Investment research report for HUM

Table of Contents

Executive Summary
Valuation Analysis
Industry and Competitors Analysis
Financial Analysis
Earnings Call Multi-Year Analysis
Financial Statements Multi Year
Insider Trading Analysis
Management Compensation Benchmark Analysis
Proxy Statement Analysis
News Analysis
Technical Indicators Analysis
Financial Statements Annual
Financial Statements Quarterly
Earnings Call Analysis

Executive Summary

Company Description

Humana Inc. is a leading healthcare company that operates in the insurance and healthcare services sectors. Its primary business is providing medical and supplemental benefit plans to individuals, as well as services to government programs like Medicare and Medicaid. Humana is a major player in the rapidly growing Medicare Advantage market and has been expanding its integrated care delivery capabilities through acquisitions and investments in areas like primary care, home health, and pharmacy services.

Financial Performance and Outlook

Humana has delivered consistent revenue growth driven by strong membership gains in its core Medicare Advantage business and expansion into new markets. The company has maintained healthy profit margins and earnings growth, supported by operational efficiencies and scale benefits. Humana generates robust operating cash flows and has a strong balance sheet, providing ample liquidity to fund growth initiatives and shareholder returns. The company has a disciplined capital allocation strategy, investing in strategic acquisitions while also returning capital to shareholders through share buybacks and dividends.

Competitive Landscape

Humana operates in the highly competitive healthcare plans industry, facing intense competition from industry giants like UnitedHealth Group, CVS Health, and Elevance Health (formerly Anthem), as well as specialized players like Centene Corporation, Cigna Corporation, and Molina Healthcare. However, Humana’s strong focus on government-sponsored programs like Medicare and Medicaid, coupled with its expanding integrated care delivery capabilities, positions it as a formidable competitor in this dynamic market.

Risks and Opportunities

While Humana’s prospects appear promising, the company faces regulatory risks related to policy changes that could impact its profitability and growth prospects in government-sponsored healthcare programs. Additionally, the company must navigate industry challenges such as rising medical costs and intense competition. On the other hand, Humana’s strategic transformation, including exiting certain business lines and focusing on its core strengths, presents opportunities for long-term growth and value creation. The company’s experienced management team and strong governance practices provide confidence in its ability to navigate these challenges and capitalize on emerging opportunities.

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Valuation Analysis

PE Ratio

The PE ratio for the company HUM is as follows:
– Low: 9.351825809879097
– Base: 23.519023290984247
– High: 37.6862207720894

PB Ratio

The PB ratio for the company HUM is as follows:
– Low: 3.180859726792843
– Base: 3.728964538373235
– High: 4.277069349953626

Dividend Per Share (DPS) Growth

The DPS growth for the company HUM is as follows:
– Low: 13.60%
– Medium: 14.85%
– High: 16.00%

Unable to provide price targets since this company’s financials are highly unstable. We recommend not to hold this stock in your portfolio.

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Industry and Competitors Analysis

Humana Inc. (HUM) and Competitors

Based on the information provided, HUM (Humana Inc.) operates in the healthcare plans industry, providing medical and supplemental benefit plans to individuals, as well as services to government programs like Medicare and Medicaid. Its main competitors appear to be other major healthcare insurance and managed care companies such as:

  1. ELV (Elevance Health Inc., formerly Anthem Inc.): A large health benefits company offering medical, pharmacy, and other healthcare services to individuals and employers.

  2. CNC (Centene Corporation): A multi-national healthcare enterprise focused on government-sponsored healthcare programs like Medicaid, Medicare, and the Affordable Care Act exchanges.

  3. UNH (UnitedHealth Group Inc.): A diversified healthcare company with segments including UnitedHealthcare (health insurance plans), Optum Health (care delivery), Optum Insight (analytics and technology), and OptumRx (pharmacy care services).

  4. CVS (CVS Health Corporation): A healthcare company with segments in health insurance, pharmacy benefit management, retail pharmacies, and walk-in medical clinics.

  5. CI (Cigna Corporation): A global health services company offering medical, dental, behavioral health, and other insurance products and services.

  6. MOH (Molina Healthcare, Inc.): A managed care company focused on providing healthcare services to low-income families and individuals through government programs like Medicaid and Medicare.

  7. ALHC (Alignment Healthcare, Inc.): A tech-enabled Medicare Advantage company offering consumer-centric healthcare plans for seniors.

In terms of competitive positioning, HUM appears to be one of the larger players in the managed healthcare and health insurance space, with a strong focus on government-sponsored programs like Medicare and Medicaid. However, it faces intense competition from industry giants like UNH, CVS, and ELV, as well as specialized players like CNC, CI, and MOH in their respective segments.

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Financial Analysis

Financial Strength

The company has maintained a relatively stable current ratio around 1.5 in recent years, indicating decent liquidity to cover short-term obligations. The debt-to-equity ratio has been around 0.7-0.8 in recent years, which is a moderate level of leverage. Interest coverage ratios have been mostly positive and high, suggesting the company can comfortably service its debt obligations.

Potential for Growth

Revenue growth has been modest in the 0-5% range in recent years, though it saw a spike of around 19% in Q1 2023. Analyst estimates project revenue growth in the 5-10% range over the next few years. Net income growth has been volatile, with some quarters showing very high growth and others negative growth.

Competitive Advantage

As a major health insurance provider with over 17 million members, Humana likely benefits from economies of scale and a large customer base. However, the health insurance market is highly competitive, which could pressure margins.

Quality of Management

Profitability metrics like return on equity and assets have been relatively stable in recent years, suggesting decent operational execution. The company has maintained a consistent dividend payout, which could signal disciplined capital allocation.

Shareholder Friendliness

Humana pays a modest dividend, with a current yield around 0.25%. The payout ratio has been volatile but mostly below 20%, leaving room for investments. Share repurchases have likely contributed to the slight decline in weighted average shares outstanding.

Valuation

The forward P/E ratio based on analyst estimates is around 16x, which appears reasonable for the healthcare sector. However, the price-to-free-cash-flow ratio has been quite high and volatile, suggesting potential overvaluation at times.

In summary, Humana appears to be a financially stable company with decent growth prospects, though growth has been uneven. Its large scale provides competitive advantages, but the industry is highly competitive. Management seems disciplined, and the valuation appears reasonable based on forward earnings estimates.

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Earnings Call Multi-Year Analysis

Humana’s Long-Term Growth Prospects

Humana remains confident in the long-term growth prospects of the Medicare Advantage (MA) market and its ability to capitalize on this opportunity through its strong MA platform, focus on value-based care models, and expanding healthcare services capabilities like primary care and home health.

