03.08.2009 10:00:00
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Humana Reports Second Quarter Financial Results
Humana Inc. (NYSE: HUM) today reported diluted earnings per common share (EPS) for the quarter ended June 30, 2009 (2Q09) of $1.67, consistent with management’s guidance of $1.65 to $1.70. The company earned $1.24 per share for the quarter ended June 30, 2008 (2Q08) which reflected high stand-alone Prescription Drug Plan (PDP) claim expenses.
For the six months ended June 30, 2009 (1H09) the company reported $2.89 in EPS compared to $1.71 for the six months ended June 30, 2008 (1H08), also reflecting a reduction in stand-alone PDP claim expenses year over year.
"Our second quarter results confirm our 2009 financial performance is on track despite pressures from the overall economy,” said Michael B. McCallister, Humana’s president and chief executive officer. "We’re making progress reducing costs and investing in improved health outcomes for our members while we closely monitor events in Washington.”
In July 2009 the company was notified that it was not awarded the third generation TRICARE contract for the South Region. Humana has filed a related protest with the Government Accountability Office. The company expects non-GAAP(a) EPS for the year ending December 31, 2009 in the range of $6.10 to $6.20(b) which excludes any potential accounting charges and other costs associated with the military contract loss. This 2009 projection compares to EPS of $3.83 for the year ended December 31, 2008 and is consistent with the company’s prior 2009 guidance.
Consolidated Highlights
Revenues – 2Q09 consolidated revenues rose 7 percent to $7.90 billion from $7.35 billion in 2Q08, with total premium and administrative services fees up 8 percent compared to the prior year’s quarter. The increase in premiums and administrative services fees primarily reflects an increase in both average membership and per-member premiums for the company’s Medicare Advantage products.
1H09 consolidated revenues rose 9 percent to $15.61 billion from $14.31 billion in 1H08 with total premium and administrative services fees also up 9 percent compared to the prior year’s period, also driven primarily by the increases in average Medicare Advantage enrollment and per-member premiums.
Benefit expenses – The 2Q09 consolidated benefit ratio (benefit expenses as a percent of premium revenues) improved from that for the prior year’s quarter, as expected. The 2Q09 consolidated benefit ratio of 83.3 percent compares to 85.0 percent in 2Q08. This 170 basis point improvement was primarily driven by improvements of 220 basis points and 20 basis points in the Government Segment and Commercial Segment benefit ratios, respectively.
The consolidated benefits ratio for 1H09 of 83.6 percent was 220 basis points lower than the 1H08 consolidated benefits ratio of 85.8 percent, also driven by improvements in both of the company’s business segments.
Selling, general, & administrative (SG&A) expenses – The 2Q09 consolidated SG&A expense ratio (SG&A expenses as a percent of premiums, administrative services fees and other revenue) of 12.8 percent increased 20 basis points compared to the 2Q08 ratio of 12.6 percent, primarily due to an increase in the mix of commercial products with traditionally higher administrative cost ratios.
The SG&A expense ratio for 1H09 of 13.4 percent also increased 20 basis points from that for 1H08 of 13.2 percent, primarily due to the effect of the change in the commercial business mix discussed above during both the first and second quarters of 2009.
Government Segment Results
Pretax results:
- Government segment pretax income increased by 62 percent to $404.7 million in 2Q09 from $249.4 million in 2Q08 primarily driven by lower PDP claim expenses, a 13 percent increase in average Medicare Advantage membership and the implementation of member premiums for most of the company’s Medicare Advantage products.
- For 1H09, pretax earnings for the Government Segment of $570.8 million increased by $324.6 million versus 1H08 pretax earnings for the segment of $246.2 million, also primarily reflecting the same factors as those affecting the year-over-year comparisons for 2Q09.
Enrollment:
- Medicare Advantage membership grew to 1,499,800 at June 30, 2009, an increase of 154,800 members, or 12 percent, from June 30, 2008, and up 63,900, or 4 percent versus December 31, 2008. The year-over-year increase includes 54,200 members added through acquisitions completed during the second half of 2008. As of June 30, 2009, approximately 62 percent of the company’s Medicare Advantage members were in network-based products versus 49 percent at June 30, 2008 and 51 percent at December 31, 2008.
- Membership in the company’s stand-alone PDPs totaled 1,992,000 at June 30, 2009 compared to 3,105,200 at June 30, 2008 and 3,066,600 at December 31, 2008. Both the year-over-year and year-to-date membership declines resulted primarily from attrition associated with low-income seniors opting to join a competitor plan with a lower or no member premium as well as stand-alone PDP members upgrading themselves to Medicare Advantage plans. For 2009, the company realigned its stand-alone PDP premium and benefit designs to correspond with its prescription drug claims experience.
- Military services membership at June 30, 2009 of 3,008,300 was up approximately 2 percent from 2,943,800 at June 30, 2008 and up approximately 1 percent from 2,964,700 at December 31, 2008.
Premiums and administrative services fees:
- Medicare Advantage premiums of $4.15 billion in 2Q09 increased 19 percent compared to $3.49 billion in 2Q08, primarily the combined result of a 13 percent increase in average Medicare Advantage membership and the introduction of member premiums for most of the company’s Medicare Advantage products.
- Medicare stand-alone PDP premiums of $638.8 million in 2Q09 decreased 29 percent compared to $905.1 million in 2Q08, reflecting a 35 percent decline in average membership year over year primarily due to members choosing competitor offerings given the premium and benefit design changes discussed above.
- Military services premiums and administrative services fees during 2Q09 increased $123.1 million, or 15 percent, to $947.5 million compared to $824.4 million in 2Q08.
Benefit Expenses:
- The Government Segment benefit ratio decreased 220 basis points to 84.1 percent in 2Q09 compared to 86.3 percent in the prior year’s quarter, primarily driven by a 240 basis point decline in the Medicare benefit ratio primarily from a substantial decline in the stand-alone PDP benefit ratio.
SG&A Expenses:
- The Government Segment’s SG&A expense ratio decreased 20 basis points to 9.3 percent in 2Q09 compared to 9.5 percent in the prior year’s quarter driven primarily by increased leverage from higher average medical membership in the company’s Medicare Advantage plans.
Commercial Segment Results
Pretax results:
- Commercial Segment pretax earnings decreased by 53 percent to $35.3 million in 2Q09 compared to $75.6 million in 2Q08 primarily driven by lower investment income together with lower income from the company’s small group business.
- The segment’s 20 percent decrease in pretax earnings for 1H09 ($162.9 million versus $202.7 million in 1H08) was primarily attributable to lower investment income.
Enrollment:
- Commercial Segment medical membership declined to 3,447,900 at June 30, 2009, a decrease of 110,600, or 3 percent, from 3,558,500 at June 30, 2008 and a decline of 172,900, or 5 percent, from 3,620,800 at December 31, 2008. The decline during 1H09 primarily reflected the loss of two large ASO accounts totaling approximately 95,400 members on January 1, 2009 as well as the impact of the economy across various of the company’s fully-insured group medical lines of business.
- The company’s individual product line has continued to grow steadily, with membership of 347,200, up 17 percent at June 30, 2009 compared to 297,200 at June 30, 2008 and up 7 percent from 325,100 at December 31, 2008.
- Membership in Commercial Segment specialty products(c) of 6,790,400 at June 30, 2009 increased 1 percent from June 30, 2008 and was essentially unchanged from December 31, 2008, including the loss of dental business associated with one of the large ASO accounts referred to above.
Premiums and administrative services fees:
- Premiums and administrative services fees for the Commercial Segment increased 1 percent to $1.87 billion in 2Q09 compared to $1.85 billion in the prior year’s quarter, reflecting increased premiums associated primarily with acquisitions in the latter half of 2008 partially offset by lower average medical membership.
- Commercial Segment medical premiums for fully-insured group accounts increased approximately 6 percent on a per-member basis during 2Q09 compared to 2Q08.
Benefit Expenses:
- In 2Q09, the Commercial Segment benefits ratio of 80.8 percent improved 20 basis points versus the 2Q08 benefit ratio of 81.0 percent, as an increase in per-member premiums was partially offset by higher utilization associated with the general economy, most pronounced in the company’s small group business.
