Humana Inc. Reports Second Quarter 2006 Financial Results including Earnings Per Share of $0.53

-- EPS for second quarter up 8 percent versus prior year

-- Consolidated revenues up 52 percent to $5.41 billion

-- Medical membership exceeds 11 million

-- Full-year cash flow guidance raised

Humana Inc. (NYSE: HUM) today reported $0.53 in diluted earningsper common share (EPS) for the quarter ended June 30, 2006 (2Q06),$0.19 per share higher than the mid-point of the company's priorguidance. On a year-over-year basis, the 2Q06 EPS is 8 percent higherthan the company's EPS for the quarter ended June 30, 2005 (2Q05) of$0.49 (a). The upside in the quarter was a combination ofbetter-than-expected performance in the company's Medicare Advantage,commercial and TRICARE business lines, partially offset by profitmargins in its Prescription Drug Plans (PDPs) moving to the low end ofthe projected range.

The company continues to estimate EPS for the year ending December31, 2006 (FY06E) in the range of $2.82 to $2.88 versus $1.79 (a) forthe year ended December 31, 2005 (FY05), a growth rate ofapproximately 60 percent. In addition to the impact of changesassociated with second quarter performance, this forecast has beenrevised to reflect management's updated expectations for Medicaremarketing costs in the latter half of 2006. In order to maximize 2007Medicare growth opportunities, the company now anticipates itssecond-half 2006 Medicare marketing costs to be approximately $0.15per share higher than it had previously forecast.

"Strong results in our Medicare Advantage, Commercial and TRICAREbusinesses combined to produce second-quarter earnings thatsignificantly surpassed our expectations," said Michael B.McCallister, Humana's president and chief executive officer. "We're ontrack to grow revenues by 50 percent this year as we enhance ourreputation as the consumer leader in health benefits and expand ourMedicare business into a long-term growth engine."

For the six months ended June 30, 2006 (1H06) the company reported$1.03 in EPS compared to $1.14 (a) for the six months ended June 30,2005 (1H05). The year-over-year decline in year-to-date results wasexpected given the change in the quarterly pattern of 2006 earningsprimarily driven by the introduction of the company's stand-aloneMedicare PDPs in January 2006. Higher Medicare administrative costs in1H06 versus 1H05 also contributed to the decline in earnings from the2005 period. Given these factors, earnings are expected to increase inthe second half of the year compared to the same period in 2005.

Revenues - 2Q06 consolidated revenues rose 52 percent to $5.41billion from $3.55 billion in 2Q05, with total premium andadministrative services fees also up 52 percent compared to the prioryear's quarter. These increases were primarily the result of higherenrollment in the company's Medicare Advantage plans and new 2006revenues from stand-alone PDPs for Medicare beneficiaries.

1H06 consolidated revenues rose 46 percent to $10.11 billion from$6.93 billion in 1H05 with total premium and administrative servicesfees up 45 percent compared to the prior year's period, also primarilydriven by enrollment in the company's Medicare Advantage plans andstand-alone PDPs.

Medical costs - The company's medical expense ratio (medicalexpenses as a percent of premium revenue or MER) of 85.1 percent in2Q06 was 130 basis points higher than that for 2Q05 as year-over-yearimprovement in this metric for the Commercial Segment was offset by ahigher Government Segment MER. The higher MER in the GovernmentSegment primarily results from the introduction of the stand-alone PDPresults in 2006, as described more fully in the Government Segmentresults discussion below.

The consolidated MER for 1H06 of 84.4 percent was 60 basis pointshigher than the 1H05 consolidated MER of 83.8 percent, driven by thesame factors affecting the 2Q06 MER.

Selling, general, & administrative (SG&A) expenses - The company'sconsolidated SG&A expense ratio (SG&A expenses as a percent ofpremiums plus administrative services fees or SG&A expense ratio)decreased to 13.7 percent for 2Q06 from 14.0 percent (a) in 2Q05. Thisresulted primarily from growth in revenues which began to outpace therelated increase in administrative spending on a consolidated basisduring the quarter. The consolidated SG&A ratio improved 240 basispoints compared to the first quarter of 2006 for this reason.

The SG&A expense ratio for 1H06 of 14.8 percent was 70 basispoints higher than the 1H05 ratio of 14.1 percent (a) due to theincrease in SG&A expenses associated with the Medicare expansion inthe first quarter of 2006 coupled with an increase in the percentageof Commercial medical members in ASO accounts. The increase in theMedicare administrative costs results from the build out ofinfrastructure and support functions in advance of the anticipatedcontinued escalation in enrollment as well as sales and marketingspending occurring in a more concentrated 2006 Medicare sellingseason.

Government Segment Results Summary

Pretax results:

-- Government Segment pretax earnings were $98.0 million in 2Q06 compared to $102.5 million(a) in 2Q05. This decline was anticipated because Medicare stand-alone PDP offerings changed the company's quarterly pattern of earnings for 2006 given the medical expense patterns associated with PDP benefit designs.

-- For 1H06, pretax earnings for the Government Segment of $119.6 million were $53.4 million, or 31 percent lower than 1H05 pretax earnings for the segment of $173.0 million(a) with the first half results also impacted primarily by the new PDP offerings in 2006.

Enrollment:

-- Medicare Advantage membership rose to 959,800 at June 30, 2006, an increase of 485,500, or 102 percent, from June 30, 2005 and 218,600, or 29 percent, from March 31, 2006. The company's expanded participation in various Medicare products and markets combined with the company's increased sales and marketing efforts for these programs led to the higher membership level.

-- July 2006 Medicare Advantage membership approximated 990,000. The company now expects Medicare Advantage membership will approximate 1 million at December 31, 2006.

-- Membership in the company's stand-alone PDPs totaled 3,458,800 at June 30, 2006, a sequential increase of 1.5 million, or 77 percent, primarily driven by strong sales during the final two weeks of the open enrollment period which ended on May 15, 2006. The company now anticipates stand-alone PDP membership of approximately 3.5 million at the end of 2006. The significant PDP membership growth during May is not anticipated to substantially increase the company's net earnings for 2006. This is primarily due to the front-loaded pattern of medical spend generally associated with PDP members and the shortened time frame during which such spending would occur for these members through the remainder of 2006 given their enrollment timing.

-- As expected, TRICARE membership of 2,874,500 at June 30, 2006 was essentially unchanged from March 31, 2006. The company also anticipates no material change in TRICARE membership during 2006 compared to year-end 2005.

-- Medicaid membership of 418,500 at June 30, 2006 declined 59,400 from June 30, 2005 and 8,500 from March 31, 2006 due primarily to the non-renewal of the Illinois Medicaid contract in the third quarter of 2005 and a continuing shift of eligible Puerto Rico Medicaid members to the Medicare program.

Revenues:

-- Medicare Advantage premiums of $2.11 billion in 2Q06 increased 93 percent compared to $1.09 billion in 2Q05, primarily the result of higher enrollment, increases in per-member revenues from CMS, and the expanded geography across which Medicare Advantage products were offered. Medicare Advantage premiums per member increased 2 percent year over year during 2Q06, primarily resulting from the increase in per-member revenues from CMS, combined with an increase in the percentage of Medicare Advantage members in the company's Private Fee-For-Service products together with a more diverse geographic mix than in the prior year. At June 30, 2006, approximately 46 percent of the company's Medicare Advantage members were in Private Fee-For-Service plans versus 11 percent at June 30, 2005.

