Humana Reports Fourth Quarter and Full Year 2012 Financial Results; Reaffirms 2013 Financial Guidance
Humana Reports Fourth Quarter and Full Year 2012 Financial Results;
Reaffirms 2013 Financial Guidance
* 4Q12 EPS of $1.19; FY12 EPS of $7.47, both above management’s expectations
* FY13 EPS guidance of $7.60 to $7.80 reaffirmed
* FY12 consolidated revenues grew 6 percent to over $39 billion
* FY12 cash flows from operations of $1.9 billion
Business Wire
LOUISVILLE, Ky. -- February 4, 2013
Humana Inc. (NYSE: HUM) today reported diluted earnings per common share (EPS)
for the quarter ended December 31, 2012 (4Q12) of $1.19, compared to $1.20 per
share for the quarter ended December 31, 2011 (4Q11). Results for 4Q12 were
relatively unchanged versus those for 4Q11, but exceeded management’s previous
expectations.
For the year ended December 31, 2012 (FY12) the company reported $7.47 in EPS
compared to $8.46 for the year ended December 31, 2011 (FY11), which was
higher than management’s previous expectations for FY12 EPS in the range of
$7.25 to $7.35. FY12 consolidated results included $0.48 per share of benefit
from favorable prior period medical claims reserve development compared to
$0.77 per share in FY11.
The company continues to anticipate EPS for the year ending December 31, 2013
(FY13) in the range of $7.60 to $7.80 as improving operating results and
modest accretion from the Metropolitan Health Networks, Inc. (Metropolitan)
acquisition that closed in late FY12 are expected to be generally offset by
slightly higher flu-related medical costs than previously anticipated, as well
as additional interest expense associated with the company’s recent senior
notes offering.
“The progress we made building our clinical capabilities in 2012 positions us
strongly for success in 2014 and beyond,” said Bruce D. Broussard, President
and Chief Executive Officer of Humana. “For 2013, we will continue to enhance
our integrated care delivery model, which we believe represents the future of
health care delivery, as we forecast another year of growth in revenues,
earnings and Medicare membership.”
Consolidated Highlights
Revenues – 4Q12 consolidated revenues were $9.56 billion, an increase of 6
percent from $9.06 billion in 4Q11, with total premiums and services revenue
up 5 percent compared to the prior year’s quarter. The year-over-year increase
in premiums and services revenue was primarily driven by higher Retail and
Employer Group segment revenues resulting from higher average individual and
group Medicare membership, partially offset by the company’s new South Region
TRICARE contract being accounted for as self-funded versus fully-insured for
the previous contract. The new contract became effective on April 1, 2012.
FY12 consolidated revenues increased 6 percent to $39.13 billion from $36.83
billion in FY11 with total premiums and services revenue also up 6 percent
compared to the prior year period, as a result of similar segment-level
changes as those affecting the fourth quarter year-over-year change.
Benefits expense – The 4Q12 consolidated benefit ratio (benefits expense as a
percent of premiums) of 83.7 percent increased by 190 basis points from 81.8
percent for the prior year’s quarter due primarily to a 360 basis point
increase in the Retail Segment benefit ratio, as discussed more fully below.
The consolidated benefit ratio for FY12 of 83.7 percent increased by 160 basis
points from the FY11 consolidated benefit ratio of 82.1 percent also primarily
due to a 290 basis point increase in the benefit ratio for the Retail Segment.
Operating expenses – The consolidated operating cost ratio (operating costs as
a percent of total revenues less investment income) of 17.5 percent for 4Q12
declined from 17.7 percent in 4Q11 primarily due to substantial reductions in
this operating metric for the Retail and Employer Group Segments nearly offset
by the impact of the accounting for the company’s new South Region TRICARE
contract in the company’s Other Businesses.
The FY12 consolidated operating cost ratio of 15.1 percent increased 30 basis
points from 14.8 percent for FY11 primarily due to the impact of the new South
Region TRICARE contract discussed above, partially offset by lower
year-over-year operating cost ratios for the Retail and Employer Group
Segments.
Strategic transaction update – On December 21, 2012, Humana completed its
previously disclosed acquisition of Metropolitan, a Medical Services
Organization that coordinates medical care for Medicare Advantage and Medicaid
beneficiaries, primarily in Florida.
Retail Segment Highlights
Pretax results:
* Retail Segment pretax income of $256 million in 4Q12 compares to $326
million in 4Q11, a decline of $70 million. This decrease was primarily due
to a higher benefit ratio, partially offset by a lower operating cost
ratio.
* For FY12, pretax earnings for the Retail Segment of $1.16 billion
decreased by $425 million from FY11 pretax earnings of $1.59 billion. The
full-year decrease reflects the same factors impacting the fourth quarter
year-over-year comparison. FY12 Retail Segment pretax results included
$110 million of benefit from favorable prior period medical claims reserve
development compared to $147 million in FY11.
Enrollment:
* Individual Medicare Advantage membership was 1,927,600 at December 31,
2012, an increase of 287,300 members, or 18 percent from 1,640,300 at
December 31, 2011, primarily due to a successful enrollment season
associated with the 2012 plan year as well as age-in enrollment throughout
the year.
