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Segment Reporting (Tables) | 9 Months Ended
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Sep. 30, 2019
Segment Reporting [Abstract] |
Schedule of Error Corrections and Prior Period Adjustments | Segment financial information for the three and nine months ended September 30, 2018, has been retrospectively adjusted to reflect these changes as shown below:
| Three Months Ended September 30, 2018
In millions | Pharmacy Services |  | Retail/ LTC |  | Health Care Benefits |  | Corporate/ Other |  | Intersegment Eliminations |  | Consolidated Totals
Revenues, as previously reported | $ | 33,767 |  |  | $ | 20,856 |  |  | $ | — |  |  | $ | 217 |  |  | $ | (7,350 | ) |  | $ | 47,490 |
Adjustments | 97 |  |  | — |  |  | 641 |  |  | — |  |  | (738 | ) |  | — |
Revenues, as adjusted | $ | 33,864 |  |  | $ | 20,856 |  |  | $ | 641 |  |  | $ | 217 |  |  | $ | (8,088 | ) |  | $ | 47,490 |
Cost of products sold (1) | $ | 31,587 |  |  | $ | 15,042 |  |  | $ | — |  |  | $ | — |  |  | $ | (7,127 | ) |  | $ | 39,502 |
Adjustments | 651 |  |  | — |  |  | — |  |  | — |  |  | (651 | ) |  | — |
Cost of products sold, as adjusted | $ | 32,238 |  |  | $ | 15,042 |  |  | $ | — |  |  | $ | — |  |  | $ | (7,778 | ) |  | $ | 39,502 |
Benefit costs (1) | $ | 439 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 439 |
Adjustments | (439 | ) |  | — |  |  | 439 |  |  | — |  |  | — |  |  | — |
Benefit costs, as adjusted | $ | — |  |  | $ | — |  |  | $ | 439 |  |  | $ | — |  |  | $ | — |  |  | $ | 439 |
Operating expenses, as previously reported | $ | 392 |  |  | $ | 4,323 |  |  | $ | — |  |  | $ | 287 |  |  | $ | (27 | ) |  | $ | 4,975 |
Adjustments | (41 | ) |  | — |  |  | 128 |  |  | — |  |  | (87 | ) |  | — |
Operating expenses, as adjusted | $ | 351 |  |  | $ | 4,323 |  |  | $ | 128 |  |  | $ | 287 |  |  | $ | (114 | ) |  | $ | 4,975 |
Operating income (loss), as previously reported | $ | 1,349 |  |  | $ | 1,491 |  |  | $ | — |  |  | $ | (70 | ) |  | $ | (196 | ) |  | $ | 2,574 |
Adjustments | (74 | ) |  | — |  |  | 74 |  |  | — |  |  | — |  |  | — |
Operating income (loss), as adjusted | 1,275 |  |  | 1,491 |  |  | 74 |  |  | (70 | ) |  | (196 | ) |  | 2,574 |
Segment measure adjustments | 87 |  |  | 131 |  |  | 1 |  |  | (143 | ) |  | — |  |  | 76 |
Adjusted operating income (loss) | $ | 1,362 |  |  | $ | 1,622 |  |  | $ | 75 |  |  | $ | (213 | ) |  | $ | (196 | ) |  | $ | 2,650 |
_____________________________________________
(1) | The total of cost of products sold and benefit costs previously were reported as cost of revenues.
| Nine Months Ended September 30, 2018
In millions | Pharmacy Services |  | Retail/ LTC |  | Health Care Benefits |  | Corporate/ Other |  | Intersegment Eliminations |  | Consolidated Totals
Revenues, as previously reported | $ | 99,238 |  |  | $ | 61,960 |  |  | $ | — |  |  | $ | 475 |  |  | $ | (21,518 | ) |  | $ | 140,155 |
Adjustments | 599 |  |  | — |  |  | 2,723 |  |  | — |  |  | (3,322 | ) |  | — |
Revenues, as adjusted | $ | 99,837 |  |  | $ | 61,960 |  |  | $ | 2,723 |  |  | $ | 475 |  |  | $ | (24,840 | ) |  | $ | 140,155 |
Cost of products sold (1) | $ | 92,459 |  |  | $ | 44,318 |  |  | $ | — |  |  | $ | — |  |  | $ | (20,894 | ) |  | $ | 115,883 |
Adjustments | 3,059 |  |  | — |  |  | — |  |  | — |  |  | (3,059 | ) |  | — |
Cost of products sold, as adjusted | $ | 95,518 |  |  | $ | 44,318 |  |  | $ | — |  |  | $ | — |  |  | $ | (23,953 | ) |  | $ | 115,883 |
Benefit costs (1) | $ | 2,399 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 2,399 |
Adjustments | (2,399 | ) |  | — |  |  | 2,399 |  |  | — |  |  | — |  |  | — |
Benefit costs, as adjusted | $ | — |  |  | $ | — |  |  | $ | 2,399 |  |  | $ | — |  |  | $ | — |  |  | $ | 2,399 |
Operating expenses, as previously reported | $ | 1,176 |  |  | $ | 12,831 |  |  | $ | — |  |  | $ | 814 |  |  | $ | (66 | ) |  | $ | 14,755 |
Adjustments | (125 | ) |  | — |  |  | 388 |  |  | — |  |  | (263 | ) |  | — |
Operating expenses, as adjusted | $ | 1,051 |  |  | $ | 12,831 |  |  | $ | 388 |  |  | $ | 814 |  |  | $ | (329 | ) |  | $ | 14,755 |
Operating income (loss), as previously reported | $ | 3,204 |  |  | $ | 890 |  |  | $ | — |  |  | $ | (339 | ) |  | $ | (558 | ) |  | $ | 3,197 |
Adjustments | 64 |  |  | — |  |  | (64 | ) |  | — |  |  | — |  |  | — |
Operating income (loss), as adjusted | 3,268 |  |  | 890 |  |  | (64 | ) |  | (339 | ) |  | (558 | ) |  | 3,197 |
Segment measure adjustments | 262 |  |  | 4,389 |  |  | 2 |  |  | (308 | ) |  | — |  |  | 4,345 |
Adjusted operating income (loss) | $ | 3,530 |  |  | $ | 5,279 |  |  | $ | (62 | ) |  | $ | (647 | ) |  | $ | (558 | ) |  | $ | 7,542 |
_____________________________________________ (1) The total of cost of products sold and benefit costs previously were reported as cost of revenues.
