Discontinued Operations

At December 31, 2015, Torchmark met the criteria to account for its Medicare Part D Prescription Drug Plan business as a discontinued operation. Historically, the business was a reportable segment. Effective July 1, 2016, Torchmark sold its Medicare Part D Prescription Drug Plan business to an unaffiliated third party.

The sale resulted in a net gain of $1.8 million ($1.2 million net of tax) in 2016. The operating results from discontinued operations are reflected in income for the six months ended June 30, 2017. The remaining assets and liabilities reflected on the Torchmark balance sheet related to discontinued operations are receivables and payables associated with the 2016 and prior plan years that are expected to be settled in the ordinary course of business during 2017 and 2018.

The net assets related to discontinued operations at June 30, 2017 and December 31, 2016 were as follows:



	June 30, 2017		December 31, 2016
Assets:
Due premiums	$	3,945	$	8,840
Other receivables⁽¹⁾	64,678		118,692
Total assets related to discontinued operations	68,623		127,532

Liabilities:
Risk sharing payable	9,126		8,374
Current and deferred income taxes payable	1,910		3,820
Other⁽²⁾	28,113		15,230
Total liabilities related to discontinued operations	39,149		27,424

Net assets	$	29,474	$	100,108

(1) At June 30, 2017, other receivables included $65 million from the Centers for Medicare and Medicaid Services (CMS). At December 31, 2016, other receivables included $50 million from the Centers for Medicare and Medicaid Services (CMS) and $69 million from drug manufacturer rebates.

(2) At June 30, 2017, the balance included $25.6 million due to CMS. At December 31, 2016, the balance included a $3.6 million contingent purchase price reserve.

Income from discontinued operations for the three and six months ended June 30, 2017 and 2016 was as follows:



	Three Months Ended June 30,						Six Months Ended June 30,
	2017			2016			2017			2016
Revenue:
Health premium	$	(71	)	$	56,774		$	(295	)	$	111,473

Benefits and expenses:
Health policyholder benefits	(252		)	51,871			3,932			113,352
Amortization of deferred acquisition costs	—			932			—			1,940
Commissions, premium taxes, and non-deferred acquisition expenses	154			3,792			730			8,901
Other operating expense	166			1,510			777			3,290
Total benefits and expenses	68			58,105			5,439			127,483

Income (loss) before income taxes for discontinued operations	(139		)	(1,331		)	(5,734		)	(16,010		)
Income tax benefit (expense)	49			466			2,007			5,604
Income (loss) from discontinued operations	$	(90	)	$	(865	)	$	(3,727	)	$	(10,406	)

Operating cash flows of the discontinued operations for the six months ended June 30, 2017 and 2016 were as follows:



	Six Months Ended June 30,
	2017		2016
Net cash provided from (used for) discontinued operations	$	66,907	$	60,995