* Effective March 31, 2012, the company added approximately 62,600 members
from the acquisition of Arcadian Management Services, Inc. (Arcadian). As
previously announced, the company divested approximately 12,600 members
acquired with Arcadian effective January 1, 2013 in accordance with the
company’s previously disclosed agreement with the United States Department
of Justice.
* January 2013 individual Medicare Advantage membership approximated
2,011,000, up approximately 83,400 from December 31, 2012, reflecting net
membership additions in line with the company’s expectations for the
recently completed 2013 Annual Election Period (AEP) for Medicare
beneficiaries and the Arcadian-related membership divestitures discussed
above.
* Membership in the company’s individual stand-alone Prescription Drug Plans
(PDPs) was 2,985,600 at December 31, 2012, up 445,200, or 18 percent
compared to 2,540,400 at December 31, 2011. These increases resulted
primarily from higher gross sales primarily during the 2012 enrollment
season, particularly for the company’s innovative Humana-Walmart plan
offering, supplemented by dual-eligible and age-in enrollments throughout
the year.
* January 2013 individual stand-alone PDP membership grew to approximately
3,113,000, an increase of approximately 127,400 from December 31, 2012, in
line with the company’s expectations for net additions during the AEP.
* HumanaOne® medical membership increased to 444,000 at December 31, 2012,
an increase of 10,400, or 2 percent, from 433,600 at December 31, 2011.
* Membership in individual specialty products^(a) of 948,700 at December 31,
2012 increased 21 percent from 782,500 at December 31, 2011, driven
primarily by increased membership in dental offerings.
Premiums and services revenue:
* 4Q12 premiums and services revenue for the Retail Segment was $6.11
billion, an increase of 15 percent from $5.31 billion in 4Q11. The
increase was primarily the result of 19 percent higher average individual
Medicare Advantage membership year over year.
Benefits expense:
* The 4Q12 benefit ratio for the Retail Segment was 82.6 percent, an
increase of 360 basis points from 79.0 percent in 4Q11. The year-over-year
increase was primarily due to a higher Medicare Advantage benefit ratio
associated with new members and increased outpatient utilization for both
new and existing members.
Operating costs:
* The Retail Segment’s operating cost ratio of 13.1 percent in 4Q12
decreased 160 basis points from 14.7 percent in 4Q11. The decrease was
primarily the result of cost efficiencies resulting from higher average
membership together with the company’s continued focus on operating cost
efficiencies.
Employer Group Segment Highlights
Pretax results:
* Employer Group Segment pretax loss of $25 million in 4Q12 compares to a
pretax loss of $51 million in 4Q11, and reflects an improved operating
cost ratio partially offset by a year-over-year increase in the benefit
ratio for this segment.
* For FY12, pretax earnings for the Employer Group Segment of $253 million
increased by $11 million versus FY11 pretax earnings of $242 million with
the same factors impacting fourth quarter results also driving the
year-over-year increase.
Enrollment:
* Group Medicare Advantage membership was 398,500 at December 31, 2012, an
increase of 80,300 members, or 25 percent, from 318,200 at December 31,
2011 primarily due to the addition of a large retiree account during FY12.
* Group fully-insured commercial medical membership increased to 1,211,800
at December 31, 2012, an increase of 31,600, or 3 percent, from 1,180,200
at December 31, 2011. This increase primarily reflected small group
business membership gains partially offset by lower membership in large
group accounts. Approximately 59 percent of group fully-insured commercial
medical membership was in small group accounts at December 31, 2012 versus
56 percent at December 31, 2011.
* Group administrative services only (ASO) commercial medical membership
declined to 1,237,700 at December 31, 2012, a decrease of 54,600, or 4
percent, from 1,292,300 at December 31, 2011. This decline reflected a
continuation of discipline in pricing services for self-funded accounts
amid a highly competitive environment.
* Membership in Employer Group specialty products^(a) increased to 7,136,200
at December 31, 2012, an increase of 603,600, or 9 percent, from 6,532,600
at December 31, 2011. This increase primarily resulted from increased
cross-sales of the company’s specialty products to its medical membership
and growth in stand-alone specialty product sales.
Premiums and services revenue:
* 4Q12 premiums and services revenue for the Employer Group Segment were
$2.63 billion, up approximately 14 percent from $2.30 billion in 4Q11
primarily reflecting the impacts of higher average group Medicare
Advantage and commercial fully-insured membership.
Benefits expense:
* 4Q12 benefit ratio for the Employer Group Segment was 87.1 percent, an
increase of 70 basis points from 86.4 percent for 4Q11. The year-over-year
increase in the benefit ratio primarily reflected a higher percentage of
members in group Medicare Advantage plans (which carry a higher benefit
ratio than commercial fully-insured group accounts).
Operating costs:
* The Employer Group Segment’s operating cost ratio was 16.7 percent in
4Q12, a decline of 210 basis points from 18.8 percent in 4Q11, primarily
reflecting a higher percentage of members in group Medicare Advantage
plans (which carry a lower operating cost ratio than commercial
fully-insured group accounts) as well as cost savings associated with
operating cost reduction initiatives.
Health and Well-Being Services Segment Highlights
Pretax results:
* Health and Well-Being Services Segment pretax income of $75 million in
4Q12 declined $10 million from $85 million in 4Q11 primarily due to
transaction costs associated with the closings of the Metropolitan and
MCCI Holdings, LLC (MCCI) strategic transactions announced in November
2012.
