Read Larry Connors' blog – Short Term Trading Strategies
--Medicare operations continue to perform well
--TRICARE contract protest upheld by GAO
--Commercial results continue to be impacted by general economy
Humana Inc. (NYSE: HUM | Quote | Chart | News | PowerRating) today reported diluted earnings per common share (EPS) for the quarter ended September 30, 2009 (3Q09) of $1.78, consistent with management's guidance of $1.75 to $1.80. The company earned $1.09 per share for the quarter ended September 30, 2008 (3Q08) which reflected $0.40 per share in realized losses primarily associated with other-than-temporary impairments in investments and sales of distressed financial institution securities. The 3Q08 results also included high stand-alone Prescription Drug Plan (PDP) claim expenses.
For the nine months ended September 30, 2009 (YTD09) the company reported $4.67 in EPS compared to $2.79 in EPS for the nine months ended September 30, 2008 (YTD08). The YTD08 results reflected both high stand-alone PDP claim expenses and lower investment income primarily due to significant realized losses on investments.
"Our results this quarter reflect continued solid performance in our Government businesses, offsetting continuing challenges in our Commercial Segment," said Michael B. McCallister, president and chief executive officer of Humana. "We continue to anticipate consolidated results in line with our previous expectations and thus are reaffirming our 2009 EPS guidance."
The company anticipates EPS of approximately $6.15 for the year ending December 31, 2009 (FY09). Looking ahead to the year ending December 31, 2010 (FY10), the company projects EPS to be in the range of $5.05 to $5.25. The 2010 estimate includes military services EPS between breakeven and $0.10 per share (including the impact of asset write-downs and other charges) and excludes any potential impact from pending health legislation or regulatory reform.
"Looking to 2010, we're forecasting substantial net-new Medicare Advantage member growth, attributable to both large-group and individual customers," McCallister said. "In addition, as we've said in the past, we target an overall Medicare pretax operating margin of approximately 5 percent, which next year will include a significant increase in group membership, a traditionally lower margin business, a moderating margin for our stand-alone PDPs, and an individual Medicare margin that approximates the overall target. We also anticipate stabilizing our Commercial operating results with administrative cost reductions and continuation of pricing actions."
TRICARE Update
As previously disclosed, on July 22, 2009, Humana Military Healthcare Services (HMHS), a wholly owned subsidiary of the company, filed a protest with the Government Accountability Office (GAO) in connection with the award of the third generation TRICARE program contract for the South Region to another contractor. In its protest, Humana cited discrepancies between the award criteria and procedures prescribed in the request for proposals issued by the Department of Defense (DoD) and those that appear to have been used by the DoD in making its contractor selection. On October 28, 2009, the company learned that the GAO had upheld HMHS' protest. Humana anticipates the GAO will publicly release a detailed version of its protest decision expeditiously to include the grounds for the decision and the nature of relief recommended by the GAO to the DoD. At this time, Humana is not able to determine what actions the DoD will take in response to recommendations by the GAO, nor can it determine whether or not the protest decision by the GAO will have any effect upon the ultimate disposition of the contract award, and therefore whether or not the protest decision is material.
Consolidated Highlights
Revenues -- 3Q09 consolidated revenues rose 8 percent to $7.72 billion from $7.15 billion in 3Q08, with total premium and administrative services fees up 7 percent compared to the prior year's quarter. The increase in premiums and administrative services fees primarily reflects an increase in both average Medicare Advantage membership and per-member premiums for these products.
Consolidated revenues for YTD09 rose 9 percent to $23.33 billion from $21.46 billion for YTD08 with total premiums and administrative services fees up 8 percent compared to the prior year's period, also driven primarily by the increases in average Medicare Advantage enrollment and per-member premiums.
Benefit expenses -- The 3Q09 consolidated benefit ratio (benefit expenses as a percent of premium revenues) of 82.1 percent decreased from 83.1 percent for the prior year's quarter, as expected. This 100 basis point decrease was primarily driven by a decrease of 220 basis points in the Government Segment, partially offset by a 250 basis point increase in the Commercial Segment benefit ratio.
The consolidated benefit ratio for YTD09 of 83.1 percent was 180 basis points lower than the YTD08 consolidated benefit ratio of 84.9 percent, reflecting a 250 basis point decrease in the Government Segment's benefit ratio year over year while the Commercial Segment's benefit ratio was unchanged YTD09 compared to YTD08.
Selling, general, & administrative (SG&A) expenses -- The 3Q09 consolidated SG&A expense ratio (SG&A expenses as a percent of premiums, administrative services fees and other revenue) of 13.7 percent remained unchanged from 3Q08. The YTD09 consolidated SG&A expense ratio of 13.5 percent increased 10 basis points from the YTD08 ratio of 13.4 percent.
