Segment Reporting (Tables)

12 Months Ended

Dec. 31, 2019

Summarized financial information of segments



In millions	Pharmacy Services ⁽¹⁾		Retail/ LTC		Health Care Benefits		Corporate/ Other			Intersegment Eliminations ⁽²⁾			Consolidated Totals
2019:
Revenues from customers	$	141,491	$	86,608	$	69,005	$	100		$	(41,439	)	$	255,765
Net investment income	—		—		599		412			—			1,011
Total revenues	141,491		86,608		69,604		512			(41,439		)	256,776
Adjusted operating income (loss)	5,129		6,705		5,202		(1,000		)	(697		)	15,339
Depreciation and amortization	766		1,723		1,721		161			—			4,371
Additions to property and equipment	332		1,212		533		404			—			2,481
2018:
Revenues from customers	134,736		83,989		8,904		4			(33,714		)	193,919
Net investment income	—		—		58		602			—			660
Total revenues	134,736		83,989		8,962		606			(33,714		)	194,579
Adjusted operating income (loss)	4,955		7,403		528		(856		)	(769		)	11,261
Depreciation and amortization	710		1,698		172		138			—			2,718
Additions to property and equipment	326		1,350		46		401			—			2,123
2017:
Revenues from customers	130,822		79,398		3,582		—			(29,037		)	184,765
Net investment income	—		—		5		16			—			21
Total revenues	130,822		79,398		3,587		16			(29,037		)	184,786
Adjusted operating income (loss)	4,628		7,475		359		(896		)	(741		)	10,825
Depreciation and amortization	710		1,651		2		116			—			2,479
Additions to property and equipment	311		1,398		—		340			—			2,049

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(1)	Total revenues of the Pharmacy Services segment include approximately $11.5 billion, $11.4 billion and $10.8 billion of retail co-payments for 2019, 2018 and 2017, respectively. See Note 1 ‘‘Significant Accounting Policies’’ for additional information about retail co-payments.


(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 is a reconciliation of consolidated operating income to adjusted operating income for the years ended December 31, 2019, 2018 and 2017:



In millions	2019		2018			2017
Operating income (GAAP measure)	$	11,987	$	4,021		$	9,538
Amortization of intangible assets ⁽¹⁾	2,436		1,006			817
Acquisition-related transaction and integration costs ⁽²⁾	480		492			65
Store rationalization charges ⁽³⁾	231		—			215
Loss on divestiture of subsidiary ⁽⁴⁾	205		86			9
Goodwill impairments ⁽⁵⁾	—		6,149			181
Impairment of long-lived assets ⁽⁶⁾	—		43			—
Interest income on financing for the Aetna Acquisition ⁽⁷⁾	—		(536		)	—
Adjusted operating income	$	15,339	$	11,261		$	10,825

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(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)

In 2019, 2018 and 2017, acquisition-related transaction and integration costs relate to the Aetna Acquisition. In 2018 and 2017, acquisition-related transaction and integration costs also relate to the acquisition of Omnicare. The acquisition-related transaction and integration costs are reflected in the Company’s consolidated statements of operations in operating expenses within the Corporate/Other segment and the Retail/LTC segment.

(3)

In 2019, the store rationalization charges relate to the planned closure of 46 underperforming retail pharmacy stores during the second quarter of 2019 and the planned closure of 22 underperforming retail pharmacy stores during the first quarter of 2020. In 2019, the store rationalization charges primarily relate to operating lease right-of-use asset impairment charges and are reflected in the Company’s consolidated statements of operations in operating expenses within the Retail/LTC segment. In 2017, the store rationalization charges related to the Company’s enterprise streamlining initiative and are reflected in the Company’s consolidated statements of operations in operating expenses within the Retail/LTC segment.

(4)

In 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. In 2018, the loss on divestiture of subsidiary represents the pre-tax loss on the sale of the Company’s RxCrossroads subsidiary for $725 million on January 2, 2018. In 2017, the loss on divestiture of subsidiary represents transaction costs associated with the sale of RxCrossroads. The losses on divestiture of subsidiary are reflected in the Company’s consolidated statements of operations in operating expenses within the Retail/LTC segment and Corporate/Other segment.


(5)	In 2018, the goodwill impairments relate to the LTC reporting unit within the Retail/LTC segment. In 2017, the goodwill impairments relate to the RxCrossroads reporting unit within the Retail/LTC segment.


(6)	In 2018, impairment of long-lived assets primarily relates to the impairment of property and equipment within the Retail/LTC segment and is reflected in operating expenses in the Company’s consolidated statements of operations.

(7)

In 2018, the Company recorded interest income of $536 million on the proceeds of the $40 billion of unsecured senior notes it 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.