Summarized Financial Information Of Segments | The following is a reconciliation of financial measures of the Company’s segments to the consolidated totals:
In millions | Pharmacy Services (1) |  | Retail/ LTC |  | Health Care Benefits |  | Corporate/ Other |  | Intersegment Eliminations (2) |  | Consolidated Totals
Three Months Ended |  |  |  |  |  |  |  |  |  |  |
September 30, 2019 |  |  |  |  |  |  |  |  |  |  |
Revenues from customers | $ | 36,018 |  |  | $ | 21,466 |  |  | $ | 17,035 |  |  | $ | 35 |  |  | $ | (10,007 | ) |  | $ | 64,547 |
Net investment income | — |  |  | — |  |  | 146 |  |  | 117 |  |  | — |  |  | 263 |
Total revenues | 36,018 |  |  | 21,466 |  |  | 17,181 |  |  | 152 |  |  | (10,007 | ) |  | 64,810 |
Adjusted operating income (loss) | 1,439 |  |  | 1,516 |  |  | 1,423 |  |  | (252 | ) |  | (179 | ) |  | 3,947 |
September 30, 2018 |  |  |  |  |  |  |  |  |  |  |
Revenues from customers | $ | 33,864 |  |  | $ | 20,856 |  |  | $ | 637 |  |  | $ | — |  |  | $ | (8,088 | ) |  | $ | 47,269 |
Net investment income | — |  |  | — |  |  | 4 |  |  | 217 |  |  | — |  |  | 221 |
Total revenues | 33,864 |  |  | 20,856 |  |  | 641 |  |  | 217 |  |  | (8,088 | ) |  | 47,490 |
Adjusted operating income (loss) | 1,362 |  |  | 1,622 |  |  | 75 |  |  | (213 | ) |  | (196 | ) |  | 2,650 |
Nine Months Ended |  |  |  |  |  |  |  |  |  |  |
September 30, 2019 |  |  |  |  |  |  |  |  |  |  |
Revenues from customers | $ | 104,418 |  |  | $ | 64,028 |  |  | $ | 51,996 |  |  | $ | 76 |  |  | $ | (31,436 | ) |  | $ | 189,082 |
Net investment income | — |  |  | — |  |  | 458 |  |  | 347 |  |  | — |  |  | 805 |
Total revenues | 104,418 |  |  | 64,028 |  |  | 52,454 |  |  | 423 |  |  | (31,436 | ) |  | 189,887 |
Adjusted operating income (loss) | 3,682 |  |  | 4,674 |  |  | 4,423 |  |  | (685 | ) |  | (521 | ) |  | 11,573 |
September 30, 2018 |  |  |  |  |  |  |  |  |  |  |
Revenues from customers | $ | 99,837 |  |  | $ | 61,960 |  |  | $ | 2,713 |  |  | $ | — |  |  | $ | (24,840 | ) |  | $ | 139,670 |
Net investment income | — |  |  | — |  |  | 10 |  |  | 475 |  |  | — |  |  | 485 |
Total revenues | 99,837 |  |  | 61,960 |  |  | 2,723 |  |  | 475 |  |  | (24,840 | ) |  | 140,155 |
Adjusted operating income (loss) | 3,530 |  |  | 5,279 |  |  | (62 | ) |  | (647 | ) |  | (558 | ) |  | 7,542 |
_____________________________________________
(1) | Total revenues of the Pharmacy Services segment include approximately $2.7 billion of retail co-payments for each of the three-month periods ended September 30, 2019 and 2018, and $8.9 billion and $8.8 billion of retail co-payments for the nine months ended September 30, 2019 and 2018, respectively.