Government Segment Results
Pretax results:
-- Government segment pretax income of $474.5 million in 3Q09 compares to $271.7 million in 3Q08. This increase was primarily driven by lower PDP claim expenses, an 11 percent increase in average Medicare Advantage membership, the implementation of member premiums for most of the company's Medicare Advantage products, and higher investment income.
Enrollment:
-- Medicare Advantage membership grew to 1,514,800 at September 30, 2009, an increase of 146,800 members, or 11 percent, from September 30, 2008, and up 78,900, or 5 percent, versus December 31, 2008. As of September 30, 2009, approximately 62 percent of the company's Medicare Advantage members were in network-based products versus 49 percent at September 30, 2008 and 51 percent at December 31, 2008.
-- Membership in the company's stand-alone PDPs totaled 1,960,400 at September 30, 2009 compared to 3,089,000 at September 30, 2008 and 3,066,600 at December 31, 2008. Both the year-over-year and year-to-date membership declines resulted primarily from attrition associated with low-income seniors opting to join competitor plans with lower or no member premiums as well as stand-alone PDP members choosing Medicare Advantage plans. For 2009, the company realigned its stand-alone PDP premium and benefit designs to correspond with its prescription drug claims experience.
-- Military services membership at September 30, 2009 of 3,015,100 was up approximately 2 percent from 2,953,900 at September 30, 2008 and 2,964,700 at December 31, 2008.
Premiums and administrative services fees:
-- Medicare Advantage premiums of $4.14 billion in 3Q09 increased 18 percent compared to $3.50 billion in 3Q08, primarily the combined result of an 11 percent increase in average Medicare Advantage membership and the introduction of member premiums for most of the company's Medicare Advantage products.
-- Medicare stand-alone PDP premiums of $578.1 million in 3Q09 decreased 26 percent compared to $782.9 million in 3Q08, reflecting a 36 percent decline in average membership year over year primarily due to members choosing competitor offerings given the premium and benefit design changes discussed above.
-- Military services premiums and administrative services fees during 3Q09 increased $30.7 million, or 4 percent, to $818.8 million compared to $788.1 million in 3Q08.
Benefit Expenses:
-- The Government Segment benefit ratio decreased 220 basis points to 81.9 percent in 3Q09 compared to 84.1 percent in the prior year's quarter, primarily driven by a 340 basis point decline in the Medicare benefit ratio with decreases in both the Medicare Advantage and stand-alone PDP benefit ratios.
SG&A Expenses:
-- The Government Segment's SG&A expense ratio of 10.2% remained unchanged from 3Q08.
Commercial Segment Results
Pretax results:
-- The Commercial Segment had a pretax loss of $5.2 million in 3Q09 compared to pretax income of $11.2 million in 3Q08 primarily driven by higher benefit expenses as a percent of premiums and lower average medical membership, partially offset by higher investment income.
Enrollment:
-- Commercial Segment medical membership declined to 3,426,900 at September 30, 2009, a decrease of 127,100, or 4 percent, from 3,554,000 at September 30, 2008 and a decline of 193,900, or 5 percent, from 3,620,800 at December 31, 2008. The decline during 2009 primarily reflected the impact of the economic recession and increased unemployment across various of the company's fully-insured group medical lines of business as well as the loss of two large ASO accounts totaling approximately 95,400 members on January 1, 2009.
-- The company's individual product line has continued to grow steadily, with membership of 358,800, up 13 percent at September 30, 2009 compared to 316,800 at September 30, 2008 and up 10 percent from 325,100 at December 31, 2008.
-- Membership in Commercial Segment specialty products (a) of 7,262,900 at September 30, 2009 increased 8 percent from 6,727,400 at September 30, 2008 and 7 percent from 6,817,000 at December 31, 2008.
Premiums and administrative services fees:
-- Premiums and administrative services fees for the Commercial Segment decreased 1 percent to $1.87 billion in 3Q09 compared to $1.88 billion in the prior year's quarter, reflecting a 4 percent decline in average medical membership year over year.
-- Commercial Segment medical premiums for fully-insured group accounts increased approximately 5 percent on a per-member basis during 3Q09 compared to 3Q08.
Benefit Expenses:
-- In 3Q09, the Commercial Segment benefits ratio of 82.7 percent increased 250 basis points versus the 3Q08 benefit ratio of 80.2 percent, as an increase in per-member premiums was more than offset by higher utilization primarily associated with the general economy (aging of small group membership, higher utilization prior to termination, and increased COBRA participation) as well as the impact of the H1N1 virus.
SG&A Expenses:
-- The Commercial Segment SG&A expense ratio of 24.0 percent for 3Q09 compares to 23.0 percent in 3Q08, primarily driven by increases in certain of the segment's businesses that carry a higher administrative expense load such as mail-order pharmacy and individual medical products.