-- Medicare PDP premiums added $801.8 million in new revenues in 2Q06 versus 2Q05.

-- TRICARE premiums and administrative services fees during 2Q06 of $668.8 million compared to $626.6 million in 2Q05. The year-over-year increase primarily reflects a higher reimbursement for claims incurred in 2Q06 combined with revenue from favorable performance for the second option period which concluded on March 31, 2006.

Medical Expenses:

-- The Government Segment MER increased 220 basis points to 86.0 percent in 2Q06 compared to 83.8 percent in the prior year's quarter. The increase is primarily the result of the establishment of the stand-alone PDPs in January 2006. The MER for the company's PDP business was 92.7 percent for 2Q06.

-- The MER for stand-alone PDP offerings over each of the interim reporting periods is impacted by the recognition of benefit costs as incurred under each plan's provisions. Different PDP designs offered by the company result in varying levels of coverage through each of the different layers of beneficiary cost responsibility. The company now anticipates an MER for the full year for its stand-alone PDPs in the range of 86 percent to 89 percent, with MER improvement expected in each quarter sequentially throughout the remainder of the year. Variables that may impact the quarterly MER for the stand-alone PDPs primarily include: (1) the timing of member enrollment, (2) the PDP offering chosen by the member, and (3) the speed with which members move through their deductibles.

SG&A Expenses:

-- The Government Segment's SG&A expense ratio for 2Q06 of 11.5 percent was 90 basis points higher than that for 2Q05 of 10.6 percent(a) primarily driven by expenses associated with the infrastructure build out of the company's expanded Medicare offerings. In particular, marketing expenses and service costs per member were higher year over year. On a sequential basis, the segment's SG&A ratio improved 230 basis points primarily due to the administrative cost leverage provided by revenues associated with higher average membership for this segment.

-- The company anticipates that its SG&A expense ratio for the second half of 2006 will improve over that for 1H06 as marketing expenses decline during the Medicare Advantage lock-in period that began July 1, 2006, and the average membership associated with the Medicare expansion increases throughout the year, providing more leverage against administrative costs.

Commercial Segment Results Summary

Pretax results:

-- Results for the Commercial Segment during 2Q06 reflect pretax income of $42.3 million compared to $22.3 million(a) in 2Q05. Commercial Segment operating earnings in 2Q06 primarily reflect year-over-year improvements in medical cost utilization trends and the company's commitment to underwriting discipline.

-- For 1H06, pretax earnings for the Commercial Segment of $152.0 million were $83.5 million, or 122 percent higher than 1H05 pretax earnings for the segment of $68.5 million(a) primarily reflecting the same drivers which impacted 2Q06 earnings performance combined with higher-than-average capital gains in the first quarter of 2006.

Enrollment:

-- Commercial Segment medical membership of 3,313,900 at June 30, 2006 increased approximately 114,200, or 4 percent, from June 30, 2005 and 54,500, or 2 percent, from March 31, 2006. The sequential increase in Commercial Segment medical membership was primarily the result of the company's acquisition of CHA Health on May 1, 2006.

-- Membership in the company's Smart plans and other consumer offerings increased year over year to 416,400 at June 30, 2006, representing approximately 13 percent of Commercial medical membership compared to 11 percent at June 30, 2005 and 13 percent at March 31, 2006.

Revenues:

-- Premiums and administrative services fees for the Commercial Segment decreased 1 percent to $1.64 billion in 2Q06 compared to $1.66 billion in the prior year's quarter, as an increase in administrative services fees resulting from a 21 percent increase in ASO membership was more than offset by lower premiums due to declines in at-risk enrollment.

-- Commercial Segment medical premiums for fully insured groups increased approximately 5.5 percent on a per-member basis during 2Q06 compared to 2Q05. This increase primarily includes the effect of a greater percentage of the company's fully-insured group block being weighted towards small groups, as its large group business becomes more weighted towards ASO. Premium yield and medical cost trends for the small group business generally include a higher level of benefit buy-downs versus larger employers. The company anticipates the FY06 range of increase in commercial premiums for fully insured group membership to be in the range of the expected increase in per-member medical costs.

Medical Expenses:

-- In 2Q06, the Commercial Segment MER of 82.9 percent was 90 basis points lower than the 2Q05 MER of 83.8 percent, again primarily reflecting improving medical cost utilization trends and the company's commitment to underwriting discipline.

-- Per-member medical costs for commercial fully insured group accounts are now forecasted to rise in the range of 5.5 to 6.5 percent during 2006, including the effect of a greater percentage of the company's fully-insured groups being weighted towards small employers, as discussed above.

-- The company continues to project individual components of commercial medical cost trend for 2006 will approximate as follows: inpatient hospital utilization - flat to 1 percent; inpatient and outpatient hospital rates - upper single digits; outpatient hospital utilization - low to mid single digits; physician - mid single digits; and pharmacy - high single digits to low double digits.

SG&A Expenses:

-- The Commercial Segment SG&A expense ratio of 18.8 percent for 2Q06 compares to 17.7 percent(a) in 2Q05, primarily the result of lower average fully-insured medical enrollment and an increase in the percentage of commercial medical membership related to ASO to 43 percent in 2Q06 versus 37 percent in the prior year. On a sequential basis, the segment's SG&A ratio improved 160 basis points primarily due to progressively higher administrative cost leverage.

Cash Flows from Operations

Cash flows provided by operations for 2Q06 of $534.9 millioncompared to $179.3 million(a) in 2Q05. The company also evaluatesoperating cash flows on a non-GAAP basis(b)(c).
Cash flows from operations
($ in millions) 2Q06 2Q05(a) 1H06 1H05(a)
----------------------------------------------------------------------
GAAP cash flows provided by
operations $534.9 $179.3 $1,542.8 $274.9
----------------------------------------------------------------------
Timing of premium payment from
CMS (c) (257.2) -- (1,031.7) 19.8
----------------------------------------------------------------------
Non-GAAP cash flows provided
by operations (b)(c) $277.7 $179.3 $511.1 $294.7
----------------------------------------------------------------------

Non-GAAP cash flows provided by operations rose to $277.7 millionin 2Q06 from $179.3 million in 2Q05 driven by growth in the company'sMedicare operations. The company now expects that cash flows fromoperations for 2006 will be in the range of $850 million to $950million driven by expected higher earnings over the prior yeartogether with anticipated changes in working capital.

Footnotes
---------

(a) In accordance with Generally Accepted Accounting Principles
(GAAP), Humana adopted the retrospective method for implementing
new stock option accounting rules on January 1, 2006.
Consequently, prior period results in this news release have been
adjusted to retrospectively reflect the expensing of stock
options.

(b) The Company has included certain financial measures that are not
in accordance with GAAP within this news release. The company
believes that these non-GAAP measures, when presented in
conjunction with comparable GAAP measures, are useful to both
management and its investors in analyzing the company's ongoing
business and operating performance. Internally, management uses
these non-GAAP financial measures as indicators of business
performance, as well as for operational planning and decision
making purposes. Non-GAAP financial measures should be considered
in addition to, but not as a substitute for, or superior to,
financial measures prepared in accordance with GAAP.

(c) When reviewing and analyzing Humana's operating cash flows,
company management applies the CMS premium payment in each month
to match the corresponding disbursements. To do otherwise distorts
meaningful analysis of the company's operating cash flow.
Therefore, decisions such as management's forecasting and business
plans regarding cash flow use this non-GAAP financial measure.