Managing Near-Term Challenges

The company is proactively managing near-term challenges like higher-than-expected medical cost trends by taking prudent pricing actions, prioritizing profitability over membership growth when necessary, and driving productivity improvements across the organization.

Strategic Investments for Growth

Humana is making strategic investments in areas like marketing, distribution, and plan design to drive strong MA membership growth, while also enhancing its integrated care delivery model through initiatives like expanding its primary care centers and value-based home health offerings.

Long-Term Financial Targets

The company remains committed to its long-term financial targets, including achieving its $37 adjusted EPS goal for 2025 and delivering 11-15% annual earnings growth, though the path to these targets may require some near-term repositioning to address cost pressures.

Competitive Advantages

Humana’s focus on quality, customer satisfaction, and its ability to leverage data analytics and value-based care arrangements are seen as key competitive advantages that should support its ability to grow profitably in the MA market.

Regulatory Monitoring

The company is closely monitoring regulatory changes, like potential Medicare Advantage payment reforms, and aims to work constructively with policymakers to enhance the program’s value proposition.

Balanced Approach

Humana appears to be taking a balanced approach, proactively addressing near-term headwinds while continuing to invest in its long-term strategic priorities and maintaining financial discipline through productivity initiatives and prudent capital allocation.

In summary, while Humana faces some near-term challenges, its diversified business model, strategic focus on value-based care and healthcare services, and commitment to long-term targets position it well for sustainable growth and value creation for patient-investors.

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Financial Statements Multi Year

Revenue and Membership Growth

Humana has demonstrated consistent revenue growth driven by strong membership gains in its core Medicare Advantage business, as well as expansion into new markets like Medicaid and state-based contracts.

Profitability

While profitability has fluctuated due to one-time items and investments, Humana has generally maintained healthy profit margins and earnings growth, supported by operational efficiencies and scale benefits.

Cash Flow and Balance Sheet

The company generates robust operating cash flows and has a strong balance sheet with ample liquidity to fund growth initiatives, capital expenditures, and shareholder returns.

Capital Allocation

Humana has a disciplined capital allocation strategy, returning capital to shareholders through share buybacks and dividends while also investing in strategic acquisitions and business expansions.

Regulatory Environment

As a major player in government-sponsored healthcare programs, Humana faces regulatory risks related to policy changes that could impact its profitability and growth prospects.

Strategic Transformation

Humana has undertaken strategic shifts, such as exiting certain business lines, to better align its operations with long-term priorities and focus on its core strengths.

Leadership and Governance

The company has an experienced management team and a diverse board of directors, providing strong oversight and strategic guidance.

Overall, Humana’s financial performance, strategic initiatives, and capital allocation decisions position it well for long-term growth in the rapidly evolving healthcare industry. However, investors should closely monitor regulatory developments and the company’s ability to navigate industry challenges while maintaining profitability and shareholder value creation.

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Insider Trading Analysis

Long-Term Patterns

Based on the detailed insider trading data provided, the key long-term patterns at Humana Inc. are as follows:

  • The CEO (BROUSSARD BRUCE D) has been actively trading Humana stock, with large transactions including award grants, option exercises, and stock sales. This suggests the CEO has confidence in the long-term prospects of the company.
  • Several other senior executives, including the CFO (Deshpande Samir) and other C-suite leaders, have also received substantial award grants and engaged in option exercises and stock transactions. This indicates broad insider confidence in Humana’s future.
  • Insider ownership remains high, with the CEO and other executives holding a significant number of shares even after recent transactions. This aligns their interests with long-term shareholders.

Short-Term Implications

The recent insider trading activity at Humana also has some short-term implications to consider:

  • The recent flurry of award grants, option exercises, and stock transactions by insiders suggests they believe Humana’s stock is undervalued at current levels. This could signal potential near-term upside for the stock.
  • The large stock sales by the CEO and other executives, while not unexpected given the size of their holdings, may raise some short-term concerns about insider sentiment. However, the overall pattern of insider buying and holding indicates this is likely not a major cause for concern.
  • The consistent pattern of insider buying, holding, and selective selling across multiple senior executives provides a positive signal for long-term investors about Humana’s prospects and the management team’s confidence in the company’s future.

In summary, the long-term insider trading patterns at Humana suggest strong alignment between management and shareholders, with insiders maintaining substantial ownership stakes and expressing confidence in the company’s future through their transactions. While short-term volatility may occur, the overall insider trading activity points to a positive long-term outlook for Humana.

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Management Compensation Benchmark Analysis

Base Salary Portion of Total Compensation

The base salary portion of total compensation for HUM executives is relatively low, averaging around 24.19% across all reported years and executives. This suggests that HUM’s executive compensation structure is more heavily weighted towards variable, performance-based components like stock awards and incentive plan compensation.

Compared to other healthcare companies like Elevance Health Inc. (ELV) and Centene Corporation (CNC), where the base salary portion averages around 20.61% and 49.39% respectively, HUM’s executives have a lower base salary component in their total compensation.

CEO Compensation

The CEO, Bruce D. Broussard, has the lowest base salary portion of total compensation among HUM’s executives, ranging from around 6-12% in the reported years. This indicates a strong emphasis on aligning his compensation with long-term shareholder value creation through stock awards and incentive plans.

Other Key Executives’ Compensation

Other key HUM executives, such as the CFO, President of CenterWell, and President of Medicare & Medicaid, also have relatively low base salary portions, typically ranging from 10-22% of their total compensation.

Overall, the executive compensation structure at HUM appears to be designed to incentivize long-term performance and align the interests of executives with those of shareholders, as evidenced by the low base salary portions and higher variable, performance-based components.

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Proxy Statement Analysis

Overview

The following analysis is based on the latest proxy statement of HUM. Based on the limited information provided, the analyst does not have enough context to confidently assess how the executives at this company are compensated or whether their incentives are well-aligned with creating long-term shareholder value. The document appears to be focused specifically on shareholder proposals related to changing the voting requirements, rather than providing details about executive compensation practices.

Shareholder Voting Requirements

The key insight from this document for a long-term investor seems to be the importance being placed on implementing a simple majority voting standard for certain shareholder proposals. Enabling shareholders to have more influence through a simple majority vote, rather than a supermajority requirement, could potentially better align the interests of executives with those of long-term shareholders.

Limitations and Further Analysis

However, without more information about the company’s governance practices, executive compensation structure, strategic plans, and overall approach to sustainable value creation, it is difficult to draw definitive conclusions about the alignment of incentives. As a long-term investor, the analyst would likely need to review additional materials, such as the company’s proxy statements, to fully assess this aspect.

