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Humana Reports Third Quarter 2012 Financial Results, Issues 2013 Guidance, And Announces CEO Transition And Recent Strategic Transactions

Stocks in this article: HUM

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-Q for the quarters ended March 31, 2012 and June 30, 2012;
  • Form 8-Ks filed during 2012.

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 November 5, 2012

   

(in accordance with Generally Accepted Accounting Principles)

For the year ending December 31,

Comments

Excludes the pending acquisition of     Metropolitan Health Networks, Inc.

  2012   2013  

Diluted earnings per common share (EPS)

 

2013 includes approximately $0.30 per share  in investment spending

Full Year   $7.25 to $7.35   $7.60 to $7.80  
Revenues
Consolidated $39.0 billion to $39.5 billion $40.8 billion to $41.3 billion

Includes expected investment income of  approximately $385 million for 2012 and in  the range of $365 million to $385 million for  2013

 

Retail Segment

$24.5 billion to $25.0 billion

$26.25 billion to $26.75 billion

Segment-level revenues include intersegment  amounts that eliminate in consolidation

Employer Group Segment $10.5 billion to $11.0 billion $11.0 billion to $11.5 billion
Health and Well-Being Services Segment $13.1 billion to $13.3 billion $17.5 billion to $18.0 billion
Other Businesses   $2.50 billion to $2.75 billion   $1.8 billion to $2.1 billion  
Ending medical membership versus prior year end

 

Includes the January 1, 2013 disposition of  12,600 Medicare 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.

Retail Segment
Medicare Advantage Up 270,000 to 280,000 Up 100,000 to 120,000

Medicare stand-alone PDPs

 

 

 

 

Up 440,000 to 460,000

 

 

 

 

Up 125,000 to 175,000

Humana One Up 5,000 to 10,000 Down approximately 45,000
Medicare Supplement Up 15,000 to 25,000 Up 15,000 to 25,000
Employer Group Segment
Medicare Advantage Up approximately 80,000 Up approximately 20,000
Commercial Fully-Insured Up approximately 30,000 Down 5,000 to 20,000
Commercial ASO   Down 50,000 to 60,000   Down 25,000 to 45,000  
Benefit ratios Benefit expenses as a percent of premiums
Retail Segment 84.0% to 84.5% 84.0% to 84.5%
Employer Group Segment   84.0% to 85.0%   85.0% to 86.0%  
Operating cost ratios

Consolidated operating costs as a percent of  total revenues excluding investment income

Consolidated 14.75% to 15.25% 15.0% to 15.5%
Health & Well-Being Services Segment   95.25% to 95.75%   96.25% to 96.75%  
Consolidated depreciation and amortization

 

 

Certain D&A is included in benefits expense on

Income statement

$290 million to $310 million

$330 million to $350 million

the income statement but shown as a non-

Cash flows statement  

$330 million to $345 million

 

$380 million to $400 million

 

cash item on the cash flows statement

Consolidated interest expense   Approximately $105 million   Approximately $105 million    
Detailed pretax results

Segment-level pretax results and margins  include the impact of net investment  income

 

Retail Segment

 

$1.10 billion to $1.15 billion4.5% to 4.7%

 

$1.29 billion to $1.33 billionApproximately 5% pretax margin

 

Employer Group Segment

 

$200 million to $210 millionApproximately 2% pretax margin

 

$100 million to $150 million1.0% to 1.2% pretax margin

 

Health & Well-Being Services Segment

 

 

$510 million to $520 million3.75% to 4.25% pretax margin

 

 

$460 million to $510 million2.5% to 3.0% pretax margin

 
Effective Tax Rate   Approximately 36.8%   Approximately 37%    
Diluted shares   Approximately 163.5 million   Approximately 161.5 million  

Projections exclude the impact of future share  repurchases

Cash flows from operations   $1.7 billion to $1.9 billion   $1.8 billion to $2.0 billion    
Capital expenditures   Approximately $400 million   $425 million to $450 million    
 

     
Key Assumptions Affecting 2013 Guidance* * Expectation mid-points used for simplicity
Dollars in millions except per share amounts                    
Pretax Income  
Retail Segment  

Employer Group Segment

 

Health & Well- Being Services Segment

 

Other Businesses and Corporate

  Consolidated EPS
FY12 Guidance $1,125 $205 $515   $45   $1,890 $7.30
Changes in operating margins 150 (90 ) - (30 ) 30 0.12
Changes in membership and volume levels 25 10 45 - 80 0.31
Non-recurrence of 2Q12 litigation settlement -   -     -     46     46   0.18
Subtotal $1,300 $125 $560 $61 $2,046
Change in share count and tax rate 0.09  
Subtotal $8.00
Investments in integrated care delivery models -   -     (75 )   -     (75 ) (0.30 )
FY13 Guidance $1,300   $125     $485     $61     $1,971   $ 7.70  
 

 
 

Humana Inc.