Conference Call & Virtual Slide Presentation

Humana will host a conference call, as well as a virtual slidepresentation, at 9:00 a.m. eastern time today to discuss its financialresults for the quarter and the company's expectations for futureearnings. A live virtual presentation (audio with slides) may beaccessed via Humana's Investor Relations page at www.humana.com. Thecompany suggests web participants sign on approximately 15 minutes inadvance of the call. The company also suggests web participants visitthe site well in advance of the call to run a system test and todownload any free software needed to view the presentation.

All parties interested in the audio-only portion of the conferencecall are invited to dial 888-625-7430. No password is required. Thecompany suggests participants dial in approximately ten minutes inadvance of the call. For those unable to participate in the liveevent, the virtual presentation archive will be available in thePresentations section of the Investor Relations page atwww.humana.com.

Cautionary Statement

This news release contains forward-looking statements. Theforward-looking statements herein are made pursuant to the safe harborprovisions of the Private Securities Litigation Reform Act of 1995.Forward-looking statements may be significantly impacted by certainrisks and uncertainties described in the following documents filed byHumana with the Securities and Exchange Commission

-- Form 10-K for the year ended December 31, 2005,

-- Form 10-Q for the quarter ended March 31, 2006,

-- Form 8-Ks filed during May, June, and July 2006.

About Humana

Humana Inc., headquartered in Louisville, Ky., is one of thenation's largest publicly traded health benefits companies, with over11 million medical members. Humana offers a diversified portfolio ofhealth insurance products and related services - through traditionaland consumer-choice plans - to employer groups, government-sponsoredplans, and individuals.

Over its 45-year history, Humana has consistently seizedopportunities to meet changing customer needs. Today, the company is aleader in consumer engagement, providing guidance that leads to lowercosts and a better health plan experience throughout its diversifiedcustomer portfolio.

More information regarding Humana is available to investors viathe Investor Relations page of the company's web site atwww.humana.com, including copies of:

-- Annual report to stockholders;

-- Securities and Exchange Commission filings;

-- Most recent investor conference presentation;

-- Quarterly earnings news releases;

-- Replay of most recent earnings release conference call;

-- Calendar of events (includes upcoming earnings conference call dates, times, and access number, as well as planned interaction with research analysts and institutional investors);

-- Corporate Governance information.
Humana Inc.
GAAP Earnings Guidance Points
For the year ending December 31, 2006
As of July 31, 2006

Diluted earnings per Full year: $2.82 to $2.88
common share Third quarter 2006: $0.95 to $1.00
----------------------------------------------------------------------
Revenues Consolidated: $21 billion to $22 billion
Medicare Advantage: $8.5 billion to $9.0
billion
Medicare stand-alone PDPs: $2.8 billion
to $3.2 billion
TRICARE: $2.5 billion to $2.9 billion
Commercial: $6.5 billion to $7.0 billion
----------------------------------------------------------------------
Year-end medical Medicare Advantage: approximately 1
membership million
Medicare stand-alone PDPs: approximately
3.5 million
TRICARE: No material change from prior
year
Medicaid: Down approximately 40,000 from
prior year
Commercial: Up approximately 140,000 to
150,000 from prior year including the
benefit of members acquired via the CHA
Health acquisition
----------------------------------------------------------------------
Medical costs Medicare stand-alone PDPs: MER in the
range of 86% to 89%
Commercial fully insured groups: Medical
cost trends in the range of 5.5% to 6.5%;
premium yields in line with medical cost
trends
----------------------------------------------------------------------
Selling, general & Consolidated SG&A expense ratio of 13% to
administrative expenses 14%
----------------------------------------------------------------------
Pretax results Medicare Advantage: 3% to 5% pretax
(1) excluding allocation margin(1)
of investment and other Medicare stand-alone PDPs: Approximately
income and interest 1% pretax margin(1)
expense TRICARE: Approximately 3% to 4% pretax
margin(1)
Commercial Segment: $200 million to $240
million
----------------------------------------------------------------------
Cash flows from $850 million to $950 million
operations
----------------------------------------------------------------------
Capital expenditures $155 million to $165 million
----------------------------------------------------------------------
Effective tax rate Approximately 35% to 37%
----------------------------------------------------------------------
Weighted average shares Approximately 168 million
outstanding used to
compute diluted earnings
per common share
----------------------------------------------------------------------



Humana Inc.
Statistical Schedules
And
Supplementary Information
2Q06 Earnings Release


Humana Inc. S-2
Statistical Schedules and Supplementary Information
2Q06 Earnings Release

Contents

Page Description
------------ -------------------------------------------------------

S-3 2Q06 Consolidated Statements of Income
S-4 YTD Consolidated Statements of Income
S-5 Consolidated Balance Sheets
S-6 2Q06 Consolidated Statements of Cash Flows
S-7 YTD Consolidated Statements of Cash Flows
S-8 2005 Quarters Adjusted to Reflect Retrospective
Application of Expensing Stock Options
S-9 2003 Through 2005 Adjusted to Reflect Retrospective
Application of Expensing Stock Options
S-10 Key Income Statement Ratios and Segment Operating
Results
S-11 Membership Detail
S-12 2Q06 Premiums and Administrative Services Fees Detail
S-13 YTD Premiums and Administrative Services Fees Detail
S-14 Percentage of Ending Membership under Capitation
Arrangements
S-15 Detail of Medical and Other Expenses Payable Balance
and Year-to-Date Changes
S-16-17 Medical Claims Reserves Statistics
S-18 Footnotes


Humana Inc. S-3
2Q06 Consolidated Statements of Income
In thousands, except per common share results


Three Months Ended
June 30,
-----------------------
Dollar Percentage
2006 2005 (A) Change Change
----------------------- ----------------------
Revenues:
Premiums $5,264,475 $3,446,019 $1,818,456 52.8%
Administrative
services fees 83,711 66,655 17,056 25.6%
Investment income 50,567 31,131 19,436 62.4%
Other income 8,416 2,556 5,860 229.3%
----------------------- -----------
Total revenues 5,407,169 3,546,361 1,860,808 52.5%
----------------------- -----------
Operating expenses:
Medical 4,479,501 2,888,509 1,590,992 55.1%
Selling, general and
administrative 733,863 490,919 242,944 49.5%
Depreciation 31,613 24,815 6,798 27.4%
Other intangible
amortization 4,983 6,948 (1,965) -28.3%
----------------------- -----------
Total operating
expenses 5,249,960 3,411,191 1,838,769 53.9%
----------------------- -----------
Income from operations 157,209 135,170 22,039 16.3%
Interest expense 16,887 10,322 6,565 63.6%
----------------------- -----------
Income before income
taxes 140,322 124,848 15,474 12.4%
Provision for income
taxes 50,833 43,436 7,397 17.0%
----------------------- -----------
Net income $89,489 $81,412 $8,077 9.9%
======================= ===========

Basic earnings per
common share $0.55 $0.50 $0.05 10.0%
Diluted earnings per
common share $0.53 $0.49 $0.04 8.2%

Shares used in
computing basic
earnings per common
share 163,706 161,492
Shares used in
computing diluted
earnings per common
share 167,536 165,149



Humana Inc. S-4
YTD Consolidated Statements of Income
In thousands, except per common share results