SG&A Expenses:
- The Commercial Segment SG&A expense ratio of 23.5 percent for 2Q09 compares to 21.5 percent in 2Q08, primarily driven by increases in certain of the segment’s businesses that carry a higher administrative expense load such as mail-order pharmacy and individual medical products.
Balance Sheet
- At June 30, 2009, the company had cash, cash equivalents, and investment securities of $7.41 billion, essentially unchanged from $7.43 billion in such assets at March 31, 2009.
- Parent company cash and investments increased to $665.8 at June 30, 2009 from $250.5 at December 31, 2008 primarily reflecting dividends to the parent from operating subsidiaries of $774.1 million and the repayment of $250.0 million in credit facility borrowings.
- Days in claims payable of 56.1 at June 30, 2009 reflected an increase of 1.5 days from 54.6 at March 31, 2009.
- Debt-to-total capitalization at June 30, 2009 was 25.0 percent, down 430 basis points from 29.3 percent at March 31, 2009 due primarily to the repayment of outstanding credit facility borrowings together with favorable operating results during 2Q09.
Cash Flows from Operations
Cash flows provided by operations for 2Q09 of $161.9 million compared to cash flows provided by operations of $104.0 million in 2Q08 primarily due to higher net income, partially offset by changes in working capital accounts.
Share Repurchase Program
In the third quarter of 2008, the company’s Board of Directors authorized the repurchase of up to $250 million of the company’s common shares exclusive of shares repurchased in connection with employee stock plans. Due to volatility in the financial markets, the company has not yet repurchased any shares under the third quarter 2008 authorization. The share repurchase program expires on December 31, 2009.
Footnote
(a) Non-GAAP refers to earnings projections not in accordance with Generally Accepted Accounting Principles (GAAP).
(b) Excludes the potential impact upon the company’s future operating results of issues associated with the previously announced change in the company’s military services contract. This would primarily include such issues as impairment of military services goodwill, potential military services exit costs, possible military services asset sales, and a strategic assessment of ancillary military services businesses. The company cannot yet, using reasonable efforts, determine an estimate of such issues, and thus cannot reconcile to a GAAP estimate.
(c) The Commercial Segment provides a full range of insured specialty products including dental, vision and other supplemental products. Members included in these products may not be unique to each product since members have the ability to enroll in multiple products. Other supplemental benefits include life, disability, and fixed benefit products including cancer and critical illness policies.
Conference Call & Virtual Slide Presentation
Humana will host a conference call, as well as a virtual slide presentation, at 9:00 a.m. eastern time today to discuss its financial results for the quarter and the company’s expectations for future earnings. A live virtual presentation (audio with slides) may be accessed via Humana’s Investor Relations page at www.humana.com. The company suggests web participants sign on approximately 15 minutes in advance of the call. The company also suggests web participants visit the site well in advance of the call to run a system test and to download any free software needed to view the presentation.
All parties interested in the audio-only portion of the conference call are invited to dial 888-625-7430. No password is required. The company suggests participants dial in approximately ten minutes in advance of the call. For those unable to participate in the live event, the virtual presentation archive may be accessed via the Historical Webcasts & Presentations section of the Investor Relations page at www.humana.com.
Cautionary Statement
This news release includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. When used in investor presentations, press releases, Securities and Exchange Commission (SEC) filings, and in oral statements made by or with the approval of one of our executive officers, the words or phrases like "expects,” "anticipates,” "believes,” "intends,” "likely will result,” "estimates,” "projects” or variations of such words and similar expressions are intended to identify such forward-looking statements. These forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties, and assumptions, including, among other things, information set forth in the "Risk Factors” section of our SEC filings, a summary of which includes but is not limited to the following:
- If Humana does not design and price its products properly and competitively, if the premiums Humana charges are insufficient to cover the cost of health care services delivered to its members, or if its estimates of benefits payable or future policy benefits payable based upon its estimates of future benefit claims are inadequate, Humana’s profitability could be materially adversely affected. Humana estimates the costs of its benefit expense payments, and designs and prices its products accordingly, using actuarial methods and assumptions based upon, among other relevant factors, claim payment patterns, medical cost inflation, and historical developments such as claim inventory levels and claim receipt patterns. These estimates, however, involve extensive judgment, and have considerable inherent variability that is extremely sensitive to payment patterns and changes in medical cost trends.
- If Humana fails to effectively implement its operational and strategic initiatives, including its Medicare initiatives, the company’s business could be materially adversely affected.
- If Humana fails to properly maintain the integrity of its data, to strategically implement new information systems, or to protect Humana’s proprietary rights to its systems, the company’s business could be materially adversely affected.
- Humana is involved in various legal actions, which, if resolved unfavorably to Humana, could result in substantial monetary damages. Increased litigation and negative publicity could increase the company’s cost of doing business.
- As a government contractor, Humana is exposed to additional risks including reimbursement and payment changes that could adversely affect its business or its willingness to participate in government health care programs.
- Humana’s industry is currently subject to substantial government regulation, which along with possible increased governmental regulation or legislative change, could increase Humana’s cost of doing business and could adversely affect the company’s profitability.
- Humana is also subject to potential changes in the political environment that can affect public policy and can adversely affect the markets for its products.
- Any failure to manage administrative costs could hamper Humana’s profitability.
- Any failure by Humana to manage acquisitions and other significant transactions successfully could have a material adverse effect on its financial results, business and prospects.
- If Humana fails to develop and maintain satisfactory relationships with the providers of care to its members, the company’s business could be adversely affected.
- Humana’s mail order pharmacy business is highly competitive and subjects it to regulations in addition to those the company faces with its core health benefits businesses.
- Humana’s ability to obtain funds from its subsidiaries is restricted by state insurance regulations.
- Downgrades in Humana’s debt ratings, should they occur, may adversely affect its cost and availability of funds.
- Extreme volatility and disruption in the securities and credit markets may adversely affect Humana’s business, results of operations and financial condition.
- Changes in economic conditions could adversely affect Humana’s business and results of operations.
- Given the current economic climate, Humana’s stock and the stock of other companies in the insurance industry may be increasingly subject to stock price and trading volume volatility.
In making forward-looking statements, Humana is not undertaking to address or update them in future filings or communications regarding its business or results. In light of these risks, uncertainties, and assumptions, the forward-looking events discussed herein may or may not occur. There also may be other risks that we are unable to predict at this time. Any of these risks and uncertainties may cause actual results to differ materially from the results discussed in the forward-looking statements.
Humana advises investors to read the following documents as filed by the company with the SEC for further discussion both of the risks it faces and its historical performance:
- Form 10-K for the year ended December 31, 2008;
- Form 10-Q for the quarter ended March 31, 2009;
- Form 8-Ks filed during 2009.
About Humana
Humana Inc., headquartered in Louisville, Kentucky, is one of the nation’s largest publicly traded health and supplemental benefits companies, with approximately 10.3 million medical members. Humana is a full-service benefits solutions company, offering a wide array of health and supplemental benefit plans for employer groups, government programs and individuals.
Over its 48-year history, Humana has consistently seized opportunities to meet changing customer needs. Today, the company is a leader in consumer engagement, providing guidance that leads to lower costs and a better health plan experience throughout its diversified customer portfolio.
More information regarding Humana is available to investors via the Investor Relations page of the company’s web site at www.humana.com, including copies of:
- Annual reports to stockholders;
- Securities and Exchange Commission filings;
- Most recent investor conference presentations;
- Quarterly earnings news releases;
- Replays of most recent earnings release conference calls;
- Calendar of events (including upcoming earnings conference call dates and times, as well as planned interaction with research analysts and institutional investors);
- Corporate Governance information.