* For FY12, pretax earnings for the Health and Well-Being Services Segment
of $486 million increased by $133 million from FY11 pretax earnings of
$353 million, primarily from higher earnings in the company’s RightSource®
mail order operations.
Revenues:
* Revenues of $3.26 billion in 4Q12 for the Health and Well-Being Services
Segment increased 13 percent from $2.90 billion in 4Q11. This increase was
primarily due to growth in the company’s pharmacy solutions business.
Operating costs:
* The Health and Well-Being Services Segment’s operating cost ratio of 96.8
percent in 4Q12 increased by 50 basis points from 96.3 percent in 4Q11,
primarily due to costs associated with the 4Q12 closings of the previously
announced Metropolitan and MCCI strategic transactions.
Other Businesses Highlights
Pretax results:
* Other Businesses incurred a pretax loss of $31 million in 4Q12 versus
pretax income of $1 million in 4Q11, primarily due to a reserve
strengthening for the company’s closed block of long-term-care business in
4Q12
* For FY12, a pretax loss for Other Businesses of $19 million compares to
pretax income of $84 million in FY11. This year-over-year decline
primarily reflected the combined effect of approximately $46 million in
benefits expense related to the settlement of previously disclosed
litigation involving Humana Military Healthcare Services, Inc., the 4Q12
adjustments to long-term-care reserves described above and the change in
profitability under the new South Region TRICARE contract described below.
* On April 1, 2012, the company’s new South Region TRICARE contract became
effective with the Department of Defense (DoD). The company’s new contract
is structured similar to self-funded products versus a fully-insured
structure for the company’s previous South Region TRICARE contract with
the DoD. This change resulted in significant volatility in year-over-year
comparisons for the company’s Other Businesses.
Balance Sheet
* At December 31, 2012, the company had cash, cash equivalents, and
investment securities of $11.15 billion, up approximately $320 million
from $10.83 billion at December 31, 2011 reflecting higher balances
associated with increased revenues for FY12 versus FY11.
* In early December 2012, the company announced it had completed its public
offering of $1 billion of senior notes. A substantial portion of the
proceeds from that debt offering was used to complete the Metropolitan
transaction, including the retirement of Metropolitan’s indebtedness and
for related transaction fees and expenses, all in late December 2012.
* Parent company cash and short-term investments of $346 million at December
31, 2012 decreased $176 million from $522 million at September 30, 2012,
primarily reflecting strategic transaction activity and cash dividends to
stockholders during 4Q12 partially offset by the net proceeds from the
issuance of debt. Cash and short-term investments at the parent decreased
$148 million year over year from $494 million held at the parent at
December 31, 2011 as increased dividends from subsidiaries and net
proceeds from the issuance of debt during 4Q12 were more than offset by
strategic transaction activity, share repurchases and cash dividends to
stockholders.
* Days in claims payable of 48.5 at December 31, 2012 decreased 3.1 days
from 51.6 days at September 30, 2012 primarily due to a decline in
processed and unprocessed claims on hand as well as certain provider
capitation payment settlements during 4Q12.
* Debt-to-total capitalization at December 31, 2012 was 22.8 percent, up 710
basis points from 15.7 percent at September 30, 2012, and up 570 basis
points from 17.1 percent at December 31, 2011 primarily driven by the 4Q12
issuance of senior notes described above.
Cash Flows from Operations
Cash flows provided by operations for 4Q12 were $205 million compared to cash
flows used in operations of $1.80 billion in 4Q11. The company also evaluates
operating cash flows on a non-GAAP basis:
Net cash from operating activities 4Q12 4Q11
(in millions) Cash Flows Cash Flows
GAAP $ 205 ($1,797)
Timing of premium payment from CMS (b) - 1,796
Non-GAAP (c) $ 205 ($1)
The year-over-year increase in the non-GAAP cash flows from operations is due
primarily to the effect on cash flows of changes in working capital accounts.
FY12 cash flows from operations of $1.92 billion compared to $2.08 billion for
FY11, primarily due to lower net income year over year.
Share Repurchase Program
* During FY12, under the company’s current share repurchase authorization
and a previously approved share repurchase authorization, the company
executed share repurchases of approximately $460 million, or approximately
6,252,900 of its outstanding shares, at an average price of $73.66 per
share.
* As of February 4, 2013, approximately $640 million of the $1 billion April
2012 share repurchase authorization remained, with an expiration date of
June 30, 2014.
Footnotes
(a) The company provides a full range of insured specialty products including
dental, vision and other supplemental health and financial protection
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.
(b) Generally, when the first day of a month falls on a weekend or holiday,
with the exception of January 1 (New Year’s Day), the company receives this
payment on the last business day of the previous month. Consequently, 4Q11
cash flows included two monthly Medicare payments compared to three monthly
Medicare payments during 4Q12.
(c) The Company has included certain financial measures that are not in
accordance with Generally Accepted Accounting Principles (GAAP) in its summary
of financial results within this earnings press 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.
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 at least 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 at least 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
Humana’s executive officers, the words or phrases like “expects,”
“anticipates,” “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 the company’s 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, if the company
is unable to implement clinical initiatives to provide a better health
care experience for its members, lower costs and appropriately document
the risk profile of its members, or if its estimates of benefits expense
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 because they are extremely sensitive to changes in payment
patterns and medical cost trends.