Six Months Ended
June 30,
-----------------------
Dollar Percentage
2006 2005 (A) Change Change
----------------------- ----------------------
Revenues:
Premiums $9,785,961 $6,736,834 $3,049,127 45.3%
Administrative
services fees 162,389 130,168 $32,221 24.8%
Investment income 149,469 61,342 $88,127 143.7%
Other income 13,715 5,242 $8,473 161.6%
----------------------- -----------
Total revenues 10,111,534 6,933,586 $3,177,948 45.8%
----------------------- -----------
Operating expenses:
Medical 8,263,427 5,642,242 $2,621,185 46.5%
Selling, general and
administrative 1,474,749 969,959 $504,790 52.0%
Depreciation 61,465 49,621 $11,844 23.9%
Other intangible
amortization 10,037 11,391 ($1,354) -11.9%
----------------------- -----------
Total operating
expenses 9,809,678 6,673,213 $3,136,465 47.0%
----------------------- -----------
Income from operations 301,856 260,373 $41,483 15.9%
Interest expense 30,326 18,845 $11,481 60.9%
----------------------- -----------
Income before income
taxes 271,530 241,528 $30,002 12.4%
Provision for income
taxes 98,326 53,381 $44,945 84.2%
----------------------- -----------
Net income $173,204 $188,147 ($14,943) -7.9%
======================= ===========

Basic earnings per
common share $1.06 $1.17 ($0.11) -9.4%
Diluted earnings per
common share $1.03 $1.14 ($0.11) -9.6%

Shares used in
computing basic
earnings per common
share 163,411 161,202
Shares used in
computing diluted
earnings per common
share 167,430 164,823



Humana Inc. S-5
Consolidated Balance Sheets
Dollars in thousands, except share amounts

Sequential Change
June 30, March 31, December 31, -----------------
2006 2006 2005 (A) Dollar Percent
---------------------------------- -----------------
Assets
Current assets:
Cash and cash
equivalents $2,258,464 $1,843,405 $732,016
Investment
securities 2,998,440 2,623,009 2,354,904
Receivables, net:
Premiums 767,610 763,061 723,190
Administrative
services fees 14,842 21,652 15,462
Securities
lending
collateral 240,849 250,322 47,610
Other 778,821 517,877 333,004
----------------------------------
Total current
assets 7,059,026 6,019,326 4,206,186 $1,039,700 17.3%
Property and
equipment 505,721 498,267 484,412
Other assets:
Long-term
investment
securities 387,362 374,583 391,035
Goodwill 1,307,650 1,265,176 1,264,575
Other 576,841 540,668 523,406
----------------------------------
Total other
assets 2,271,853 2,180,427 2,179,016
----------------------------------
Total assets $9,836,600 $8,698,020 $6,869,614 $1,138,580 13.1%
==================================

Liabilities and
Stockholders'
Equity
Current
liabilities:
Medical and
other expenses
payable $2,457,643 $2,169,489 $1,909,682
Trade accounts
payable and
accrued
expenses 1,102,919 871,231 560,550
Book overdraft 271,824 275,587 280,005
Securities
lending payable 240,849 250,322 47,610
Unearned
revenues 1,170,278 920,678 120,489
Current portion
of long-term
debt 299,941 300,231 301,254
----------------------------------
Total current
liabilities 5,543,454 4,787,538 3,219,590 $755,916 15.8%
Long-term debt 784,399 601,225 513,790
Other long-term
liabilities 849,952 741,498 627,360
----------------------------------
Total
liabilities 7,177,805 6,130,261 4,360,740 $1,047,544 17.1%
----------------------------------
Commitments and
contingencies
Stockholders'
equity:
Preferred stock,
$1 par;
10,000,000
shares
authorized,
none issued - - -
Common stock,
$0.16 2/3 par;
300,000,000
shares
authorized;
181,012,456
issued at June
30, 2006 30,170 30,085 29,843
Capital in
excess of par
value 1,285,399 1,264,161 1,235,888
Retained
earnings 1,594,879 1,505,390 1,421,675
Accumulated
other
comprehensive
(loss) income (43,352) (28,408) 24,832
Treasury stock,
at cost,
15,948,235
shares at June
30, 2006 (208,301) (203,469) (203,364)
----------------------------------
Total
stockholders'
equity 2,658,795 2,567,759 2,508,874 $91,036 3.5%
----------------------------------
Total liabilities
and
stockholders'
equity $9,836,600 $8,698,020 $6,869,614 $1,138,580 13.1%
==================================

Debt to total
capitalization
ratio 29.0% 26.0% 24.5%


Humana Inc. S-6
2Q06 Consolidated Statements of Cash Flows
Dollars in thousands

Three Months Ended
June 30,
-----------------------
Dollar Percentage
2006 2005 (A) Change Change
----------------------- ----------------------
Cash flows from
operating activities
Net income $89,489 $81,412
Adjustments to
reconcile net income
to net cash provided
by operating
activities:
Depreciation and
amortization 36,596 31,763
Stock-based
compensation 8,471 7,646
Provision for
deferred income
taxes 2,479 3,124
Changes in
operating assets
and liabilities
excluding the
effects of
acquisitions:
Receivables 3,104 (19,825)
Other assets (174,050) (20,154)
Medical and other
expenses payable 266,956 131,501
Other liabilities 57,967 (13,949)
Unearned revenues 244,661 (22,535)
Other (818) 304
-----------------------
Net cash provided by
operating activities 534,855 179,287 $355,568 198.3%
-----------------------

Cash flows from
investing activities
Acquisitions, net of
cash acquired (25,818) (4,627)
Purchases of property
and equipment (36,712) (31,034)
Proceeds from sales
of property and
equipment 18 30
Purchases of
investment
securities (594,890) (531,234)
Proceeds from
maturities of
investment
securities 100,289 131,947
Proceeds from sales
of investment
securities 152,855 325,329
Change in securities
lending collateral 9,473 49,680
-----------------------
Net cash used in
investing activities (394,785) (59,909) ($334,876) -559.0%
-----------------------

Cash flows from
financing activities
Receipts from CMS
contract deposits 550,868 -
Withdrawals from CMS
contract deposits (462,981) -
Repayments under
credit agreement (300,000) (25,000)
Proceeds from
issuance of senior
notes 498,545 -
Debt issue costs (3,825) -
Change in book
overdraft (3,763) (10,248)
Change in securities
lending payable (9,473) (49,680)
Common stock
repurchases (4,832) (315)
Tax benefit from
stock-based
compensation 5,252 2,570
Proceeds from stock
option exercises and
other 5,198 6,821
-----------------------
Net cash provided by
(used in) financing
activities 274,989 (75,852) $350,841 462.5%
-----------------------

Increase in cash and
cash equivalents 415,059 43,526
Cash and cash
equivalents at
beginning of period 1,843,405 560,264
-----------------------

Cash and cash
equivalents at end of
period $2,258,464 $603,790
=======================


Humana Inc. S-7
YTD Consolidated Statements of Cash Flows
Dollars in thousands
Six Months Ended
June 30,
-----------------------
Dollar Percentage
2006 2005 (A) Change Change
----------------------- ----------------------
Cash flows from
operating activities
Net income $173,204 $188,147
Adjustments to
reconcile net income
to net cash provided
by (used in)
operating
activities:
Depreciation and
amortization 71,502 61,012
Stock-based
compensation 15,051 14,370
(Benefit) provision
for deferred
income taxes (1,226) 11,186
Changes in
operating assets
and liabilities
excluding the
effects of
acquisitions:
Receivables (42,957) (26,250)
Other assets (359,300) (28,514)
Medical and
other expenses
payable 526,763 218,166
Other
liabilities 172,719 (117,906)
Unearned
revenues 1,044,850 (44,951)
Other (57,778) (400)
-----------------------
Net cash provided by
operating activities 1,542,828 274,860 $1,267,968 461.3%
-----------------------

