2018 Annual Report

— Financials

Financial Highlights Summary

  • 1-Total-Rev v3
  • 2-Total-Med-Mem v2
  • 3-Net Inc-PS v2
  • 4-Adj-Net Inc-PS 040819 v2
  • 5-Sell-Gen-Admin-Exp-Rat v4
  • 6-Bene-Exp-Rat v2
  • 7-Cust-base v2

*Refer to the GAAP reconciliation table below.

Financial and Membership Highlights 

(dollars in millions, except per share data)201820172016
Operating Results
Total operating revenue$91,341$89,061$84,194
Total revenue92,10590,04084,863
Net income3,7503,8432,470
Net Income Per Share
Basic$14.53$14.70$9.39
Diluted14.1914.359.21
Dividends per share3.002.702.60
Balance Sheet Information
Total assets$71,571$70,540$65,083
Total liabilities43,03044,03739,982
Total shareholders’ equity28,54126,50325,101
Medical Membership (000s)
Commercial & Specialty Business29,81430,67230,365
Government Business10,1249,6279,575
Total medical membership39,93840,29939,940
Customer Type
Local Group15,73315,88815,417
Individual6551,5881,664
National:
National Accounts7,5887,4637,510
BlueCard®5,8385,7335,774
Total National13,42613,19613,284
Medicare1,8521,5691,457
Medicaid6,7166,4966,548
FEP®1,5561,5621,570
Total medical membership39,93840,29939,940
Funding Arrangement
Self-Funded25,28724,86224,563
Fully-Insured14,65115,43715,377
Total medical membership39,93840,29939,940
Other Membership
Life and Disability Members4,7954,7004,732
Dental Members5,8075,8645,486
Dental Administration Members5,3275,3425,294
Vision Members6,9466,8676,388

The information presented above should be read in conjunction with the audited consolidated financial statements and accompanying notes and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in Anthem’s 2018 Annual Report on Form 10-K.

Consolidated Balance Sheets 

(in millions, except share data)Dec. 31, 2018Dec. 31, 2017
Assets
Current assets:
Cash and cash equivalents$3,934$3,609
Fixed maturity securities, current (amortized cost of $16,894 and $17,055)16,69217,377
Equity securities, current1,4933,599
Other invested assets, current2117
Accrued investment income162163
Premium receivables4,4653,605
Self-funded receivables2,2782,580
Other receivables2,5582,267
Income taxes receivable10342
Securities lending collateral604455
Other current assets2,1042,249
Total current assets34,32136,263
Long-term investments:
Fixed maturity securities (amortized cost of $486 and $555)487561
Equity securities3333
Other invested assets3,7263,344
Property and equipment, net2,7352,175
Goodwill20,50419,231
Other intangible assets9,0078,368
Other noncurrent assets758565
Total assets$71,571$70,540
Liabilities and shareholders’ equity
Liabilities
Current liabilities:
Policy liabilities:
Medical claims payable$7,454$ 7,992
Reserves for future policy benefits7570
Other policyholder liabilities2,5902,950
Total policy liabilities10,11911,012
Unearned income902860
Accounts payable and accrued expenses4,9595,024
Security trades pending payable197113
Securities lending payable604454
Short-term borrowings1,1451,275
Current portion of long-term debt8491,275
Other current liabilities3,1903,343
Total current liabilities21,96523,356
Long-term debt, less current portion17,21717,382
Reserves for future policy benefits, noncurrent706647
Deferred tax liabilities, net1,9601,727
Other noncurrent liabilities1,182925
Total liabilities43,03044,037
Commitments and contingencies – Note 13
Shareholders’ equity
Preferred stock, without par value, shares authorized – 100,000,000; shares issued and outstanding – none——
Common stock, par value $0.01, shares authorized – 900,000,000; shares issued and outstanding – 257,395,577 and 256,084,91333
Additional paid-in capital9,5368,547
Retained earnings19,98818,054
Accumulated other comprehensive loss(986)(101)
Total shareholders’ equity28,54126,503
Total liabilities and shareholders’ equity$71,571$70,540

The information presented above should be read in conjunction with the audited consolidated financial statements and accompanying notes included in Anthem’s 2018 Annual Report on Form 10-K.

Consolidated Statements of Income 

Years Ended December 31

(in millions, except per share data)201820172016
Revenues
Premiums$85,421$83,648$78,860
Administrative fees and other revenue5,9205,4135,334
Total operating revenue91,34189,06184,194
Net investment income970867779
Net realized (losses) gains on financial instruments(180)1455
Other-than-temporary impairment losses on investments:
Total other-than-temporary impairment losses on investments(29)(35)(147)
Portion of other-than-temporary impairment losses recognized in other comprehensive income (loss)3232
Other-than-temporary impairment losses recognized in income(26)(33)(115)
Total revenues92,10590,04084,863
Expenses
Benefit expense71,89572,23666,834
Selling, general and administrative expense14,02012,65012,559
Interest expense753739723
Amortization of other intangible assets358169192
Loss on extinguishment of debt11282—
Total expenses87,03786,07680,308
Income before income tax expense5,0683,9644,555
Income tax expense1,3181212,085
Net income$3,750$3,843$2,470
Net income per share
Basic$14.53$14.70$9.39
Diluted$14.19$14.35$9.21
Dividends per share$3.00$2.70$2.60

The information presented above should be read in conjunction with the audited financial statements and accompanying notes included in Anthem’s 2018 Annual Report on Form 10-K.