* If Humana fails to effectively implement its operational and strategic
initiatives, particularly its Medicare initiatives (given the
concentration of the company’s revenues in the Medicare business), the
company’s business may be materially adversely affected.
* If Humana fails to properly maintain the integrity of its data, to
strategically implement new information systems, to protect Humana’s
proprietary rights to its systems, or to defend against cyber-security
attacks, the company’s business may be materially adversely affected.
* Humana’s business may be materially adversely impacted by CMS’s adoption
of a new coding set for diagnoses.
* Humana is involved in various legal actions and governmental and internal
investigations, any of which, if resolved unfavorably to the company,
could result in substantial monetary damages. Increased litigation and
negative publicity could also increase the company’s cost of doing
business.
* As a government contractor, Humana is exposed to risks that may materially
adversely affect its business or its willingness or ability to participate
in government health care programs.
* Recently enacted health insurance reform, including The Patient Protection
and Affordable Care Act and The Health Care and Education Reconciliation
Act of 2010, could have a material adverse effect on Humana’s results of
operations, including restricting revenue, enrollment and premium growth
in certain products and market segments, restricting the company’s ability
to expand into new markets, increasing the company's medical and operating
costs by, among other things, requiring a minimum benefit ratio on insured
products (and particularly how the ratio may apply to Medicare plans,
including aggregation, credibility thresholds, and its possible
application to prescription drug plans), lowering the company’s Medicare
payment rates and increasing the company’s expenses associated with a
non-deductible federal premium tax and other assessments; financial
position, including the company's ability to maintain the value of its
goodwill; and cash flows. In addition, if the new non-deductible federal
premium tax and other assessments, including a three-year commercial
reinsurance fee, were imposed as enacted, and if Humana is unable to
adjust its business model to address these new taxes and assessments, such
as through the reduction of the company’s operating costs, there can be no
assurance that the non-deductible federal premium tax and other
assessments would not have a material adverse effect on the company’s
results of operations, financial position, and cash flows.
* Humana’s business activities are subject to substantial government
regulation. New laws or regulations, or changes in existing laws or
regulations or their manner of application could increase the company’s
cost of doing business and may adversely affect the company’s business,
profitability and cash flows.
* Any failure to manage operating costs could hamper Humana’s profitability.
* Any failure by Humana to manage acquisitions and other significant
transactions successfully may have a material adverse effect on its
results of operations, financial position, and cash flows.
* If Humana fails to develop and maintain satisfactory relationships with
the providers of care to its members, the company’s business may be
adversely affected.
* Humana’s pharmacy business is highly competitive and subjects it to
regulations in addition to those the company faces with its core health
benefits businesses.
* Changes in the prescription drug industry pricing benchmarks may adversely
affect Humana’s financial performance.
* If Humana does not continue to earn and retain purchase discounts and
volume rebates from pharmaceutical manufacturers at current levels,
Humana’s gross margins may decline.
* 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 business, results of operations, and financial condition.
* Changes in economic conditions could adversely affect Humana’s business
and results of operations.
* The securities and credit markets may experience volatility and
disruption, which may adversely affect Humana’s business.
* 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 the company is 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, 2011;
* Form 10-Qs for the quarters ended March 31, 2012, June 30, 2012 and
September 30, 2012 (as amended by the Form 10-Q/A filed on December 4,
2012);
* Form 8-Ks filed during 2012 and 2013.
About Humana
Humana Inc., headquartered in Louisville, Kentucky, is a leading health care
company that offers a wide range of insurance products and health and wellness
services that incorporate an integrated approach to lifelong well-being. By
leveraging the strengths of its core businesses, Humana believes it can better
explore opportunities for existing and emerging adjacencies in health care
that can further enhance wellness opportunities for the millions of people
across the nation with whom the company has relationships.
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 February 4, 2013
(in accordance with For the year ending Comments
Generally Accepted December 31, 2013
Accounting Principles)
Diluted earnings per
common share (EPS)
FY13 includes
Full Year $7.60 to $7.80 approximately $0.30 per
share in
investment spending
First Quarter $1.75 to $1.85
Revenues
$41.0 billion to $41.5 Includes expected
Consolidated billion investment income in
the range
of $365 million to $385
million for 2013
Retail Segment $26.25 billion to Segment-level revenues
$26.75 billion include intersegment
Employer Group Segment $11.0 billion to $11.5 amounts that eliminate
billion in consolidation
Health and Well-Being
Services
Segment $15.0 billion to $15.5
billion
Other Businesses $1.8 billion to $2.1
billion
Ending medical
membership versus prior
year end
Retail Segment Up 100,000 to 120,000 Includes the January 1,
2013 disposition of
12,600 Medicare
Medicare Advantage Advantage members
acquired in
the March 2012 Arcadian
transaction in
accordance with the
company’s previously
disclosed agreement
with the United States
Department of Justice.