Humana Inc. – Earnings Guidance Points as of August 3, 2009 |
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(in accordance with Generally Accepted Accounting Principles (GAAP) unless otherwise noted) |
For the year ending December 31, 2009
(1) Non-GAAP estimates in this earnings guidance point chart exclude the impact of issues associated with the previously announced change in the company’s military services contract for which the company cannot yet, using reasonable efforts, determine an estimate of such issues, and thus cannot reconcile to a GAAP estimate. |
Comments
(2) Military services contract change issues described in note (1) primarily include impairment of military services goodwill, potential military services exit costs, possible military services asset sales, and a strategic assessment of ancillary military services businesses. |
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Diluted earnings per common share (EPS) |
Full year 2009: Non-GAAP EPS of $6.10 to $6.20 ((1)(2)) |
Excludes impact of future share repurchases | ||
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Third quarter 2009: Non-GAAP EPS of $1.75 to $1.80 ((1)(2)) |
Excludes impact of future share repurchases |
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Revenues |
Consolidated revenues: $30 billion to $32 billion |
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Premiums and ASO fees: |
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Medicare Advantage: $16.0 billion to $16.5 billion |
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Medicare stand-alone PDPs: |
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Military services: $3.5 billion to $3.6 billion; |
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Commercial Segment: approximately $7.5 billion |
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Consolidated investment income: $270 million to $290 million |
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Consolidated other revenue: $270 million to $280 million |
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Ending medical membership |
Medicare Advantage: Up approximately 50,000 from prior year |
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Medicare stand-alone PDPs: Down 1.1 million to 1.2 million from prior year |
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Military services: No material change from prior year |
Fully insured and ASO combined |
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Medicaid: Down approximately 86,000 from prior year |
Expected decline in Medicaid membership relates to a contract assumed in connection with the FY08 Cariten Healthcare acquisition that terminated effective December 31, 2008. |
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Commercial: Down 175,000 to 195,000 from prior year |
Fully-insured and ASO combined |
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Benefit ratios and benefit expense trend components |
Government Segment benefit ratio in the range of 83.5% to 84.5% |
Medicare, Medicaid, and Military Services combined |
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Medicare benefit ratio in the range of 82.5% to 83.5% |
Medicare Advantage and Stand-Alone PDP combined |
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Commercial Segment benefit ratio in the range of 79% to 80% |
Medical and Specialty combined | |||
Secular Commercial benefit expense trend components: inpatient hospital utilization – relatively flat; inpatient and outpatient hospital rates – mid to upper single digits; outpatient hospital utilization – low to mid single digits; physician – mid single digits; pharmacy – mid to upper single digits |
Secular trends of approximately 7% exclude the impact of benefit buy-downs and mix changes |
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Selling, general & administrative expense ratio | Non-GAAP ratio of 13% to 14% (1)(2) | SG&A expenses as a percent of premiums, administrative services fees, and other revenue | ||
Depreciation & amortization | Non-GAAP expense of $240 million to $250 million (1)(2) | |||
Interest expense | $105 million to $110 million | |||
Government Segment operating margins |
Medicare Advantage & stand-alone PDP combined: 5.5% to 6.5%
Military services: non-GAAP operating margin of 2.5% to 3.0% (1)(2) |
Line-of-business-level results exclude the impact of investment income and interest expense | ||
Commercial Segment pretax earnings | $190 million to $210 million | Segment-level results include the impact of investment income and interest expense | ||
Cash flows from operations | $1.2 billion to $1.4 billion | |||
Capital expenditures | Approximately $225 million | |||
Effective tax rate | 34% to 35% | |||
Shares used in computing full-year EPS | Approximately 170 million | Excludes impact of future share repurchases |
Humana Inc. |
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Statistical Schedules |
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And |
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Supplementary Information |
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2Q09 Earnings Release |
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S-1 |
Humana Inc. | |||||
Statistical Schedules and Supplementary Information | |||||
2Q09 Earnings Release | |||||
Contents | |||||
Page | Description | ||||
S-3-4 | Consolidated Statements of Income | ||||
S-5 | Consolidated Balance Sheets | ||||
S-6-7 | Consolidated Statements of Cash Flows | ||||
S-8 | Key Income Statement Ratios and Segment Operating Results | ||||
S-9 | Membership Detail | ||||
S-10-11 | Premiums and Administrative Services Fees Detail | ||||
S-12 | Percentage of Ending Membership under Capitation Arrangements | ||||
S-13 | Investments | ||||
S-14-16 | Benefits Payable | ||||
S-17 | Footnotes | ||||
S-2 |
Humana Inc. |
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Consolidated Statements of Income | |||||||||||
In thousands, except per common share results | |||||||||||
Three Months Ended June 30, | |||||||||||
Dollar | Percentage | ||||||||||
2009 | 2008 | Change | Change | ||||||||
Revenues: | |||||||||||
Premiums | $7,642,527 | $7,106,752 | $535,775 | 7.5 | % | ||||||
Administrative services fees | 118,694 | 112,964 | 5,730 | 5.1 | % | ||||||
Investment income | 75,340 | 80,821 | (5,481 | ) | -6.8 | % | |||||
Other revenue | 62,328 | 50,325 | 12,003 | 23.9 | % | ||||||
Total revenues | 7,898,889 | 7,350,862 | 548,027 | 7.5 | % | ||||||
Operating expenses: | |||||||||||
Benefits | 6,367,545 | 6,038,482 | 329,063 | 5.4 | % | ||||||
Selling, general and administrative | 1,004,342 | 916,041 | 88,301 | 9.6 | % | ||||||
Depreciation | 50,677 | 44,141 | 6,536 | 14.8 | % | ||||||
Other intangible amortization | 9,801 | 9,317 | 484 | 5.2 | % | ||||||
Total operating expenses | 7,432,365 | 7,007,981 | 424,384 | 6.1 | % | ||||||
Income from operations | 466,524 | 342,881 | 123,643 | 36.1 | % | ||||||
Interest expense | 26,574 | 17,867 | 8,707 | 48.7 | % | ||||||
