- Reports 1Q22 earnings per diluted common share of $7.29 on a
GAAP basis, while reporting Adjusted EPS of $8.04
- Updates FY 2022 EPS guidance to 'approximately $22.98' on a
GAAP basis; raises to 'approximately $24.50' on an Adjusted basis,
which continues to contemplate an explicit COVID-19 related
headwind of $1.00 per share
- Reaffirms FY 2022 expected individual Medicare Advantage
membership growth range of approximately 150,000 to 200,000
Humana Inc. (NYSE: HUM) today reported consolidated pretax
results and diluted earnings per common share for the quarter ended
March 31, 2022 (1Q22) versus the quarter ended March 31, 2021
(1Q21) as noted in the tables below.
Consolidated income before income taxes
and equity in earnings (pretax income) In millions
1Q22 (a)
1Q21 (b)
Generally Accepted Accounting
Principles (GAAP)
$1,220
$1,040
Amortization associated with identifiable
intangibles
19
15
Transaction and integration costs
associated with the Kindred at Home acquisition
17
—
Put/call valuation adjustments associated
with company's non-consolidating minority interest investments
(21
)
115
Change in fair market value of
publicly-traded equity securities
109
85
Adjusted (non-GAAP)
1,344
$1,255
Diluted earnings per common share
(EPS)
1Q22 (a)
1Q21 (b)
GAAP
$7.29
$6.39
Amortization associated with identifiable
intangibles
0.11
0.08
Transaction and integration costs
associated with the Kindred at Home acquisition
0.10
—
Put/call valuation adjustments associated
with company's non-consolidating minority interest investments
(0.12
)
0.69
Change in fair market value of
publicly-traded equity securities
0.66
0.51
Adjusted (non-GAAP)
$8.04
$7.67
“We are pleased with our strong start to the year, with all our
business lines performing well,” said Bruce D. Broussard, Humana’s
President and Chief Executive Officer. “Our updated full year
Adjusted earnings per share guidance of ‘approximately $24.50’
represents 19 percent growth over our actual 2021 results. We’re
also making strong progress in our plans for significantly
improving Medicare Advantage membership growth in 2023, including
work underway with our distribution partners, and steps we’re
taking to improve retention. The $1 billion value creation
initiative we introduced last quarter is developing as expected,
creating capacity to further enhance our Medicare offerings and
expand our Healthcare Services capabilities.”
Please refer to the tables above, as well as the consolidated
and segment highlight sections in the detailed earnings release for
additional discussion of the factors impacting the
year-over-comparisons.
In addition, below is a summary of key consolidated and segment
statistics comparing 1Q22 to 1Q21.
Humana Inc. Summary of Quarterly
Results (dollars in millions, except per share amounts and
percentages)
1Q22 (a)
1Q21 (b)
CONSOLIDATED
Revenues - GAAP
$23,970
$20,668
Revenues - Adjusted
$24,079
$20,753
Pretax income - GAAP
$1,220
$1,040
Pretax income - Adjusted
$1,344
$1,255
Diluted EPS - GAAP
$7.29
$6.39
Diluted EPS - Adjusted
$8.04
$7.67
Benefits expense ratio - GAAP
86.4
%
85.9
%
Operating cost ratio - GAAP
12.0
%
9.7
%
Operating cash flows - GAAP
$302
($837
)
Parent company cash and short-term
investments
$1,096
$547
Debt-to-total capitalization
45.8
%
33.9
%
RETAIL
SEGMENT
Revenues - GAAP
$21,351
$18,648
Benefits expense ratio - GAAP
88.0
%
87.7
%
Operating cost ratio - GAAP
8.0
%
7.8
%
Segment earnings - GAAP
$784
$794
Segment earnings - Adjusted
$788
$798
GROUP AND
SPECIALTY SEGMENT
Revenues - GAAP
$1,613
$1,737
Benefits expense ratio - GAAP
74.7
%
74.7
%
Operating cost ratio - GAAP
25.7
%
22.9
%
Segment earnings - GAAP
$132
$174
Segment earnings - Adjusted
$133
$175
HEALTHCARE
SERVICES SEGMENT
Revenues - GAAP
$8,688
$7,198
Operating cost ratio - GAAP
94.2
%
96.0
%
Segment earnings attributable to Humana -
GAAP
$446
$269
Adjusted earnings before interest, taxes,
depreciation and amortization (Adjusted EBITDA) (c)
$499
$329
2022 Earnings Guidance
The company is pleased its strong start to the year has enabled
it to raise its Adjusted EPS guidance for the year ending December
31, 2022 (FY22) by $0.50 per share to ‘approximately $24.50’,
representing 19 percent growth over the FY 2021 Adjusted EPS.