Balance Sheet
-- At September 30, 2009, the company had cash, cash equivalents, and investment securities of $8.67 billion, up 17 percent from $7.41 billion in such assets at June 30, 2009.
-- Debt-to-total capitalization at September 30, 2009 was 23.2 percent, down 180 basis points from 25.0 percent at June 30, 2009 due primarily to the favorable operating results during 3Q09.
Cash Flows from Operations
Cash flows provided by operations for 3Q09 of $940.1 million compared to cash flows provided by operations of $577.3 million in 3Q08 with the increase primarily due to higher net income as well as the positive impact of changes in working capital accounts.
Share Repurchase Program
In the third quarter of 2008, the company's Board of Directors authorized the repurchase of up to $250 million of the company's common shares exclusive of shares repurchased in connection with employee stock plans. Due to volatility in the financial markets, the company has not repurchased any shares under the third quarter 2008 authorization. The share repurchase program expires on December 31, 2009.
Footnote
(a) The Commercial Segment provides a full range of insured specialty products including dental, vision and other supplemental products. Members included in these products may not be unique to each product since members have the ability to enroll in multiple products. Other supplemental benefits include life, disability, and fixed benefit products including cancer and critical illness policies.
Conference Call & Virtual Slide Presentation
Humana will host a conference call, as well as a virtual slide presentation, at 9:00 a.m. eastern time today to discuss its financial results for the quarter and the company's expectations for future earnings. A live virtual presentation (audio with slides) may be accessed via Humana's Investor Relations page at www.humana.com. The company suggests web participants sign on 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 our executive officers, the words or phrases like "expects," "anticipates," "believes," "intends," "likely will result," "estimates," "projects" or variations of such words and similar expressions are intended to identify such forward-looking statements. These forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties, and assumptions, including, among other things, information set forth in the "Risk Factors" section of our SEC filings, a summary of which includes but is not limited to the following:
-- If Humana does not design and price its products properly and competitively, if the premiums Humana charges are insufficient to cover the cost of health care services delivered to its members, or if its estimates of benefits payable or future policy benefits payable based upon its estimates of future benefit claims are inadequate, Humana's profitability could be materially adversely affected. Humana estimates the costs of its benefit expense payments, and designs and prices its products accordingly, using actuarial methods and assumptions based upon, among other relevant factors, claim payment patterns, medical cost inflation, and historical developments such as claim inventory levels and claim receipt patterns. These estimates, however, involve extensive judgment, and have considerable inherent variability that is extremely sensitive to payment patterns and changes in medical cost trends.
-- If Humana fails to effectively implement its operational and strategic initiatives, including its Medicare initiatives, the company's business could be materially adversely affected.
-- If Humana fails to properly maintain the integrity of its data, to strategically implement new information systems, or to protect Humana's proprietary rights to its systems, the company's business could be materially adversely affected.
-- Humana is involved in various legal actions, which, if resolved unfavorably to Humana, could result in substantial monetary damages. Increased litigation and negative publicity could increase the company's cost of doing business.
-- Humana's business activities are subject to substantial government regulation. New laws or regulations, or changes in existing laws or regulations or their enforcement, could increase the company's cost of doing business and could materially affect its business, profitability and financial condition. In addition, as a government contractor, the comapny is exposed to additional risks that could adversely affect its business or its willingness to participate in government health care programs.
-- Any failure to manage administrative costs could hamper Humana's profitability.
-- Any failure by Humana to manage acquisitions and other significant transactions successfully could have a material adverse effect on its financial results, business and prospects.
-- If Humana fails to develop and maintain satisfactory relationships with the providers of care to its members, the company's business could be adversely affected.
-- Humana's mail order pharmacy business is highly competitive and subjects it to regulations in addition to those the company faces with its core health benefits businesses.
-- Humana's ability to obtain funds from its subsidiaries is restricted.
-- 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 could adversely affect the company'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 we are unable to predict at this time. Any of these risks and uncertainties may cause actual results to differ materially from the results discussed in the forward-looking statements.
Humana advises investors to read the following documents as filed by the company with the SEC for further discussion both of the risks it faces and its historical performance:
-- Form 10-K for the year ended December 31, 2008;
-- Form 10-Q for the quarters ended March 31, 2009 and June 30, 2009;
-- Form 8-Ks filed during 2009.
About Humana
Humana Inc., headquartered in Louisville, Kentucky, is one of the nation's largest publicly traded health and supplemental benefits companies, with approximately 10.3 million medical members and approximately 7.3 million specialty-benefit members. Humana is a full-service benefits solutions company, offering a wide array of health and supplemental benefit plans for employer groups, government programs and individuals.
Over its 48-year history, Humana has consistently seized opportunities to meet changing customer needs. Today, the company is a leader in consumer engagement, providing guidance that leads to lower costs and a better health plan experience throughout its diversified customer portfolio.