Income before income taxes | 439,950 | 325,014 | 114,936 | 35.4 | % | ||||||
Provision for income taxes | 158,170 | 115,118 | 43,052 | 37.4 | % | ||||||
Net income | $281,780 | $209,896 | $71,884 | 34.2 | % | ||||||
Basic earnings per common share | $1.68 | $1.26 | $0.42 | 33.3 | % | ||||||
Diluted earnings per common share | $1.67 | $1.24 | $0.43 | 34.7 | % | ||||||
Shares used in computing basic earnings per common share | 167,301 | 167,146 | |||||||||
Shares used in computing diluted earnings per common share | 168,669 | 168,997 | |||||||||
S-3 |
Humana Inc. | |||||||||||
Consolidated Statements of Income | |||||||||||
In thousands, except per common share results | |||||||||||
Six Months Ended June 30, | |||||||||||
Dollar | Percentage | ||||||||||
2009 | 2008 | Change | Change | ||||||||
Revenues: | |||||||||||
Premiums | $15,113,821 | $13,819,353 | $1,294,468 | 9.4 | % | ||||||
Administrative services fees | 234,576 | 224,943 | 9,633 | 4.3 | % | ||||||
Investment income | 144,884 | 170,780 | (25,896 | ) | -15.2 | % | |||||
Other revenue | 117,269 | 95,490 | 21,779 | 22.8 | % | ||||||
Total revenues | 15,610,550 | 14,310,566 | 1,299,984 | 9.1 | % | ||||||
Operating expenses: | |||||||||||
Benefits | 12,636,855 | 11,856,516 | 780,339 | 6.6 | % | ||||||
Selling, general and administrative | 2,068,145 | 1,866,486 | 201,659 | 10.8 | % | ||||||
Depreciation | 99,353 | 87,098 | 12,255 | 14.1 | % | ||||||
Other intangible amortization | 19,139 | 17,318 | 1,821 | 10.5 | % | ||||||
Total operating expenses | 14,823,492 | 13,827,418 | 996,074 | 7.2 | % | ||||||
Income from operations | 787,058 | 483,148 | 303,910 | 62.9 | % | ||||||
Interest expense | 53,346 | 34,206 | 19,140 | 56.0 | % | ||||||
Income before income taxes | 733,712 | 448,942 | 284,770 | 63.4 | % | ||||||
Provision for income taxes | 246,215 | 158,876 | 87,339 | 55.0 | % | ||||||
Net income | $487,497 | $290,066 | $197,431 | 68.1 | % | ||||||
Basic earnings per common share | $2.92 | $1.73 | $1.19 | 68.8 | % | ||||||
Diluted earnings per common share | $2.89 | $1.71 | $1.18 | 69.0 | % | ||||||
Shares used in computing basic earnings per common share | 167,172 | 167,668 | |||||||||
Shares used in computing diluted earnings per common share | 168,664 | 169,799 | |||||||||
S-4 |
Humana Inc. | ||||||||||||||||
Consolidated Balance Sheets | ||||||||||||||||
Dollars in thousands, except share amounts | ||||||||||||||||
June 30, | March 31, | December 31, | Sequential Change | |||||||||||||
2009 | 2009 | 2008 | Dollar | Percent | ||||||||||||
Assets | ||||||||||||||||
Current assets: | ||||||||||||||||
Cash and cash equivalents | $1,585,109 | $1,911,202 | $1,970,423 | |||||||||||||
Investment securities | 4,583,423 | 4,439,005 | 4,203,538 | |||||||||||||
Receivables, net: | ||||||||||||||||
Premiums | 1,265,986 | 1,025,793 | 777,672 | |||||||||||||
Administrative services fees | 10,928 | 12,080 | 12,010 | |||||||||||||
Securities lending invested collateral | 270,120 | 331,393 | 402,399 | |||||||||||||
Other | 1,056,798 | 1,163,283 | 1,030,000 | |||||||||||||
Total current assets | 8,772,364 | 8,882,756 | 8,396,042 | ($110,392 | ) | -1.2 | % | |||||||||
Property and equipment, net | 691,414 | 701,376 | 711,492 | |||||||||||||
Other assets: | ||||||||||||||||
Long-term investment securities | 1,240,197 | 1,081,970 | 1,011,904 | |||||||||||||
Goodwill | 1,992,924 | 1,991,220 | 1,963,111 | |||||||||||||
Other | 987,490 | 949,288 | 959,211 | |||||||||||||
Total other assets | 4,220,611 | 4,022,478 | 3,934,226 | |||||||||||||
Total assets | $13,684,389 | $13,606,610 | $13,041,760 | $77,779 | 0.6 | % | ||||||||||
Liabilities and Stockholders' Equity | ||||||||||||||||
Current liabilities: | ||||||||||||||||
Benefits payable | $3,411,197 | $3,238,499 | $3,205,579 | |||||||||||||
Trade accounts payable and accrued expenses | 1,351,689 | 1,384,290 | 1,077,027 | |||||||||||||
Book overdraft | 153,853 | 258,062 | 224,542 | |||||||||||||
Securities lending payable | 305,008 | 367,416 | 438,699 | |||||||||||||
Unearned revenues | 244,855 | 241,462 | 238,098 | |||||||||||||
Total current liabilities | 5,466,602 | 5,489,729 | 5,183,945 | ($23,127 | ) | -0.4 | % | |||||||||
Long-term debt | 1,682,654 | 1,934,856 | 1,937,032 | |||||||||||||
Future policy benefits payable | 1,154,317 | 1,139,690 | 1,164,758 | |||||||||||||
Other long-term liabilities | 322,538 | 372,022 | 298,835 | |||||||||||||
Total liabilities | 8,626,111 | 8,936,297 | 8,584,570 | ($310,186 | ) | -3.5 | % | |||||||||
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; 188,867,271 issued at June 30, 2009 |
31,478 | 31,472 | 31,309 | |||||||||||||
Capital in excess of par value | 1,604,979 | 1,587,168 | 1,574,245 | |||||||||||||
Retained earnings | 3,877,433 | 3,595,653 | 3,389,936 | |||||||||||||
Accumulated other comprehensive loss | (86,556 | ) | (174,924 | ) | (175,243 | ) | ||||||||||
Treasury stock, at cost, 19,209,826 shares at June 30, 2009 | (369,056 | ) | (369,056 | ) | (363,057 | ) | ||||||||||
Total stockholders' equity | 5,058,278 | 4,670,313 | 4,457,190 | $387,965 | 8.3 | % | ||||||||||
Total liabilities and stockholders' equity | $13,684,389 | $13,606,610 | $13,041,760 | $77,779 | 0.6 | % | ||||||||||
Debt-to-total capitalization ratio | 25.0 | % | 29.3 | % | 30.3 | % | ||||||||||
S-5 |
Humana Inc. | |||||||||||||
Consolidated Statements of Cash Flows | |||||||||||||
Dollars in thousands | |||||||||||||
Three Months Ended June 30, | |||||||||||||
Dollar | Percentage | ||||||||||||
2009 | 2008 | Change | Change | ||||||||||
Cash flows from operating activities | |||||||||||||
Net income | $281,780 | $209,896 | |||||||||||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||||
Depreciation and amortization | 60,478 | 53,458 | |||||||||||
Gain on sale of investment securities, net | (8,507 | ) | (8,585 | ) | |||||||||
Stock-based compensation | 17,346 | 13,249 | |||||||||||
(Benefit) provision for deferred income taxes | (54,512 | ) | 2,761 | ||||||||||
Changes in operating assets and liabilities excluding the effects of acquisitions: |
|||||||||||||
Receivables | (239,041 | ) | (229,603 | ) | |||||||||
Other assets | 43,080 | (112,388 | ) | ||||||||||
Benefits payable | 172,698 | 192,924 | |||||||||||
Other liabilities | (120,822 | ) | (3,401 | ) | |||||||||
Unearned revenues | 3,393 | (20,169 | ) | ||||||||||
Other | 5,967 | 5,881 | |||||||||||
Net cash provided by operating activities | 161,860 | 104,023 | $57,837 | 55.6 | % | ||||||||
Cash flows from investing activities | |||||||||||||
Acquisitions, net of cash acquired | - | (262,255 | ) | ||||||||||
Purchases of property and equipment | (43,555 | ) | (64,958 | ) | |||||||||
Purchases of investment securities | (1,435,869 | ) | (1,861,577 | ) | |||||||||
Proceeds from maturities of investment securities | 199,584 | 102,369 | |||||||||||
Proceeds from sales of investment securities | 1,029,153 | 1,389,636 | |||||||||||
Change in securities lending collateral | 62,408 | 173,599 | |||||||||||
Net cash used in investing activities | (188,279 | ) | (523,186 | ) | $334,907 | 64.0 | % | ||||||