Importantly, this updated guidance continues to include a $1.00
embedded COVID headwind, as well as the estimated dilutive impact
related to the pending divestiture of the company's 60 percent
ownership of Kindred at Home's Hospice and Personal Care
divisions.
The outperformance in 1Q22 is primarily driven by the following
items, which have been considered in the company's updated full
year guidance:
- lower than expected administrative expenses, some of which are
timing in nature; and
- strong results in the company's pharmacy business fueled by
membership favorability, higher than expected mail-order
utilization, and lower unit cost due to favorable underlying drug
mix; the company expects the favorability to persist throughout the
year, although with some moderation, as previous estimates
contemplated increasing mail-order penetration rates over the
course of the year.
All other lines of business are performing as expected or
slightly positive, further contributing to the company's strong
quarter.
Diluted earnings per common
share
FY 2022
Guidance (d)
FY 2021 (e)
GAAP
approximately $22.98
$22.67
Amortization of identifiable
intangibles
0.44
0.39
Gain on Kindred at Home equity method
investment
—
(8.73
)
Put/call valuation adjustments associated
with company's non-consolidating minority interest investments
(0.12
)
3.56
Transaction and integration costs
associated with the Kindred at Home acquisition
0.54
0.72
Change in fair market value of
publicly-traded equity securities
0.66
2.03
Adjusted (non-GAAP) – FY 2022
projected; FY 2021 reported
approximately $24.50
$20.64
2023 Final Rate Notice
On April 4, 2022, Centers for Medicare & Medicaid Services
(CMS) published its Announcement of Calendar Year 2023 Medicare
Advantage Capitation Rates and Part C and Part D Payment Policies
(the Final Rate Notice). The company expects the Final Rate Notice
to result in a 4.6 percent rate increase for non-end stage renal
disease (ESRD) Medicare Advantage business, excluding the impact of
Employer Group Waiver Plan funding changes. The company’s 4.6
percent rate increase compares to CMS’s estimate for the sector of
5.0 percent on a comparable basis, with the variance primarily
driven by average Star ratings, as well as county rebasing and the
company's geographic footprint. CMS also establishes separate rates
of payment for ESRD beneficiaries enrolled in Medicare Advantage
plans. The company expects the Final Rate Notice to result in a 6.8
percent rate increase in 2023 for ESRD beneficiaries, which
reflects CMS’s United States Per Capita Cost trend of 9.6 percent,
offset by 2.8 percent for ESRD risk model change impacts.
Detailed Press Release
Humana’s full earnings press release including the statistical
pages has been posted to the company’s Investor Relations site and
may be accessed at https://humana.gcs-web.com/ or via a current
report on Form 8-K filed by the company with the Securities and
Exchange Commission this morning (available at www.sec.gov or on
the company’s website).
Conference Call
Humana will host a conference call at 9:00 a.m. Eastern time
today to discuss its financial results for the quarter and the
company’s expectations for future earnings.
To participate via phone, please register in advance at this
link - http://www.directeventreg.com/registration/event/6798094.
Upon registration, telephone participants will receive a
confirmation email detailing how to join the conference call,
including dial-in number, event passcode, and unique registrant ID
that can be used to access the call. A webcast of the 1Q22 earnings
call may also be accessed via Humana’s Investor Relations page at
humana.com. The company suggests participants for both the
conference call and those listening via the web dial in or sign on
at least 15 minutes in advance of the call.
For those unable to participate in the live event, the archive
will be available in the Historical Webcasts and Presentations
section of the Investor Relations page at humana.com, approximately
two hours following the live webcast. Telephone replays will be
available from approximately 12:30 p.m. Eastern time on April 27,
2022 until 12:30 p.m. Eastern time on May 4, 2022 and can be
accessed by dialing 855-859-2056 and providing the conference ID
#6798094.
