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 (in millions) | 4Q12 Cash Flows |
4Q11
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 Generally Accepted | For the year ending December 31, 2013 | Comments | ||||
Accounting Principles) | ||||||
Diluted earnings per common share (EPS) | ||||||
Full Year | $7.60 to $7.80 | FY13 includes approximately $0.30 per share in | ||||
investment spending | ||||||
First Quarter | $1.75 to $1.85 | |||||
Revenues | ||||||
Consolidated | $41.0 billion to $41.5 billion | Includes expected investment income in the range | ||||
of $365 million to $385 million for 2013 | ||||||
Retail Segment | $26.25 billion to $26.75 billion | Segment-level revenues include intersegment | ||||
Employer Group Segment | $11.0 billion to $11.5 billion | amounts that eliminate 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 | ||||
Medicare Advantage | 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. | ||||||
Medicare stand-alone PDPs | Up 135,000 to 175,000 | |||||
HumanaOne | Down approximately 50,000 | |||||
Medicare Supplement | Up 15,000 to 25,000 | |||||
Employer Group Segment | ||||||
Medicare Advantage | Up approximately 20,000 | |||||
Commercial Fully-Insured | Flat to up 5,000 | |||||
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 cost ratios | Operating costs as a 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 depreciation and amortization | Certain D&A is included in benefits expense on | |||||
Income statement | $330 million to $350 million | the income statement but shown as a non-cash | ||||
Cash flows statement | $415 million to $435 million | item on the cash flows statement | ||||
Consolidated interest expense | $140 million to $145 million | |||||
Detailed pretax results | Segment-level pretax 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 million | Projections exclude the impact of future share | ||||
repurchases | ||||||
Cash flows from operations | $1.8 billion to $2.0 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 revenues | 9,557 | 9,056 | 501 | 5.5 | % | ||||||||||
Operating expenses: | |||||||||||||||
Benefits | 7,516 | 7,062 | 454 | 6.4 | % | ||||||||||
Operating costs | 1,655 | 1,585 | 70 | 4.4 | % | ||||||||||
Depreciation and amortization | 77 | 69 | 8 | 11.6 | % | ||||||||||
Total operating expenses | 9,248 | 8,716 | 532 | 6.1 | % | ||||||||||
Income from operations | 309 | 340 | (31 | ) | -9.1 | % | |||||||||
Interest expense | 27 | 27 | 0 | 0.0 | % | ||||||||||
Income before income taxes | 282 | 313 | (31 | ) | -9.9 | % | |||||||||
Provision for income taxes | 90 | 114 | (24 | ) | -21.1 | % | |||||||||
Net income | $ | 192 | $ | 199 | $ | (7 | ) | -3.5 | % | ||||||
Basic earnings per common share | $ | 1.21 | $ | 1.22 | $ | (0.01 | ) | -0.8 | % | ||||||
Diluted earnings per common share | $ | 1.19 | $ | 1.20 | $ | (0.01 | ) | -0.8 | % | ||||||
Shares used in computing basic earnings per common share (000's) | 158,764 | 163,238 | |||||||||||||
Shares used in computing diluted earnings per common share (000's) | 160,682 | 165,632 | |||||||||||||
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 amortization | 295 | 270 | 25 | 9.3% | ||||||
Total operating expenses | 37,110 | 34,488 | 2,622 | 7.6% | ||||||
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 share | $ 7.56 | $ 8.58 | $ (1.02) | -11.9% | ||||||
Diluted earnings per common share | $ 7.47 | $ 8.46 | $ (0.99) | -11.7% | ||||||
Shares used in computing basic earnings per common share (000's) | 161,484 | 165,413 | ||||||||
Shares used in computing diluted earnings per common share (000's) | 163,457 | 167,827 | ||||||||
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 Advantage | $ | 5,184 | $ | 1,005 | $ | - | $ | - | $ | - | $ | 6,189 | ||||||||||||||||||
Medicare stand-alone PDP | 620 | 2 | - | 63 | - | 685 | ||||||||||||||||||||||||
Total Medicare | 5,804 | 1,007 | - | 63 | - | 6,874 | ||||||||||||||||||||||||
Fully-insured | 255 | 1,251 | - | - | - | 1,506 | ||||||||||||||||||||||||
Specialty | 46 | 277 | - | - | - | 323 | ||||||||||||||||||||||||
Military services | - | - | - | 11 | - | 11 | ||||||||||||||||||||||||
Medicaid and other (A) | - | - | - | 266 | - | 266 | ||||||||||||||||||||||||
Total premiums | 6,105 | 2,535 | - | 340 | - | 8,980 | ||||||||||||||||||||||||
Services revenue: | ||||||||||||||||||||||||||||||
Provider | - | - | 271 | - | - | 271 | ||||||||||||||||||||||||
ASO and other (B) | 7 | 92 | - | 100 | - | 199 | ||||||||||||||||||||||||
Pharmacy | - | - | 5 | - | - | 5 | ||||||||||||||||||||||||
Total services revenue | 7 | 92 | 276 | 100 | - | 475 | ||||||||||||||||||||||||
Total revenues - external customers | 6,112 | 2,627 | 276 | 440 | - | 9,455 | ||||||||||||||||||||||||