Cash flows from
investing activities
Acquisitions, net of
cash acquired (25,931) (352,726)
Purchases of property
and equipment (81,973) (67,227)
Proceeds from sales
of property and
equipment 2,156 38
Purchases of
investment
securities (2,258,548) (1,245,605)
Proceeds from
maturities of
investment
securities 1,010,397 393,612
Proceeds from sales
of investment
securities 712,685 759,835
Change in securities
lending collateral (193,239) 842
-----------------------
Net cash used in
investing activities (834,453) (511,231) ($323,222) -63.2%
-----------------------

Cash flows from
financing activities
Receipts from CMS
contract deposits 1,045,062 -
Withdrawals from CMS
contract deposits (736,425) -
Borrowings under
credit agreement 100,000 294,000
Repayments under
credit agreement (300,000) (50,000)
Proceeds from
issuance of senior
notes 498,545 -
Debt issue costs (3,825) -
Change in book
overdraft (8,181) (9,567)
Change in securities
lending payable 193,239 (842)
Common stock
repurchases (4,937) (1,691)
Tax benefit from
stock-based
compensation 13,656 6,225
Proceeds from stock
option exercises and
other 20,939 21,957
-----------------------
Net cash provided by
financing activities 818,073 260,082 $557,991 214.5%
-----------------------

Increase in cash and
cash equivalents 1,526,448 23,711
Cash and cash
equivalents at
beginning of period 732,016 580,079
-----------------------

Cash and cash
equivalents at end of
period $2,258,464 $603,790
=======================


Humana Inc. S-8
2005 Quarters Adjusted to Reflect Retrospective Application of
Expensing Stock Options
In thousands, except per common share results

------------------------- -------------------------
1Q05 2Q05
------------------------- -------------------------
Reported Adjusted (A) Reported Adjusted (A)
------------ ------------ ------------ ------------

Revenues $3,387,225 $3,387,225 $3,546,361 $3,546,361

Pretax income (loss):
Government $72,224 $70,472 $104,092 $102,531
Commercial 49,463 46,208 25,215 22,317
------------ ------------ ------------ ------------
Consolidated $121,687 $116,680 $129,307 $124,848

Net income $109,795 $106,735 $84,137 $81,412

Diluted earnings
per common share $0.67 $0.65 $0.51 $0.49

Shares used in
computing diluted
earnings per
common share 164,179 164,496 164,908 165,149

SG&A expense ratio:
Government 10.8% 10.9% 10.6% 10.6%
Commercial 17.6% 17.8% 17.5% 17.7%
Consolidated 14.1% 14.3% 13.8% 14.0%

Total assets $6,149,593 $6,149,593 $6,277,907 $6,277,907
Total liabilities $3,949,788 $3,916,471 $3,961,719 $3,927,862
Total
stockholders'
equity $2,199,805 $2,233,122 $2,316,188 $2,350,045

Net cash provided
by (used in)
operating
activities $99,228 $95,573 $181,857 $179,287
Net cash used in
investing
activities ($451,322) ($451,322) ($59,909) ($59,909)
Net cash provided
by (used in)
financing
activities $332,279 $335,934 ($78,422) ($75,852)


------------------------- -------------------------
3Q05 4Q05
------------------------- -------------------------
Reported Adjusted (A) Reported Adjusted (A)
------------ ------------ ------------ ------------

Revenues $3,821,461 $3,821,461 $3,663,080 $3,663,080

Pretax income (loss):
Government $89,557 $87,868 $57,395 $55,805
Commercial (18,053) (21,190) 41,821 38,869
------------ ------------ ------------ ------------
Consolidated $71,504 $66,678 $99,216 $94,674

Net income $49,944 $46,807 $64,607 $61,776

Diluted earnings
per common share $0.30 $0.28 $0.39 $0.37

Shares used in
computing diluted
earnings per
common share 166,037 166,076 166,371 166,521

SG&A expense ratio:
Government 13.1% 13.2% 15.5% 15.6%
Commercial 20.0% 20.2% 18.1% 18.3%
Consolidated 16.2% 16.3% 16.7% 16.9%

Total assets $6,832,421 $6,832,421 $6,869,614 $6,869,614
Total liabilities $4,466,451 $4,432,166 $4,395,509 $4,360,740
Total
stockholders'
equity $2,365,970 $2,400,255 $2,474,105 $2,508,874

Net cash provided
by (used in)
operating
activities $591,039 $586,006 ($246,497) ($250,784)
Net cash used in
investing
activities ($96,395) ($96,395) ($159,650) ($159,650)
Net cash provided
by (used in)
financing
activities ($119,498) ($114,465) $159,227 $163,514


Humana Inc. S-9
2003 Through 2005 Adjusted to Reflect Retrospective Application of
Expensing Stock Options
In thousands, except per common share results

For the year ended For the year ended
December 31, 2005 December 31, 2004
------------------------- -------------------------
Reported Adjusted (A) Reported Adjusted (A)
------------ ------------ ------------ ------------

Revenues $14,418,127 $14,418,127 $13,104,325 $13,104,325

Pretax income:
Government $323,268 $316,676 $273,840 $269,063
Commercial 98,446 86,204 142,010 130,315
------------ ------------ ------------ ------------
Consolidated $421,714 $402,880 $415,850 $399,378

Net income $308,483 $296,730 $280,012 $269,947

Diluted earnings
per common share $1.87 $1.79 $1.72 $1.66

Shares used in
computing diluted
earnings per
common share 165,374 165,560 162,456 162,905

SG&A expense ratio:
Government 12.6% 12.7% 12.2% 12.3%
Commercial 18.3% 18.5% 16.4% 16.5%
Consolidated 15.3% 15.4% 14.5% 14.6%

Total assets $6,869,614 $6,869,614 $5,657,617 $5,657,617
Total liabilities $4,395,509 $4,360,740 $3,567,493 $3,533,369
Total stockholders'
equity $2,474,105 $2,508,874 $2,090,124 $2,124,248

Net cash provided
by operating
activities $625,627 $610,082 $347,809 $344,061
Net cash used in
investing
activities ($767,276) ($767,276) ($624,081) ($624,081)
Net cash provided
by (used in)
financing
activities $293,586 $309,131 ($75,053) ($71,305)



For the year ended
December 31, 2003
------------------------
Reported Adjusted (A)
------------ -----------

Revenues $12,226,311 $12,226,311

Pretax income:
Government $223,706 $221,240
Commercial 121,010 114,973
------------ ------------
Consolidated $344,716 $336,213

Net income $228,934 $223,739

Diluted earnings
per common share $1.41 $1.38

Shares used in
computing diluted
earnings per
common share 161,960 162,406

SG&A expense ratio:
Government 13.4% 13.5%
Commercial 16.9% 17.0%
Consolidated 15.4% 15.4%

Total assets $5,379,814 $5,379,814
Total liabilities $3,543,865 $3,510,842
Total stockholders'
equity $1,835,949 $1,868,972

Net cash provided
by operating
activities $413,140 $397,921
Net cash used in
investing
activities ($382,837) ($382,837)
Net cash provided
by (used in)
financing
activities $179,744 $194,963


Humana Inc. S-10
Key Income Statement Ratios and Segment Operating Results
Dollars in thousands