Medicare stand-alone Up 135,000 to 175,000
PDPs
HumanaOne Down approximately
50,000
Medicare Supplement Up 15,000 to 25,000
Employer Group Segment
Medicare Advantage Up approximately
20,000
Commercial Flat to up 5,000
Fully-Insured
Commercial ASO Down 25,000 to 45,000
Benefit ratios Benefits expense as a
percent of premiums
Retail Segment 84.5% to 85.0%
Employer Group Segment 85.0% to 86.0%
Operating costs as a
Operating cost ratios percent of total
revenues
excluding investment
income
Consolidated 15.0% to 15.5%
Health and Well-Being
Services
Segment 95.5% to 96.0%
Consolidated Certain D&A is included
depreciation and in benefits expense on
amortization
Income statement $330 million to $350 the income statement
million but shown as a non-cash
Cash flows statement $415 million to $435 item on the cash flows
million statement
Consolidated interest $140 million to $145
expense million
Segment-level pretax
Detailed pretax results results and margins
include
the impact of net
investment income
Retail Segment $1.29 billion to $1.33
billion;
approximately 5%
pretax margin
Employer Group Segment $105 million to $155
million;
1.0% to 1.2% pretax
margin
Health and Well-Being
Services
Segment $500 million to $550
million;
3.0% to 3.5% pretax
margin
Effective Tax Rate Approximately 37%
Diluted shares Approximately 161.5 Projections exclude the
million impact of future share
repurchases
Cash flows from $1.8 billion to $2.0
operations billion
Capital expenditures $425 million to $450
million
Humana Inc.
Statistical Schedules
And
Supplementary Information
4Q12 Earnings Release
S-1
Humana Inc.
Statistical Schedules and Supplementary Information
4Q12 Earnings Release
Contents
Page Description
S-3-4 Consolidated Statements of Income
S-5-6 Quarterly Segment Financial Information
S-7-8 FY Segment Financial Information
S-9 Consolidated Balance Sheets
S-10-11 Consolidated Statements of Cash Flows
S-12 Key Income Statement Ratios and Segment Operating Results
S-13-14 Health and Well-Being Services Segment Metrics
S-15 Membership Detail
S-16-17 Premiums and Services Revenue Detail
S-18 Medicare Summary
S-19 Investments
S-20-22 Benefits Payable Detail and Statistics
S-23 Footnotes
S-2
Humana Inc.
Consolidated Statements
of Income
In millions, except per
common share results
Three Months Ended
December 31,
Dollar Percentage
2012 2011 Change Change
Revenues:
Premiums $ 8,980 $ 8,638 $ 342 4.0 %
Services 475 325 150 46.2 %
Investment income 102 93 9 9.7 %
Total 9,557 9,056 501 5.5 %
revenues
Operating expenses:
Benefits 7,516 7,062 454 6.4 %
Operating costs 1,655 1,585 70 4.4 %
Depreciation and 77 69 8 11.6 %
amortization
Total
operating 9,248 8,716 532 6.1 %
expenses
Income from operations 309 340 (31 ) -9.1 %
Interest expense 27 27 0 0.0 %
Income before income 282 313 (31 ) -9.9 %
taxes
Provision for income 90 114 (24 ) -21.1 %
taxes
Net income $ 192 $ 199 $ (7 ) -3.5 %
Basic earnings per $ 1.21 $ 1.22 $ (0.01 ) -0.8 %
common share
Diluted earnings per $ 1.19 $ 1.20 $ (0.01 ) -0.8 %
common share
Shares used in computing
basic earnings per 158,764 163,238
common share (000's)
Shares used in computing
diluted earnings per 160,682 165,632
common share (000's)
S-3
Humana Inc.
Consolidated Statements of
Income
In millions, except per
common share results
Twelve Months Ended
December 31,
Dollar Percentage
2012 2011 Change Change
Revenues:
Premiums $ 37,009 $ 35,106 $ 1,903 5.4%
Services 1,726 1,360 366 26.9%
Investment income 391 366 25 6.8%
Total revenues 39,126 36,832 2,294 6.2%
Operating expenses:
Benefits 30,985 28,823 2,162 7.5%
Operating costs 5,830 5,395 435 8.1%
Depreciation and 295 270 25 9.3%
amortization
Total operating 37,110 34,488 2,622 7.6%
expenses
Income from operations 2,016 2,344 (328) -14.0%
Interest expense 105 109 (4) -3.7%
Income before income taxes 1,911 2,235 (324) -14.5%
Provision for income taxes 689 816 (127) -15.6%
Net income $ 1,222 $ 1,419 $ (197) -13.9%
Basic earnings per common $ 7.56 $ 8.58 $ (1.02) -11.9%
share
Diluted earnings per common $ 7.47 $ 8.46 $ (0.99) -11.7%
share
Shares used in computing
basic earnings per common 161,484 165,413
share (000's)
Shares used in computing
diluted earnings per common 163,457 167,827
share (000's)
S-4
Humana Inc.