Intersegment revenues | ||||||||||||||||||||||||||||||
Services | - | 4 | 2,423 | - | (2,427 | ) | - | |||||||||||||||||||||||
Products | - | - | 565 | - | (565 | ) | - | |||||||||||||||||||||||
Total intersegment revenues | - | 4 | 2,988 | - | (2,992 | ) | - | |||||||||||||||||||||||
Investment income | 21 | 11 | - | 15 | 55 | 102 | ||||||||||||||||||||||||
Total revenues | 6,133 | 2,642 | 3,264 | 455 | (2,937 | ) | 9,557 | |||||||||||||||||||||||
Operating expenses: | ||||||||||||||||||||||||||||||
Benefits | 5,042 | 2,208 | - | 354 | (88 | ) | 7,516 | |||||||||||||||||||||||
Operating costs | 800 | 439 | 3,161 | 128 | (2,873 | ) | 1,655 | |||||||||||||||||||||||
Depreciation and amortization | 35 | 20 | 28 | 4 | (10 | ) | 77 | |||||||||||||||||||||||
Total operating expenses | 5,877 | 2,667 | 3,189 | 486 | (2,971 | ) | 9,248 | |||||||||||||||||||||||
Income (loss) from operations | 256 | (25 | ) | 75 | (31 | ) | 34 | 309 | ||||||||||||||||||||||
Interest expense | - | - | - | - | 27 | 27 | ||||||||||||||||||||||||
Income (loss) before income taxes | $ | 256 | $ | (25 | ) | $ | 75 | $ | (31 | ) | $ | 7 | $ | 282 | ||||||||||||||||
Benefit ratio | 82.6 | % | 87.1 | % | 104.1 | % | 83.7 | % | ||||||||||||||||||||||
Operating cost ratio (C) | 13.1 | % | 16.7 | % | 96.8 | % | 29.1 | % | 17.5 | % | ||||||||||||||||||||
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 Advantage | $ | 4,454 | $ | 789 | $ | - | $ | - | $ | - | $ | 5,243 | ||||||||||||||||||
Medicare stand-alone PDP | 580 | 2 | - | 57 | - | 639 | ||||||||||||||||||||||||
Total Medicare | 5,034 | 791 | - | 57 | - | 5,882 | ||||||||||||||||||||||||
Fully-insured | 233 | 1,181 | - | - | - | 1,414 | ||||||||||||||||||||||||
Specialty | 35 | 237 | - | - | - | 272 | ||||||||||||||||||||||||
Military services | - | - | - | 814 | - | 814 | ||||||||||||||||||||||||
Medicaid and other (A) | - | - | - | 256 | - | 256 | ||||||||||||||||||||||||
Total premiums | 5,302 | 2,209 | - | 1,127 | - | 8,638 | ||||||||||||||||||||||||
Services revenue: | ||||||||||||||||||||||||||||||
Provider | - | - | 222 | - | - | 222 | ||||||||||||||||||||||||
ASO and other (B) | 4 | 87 | - | 9 | - | 100 | ||||||||||||||||||||||||
Pharmacy | - | - | 3 | - | - | 3 | ||||||||||||||||||||||||
Total services revenue | 4 | 87 | 225 | 9 | - | 325 | ||||||||||||||||||||||||
Total revenues - external customers | 5,306 | 2,296 | 225 | 1,136 | - | 8,963 | ||||||||||||||||||||||||
Intersegment revenues | ||||||||||||||||||||||||||||||
Services | - | 4 | 2,185 | - | (2,189 | ) | - | |||||||||||||||||||||||
Products | - | - | 490 | - | (490 | ) | - | |||||||||||||||||||||||
Total intersegment revenues | - | 4 | 2,675 | - | (2,679 | ) | - | |||||||||||||||||||||||
Investment income | 19 | 12 | - | 14 | 48 | 93 | ||||||||||||||||||||||||
Total revenues | 5,325 | 2,312 | 2,900 | 1,150 | (2,631 | ) | 9,056 | |||||||||||||||||||||||
Operating expenses: | ||||||||||||||||||||||||||||||
Benefits | 4,190 | 1,909 | - | 1,036 | (73 | ) | 7,062 | |||||||||||||||||||||||
Operating costs | 779 | 433 | 2,794 | 110 | (2,531 | ) | 1,585 | |||||||||||||||||||||||
Depreciation and amortization | 30 | 21 | 21 | 3 | (6 | ) | 69 | |||||||||||||||||||||||
Total operating expenses | 4,999 | 2,363 | 2,815 | 1,149 | (2,610 | ) | 8,716 | |||||||||||||||||||||||
Income (loss) from operations | 326 | (51 | ) | 85 | 1 | (21 | ) | 340 | ||||||||||||||||||||||
Interest expense | - | - | - | - | 27 | 27 | ||||||||||||||||||||||||
Income (loss) before income taxes | $ | 326 | $ | (51 | ) | $ | 85 | $ | 1 | $ | (48 | ) | $ | 313 | ||||||||||||||||
Benefit ratio | 79.0 | % | 86.4 | % | 91.9 | % | 81.8 | % | ||||||||||||||||||||||
Operating cost ratio (C) | 14.7 | % | 18.8 | % | 96.3 | % | 9.7 | % | 17.7 | % | ||||||||||||||||||||
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 Advantage | $ | 20,788 | $ | 4,064 | $ | - | $ | - | $ | - | $ | 24,852 | ||||||||||||||||||
Medicare stand-alone PDP | 2,587 | 8 | - | 266 | - | 2,861 | ||||||||||||||||||||||||
Total Medicare | 23,375 | 4,072 | - | 266 | - | 27,713 | ||||||||||||||||||||||||
Fully-insured | 1,004 | 4,996 | - | - | - | 6,000 | ||||||||||||||||||||||||
Specialty | 171 | 1,070 | - | - | - | 1,241 | ||||||||||||||||||||||||
Military services | - | - | - | 1,017 | - | 1,017 | ||||||||||||||||||||||||
Medicaid and other (A) | - | - | - | 1,038 | - | 1,038 | ||||||||||||||||||||||||
Total premiums | 24,550 | 10,138 | - | 2,321 | - | 37,009 | ||||||||||||||||||||||||
Services revenue: | ||||||||||||||||||||||||||||||
Provider | - | - | 1,020 | - | - | 1,020 | ||||||||||||||||||||||||
ASO and other (B) | 24 | 358 | - | 308 | - | 690 | ||||||||||||||||||||||||
Pharmacy | - | - | 16 | - | - | 16 | ||||||||||||||||||||||||