Three Months Ended
June 30,
-------------------
Percentage
2006 2005 (A) Difference Change
------------------- ---------- ----------
Medical expense ratio
Government Segment 86.0% 83.8% 2.2%
Commercial Segment 82.9% 83.8% -0.9%
Consolidated 85.1% 83.8% 1.3%

Selling, general, and
administrative expense ratio
Government Segment 11.5% 10.6% 0.9%
Commercial Segment 18.8% 17.7% 1.1%
Consolidated 13.7% 14.0% -0.3%


Detail of Pretax Income
Government Segment $97,981 $102,531 ($4,550) -4.4%
Commercial Segment 42,341 22,317 20,024 89.7%
------------------- ----------
Consolidated $140,322 $124,848 $15,474 12.4%
=================== ==========

Detail of Pretax Margins
Government Segment 2.6% 5.5% -2.9%
Commercial Segment 2.5% 1.3% 1.2%
Consolidated 2.6% 3.5% -0.9%


Six Months Ended
June 30,
-------------------
Percentage
2006 2005 (A) Difference Change
------------------- ---------------------
Medical expense ratio
Government Segment 85.8% 84.4% 1.4%
Commercial Segment 81.5% 83.0% -1.5%
Consolidated 84.4% 83.8% 0.6%

Selling, general, and
administrative expense
ratio
Government Segment 12.5% 10.8% 1.7%
Commercial Segment 19.6% 17.7% 1.9%
Consolidated 14.8% 14.1% 0.7%


Detail of Pretax Income
Government Segment $119,553 $173,003 ($53,450) -30.9%
Commercial Segment 151,977 68,525 83,452 121.8%
------------------- ----------
Consolidated $271,530 $241,528 $30,002 12.4%
=================== ==========

Detail of Pretax Margins
Government Segment 1.8% 4.9% -3.1%
Commercial Segment 4.5% 2.0% 2.5%
Consolidated 2.7% 3.5% -0.8%


Humana Inc. S-11
Membership Detail
In thousands

Ending Ending
June 30, 2006 Average - 2Q06 June 30, 2005
------------------------------------------
Medical Membership:
Government Segment:
Medicare Advantage - HMO 457.0 453.8 418.0
Medicare Advantage - PPO 64.6 54.7 3.7
Medicare Advantage - PFFS 438.2 379.7 52.6
------------------------------------------
Total Medicare
Advantage 959.8 888.2 474.3
------------------------------------------
Medicare - PDP - Standard 2,066.5 1,755.4 -
Medicare - PDP - Enhanced 977.2 743.8 -
Medicare - PDP - Complete 415.1 355.0 -
------------------------------------------
Total Medicare stand-
alone PDPs 3,458.8 2,854.2 -
------------------------------------------
Total Medicare 4,418.6 3,742.4 474.3
------------------------------------------
TRICARE insured 1,732.6 1,732.0 1,733.6
TRICARE ASO 1,141.9 1,141.8 1,142.8
------------------------------------------
Total TRICARE 2,874.5 2,873.8 2,876.4
Medicaid 418.5 422.2 477.9
------------------------------------------
Total Government Segment 7,711.6 7,038.4 3,828.6
------------------------------------------
Commercial Segment:
Fully insured medical:
Group 1,716.4 1,707.9 1,873.7
Individual 170.0 167.7 144.0
Medicare supplement 6.7 6.4 3.6
------------------------------------------
Total fully insured
medical 1,893.1 1,882.0 2,021.3
ASO 1,420.8 1,411.5 1,178.4
------------------------------------------
Total Commercial Segment 3,313.9 3,293.5 3,199.7
------------------------------------------

Total medical membership 11,025.5 10,331.9 7,028.3
==========================================


Specialty Membership (all
Commercial Segment)
Dental - fully insured 955.6 954.2 893.7
Dental - ASO 496.5 496.8 488.9
------------------------------------------
Total dental 1,452.1 1,451.0 1,382.6
Group life 427.2 427.0 437.1
Short-term disability 15.6 15.7 16.4
------------------------------------------
Total specialty membership 1,894.9 1,893.7 1,836.1
==========================================


Year-over-year Sequential
Change Ending Change
---------------- March 31, ----------------
Amount Percent 2006 Amount Percent
-------- ------- ---------- -------- -------
Medical Membership:
Government Segment:
Medicare Advantage - HMO 39.0 9.3% 443.7 13.3 3.0%
Medicare Advantage - PPO 60.9 1645.9% 35.4 29.2 82.5%
Medicare Advantage -
PFFS 385.6 733.1% 262.1 176.1 67.2%
-------- ---------- --------
Total Medicare
Advantage 485.5 102.4% 741.2 218.6 29.5%
-------- ---------- --------
Medicare - PDP -
Standard 2,066.5 100.0% 1,289.2 777.3 60.3%
Medicare - PDP -
Enhanced 977.2 100.0% 421.0 556.2 132.1%
Medicare - PDP -
Complete 415.1 100.0% 248.8 166.3 66.8%
-------- ---------- --------
Total Medicare
stand-alone PDPs 3,458.8 100.0% 1,959.0 1,499.8 76.6%
-------- ---------- --------
Total Medicare 3,944.3 831.6% 2,700.2 1,718.4 63.6%
-------- ---------- --------
TRICARE insured (1.0) -0.1% 1,724.7 7.9 0.5%
TRICARE ASO (0.9) -0.1% 1,149.3 (7.4) -0.6%
-------- ---------- --------
Total TRICARE (1.9) -0.1% 2,874.0 0.5 0.0%
Medicaid (59.4) -12.4% 427.0 (8.5) -2.0%
-------- ---------- --------
Total Government Segment 3,883.0 101.4% 6,001.2 1,710.4 28.5%
-------- ---------- --------
Commercial Segment:
Fully insured medical:
Group (157.3) -8.4% 1,695.1 21.3 1.3%
Individual 26.0 18.1% 163.1 6.9 4.2%
Medicare supplement 3.1 86.1% 6.0 0.7 11.7%
-------- ---------- --------
Total fully insured
medical (128.2) -6.3% 1,864.2 28.9 1.6%
ASO 242.4 20.6% 1,395.2 25.6 1.8%
-------- ---------- --------
Total Commercial Segment 114.2 3.6% 3,259.4 54.5 1.7%
-------- ---------- --------

Total medical membership 3,997.2 56.9% 9,260.6 1,764.9 19.1%
======== ========== ========


Specialty Membership (all
Commercial Segment)
Dental - fully insured 61.9 6.9% 950.6 5.0 0.5%
Dental - ASO 7.6 1.6% 494.7 1.8 0.4%
-------- ---------- --------
Total dental 69.5 5.0% 1,445.3 6.8 0.5%
Group life (9.9) -2.3% 421.3 5.9 1.4%
Short-term disability (0.8) -4.9% 15.7 (0.1) -0.6%
-------- ---------- --------
Total specialty
membership 58.8 3.2% 1,882.3 12.6 0.7%
======== ========== ========


Humana Inc. S-12
2Q06 Premiums and Administrative Services Fees Detail
Dollars in thousands, except per member per month