4Q12 Segment
Financial
Information
In millions
Health and
Employer Well-Being Other Eliminations/
Retail Group Services Businesses Corporate Consolidated
Revenues -
external
customers
Premiums:
Medicare $ 5,184 $ 1,005 $ - $ - $ - $ 6,189
Advantage
Medicare
stand-alone 620 2 - 63 - 685
PDP
Total 5,804 1,007 - 63 - 6,874
Medicare
Fully-insured 255 1,251 - - - 1,506
Specialty 46 277 - - - 323
Military - - - 11 - 11
services
Medicaid and - - - 266 - 266
other (A)
Total 6,105 2,535 - 340 - 8,980
premiums
Services
revenue:
Provider - - 271 - - 271
ASO and other 7 92 - 100 - 199
(B)
Pharmacy - - 5 - - 5
Total
services 7 92 276 100 - 475
revenue
Total
revenues - 6,112 2,627 276 440 - 9,455
external
customers
Intersegment
revenues
Services - 4 2,423 - (2,427 ) -
Products - - 565 - (565 ) -
Total
intersegment - 4 2,988 - (2,992 ) -
revenues
Investment 21 11 - 15 55 102
income
Total 6,133 2,642 3,264 455 (2,937 ) 9,557
revenues
Operating
expenses:
Benefits 5,042 2,208 - 354 (88 ) 7,516
Operating 800 439 3,161 128 (2,873 ) 1,655
costs
Depreciation
and 35 20 28 4 (10 ) 77
amortization
Total
operating 5,877 2,667 3,189 486 (2,971 ) 9,248
expenses
Income (loss)
from 256 (25 ) 75 (31 ) 34 309
operations
Interest - - - - 27 27
expense
Income (loss)
before income $ 256 $ (25 ) $ 75 $ (31 ) $ 7 $ 282
taxes
Benefit ratio 82.6 % 87.1 % 104.1 % 83.7 %
Operating
cost ratio 13.1 % 16.7 % 96.8 % 29.1 % 17.5 %
(C)
S-5
Humana Inc.
4Q11 Segment
Financial
Information
In millions
Health and
Employer Well-Being Other Eliminations/
Retail Group Services Businesses Corporate Consolidated
Revenues -
external
customers
Premiums:
Medicare $ 4,454 $ 789 $ - $ - $ - $ 5,243
Advantage
Medicare
stand-alone 580 2 - 57 - 639
PDP
Total 5,034 791 - 57 - 5,882
Medicare
Fully-insured 233 1,181 - - - 1,414
Specialty 35 237 - - - 272
Military - - - 814 - 814
services
Medicaid and - - - 256 - 256
other (A)
Total 5,302 2,209 - 1,127 - 8,638
premiums
Services
revenue:
Provider - - 222 - - 222
ASO and other 4 87 - 9 - 100
(B)
Pharmacy - - 3 - - 3
Total
services 4 87 225 9 - 325
revenue
Total
revenues - 5,306 2,296 225 1,136 - 8,963
external
customers
Intersegment
revenues
Services - 4 2,185 - (2,189 ) -
Products - - 490 - (490 ) -
Total
intersegment - 4 2,675 - (2,679 ) -
revenues
Investment 19 12 - 14 48 93
income
Total 5,325 2,312 2,900 1,150 (2,631 ) 9,056
revenues
Operating
expenses:
Benefits 4,190 1,909 - 1,036 (73 ) 7,062
Operating 779 433 2,794 110 (2,531 ) 1,585
costs
Depreciation
and 30 21 21 3 (6 ) 69
amortization
Total
operating 4,999 2,363 2,815 1,149 (2,610 ) 8,716
expenses
Income (loss)
from 326 (51 ) 85 1 (21 ) 340
operations
Interest - - - - 27 27
expense
Income (loss)
before income $ 326 $ (51 ) $ 85 $ 1 $ (48 ) $ 313
taxes
Benefit ratio 79.0 % 86.4 % 91.9 % 81.8 %
Operating
cost ratio 14.7 % 18.8 % 96.3 % 9.7 % 17.7 %
(C)
S-6
Humana Inc.
FY 12 Segment
Financial
Information
In millions
Health and
Employer Well-Being Other Eliminations/
Retail Group Services Businesses Corporate Consolidated
Revenues -
external
customers
Premiums:
Medicare $ 20,788 $ 4,064 $ - $ - $ - $ 24,852
Advantage
Medicare
stand-alone 2,587 8 - 266 - 2,861
PDP
Total 23,375 4,072 - 266 - 27,713
Medicare
Fully-insured 1,004 4,996 - - - 6,000
Specialty 171 1,070 - - - 1,241
Military - - - 1,017 - 1,017
services
Medicaid and - - - 1,038 - 1,038
other (A)
Total 24,550 10,138 - 2,321 - 37,009
premiums
Services
revenue:
Provider - - 1,020 - - 1,020
ASO and other 24 358 - 308 - 690
(B)
Pharmacy - - 16 - - 16
Total
services 24 358 1,036 308 - 1,726
revenue
Total
revenues - 24,574 10,496 1,036 2,629 - 38,735
external
customers
Intersegment
revenues
Services 2 15 9,610 - (9,627 ) -
Products - - 2,342 - (2,342 ) -
Total
intersegment 2 15 11,952 - (11,969 ) -
revenues
Investment 79 42 - 58 212 391
income
Total 24,655 10,553 12,988 2,687 (11,757 ) 39,126
revenues
Operating
expenses:
Benefits 20,651 8,524 - 2,198 (388 ) 30,985
Operating 2,711 1,696 12,407 492 (11,476 ) 5,830
costs
Depreciation
and 131 80 95 16 (27 ) 295
amortization
Total
operating 23,493 10,300 12,502 2,706 (11,891 ) 37,110
expenses
Income (loss)
from 1,162 253 486 (19 ) 134 2,016
operations
Interest - - - - 105 105
expense
Income (loss)
before income $ 1,162 $ 253 $ 486 $ (19 ) $ 29 $ 1,911
taxes
Benefit ratio 84.1 % 84.1 % 94.7 % 83.7 %
Operating
cost ratio 11.0 % 16.1 % 95.5 % 18.7 % 15.1 %
(C)
S-7
Humana Inc.