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News Analysis

Positive Factors

Humana (HUM) has demonstrated strong performance in the Medicare Advantage business, with growing membership and premiums. As a leader in this market, the company’s Medicare Advantage business provides stability.

Humana is also expanding into new geographic markets and offering new product offerings for 2024, indicating continued growth opportunities.

The company has been actively pursuing partnerships and acquisitions to enhance its capabilities in areas like home health, kidney care, and primary care for seniors.

Consistently beating earnings estimates and raising full-year guidance demonstrates Humana’s solid execution.

Humana’s investments in affordable housing, health equity initiatives, and community support programs align with the company’s mission.

Potential Concerns

Rising medical costs and higher utilization as seniors catch up on delayed care could pressure Humana’s margins.

Regulatory changes or unfavorable reimbursement rates for Medicare Advantage could impact the company’s profitability.

Humana faces intense competition in the Medicare Advantage market from other large insurers.

If the rumored merger with Cigna proceeds, Humana could be exposed to potential antitrust challenges.

Overall Sentiment

The general sentiment seems positive, with Humana’s leadership in the growing Medicare Advantage market and consistent financial performance being key strengths. However, investors should monitor medical cost trends, regulatory developments, and competitive dynamics closely. The potential Cigna merger could be a major development to watch.

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Technical Indicators Analysis

Next Week Trading

The recent price action and technical indicators suggest a potential short-term trading opportunity. The stock has been trading in a range, with the 20-day TEMA providing support around $369-$370. The RSI is in the neutral zone, indicating the stock is not overbought or oversold. Traders may look for opportunities to buy on dips and sell on rallies in the near term.

Resistance and Support Levels

The key resistance levels to watch are around $375-$380, where the stock has faced selling pressure in the past few days. The support levels are around $360-$365, where the 20-day SMA and TEMA are providing support. A breakout above $380 or a drop below $360 could signal the next directional move.

Short-Term Investor

Short-term investors may consider taking a cautious approach, as the stock appears to be in a consolidation phase. The ADX is above 25, indicating a strong trend, but the RSI is in the neutral zone, suggesting the stock may need more time to establish a clear direction. Investors may want to wait for a breakout or a pullback to a support level before taking a position.

Long-Term Investor

For long-term investors, the overall technical picture remains positive. The 200-day SMA is above the current price, and the stock is trading above the 50-day SMA, indicating a bullish long-term trend. However, the recent consolidation and the potential resistance levels may warrant a cautious approach. Long-term investors may consider adding to their positions on dips or waiting for a clear breakout above the recent highs.

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Financial Statements Annual

Financial Statements Annual 2024 Q3

Strong Revenue and Profitability

Humana reported total revenue of $106.44 billion, reflecting a robust top-line performance. The company’s gross profit margin was an impressive 87.60%, indicating efficient cost management and pricing power. Operating income stood at $4.01 billion, with an operating margin of 3.77%, demonstrating the company’s ability to generate consistent profitability. Net income for the year was $2.49 billion, translating to a net profit margin of 2.34%.

Healthy Balance Sheet and Liquidity

Humana had a strong cash and short-term investments position of $21.32 billion, providing ample liquidity to fund operations and strategic initiatives. The company’s total assets amounted to $46.89 billion, with a well-diversified asset base, including $11.24 billion in goodwill and intangible assets. Total liabilities were $30.57 billion, with a manageable debt load of $12.27 billion, resulting in a net debt position of $7.58 billion. Stockholders’ equity stood at $16.32 billion, indicating a solid capital structure.

Efficient Cash Flow Generation

Humana generated $3.98 billion in net cash from operating activities, demonstrating the company’s ability to convert its earnings into cash. Free cash flow, calculated as operating cash flow minus capital expenditures, amounted to $2.98 billion, providing the company with the financial flexibility to invest in growth and return capital to shareholders.

Shareholder-Friendly Actions

The company repurchased $1.57 billion worth of its common stock, indicating management’s confidence in the business and commitment to enhancing shareholder value. Humana paid $431 million in dividends, underscoring its focus on providing consistent returns to its shareholders.

Experienced Leadership and Governance

The report highlights the involvement of a seasoned management team, including the Chief Financial Officer, Chief Accounting Officer, and Chief Executive Officer, who have extensive experience in the industry. The board of directors is composed of a diverse group of individuals with relevant expertise, providing strong oversight and strategic guidance to the company.

Overall, Humana’s financial statements demonstrate a well-managed, profitable, and financially sound organization with a focus on shareholder value creation. The company’s strong liquidity, efficient cash flow generation, and shareholder-friendly actions suggest a solid foundation for long-term investors.

Financial Statements Annual 2024 Q2

Strong Financial Performance

Humana reported robust revenue of $106.44 billion, a testament to its ability to grow its business. The company maintained a healthy gross profit margin of 87.60%, indicating efficient operations and pricing power. Operating income stood at $4.01 billion, with an operating income margin of 3.77%, showcasing the company’s profitability. Net income reached $2.49 billion, translating to an earnings per share (EPS) of $20.09, which is a solid financial outcome.

Healthy Balance Sheet

Humana has a strong cash and short-term investments position of $21.32 billion, providing ample liquidity and financial flexibility. The company’s total assets of $46.89 billion and total stockholders’ equity of $16.26 billion demonstrate a well-capitalized balance sheet. Total debt of $12.27 billion, with a net debt position of $7.58 billion, suggests a manageable leverage profile.

Efficient Cash Flow Generation

Humana generated $3.98 billion in net cash from operating activities, showcasing its ability to convert earnings into cash. Free cash flow, calculated as operating cash flow minus capital expenditures, amounted to $2.98 billion, indicating the company’s capacity to fund growth and return capital to shareholders.

Capital Allocation and Shareholder Returns

The company repurchased $1.57 billion worth of common stock, demonstrating its commitment to enhancing shareholder value. Humana paid $431 million in dividends, providing a return to shareholders. The company’s focus on strategic acquisitions, with $23 million spent on net acquisitions, suggests a disciplined approach to inorganic growth.

Experienced Leadership and Governance

The report highlights the experienced leadership team, with Susan M. Diamond serving as the Chief Financial Officer and Bruce D. Broussard as the Chief Executive Officer. The board of directors comprises individuals with diverse backgrounds and expertise, providing effective oversight and guidance.

Overall, Humana’s financial statements demonstrate a well-managed, profitable, and financially sound company with a strong market position, efficient operations, and a commitment to shareholder value creation. These insights would be valuable for long-term investors considering an investment in Humana.

Financial Statements Annual 2023 Q3

Strong Revenue Growth

Humana reported total revenue of $92.87 billion in 2022, reflecting a robust year-over-year growth.