Statistical Schedules

And

Supplementary Information

3Q12 Earnings Release

 
 

S-1

 
Humana Inc.
Statistical Schedules and Supplementary Information
3Q12 Earnings Release
 
Contents
 

Page

Description

 
S-3-4 Consolidated Statements of Income
S-5-6 Quarterly Segment Financial Information
S-7-8 YTD 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 Pharmacy Statistics
S-14 Membership Detail
S-15-16 Premiums and Services Revenue Detail
S-17 Medicare Summary
S-18 Investments
S-19-21 Benefits Payable
S-22 Footnotes
 
 

S-2

 

 
Humana Inc.
Consolidated Statements of Income
In millions, except per common share results
           
Three Months Ended September 30,
  Dollar Percentage
2012 2011 Change   Change
Revenues:
Premiums $ 9,088 $ 8,852 $ 236 2.7 %
Services 467 356 111 31.2 %
Investment income   96   93   3   3.2 %
Total revenues   9,651   9,301   350   3.8 %
Operating expenses:
Benefits 7,467 7,147 320 4.5 %
Operating costs 1,408 1,361 47 3.5 %
Depreciation and amortization   75   67   8   11.9 %
Total operating expenses   8,950   8,575   375   4.4 %
Income from operations 701 726 (25 ) -3.4 %
Interest expense   26   27   (1 ) -3.7 %
Income before income taxes 675 699 (24 ) -3.4 %
Provision for income taxes   249   254   (5 ) -2.0 %
Net income $ 426 $ 445 $ (19 ) -4.3 %
 
Basic earnings per common share $ 2.65 $ 2.71 $ (0.06 ) -2.2 %
Diluted earnings per common share $ 2.62 $ 2.67 $ (0.05 ) -1.9 %
 
Shares used in computing basic earnings per common share (000's) 160,639 164,121
Shares used in computing diluted earnings per common share (000's) 162,418 166,580
 
 

S-3

 

       
Humana Inc.
Consolidated Statements of Income
In millions, except per common share results
   
Nine Months Ended September 30,
Dollar Percentage
2012 2011 Change Change
Revenues:
Premiums $ 28,029 $ 26,468 $ 1,561 5.9 %
Services 1,251 1,035 216 20.9 %
Investment income   289   273   16   5.9 %
Total revenues   29,569   27,776   1,793   6.5 %
Operating expenses:
Benefits 23,469 21,761 1,708 7.8 %
Operating costs 4,175 3,810 365 9.6 %
Depreciation and amortization   218   201   17   8.5 %
Total operating expenses   27,862   25,772   2,090   8.1 %
Income from operations 1,707 2,004 (297 ) -14.8 %
Interest expense   78   82   (4 ) -4.9 %
Income before income taxes 1,629 1,922 (293 ) -15.2 %
Provision for income taxes   599   702   (103 ) -14.7 %
Net income $ 1,030 $ 1,220 $ (190 ) -15.6 %
 
Basic earnings per common share $ 6.34 $ 7.34 $ (1.00 ) -13.6 %
Diluted earnings per common share $ 6.27 $ 7.24 $ (0.97 ) -13.4 %
 
Shares used in computing basic earnings per common share (000's) 162,391 166,138
Shares used in computing diluted earnings per common share (000's) 164,382 168,558
 
 

S-4

 

 
Humana Inc.
3Q12 Segment Financial Information
In millions
      Health and      
Employer Well-Being Other Eliminations/
Retail Group Services Businesses Corporate Consolidated
 
Revenues - external customers
Premiums:
Medicare Advantage $ 5,203 $ 1,023 $ - $ - $ - $ 6,226
Medicare stand-alone PDP   635     2     -     64     -     701  
Total Medicare   5,838     1,025     -     64     -     6,927  
Fully-insured 255 1,256 - - - 1,511
Specialty 45 271 - - - 316
Military services - - - 69 - 69
Medicaid and other (A)   -     -     -     265     -     265  
Total premiums   6,138     2,552     -     398     -     9,088  
Services revenue:
Provider - - 271 - - 271
ASO and other (B) 6 88 - 99 - 193
Pharmacy   -     -     3     -     -     3  
Total services revenue   6     88     274     99     -     467  
Total revenues - external customers   6,144     2,640     274     497     -     9,555  
 
Intersegment revenues
Services 1 3 2,324 - (2,328 ) -
Products   -     -     602     -     (602 )   -  
Total intersegment revenues   1     3     2,926     -     (2,930 )   -  
Investment income   19     11     -     14     52     96  
Total revenues   6,164     2,654     3,200     511     (2,878 )   9,651  
 
Operating expenses:
Benefits 5,049 2,178 - 332 (92 ) 7,467
Operating costs 658 413 3,028 125 (2,816 ) 1,408
Depreciation and amortization   33     20     24     4     (6 )   75  
Total operating expenses   5,740     2,611     3,052     461     (2,914 )   8,950  
Income from operations 424 43 148 50 36 701
Interest expense   -     -     -     -     26     26  
Income before income taxes $ 424   $ 43   $ 148   $ 50   $ 10   $ 675  
 
Benefit ratio 82.3 % 85.3 % 83.4 % 82.2 %
Operating cost ratio (C) 10.7 % 15.6 % 94.6 % 25.2 % 14.7 %
 
 

S-5

 

 
Humana Inc.
3Q11 Segment Financial Information
In millions
      Health and      
Employer Well-Being Other Eliminations/
Retail Group Services Businesses Corporate Consolidated
 