FY 11 Segment
Financial
Information
In millions
Health and
Employer Well-Being Other Eliminations/
Retail Group Services Businesses Corporate Consolidated
Revenues -
external
customers
Premiums:
Medicare $ 18,100 $ 3,152 $ - $ - $ - $ 21,252
Advantage
Medicare
stand-alone 2,317 8 - 253 - 2,578
PDP
Total 20,417 3,160 - 253 - 23,830
Medicare
Fully-insured 861 4,782 - - - 5,643
Specialty 124 935 - - - 1,059
Military - - - 3,616 - 3,616
services
Medicaid and - - - 958 - 958
other (A)
Total 21,402 8,877 - 4,827 - 35,106
premiums
Services
revenue:
Provider - - 892 - - 892
ASO and other 16 356 - 85 - 457
(B)
Pharmacy - - 11 - - 11
Total
services 16 356 903 85 - 1,360
revenue
Total
revenues - 21,418 9,233 903 4,912 - 36,466
external
customers
Intersegment
revenues
Services - 14 8,510 - (8,524 ) -
Products - - 1,820 - (1,820 ) -
Total
intersegment - 14 10,330 - (10,344 ) -
revenues
Investment 76 48 - 54 188 366
income
Total 21,494 9,295 11,233 4,966 (10,156 ) 36,832
revenues
Operating
expenses:
Benefits 17,383 7,318 - 4,411 (289 ) 28,823
Operating 2,405 1,650 10,798 461 (9,919 ) 5,395
costs
Depreciation
and 119 85 82 10 (26 ) 270
amortization
Total
operating 19,907 9,053 10,880 4,882 (10,234 ) 34,488
expenses
Income from 1,587 242 353 84 78 2,344
operations
Interest - - - - 109 109
expense
Income (loss)
before income $ 1,587 $ 242 $ 353 $ 84 $ (31 ) $ 2,235
taxes
Benefit ratio 81.2 % 82.4 % 91.4 % 82.1 %
Operating
cost ratio 11.2 % 17.8 % 96.1 % 9.4 % 14.8 %
(C)
S-8
Humana Inc.
Consolidated Balance Sheets
Dollars in millions, except
share amounts
December 31, December 31, YOY Change
2012 2011 Dollar Percent
Assets
Current assets:
Cash and cash equivalents $ 1,306 $ 1,377
Investment securities 8,001 7,743
Receivables, net 733 1,034
Other 1,670 1,027
Total current assets 11,710 11,181 $ 529 4.7 %
Property and equipment, net 1,098 912
Long-term investment 1,846 1,710
securities
Goodwill 3,640 2,740
Other 1,685 1,165
Total assets 19,979 17,708 $ 2,271 12.8 %
Liabilities and
Stockholders' Equity
Current liabilities:
Benefits payable 3,779 3,754
Trade accounts payable and 2,042 1,783
accrued expenses
Book overdraft 324 306
Unearned revenues 230 213
Total current liabilities 6,375 6,056 $ 319 5.3 %
Long-term debt 2,611 1,659
Future policy benefits 1,858 1,663
payable
Other long-term liabilities 288 267
Total liabilities 11,132 9,645 $ 1,487 15.4 %
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; 194,470,820 32 32
issued at December 31,
2012
Capital in excess of par 2,101 1,938
value
Retained earnings 7,881 6,825
Accumulated other 386 303
comprehensive income
Treasury stock, at cost,
36,138,955 shares at (1,553 ) (1,035 )
December 31, 2012
Total stockholders' equity 8,847 8,063 $ 784 9.7 %
Total liabilities and $ 19,979 $ 17,708 $ 2,271 12.8 %
stockholders' equity
Debt-to-total capitalization 22.8 % 17.1 %
ratio
S-9
Humana Inc.
Consolidated
Statements of Cash
Flows
Dollars in millions
Three Months Ended December 31,
Dollar Percentage
2012 2011 Change Change
Cash flows from
operating
activities
Net income $ 192 $ 199
Adjustments to
reconcile net
income to net
cash
provided by (used
in) operating
activities:
Depreciation and 100 78
amortization
Net realized (13 ) (4 )
capital gains
Stock-based 14 14
compensation
(Benefit from)
provision for (74 ) 10
deferred income
taxes
Changes in
operating assets
and liabilities
excluding the
effects of
acquisitions:
Receivables (84 ) 2
Other assets (17 ) 22
Benefits payable (172 ) (143 )
Other liabilities 179 (198 )
Unearned revenues 52 (1,794 )
Other 28 17
Net cash provided
by (used in) 205 (1,797 ) $ 2,002 111.4 %
operating
activities
Cash flows from
investing
activities
Acquisitions, net (947 ) (212 )
of cash acquired
Purchases of
property and (106 ) (120 )
equipment
Purchases of
investment (1,055 ) (1,011 )
securities
Proceeds from
maturities of 386 494
investment
securities
Proceeds from
sales of 510 634
investment
securities
Net cash used in
investing (1,212 ) (215 ) ($997 ) -463.7 %
activities
Cash flows from
financing
activities
Receipts
(withdrawals) (50 ) (603 )
from contract
deposits, net
Proceeds from
issuance of 990 -
senior notes, net
Change in book 47 7
overdraft
Common stock (5 ) -
repurchases
Excess tax
benefit from 1 3
stock-based
compensation
Dividends paid (41 ) (41 )
Proceeds from
stock option 8 4
exercises and
other
Net cash provided
by (used in) 950 (630 ) $ 1,580 250.8 %
financing
activities
Decrease in cash
and cash (57 ) (2,642 )
equivalents
Cash and cash
equivalents at 1,363 4,019
beginning of period
Cash and cash
equivalents at end $ 1,306 $ 1,377
of period
S-10
Humana Inc.