Footnotes
The company has included financial measures throughout this
earnings release that are not in accordance with GAAP. Management
believes that these measures, when presented in conjunction with
the comparable GAAP measures, are useful to both management and its
investors in analyzing the company’s ongoing business and operating
performance. Consequently, management uses these non-GAAP
(Adjusted) financial measures as indicators of the company’s
business performance, as well as for operational planning and
decision making purposes. Non-GAAP (Adjusted) financial measures
should be considered in addition to, but not as a substitute for,
or superior to, financial measures prepared in accordance with
GAAP. All financial measures in this press release are in
accordance with GAAP unless otherwise indicated. Please refer to
the footnotes for a detailed description of each item adjusted out
of GAAP financial measures to arrive at a non-GAAP (Adjusted)
financial measure.
(a) 1Q22 Adjusted results exclude the
following:
- Amortization expense for identifiable intangibles of
approximately $19 pretax, or $0.11 per diluted common share. GAAP
measures affected in this release include consolidated pretax, EPS,
and segment earnings (including amortization expense of $4 million
in the Retail segment and $1 million in the Group and Specialty
segment).
- Put/call valuation adjustments of approximately $21 million
pretax, or $0.12 per diluted common share, associated with Humana’s
non-consolidating minority interest investments. GAAP measures
affected in this release include consolidated pretax and EPS.
- Transaction and integration costs associated with the Kindred
at Home acquisition of approximately $17 million pretax, or $0.10
per diluted common share; GAAP measure affected in this release
include consolidated pretax, EPS, and the consolidated operating
cost ratio.
- Change in fair market value of publicly-traded equity
securities of $109 million pretax, or $0.66 per diluted common
share. GAAP measures affected in this release include consolidated
pretax, EPS, and consolidated revenues.
Consolidated revenues
(in millions)
1Q22 (a)
1Q21 (b)
GAAP
$23,970
$20,668
Change in fair market value of
publicly-traded equity securities
109
85
Adjusted (non-GAAP)
$24,079
$20,753
(b) 1Q21 Adjusted results exclude the
following:
- Amortization expense for identifiable intangibles of
approximately $15 million pretax, or $0.08 per diluted common
share. GAAP measures affected in this release include consolidated
pretax, EPS, and segment earnings (including amortization expense
of $4 million in the Retail segment and $1 million in the Group and
Specialty segment).
- Put/call valuation adjustments of approximately $115 million
pretax, or $0.69 per diluted common share, associated with Humana’s
non-consolidating minority interest investments. GAAP measures
affected in this release include consolidated pretax and EPS.
- Change in fair market value of publicly-traded equity
securities of $85 million pretax, or $0.51 per diluted common
share. GAAP measures affected in this release include consolidated
pretax, EPS, and consolidated revenues.
(c) The Healthcare Services segment Adjusted earnings before
interest, taxes, depreciation and amortization (Adjusted EBITDA)
includes GAAP segment earnings attributable to Humana with
adjustments to add back depreciation and amortization expense,
interest expense, and income taxes. Adjusted EBITDA includes
results from all lines of business within the segment. Adjusted
EBITDA also includes the impact of Humana’s minority interest
related to the strategic partnership with Welsh, Carson, Anderson
& Stowe (WCAS) to develop and operate senior-focused,
payor-agnostic, primary care centers. Prior periods reflect the
impact of Humana's previous 40 percent minority interest in Kindred
at Home. In August 2021, Humana completed the acquisition of the
remaining 60 percent ownership of Kindred at Home and accordingly,
now consolidates its results.
Healthcare Services segment results
(in millions)
1Q22
1Q21
GAAP segment earnings attributable to
Humana
$446
$269
Depreciation and amortization expense
53
45
Interest and taxes
—
15
Adjusted EBITDA
$499
$329
(d) FY 2022 projected Adjusted results
exclude the following:
- Amortization expense for identifiable intangibles of
approximately $0.44 per diluted common share.
- Put/call valuation adjustments of approximately $0.12 per
diluted common share, associated with Humana’s non-consolidating
minority interest investments. FY 2022 GAAP EPS guidance excludes
the impact of future value changes of these put/call options as the
future value changes cannot be estimated.
- Transaction and integration costs associated with the Kindred
at Home acquisition of approximately $0.54 per diluted common
share.
- Change in fair market value of publicly-traded equity
securities of $0.66 per diluted common share. The future value of
publicly-traded equity securities, their impact on GAAP EPS, and
the related non-GAAP adjustment will fluctuate on the public
trading value of the stock. The guidance set forth herein assumes
no further change in the fair value of these investments.