Revenues - external customers
Premiums:
Medicare Advantage $ 4,566 $ 803 $ - $ - $ - $ 5,369
Medicare stand-alone PDP   579     2     -     43     -     624  
Total Medicare   5,145     805     -     43     -     5,993  
Fully-insured 221 1,185 - - - 1,406
Specialty 33 235 - - - 268
Military services - - - 944 - 944
Medicaid and other (A)   -     -     -     241     -     241  
Total premiums   5,399     2,225     -     1,228     -     8,852  
Services revenue:
Provider - - 233 - - 233
ASO and other (B) 5 89 - 26 - 120
Pharmacy   -     -     3     -     -     3  
Total services revenue   5     89     236     26     -     356  
Total revenues - external customers   5,404     2,314     236     1,254     -     9,208  
 
Intersegment revenues
Services - 4 2,130 - (2,134 ) -
Products   -     -     461     -     (461 )   -  
Total intersegment revenues   -     4     2,591     -     (2,595 )   -  
Investment income   19     12     -     15     47     93  
Total revenues   5,423     2,330     2,827     1,269     (2,548 )   9,301  
 
Operating expenses:
Benefits 4,249 1,857 - 1,117 (76 ) 7,147
Operating costs 603 406 2,723 121 (2,492 ) 1,361
Depreciation and amortization   30     21     21     2     (7 )   67  
Total operating expenses   4,882     2,284     2,744     1,240     (2,575 )   8,575  
Income from operations 541 46 83 29 27 726
Interest expense   -     -     -     -     27     27  
Income before income taxes $ 541   $ 46   $ 83   $ 29   $ -   $ 699  
 
Benefit ratio 78.7 % 83.5 % 91.0 % 80.7 %
Operating cost ratio (C) 11.2 % 17.5 % 96.3 % 9.6 % 14.8 %
 
 

S-6

 

 
Humana Inc.
YTD12 Segment Financial Information
In millions
      Health and      
Employer Well-Being Other Eliminations/
Retail Group Services Businesses Corporate Consolidated
 
Revenues - external customers
Premiums:
Medicare Advantage $ 15,604 $ 3,059 $ - $ - $ - $ 18,663
Medicare stand-alone PDP   1,967     6     -     203     -     2,176  
Total Medicare   17,571     3,065     -     203     -     20,839  
Fully-insured 749 3,745 - - - 4,494
Specialty 125 793 - - - 918
Military services - - - 1,006 - 1,006
Medicaid and other (A)   -     -     -     772     -     772  
Total premiums   18,445     7,603     -     1,981     -     28,029  
Services revenue:
Provider - - 749 - - 749
ASO and other (B) 17 266 - 208 - 491
Pharmacy   -     -     11     -     -     11  
Total services revenue   17     266     760     208     -     1,251  
Total revenues - external customers   18,462     7,869     760     2,189     -     29,280  
 
Intersegment revenues
Services 2 11 7,187 - (7,200 ) -
Products   -     -     1,777     -     (1,777 )   -  
Total intersegment revenues   2     11     8,964     -     (8,977 )   -  
Investment income   58     31     -     43     157     289  
Total revenues   18,522     7,911     9,724     2,232     (8,820 )   29,569  
 
Operating expenses:
Benefits 15,609 6,316 - 1,844 (300 ) 23,469
Operating costs 1,911 1,257 9,246 364 (8,603 ) 4,175
Depreciation and amortization   96     60     67     12     (17 )   218  
Total operating expenses   17,616     7,633     9,313     2,220     (8,920 )   27,862  
Income from operations 906 278 411 12 100 1,707
Interest expense   -     -     -     -     78     78  
Income before income taxes $ 906   $ 278   $ 411   $ 12   $ 22   $ 1,629  
 
Benefit ratio 84.6 % 83.1 % 93.1 % 83.7 %
Operating cost ratio (C) 10.3 % 16.0 % 95.1 % 16.6 % 14.3 %
 
 

S-7

 

           
Humana Inc.
YTD11 Segment Financial Information
In millions
Health and
Employer Well-Being Other Eliminations/
Retail Group Services Businesses Corporate Consolidated
 
Revenues - external customers
Premiums:
Medicare Advantage $ 13,646 $ 2,363 $ - $ - $ - $ 16,009
Medicare stand-alone PDP   1,737     6     -     196     -     1,939  
Total Medicare   15,383     2,369     -     196     -     17,948  
Fully-insured 628 3,601 - - - 4,229
Specialty 89 698 - - - 787
Military services - - - 2,802 - 2,802
Medicaid and other (A)   -     -     -     702     -     702  
Total premiums   16,100     6,668     -     3,700     -     26,468  
Services revenue:
Provider - - 670 - - 670
ASO and other (B) 12 269 - 76 - 357
Pharmacy   -     -     8     -     -     8  
Total services revenue   12     269     678     76     -     1,035  
Total revenues - external customers   16,112     6,937     678     3,776     -     27,503  
 
Intersegment revenues
Services - 10 6,325 - (6,335 ) -
Products   -     -     1,330     -     (1,330 )   -  
Total intersegment revenues   -     10     7,655     -     (7,665 )   -  
Investment income   57     36     -     40     140     273  
Total revenues   16,169     6,983     8,333     3,816     (7,525 )   27,776  
 