Cash flows from financing activities | |||||||||||||
Receipts from CMS contract deposits | 505,677 | 590,538 | |||||||||||
Withdrawals from CMS contract deposits | (388,885 | ) | (573,184 | ) | |||||||||
Borrowings under credit agreement | - | 175,000 | |||||||||||
Repayments under credit agreement | (250,000 | ) | (850,000 | ) | |||||||||
Proceeds from issuance of senior notes | - | 749,247 | |||||||||||
Debt issue costs | - | (5,480 | ) | ||||||||||
Change in book overdraft | (104,209 | ) | 6,719 | ||||||||||
Change in securities lending payable | (62,408 | ) | (173,599 | ) | |||||||||
Common stock repurchases | - | (14,714 | ) | ||||||||||
Excess tax benefit from stock-based compensation | 96 | 167 | |||||||||||
Proceeds from stock option exercises and other | 55 | 824 | |||||||||||
Net cash used in financing activities | (299,674 | ) | (94,482 | ) | ($205,192 | ) | -217.2 | % | |||||
Decrease in cash and cash equivalents | (326,093 | ) | (513,645 | ) | |||||||||
Cash and cash equivalents at beginning of period | 1,911,202 | 1,688,287 | |||||||||||
Cash and cash equivalents at end of period | $1,585,109 | $1,174,642 | |||||||||||
S-6 |
Humana Inc. | |||||||||||||
Consolidated Statements of Cash Flows | |||||||||||||
Dollars in thousands | |||||||||||||
Six Months Ended June 30, | |||||||||||||
Dollar | Percentage | ||||||||||||
2009 | 2008 | Change | Change | ||||||||||
Cash flows from operating activities | |||||||||||||
Net income | $487,497 | $290,066 | |||||||||||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||||
Depreciation and amortization | 118,492 | 104,416 | |||||||||||
Gain on sale of investment securities, net | (9,550 | ) | (18,849 | ) | |||||||||
Stock-based compensation | 33,022 | 27,165 | |||||||||||
(Benefit) provision for deferred income taxes | (34,825 | ) | 10,572 | ||||||||||
Changes in operating assets and liabilities excluding the effects of acquisitions: |
|||||||||||||
Receivables | (494,139 | ) | (383,385 | ) | |||||||||
Other assets | (18,827 | ) | (195,211 | ) | |||||||||
Benefits payable | 205,618 | 381,462 | |||||||||||
Other liabilities | (98,447 | ) | (104,475 | ) | |||||||||
Unearned revenues | 6,757 | (12,457 | ) | ||||||||||
Other | 11,782 | 9,158 | |||||||||||
Net cash provided by operating activities | 207,380 | 108,462 | $98,918 | 91.2 | % | ||||||||
Cash flows from investing activities | |||||||||||||
Acquisitions, net of cash acquired | (12,367 | ) | (266,093 | ) | |||||||||
Purchases of property and equipment | (82,602 | ) | (112,045 | ) | |||||||||
Purchases of investment securities | (2,839,775 | ) | (3,524,144 | ) | |||||||||
Proceeds from maturities of investment securities | 604,535 | 274,347 | |||||||||||
Proceeds from sales of investment securities | 1,751,441 | 2,649,402 | |||||||||||
Change in securities lending collateral | 133,691 | 536,723 | |||||||||||
Net cash used in investing activities | (445,077 | ) | (441,810 | ) | ($3,267 | ) | -0.7 | % | |||||
Cash flows from financing activities | |||||||||||||
Receipts from CMS contract deposits | 1,034,642 | 1,188,830 | |||||||||||
Withdrawals from CMS contract deposits | (723,413 | ) | (1,079,245 | ) | |||||||||
Borrowings under credit agreement | - | 425,000 | |||||||||||
Repayments under credit agreement | (250,000 | ) | (1,225,000 | ) | |||||||||
Proceeds from issuance of senior notes | - | 749,247 | |||||||||||
Debt issue costs | - | (5,480 | ) | ||||||||||
Change in book overdraft | (70,689 | ) | 28,739 | ||||||||||
Change in securities lending payable | (133,691 | ) | (536,723 | ) | |||||||||
Common stock repurchases | (5,999 | ) | (94,661 | ) | |||||||||
Excess tax benefit from stock-based compensation | 244 | 9,344 | |||||||||||
Proceeds from stock option exercises and other | 1,289 | 7,486 | |||||||||||
Net cash used in financing activities | (147,617 | ) | (532,463 | ) | $384,846 | 72.3 | % | ||||||
Decrease in cash and cash equivalents | (385,314 | ) | (865,811 | ) | |||||||||
Cash and cash equivalents at beginning of period | 1,970,423 | 2,040,453 | |||||||||||
Cash and cash equivalents at end of period | $1,585,109 | $1,174,642 | |||||||||||
S-7 |
Humana Inc. | |||||||||||||||||||||||||||
Key Income Statement Ratios and Segment Operating Results | |||||||||||||||||||||||||||
Dollars in thousands | |||||||||||||||||||||||||||
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||||||
Percentage | Percentage | ||||||||||||||||||||||||||
2009 | 2008 | Difference | Change | 2009 | 2008 | Difference | Change | ||||||||||||||||||||
Benefit ratio | |||||||||||||||||||||||||||
Government Segment | 84.1 | % | 86.3 | % | -2.2 | % | 85.4 | % | 88.1 | % | -2.7 | % | |||||||||||||||
Commercial Segment | 80.8 | % | 81.0 | % | -0.2 | % | 77.7 | % | 79.0 | % | -1.3 | % | |||||||||||||||
Consolidated | 83.3 | % | 85.0 | % | -1.7 | % | 83.6 | % | 85.8 | % | -2.2 | % | |||||||||||||||
Selling, general, and administrative expense ratio (A) |
|||||||||||||||||||||||||||
Government Segment | 9.3 | % | 9.5 | % | -0.2 | % | 9.9 | % | 10.1 | % | -0.2 | % | |||||||||||||||
Commercial Segment | 23.5 | % | 21.5 | % | 2.0 | % | 23.8 | % | 21.9 | % | 1.9 | % | |||||||||||||||
Consolidated | 12.8 | % | 12.6 | % | 0.2 | % | 13.4 | % | 13.2 | % | 0.2 | % | |||||||||||||||
Investment income | |||||||||||||||||||||||||||
Government Segment | $47,176 | $38,775 | $8,401 | 21.7 | % | $87,958 | $87,093 | $865 | 1.0 | % | |||||||||||||||||
Commercial Segment | 28,164 | 42,046 | (13,882 | ) | -33.0 | % | 56,926 | 83,687 | (26,761 | ) | -32.0 | % | |||||||||||||||
Consolidated | $75,340 | $80,821 | ($5,481 | ) | -6.8 | % | $144,884 | $170,780 | ($25,896 | ) | -15.2 | % | |||||||||||||||
Interest expense | |||||||||||||||||||||||||||
Government Segment | $16,225 | $5,966 | $10,259 | 172.0 | % | $32,713 | $11,115 | $21,598 | 194.3 | % | |||||||||||||||||
Commercial Segment | 10,349 | 11,901 | (1,552 | ) | -13.0 | % | 20,633 | 23,091 | (2,458 | ) | -10.6 | % | |||||||||||||||
Consolidated | $26,574 | $17,867 | $8,707 | 48.7 | % | $53,346 | $34,206 | $19,140 | 56.0 | % | |||||||||||||||||
Detail of pretax income | |||||||||||||||||||||||||||
Government Segment | $404,675 | $249,449 | $155,226 | 62.2 | % | $570,776 | $246,212 | $324,564 | 131.8 | % | |||||||||||||||||
Commercial Segment | 35,275 | 75,565 | (40,290 | ) | -53.3 | % | 162,936 | 202,730 | (39,794 | ) | -19.6 | % | |||||||||||||||
Consolidated | $439,950 | $325,014 | $114,936 | 35.4 | % | $733,712 | $448,942 | $284,770 | 63.4 | % | |||||||||||||||||
Detail of pretax margins | |||||||||||||||||||||||||||
Government Segment | 6.8 | % | 4.6 | % | 2.2 | % | 4.9 | % | 2.4 | % | 2.5 | % | |||||||||||||||
Commercial Segment | 1.8 | % | 3.9 | % | -2.1 | % | 4.2 | % | 5.3 | % | -1.1 | % | |||||||||||||||
Consolidated | 5.6 | % | 4.4 | % | 1.2 | % | 4.7 | % | 3.1 | % | 1.6 | % | |||||||||||||||
S-8 |
Humana Inc. | |||||||||||||||||||||
Membership Detail | |||||||||||||||||||||
In thousands | |||||||||||||||||||||
Ending |
Average |
Ending | Year-over-year Change | Ending | Sequential Change | ||||||||||||||||