Total services revenue | 24 | 358 | 1,036 | 308 | - | 1,726 | ||||||||||||||||||||||||
Total revenues - external customers | 24,574 | 10,496 | 1,036 | 2,629 | - | 38,735 | ||||||||||||||||||||||||
Intersegment revenues | ||||||||||||||||||||||||||||||
Services | 2 | 15 | 9,610 | - | (9,627 | ) | - | |||||||||||||||||||||||
Products | - | - | 2,342 | - | (2,342 | ) | - | |||||||||||||||||||||||
Total intersegment revenues | 2 | 15 | 11,952 | - | (11,969 | ) | - | |||||||||||||||||||||||
Investment income | 79 | 42 | - | 58 | 212 | 391 | ||||||||||||||||||||||||
Total revenues | 24,655 | 10,553 | 12,988 | 2,687 | (11,757 | ) | 39,126 | |||||||||||||||||||||||
Operating expenses: | ||||||||||||||||||||||||||||||
Benefits | 20,651 | 8,524 | - | 2,198 | (388 | ) | 30,985 | |||||||||||||||||||||||
Operating costs | 2,711 | 1,696 | 12,407 | 492 | (11,476 | ) | 5,830 | |||||||||||||||||||||||
Depreciation and amortization | 131 | 80 | 95 | 16 | (27 | ) | 295 | |||||||||||||||||||||||
Total operating expenses | 23,493 | 10,300 | 12,502 | 2,706 | (11,891 | ) | 37,110 | |||||||||||||||||||||||
Income (loss) from operations | 1,162 | 253 | 486 | (19 | ) | 134 | 2,016 | |||||||||||||||||||||||
Interest expense | - | - | - | - | 105 | 105 | ||||||||||||||||||||||||
Income (loss) before income taxes | $ | 1,162 | $ | 253 | $ | 486 | $ | (19 | ) | $ | 29 | $ | 1,911 | |||||||||||||||||
Benefit ratio | 84.1 | % | 84.1 | % | 94.7 | % | 83.7 | % | ||||||||||||||||||||||
Operating cost ratio (C) | 11.0 | % | 16.1 | % | 95.5 | % | 18.7 | % | 15.1 | % | ||||||||||||||||||||
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 Advantage | $ | 18,100 | $ | 3,152 | $ | - | $ | - | $ | - | $ | 21,252 | ||||||||||||||||||
Medicare stand-alone PDP | 2,317 | 8 | - | 253 | - | 2,578 | ||||||||||||||||||||||||
Total Medicare | 20,417 | 3,160 | - | 253 | - | 23,830 | ||||||||||||||||||||||||
Fully-insured | 861 | 4,782 | - | - | - | 5,643 | ||||||||||||||||||||||||
Specialty | 124 | 935 | - | - | - | 1,059 | ||||||||||||||||||||||||
Military services | - | - | - | 3,616 | - | 3,616 | ||||||||||||||||||||||||
Medicaid and other (A) | - | - | - | 958 | - | 958 | ||||||||||||||||||||||||
Total premiums | 21,402 | 8,877 | - | 4,827 | - | 35,106 | ||||||||||||||||||||||||
Services revenue: | ||||||||||||||||||||||||||||||
Provider | - | - | 892 | - | - | 892 | ||||||||||||||||||||||||
ASO and other (B) | 16 | 356 | - | 85 | - | 457 | ||||||||||||||||||||||||
Pharmacy | - | - | 11 | - | - | 11 | ||||||||||||||||||||||||
Total services revenue | 16 | 356 | 903 | 85 | - | 1,360 | ||||||||||||||||||||||||
Total revenues - external customers | 21,418 | 9,233 | 903 | 4,912 | - | 36,466 | ||||||||||||||||||||||||
Intersegment revenues | ||||||||||||||||||||||||||||||
Services | - | 14 | 8,510 | - | (8,524 | ) | - | |||||||||||||||||||||||
Products | - | - | 1,820 | - | (1,820 | ) | - | |||||||||||||||||||||||
Total intersegment revenues | - | 14 | 10,330 | - | (10,344 | ) | - | |||||||||||||||||||||||
Investment income | 76 | 48 | - | 54 | 188 | 366 | ||||||||||||||||||||||||
Total revenues | 21,494 | 9,295 | 11,233 | 4,966 | (10,156 | ) | 36,832 | |||||||||||||||||||||||
Operating expenses: | ||||||||||||||||||||||||||||||
Benefits | 17,383 | 7,318 | - | 4,411 | (289 | ) | 28,823 | |||||||||||||||||||||||
Operating costs | 2,405 | 1,650 | 10,798 | 461 | (9,919 | ) | 5,395 | |||||||||||||||||||||||
Depreciation and amortization | 119 | 85 | 82 | 10 | (26 | ) | 270 | |||||||||||||||||||||||
Total operating expenses | 19,907 | 9,053 | 10,880 | 4,882 | (10,234 | ) | 34,488 | |||||||||||||||||||||||
Income from operations | 1,587 | 242 | 353 | 84 | 78 | 2,344 | ||||||||||||||||||||||||
Interest expense | - | - | - | - | 109 | 109 | ||||||||||||||||||||||||
Income (loss) before income taxes | $ | 1,587 | $ | 242 | $ | 353 | $ | 84 | $ | (31 | ) | $ | 2,235 | |||||||||||||||||
Benefit ratio | 81.2 | % | 82.4 | % | 91.4 | % | 82.1 | % | ||||||||||||||||||||||
Operating cost ratio (C) | 11.2 | % | 17.8 | % | 96.1 | % | 9.4 | % | 14.8 | % | ||||||||||||||||||||
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 securities | 1,846 | 1,710 | |||||||||||||
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 accrued expenses | 2,042 | 1,783 | |||||||||||||
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 payable | 1,858 | 1,663 | |||||||||||||
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 issued at December 31, 2012 | 32 | 32 | |||||||||||||
Capital in excess of par value | 2,101 | 1,938 | |||||||||||||
Retained earnings | 7,881 | 6,825 | |||||||||||||
Accumulated other comprehensive income | 386 | 303 | |||||||||||||
Treasury stock, at cost, 36,138,955 shares at December 31, 2012 | (1,553 | ) | (1,035 | ) | |||||||||||