Operating expenses:
Benefits 13,193 5,409 - 3,375 (216 ) 21,761
Operating costs 1,626 1,217 8,004 351 (7,388 ) 3,810
Depreciation and amortization   89     64     61     7     (20 )   201  
Total operating expenses   14,908     6,690     8,065     3,733     (7,624 )   25,772  
Income from operations 1,261 293 268 83 99 2,004
Interest expense   -     -     -     -     82     82  
Income before income taxes $ 1,261   $ 293   $ 268   $ 83   $ 17   $ 1,922  
 
Benefit ratio 81.9 % 81.1 % 91.2 % 82.2 %
Operating cost ratio (C) 10.1 % 17.5 % 96.1 % 9.3 % 13.9 %
 
 

S-8

 

 
Humana Inc.
Consolidated Balance Sheets
Dollars in millions, except share amounts        
September 30, December 31, Sequential Change
2012   2011 Dollar   Percent
Assets  
Current assets:
Cash and cash equivalents $ 1,363 $ 1,377
Investment securities 8,058 7,743
Receivables, net 642 1,034
Other   1,615       1,027  
Total current assets 11,678 11,181 $ 497 4.4 %
 
Property and equipment, net 1,034 912
Long-term investment securities 1,837 1,710
Goodwill 2,962 2,740
Other   1,286       1,165  
Total assets   18,797       17,708   $ 1,089 6.1 %
 
Liabilities and Stockholders' Equity
Current liabilities:
Benefits payable 3,958 3,754
Trade accounts payable and accrued expenses 1,962 1,783
Book overdraft 277 306
Unearned revenues   172       213  
Total current liabilities 6,369 6,056 $ 313 5.2 %
 
Long-term debt 1,616 1,659
Future policy benefits payable 1,851 1,663
Other long-term liabilities   270       267  
Total liabilities   10,106       9,645   $ 461 4.8 %
 
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; 194,285,994 issued at September 30, 2012

32 32
Capital in excess of par value 2,079 1,938
Retained earnings 7,731 6,825
Accumulated other comprehensive income 397 303
Treasury stock, at cost, 36,062,239 shares at September 30, 2012   (1,548 )     (1,035 )
Total stockholders' equity   8,691       8,063   $ 628 7.8 %
Total liabilities and stockholders' equity $ 18,797     $ 17,708   $ 1,089 6.1 %
 
Debt-to-total capitalization ratio 15.7 % 17.1 %
 
 

S-9

 

 
Humana Inc.
Consolidated Statements of Cash Flows
Dollars in millions            
Three Months Ended September 30,
  Dollar Percentage
2012   2011 Change   Change
Cash flows from operating activities
Net income $ 426 $ 445

Adjustments to reconcile net income to net cash (used in) provided by operating activities:

Depreciation and amortization 78 74
Net realized capital gains (6 ) (2 )
Stock-based compensation 14 12
Provision for (benefit from) deferred income taxes 3 (9 )

Changes in operating assets and liabilities excluding the effects of acquisitions:

Receivables 259 510
Other assets 14 (30 )
Benefits payable (39 ) (85 )
Other liabilities 70 190
Unearned revenues (2,172 ) 1,800
Other   19       14  
Net cash (used in) provided by operating activities   (1,334 )     2,919   ($4,253 ) -145.7 %
 
Cash flows from investing activities
Acquisitions, net of cash acquired (212 ) (3 )
Purchases of property and equipment (119 ) (87 )
Purchases of investment securities (802 ) (765 )
Proceeds from maturities of investment securities 354 378
Proceeds from sales of investment securities   365       193  
Net cash used in investing activities   (414 )     (284 ) ($130 ) -45.8 %
 
Cash flows from financing activities
Receipts (withdrawals) from contract deposits, net (499 ) 37
Change in book overdraft 17 82
Common stock repurchases (235 ) (240 )
Excess tax benefit from stock-based compensation - 1
Dividends paid (42 ) (41 )
Proceeds from stock option exercises and other   1       (23 )
Net cash used in financing activities   (758 )     (184 ) ($574 ) -312.0 %
 
(Decrease) increase in cash and cash equivalents (2,506 ) 2,451
Cash and cash equivalents at beginning of period   3,869       1,568  
 
Cash and cash equivalents at end of period $ 1,363     $ 4,019  
 
 

S-10

 

       
Humana Inc.
Consolidated Statements of Cash Flows
Dollars in millions  
Nine Months Ended September 30,
Dollar Percentage
2012   2011 Change   Change
Cash flows from operating activities
Net income $ 1,030 $ 1,220

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization 238 225
Net realized capital gains (20 ) (7 )
Stock-based compensation 68 53
(Benefit from) provision for deferred income taxes (6 ) 12

Changes in operating assets and liabilities excluding the effects of acquisitions:

Receivables 436 (77 )
Other assets (236 ) (205 )
Benefits payable 131 399
Other liabilities 121 392
Unearned revenues (95 ) 1,820
Other   51       44  
Net cash provided by operating activities   1,718       3,876   ($2,158 ) -55.7 %
 
Cash flows from investing activities
Acquisitions, net of cash acquired (288 ) (14 )
Purchases of property and equipment (304 ) (216 )
Purchases of investment securities (2,166 ) (2,667 )
Proceeds from maturities of investment securities 1,111 1,129
Proceeds from sales of investment securities   894       625  
Net cash used in investing activities   (753 )     (1,143 ) $ 390 34.1 %
 