Consolidated Statements of Comprehensive Income 

Years Ended December 31

(in millions)201820172016
Net income$3,750$3,843$2,470
Other comprehensive (loss) income, net of tax:
Change in net unrealized gains/losses on investments(418)173118
Change in non-credit component of other-than-temporary impairment losses on investments(2)45
Change in net unrealized gains/losses on cash flow hedges37(65)(87)
Change in net periodic pension and postretirement costs(90)51(13)
Foreign currency translation adjustments(1)32
Other comprehensive (loss) income(474)16625
Total comprehensive income$3,276$4,009$2,495

The information presented above should be read in conjunction with the audited financial statements and accompanying notes included in Anthem’s 2018 Annual Report on Form 10-K.

Consolidated Statements of Cash Flows 

Years Ended December 31

(in millions)201820172016
Operating activities
Net income$3,750$3,843$2,470
Adjustments to reconcile net income to net cash provided by operating activities:
Net realized losses (gains) on financial instruments180(145)(5)
Other-than-temporary impairment losses recognized in income2633115
Loss on extinguishment of debt11282—
Loss on disposal of assets8135
Deferred income taxes91(1,272)127
Amortization, net of accretion1,008780808
Depreciation expense124111104
Impairment of property and equipment5245
Share-based compensation226170165
Excess tax benefits from share-based compensation——(54)
Changes in operating assets and liabilities:
Receivables, net(695)(22)(1,381)
Other invested assets(1)(36)(19)
Other assets(26)(629)(128)
Policy liabilities(1,059)732322
Unearned income(36)(120)(174)
Accounts payable and accrued expenses122922182
Other liabilities(25)(120)606
Income taxes323(194)179
Other, net(205)(165)(97)
Net cash provided by operating activities3,8274,1853,270
Investing activities
Purchases of fixed maturity securities(8,244)(9,795)(10,158)
Proceeds from fixed maturity securities:
Sales6,4427,9328,636
Maturities, calls and redemptions1,9381,8481,419
Purchases of equity securities(896)(5,416)(1,476)
Proceeds from sales of equity securities2,8093,4631,593
Purchases of other invested assets(531)(1,164)(433)
Proceeds from sales of other invested assets411219305
Changes in collateral and settlement of non-hedging derivatives—65(35)
Changes in securities lending collateral(149)625222
Purchases of subsidiaries, net of cash acquired(1,760)(2,080)—
Purchases of property and equipment(1,208)(800)(584)
Proceeds from sales of property and equipment—9—
Other, net(71)12(3)
Net cash used in investing activities(1,259)(5,082)(514)
Financing activities
Net (repayments of) proceeds from commercial paper borrowings(107)175(53)
Proceeds from long-term borrowings8355,458—
Repayments of long-term borrowings(1,684)(2,815)—
Proceeds from short-term borrowings9,1205,8352,400
Repayments of short-term borrowings(9,250)(5,000)(2,500)
Changes in securities lending payable150(625)(222)
Changes in bank overdrafts(210)71513
Proceeds from sale of put options11—
Proceeds from issuance of common stock under Equity Units stock purchase contracts1,250——
Repurchase and retirement of common stock(1,685)(1,998)—
Change in collateral and settlements of debt-related derivatives23(149)(360)
Cash dividends(776)(705)(684)
Proceeds from issuance of common stock under employee stock plans173225120
Taxes paid through withholding of common stock under employee stock plans(81)(46)(67)
Excess tax benefits from share-based compensation——54
Net cash (used in) provided by financing activities(2,241)427(799)
Effect of foreign exchange rates on cash and cash equivalents(2)45
Change in cash and cash equivalents325(466)1,962
Cash and cash equivalents at beginning of year3,6094,0752,113
Cash and cash equivalents at end of year$3,934$3,609$4,075

The information presented above should be read in conjunction with the audited financial statements and accompanying notes included in Anthem’s 2018 Annual Report on Form 10-K.

GAAP Reconciliation
(Unaudited)

We have referenced “Adjusted Net Income Per Diluted Share”, which is a non-GAAP measure, in this document. This non-GAAP measure is not intended to be an alternative to any measure calculated in accordance with GAAP. Rather, this non-GAAP measure is intended to aid investors in understanding and analyzing our core operating results and comparing our financial results. A reconciliation of this measure to the most directly comparable measure calculated in accordance with GAAP is presented below.

Years Ended December 31

(in millions, except per share data) 2018 2017 2016
Net income per diluted share $14.19 $14.35 $9.21
Add / (Subtract):
 Net realized losses/(gains) on financial instruments 0.68 (0.54) (0.02)
 Other-than-temporary impairment losses recognized in income 0.10 0.12 0.43
 Amortization of other intangible assets 1.36 0.63 0.72
 Transaction related costs 0.03 0.62 1.20
 Loss on extinguishment of debt 0.04 1.05 —
 Deferred tax benefit from corporate tax reform — (4.14) —
 Penn Treaty assessment costs — 0.95 —
 2015 cyber attack litigation — 0.43 —
 Income tax true-up of prior transaction costs — (0.26) —
 Tricare bid conclusion costs — — 0.14
 Deferred tax asset write-off from California tax legislation — — 0.08
 Tax impact of non-GAAP adjustments (0.51) (1.18) (0.76)
 Rounding impact — 0.01 —
Net adjustment items 1.70 (2.31) 1.79
Adjusted net income per diluted share or Adjusted EPS $15.89 $12.04 $11.00
Created by Addison