June 30, 2009 |
2Q09 |
June 30, 2008 | Amount | Percent | March 31, 2009 | Amount | Percent | ||||||||||||||
Medical Membership: | |||||||||||||||||||||
Government Segment: | |||||||||||||||||||||
Medicare Advantage - HMO | 586.1 | 584.2 | 494.0 | 92.1 | 18.6 | % | 578.6 | 7.5 | 1.3 | % | |||||||||||
Medicare Advantage - PPO | 338.9 | 335.7 | 163.5 | 175.4 | 107.3 | % | 313.2 | 25.7 | 8.2 | % | |||||||||||
Medicare Advantage - PFFS | 574.8 | 574.1 | 687.5 | (112.7 | ) | -16.4 | % | 577.1 | (2.3 | ) | -0.4 | % | |||||||||
Total Medicare Advantage | 1,499.8 | 1,494.0 | 1,345.0 | 154.8 | 11.5 | % | 1,468.9 | 30.9 | 2.1 | % | |||||||||||
Medicare - PDP - Standard | 771.5 | 780.2 | 1,531.6 | (760.1 | ) | -49.6 | % | 830.9 | (59.4 | ) | -7.1 | % | |||||||||
Medicare - PDP - Enhanced | 1,095.6 | 1,099.8 | 1,409.4 | (313.8 | ) | -22.3 | % | 1,118.5 | (22.9 | ) | -2.0 | % | |||||||||
Medicare - PDP - Complete | 124.9 | 126.2 | 164.2 | (39.3 | ) | -23.9 | % | 129.5 | (4.6 | ) | -3.6 | % | |||||||||
Total Medicare stand-alone PDPs | 1,992.0 | 2,006.2 | 3,105.2 | (1,113.2 | ) | -35.8 | % | 2,078.9 | (86.9 | ) | -4.2 | % | |||||||||
Total Medicare | 3,491.8 | 3,500.2 | 4,450.2 | (958.4 | ) | -21.5 | % | 3,547.8 | (56.0 | ) | -1.6 | % | |||||||||
Military services insured | 1,753.4 | 1,751.6 | 1,737.6 | 15.8 | 0.9 | % | 1,746.6 | 6.8 | 0.4 | % | |||||||||||
Military services ASO | 1,254.9 | 1,251.7 | 1,206.2 | 48.7 | 4.0 | % | 1,244.0 | 10.9 | 0.9 | % | |||||||||||
Total military services | 3,008.3 | 3,003.3 | 2,943.8 | 64.5 | 2.2 | % | 2,990.6 | 17.7 | 0.6 | % | |||||||||||
Medicaid insured | 393.6 | 391.5 | 387.7 | 5.9 | 1.5 | % | 385.2 | 8.4 | 2.2 | % | |||||||||||
Medicaid ASO | - | - | 173.8 | (173.8 | ) | -100.0 | % | - | - | 0.0 | % | ||||||||||
Total Medicaid | 393.6 | 391.5 | 561.5 | (167.9 | ) | -29.9 | % | 385.2 | 8.4 | 2.2 | % | ||||||||||
Total Government Segment | 6,893.7 | 6,895.0 | 7,955.5 | (1,061.8 | ) | -13.3 | % | 6,923.6 | (29.9 | ) | -0.4 | % | |||||||||
Commercial Segment: | |||||||||||||||||||||
Fully-insured medical: | |||||||||||||||||||||
Group | 1,499.6 | 1,508.6 | 1,623.3 | (123.7 | ) | -7.6 | % | 1,534.8 | (35.2 | ) | -2.3 | % | |||||||||
Individual | 347.2 | 344.1 | 297.2 | 50.0 | 16.8 | % | 336.1 | 11.1 | 3.3 | % | |||||||||||
Medicare supplement | 24.9 | 24.2 | 16.1 | 8.8 | 54.7 | % | 22.8 | 2.1 | 9.2 | % | |||||||||||
Total fully-insured medical | 1,871.7 | 1,876.9 | 1,936.6 | (64.9 | ) | -3.4 | % | 1,893.7 | (22.0 | ) | -1.2 | % | |||||||||
ASO | 1,576.2 | 1,578.0 | 1,621.9 | (45.7 | ) | -2.8 | % | 1,577.8 | (1.6 | ) | -0.1 | % | |||||||||
Total Commercial Segment | 3,447.9 | 3,454.9 | 3,558.5 | (110.6 | ) | -3.1 | % | 3,471.5 | (23.6 | ) | -0.7 | % | |||||||||
Total medical membership | 10,341.6 | 10,349.9 | 11,514.0 | (1,172.4 | ) | -10.2 | % | 10,395.1 | (53.5 | ) | -0.5 | % | |||||||||
Specialty Membership | |||||||||||||||||||||
Dental - fully-insured | 2,446.7 | 2,449.5 | 2,612.2 | (165.5 | ) | -6.3 | % | 2,446.8 | (0.1 | ) | 0.0 | % | |||||||||
Dental - ASO | 980.3 | 979.5 | 1,074.0 | (93.7 | ) | -8.7 | % | 982.3 | (2.0 | ) | -0.2 | % | |||||||||
Total dental | 3,427.0 | 3,429.0 | 3,686.2 | (259.2 | ) | -7.0 | % | 3,429.1 | (2.1 | ) | -0.1 | % | |||||||||
Vision | 2,376.1 | 2,358.2 | 2,160.9 | 215.2 | 10.0 | % | 2,322.8 | 53.3 | 2.3 | % | |||||||||||
Other supplemental benefits (B) | 987.3 | 987.9 | 897.3 | 90.0 | 10.0 | % | 991.8 | (4.5 | ) | -0.5 | % | ||||||||||
Total specialty membership | 6,790.4 | 6,775.1 | 6,744.4 | 46.0 | 0.7 | % | 6,743.7 | 46.7 | 0.7 | % | |||||||||||
S-9 |
Humana Inc. | |||||||||||||||
Premiums and Administrative Services Fees Detail | |||||||||||||||
Dollars in thousands, except per member per month | |||||||||||||||
Per Member per Month (C) | |||||||||||||||
Three Months Ended June 30, | Three Months Ended June 30, | ||||||||||||||
Dollar | Percentage | ||||||||||||||
2009 | 2008 | Change | Change | 2009 | 2008 | ||||||||||
Premium revenues | |||||||||||||||
Government Segment: | |||||||||||||||
Medicare Advantage | $4,145,129 | $3,491,824 | $653,305 | 18.7 | % | $925 | $877 | ||||||||
Medicare stand-alone PDPs | 638,813 | 905,071 | (266,258 | ) | -29.4 | % | $106 | $97 | |||||||
Total Medicare | 4,783,942 | 4,396,895 | 387,047 | 8.8 | % | ||||||||||
Military services insured (D) | 924,308 | 806,976 | 117,332 | 14.5 | % | $176 | $155 | ||||||||
Medicaid insured | 160,529 | 141,976 | 18,553 | 13.1 | % | $137 | $123 | ||||||||
Total Government Segment premiums | 5,868,779 | 5,345,847 | 522,932 | 9.8 | % | ||||||||||
Commercial Segment: | |||||||||||||||
Fully-insured medical | 1,544,093 | 1,526,026 | 18,067 | 1.2 | % | $274 | $266 | ||||||||
Specialty | 229,655 | 234,879 | (5,224 | ) | -2.2 | % | $12 | $13 | |||||||
Total Commercial Segment premiums | 1,773,748 | 1,760,905 | 12,843 | 0.7 | % | ||||||||||
Total premium revenues | $7,642,527 | $7,106,752 | $535,775 | 7.5 | % | ||||||||||
Administrative services fees | |||||||||||||||
Military services ASO (D) | $23,155 | $17,403 | $5,752 | 33.1 | % | $6 | $5 | ||||||||
Medicaid ASO | - | 2,053 | (2,053 | ) | -100.0 | % | - | $4 | |||||||
Commercial Segment | 95,539 | 93,508 | 2,031 | 2.2 | % | $12 | $12 | ||||||||
Total administrative services fees | $118,694 | $112,964 | $5,730 | 5.1 | % | ||||||||||
S-10 |
Humana Inc. | |||||||||||||||
Premiums and Administrative Services Fees Detail | |||||||||||||||
Dollars in thousands, except per member per month | |||||||||||||||
Per Member per Month (C) | |||||||||||||||
Six Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
Dollar | Percentage | ||||||||||||||
2009 | 2008 | Change | Change | 2009 | 2008 | ||||||||||
Premium revenues | |||||||||||||||
Government Segment: | |||||||||||||||
Medicare Advantage | $8,205,588 | $6,659,541 | $1,546,047 | 23.2 | % | $927 | $862 | ||||||||
Medicare stand-alone PDPs | 1,234,496 | 1,780,070 | (545,574 | ) | -30.6 | % | $100 | $95 | |||||||
Total Medicare | 9,440,084 | 8,439,611 | 1,000,473 | 11.9 | % | ||||||||||
Military services insured (D) | 1,795,479 | 1,617,635 | 177,844 | 11.0 | % | $171 | $156 | ||||||||
Medicaid insured | 317,189 | 285,656 | 31,533 | 11.0 | % | $136 | $124 | ||||||||
Total Government Segment premiums | 11,552,752 | 10,342,902 | 1,209,850 | 11.7 | % | ||||||||||
Commercial Segment: | |||||||||||||||
Fully-insured medical | 3,102,762 | 3,007,512 | 95,250 | 3.2 | % | $274 | $267 | ||||||||
Specialty | 458,307 | 468,939 | (10,632 | ) | -2.3 | % | $12 | $13 | |||||||
Total Commercial Segment premiums | 3,561,069 | 3,476,451 | 84,618 | 2.4 | % | ||||||||||
Total premium revenues | $15,113,821 | $13,819,353 | $1,294,468 | 9.4 | % | ||||||||||
Administrative services fees | |||||||||||||||
Military services ASO (D) | $43,488 | $37,927 | $5,561 | 14.7 | % | $6 | $5 | ||||||||
Medicaid ASO | - | 4,235 | (4,235 | ) | -100.0 | % | - | $4 | |||||||
Commercial Segment | 191,088 | 182,781 | 8,307 | 4.5 | % | $12 | $11 | ||||||||
Total administrative services fees | $234,576 | $224,943 | $9,633 | 4.3 | % | ||||||||||
S-11 |