Total stockholders' equity | 8,847 | 8,063 | $ | 784 | 9.7 | % | |||||||||
Total liabilities and stockholders' equity | $ | 19,979 | $ | 17,708 | $ | 2,271 | 12.8 | % | |||||||
Debt-to-total capitalization ratio | 22.8 | % | 17.1 | % | |||||||||||
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 amortization | 100 | 78 | ||||||||||||||
Net realized capital gains | (13 | ) | (4 | ) | ||||||||||||
Stock-based compensation | 14 | 14 | ||||||||||||||
(Benefit from) provision for deferred income taxes | (74 | ) | 10 | |||||||||||||
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) operating activities | 205 | (1,797 | ) | $ | 2,002 | 111.4 | % | |||||||||
Cash flows from investing activities | ||||||||||||||||
Acquisitions, net of cash acquired | (947 | ) | (212 | ) | ||||||||||||
Purchases of property and equipment | (106 | ) | (120 | ) | ||||||||||||
Purchases of investment securities | (1,055 | ) | (1,011 | ) | ||||||||||||
Proceeds from maturities of investment securities | 386 | 494 | ||||||||||||||
Proceeds from sales of investment securities | 510 | 634 | ||||||||||||||
Net cash used in investing activities | (1,212 | ) | (215 | ) | ($997 | ) | -463.7 | % | ||||||||
Cash flows from financing activities | ||||||||||||||||
Receipts (withdrawals) from contract deposits, net | (50 | ) | (603 | ) | ||||||||||||
Proceeds from issuance of senior notes, net | 990 | - | ||||||||||||||
Change in book overdraft | 47 | 7 | ||||||||||||||
Common stock repurchases | (5 | ) | - | |||||||||||||
Excess tax benefit from stock-based compensation | 1 | 3 | ||||||||||||||
Dividends paid | (41 | ) | (41 | ) | ||||||||||||
Proceeds from stock option exercises and other | 8 | 4 | ||||||||||||||
Net cash provided by (used in) financing activities | 950 | (630 | ) | $ | 1,580 | 250.8 | % | |||||||||
Decrease in cash and cash equivalents | (57 | ) | (2,642 | ) | ||||||||||||
Cash and cash equivalents at beginning of period | 1,363 | 4,019 | ||||||||||||||
Cash and cash equivalents at end of period | $ | 1,306 | $ | 1,377 | ||||||||||||
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 amortization | 338 | 303 | ||||||||||||||
Net realized capital gains | (33 | ) | (11 | ) | ||||||||||||
Stock-based compensation | 82 | 67 | ||||||||||||||
(Benefit from) provision for deferred income taxes | (80 | ) | 22 | |||||||||||||
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 operating activities | 1,923 | 2,079 | ($156 | ) | -7.5 | % | ||||||||||
Cash flows from investing activities | ||||||||||||||||
Acquisitions, net of cash acquired | (1,235 | ) | (226 | ) | ||||||||||||
Purchases of property and equipment | (410 | ) | (336 | ) | ||||||||||||
Purchases of investment securities | (3,221 | ) | (3,678 | ) | ||||||||||||
Proceeds from maturities of investment securities | 1,497 | 1,623 | ||||||||||||||
Proceeds from sales of investment securities | 1,404 | 1,259 | ||||||||||||||
Net cash used in investing activities | (1,965 | ) | (1,358 | ) | ($607 | ) | -44.7 | % | ||||||||
Cash flows from financing activities | ||||||||||||||||
Receipts (withdrawals) from contract deposits, net | (397 | ) | (378 | ) | ||||||||||||
Repayment of long-term debt | (36 | ) | - | |||||||||||||
Proceeds from issuance of senior notes, net | 990 | - | ||||||||||||||
Change in book overdraft | 18 | (103 | ) | |||||||||||||
Common stock repurchases | (518 | ) | (541 | ) | ||||||||||||
Excess tax benefit from stock-based compensation | 22 | 15 | ||||||||||||||
Dividends paid | (165 | ) | (82 | ) | ||||||||||||
Proceeds from stock option exercises and other | 57 | 72 | ||||||||||||||
Net cash provided by (used) in financing activities | (29 | ) | (1,017 | ) | $ | 988 | 97.1 | % | ||||||||
Decrease in cash and cash equivalents | (71 | ) | (296 | ) | ||||||||||||
Cash and cash equivalents at beginning of period | 1,377 | 1,673 | ||||||||||||||
Cash and cash equivalents at end of period | $ | 1,306 | $ | 1,377 | ||||||||||||
S-11 |
Humana Inc. | |||||||||||||||||||||||||||||||||
Key Income Statement Ratios and Segment Operating Results | |||||||||||||||||||||||||||||||||
Dollars in millions | |||||||||||||||||||||||||||||||||
Three Months Ended December 31, | Twelve Months Ended 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 Group | 87.1 | % | 86.4 | % | 0.7 | % | 84.1 | % | 82.4 | % | 1.7 | % | |||||||||||||||||||||
Other Businesses | 104.1 | % | 91.9 | % | 12.2 | % | 94.7 | % | 91.4 | % | 3.3 | % | |||||||||||||||||||||
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 Group | 16.7 | % | 18.8 | % | -2.1 | % | 16.1 | % | 17.8 | % | -1.7 | % | |||||||||||||||||||||
Health and Well-Being Services | 96.8 | % | 96.3 | % | 0.5 | % | 95.5 | % | 96.1 | % | -0.6 | % | |||||||||||||||||||||