(e) FY 2021 Adjusted results exclude the
following:
- Amortization expense for identifiable intangibles of
approximately $0.39 per diluted common share.
- Gain associated with Kindred at Home equity method investment
of approximately $8.73 per diluted common share; the gain was
recorded upon closing of the Kindred at Home transaction in August
2021.
- Put/call valuation adjustments of approximately $3.56 per
diluted common share, associated with Humana’s non-consolidating
minority interest investments, including the impact of the
termination of the put/call agreement related to Kindred at Home as
a result of the transaction announced on April 27, 2021.
- Transaction and integration costs associated with the Kindred
at Home acquisition of approximately $0.72 per diluted common
share.
- Change in fair market value of publicly-traded equity
securities of $2.03 per diluted common share.
Cautionary Statement
This news release includes forward-looking statements regarding
Humana 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,”
“believes,” “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 receives are insufficient to
cover the cost of healthcare services delivered to its members, if
the company is unable to implement clinical initiatives to provide
a better healthcare 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. The company
continually reviews estimates of future payments relating to
benefit expenses for services incurred in the current and prior
periods and makes necessary adjustments to its reserves, including
premium deficiency reserves, where appropriate. These estimates
involve extensive judgment, and have considerable inherent
variability because they are extremely sensitive to changes in
claim payment patterns and medical cost trends. Accordingly,
Humana's reserves may be insufficient.
- If Humana fails to effectively implement its operational and
strategic initiatives, particularly its Medicare initiatives and
state-based contract strategy, the company’s business may be
materially adversely affected, which is of particular importance
given the concentration of the company’s revenues in these
products. In addition, there can be no assurances that the company
will be successful in maintaining or improving its Star ratings in
future years.
- If Humana fails to properly maintain the integrity of its data,
to strategically maintain existing or implement new information
systems, to protect Humana’s proprietary rights to its systems, or
to defend against cyber-security attacks or prevent other privacy
or data security incidents that result in security breaches that
disrupt the company's operations or in the unintentional
dissemination of sensitive personal information or proprietary or
confidential information, the company’s business may be materially
adversely affected.
- Humana is involved in various legal actions, or disputes that
could lead to legal actions (such as, among other things, provider
contract disputes and qui tam litigation brought by individuals on
behalf of the government), governmental and internal
investigations, and routine internal review of business processes
any of which, if resolved unfavorably to the company, could result
in substantial monetary damages or changes in its business
practices. 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 healthcare programs including,
among other things, loss of material government contracts;
governmental audits and investigations; potential inadequacy of
government determined payment rates; potential restrictions on
profitability; including by comparison of profitability of the
company’s Medicare Advantage business to non-Medicare Advantage
business; or other changes in the governmental programs in which
Humana participates. Changes to the risk-adjustment model utilized
by CMS to adjust premiums paid to Medicare Advantage, or MA, plans
according to the health status of covered members, including
proposed changes to the methodology used by CMS for risk adjustment
data validation audits that fail to address adequately the
statutory requirement of actuarial equivalence, if implemented,
could have a material adverse effect on the company's operating
results, financial position and cash flows.
- Humana's business activities are subject to substantial
government regulation. New laws or regulations, or legislative,
judicial, or regulatory changes in existing laws or regulations or
their manner of application could increase the company's cost of
doing business and 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, lowering the company’s Medicare payment rates and
increasing the company’s expenses associated with a non-deductible
health insurance industry fee and other assessments); the company’s
financial position (including the company’s ability to maintain the
value of its goodwill); and the company’s cash flows.
- Humana’s failure to manage acquisitions, divestitures and other
significant transactions successfully may have a material adverse
effect on the company’s 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 faces significant competition in attracting and
retaining talented employees. Further, managing succession for, and
retention of, key executives is critical to the Company’s success,
and its failure to do so could adversely affect the Company’s
businesses, operating results and/or future performance.
- Humana’s pharmacy business is highly competitive and subjects
it to regulations and supply chain risks 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.
- Humana’s ability to obtain funds from certain of its licensed
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.
- The securities and credit markets may experience volatility and
disruption, which may adversely affect Humana’s business.