Cash flows from financing activities
Receipts (withdrawals) from contract deposits, net (347 ) 225
Repayment of long-term debt (36 ) -
Change in book overdraft (29 ) (110 )
Common stock repurchases (513 ) (541 )
Excess tax benefit from stock-based compensation 21 12
Dividends paid (124 ) (41 )
Proceeds from stock option exercises and other   49       68  
Net cash used in financing activities   (979 )     (387 ) ($592 ) -153.0 %
 
(Decrease) increase in cash and cash equivalents (14 ) 2,346
Cash and cash equivalents at beginning of period   1,377       1,673  
 
Cash and cash equivalents at end of period $ 1,363     $ 4,019  
 
 

S-11

 

 
Humana Inc.
Key Income Statement Ratios and Segment Operating Results
Dollars in millions
                       
Three Months Ended September 30, Nine Months Ended September 30,
 

 

 
Percentage Percentage
2012   2011 Difference   Change 2012   2011 Difference   Change
Benefit ratio
Retail 82.3% 78.7% 3.6% 84.6% 81.9% 2.7%
Employer Group 85.3% 83.5% 1.8% 83.1% 81.1% 2.0%
Other Businesses 83.4% 91.0% -7.6% 93.1% 91.2% 1.9%
Consolidated 82.2% 80.7% 1.5% 83.7% 82.2% 1.5%
 
Operating cost ratio (C)
Retail 10.7% 11.2% -0.5% 10.3% 10.1% 0.2%
Employer Group 15.6% 17.5% -1.9% 16.0% 17.5% -1.5%
Health and Well-Being Services 94.6% 96.3% -1.7% 95.1% 96.1% -1.0%
Other Businesses 25.2% 9.6% 15.6% 16.6% 9.3% 7.3%
Consolidated 14.7% 14.8% -0.1% 14.3% 13.9% 0.4%
 
Detail of pretax income
Retail $424 $541 ($117) -21.6% $906 $1,261 ($355) -28.2%
Employer Group $43 $46 ($3) -6.5% $278 $293 ($15) -5.1%
Health and Well-Being Services $148 $83 $65 78.3% $411 $268 $143 53.4%
Other Businesses $50 $29 $21 72.4% $12 $83 ($71) -85.5%
Consolidated $675 $699 ($24) -3.4% $1,629 $1,922 ($293) -15.2%
 
 

S-12

 

 
Humana Inc.
Pharmacy Metrics
Script volume in thousands
               
Three Months Ended September 30, Nine Months Ended September 30,
   
 
2012   2011 Difference 2012   2011 Difference
 
Generic Dispense Rate
Retail

 

Mail-Order 89.9 % 87.2 % 2.7 % 88.9 % 86.5 % 2.4 %
90-Day Retail 87.7 % 83.7 % 4.0 % 86.7 % 83.2 % 3.5 %
All Other 82.1 %   77.7 % 4.4 % 80.5 % 77.4 % 3.1 %
Total 85.3 %   81.1 % 4.2 % 84.0 % 80.6 % 3.4 %
Employer Group
Mail-order 76.4 % 68.5 % 7.9 % 74.4 % 67.6 % 6.8 %
90-Day Retail 83.1 % 77.0 % 6.1 % 81.9 % 76.3 % 5.6 %
All Other 74.7 %   69.5 % 5.2 % 73.3 % 69.4 % 3.9 %
Total Employer Group 77.2 %   71.1 % 6.1 % 75.6 % 70.7 % 4.9 %
 
Percentage Percentage
Difference   Change Difference   Change
Script volume
Retail
Mail-order 12,431 9,931 2,500 25.2 % 36,795 27,677 9,118 32.9 %
90-Day Retail 13,400 10,856 2,544 23.4 % 38,457 31,384 7,073 22.5 %
All Other 27,300     25,313   1,987     7.8 % 82,320     75,720   6,600     8.7 %
Total Retail 53,131     46,100   7,031     15.3 % 157,572     134,781   22,791     16.9 %
 
Employer Group
Mail-order 1,045 966 79 8.2 % 3,034 2,893 141 4.9 %
90-Day Retail 1,865 1,445 420 29.1 % 4,904 4,186 718 17.2 %
All Other 4,013     3,744   269     7.2 % 11,561     11,562   (1 )   0.0 %
Total Employer Group 6,923     6,155   768     12.5 % 19,499     18,641   858     4.6 %
                       
Total Retail and Employer Group 60,054     52,255   7,799     14.9 % 177,071     153,422   23,649     15.4 %
 
 

S-13

 

 
Humana Inc.
Membership Detail
In thousands                        
Ending Average 2Q12 Ending Year-over-year Change Ending Sequential Change
September 30, 2012       September 30, 2011 Amount   Percent December 31, 2011 Amount   Percent
Medical Membership:  
Retail
Medicare Advantage 1,911.8 1,907.2 1,613.4 298.4 18.5 % 1,640.3 271.5 16.6 %
Medicare stand-alone PDPs 2,947.2 2,929.8 2,478.1 469.1 18.9 % 2,540.4 406.8 16.0 %
Individual commercial 443.4 443.5 424.0 19.4 4.6 % 433.6 9.8 2.3 %
Medicare Supplement 75.2   74.0   56.7 18.5   32.6 % 59.6 15.6   26.2 %
Total Retail 5,377.6   5,354.5   4,572.2 805.4   17.6 % 4,673.9 703.7   15.1 %
 
