Exhibit 99.2
Explanatory Note
During the first quarter of 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 Business category, to our Group segment as we consider this contract with the government to be a group account. Selected financial data set forth in this Exhibit 99.2 has been revised from the selected financial data included in "Item 6" to Humana's Annual Report on Form 10-K for the year ended December 31, 2014 (which we refer to as the "2014 Form 10-K") to reflect retrospective application of the new reporting structure and reclassified historical results to conform to the new presentation. Revisions are highlighted in blue font. Selected financial data set forth below has not been revised to reflect events or developments subsequent to February 18, 2015, the date that Humana filed the 2014 Form 10-K. For a discussion of events and developments subsequent to the filing date of the 2014 Form 10-K, please refer to the reports and other information Humana has filed with the Securities and Exchange Commission since that date, including Humana's Quarterly Reports on Form 10-Q for the quarterly periods ended March 31, 2015 and June 30, 2015.
ITEM 6. SELECTED FINANCIAL DATA WITH RETROSPECTIVE APPLICATION OF SEGMENTS
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| | | | | | | | | | | | | | | | | | | |
| 2014 (a) | | 2013 (b) | | 2012 (c) | | 2011 | | 2010 (d) |
| (dollars in millions, except per common share results) |
Summary of Operating Results: | | | | | | | | | |
Revenues: | | | | | | | | | |
Premiums | $ | 45,959 |
| | $ | 38,829 |
| | $ | 37,009 |
| | $ | 35,106 |
| | $ | 32,712 |
|
Services | 2,164 |
| | 2,109 |
| | 1,726 |
| | 1,360 |
| | 555 |
|
Investment income | 377 |
| | 375 |
| | 391 |
| | 366 |
| | 329 |
|
Total revenues | 48,500 |
| | 41,313 |
| | 39,126 |
| | 36,832 |
| | 33,596 |
|
Operating expenses: | | | | | | | | | |
Benefits | 38,166 |
| | 32,564 |
| | 30,985 |
| | 28,823 |
| | 27,117 |
|
Operating costs | 7,639 |
| | 6,355 |
| | 5,830 |
| | 5,395 |
| | 4,380 |
|
Depreciation and amortization | 333 |
| | 333 |
| | 295 |
| | 270 |
| | 245 |
|
Total operating expenses | 46,138 |
| | 39,252 |
| | 37,110 |
| | 34,488 |
| | 31,742 |
|
Income from operations | 2,362 |
| | 2,061 |
| | 2,016 |
| | 2,344 |
| | 1,854 |
|
Interest expense | 192 |
| | 140 |
| | 105 |
| | 109 |
| | 105 |
|
Income before income taxes | 2,170 |
| | 1,921 |
| | 1,911 |
| | 2,235 |
| | 1,749 |
|
Provision for income taxes | 1,023 |
| | 690 |
| | 689 |
| | 816 |
| | 650 |
|
Net income | $ | 1,147 |
| | $ | 1,231 |
| | $ | 1,222 |
| | $ | 1,419 |
| | $ | 1,099 |
|
Basic earnings per common share | $ | 7.44 |
| | $ | 7.81 |
| | $ | 7.56 |
| | $ | 8.58 |
| | $ | 6.55 |
|
Diluted earnings per common share | $ | 7.36 |
| | $ | 7.73 |
| | $ | 7.47 |
| | $ | 8.46 |
| | $ | 6.47 |
|
Dividends declared per common share | $ | 1.11 |
| | $ | 1.07 |
| | $ | 1.03 |
| | $ | 0.75 |
| | $ | — |
|
Financial Position: | | | | | | | | | |
Cash and investments | $ | 11,482 |
| | $ | 10,938 |
| | $ | 11,153 |
| | $ | 10,830 |
| | $ | 10,046 |
|
Total assets | 23,466 |
| | 20,735 |
| | 19,979 |
| | 17,708 |
| | 16,103 |
|
Benefits payable | 4,475 |
| | 3,893 |
| | 3,779 |
| | 3,754 |
| | 3,469 |
|
Debt | 3,825 |
| | 2,600 |
| | 2,611 |
| | 1,659 |
| | 1,669 |
|
Stockholders’ equity | 9,646 |
| | 9,316 |
| | 8,847 |
| | 8,063 |
| | 6,924 |
|
Cash flows from operations | $ | 1,618 |
| | $ | 1,716 |
| | $ | 1,923 |
| | $ | 2,079 |
| | $ | 2,242 |
|
Key Financial Indicators: | | | | | | | | | |
Benefit ratio | 83.0 | % | | 83.9 | % | | 83.7 | % | | 82.1 | % | | 82.9 | % |
Operating cost ratio | 15.9 | % | | 15.5 | % | | 15.1 | % | | 14.8 | % | | 13.2 | % |
Membership by Segment: | | | | | | | | | |
Retail segment: | | | | | | | | | |
Medical membership | 8,376,500 |
| | 6,459,300 |
| | 5,956,700 |
| | 5,117,400 |
| | 3,985,600 |
|
Specialty membership | 1,165,800 |
| | 1,042,500 |
| | 948,700 |
| | 782,500 |
| | 510,000 |
|
Group segment: | | | | | | | | | |
Medical membership | 5,430,200 |
| | 5,501,600 |
| | 5,573,400 |
| | 5,500,600 |
| | 5,733,600 |
|
Specialty membership | 6,502,700 |
| | 6,780,800 |
| | 7,136,200 |
| | 6,532,600 |
| | 6,517,500 |
|
Other Businesses: | | | | | | | | | |
Medical membership | 35,000 |
| | 23,400 |
| | 558,700 |
| | 566,600 |
| | 567,400 |
|
Consolidated: | | | | | | | | | |
Total medical membership | 13,841,700 |
| | 11,984,300 |
| | 12,088,800 |
| | 11,184,600 |
| | 10,286,600 |
|
Total specialty membership | 7,668,500 |
| | 7,823,300 |
| | 8,084,900 |
| | 7,315,100 |
| | 7,027,500 |
|
| |
(a) | Includes loss on extinguishment of debt of $37 million ($23 million after tax, or $0.15 per diluted common share) for the redemption of senior notes. |
| |
(b) | Includes benefits expense of $243 million ($154 million after tax, or $0.99 per diluted common share) for reserve strengthening associated with our non-strategic closed block of long-term care insurance policies. |
| |
(c) | Includes the acquired operations of Arcadian Management Services, Inc. from March 31, 2012, SeniorBridge Family Companies, Inc. from July 6, 2012, and Metropolitan Health Networks, Inc. from December 21, 2012. |
| |
(d) | Includes the acquired operations of Concentra Inc. from December 21, 2010. Also includes operating costs of $147 million ($93 million after tax, or $0.55 per diluted common share) for the write-down of deferred acquisition costs associated with our individual commercial medical policies and benefits expense of $139 million ($88 million after tax, or $0.52 per diluted common share) associated with reserve strengthening for our non-strategic closed block of long-term care insurance policies. |