- The spread of, and response to, the novel coronavirus, or
COVID-19, underscores certain risks Humana faces, including those
discussed above, and the ongoing, heightened uncertainty created by
the pandemic precludes any prediction as to the ultimate adverse
impact to Humana of COVID-19. As the COVID-19 pandemic continues,
the premiums the company charges may prove to be insufficient to
cover the cost of health care services delivered to its members,
each of which could be impacted by many factors, including the
impacts that Humana has experienced, and may continue to
experience, to its revenues due to limitations on its ability to
implement clinical initiatives to manage health care costs and
chronic conditions of its members, and appropriately document their
risk profiles, as a result of the company’s members being unable or
unwilling to see their providers due to actions taken to mitigate
the spread of COVID-19; increased costs that may result from higher
utilization rates of medical facilities and services and other
increases in associated hospital and pharmaceutical costs; and
shifts in the company’s premium and medical claims cost trends to
reflect the demographic impact of higher mortality during the
COVID-19 pandemic. In addition, Humana is offering, and has been
mandated by legislative and regulatory action (including the
Families First Act and CARES Act) to provide, certain expanded
benefit coverage to its members, such as waiving, or reimbursing,
certain costs for COVID-19 testing, vaccinations and treatment.
These measures taken by Humana, or governmental action, to respond
to the ongoing impact of COVID-19 (including further expansion or
modification of the services delivered to its members, the adoption
or modification of regulatory requirements associated with those
services and the costs and challenges associated with ensuring
timely compliance with such requirements), and the potential for
widespread testing, treatments and the distribution and
administration of COVID-19 vaccines, could adversely impact the
company’s profitability. The spread and impact of COVID-19 and
additional variants, or actions taken to mitigate this spread,
could have material and adverse effects on Humana’s ability to
operate effectively, including as a result of the complete or
partial closure of facilities or labor shortages. Disruptions in
public and private infrastructure, including communications,
availability of in-person sales and marketing channels, financial
services and supply chains, could materially and adversely disrupt
the company’s normal business operations. A significant subset of
the company's and the company's third party providers' employee
population are in a remote work environment in an effort to
mitigate the spread of COVID-19, which may exacerbate certain risks
to Humana’s business, including an increased demand for information
technology resources, increased risk of phishing and other
cybersecurity attacks, and increased risk of unauthorized
dissemination of sensitive personal, proprietary, or confidential
information. The continued COVID-19 pandemic has severely impacted
global economic activity, including the businesses of some of
Humana’s commercial customers, and caused significant volatility
and negative pressure in the financial markets. In addition to
disrupting Humana’s operations, these developments may adversely
affect the timing of commercial customer premium collections and
corresponding claim payments, the value of the company’s investment
portfolio, or future liquidity needs. The ongoing, heightened
uncertainty created by the pandemic precludes any prediction as to
the ultimate adverse impact to Humana of COVID-19. Humana is
continuing to monitor the spread of COVID-19, changes to the
company’s benefit coverages, and the ongoing costs and business
impacts of dealing with COVID-19, including the potential costs and
impacts associated with lifting or reimposing restrictions on
movement and economic activity, the timing and degree in resumption
of demand for deferred healthcare services, the pace of
administration of COVID-19 vaccines and the effectiveness of those
vaccines, and related risks. The magnitude and duration of the
pandemic remain uncertain, and its impact on Humana’s business,
results of operations, financial position, and cash flows could be
material.
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, 2021; and
- Form 8-Ks filed during 2022.
About Humana
Humana Inc. (NYSE: HUM) is committed to helping our millions of
medical and specialty members achieve their best health. Our
successful history in care delivery and health plan administration
is helping us create a new kind of integrated care with the power
to improve health and well-being and lower costs. Our efforts are
leading to a better quality of life for people with Medicare,
families, individuals, military service personnel, and communities
at large.
To accomplish that, we support physicians and other health care
professionals as they work to deliver the right care in the right
place for their patients, our members. Our range of clinical
capabilities, resources and tools – such as in-home care,
behavioral health, pharmacy services, data analytics and wellness
solutions – combine to produce a simplified experience that makes
health care easier to navigate and more effective.
More information regarding Humana is available to investors via
the Investor Relations page of the company’s website at humana.com,
including copies of:
- Annual reports to stockholders
- Securities and Exchange Commission filings
- Most recent investor conference presentations
- Quarterly earnings news releases and conference calls
- Calendar of events
- Corporate Governance information
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220427005395/en/
Lisa Stoner Humana Investor Relations (502) 580-2652 e-mail:
LStamper@humana.com Mark Taylor Humana Corporate Communications
(317) 753-0345 e-mail: MTaylor108@humana.com
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