Employer Group
Medicare Advantage 367.9 366.9 287.9 80.0 27.8 % 290.6 77.3 26.6 %
Medicare Advantage ASO 27.8 27.8 27.6 0.2 0.7 % 27.6 0.2 0.7 %
Medicare stand-alone PDPs 4.4 4.4 4.2 0.2 4.8 % 4.2 0.2 4.8 %
Fully-insured medical commercial 1,204.5 1,203.0 1,181.3 23.2 2.0 % 1,180.2 24.3 2.1 %
ASO commercial 1,231.1   1,231.7   1,287.0 (55.9 ) -4.3 % 1,292.3 (61.2 ) -4.7 %
Total Employer Group 2,835.7   2,833.8   2,788.0 47.7   1.7 % 2,794.9 40.8   1.5 %
 
Other Businesses
Military Services 3,124.6 3,120.1 3,025.9 98.7 3.3 % 3,028.1 96.5 3.2 %
Medicaid and other 607.1 606.2 621.5 (14.4 ) -2.3 % 614.2 (7.1 ) -1.2 %
LI-NET (D) 73.9   73.5   74.6 (0.7 ) -0.9 % 73.5 0.4   0.5 %
Total Other Businesses 3,805.6   3,799.8   3,722.0 83.6   2.2 % 3,715.8 89.8   2.4 %
 
Total Medical Membership 12,018.9   11,988.1   11,082.2 936.7   8.5 % 11,184.6 834.3   7.5 %
 
 
Specialty Membership:
Retail
Dental - fully-insured 685.3 675.4 564.7 120.6 21.4 % 579.6 105.7 18.2 %
Vision 113.8 110.0 79.3 34.5 43.5 % 83.8 30.0 35.8 %
Other supplemental benefits (E) 141.7   141.5   111.6 30.1   27.0 % 119.1 22.6   19.0 %
Total Retail 940.8   926.9   755.6 185.2   24.5 % 782.5 158.3   20.2 %
 
Employer Group
Dental - fully-insured 2,431.0 2,426.9 2,259.5 171.5 7.6 % 2,283.9 147.1 6.4 %
Dental - ASO 863.1 854.5 876.9 (13.8 ) -1.6 % 869.9 (6.8 ) -0.8 %
Vision 2,515.5 2,496.6 2,272.8 242.7 10.7 % 2,329.6 185.9 8.0 %
Other supplemental benefits (E) 1,279.0   1,270.0   1,010.1 268.9   26.6 % 1,049.2 229.8   21.9 %
Total Employer Group 7,088.6   7,048.0   6,419.3 669.3   10.4 % 6,532.6 556.0   8.5 %
 
Total Specialty Membership

8,029.4

  7,974.9   7,174.9 854.5   11.9 % 7,315.1 714.3   9.8 %
 
 

S-14

 

           
Humana Inc.
Premiums and Services Revenue Detail
Dollars in millions, except per member per month
     
      Per Member per Month (F)
Three Months Ended September 30, Three Months Ended September 30,
Dollar Percentage
2012   2011 Change   Change 2012   2011
 
Premiums and Services Revenue
Retail:
Medicare Advantage $ 5,203 $ 4,566 $ 637 14.0 % $909 $945
Medicare stand-alone PDPs 635 579 56 9.7 % $72 $79
Individual commercial 219 194 25 12.9 % $165 $155
Medicare Supplemental 36 27 9 33.3 % $162 $162
Specialty 45 33 12 36.4 % $16 $15
ASO & other services (B)   7     5   2   40.0 %
Total Retail   6,145     5,404   741   13.7 %
 
Employer Group:
Medicare Advantage 1,023 803 220 27.4 % $929 $933
Medicare stand-alone PDPs 2 2 - 0.0 %
Fully-insured medical commercial 1,256 1,185 71 6.0 % $348 $335
Specialty 271 235 36 15.3 % $15 $14
ASO & other services (B)   91     93   (2 ) -2.2 %
Total Employer Group   2,643     2,318   325   14.0 %
 
Health and Well-Being Services:
Pharmacy solutions 2,770 2,484 286 11.5 %
Primary care services 311 277 34 12.3 %
Home care services 62 21 41 195.2 %
Integrated wellness services   57     45   12   26.7 %
Total Health and Well-Being Services   3,200     2,827   373   13.2 %
 
Other Businesses:
Military services (G) 155 968 (813 ) -84.0 % $13 $181
LI-NET (D) 64 43 21 48.8 % $290 $190
Medicaid and other (H)   278     243   35   14.4 % $146 $130
Total Other Businesses   497     1,254   (757 ) -60.4 %
 
 

S-15

 

 
Humana Inc.
Premiums and Services Revenue Detail
Dollars in millions, except per member per month
           
  Per Member per Month (F)
Nine Months Ended September 30, Nine Months Ended September 30,
Dollar Percentage  
2012   2011 Change   Change 2012   2011
 