Healthy Profitability

The company’s gross profit margin was 86.35%, indicating strong operational efficiency. The net income margin was 3.02%, showcasing the company’s ability to generate healthy profits.

Solid Cash Flow Generation

Humana generated $4.59 billion in net cash from operating activities, which enabled it to fund capital expenditures and other investments.

Balanced Capital Structure

The company has a well-managed capital structure, with a total debt of $11.42 billion and a net debt position of $6.36 billion, which is reasonable given the scale of the business.

Shareholder-Friendly Actions

Humana returned $2.49 billion to shareholders through share repurchases and dividends, demonstrating its commitment to enhancing shareholder value.

Regulatory Compliance

Humana’s regulated subsidiaries maintain strong statutory capital and surplus levels, exceeding the minimum regulatory requirements, ensuring financial stability and compliance.

Inorganic Growth

The company funded several acquisitions during the year, indicating its strategic focus on expanding its capabilities and market presence through inorganic means.

Overall, Humana’s 2022 financial performance showcases its ability to generate robust revenue, maintain profitability, and manage its capital structure effectively, while also returning value to shareholders and investing in strategic growth initiatives.

Financial Statements Annual 2023 Q2

Strong Revenue Growth

Humana reported total revenue of $92.87 billion in 2022, reflecting a robust year-over-year growth.

Healthy Profitability

The company’s gross profit margin was 86.35%, indicating efficient operations and pricing power. The operating income margin was 4.27%, and the net income margin was 3.02%, demonstrating solid profitability.

Solid Cash Flow Generation

Humana generated $4.59 billion in net cash from operating activities, which enabled it to fund capital expenditures of $1.12 billion and still have $3.47 billion in free cash flow.

Disciplined Capital Allocation

The company repurchased $2.10 billion of its common stock and paid $392 million in dividends, demonstrating a commitment to returning capital to shareholders.

Strong Balance Sheet

Humana ended the year with $18.94 billion in cash and short-term investments, $15.01 billion in long-term investments, and a manageable debt load of $11.42 billion, resulting in a net debt position of $6.36 billion.

Regulatory Oversight

As a healthcare insurance provider, Humana’s subsidiaries are subject to regulatory requirements, including minimum capital and surplus levels, which the company appears to have maintained comfortably.

Intracompany Transactions

Humana’s parent company charges a services fee to its subsidiaries and receives dividends from them, highlighting the integrated nature of the organization.

Overall, Humana’s 2022 financial performance demonstrates a well-managed, profitable, and financially strong healthcare company with a solid balance sheet and disciplined capital allocation strategy, which should be appealing to long-term investors.

Financial Statements Annual 2022 Q3

Strong Financial Performance

Humana reported robust financial results in 2021, with revenue of $83.06 billion and net income of $2.93 billion. The company maintained a healthy gross profit margin of 87.8% and an operating income margin of 4.1%. Humana’s earnings per share (EPS) stood at $22.79, indicating solid profitability.

Solid Cash Flow and Liquidity

Humana generated $2.26 billion in operating cash flow and $946 million in free cash flow, demonstrating the company’s ability to generate consistent cash flow. The company had $16.59 billion in cash and short-term investments, providing ample liquidity to fund operations and strategic initiatives.

Disciplined Capital Allocation

Humana repurchased $79 million worth of common stock, indicating a commitment to returning capital to shareholders. The company paid $354 million in dividends, highlighting its focus on shareholder returns. Humana also invested $1.32 billion in capital expenditures, suggesting a balanced approach to investing in the business.

Debt Management

Humana had $12.82 billion in total debt, with a net debt position of $9.43 billion, which appears manageable given the company’s strong cash flow generation. The company’s debt structure and maturity profile should be further analyzed to assess the sustainability of its capital structure.

Acquisitions and Investments

Humana made $4.19 billion in net acquisitions, indicating a focus on inorganic growth and expansion. The company also invested $7.20 billion in various investments, which could provide additional revenue streams and diversification.

Overall, Humana’s financial statements demonstrate a well-managed, profitable, and cash-generative business. The company’s disciplined capital allocation, debt management, and strategic investments suggest a long-term focus, which could be attractive to investors seeking stability and growth in the healthcare sector.

Financial Statements Annual 2022 Q2

Strong Financial Performance

Humana reported robust financial results in 2021, with revenue of $83.06 billion and net income of $2.93 billion. The company maintained a healthy gross profit margin of 87.8% and an operating income margin of 4.1%. Humana’s earnings per share (EPS) stood at $22.79, indicating solid profitability.

Solid Cash Flow and Liquidity

Humana generated $2.26 billion in operating cash flow and $946 million in free cash flow, demonstrating the company’s ability to convert earnings into cash. The company had $16.59 billion in cash and short-term investments, providing ample liquidity to fund operations and investments.

Disciplined Capital Allocation

Humana repurchased $79 million worth of common stock, indicating a commitment to returning capital to shareholders. The company paid $354 million in dividends, providing a steady stream of income for investors. Humana also invested $1.32 billion in capital expenditures, suggesting a focus on maintaining and improving its operational capabilities.

Debt Management

Humana had $12.82 billion in total debt, with a net debt position of $9.43 billion, which appears manageable given the company’s strong cash flow generation. The company’s debt structure and maturity profile should be further examined in the notes to the financial statements for a more comprehensive understanding.

Acquisitions and Investments

Humana made $4.19 billion in net acquisitions, indicating a strategic focus on inorganic growth and expansion. The company also invested $7.20 billion in various investments, which could provide additional revenue streams and diversification in the long run.

Overall, Humana’s 2021 financial performance demonstrates a well-managed, profitable, and cash-generative business. The company’s disciplined capital allocation, debt management, and strategic investments suggest a long-term focus, which could be attractive to investors seeking stability and growth in the healthcare sector.

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Financial Statements Quarterly

Financial Statements Quarterly 2024 Q3

Revenue growth

Consolidated premiums revenue increased 10.6% from $25.6 billion in Q1 2023 to $28.3 billion in Q1 2024, primarily due to higher per member Medicare premiums and individual and group Medicare Advantage membership growth.

Profitability

Net income attributable to Humana was $741 million or $6.11 per diluted common share in Q1 2024, compared to $1.2 billion or $9.87 per diluted common share in Q1 2023. The decrease was significantly impacted by various one-time adjustments related to put-call valuations, transactions, and value creation initiatives.

Membership growth

Individual Medicare Advantage membership increased 7.7% from March 2023 to March 2024, reaching 5.55 million members. Group Medicare Advantage membership also grew 7.9% over the same period.

Benefit ratio

The consolidated benefit ratio increased 340 basis points from 85.5% in Q1 2023 to 88.9% in Q1 2024, primarily due to higher Medicare Advantage medical cost trends.

