) the matters present legal uncertainties; (v) there are significant facts in dispute; (vi) there are a large number of parties (including where it is uncertain how liability, if any, will be shared among multiple defendants); or (vii) there is a wide range of potential outcomes.
The outcome of any current or future litigation or governmental or internal investigations, including the matters described above, cannot be accurately predicted, nor can we predict any resulting judgments, penalties, fines or other sanctions that may be imposed at the discretion of federal or state regulatory authorities or as a result of actions by third parties. Nevertheless, it is reasonably possible that any such outcome of litigation, judgments, penalties, fines or other sanctions could be substantial, and the outcome of these matters may have a material adverse effect on our results of operations, financial position, and cash flows, and may also affect our reputation.
14. SEGMENT INFORMATION
On January 1, 2015, we realigned certain of our businesses among our reportable segments to correspond with internal management reporting changes and renamed our Employer Group segment to the Group segment. Our three reportable segments remain Retail, Group, and Healthcare Services. The more significant realignments included reclassifying Medicare benefits offered to groups to the Retail segment from the Group segment, bringing all of our Medicare offerings, which are now managed collectively, together in one segment, recognizing that in some instances we market directly to individuals that are part of a group Medicare account. In addition, we realigned our military
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
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services business, primarily consisting of our TRICARE South Region contract previously included in the Other Businesses category, to our Group segment as we consider this contract with the government to be a group account. Prior period segment financial information has been recast to conform to the 2015 presentation.
We manage our business with three reportable segments: Retail, Group, and Healthcare Services. In addition, the Other Businesses category includes businesses that are not individually reportable because they do not meet the quantitative thresholds required by generally accepted accounting principles. These segments are based on a combination of the type of health plan customer and adjacent businesses centered on well-being solutions for our health plans and other customers, as described below. These segment groupings are consistent with information used by our Chief Executive Officer to assess performance and allocate resources.
The Retail segment consists of Medicare benefits, marketed to individuals or directly via group accounts, as well as individual commercial fully-insured medical and specialty health insurance benefits, including dental, vision, and other supplemental health and financial protection products. In addition, the Retail segment also includes our contract with CMS to administer the LI-NET prescription drug plan program and contracts with various states to provide Medicaid, dual eligible, and Long-Term Support Services benefits, collectively our state-based contracts. The Group segment consists of employer group commercial fully-insured medical and specialty health insurance benefits, including dental, vision, and other supplemental health and voluntary insurance benefits, as well as administrative services only, or ASO products. In addition, our Group segment includes our health and wellness products (primarily marketed to employer groups) and military services business, primarily our TRICARE South Region contract. The Healthcare Services segment includes services offered to our health plan members as well as to third parties, including pharmacy solutions, provider services, home based services, and clinical programs, as well as services and capabilities to advance population health. We will continue to report under the category of Other Businesses those businesses which do not align with the reportable segments described above, primarily our closed-block long-term care insurance policies.
Our Healthcare Services intersegment revenues primarily relate to managing prescription drug coverage for members of our other segments through Humana Pharmacy Solutions®, or HPS, and includes the operations of RightSourceRx®, our mail order pharmacy business. These revenues consist of the prescription price (ingredient cost plus dispensing fee), including the portion to be settled with the member (co-share) or with the government (subsidies), plus any associated administrative fees. Services revenues related to the distribution of prescriptions by third party retail pharmacies in our networks are recognized when the claim is processed and product revenues from dispensing prescriptions from our mail order pharmacies are recorded when the prescription or product is shipped. Our pharmacy operations, which are responsible for designing pharmacy benefits, including defining member co-share responsibilities, determining formulary listings, contracting with retail pharmacies, confirming member eligibility, reviewing drug utilization, and processing claims, act as a principal in the arrangement on behalf of members in our other segments. As principal, our Healthcare Services segment reports revenues on a gross basis including co-share amounts from members collected by third party retail pharmacies at the point of service.