Consolidated
Statements of Cash
Flows
Dollars in millions
Twelve Months Ended December
31,
Dollar Percentage
2012 2011 Change Change
Cash flows from
operating activities
Net income $ 1,222 $ 1,419
Adjustments to
reconcile net
income to net cash
provided by
operating
activities:
Depreciation and 338 303
amortization
Net realized (33 ) (11 )
capital gains
Stock-based 82 67
compensation
(Benefit from)
provision for (80 ) 22
deferred income
taxes
Changes in
operating assets
and liabilities
excluding the
effects of
acquisitions:
Receivables 352 (75 )
Other assets (253 ) (183 )
Benefits payable (41 ) 256
Other liabilities 300 194
Unearned revenues (43 ) 26
Other 79 61
Net cash provided by 1,923 2,079 ($156 ) -7.5 %
operating activities
Cash flows from
investing activities
Acquisitions, net (1,235 ) (226 )
of cash acquired
Purchases of
property and (410 ) (336 )
equipment
Purchases of
investment (3,221 ) (3,678 )
securities
Proceeds from
maturities of 1,497 1,623
investment
securities
Proceeds from
sales of 1,404 1,259
investment
securities
Net cash used in (1,965 ) (1,358 ) ($607 ) -44.7 %
investing activities
Cash flows from
financing activities
Receipts
(withdrawals) from (397 ) (378 )
contract deposits,
net
Repayment of (36 ) -
long-term debt
Proceeds from
issuance of senior 990 -
notes, net
Change in book 18 (103 )
overdraft
Common stock (518 ) (541 )
repurchases
Excess tax benefit
from stock-based 22 15
compensation
Dividends paid (165 ) (82 )
Proceeds from
stock option 57 72
exercises and
other
Net cash provided by
(used) in financing (29 ) (1,017 ) $ 988 97.1 %
activities
Decrease in cash and (71 ) (296 )
cash equivalents
Cash and cash
equivalents at 1,377 1,673
beginning of period
Cash and cash
equivalents at end $ 1,306 $ 1,377
of period
S-11
Humana Inc.
Key Income Statement Ratios and
Segment Operating Results
Dollars in
millions
Three Months Ended Twelve Months Ended
December 31, December 31,
Percentage Percentage
2012 2011 Difference Change 2012 2011 Difference Change
Benefit ratio
Retail 82.6 % 79.0 % 3.6 % 84.1 % 81.2 % 2.9 %
Employer 87.1 % 86.4 % 0.7 % 84.1 % 82.4 % 1.7 %
Group
Other 104.1 % 91.9 % 12.2 % 94.7 % 91.4 % 3.3 %
Businesses
Consolidated 83.7 % 81.8 % 1.9 % 83.7 % 82.1 % 1.6 %
Operating cost
ratio (C)
Retail 13.1 % 14.7 % -1.6 % 11.0 % 11.2 % -0.2 %
Employer 16.7 % 18.8 % -2.1 % 16.1 % 17.8 % -1.7 %
Group
Health and
Well-Being 96.8 % 96.3 % 0.5 % 95.5 % 96.1 % -0.6 %
Services
Other 29.1 % 9.7 % 19.4 % 18.7 % 9.4 % 9.3 %
Businesses
Consolidated 17.5 % 17.7 % -0.2 % 15.1 % 14.8 % 0.3 %
Detail of
pretax income
(loss)
Retail $ 256 $ 326 ($70 ) -21.5 % $ 1,162 $ 1,587 ($425 ) -26.8 %
Employer ($25 ) ($51 ) $ 26 51.0 % $ 253 $ 242 $ 11 4.5 %
Group
Health and
Well-Being $ 75 $ 85 ($10 ) -11.8 % $ 486 $ 353 $ 133 37.7 %
Services
Other ($31 ) $ 1 ($32 ) -3200.0 % ($19 ) $ 84 ($103 ) -122.6 %
Businesses
Consolidated $ 282 $ 313 ($31 ) -9.9 % $ 1,911 $ 2,235 ($324 ) -14.5 %
S-12
*Story too large*
Humana Inc.
Health and Well-Being
Services Segment Metrics
Year Ended December 31,
2012 2011 Difference
Primary Care Providers:
Risk
Owned / JV 2,500 900 1,600 177.8 %
Contracted 2,900 2,900 - 0.0 %
Path-to-Risk 18,200 12,000 6,200 51.7 %
Other 84,900 76,400 8,500 11.1 %
Total 108,500 92,200 16,300 17.7 %
Care Management Clinicians:
[TRUNCATED]
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