Other Businesses | 29.1 | % | 9.7 | % | 19.4 | % | 18.7 | % | 9.4 | % | 9.3 | % | |||||||||||||||||||||
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 Group | ($25 | ) | ($51 | ) | $ | 26 | 51.0 | % | $ | 253 | $ | 242 | $ | 11 | 4.5 | % | |||||||||||||||||
Health and Well-Being Services | $ | 75 | $ | 85 | ($10 | ) | -11.8 | % | $ | 486 | $ | 353 | $ | 133 | 37.7 | % | |||||||||||||||||
Other Businesses | ($31 | ) | $ | 1 | ($32 | ) | -3200.0 | % | ($19 | ) | $ | 84 | ($103 | ) | -122.6 | % | |||||||||||||||||
Consolidated | $ | 282 | $ | 313 | ($31 | ) | -9.9 | % | $ | 1,911 | $ | 2,235 | ($324 | ) | -14.5 | % | |||||||||||||||||
S-12 |
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: | ||||||||||||||
Employed | 3,300 | 2,300 | 1,000 | 43.5 | % | |||||||||
Contracted | 3,400 | 1,500 | 1,900 | 126.7 | % | |||||||||
Total | 6,700 | 3,800 | 2,900 | 76.3 | % | |||||||||
Care Management Statistics: | ||||||||||||||
Percentage of members with complex chronic conditions in Humana Chronic Care Program | 52.0 | % | 46.0 | % | 6.0 | % | ||||||||
Percentage of high-risk discharges reviewed by Humana Transitions Program | 21.6 | % | N/A | N/A | ||||||||||
S-13 |
Humana Inc. | ||||||||||||||||||||||||||
Health and Well-Being Services Segment Metrics (Continued) | ||||||||||||||||||||||||||
Script volume in thousands | ||||||||||||||||||||||||||
Three Months Ended December 31, | Year Ended December 31, | |||||||||||||||||||||||||
2012 | 2011 | Difference | 2012 | 2011 | Difference | |||||||||||||||||||||
Pharmacy: | ||||||||||||||||||||||||||
Generic Dispense Rate | ||||||||||||||||||||||||||
Retail | 85.9 | % | 81.8 | % | 4.1 | % | 84.5 | % | 80.9 | % | 3.6 | % | ||||||||||||||
Employer Group | 78.1 | % | 71.8 | % | 6.3 | % | 76.3 | % | 71.0 | % | 5.3 | % | ||||||||||||||
Total | 85.0 | % | 80.6 | % | 4.4 | % | 83.6 | % | 79.7 | % | 3.9 | % | ||||||||||||||
Mail-Order Penetration | ||||||||||||||||||||||||||
Retail | 22.2 | % | 22.0 | % | 0.2 | % | 23.0 | % | 20.9 | % | 2.1 | % | ||||||||||||||
Employer Group | 14.6 | % | 15.3 | % | -0.7 | % | 15.3 | % | 15.5 | % | -0.2 | % | ||||||||||||||
Total | 21.3 | % | 21.2 | % | 0.1 | % | 22.2 | % | 20.2 | % | 2.0 | % | ||||||||||||||
Percentage | Percentage | |||||||||||||||||||||||||
Difference | Change | Difference | Change | |||||||||||||||||||||||
Script volume | ||||||||||||||||||||||||||
Retail | 54,100 | 46,500 | 7,600 | 16.3 | % | 211,600 | 181,300 | 30,300 | 16.7 | % | ||||||||||||||||
Employer Group | 7,200 | 6,300 | 900 | 14.3 | % | 26,600 | 25,000 | 1,600 | 6.4 | % | ||||||||||||||||
Total | 61,300 | 52,800 | 8,500 | 16.1 | % | 238,200 | 206,300 | 31,900 | 15.5 | % | ||||||||||||||||
S-14 |
Humana Inc. | ||||||||||||||||||||||
Membership Detail | ||||||||||||||||||||||
In thousands | ||||||||||||||||||||||
Ending | Average | Ending | Year-over-year Change | Ending | Sequential Change | |||||||||||||||||
December 31, 2012 | 4Q12 | December 31, 2011 | Amount | Percent | September 30, 2012 | Amount | Percent | |||||||||||||||
Medical Membership: | ||||||||||||||||||||||
Retail | ||||||||||||||||||||||
Medicare Advantage | 1,927.6 | 1,921.8 | 1,640.3 | 287.3 | 17.5 | % | 1,911.8 | 15.8 | 0.8 | % | ||||||||||||
Medicare stand-alone PDPs | 2,985.6 | 2,973.5 | 2,540.4 | 445.2 | 17.5 | % | 2,947.2 | 38.4 | 1.3 | % | ||||||||||||
Individual commercial | 444.0 | 443.9 | 433.6 | 10.4 | 2.4 | % | 443.4 | 0.6 | 0.1 | % | ||||||||||||
Medicare Supplement | 77.4 | 76.6 | 59.6 | 17.8 | 29.9 | % | 75.2 | 2.2 | 2.9 | % | ||||||||||||
Total Retail | 5,434.6 | 5,415.8 | 4,673.9 | 760.7 | 16.3 | % | 5,377.6 | 57.0 | 1.1 | % | ||||||||||||
Employer Group | ||||||||||||||||||||||
Medicare Advantage | 370.8 | 370.0 | 290.6 | 80.2 | 27.6 | % | 367.9 | 2.9 | 0.8 | % | ||||||||||||
Medicare Advantage ASO | 27.7 | 27.7 | 27.6 | 0.1 | 0.4 | % | 27.8 | (0.1 | ) | -0.4 | % | |||||||||||
Medicare stand-alone PDPs | 4.4 | 4.4 | 4.2 | 0.2 | 4.8 | % | 4.4 | - | 0.0 | % | ||||||||||||
Fully-insured medical commercial | 1,211.8 | 1,209.5 | 1,180.2 | 31.6 | 2.7 | % | 1,204.5 | 7.3 | 0.6 | % | ||||||||||||
ASO commercial | 1,237.7 | 1,235.0 | 1,292.3 | (54.6 | ) | -4.2 | % | 1,231.1 | 6.6 | 0.5 | % | |||||||||||
Total Employer Group | 2,852.4 | 2,846.6 | 2,794.9 | 57.5 | 2.1 | % | 2,835.7 | 16.7 | 0.6 | % | ||||||||||||
Other Businesses | ||||||||||||||||||||||
Military Services | 3,123.9 | 3,127.7 | 3,028.1 | 95.8 | 3.2 | % | 3,124.6 | (0.7 | ) | 0.0 | % | |||||||||||
Medicaid and other | 610.8 | 610.0 | 614.2 | (3.4 | ) | -0.6 | % | 607.1 | 3.7 | 0.6 | % | |||||||||||
LI-NET (D) | 67.1 | 70.6 | 73.5 | (6.4 | ) | -8.7 | % | 73.9 | (6.8 | ) | -9.2 | % | ||||||||||
Total Other Businesses | 3,801.8 | 3,808.3 | 3,715.8 | 86.0 | 2.3 | % | 3,805.6 | (3.8 | ) | -0.1 | % | |||||||||||