Operating efficiency

The consolidated operating cost ratio decreased 80 basis points from 11.2% in Q1 2023 to 10.4% in Q1 2024, driven by scale efficiencies, administrative cost savings, and lower commission expenses.

Cash flow

Net cash provided by operating activities decreased from $6.7 billion in Q1 2023 to $423 million in Q1 2024, primarily due to the timing of Medicare premium receipts in the prior year period.

Debt and liquidity

Humana issued $2.3 billion of new senior notes in Q1 2024 and had $5.9 billion in cash and cash equivalents at March 31, 2024, providing ample liquidity.

In summary, Humana delivered solid revenue growth and operational efficiency improvements, though profitability was impacted by various one-time items. The company continued to see strong membership gains in its core Medicare Advantage business.

Financial Statements Quarterly 2024 Q2

Revenue Growth

Humana’s total revenues increased 15.9% year-over-year in the third quarter and 13.5% year-over-year in the first nine months of 2023. This was driven primarily by growth in the Individual Medicare Advantage and state-based contracts businesses.

Membership Growth

Humana’s Individual Medicare Advantage membership grew 17.8% year-over-year, adding 810,200 new members. This was partially offset by declines in Group Medicare Advantage, Medicare standalone PDP, and commercial fully-insured and ASO membership.

Profitability

Humana’s net income attributable to the company increased 30.4% in the third quarter and 7.2% in the first nine months of 2023. This was driven by the revenue growth, partially offset by higher benefit and operating costs.

Benefit Ratio

Humana’s consolidated benefit ratio increased 100 basis points in the third quarter and 20 basis points in the first nine months, primarily due to investments in Medicare Advantage benefits, elevated utilization trends, and the impact of individual Medicare Advantage membership growth.

Operating Efficiency

Humana’s consolidated operating cost ratio decreased 100 basis points in the third quarter and 120 basis points in the first nine months, driven by the Gentiva Hospice divestiture, scale efficiencies, and administrative cost savings.

Capital Management

Humana repurchased $980 million of common stock in the first nine months of 2023 and paid $320 million in dividends to shareholders. The company also issued $1.25 billion in new senior notes and repaid $1.5 billion in senior notes.

Overall, Humana delivered strong revenue and membership growth, particularly in its core Medicare Advantage business, while managing costs and returning capital to shareholders. The company’s profitability was impacted by higher medical costs, but it demonstrated operational efficiency improvements.

Financial Statements Quarterly 2024 Q1

Revenue Growth

Humana saw strong revenue growth, with premiums increasing 14.5% in Q2 2023 vs Q2 2022, and 13.5% in H1 2023 vs H1 2022. This was driven by membership growth in individual Medicare Advantage and state-based contracts.

Profitability

Humana’s net income grew 37.2% in Q2 2023 vs Q2 2022, and 34.8% in H1 2023 vs H1 2022. This was despite some headwinds from increased benefit costs and operating expenses. The company was able to offset these through premium increases, favorable prior-period medical claims development, and scale efficiencies.

Segment Performance

The Insurance segment, which includes Medicare Advantage and other government programs, continues to be the main driver of Humana’s growth and profitability. The CenterWell segment, which includes pharmacy and provider services, saw a decline in profitability due to higher operating costs.

Capital Management

Humana continues to maintain a strong balance sheet, with $16.2 billion in cash and cash equivalents as of June 30, 2023. The company has been actively managing its capital through share repurchases and debt refinancing.

Regulatory Environment

Humana faces regulatory risks related to the Medicare Advantage risk adjustment model, which could have a material impact on its results. The company is considering its legal options in response to recent regulatory changes.

Business Transformation

Humana announced the planned exit from its Employer Group Commercial Medical Products business, as it was no longer aligned with the company’s long-term strategic priorities. This transition could have short-term financial impacts.

Overall, Humana’s strong performance in its core Medicare Advantage business, coupled with its financial discipline and strategic initiatives, position the company well for long-term growth. However, the regulatory environment and ongoing business transformation will require close monitoring by investors.

Financial Statements Quarterly 2023 Q4

Revenue Growth

Humana’s total revenues increased by 11.6% year-over-year, driven by a 12.5% increase in premiums revenue and a 21.0% decrease in services revenue. The increase in premiums was primarily due to growth in individual Medicare Advantage and state-based contracts membership, as well as higher per member individual Medicare Advantage premiums.

Profitability

Humana’s net income increased by 33.1% year-over-year, from $930 million in Q1 2022 to $1.24 billion in Q1 2023. This was driven by a 114% increase in benefits expense, a 3.2% increase in operating costs, and a 94% increase in depreciation and amortization. The consolidated benefit ratio decreased by 90 basis points to 85.5%, while the operating cost ratio decreased by 80 basis points to 11.2%.

Segment Performance

The Insurance segment’s income from operations increased by 33.2%, driven by a lower benefit ratio and higher premiums revenue, partially offset by a higher operating cost ratio. The CenterWell segment’s income from operations decreased by 10.8%, primarily due to a higher operating cost ratio, partially offset by higher services and intersegment revenues.

Membership Growth

Individual Medicare Advantage membership increased by 13.5% year-over-year, while group Medicare Advantage and standalone PDP membership declined. Medicaid and other membership increased by 35.8%, reflecting the impact of new state contracts. Commercial fully-insured and ASO medical membership declined by 16.3% and 8.2%, respectively, due to the planned exit from the Employer Group Commercial Medical Products business.

Cash Flows

Operating cash flows increased significantly from $302 million in Q1 2022 to $6.69 billion in Q1 2023, primarily due to the early receipt of the April 2023 Medicare premium remittance. Investing cash flows were used for acquisitions and capital expenditures, while financing cash flows included debt issuances, share repurchases, and dividend payments.

In summary, Humana delivered strong revenue and earnings growth in Q1 2023, driven by continued momentum in its Medicare Advantage business and expansion in Medicaid, partially offset by the planned exit from the commercial employer group business. The company’s cash flows and liquidity position remain robust, supporting its growth initiatives and capital deployment.

Financial Statements Quarterly 2023 Q3

Strong revenue growth

Humana’s total revenues grew 10.2% year-over-year in the quarter and 13.6% year-over-year in the 9-month period, driven by membership growth in individual Medicare Advantage and state-based contracts as well as higher per-member premiums.

Improved profitability

The consolidated benefit ratio improved 150 basis points in the quarter and 30 basis points in the 9-month period, reflecting higher individual Medicare Advantage premiums and lower inpatient utilization. This led to a 61.6% increase in segment earnings for the Retail segment in the quarter and a 17.4% increase for the 9-month period.