(2) Intersegment eliminations relate to intersegment revenue generating activities that occur between the Pharmacy Services segment, the Retail/LTC segment and/or the Health Care Benefits segment.
Reconciliation of Operating Earnings to Net Income | The following are reconciliations of consolidated operating income to adjusted operating income for the three and nine months ended September 30, 2019 and 2018:
| Three Months Ended September 30, |  | Nine Months Ended September 30,
In millions | 2019 |  | 2018 |  | 2019 |  | 2018
Operating income (GAAP measure) | $ | 2,928 |  |  | $ | 2,574 |  |  | $ | 8,950 |  |  | $ | 3,197 |
Amortization of intangible assets (1) | 607 |  |  | 215 |  |  | 1,822 |  |  | 639 |
Acquisition-related transaction and integration costs (2) | 111 |  |  | 70 |  |  | 365 |  |  | 152 |
Store rationalization charges (3) | 96 |  |  | — |  |  | 231 |  |  | — |
Loss on divestiture of subsidiary (4) | 205 |  |  | — |  |  | 205 |  |  | 86 |
Goodwill impairment (5) | — |  |  | — |  |  | — |  |  | 3,921 |
Interest income on financing for the Aetna Acquisition (6) | — |  |  | (209 | ) |  | — |  |  | (453 | )
Adjusted operating income | $ | 3,947 |  |  | $ | 2,650 |  |  | $ | 11,573 |  |  | $ | 7,542 |
_____________________________________________
(1) | The Company’s acquisition activities have resulted in the recognition of intangible assets as required under the acquisition method of accounting which consist primarily of trademarks, customer contracts/relationships, covenants not to compete, technology, provider networks and value of business acquired. Definite-lived intangible assets are amortized over their estimated useful lives and are tested for impairment when events indicate that the carrying value may not be recoverable. The amortization of intangible assets is reflected in the Company’s statements of operations in operating expenses within each segment. Although intangible assets contribute to the Company’s revenue generation, the amortization of intangible assets does not directly relate to the underwriting of the Company’s insurance products, the services performed for the Company’s customers or the sale of the Company’s products or services. Additionally, intangible asset amortization expense typically fluctuates based on the size and timing of the Company’s acquisition activity. Accordingly, the Company believes excluding the amortization of intangible assets enhances the Company’s and investors’ ability to compare the Company’s past financial performance with its current performance and to analyze underlying business performance and trends. Intangible asset amortization excluded from the related non-GAAP financial measure represents the entire amount recorded within the Company’s GAAP financial statements and the revenue generated by the associated intangible assets has not been excluded from the related non-GAAP financial measure. Intangible asset amortization is excluded from the related non-GAAP financial measure because the amortization, unlike the related revenue, is not affected by operations of any particular period unless an intangible asset becomes impaired or the estimated useful life of an intangible asset is revised.
(2) | During the three and nine months ended September 30, 2019 and 2018, acquisition-related transaction and integration costs relate to the Aetna Acquisition. During the nine months ended September 30, 2018, acquisition-related integration costs also relate to the acquisition of Omnicare, Inc. The acquisition-related transaction and integration costs are reflected in the Company’s unaudited GAAP condensed consolidated statements of operations in operating expenses primarily within the Corporate/Other segment.
(3) | During the three and nine months ended September 30, 2019, the store rationalization charges relate to the planned closure of 22 underperforming retail pharmacy stores in the first quarter of 2020. During the nine months ended September 30, 2019, the store rationalization charges also relate to the planned closure of 46 underperforming retail pharmacy stores in the second quarter of 2019. The store rationalization charges primarily relate to operating lease right-of-use asset impairment charges and are reflected in the Company’s unaudited GAAP condensed consolidated statements of operations in operating expenses within the Retail/LTC segment.
(4) | During the three and nine months ended September 30, 2019, the loss on divestiture of subsidiary represents the pre-tax loss on the sale of Onofre, which occurred on July 1, 2019. The loss on divestiture primarily relates to the elimination of the cumulative translation adjustment from accumulated other comprehensive income and is reflected in operating expenses in the Company’s unaudited GAAP condensed consolidated statements of operations within the Retail/LTC segment. During the nine months ended September 30, 2018, the loss on divestiture of subsidiary represents the pre-tax loss on the sale of the Company’s RxCrossroads subsidiary for $725 million and is reflected in operating expenses in the Company’s unaudited GAAP condensed consolidated statements of operations within the Retail/LTC segment.
(5) | During the nine months ended September 30, 2018, the goodwill impairment charge relates to the LTC reporting unit within the Retail/LTC segment.
(6) During the three and nine months ended September 30, 2018, the Company recorded interest income of $209 million and $453 million, respectively, on the proceeds of its unsecured senior notes issued in March 2018 to partially fund the Aetna Acquisition. All amounts are for the periods prior to the close of the Aetna Acquisition, which occurred on November 28, 2018, and were recorded within the Corporate/Other segment.

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