Q1 2023 Financial Statement Changes
The Company’s financial information for the three months ended March 31, 2023 reflects the following items:
Effective for the first quarter of 2023, the Company realigned the composition of its segments to correspond with changes made to its operating model and how the business is managed. As a result of this realignment, the Company formed a new Health Services segment, which in addition to providing a full range of pharmacy benefit management (“PBM”) solutions, also delivers health care services in the Company’s medical clinics, virtually, and in the home, as well as provider enablement solutions. In addition, the Company created a new Pharmacy & Consumer Wellness segment, which includes its retail and long-term care pharmacy operations and related pharmacy services, as well as its retail front store operations. This segment will also provide pharmacy fulfillment services to support the Health Services segment’s specialty and mail order pharmacy offerings. The Company also discontinued its former segment reporting practice for activity under its Maintenance Choice® program. Following this segment realignment, the Company’s four reportable segments are: Health Care Benefits, Health Services, Pharmacy & Consumer Wellness and Corporate/Other.
Effective January 1, 2023, the Company adopted a new accounting standard related to the accounting for long-duration insurance contracts using a modified retrospective transition method. Refer to Note 1 ‘‘Significant Accounting Policies’’ in the Company’s Quarterly Report on Form 10-Q for the period ended March 31, 2023 for further information regarding the adoption of this accounting standard.
Effective for the first quarter of 2023, the impact of net realized capital gains or losses are excluded from adjusted operating income.
Prior period financial information has been revised to conform with the current period presentation.
Q1 2023 Financial Results
For the three months ended March 31, 2023 compared to the prior year:
Total revenues increased 11.0% driven by growth across all segments.
Operating income decreased 2.8% primarily due to the write-down of the Company’s Omnicare® long-term care business (“LTC business”), the decrease in adjusted operating income described below and an increase in acquisition-related transaction and integration costs compared to the prior year. The decrease in operating income was partially offset by the absence of a $484 million opioid litigation charge recorded in the prior year and a decrease in amortization of intangible assets compared to the prior year.
Adjusted operating income decreased 5.1% primarily driven by declines in the Pharmacy & Consumer Wellness segment, partially offset by increases in the Health Services segment.
Interest expense remained relatively consistent, increasing to $589 million from $586 million.
The effective income tax rate increased to 25.6% compared to 21.5% primarily due to the absence of the impact of certain discrete tax items concluded in the first quarter of 2022. The Company’s adjusted effective income tax rate remained relatively consistent compared to prior year.