Successful divestiture

Humana completed the sale of a 60% interest in its Kindred at Home Hospice subsidiary for $2.7 billion in net cash proceeds, recognizing a $240 million pre-tax gain. This transaction allows Humana to focus on its core Medicare Advantage and healthcare services businesses.

Ongoing investments

Humana continues to invest in its Medicare Advantage business, provider partnerships, and healthcare services capabilities, including $285 million in charges related to productivity initiatives during the 9-month period. These investments position the company for long-term growth.

Strong liquidity and capital position

Humana ended the quarter with $13.6 billion in cash and cash equivalents, providing ample financial flexibility. The company’s regulated subsidiaries also maintain significant excess statutory capital and surplus.

Overall, Humana’s results demonstrate its ability to drive profitable growth in its core Medicare Advantage business while strategically investing in its integrated care delivery model and healthcare services capabilities. The divestiture of the hospice business further streamlines the company’s focus on its key strategic priorities.

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Earnings Call Analysis

Earnings Call Analysis 2024 Q2

Solid Start to 2024 and Increased MA Membership Outlook

Humana had a solid start to 2024 and reaffirmed its full-year adjusted EPS guidance, while increasing its individual MA membership growth outlook. Early medical cost trend indicators in the individual MA business are largely in line to positive relative to expectations.

Insufficient 2025 MA Rate Notice

The final 2025 MA rate notice is not sufficient to address the current medical cost trend environment and regulatory changes. This will negatively impact benefit levels, plan stability, and choice for seniors. Humana no longer believes its previous $6-$10 adjusted EPS growth target for 2025 is appropriate.

Industry Adjustment and Margin Recovery

Humana expects the industry to adjust to the current funding and regulatory environment over time, continuing to deliver strong top-line growth and normalizing at an appropriate margin of at least 3%. Humana remains committed to margin recovery and profitable growth through multi-year pricing actions.

2025 Adjusted EPS Growth Outlook

Humana’s 2025 adjusted EPS growth outlook will be impacted by several variables, including finalization of MA bid pricing decisions, continued evolution of industry cost trends, and the level of competitor pricing actions. Humana will provide an update on its bid strategy post bid finalization.

Bipartisan Support and Competitive Positioning

Humana believes there is strong bipartisan support for the MA program, and the strong core fundamentals and growth outlook for MA and value-based care remain intact. Humana’s platform, focus on MA, and expanding CenterWell capabilities will allow it to compete effectively and deliver compelling shareholder value over the long term.

Opportunities for Growth and Productivity

Humana is evaluating opportunities to drive growth and further productivity across all lines of business to support 2025 adjusted EPS growth.

Earnings Call Analysis 2024 Q1

Humana is facing significant challenges in the near-term due to unexpected increases in medical cost trends, particularly in the fourth quarter of 2023. This has led to a disappointing update and outlook for 2024.

Long-term Attractiveness of Medicare Advantage

However, Humana remains confident in the long-term attractiveness of the Medicare Advantage (MA) sector and its position within it. The company believes the MA program is designed to be dynamic and respond to changes in medical trends.

Margin Recovery in 2025

Humana is prioritizing margin recovery in 2025 and expects to deliver $6 to $10 of adjusted EPS growth that year, though this will likely require benefit reductions. The company sees this as a repositioning year before resuming stronger earnings growth.

Industry Pricing Discipline

Humana is closely watching competitor pricing actions and expects the industry as a whole will need to price more disciplined in 2025 to offset the higher cost trends. The company is willing to prioritize profitability over membership growth.

Evaluating Drivers of Utilization Increase

Humana is evaluating the drivers of the unexpected utilization increase, which appears to be broad-based and not just isolated to certain member cohorts. The company is committed to updating investors as it gains more clarity.

Expanding Enterprise Margin

The company remains focused on expanding its enterprise margin over the long-term by leveraging its CenterWell capabilities, in addition to restoring profitability in the core MA business.

Overall, Humana is taking a prudent, disciplined approach to navigate the near-term challenges, while maintaining confidence in the long-term opportunity in the MA market.

Earnings Call Analysis 2023 Q4

Humana is navigating near-term challenges in its Medicare Advantage business, with higher-than-anticipated utilization leading to an increase in the insurance segment benefit ratio guidance. However, the company remains committed to its long-term 2025 adjusted EPS target of $37, reflecting a 14% CAGR from 2022.

Strength in Primary Care and Medicaid

The company’s primary care and Medicaid businesses continue to outperform, demonstrating the strength and diversification of Humana’s operations. This suggests the company is well-positioned to offset some of the near-term pressures in the Medicare Advantage segment.

Driving Productivity Improvements

Humana is focused on driving sustainable productivity improvements and value creation initiatives across the organization, which are expected to create more than the 20 basis points of annual operating leverage previously committed to. This indicates the company is proactively managing costs and seeking to improve efficiency.

Balanced Approach to Medicare Advantage

The company’s 2024 Medicare Advantage product strategy aims to balance the rate environment with its commitment to achieve industry average or better membership growth. This suggests Humana is taking a prudent and balanced approach to pricing and benefit design.

Competitive Advantage in Quality and Customer Satisfaction

Humana’s strong quality and customer satisfaction metrics, as evidenced by its CMS star ratings and customer experience rankings, are a key competitive advantage that should support its ability to continue growing its Medicare Advantage membership.

Leadership Transition

The planned leadership transition, with Jim Richon joining as President and Chief Operating Officer and eventually assuming the CEO role, is a long-term strategic move that could provide fresh perspectives and continued innovation.

Overall, Humana appears to be taking a proactive and balanced approach to managing near-term challenges while remaining focused on its long-term growth strategy. The company’s diversified business model, productivity initiatives, and commitment to quality and customer satisfaction suggest it is well-positioned for sustained success.

Earnings Call Analysis 2023 Q3

Membership Growth and Sustainable Future

Humana is delivering strong membership growth in 2023, expecting to add around 825,000 new individual Medicare Advantage members, an 18% growth rate. This positions the company well for sustainable growth going forward.

The company is confident it can navigate the near-term impact of higher-than-expected Medicare Advantage utilization in 2023 and deliver earnings growth in line with its historical 11-15% target range in 2024. It has identified various offsets like administrative expense reductions and favorable prior year development to mitigate the higher utilization.

Positioning for 2024 Medicare Advantage Bid Season

Humana is well-positioned for the 2024 Medicare Advantage bid season, with a focus on preserving key benefits and selectively enhancing products. It expects to capitalize on potential disruption in the market due to benefit reductions at some competitors.

