Segment Information
On May 20, 2013, we announced certain organizational and executive leadership changes to align with how our new Chief Executive Officer is managing our operations. Beginning with the three months ended June 30, 2013, our organizational structure is comprised of three reportable segments: Commercial and Specialty Business; Government Business; and Other.
Our Commercial and Specialty Business segment includes our Local Group, National Accounts, Individual and Specialty businesses. Business units in the Commercial and Specialty Business segment offer fully-insured products; provide a broad array of managed care services to self-funded customers including claims processing, underwriting, stop loss insurance, actuarial services, provider network access, medical cost management, disease management, wellness programs and other administrative services; and provide an array of specialty and other insurance products and services such as behavioral health benefit services, dental, vision, life and disability insurance benefits, radiology benefit management, analytics-driven personal health care guidance and long-term care insurance.
Our Government Business segment includes Medicare and Medicaid businesses, National Government Services and services provided to the Federal Government in connection with FEP. Our Medicare business includes services such as Medicare Advantage, Medicare Part D, and Medicare Supplement, while our Medicaid business includes our managed care alternatives through publicly funded health care programs, including Medicaid, state Children’s Health Insurance Programs and Medicaid expansion programs. National Government Services acts as a Medicare contractor in several regions across the nation.
Our Other segment includes other businesses that do not meet the quantitative thresholds for an operating segment as defined by FASB guidance, as well as corporate expenses not allocated to the other reportable segments.
We define operating revenues to include premium income, administrative fees and other revenues. Operating revenues are derived from premiums and fees received primarily from the sale and administration of health benefit products. Operating gain is calculated as total operating revenue less benefit expense and selling, general and administrative expense.
Through our participation in various federal government programs, we generated approximately 20.3%, 23.7% and 23.5% of our total consolidated revenues from agencies of the U.S. government for the years ended December 31, 2013, 2012, and 2011, respectively. These revenues are contained in the Government Business segment.
The accounting policies of the segments are consistent with those described in the summary of significant accounting policies in Note 2, “Basis of Presentation and Significant Accounting Policies,” except that certain shared administrative expenses for each segment are recognized on a pro rata allocated basis, which in aggregate approximates the consolidated expense. Any difference between the allocated expenses and actual consolidated expense is included in other expenses not allocated to reportable segments. Intersegment sales and expenses are recorded at cost and eliminated in the consolidated financial statements. We evaluate performance of the reportable segments based on operating gain or loss as defined above. We evaluate investment income, net realized gains on investments, other-than-temporary impairment losses recognized in income, interest expense, amortization expense, loss on extinguishment of debt and income taxes, and asset and liability details on a consolidated basis as these items are managed in a corporate shared service environment and are not the responsibility of segment operating management.
Financial data by reportable segment for the years ended December 31 is as follows:
|
| | | | | | | | | | | | | | | |
| Commercial and Specialty Business | | Government Business | | Other | | Total |
Year ended December 31, 2013 | | | | | | | |
Operating revenue | $ | 38,790.1 |
| | $ | 31,366.7 |
| | $ | 34.6 |
| | $ | 70,191.4 |
|
Operating gain (loss) | 3,093.3 |
| | 927.1 |
| | (19.0 | ) | | 4,001.4 |
|
Depreciation and amortization of property and equipment | — |
| | — |
| | 457.1 |
| | 457.1 |
|
Year ended December 31, 2012 | | | | | | | |
Operating revenue | $ | 38,852.9 |
| | $ | 21,625.7 |
| | $ | 35.4 |
| | $ | 60,514.0 |
|
Operating gain (loss) | 3,339.7 |
| | 341.8 |
| | (61.6 | ) | | 3,619.9 |
|
Depreciation and amortization of property and equipment | — |
| | — |
| | 363.5 |
| | 363.5 |
|
Year ended December 31, 2011 | | | | | | | |
Operating revenue | $ | 39,961.2 |
| | $ | 19,874.0 |
| | $ | 30.0 |
| | $ | 59,865.2 |
|
Operating gain (loss) | 3,344.5 |
| | 461.6 |
| | (24.0 | ) | | 3,782.1 |
|
Depreciation and amortization of property and equipment | — |
| | — |
| | 300.3 |
| | 300.3 |
|
The major product revenues for each of the reportable segments for the years ended December 31, are as follows:
|
| | | | | | | | | | | |
| 2013 | | 2012 | | 2011 |
Commercial and Specialty Business | | | | | |
Managed care products | $ | 33,903.6 |
| | $ | 34,091.5 |
| | $ | 35,387.8 |
|
Managed care services | 3,472.1 |
| | 3,444.8 |
| | 3,374.5 |
|
Dental/Vision products and services | 952.5 |
| | 903.9 |
| | 826.8 |
|
Other | 461.9 |
| | 412.7 |
| | 372.1 |
|
Total Commercial and Specialty Business | 38,790.1 |
| | 38,852.9 |
| | 39,961.2 |
|
Government Business | | | | | |
Managed care products | 30,959.3 |
| | 21,244.7 |
| | 19,533.0 |
|
Managed care services | 407.4 |
| | 381.0 |
| | 341.0 |
|
Total Government Business | 31,366.7 |
| | 21,625.7 |
| | 19,874.0 |
|
Other | | | | | |
Other | 34.6 |
| | 35.4 |
| | 30.0 |
|
Total product revenues | $ | 70,191.4 |
| | $ | 60,514.0 |
| | $ | 59,865.2 |
|
The classification between managed care products and managed care services in the above table primarily distinguishes between the level of risk assumed. Managed care products represent insurance products where we bear the insurance risk, whereas managed care services represent product offerings where we provide claims adjudication and other administrative services to the customer, but the customer principally bears the insurance risk.
Asset and equity details by reportable segment have not been disclosed, as we do not internally report such information.
A reconciliation of reportable segment operating revenues to the amounts of total revenues included in the consolidated statements of income for the years ended December 31 is as follows:
|
| | | | | | | | | | | |
| 2013 | | 2012 | | 2011 |
Reportable segments operating revenues | $ | 70,191.4 |
| | $ | 60,514.0 |
| | $ | 59,865.2 |
|
Net investment income | 659.1 |
| | 686.1 |
| | 703.7 |
|
Net realized gains on investments | 271.9 |
| | 334.9 |
| | 235.1 |
|
Other-than-temporary impairment losses recognized in income | (98.9 | ) | | (37.8 | ) | | (93.3 | ) |
Total revenues | $ | 71,023.5 |
| | $ | 61,497.2 |
| | $ | 60,710.7 |
|
A reconciliation of reportable segment operating gain to income from continuing operations before income taxes included in the consolidated statements of income for the years ended December 31 is as follows:
|
| | | | | | | | | | | |
| 2013 | | 2012 | | 2011 |
Reportable segments operating gain | $ | 4,001.4 |
| | $ | 3,619.9 |
| | $ | 3,782.1 |
|
Net investment income | 659.1 |
| | 686.1 |
| | 703.7 |
|
Net realized gains on investments | 271.9 |
| | 334.9 |
| | 235.1 |
|
Other-than-temporary impairment losses recognized in income | (98.9 | ) | | (37.8 | ) | | (93.3 | ) |
Interest expense | (602.7 | ) | | (511.8 | ) | | (430.3 | ) |
Amortization of other intangible assets | (245.3 | ) | | (233.0 | ) | | (239.4 | ) |
Loss on extinguishment of debt | (145.3 | ) | | — |
| | — |
|
Income from continuing operations before income tax expense | $ | 3,840.2 |
| | $ | 3,858.3 |
| | $ | 3,957.9 |
|