Total Medical Membership | 12,088.8 | 12,070.7 | 11,184.6 | 904.2 | 8.1 | % | 12,018.9 | 69.9 | 0.6 | % | ||||||||||||
Specialty Membership: | ||||||||||||||||||||||
Retail | ||||||||||||||||||||||
Dental - fully-insured | 691.5 | 692.7 | 579.6 | 111.9 | 19.3 | % | 685.3 | 6.2 | 0.9 | % | ||||||||||||
Vision | 118.7 | 117.9 | 83.8 | 34.9 | 41.6 | % | 113.8 | 4.9 | 4.3 | % | ||||||||||||
Other supplemental benefits (E) | 138.5 | 139.4 | 119.1 | 19.4 | 16.3 | % | 141.7 | (3.2 | ) | -2.3 | % | |||||||||||
Total Retail | 948.7 | 950.0 | 782.5 | 166.2 | 21.2 | % | 940.8 | 7.9 | 0.8 | % | ||||||||||||
Employer Group | ||||||||||||||||||||||
Dental - fully-insured | 2,446.4 | 2,441.8 | 2,283.9 | 162.5 | 7.1 | % | 2,431.0 | 15.4 | 0.6 | % | ||||||||||||
Dental - ASO | 868.3 | 866.5 | 869.9 | (1.6 | ) | -0.2 | % | 863.1 | 5.2 | 0.6 | % | |||||||||||
Vision | 2,525.0 | 2,523.0 | 2,329.6 | 195.4 | 8.4 | % | 2,515.5 | 9.5 | 0.4 | % | ||||||||||||
Other supplemental benefits (E) | 1,296.5 | 1,295.3 | 1,049.2 | 247.3 | 23.6 | % | 1,279.0 | 17.5 | 1.4 | % | ||||||||||||
Total Employer Group | 7,136.2 | 7,126.6 | 6,532.6 | 603.6 | 9.2 | % | 7,088.6 | 47.6 | 0.7 | % | ||||||||||||
Total Specialty Membership | 8,084.9 | 8,076.6 | 7,315.1 | 769.8 | 10.5 | % | 8,029.4 | 55.5 | 0.7 | % | ||||||||||||
S-15 |
Humana Inc. | ||||||||||||||||||||||
Premiums and Services Revenue Detail | ||||||||||||||||||||||
Dollars in millions, except per member per month | ||||||||||||||||||||||
Per Member per Month (F) | ||||||||||||||||||||||
Three Months Ended December 31, | Three Months Ended December 31, | |||||||||||||||||||||
Dollar | Percentage | |||||||||||||||||||||
2012 | 2011 | Change | Change | 2012 | 2011 | |||||||||||||||||
Premiums and Services Revenue | ||||||||||||||||||||||
Retail: | ||||||||||||||||||||||
Medicare Advantage | $ | 5,184 | $ | 4,454 | $ | 730 | 16.4 | % | $ | 899 | $ | 916 | ||||||||||
Medicare stand-alone PDPs | 620 | 580 | 40 | 6.9 | % | 70 | 77 | |||||||||||||||
Individual commercial | 216 | 205 | 11 | 5.4 | % | 162 | 159 | |||||||||||||||
Medicare Supplemental | 39 | 28 | 11 | 39.3 | % | 170 | 160 | |||||||||||||||
Specialty | 46 | 35 | 11 | 31.4 | % | 16 | 15 | |||||||||||||||
ASO & other services (B) | 7 | 4 | 3 | 75.0 | % | |||||||||||||||||
Total Retail | 6,112 | 5,306 | 806 | 15.2 | % | |||||||||||||||||
Employer Group: | ||||||||||||||||||||||
Medicare Advantage | 1,005 | 789 | 216 | 27.4 | % | 905 | 907 | |||||||||||||||
Medicare stand-alone PDPs | 2 | 2 | - | 0.0 | % | |||||||||||||||||
Fully-insured medical commercial | 1,251 | 1,181 | 70 | 5.9 | % | 345 | 334 | |||||||||||||||
Specialty | 277 | 237 | 40 | 16.9 | % | 15 | 14 | |||||||||||||||
ASO & other services (B) | 96 | 91 | 5 | 5.5 | % | |||||||||||||||||
Total Employer Group | 2,631 | 2,300 | 331 | 14.4 | % | |||||||||||||||||
Health and Well-Being Services: | ||||||||||||||||||||||
Pharmacy solutions | 2,832 | 2,550 | 282 | 11.1 | % | |||||||||||||||||
Provider services | 297 | 268 | 29 | 10.8 | % | |||||||||||||||||
Home care services | 67 | 29 | 38 | 131.0 | % | |||||||||||||||||
Integrated wellness services | 68 | 53 | 15 | 28.3 | % | |||||||||||||||||
Total Health and Well-Being Services | 3,264 | 2,900 | 364 | 12.6 | % | |||||||||||||||||
Other Businesses: | ||||||||||||||||||||||
Military services (G) | 97 | 821 | (724 | ) | -88.2 | % | ||||||||||||||||
LI-NET (D) | 63 | 57 | 6 | 10.5 | % | 297 | 257 | |||||||||||||||
Medicaid and other (H) | 280 | 258 | 22 | 8.5 | % | 145 | 138 | |||||||||||||||
Total Other Businesses | $ | 440 | $ | 1,136 | $ | (696 | ) | -61.3 | % | |||||||||||||
S-16 |
Humana Inc. | ||||||||||||||||||||||
Premiums and Services Revenue Detail | ||||||||||||||||||||||
Dollars in millions, except per member per month | ||||||||||||||||||||||
Per Member per Month (F) | ||||||||||||||||||||||
Twelve Months Ended December 31, | Twelve Months Ended December 31, | |||||||||||||||||||||
Dollar | Percentage | |||||||||||||||||||||
2012 | 2011 | Change | Change | 2012 | 2011 | |||||||||||||||||
Premiums and Services Revenue | ||||||||||||||||||||||
Retail: | ||||||||||||||||||||||
Medicare Advantage | $ | 20,788 | $ | 18,100 | $ | 2,688 | 14.9 | % | $ | 917 | $ | 939 | ||||||||||
Medicare stand-alone PDPs | 2,587 | 2,317 | 270 | 11.7 | % | 74 | 80 | |||||||||||||||
Individual commercial | 861 | 757 | 104 | 13.7 | % | 162 | 156 | |||||||||||||||
Medicare Supplemental | 143 | 104 | 39 | 37.5 | % | 166 | 161 | |||||||||||||||
Specialty | 171 | 124 | 47 | 37.9 | % | 16 | 15 | |||||||||||||||
ASO & other services (B) | 26 | 16 | 10 | 62.5 | % | |||||||||||||||||
Total Retail | 24,576 | 21,418 | 3,158 | 14.7 | % | |||||||||||||||||
Employer Group: | ||||||||||||||||||||||