Expanding CenterWell Care Delivery Capabilities

The company continues to invest in and expand its CenterWell care delivery capabilities, including primary care, home health, and pharmacy, which are expected to drive improved health outcomes and enterprise value creation.

Long-Term Growth Targets

Humana remains committed to its $37 adjusted EPS target for 2025, supported by its strong Medicare Advantage platform, continued growth and integration of CenterWell, and focus on productivity and disciplined capital deployment.

The key takeaway is that Humana appears to have a strong, diversified business model and is taking proactive steps to navigate near-term challenges and position itself for long-term sustainable growth, which should be attractive for long-term investors.

Earnings Call Analysis 2023 Q2

Membership Growth in Medicare Advantage

Humana is seeing strong membership growth in its core Medicare Advantage business, with an estimated 775,000 new members for 2023 – a 17% year-over-year increase. This growth is driven by investments in benefits, marketing, and distribution.

Medicaid Business Expansion

The company’s Medicaid business is also growing, with the successful implementation of new contracts in Louisiana and Ohio. Humana was also awarded a contract for Indiana’s new Medicaid program starting in 2024.

CenterWell Healthcare Services Growth

Humana’s CenterWell healthcare services business, including primary care, home health, and pharmacy, continues to see strong growth and expansion. This integrated care model is a key strategic focus for the company.

Medicare Advantage Rate Environment

While the 2024 Medicare Advantage rate environment will be challenging, with an industry decrease of around 112 basis points, Humana believes the program will remain compelling for seniors and expects to continue growing at or above industry rates.

Member Retention and Quality

Humana is focused on improving member retention and quality, with better-than-expected retention rates so far in 2023. The company is also seeing a higher percentage of new members switching from competitor plans.

Medicaid Redeterminations

The company is closely monitoring Medicaid redeterminations and the potential impact on membership and acuity mix, but believes it is well-positioned to manage through this process.

Medicare Part D Business

Humana remains committed to its Medicare Part D business, though acknowledges upcoming changes in the program will introduce some volatility and require careful management.

Overall, Humana appears to be executing well on its strategic priorities, driving strong membership growth and expanding its integrated care model, which should position the company well for long-term success.

Earnings Call Analysis 2023 Q1

Humana’s Strong Growth Outlook

Humana is well-positioned for strong growth, with 2023 adjusted EPS guidance of at least $28, representing 11% growth over 2022. This overcomes a $0.92 headwind from the Kindred Hospice divestiture.

Robust Medicare Advantage Membership Growth

Humana expects robust individual Medicare Advantage membership growth of at least 625,000 members in 2023, a 13.7% increase year-over-year. This puts them on track to meet their 2025 MA membership growth target.

Differentiated Capabilities Driving Performance

Humana’s differentiated capabilities in value-based care, analytics, and digital solutions are driving their strong performance and competitive advantage. 70% of individual MA members are in value-based arrangements.

Expanding CenterWell Platform

Humana is expanding its CenterWell platform, including primary care centers and home health services. This payer-agnostic platform provides growth opportunities beyond Humana’s own insurance business.

Investments to Drive Membership Growth

The company is making strategic investments in marketing, distribution, and plan design to drive the strong 2023 membership growth, though this does put some pressure on the 2023 medical loss ratio.

Monitoring the RADV Rule Impact

Humana is closely monitoring the impact of the final RADV rule from CMS, which they believe lacks a necessary fee-for-service adjuster. They are evaluating options to address this issue.

Overall, Humana appears well-positioned for continued growth and execution of its integrated care strategy, though the RADV rule remains an area of uncertainty that long-term investors should monitor.

Earnings Call Analysis 2022 Q4

Strong Fundamentals and Execution Across Segments

Humana is seeing strong fundamentals and execution across its business segments, allowing it to raise its full-year 2022 adjusted EPS guidance.

Robust Medicare Advantage Membership Growth

For 2023, Humana expects individual Medicare Advantage membership growth of 325,000 to 400,000 members, in line with its expectation of high single-digit industry growth. This is driven by investments in its product offerings and distribution capabilities.

Industry-Leading Quality and Customer Experience

Humana has achieved industry-leading quality and customer experience metrics, with 96% of its MA members enrolled in plans rated 4 stars or above. This reflects its differentiated capabilities in value-based care, analytics, and customer-centric solutions.

Ongoing Productivity Improvements

Humana has achieved its $1 billion value creation initiative and is committed to ongoing productivity improvements, targeting approximately 20 basis points of annual operating leverage on a business mix adjusted basis.

Expansion of Value-Based Home Health Model

In its Healthcare Services segment, Humana’s Primary Care Organization continues to perform well, with plans to expand its value-based home health model to cover an additional 450,000 Medicare Advantage members in Q4 2022.

Solid Path to Achieve 2025 Adjusted EPS Target

Humana expects to grow its 2023 adjusted EPS within its targeted long-term range of 11% to 15% off its expected 2022 adjusted EPS of $25, putting it on a solid path to achieve its $37 adjusted EPS target in 2025.

Executing on Strategy and Delivering Value

The company remains focused on executing against its strategy and delivering on the commitments communicated to investors, providing better experiences and outcomes for its members and patients, and creating significant value for shareholders.

Earnings Call Analysis 2022 Q3

Humana’s Confidence in Growth and Returns

Humana is confident in its ability to drive strong growth and returns for shareholders. They are making significant investments in their Medicare Advantage business and healthcare services capabilities that they expect will drive improved membership growth in 2023 while still delivering compelling earnings growth.

Value Creation Initiative Progress

Humana has made strong progress on its $1 billion value creation initiative, which is allowing them to fund investments in their Medicare Advantage offerings and healthcare services expansion. This initiative has also enabled organizational simplification and greater integration across the business.

Humana is seeing favorable utilization trends in its individual Medicare Advantage business, with lower inpatient utilization partially offset by higher unit costs. They are closely monitoring emerging trends, including the potential impact of flu season, to assess the sustainability of these favorable trends.

Home Health Rate Headwind and Mitigation

The proposed 4% cut to home health rates is a potential headwind, but Humana believes the shift to value-based care models can help mitigate the impact. They are focused on expanding their value-based home health offerings.

Outlook for Medicare Advantage Growth

Humana is optimistic about its ability to drive industry-leading Medicare Advantage growth in 2023, though they acknowledge the potential for some near-term margin pressure from new membership. They plan to provide more details on their long-term growth outlook at the September investor day.

Overall, Humana appears to be executing well on its strategic initiatives and is positioning the business for continued strong performance. The key will be balancing investments for growth with maintaining profitability and shareholder returns.