Premiums and Services Revenue
Retail:
Medicare Advantage $ 15,604 $ 13,646 $ 1,958 14.3 % $923 $947
Medicare stand-alone PDPs 1,967 1,737 230 13.2 % $76 $81
Individual commercial 645 552 93 16.8 % $162 $155
Medicare Supplemental 104 76 28 36.8 % $165 $162
Specialty 125 89 36 40.4 % $16 $15
ASO & other services (B)   19     12   7   58.3 %
Total Retail   18,464     16,112   2,352   14.6 %
 
Employer Group:
Medicare Advantage 3,059 2,363 696 29.5 % $941 $929
Medicare stand-alone PDPs 6 6 - 0.0 %
Fully-insured medical commercial 3,745 3,601 144 4.0 % $349 $339
Specialty 793 698 95 13.6 % $14 $14
ASO & other services (B)   277     279   (2 ) -0.7 %
Total Employer Group   7,880     6,947   933   13.4 %
 
Health and Well-Being Services:
Pharmacy solutions 8,536 7,347 1,189 16.2 %
Primary care services 884 797 87 10.9 %
Home care services 140 55 85 154.5 %
Integrated wellness services   164     134   30   22.4 %
Total Health and Well-Being Services   9,724     8,333   1,391   16.7 %
 
Other Businesses:
Military services (G) 1,191 2,869 (1,678 ) -58.5 % $64 $179
LI-NET (D) 203 196 7 3.6 % $305 $244
Medicaid and other (H)   795     711   84   11.8 % $142 $126
Total Other Businesses   2,189     3,776   (1,587 ) -42.0 %
 
 

S-16

 

 
Humana Inc.
Medicare Summary
Premiums in millions
Membership in thousands                
            Per Member per Month (F)
Three Months Ended September 30, Year-over-year Change Three Months Ended September 30,
 
2012 2011 Amount Percent 2012 2011
Premiums
Medicare Advantage $ 6,226 $ 5,369 $ 857 16.0 % $913

$943

Medicare stand-alone PDPs   701   624   77 12.3 % $78

$82

Total Medicare $ 6,927 $ 5,993 $ 934 15.6 %
 
     
            Per Member per Month (F)
Nine Months Ended September 30, Year-over-year Change Nine Months Ended September 30,
 
2012 2011 Amount Percent 2012 2011
Premiums
Medicare Advantage $ 18,663 $ 16,009 $ 2,654 16.6 % $926 $944
Medicare stand-alone PDPs   2,176   1,939   237 12.2 % $82 $87
Total Medicare $ 20,839 $ 17,948 $ 2,891 16.1 %
 
     
Ending Ending Year-over-year Change
September 30, 2012 September 30, 2011 Amount Percent
Fully-Insured Membership
Medicare Advantage 2,279.7 1,901.3 378.4 19.9 %
Medicare stand-alone PDPs   3,025.5   2,556.9   468.6 18.3 %
Total Medicare   5,305.2   4,458.2   847.0 19.0 %
 
 

S-17

 

     
Humana Inc. Fair value
Investments
Dollars in millions
9/30/2012   6/30/2012   12/31/2011
Investment Portfolio:
Cash & cash equivalents $1,363 $3,869 $1,377
Investment securities 8,058 7,882 7,743
Long-term investments 1,837   1,783   1,710
Total investment portfolio $11,258   $13,534   $10,830
 
Duration (I) 3.89   3.24   3.94
Average Credit Rating AA-   AA-   AA-
         
 
Investment Portfolio Detail:
Cash and cash equivalents $1,363   $3,869   $1,377
U.S. Government and agency obligations
U.S. Treasury and agency obligations 563 553 725
U.S. Government residential mortgage-backed 1,908 1,921 1,751
U.S. Government commercial mortgage-backed 34   34   33
Total U.S. Government and agency obligations 2,505   2,508   2,509
Tax-exempt municipal securities
Pre-refunded 286 294 332
Insured 618 631 634
Other 1,961 1,946 1,874
Auction rate securities 13   15   16
Total tax-exempt municipal securities 2,878   2,886   2,856
Residential mortgage-backed
Prime residential mortgages 34 36 41
Alt-A residential mortgages 1 1 2
Sub-prime residential mortgages 1   1   1
Total residential mortgage-backed 36   38   44
Commercial mortgage-backed 658   448   381
Asset-backed securities 37   44   83
Corporate securities
Financial services 853 818 692
Other 2,928   2,923   2,888
Total corporate securities 3,781   3,741   3,580
Total investment portfolio $11,258   $13,534   $10,830
 
 

S-18

 

     
Humana Inc.
Detail of Benefits Payable Balance and Year-to-Date Changes
Dollars in millions
 
September 30, September 30, December 31,
2012   2011   2011
Detail of benefits payable
IBNR and other benefits payable (J) $3,097 $2,742 $2,759
Unprocessed claim inventories (K) 380 419 280
Processed claim inventories (L) 339 174 209
Payable to pharmacy benefit administrator (M) 127     157     167  
Benefits payable, excluding military services 3,943 3,492 3,415
 
Military services benefits payable (N) 15     376     339  
Total Benefits Payable $3,958     $3,868     $3,754  
 
 
Nine Months Ended Nine Months Ended Year Ended
September 30, 2012   September 30, 2011   December 31, 2011

Year-to-date changes in benefits payable, excluding military services (O)