Medicare Advantage | 4,064 | 3,152 | 912 | 28.9 | % | 932 | 923 | |||||||||||||||
Medicare stand-alone PDPs | 8 | 8 | - | 0.0 | % | |||||||||||||||||
Fully-insured medical commercial | 4,996 | 4,782 | 214 | 4.5 | % | 348 | 338 | |||||||||||||||
Specialty | 1,070 | 935 | 135 | 14.4 | % | 15 | 14 | |||||||||||||||
ASO & other services (B) | 373 | 370 | 3 | 0.8 | % | |||||||||||||||||
Total Employer Group | 10,511 | 9,247 | 1,264 | 13.7 | % | |||||||||||||||||
Health and Well-Being Services: | ||||||||||||||||||||||
Pharmacy solutions | 11,368 | 9,897 | 1,471 | 14.9 | % | |||||||||||||||||
Provider services | 1,181 | 1,065 | 116 | 10.9 | % | |||||||||||||||||
Home care services | 207 | 84 | 123 | 146.4 | % | |||||||||||||||||
Integrated wellness services | 232 | 187 | 45 | 24.1 | % | |||||||||||||||||
Total Health and Well-Being Services | 12,988 | 11,233 | 1,755 | 15.6 | % | |||||||||||||||||
Other Businesses: | ||||||||||||||||||||||
Military services (G) | 1,288 | 3,690 | (2,402 | ) | -65.1 | % | ||||||||||||||||
LI-NET (D) | 266 | 253 | 13 | 5.1 | % | 304 | 247 | |||||||||||||||
Medicaid and other (H) | 1,075 | 969 | 106 | 10.9 | % | 143 | 129 | |||||||||||||||
Total Other Businesses | $ | 2,629 | $ | 4,912 | $ | (2,283 | ) | -46.5 | % | |||||||||||||
S-17 |
Humana Inc. | |||||||||||||||||||||||
Medicare Summary | |||||||||||||||||||||||
Premiums in millions | |||||||||||||||||||||||
Membership in thousands | |||||||||||||||||||||||
Per Member per Month (F) | |||||||||||||||||||||||
Three Months Ended December 31, | Year-over-year Change | Three Months Ended December 31, | |||||||||||||||||||||
2012 | 2011 | Amount | Percent | 2012 | 2011 | ||||||||||||||||||
Premiums | |||||||||||||||||||||||
Medicare Advantage | $ | 6,189 | $ | 5,243 | $ | 946 | 18.0 | % | $ | 900 | $ | 914 | |||||||||||
Medicare stand-alone PDPs | 685 | 639 | 46 | 7.2 | % | 75 | 2 | ||||||||||||||||
Total Medicare | $ | 6,874 | $ | 5,882 | $ | 992 | 16.9 | % | |||||||||||||||
Per Member per Month (F) | |||||||||||||||||||||||
Twelve Months Ended December 31, | Year-over-year Change | Twelve Months Ended December 31, | |||||||||||||||||||||
2012 | 2011 | Amount | Percent | 2012 | 2011 | ||||||||||||||||||
Premiums | |||||||||||||||||||||||
Medicare Advantage | $ | 24,852 | $ | 21,252 | $ | 3,600 | 16.9 | % | $ | 919 | $ | 937 | |||||||||||
Medicare stand-alone PDPs | 2,861 | 2,578 | 283 | 11.0 | % | 80 | 86 | ||||||||||||||||
Total Medicare | $ | 27,713 | $ | 23,830 | $ | 3,883 | 16.3 | % | |||||||||||||||
Ending | Ending | Year-over-year Change | |||||||||||||||||||||
December 31, 2012 | December 31, 2011 | Amount | Percent | ||||||||||||||||||||
Fully-Insured Membership | |||||||||||||||||||||||
Medicare Advantage | 2,298.4 | 1,930.9 | 367.5 | 19.0 | % | ||||||||||||||||||
Medicare stand-alone PDPs | 3,057.1 | 2,618.1 | 439.0 | 16.8 | % | ||||||||||||||||||
Total Medicare | 5,355.5 | 4,549.0 | 806.5 | 17.7 | % | ||||||||||||||||||
Member Mix | |||||||||||||||||||||||
Ending | Ending | December 31 | December 31 | ||||||||||||||||||||
Retail Segment Detail | December 31, 2012 | December 31, 2011 | 2012 | 2011 | |||||||||||||||||||
Medicare Advantage Membership | |||||||||||||||||||||||
HMO | 935.8 | 715.3 | 48.5 | % | 43.6 | % | |||||||||||||||||
PPO | 991.8 | 925.0 | 51.5 | % | 56.4 | % | |||||||||||||||||
Total Individual Medicare | 1,927.6 | 1,640.3 | 100.0 | % | 100.0 | % | |||||||||||||||||
Medicare Advantage Membership | |||||||||||||||||||||||
Risk | 511.7 | 429.1 | 26.5 | % | 26.1 | % | |||||||||||||||||
Path-to-Risk | 363.9 | 199.4 | 18.9 | % | 12.2 | % | |||||||||||||||||
Other | 1,052.0 | 1,011.8 | 54.6 | % | 61.7 | % | |||||||||||||||||
Total Individual Medicare | 1,927.6 | 1,640.3 | 100.0 | % | 99.9 | % | |||||||||||||||||
S-18 |
Humana Inc. | Fair value | |||||||||||
Investments | ||||||||||||
Dollars in millions | ||||||||||||
12/31/2012 | 9/30/2012 | 12/31/2011 | ||||||||||
Investment Portfolio: | ||||||||||||
Cash & cash equivalents | $ | 1,306 | $ | 1,363 | $ | 1,377 | ||||||
Investment securities | 8,001 | 8,058 | 7,743 | |||||||||
Long-term investments | 1,846 | 1,837 | 1,710 | |||||||||
Total investment portfolio | $ | 11,153 | $ | 11,258 | $ | 10,830 | ||||||
Duration (I) | 4.02 | 3.89 | 3.94 | |||||||||
Average Credit Rating | AA- | AA- | AA- | |||||||||
Investment Portfolio Detail: | ||||||||||||
Cash and cash equivalents | $ | 1,306 | $ | 1,363 | $ | 1,377 | ||||||
U.S. Government and agency obligations | ||||||||||||
U.S. Treasury and agency obligations | 618 | 563 | 725 | |||||||||
U.S. Government residential mortgage-backed | 1,569 | 1,908 | 1,751 | |||||||||
U.S. Government commercial mortgage-backed | 34 | 34 | 33 | |||||||||
Total U.S. Government and agency obligations | 2,221 | 2,505 | 2,509 | |||||||||