In addition, our Healthcare Services intersegment revenues include revenues earned by certain owned providers derived from risk-based managed care agreements with our health plans. Under these agreements, the provider receives a monthly capitated fee that varies depending on the demographics and health status of the member, for each member assigned to these owned providers by our health plans. The owned provider assumes the economic risk of funding the assigned members’ healthcare services and related administrative costs. Accordingly, our Healthcare Services segment reports provider services related revenues on a gross basis. Capitation fee revenue is recognized in the period in which the assigned members are entitled to receive healthcare services.
We present our consolidated results of operations from the perspective of the health plans. As a result, the cost of providing benefits to our members, whether provided via a third party provider or internally through a stand-alone subsidiary, is classified as benefits expense and excludes the portion of the cost for which the health plans do not bear responsibility, including member co-share amounts and government subsidies of $2.5 billion and $1.9 billion for the three months ended March 31, 2015 and 2014, respectively. In addition, depreciation and amortization expense associated with certain businesses in our Healthcare Services segment delivering benefits to our members, primarily associated with our provider services and pharmacy operations, are included with benefits expense. The amount of this expense was $21 million and $25 million for the three months ended March 31, 2015 and 2014, respectively.
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
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Other than those described previously, the accounting policies of each segment are the same and are described in Note 2 to the consolidated financial statements included in our 2014 Form 10-K. Transactions between reportable segments primarily consist of sales of services rendered by our Healthcare Services segment, primarily pharmacy, provider, and home based services as well as clinical programs, to our Retail and Group customers. Intersegment sales and expenses are recorded at fair value and eliminated in consolidation. Members served by our segments often use the same provider networks, enabling us in some instances to obtain more favorable contract terms with providers. Our segments also share indirect costs and assets. As a result, the profitability of each segment is interdependent. We allocate most operating expenses to our segments. Assets and certain corporate income and expenses are not allocated to the segments, including the portion of investment income not supporting segment operations, interest expense on corporate debt, and certain other corporate expenses. These items are managed at a corporate level. These corporate amounts are reported separately from our reportable segments and are included with intersegment eliminations in the tables presenting segment results below.
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
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Our segment results were as follows for the three months ended March 31, 2015 and 2014, respectively:
|
| | | | | | | | | | | | | | | | | | | | | | | |
| Retail | | Group | | Healthcare
Services | | Other
Businesses | | Eliminations/
Corporate | | Consolidated |
| (in millions) |
Three months ended March 31, 2015 | | | | | | | | | | |
Revenues - external customers | | | | | | | | | | | |
Premiums: | | | | | | | | | | | |
Individual Medicare Advantage | $ | 7,433 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 7,433 |
|
Group Medicare Advantage | 1,394 |