 
Balances at January 1 $3,415 $3,214 $3,214
 
Acquisitions 73 - 29
 
Incurred related to:
Current year 22,606 19,476 25,821
Prior years (P) (235 )   (318 )   (372 )
Total incurred 22,371     19,158     25,449  
 
Paid related to:
Current year (19,091 ) (16,301 ) (22,729 )
Prior years (2,825 )   (2,579 )   (2,548 )
Total paid (21,916 )   (18,880 )   (25,277 )
 
Balances at end of period $3,943     $3,492     $3,415  
 
 
Nine Months Ended Nine Months Ended Year Ended
September 30, 2012   September 30, 2011   December 31, 2011
Summary of Consolidated Benefit Expense:
Total benefit expense incurred, per above $22,371 $19,158 $25,449
Military services benefit expense 908 2,512 3,247
Future policy benefit expense (Q) 190     91     127  
Consolidated Benefit Expense $23,469     $21,761     $28,823  
 
 

S-19

 

 
Humana Inc.
Benefits Payable Statistics (R)
 
       
Receipt Cycle Time (S)
2012   2011   Change   Percentage Change
1st Quarter Average 13.0 13.8 (0.8) -5.8%
2nd Quarter Average 13.7 13.8 (0.1) -0.7%
3rd Quarter Average 13.0 13.6 (0.6) -4.4%
4th Quarter Average     14.0   n/a n/a
Full Year Average 13.2   13.8    
 
 
 
Unprocessed Claims Inventories
 
Date  

Estimated Valuation (millions)

 

Claim Item Counts (000s)

 

Number of Days on Hand

9/30/2010 $429 1,064 5.2
12/31/2010 $374 981 5.0
3/31/2011 $482 1,197 6.0
6/30/2011 $410 1,093 5.1
9/30/2011 $419 1,272 5.7
12/31/2011 $280 599 2.8
3/31/2012 $376 1,028 4.2
6/30/2012   $310   1,077   4.2
9/30/2012   $380   1,440   5.7
 
 

S-20

 

 
Humana Inc.
Benefits Payable Statistics (Continued) (R)
 
 
Days in Claims Payable (T)      
Quarter Ended  

Days in Claims Payable (DCP)

 

Change Last 4 Quarters

 

Percentage Change

9/30/2010   57.8 1.6 2.8 %
12/31/2010 53.5 (1.9 ) -3.4 %
3/31/2011 55.5 1.3 2.4 %
6/30/2011 56.0 (1.0 ) -1.8 %
9/30/2011 54.2 (3.6 ) -6.2 %
12/31/2011 52.5 (1.0 ) -1.9 %
3/31/2012 50.1 (5.4 ) -9.7 %
6/30/2012   51.0   (5.0 )   -8.9 %
9/30/2012   51.6   (2.6 )   -4.8 %
 
Year-to-Date Change in Days in Claims Payable (U)
2012   2011
DCP - beginning of period 52.5 53.5
Components of change in DCP:
Change in unprocessed claims inventories 1.0 (2.3 )
Change in processed claims inventories 1.7 1.4
Change in pharmacy payment cutoff (0.4 ) 0.6
Change in capitation/provider settlements (3.3 ) (0.7 )
All other 0.1      
DCP - end of period 51.6     52.5  
 
 

S-21

 

   

Humana Inc.

Footnotes to Statistical Schedules and Supplementary Information

3Q12 Earnings Release

 
(A) The Medicaid and other category includes the company’s Medicaid business as well as the closed block of long-term care.
(B) The ASO and other category is primarily comprised of ASO fees and other ancillary services fees.
(C) The operating cost ratio is defined as operating costs as a percent of total revenues excluding investment income.
(D) LI-NET is the CMS Limited Income Newly Eligible Transition program, operated by Humana, to provide Part D prescription drug coverage for all uncovered Full Duals and SSI-only beneficiaries on a retroactive basis and all uncovered LIS eligible beneficiaries on a current basis.
(E) Other supplemental benefits include life, disability, and fixed benefit products including cancer and critical illness policies.
(F) 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).
(G) Military services revenues are generally not contracted on a per-member basis.
(H) Includes premiums associated with Medicaid and the closed block of long-term care as well as services revenue.
(I) Duration is the time-weighted average of the present value of the fixed income portfolio cash flows.
(J) 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.
(K) Unprocessed claim inventories represent the estimated valuation of claims received but not yet fully processed.
(L) Processed claim inventories represent the estimated valuation of processed claims that are in the post-claim-adjudication process, which consists of operating functions such as audit and check batching and handling.
(M) 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 8 days (8 th, 16 th, and 24th of month) and the last day of the month.
(N) Military services benefits payable primarily consist of IBNR and to a lesser extent risk share payables to the Department of Defense and liabilities to subcontractors.
(O) 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.
(P) 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 medical claim reserves during the quarter.
(Q) Future policy benefit expense has a related liability classified as a long-term liability on the balance sheet.
(R) Benefits reserves statistics represents fully-insured medical claims data and excludes military services claims data and specialty benefits.
(S) 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 93% of the company's fully-insured medical claims volume. Pharmacy and specialty claims, including dental, vision and other supplemental benefits, are excluded from this measurement.
(T) 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.
(U) 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 medical claims reserve recorded upon enrollment later in the quarter. This analysis excludes the impact of military services and Medicare stand-alone PDPs upon DCP.
 

S-22





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