Tax-exempt municipal securities | ||||||||||||
Pre-refunded | 311 | 286 | 332 | |||||||||
Insured | 627 | 618 | 634 | |||||||||
Other | 2,120 | 1,961 | 1,874 | |||||||||
Auction rate securities | 13 | 13 | 16 | |||||||||
Total tax-exempt municipal securities | 3,071 | 2,878 | 2,856 | |||||||||
Residential mortgage-backed | ||||||||||||
Prime residential mortgages | 32 | 34 | 41 | |||||||||
Alt-A residential mortgages | 1 | 1 | 2 | |||||||||
Sub-prime residential mortgages | 1 | 1 | 1 | |||||||||
Total residential mortgage-backed | 34 | 36 | 44 | |||||||||
Commercial mortgage-backed | 659 | 658 | 381 | |||||||||
Asset-backed securities | 68 | 37 | 83 | |||||||||
Corporate securities | ||||||||||||
Financial services | 864 | 853 | 692 | |||||||||
Other | 2,930 | 2,928 | 2,888 | |||||||||
Total corporate securities | 3,794 | 3,781 | 3,580 | |||||||||
Total investment portfolio | $ | 11,153 | $ | 11,258 | $ | 10,830 | ||||||
S-19 |
Humana Inc. | |||||||||||||
Detail of Benefits Payable Balance and Year-to-Date Changes | |||||||||||||
Dollars in millions | |||||||||||||
December 31, | September 30, | December 31, | |||||||||||
2012 | 2012 | 2011 | |||||||||||
Detail of benefits payable | |||||||||||||
IBNR and other benefits payable (J) | $ | 3,158 | $ | 3,097 | $ | 2,759 | |||||||
Unprocessed claim inventories (K) | 302 | 380 | 280 | ||||||||||
Processed claim inventories (L) | 230 | 339 | 209 | ||||||||||
Payable to pharmacy benefit administrator (M) | 85 | 127 | 167 | ||||||||||
Benefits payable, excluding military services | 3,775 | 3,943 | 3,415 | ||||||||||
Military services benefits payable (N) | 4 | 15 | 339 | ||||||||||
Total Benefits Payable | $ | 3,779 | $ | 3,958 | $ | 3,754 | |||||||
Twelve Months Ended | Nine Months Ended | Year Ended | |||||||||||
December 31, 2012 | September 30, 2012 | December 31, 2011 | |||||||||||
Year-to-date changes in benefits payable, | |||||||||||||
excluding military services (O) | |||||||||||||
Balances at January 1 | $ | 3,415 | $ | 3,415 | $ | 3,214 | |||||||
Acquisitions | 66 | 73 | 29 | ||||||||||
Incurred related to: | |||||||||||||
Current year | 30,198 | 22,708 | 25,834 | ||||||||||
Prior years (P) | (257 | ) | (235 | ) | (372 | ) | |||||||
Total incurred | 29,941 | 22,473 | 25,462 | ||||||||||
Paid related to: | |||||||||||||
Current year | (26,738 | ) | (19,193 | ) | (22,742 | ) | |||||||
Prior years | (2,909 | ) | (2,825 | ) | (2,548 | ) | |||||||
Total paid | (29,647 | ) | (22,018 | ) | (25,290 | ) | |||||||
Balances at end of period | $ | 3,775 | $ | 3,943 | $ | 3,415 | |||||||
Twelve Months Ended | Nine Months Ended | Year Ended | |||||||||||
December 31, 2012 | September 30, 2012 | December 31, 2011 | |||||||||||
Summary of Consolidated Benefit Expense: | |||||||||||||
Total benefit expense incurred, per above | $ | 29,941 | $ | 22,473 | $ | 25,462 | |||||||
Military services benefit expense | 908 | 908 | 3,247 | ||||||||||
Future policy benefit expense (Q) | 136 | 88 | 114 | ||||||||||
Consolidated Benefit Expense | $ | 30,985 | $ | 23,469 | $ | 28,823 | |||||||
S-20 |
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 | 12.8 | 14.0 | (1.2 | ) | -8.6 | % | ||||||
Full Year Average | 13.1 | 13.8 | (0.7 | ) | -5.1 | % | ||||||
Unprocessed Claims Inventories | ||||||||||||
Date | Estimated Valuation (millions) | Claim Item Counts (000s) | Number of Days on Hand | |||||||||
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 | ||||||||
12/31/2012 | $ | 302 | 1,061 | 4.1 | ||||||||
S-21 |
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 | |||||||||
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 | % | |||||||
12/31/2012 | 48.5 | (4.0 | ) | -7.6 | % | |||||||
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 | (0.1 | ) | (2.3 | ) | ||||||||
Change in processed claims inventories | 0.3 | 1.4 | ||||||||||
Change in pharmacy payment cutoff | (0.1 | ) | 0.6 | |||||||||
Change in capitation/provider settlements | (4.3 | ) | (0.7 | ) | ||||||||
All other | 0.2 | |||||||||||
DCP - end of period | 48.5 | 52.5 | ||||||||||
S-22 |
Humana Inc.
Footnotes to Statistical Schedules and Supplementary Information 4Q12 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 benefits expense 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 94% 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 benefits expense per day in the quarterly period. |
(U) DCP fluctuates due to a number of issues, the more significant of which are detailed in this roll forward. 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-23 |
Contacts:
Investor Relations:
Regina Nethery, 502-580-3644
Rnethery@humana.com
or
Corporate
Communications:
Tom Noland, 502-580-3674
Tnoland@humana.com
http://www.humana.com