Humana Inc. | |||||||||||||||||||||||||||
Percentage of Ending Membership under Capitation Arrangements | |||||||||||||||||||||||||||
Government Segment | Commercial Segment | ||||||||||||||||||||||||||
June 30, 2009 | Medicare Advantage | Medicare stand-alone PDPs | Military Services | Medicaid | Total Govt. Segment | Fully-insured | ASO | Total Comm. Segment | Total Medical Membership | ||||||||||||||||||
Capitated HMO hospital system based (E) | 1.9 | % | - | - | - | 0.4 | % | 1.2 | % | - | 0.7 | % | 0.5 | % | |||||||||||||
Capitated HMO physician group based (E) | 3.2 | % | - | - | 30.3 | % | 2.4 | % | 1.4 | % | - | 0.8 | % | 1.9 | % | ||||||||||||
Risk-sharing (F) | 18.9 | % | - | - | 68.5 | % | 8.0 | % | 1.1 | % | - | 0.7 | % | 5.6 | % | ||||||||||||
All other membership | 76.0 | % | 100.0 | % | 100.0 | % | 1.2 | % | 89.2 | % | 96.3 | % | 100.0 | % | 97.8 | % | 92.0 | % | |||||||||
Total medical membership | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | |||||||||
June 30, 2008 | |||||||||||||||||||||||||||
Capitated HMO hospital system based (E) | 1.9 | % | - | - | - | 0.3 | % | 1.3 | % | - | 0.7 | % | 0.4 | % | |||||||||||||
Capitated HMO physician group based (E) | 3.7 | % | - | - | 26.8 | % | 2.5 | % | 1.4 | % | - | 0.8 | % | 2.0 | % | ||||||||||||
Risk-sharing (F) | 20.4 | % | - | - | 41.7 | % | 6.4 | % | 1.3 | % | - | 0.7 | % | 4.7 | % | ||||||||||||
All other membership | 74.0 | % | 100.0 | % | 100.0 | % | 31.5 | % | 90.8 | % | 96.0 | % | 100.0 | % | 97.8 | % | 92.9 | % | |||||||||
Total medical membership | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | |||||||||
S-12 |
Humana Inc. | Fair value | ||||||||
Investments | |||||||||
Dollars in thousands | |||||||||
6/30/2009 | 3/31/2009 | 12/31/2008 | |||||||
Investment Portfolio: | |||||||||
Cash & cash equivalents | $1,585,109 | $1,911,202 | $1,970,423 | ||||||
Investment securities | 4,583,423 | 4,439,005 | 4,203,538 | ||||||
Long-term investment securities | 1,240,197 | 1,081,970 | 1,011,904 | ||||||
Total investment portfolio | $7,408,729 | $7,432,177 | $7,185,865 | ||||||
Duration (G) | 3.37 | 3.11 | 3.39 | ||||||
Average Credit Rating | AA+ | AA+ | AA+ | ||||||
Securities Lending Invested Collateral Portfolio: | |||||||||
Cash & cash equivalents | $61,374 | $93,425 | $46,693 | ||||||
Certificates of deposit / bank notes | 71,413 | 75,684 | 167,973 | ||||||
Corporate floating rate | 48,964 | 55,772 | 55,341 | ||||||
Asset-backed securities | 88,369 | 106,512 | 132,392 | ||||||
$270,120 | $331,393 | $402,399 | |||||||
Average Credit Rating | AA+ | AA+ | AA+ | ||||||
Investment Portfolio Detail: | |||||||||
Cash and cash equivalents | $1,585,109 | $1,911,202 | $1,970,423 | ||||||
U.S. Government and agency obligations | |||||||||
U.S. Treasury and agency obligations | $593,174 | $314,057 | $599,898 | ||||||
U.S. Government residential mortgage-backed | 1,094,271 | 1,347,895 | 1,283,482 | ||||||
U.S. Government commercial mortgage-backed | 25,093 | 14,158 | 14,223 | ||||||
Total U.S. Government and agency obligations | 1,712,538 | 1,676,110 | 1,897,603 | ||||||
Tax-exempt municipal securities | |||||||||
Pre-refunded | 481,440 | 646,218 | 694,797 | ||||||
Insured | 570,596 | 558,891 | 452,427 | ||||||
Other | 731,076 | 541,425 | 468,585 | ||||||
Auction rate securities | 72,718 | 73,433 | 73,653 | ||||||
Total tax-exempt municipal securities | 1,855,830 | 1,819,967 | 1,689,462 | ||||||
Residential mortgage-backed | |||||||||
Prime residential mortgages | 301,836 | 311,859 | 339,665 | ||||||
Alt-A residential mortgages | 3,977 | 5,870 | 5,939 | ||||||
Sub-prime residential mortgages | 1,562 | 1,641 | 1,704 | ||||||
Total residential mortgage-backed |
307,375 | 319,370 | 347,308 | ||||||
Commercial mortgage-backed | 259,373 | 249,027 | 260,299 | ||||||
Asset-backed securities | 152,469 | 151,830 | 144,370 | ||||||
Corporate securities | |||||||||
Financial services | 495,981 | 415,684 | 356,816 | ||||||
Other | 1,014,128 | 860,893 | 484,581 | ||||||
Total corporate securities | 1,510,109 | 1,276,577 | 841,397 | ||||||
Redeemable preferred stocks | 21,124 | 20,415 | 19,702 | ||||||
Non-redeemable preferred stocks | 685 | 3,665 | 11,228 | ||||||
Common stocks | 4,117 | 4,014 | 4,073 | ||||||
Total investment portfolio | $7,408,729 | $7,432,177 | $7,185,865 | ||||||
S-13 |
Humana Inc. | ||||||||||
Detail of Benefits Payable Balance and Year-to-Date Changes | ||||||||||
Dollars in thousands | ||||||||||
June 30, 2009 | March 31, 2009 | December 31, 2008 | ||||||||
Detail of benefits payable | ||||||||||
IBNR and other benefits payable (H) | $2,448,633 | $2,338,794 | $2,216,909 | |||||||
Unprocessed claim inventories (I) | 258,000 | 258,800 | 247,200 | |||||||
Processed claim inventories (J) | 199,978 | 166,402 | 190,445 | |||||||
Payable to pharmacy benefit administrator (K) | 161,200 | 162,663 | 244,228 | |||||||
Benefits payable, excluding military services | 3,067,811 | 2,926,659 | 2,898,782 | |||||||
|
||||||||||
Military services IBNR (L) | 300,583 | 268,852 | 248,492 | |||||||
Other military services benefits payable (M) | 42,803 | 42,988 | 58,305 | |||||||
Military services benefits payable | 343,386 | 311,840 | 306,797 | |||||||
Total Benefits Payable | $3,411,197 | $3,238,499 | $3,205,579 | |||||||
Six Months Ended | Six Months Ended | Year Ended | ||||||||
June 30, 2009 | June 30, 2008 | December 31, 2008 | ||||||||
Year-to-date changes in benefits payable, excluding military services (N) |
||||||||||
Balances at January 1 | $2,898,782 | $2,355,461 | $2,355,461 | |||||||
Acquisitions | - | 27,396 | 96,021 | |||||||
Incurred related to: | ||||||||||
Current year | 11,239,097 | 10,628,582 | 21,092,135 | |||||||
Prior years (O) | (219,517 | ) | (221,485 | ) | (268,027 | ) | ||||
Total incurred | 11,019,580 | 10,407,097 | 20,824,108 | |||||||
Paid related to: | ||||||||||
Current year | (9,306,788 | ) | (8,602,235 | ) | (18,832,301 | ) | ||||
Prior years | (1,543,763 | ) | (1,492,834 | ) | (1,544,507 | ) | ||||
Total paid | (10,850,551 | ) | (10,095,069 | ) | (20,376,808 | ) | ||||
Balances at end of period | $3,067,811 | $2,694,885 | $2,898,782 | |||||||
Six Months Ended | Six Months Ended | Year Ended | ||||||||
June 30, 2009 | June 30, 2008 | December 31, 2008 | ||||||||
Summary of Consolidated Benefit Expense: | ||||||||||
Total benefit expense incurred, per above | $11,019,580 | $10,407,097 | $20,824,108 | |||||||
Military services benefit expense | 1,585,959 | 1,429,657 | 2,819,787 | |||||||
Future policy benefit expense (P) | 31,316 | 19,762 | 64,338 | |||||||
Consolidated Benefit Expense | $12,636,855 | $11,856,516 | $23,708,233 | |||||||
S-14 |
Humana Inc. | |||||||||||
Benefits Payable Statistics (Q) | |||||||||||
Receipt Cycle Time (R) | |||||||||||
2009 | 2008 | Change | Percentage Change | ||||||||
1st Quarter Average | 14.8 | 15.1 | (0.3 | ) | -2.0 | % | |||||
2nd Quarter Average | 14.0 | 15.0 | (1.0 | ) | -6.7 | % | |||||
3rd Quarter Average | - | 15.2 | N/A | N/A | |||||||
4th Quarter Average | - | 14.6 | N/A | N/A | |||||||