| | — |
| | — |
| | — |
| | — |
| | 1,394 |
|
Medicare stand-alone PDP | 1,003 |
| | — |
| | — |
| | — |
| | — |
| | 1,003 |
|
Total Medicare | 9,830 |
| | — |
| | — |
| | — |
| | — |
| | 9,830 |
|
Fully-insured | 1,094 |
| | 1,384 |
| | — |
| | — |
| | — |
| | 2,478 |
|
Specialty | 63 |
| | 270 |
| | — |
| | — |
| | — |
| | 333 |
|
Medicaid and other | 591 |
| | 6 |
| | — |
| | 10 |
| | — |
| | 607 |
|
Total premiums | 11,578 |
| | 1,660 |
| | — |
| | 10 |
| | — |
| | 13,248 |
|
Services revenue: | | | | | | | | | | | |
Provider | — |
| | 9 |
| | 308 |
| | — |
| | — |
| | 317 |
|
ASO and other | 4 |
| | 160 |
| | — |
| | 2 |
| | — |
| | 166 |
|
Pharmacy | — |
| | — |
| | 7 |
| | — |
| | — |
| | 7 |
|
Total services revenue | 4 |
| | 169 |
| | 315 |
| | 2 |
| | — |
| | 490 |
|
Total revenues - external customers | 11,582 |
| | 1,829 |
| | 315 |
| | 12 |
| | — |
| | 13,738 |
|
Intersegment revenues | | | | | | | | | | | |
Services | — |
| | 22 |
| | 4,413 |
| | — |
| | (4,435 | ) | | — |
|
Products | — |
| | — |
| | 1,150 |
| | — |
| | (1,150 | ) | | — |
|
Total intersegment revenues | — |
| | 22 |
| | 5,563 |
| | — |
| | (5,585 | ) | | — |
|
Investment income | 27 |
| | 5 |
| | — |
| | 15 |
| | 48 |
| | 95 |
|
Total revenues | 11,609 |
| | 1,856 |
| | 5,878 |
| | 27 |
| | (5,537 | ) | | 13,833 |
|
Operating expenses: | | | | | | | | | | | |
Benefits | 9,936 |
| | 1,226 |
| | — |
| | 23 |
| | (180 | ) | | 11,005 |
|
Operating costs | 1,254 |
| | 453 |
| | 5,606 |
| | 3 |
| | (5,371 | ) | | 1,945 |
|
Depreciation and amortization | 44 |
| | 23 |
| | 42 |
| | — |
| | (16 | ) | | 93 |
|
Total operating expenses | 11,234 |
| | 1,702 |
| | 5,648 |
| | 26 |
| | (5,567 | ) | | 13,043 |
|
Income from operations | 375 |
| | 154 |
| | 230 |
| | 1 |
| | 30 |
| | 790 |
|
Interest expense | — |
| | — |
| | — |
| | — |
| | 46 |
| | 46 |
|
Income before income taxes | $ | 375 |
| | $ | 154 |
| | $ | 230 |
| | $ | 1 |
| | $ | (16 | ) | | $ | 744 |
|
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
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|
| | | | | | | | | | | | | | | | | | | | | | | |
| Retail | | Group | | Healthcare
Services | | Other
Businesses | | Eliminations/
Corporate | | Consolidated |
| (in millions) |
Three months ended March 31, 2014 | | | | | | | | | | |
Revenues - external customers | | | | | | | | | | | |
Premiums: | | | | | | | | | | | |
Individual Medicare Advantage | $ | 6,460 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 6,460 |
|
Group Medicare Advantage | 1,384 |
| | — |
| | — |
| | — |
| | — |
| | 1,384 |
|
Medicare stand-alone PDP | 865 |
| | — |
| | — |
| | — |
| | — |
| | 865 |
|
Total Medicare | 8,709 |
| | — |
| | — |
| | — |
| | — |
| | 8,709 |
|
Fully-insured | 525 |
| | 1,329 |
| | — |
| | — |
| | — |
| | 1,854 |
|
Specialty | 59 |
| | 275 |
| | — |
| | — |
| | — |
| | 334 |
|
Medicaid and other | 169 |
| | 6 |
| | — |
| | 11 |
| | — |
| | 186 |
|
Total premiums | 9,462 |
| | 1,610 |
| | — |
| | 11 |
| | — |
| | 11,083 |
|
Services revenue: | | | | | | | | | | | |
Provider | — |
| | 5 |
| | 307 |
| | — |
| | — |
| | 312 |
|
ASO and other | 14 |
| | 188 |
| | — |
| | 3 |
| | — |
| | 205 |
|
Pharmacy | — |
| | — |
| | 21 |
| | — |
| | — |
| | 21 |
|
Total services revenue | 14 |
| | 193 |
| | 328 |
| | 3 |
| | — |
| | 538 |
|
Total revenues - external customers | 9,476 |
| | 1,803 |
| | 328 |
| | 14 |
| | — |
| | 11,621 |
|
Intersegment revenues | | | | | | | | | | | |
Services | — |
| | 19 |
| | 3,481 |
| | — |
| | (3,500 | ) | | — |
|
Products | — |
| | — |
| | 846 |
| | — |
| | (846 | ) | | — |
|
Total intersegment revenues | — |
| | 19 |
| | 4,327 |
| | — |
| | (4,346 | ) | | — |
|
Investment income | 23 |
| | 6 |
| | — |
| | 15 |
| | 47 |
| |