Earnings Call Analysis 2022 Q2

Strong Start to 2022

Humana had a strong start to 2022, with adjusted EPS of $8.04 in Q1 exceeding expectations. This was driven by favorable pharmacy results and lower administrative expenses.

Raised Full-Year Guidance

Humana raised its full-year 2022 adjusted EPS guidance by $0.50 to around $24.50, representing 19% growth over 2021. This includes a $1 COVID-19 headwind and the dilutive impact of the pending Kindred at Home hospice and personal care divestiture.

$1 Billion Value Creation Initiative

Humana remains confident in achieving its $1 billion value creation initiative by 2023, which will fund investments in Medicare Advantage and healthcare services capabilities. This includes initiatives across strategic initiatives, organizational efficiencies, third-party spend, and automation.

Improving Medicare Advantage Membership Growth

Humana is focused on improving Medicare Advantage membership growth, including enhancing distribution partner training, quality-based broker compensation, and linking digital shoppers to internal sales agents.

Scaling Healthcare Services Capabilities

Humana is scaling its healthcare services capabilities, including primary care, pharmacy, and home health. The integration of these services in local markets is expected to drive improved outcomes, satisfaction, and cost savings.

Investor Day in September 2022

Humana plans to provide more transparency on the operational model, growth, and earnings potential of the primary care and home health businesses at an investor day in September 2022.

Kindred at Home Hospice Divestiture

Humana expects to use the majority of the $2.8 billion in proceeds from the Kindred at Home hospice divestiture for debt repayment, with the goal of deleveraging back towards its target of 35% debt-to-capitalization ratio.

Overall, Humana appears to be executing well on its strategy to invest in healthcare services and improve Medicare Advantage performance, while maintaining a disciplined approach to capital allocation and cost management.

Earnings Call Analysis 2022 Q1

Humana is operating from a position of strength

Humana is operating from a position of strength, with high-quality Medicare Advantage plans, industry-leading customer satisfaction, and a proven track record of balancing membership and margin growth.

Driving $1 billion in additional value

Humana is committed to driving $1 billion in additional value through cost savings, productivity initiatives, and value acceleration from previous investments. This will create capacity to fund growth and investments in Medicare Advantage and further expansion of healthcare services.

Optimizing marketing spend and sales channels

Humana plans to optimize marketing spend and sales channels to maximize growth, with a focus on improving retention, particularly in third-party call centers.

Advancing plans to divest hospice business

Humana is committed to advancing its plans to divest a majority interest in its hospice business, while continuing to expand its primary care and home health capabilities.

Healthcare services businesses are an important component

Humana’s healthcare services businesses, including pharmacy, primary care, and home solutions, are an important component of its strategy and will contribute considerably to long-term growth.

Committed to long-term earnings growth target

Humana remains committed to its long-term earnings growth target of 11-15% and believes the actions it is taking will allow it to return to industry-leading membership growth without negatively impacting earnings growth.

Conservative approach to 2022 guidance

The company is taking a conservative approach to its 2022 guidance, incorporating a $1 per share COVID-19 headwind, but is confident in its ability to deliver on its long-term targets.

Overall, Humana appears to be taking proactive steps to position the company for continued success, with a focus on driving operational efficiencies, expanding its healthcare services capabilities, and balancing membership and margin growth.

Earnings Call Analysis 2021 Q4

Humana’s Cautious Approach and Strategic Initiatives

Humana took a more conservative approach to its 2022 Medicare Advantage bids, reflecting continued uncertainty around the pandemic’s impact. This resulted in lower expected membership growth for 2022 compared to 2021.

Humana expects COVID-19 to be neutral to its Medicare business in 2022, with any COVID-related costs offset by reductions in non-COVID utilization. However, the company is building in an explicit COVID headwind in its initial 2022 guidance as a prudent measure.

Humana remains focused on expanding its value-based primary care centers (DeNova) and transitioning its home health business (Kindred at Home) to a more risk-bearing, value-based model. These initiatives are seen as key to improving outcomes and reducing total cost of care.

The company is closely monitoring the regulatory and legislative landscape, including potential changes to Medicare Advantage from the Build Back Better plan. Humana aims to work with policymakers to further enhance Medicare Advantage’s benefits, affordability, and value.

Humana’s guidance suggests it is taking a cautious approach, likely reflecting the ongoing uncertainty around the pandemic’s impact on utilization and costs. The company is focused on maintaining long-term benefits stability for its members.

Overall, Humana appears to be taking a prudent, conservative stance as it navigates the evolving healthcare landscape, while continuing to invest in strategic initiatives to drive long-term growth and value.

Earnings Call Analysis 2021 Q3

Humana is navigating a dynamic environment due to the ongoing COVID-19 pandemic, with various pandemic-related financial impacts affecting its 2021 performance. However, the company expects 2022 to be a more normal year as the healthcare system has reopened and vaccination rates have increased.

Strong Core Business Fundamentals

Humana’s core business fundamentals remain strong, with solid performance across its Medicare Advantage, Medicaid, and Specialty segments. The company is focused on delivering strong operating results while maintaining its commitment to high-quality healthcare.

Headwinds from Reduced Medicare Advantage Revenue

The company is facing a significant headwind from reduced Medicare Advantage revenue due to the deferral of utilization in 2020, which is impacting its 2021 risk adjustment revenue. However, Humana expects this to normalize in 2022 as provider interactions and documentation of clinical diagnoses return to more typical levels.

Monitoring Cost Normalization and COVID-19 Hospitalizations

Humana is closely monitoring the pace of non-COVID cost normalization, as well as any potential increases in COVID-19 hospitalizations, which could present headwinds to its 2021 guidance if they exceed expectations. The company has assumed a 2.5% decline in non-COVID costs in the back half of 2021.

Positioning for Financial Growth in 2022

The company’s 2022 Medicare Advantage bids reflected continued uncertainty related to COVID-19, with a focus on maintaining benefit stability. Humana believes its 2022 planning and pricing approach puts it in a strong position for financial growth next year.

Strategic Investments and Partnerships

Humana is making strategic investments, such as the acquisition of the remaining 60% interest in Kindred at Home, which is expected to close in mid-August. The company is also exploring partnerships, like the new PBM joint venture with Anthem, to enhance its capabilities and productivity.

Overall, Humana appears to be navigating the pandemic-related challenges well, with a focus on maintaining its core business performance and positioning the company for growth in 2022 and beyond. Investors should closely monitor the company’s ability to manage the ongoing COVID-19 uncertainties and its progress in executing on its strategic initiatives.

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The information provided on this blog is for informational purposes only and should not be considered as financial advice. You should consult with a qualified financial professional before making any investment decisions. Past performance is not indicative of future results. Investing involves risk, including the potential loss of principal.