Full Year Average | 14.4 | 15.0 | (0.6 | ) | -4.0 | % | |||||
Unprocessed Claims Inventories | |||||||||||
Date | Estimated Valuation (000's) | Claim Item Counts | Number of Days on Hand | ||||||||
6/30/2007 | $211,300 | 751,600 | 4.9 | ||||||||
9/30/2007 | $224,000 | 819,100 | 6.1 | ||||||||
12/31/2007 | $213,400 | 683,500 | 5.0 | ||||||||
3/31/2008 | $212,000 | 673,000 | 4.4 | ||||||||
6/30/2008 | $228,700 | 742,800 | 4.6 | ||||||||
9/30/2008 | $293,600 | 946,500 | 6.0 | ||||||||
12/31/2008 | $247,200 | 745,500 | 4.3 | ||||||||
3/31/2009 | $258,800 | 740,600 | 4.2 | ||||||||
6/30/2009 | $258,000 | 709,900 | 4.0 | ||||||||
S-15 |
Humana Inc. | ||||||||||||||||||
Benefits Payable Statistics (Continued) (Q) | ||||||||||||||||||
Days in Claims Payable (S) | ||||||||||||||||||
Quarter Ended | Days in Claims Payable (DCP) | Change Last 4 Quarters | Percentage Change | DCP Excluding Capitation | Change Last 4 Quarters | Percentage Change | ||||||||||||
6/30/2007 | 60.0 | 4.2 | 7.5 | % | 68.5 | 6.5 | 10.5 | % | ||||||||||
9/30/2007 | 61.8 | 4.3 | 7.5 | % | 70.2 | 5.9 | 9.2 | % | ||||||||||
12/31/2007 | 60.2 | 3.9 | 6.9 | % | 68.3 | 4.3 | 6.7 | % | ||||||||||
3/31/2008 | 56.9 | (2.4 | ) | -4.0 | % | 63.3 | (2.7 | ) | -4.1 | % | ||||||||
6/30/2008 | 57.2 | (2.8 | ) | -4.7 | % | 63.3 | (5.2 | ) | -7.6 | % | ||||||||
9/30/2008 | 58.1 | (3.7 | ) | -6.0 | % | 65.1 | (5.1 | ) | -7.3 | % | ||||||||
12/31/2008 | 59.4 | (0.8 | ) | -1.3 | % | 66.5 | (1.8 | ) | -2.6 | % | ||||||||
3/31/2009 | 54.6 | (2.3 | ) | -4.0 | % | 60.9 | (2.4 | ) | -3.8 | % | ||||||||
6/30/2009 | 56.1 | (1.1 | ) | -1.9 | % | 61.5 | (1.8 | ) | -2.8 | % | ||||||||
Year-to-Date Change in Days in Claims Payable (T) | ||||||||||||||||||
1H09 | 1H08 | |||||||||||||||||
DCP - beginning of period | 59.4 | 60.2 | ||||||||||||||||
Components of change in DCP: | ||||||||||||||||||
Internal versus outsourced claims processing cycle times | - | (2.6 | ) | |||||||||||||||
Change in unprocessed claims inventories | (0.9 | ) | (0.5 | ) | ||||||||||||||
Change in processed claims inventories | 0.2 | 0.7 | ||||||||||||||||
Change in pharmacy payment cutoff | (1.6 | ) | (0.4 | ) | ||||||||||||||
Impact of Cariten acquisition in 4Q08 | (0.9 | ) | - | |||||||||||||||
All other | (0.1 | ) | (0.2 | ) | ||||||||||||||
DCP - end of period | 56.1 | 57.2 | ||||||||||||||||
S-16 |
Humana Inc. | ||
Footnotes to Statistical Schedules and Supplementary Information | ||
2Q09 Earnings Release | ||
(A) | The selling, general and administrative (SG&A) expense ratio is defined as SG&A expenses as a percent of premiums, administrative services fees and other revenue. | |
(B) | Other supplemental benefits include life, disability, and fixed benefit products including cancer and critical illness policies. | |
(C) | 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). | |
(D) | Military services revenues are generally not contracted on a per-member basis. | |
(E) | 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 benefit expense ratio. 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 physicians and hospitals for services rendered to their HMO membership. | |
(F) | 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 benefit expenses 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. | |
(G) | Duration is the time-weighted average of the present value of the bond portfolio cash flow. | |
(H) | IBNR represents an estimate of benefit expenses payable for claims incurred but not reported (IBNR) at the balance sheet date. The level of IBNR is primarily impacted by membership levels, benefit 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 benefits payable includes amounts payable to providers under capitation arrangements. | |
(I) | Unprocessed claim inventories represent the estimated valuation of claims received but not yet fully processed. | |
(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) | Military services IBNR primarily fluctuates due to benefit expense inflation and changes in the utilization of benefits. Amount includes unprocessed inventories as an independent third party administrator processes all military services benefit claims on the company's behalf. | |
(M) | Other military benefits 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). | |
(N) | The table excludes activity associated with military services benefits payable, because the federal government bears a substantial portion of the risk associated with financing the cost of health benefits. More specifically, the risk-sharing provisions of the military services contracts with the federal government and with subcontractors effectively limit profits and losses when actual claim experience varies from the targeted claim amount negotiated annually. As a result of these contract provisions, the impact of changes in estimates for prior year military services benefits payable are substantially offset by the associated changes in estimates of revenue from health care services reimbursements. As such, any impact on the company's results of operations is reduced substantially, whether positive or negative. | |
(O) | Amounts incurred related to prior years vary from previously estimated liabilities as the claims ultimately are settled. Negative amounts reported for incurred related to prior years result from claims being ultimately settled for amounts less than originally estimated (favorable development). There were no changes in the approach used to determine the company's estimate of claim reserves during the quarter. | |
(P) | Future policy benefit expense has a related liability classified as a long-term liability on the balance sheet. | |
(Q) | Benefits reserves statistics represents fully-insured medical claims data and excludes military services claims data and specialty benefits. | |
(R) | 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 represent approximately 95% of the company's fully-insured claims volume. Pharmacy and specialty claims, including dental, vision and other supplemental benefits, are excluded from this measurement. | |
(S) | A common metric for monitoring benefits payable levels relative to the benefit expense is days in claims payable, or DCP, which represents the benefits payable at the end of the period divided by average benefit expenses per day in the quarterly period. Since the company has some providers under capitation payment arrangements (which do not require a benefits payable IBNR reserve), the company has also summarized this metric excluding capitation expense. In addition, this calculation excludes the impact of the company's military services and stand-alone PDP business. | |
(T) | DCP fluctuates due to a number of issues, the more significant of which are detailed in this rollforward. 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. This analysis excludes the impact of military services and Medicare stand-alone PDPs upon DCP. | |
S-17 |
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Humana Inc. | 277,90 | 0,91% |
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S&P 500 | 6 101,24 | -0,29% |