Three Months Ended
June 30,
-----------------------
Dollar Percentage
2006 2005 Change Change
----------------------- ---------------------
Premium revenues
Government Segment:
Medicare Advantage $2,109,406 $1,092,442 $1,016,964 93.1%
Medicare stand-alone
PDPs 801,755 - 801,755 100.0%
----------------------- -----------
Total Medicare 2,911,161 1,092,442 1,818,719 166.5%
TRICARE insured (C) 657,627 611,179 46,448 7.6%
Medicaid 129,158 134,730 (5,572) -4.1%
----------------------- -----------
Total Government
Segment premiums 3,697,946 1,838,351 1,859,595 101.2%
----------------------- -----------
Commercial Segment:
Fully insured medical 1,464,646 1,512,278 (47,632) -3.1%
Specialty 101,883 95,390 6,493 6.8%
----------------------- -----------
Total Commercial
Segment premiums 1,566,529 1,607,668 (41,139) -2.6%
----------------------- -----------
Total premium revenues $5,264,475 $3,446,019 $1,818,456 52.8%
======================= ===========


Administrative services
fees
Government segment
(TRICARE-related) (C) $11,144 $15,392 ($4,248) -27.6%
Commercial segment 72,567 51,263 21,304 41.6%
-----------------------------------
Total administrative
services fees $83,711 $66,655 $17,056 25.6%
===================================



Per Member per Month (B)
Three Months Ended June 30,
---------------------------
2006 2005
---------------------------
Premium revenues
Government Segment:
Medicare Advantage $792 $780
Medicare stand-alone
PDPs $94 -
TRICARE insured (C) $127 $117
Medicaid $102 $94

Commercial Segment:
Fully insured medical $259 $249
Specialty $21 $20

Administrative services fees
Government segment
(TRICARE-related) (C) $3 $4
Commercial segment $13 $10


Humana Inc. S-13
YTD Premiums and Administrative Services Fees Detail
Dollars in thousands, except per member per month



Six Months Ended
June 30,
-----------------------
Dollar Percentage
2006 2005 Change Change
----------------------- ---------------------
Premium revenues
Government Segment:
Medicare Advantage $3,830,249 $2,075,583 $1,754,666 84.5%
Medicare stand-alone
PDPs 1,316,912 - 1,316,912 100.0%
----------------------- -----------
Total Medicare 5,147,161 2,075,583 3,071,578 148.0%
TRICARE insured (C) 1,258,381 1,173,507 84,874 7.2%
Medicaid 258,625 269,144 (10,519) -3.9%
----------------------- -----------
Total Government
Segment premiums 6,664,167 3,518,234 3,145,933 89.4%
----------------------- -----------
Commercial Segment:
Fully insured medical 2,918,578 3,029,672 (111,094) -3.7%
Specialty 203,216 188,928 14,288 7.6%
----------------------- -----------
Total Commercial
Segment premiums 3,121,794 3,218,600 (96,806) -3.0%
----------------------- -----------
Total premium revenues $9,785,961 $6,736,834 $3,049,127 45.3%
======================= ===========


Administrative services
fees
Government segment
(TRICARE-related) (C) $22,335 $28,794 ($6,459) -22.4%
Commercial segment 140,054 101,374 38,680 38.2%
----------------------- -----------
Total administrative
services fees $162,389 $130,168 $32,221 24.8%
======================= ===========



Per Member per Month (B)
Six Months Ended June 30,
---------------------------
2006 2005
---------------------------
Premium revenues
Government Segment:
Medicare Advantage $808 $783
Medicare stand-alone
PDPs $6 -
TRICARE insured (C) $121 $112
Medicaid $101 $94

Commercial Segment:
Fully insured medical $259 $247
Specialty $21 $20

Administrative services fees
Government segment
(TRICARE-related) (C) $3 $4
Commercial segment $12 $10


Humana Inc. S-14
Percentage of Ending Membership under Capitation Arrangements

Government Segment
-------------------------------------------------
Medicare Total
Medicare stand-alone Govt.
June 30, 2006 Advantage PDPs TRICARE Medicaid Segment
------------- -------------------------------------------------

Capitated HMO
hospital system
based (D) 3.4% - - - 0.4%
Capitated HMO
physician group
based (D) 2.5% - - 34.7% 2.2%
Risk-sharing (E) 27.9% - - 64.6% 7.0%
All other membership 66.2% 100.0% 100.0% 0.7% 90.4%
-------------------------------------------------
Total medical
membership 100.0% 100.0% 100.0% 100.0% 100.0%
=================================================

June 30, 2005
-------------

Capitated HMO
hospital system
based (D) 7.6% - - 3.1% 1.3%
Capitated HMO
physician group
based (D) 4.9% - - 35.5% 5.0%
Risk-sharing (E) 46.1% - - 55.3% 12.6%
All other membership 41.4% - 100.0% 6.1% 81.1%
-------------------------------------------------
Total medical
membership 100.0% - 100.0% 100.0% 100.0%
=================================================




Commercial Segment
-----------------------------------
Total
Fully Total Comm. Medical
June 30, 2006 insured ASO Segment Membership
------------- -----------------------------------------------
Capitated HMO
hospital system
based (D) 1.8% - 1.1% 0.6%
Capitated HMO
physician group
based (D) 1.7% - 1.0% 1.8%
Risk-sharing (E) 2.3% - 1.3% 5.3%
All other membership 94.2% 100.0% 96.6% 92.3%
-----------------------------------------------
Total medical
membership 100.0% 100.0% 100.0% 100.0%
===============================================

June 30, 2005
-------------
Capitated HMO
hospital system
based (D) 2.7% - 1.7% 1.5%
Capitated HMO
physician group
based (D) 2.4% - 1.5% 3.4%
Risk-sharing (E) 2.5% - 1.6% 7.6%
All other membership 92.4% 100.0% 95.2% 87.5%
-----------------------------------------------
Total medical
membership 100.0% 100.0% 100.0% 100.0%
===============================================


Humana Inc. S-15
Detail of Medical and Other Expenses Payable Balance
and Year-to-Date Changes
Dollars in thousands

Sequential
Change
June 30, March 31, December 31, ----------------
2006 2006 2005 Dollar Percent
------------------------------------ ----------------
Detail of
medical and
other expenses
payable
IBNR and other
medical
expenses
payable (F) $1,580,587 $1,313,806 $1,125,205 $266,781 20.3%
TRICARE IBNR (G) 316,251 346,774 409,413 (30,523) -8.8%
TRICARE other
medical
expenses
payable (H) 92,963 90,073 88,443 2,890 3.2%
Unprocessed
claim
inventories (I) 193,700 185,300 148,200 8,400 4.5%
Processed
claim
inventories (J) 128,926 83,945 83,635 44,981 53.6%
Payable to
pharmacy
benefit
administrator
(K) 145,216 149,591 54,786 (4,375) -2.9%
------------------------------------ ---------
Total medical
and other
expenses
payable $2,457,643 $2,169,489 $1,909,682 $288,154 13.3%
==================================== =========



Six Months
Ended Year Ended
June 30, December 31,
2006 2005
-------------------------
Year-to-date
changes in
medical and
other expenses
payable

Balances at
January 1 $1,909,682 $1,422,010

Acquisitions 21,198 37,375

Incurred
related to:
Current
year (L) 8,449,662 11,765,662
Prior years
- non-
TRICARE (L) (118,602) (72,868)
Prior years -
TRICARE (M) (83,464) (41,324)
------------------------
Total incurred 8,247,596 11,651,470
------------------------

Paid related to:
Current year (6,708,473) (9,979,449)
Prior years (1,012,360) (1,221,724)
------------------------
Total paid (7,720,833) (11,201,173)
------------------------

Balances at
end of period $2,457,643 $1,909,682
========================

Humana Inc. S-16
Medical Claims Reserves Statistics


Receipt Cycle Time (N)
Percentage
2006 2005 Change Change
-----------------------------------------------
1st Quarter Average 16.1 16.6 (0.5) -3.0%
2nd Quarter Average 15.8 15.9 (0.1) -0.6%
3rd Quarter Average - 16.7 N/A N/A
4th Quarter Average - 16.9 N/A N/A
-------------------------------------
Full Year Average 15.9 16.5 (0.6) -3.6%
=====================================



Unprocessed Claims Inventories

Estimated Number of
Valuation Claim Item Days on
Date (000's) Counts Hand
-------------------- -------------------------------------
6/30/2004 $98,100 387,000 3.7
9/30/2004 $122,300 453,300 4.4
12/31/2004 $115,300 394,400 3.7
3/31/2005 $111,200 393,200 3.6
6/30/2005 $119,500 443,600 4.0
9/30/2005 $136,700 512,800 4.7
12/31/2005 $148,200 498,400 4.6
3/31/2006 $185,300 683,900 5.6
-------------------- -------------------------------------
6/30/2006 $193,700 702,000 4.8
-------------------- -------------------------------------


Humana Inc. S-17
Medical Claims Reserves Statistics (Continued)


Days in Claims Payable (O) (P)

Days in
Claim DCP
Quarter Payable Annual Percentage Excluding Annual Percentage
Ended (DCP) Change Change Capitation Change Change
----------------------------------------------------------------------
6/30/2004 47.4 (0.5) -1.0% 54.1 (2.1) -3.7%
9/30/2004 51.8 4.6 9.7% 59.1 4.6 8.4%
12/31/2004 49.5 3.3 7.1% 54.8 1.6 3.0%
3/31/2005 50.5 3.1 6.5% 56.1 1.8 3.3%
6/30/2005 52.8 5.4 11.4% 58.6 4.5 8.3%
9/30/2005 54.0 2.2 4.2% 60.8 1.7 2.9%
12/31/2005 60.3 10.8 21.8% 66.6 11.8 21.5%
3/31/2006 59.1 8.6 17.0% 65.5 9.4 16.8%
----------------------------------------------------------------------
6/30/2006 59.5 6.7 12.7% 65.5 6.9 11.8%
----------------------------------------------------------------------



Year-to-Date Change in Days in Claims Payable (P) (Q)
2006 2005
----------------
DCP - 4th quarter of prior year 60.3 49.5
Components of year-to-date change in DCP:
Change in claims receipt cycle time (2.5) 0.2
Change in unprocessed claims inventories 1.1 1.0
Change in processed claims inventories 1.1 (0.4)
Change in TRICARE reserve balances (5.5) 3.9
Change in pharmacy payment cutoff - 1.5
Growth in Medicare PFFS membership 4.4 1.2
Growth in individual membership 0.8 0.9
Change in provider payables under risk
arrangements 1.2 1.4
All other (1.4) 1.1
----------------
DCP - current quarter 59.5 60.3
================


Humana Inc. S-18
Footnotes to Statistical Schedules and Supplementary Information
2Q06 Earnings Release

Footnote
--------

(A) Adjusted to include stock-based compensation expense. Under SFAS
123R, which the company adopted effective January 1, 2006 using
the modified retrospective method, stock-based compensation
expense is recognized based on the grant date fair value over the
vesting period.

(B) Computed based on average membership for the period (i.e., monthly
ending membership during the period divided by the number of
months in the period).

(C) TRICARE revenues are not contracted on a per member basis.

(D) In a limited number of circumstances, the company contracts with
hospitals and physicians to accept financial risk for a defined
set of HMO membership. In transferring this risk, the company
prepays these providers a monthly fixed-fee per member to
coordinate substantially all of the medical care for their
capitated HMO membership, including some health benefit
administrative functions and claims processing. For these
capitated HMO arrangements, the company generally agrees to
reimbursement rates that target a medical expense ratio ranging
from 82% to 89%. Providers participating in hospital-based
capitated HMO arrangements generally receive a monthly payment for
all of the services within their system for their HMO membership.
Providers participating in physician-based capitated HMO
arrangements generally have subcontracted specialist physicians
and are responsible for reimbursing such hospitals and physicians
for services rendered to their HMO membership.

(E) In some circumstances, the company contracts with physicians under
risk-sharing arrangements whereby physicians have assumed some
level of risk for all or a portion of the medical costs of their
HMO membership. Although these arrangements do include capitation
payments for services rendered, the company processes
substantially all of the claims under these arrangements.

(F) IBNR represents an estimate of medical expenses payable for claims
incurred but not reported (IBNR) at the balance sheet date. The
level of IBNR is primarily impacted by membership levels, medical
claim trends and the receipt cycle time, which represents the
length of time between when a claim is initially incurred and when
the claim form is received (i.e. a shorter time span results in
lower reserves for claims IBNR). Other medical expenses payable
includes amounts payable to providers under capitation
arrangements.

(G) TRICARE IBNR decreased due to favorable development as more fully
discussed in Footnote M below.

(H) TRICARE other medical expenses payable may include liabilities to
subcontractors and/or risk share payables to the Department of
Defense. The level of these balances may fluctuate from period to
period due to the timing of payment (cutoff) and whether or not
the balances are payables or receivables (receivables from the
Department of Defense are classified as receivables in the
company's balance sheet).

(I) Unprocessed claim inventories represent the estimated valuation of
claims received but not yet fully processed. TRICARE claim
inventories are not included in this amount as an independent
third party administrator processes all TRICARE medical claims on
the company's behalf. Reserves for TRICARE unprocessed claims
inventory are included in TRICARE IBNR.

(J) Processed claim inventories represent the estimated valuation of
processed claims that are in the post-claim-adjudication process,
which consists of administrative functions such as audit and check
batching and handling.

(K) The balance due to the company's pharmacy benefit administrator
fluctuates as a result of the number of business days in the last
payment cycle of the month. Payment cycles are every 10 days (10th
& 20th of month) and the last day of the month.

(L) The impact of any change in "incurred related to prior years"
claims is offset as the company re-establishes such amounts in the
"incurred related to current year".

(M) Changes in estimates of TRICARE incurred claims for prior years
recognized during 2006 and 2005 resulted primarily from claim
costs and utilization levels developing favorably from the levels
originally estimated for the second half of the prior year. As a
result of substantial risk-sharing provisions with the Department
of Defense and with subcontractors, any resulting impact on
operations from the change in estimates of incurred related to
prior years is substantially reduced, whether positive or
negative.

(N) The receipt cycle time measures the average length of time between
when a claim was initially incurred and when the claim form was
received. Receipt cycle time data for the company's largest claim
processing platforms representing approximately 82% of the
company's fully insured claims volume. Pharmacy claims are
excluded from this measurement.

(O) A common metric for monitoring medical claim reserve levels
relative to the medical claims expense is days in claims payable,
or DCP, which represents the medical claim liabilities at the end
of the period divided by average medical expenses per day in the
quarterly period. Since the company has some providers under
capitation payment arrangements (which do not require a medical
claim IBNR reserve), the company has also summarized this metric
excluding capitation expense.

(P) Excludes the impact of Medicare stand-alone PDPs.

(Q) DCP fluctuates due to a number of issues, the more significant of
which are detailed in the rollforward of DCP from the fourth
quarter of the prior year. Growth in certain product lines can
also impact DCP for the quarter since a provision for claims would
not have been recorded for members that had not yet enrolled
earlier in the quarter, yet those members would have a provision
and corresponding reserve recorded upon enrollment later in the
quarter.