More information regarding Humana is available to investors via the Investor Relations page of the company's web site at www.humana.com, including copies of:
-- Annual reports to stockholders;
-- Securities and Exchange Commission filings;
-- Most recent investor conference presentations;
-- Quarterly earnings news releases;
-- Replays of most recent earnings release conference calls;
-- Calendar of events (including upcoming earnings conference call dates and times, as well as planned interaction with research analysts and institutional investors);
-- Corporate Governance information.
Humana Inc. - Earnings Guidance Points as of November 2, 2009
(in accordance with For the year ending December 31, 2009 For the year ending December 31, 2010 Comments
Generally Accepted
Accounting
Principles (GAAP))
Diluted earnings per Full year 2009: approximately $6.15 Full year 2010: $5.05 to $5.25 EPS estimates for 2009 and 2010 exclude
common share (EPS) impact of potential future share
repurchases
2010 estimate includes military services
EPS between breakeven and $0.10 per
share and excludes any potential impact
from pending health insurance
legislation or regulatory reform
Revenues Consolidated revenues: approximately $31 Consolidated revenues: $32 billion to $34
billion billion
Premiums and ASO fees: Premiums and ASO fees:
Medicare Advantage: $16.4 billion to Medicare Advantage: $18 billion to $19
$16.5 billion billion
Medicare stand-alone PDPs: Medicare stand-alone PDPs:
approximately $2.4 billion $2.8 billion to $2.9 billion
Military services: $3.5 billion to $3.6 Military services: $2.9 billion to $3.0 2010 Military Services assumes a 10/01/10
billion; billion; transition date for TRICARE contract
Commercial Segment: approximately Commercial Segment: $7.4 billion to $7.6
$7.5 billion billion
Consolidated investment income: $290 Consolidated investment income: $320
million to $300 million million to $335 million
Consolidated other revenue: approximately Consolidated other revenue: $265 million to
$245 million $275 million
Ending medical Medicare Advantage: up approximately Medicare Advantage: up 180,000 to 240,000 Includes fully-insured group and individual
membership 65,000 from prior year from prior year Medicare Advantage members and
approximately 29,000 ASO group Medicare
Advantage Members in 2010.
Medicare stand-alone PDPs: down 1.15 Medicare stand-alone PDPs: up 150,000 to 2010 includes approximately 131,000 low-
million from prior year 200,000 from prior year income members associated with a CMS
demonstration project.
Military services: no material change Military services: down approximately 3 Fully-insured and ASO combined; assumes
from prior year million from prior year 10/1/10 transition for TRICARE contract
Medicaid: down approximately 72,000 from Medicaid: no material change from prior year 2009 expected decline in Medicaid
prior year membership relates to a contract assumed
in connection with the FY08 Cariten
Healthcare acquisition that terminated
effective December 31, 2008.
Commercial: down approximately 200,000 Commercial: down 135,000 to 145,000 from Fully-insured and ASO combined
from prior year prior year
Benefit ratios and Government Segment benefit ratio in the Government Segment benefit ratio in the Medicare, Medicaid, and Military Services
benefit expense trend range of 83.5% to 84.0% range of 85% to 86% combined
components
Medicare benefit ratio in the range of Medicare benefit ratio in the range of 84% Medicare Advantage and Stand-Alone PDP
82.0% to 83.0% to 85% combined
Commercial Segment benefit ratio in the Commercial Segment benefit ratio in the Medical and Specialty combined
range of 80% to 81% range of 79% to 81%
Commercial group fully insured secular Commercial group fully insured secular Commercial group fully insured secular trends
benefit expense trend components: benefit expense trend components: of approximately 7% for 2009 and 8% for
inpatient hospital utilization - relatively inpatient hospital utilization - low single 2010 represent the underlying percentage
flat; inpatient and outpatient hospital digits; inpatient and outpatient hospital change in total medical expenses which
rates - mid to upper single digits; rates - upper single digits; outpatient excludes the impact of benefit changes and
outpatient hospital utilization - mid hospital utilization - mid single digits; business, product, and demographic mix.
single digits; physician - mid single physician - mid single digits; pharmacy -
digits; pharmacy - mid single digits mid single digits
Selling, general & 13.5% to 14.0% 13% to 14% SG&A expenses as a percent of premiums,
administrative administrative services fees, and other
expense ratio revenue
2010 estimate includes approximately $100
million in administrative cost reductions
Depreciation & $240 million to $245 million $260 million to $265 million
amortization
Interest expense $105 million to $110 million $105 million to $110 million
Government Segment Medicare operating margin: approximately 6.5% Medicare operating margin: approximately 5.0% Medicare Advantage & stand-alone PDP combined
operating results
(Line-of-business-level Military services: operating earnings of Military services: operating earnings of 2010 military services earnings include the
results exclude the approximately $110 million to $115 million breakeven to $25 million anticipated impact of the write-down of
impact of investment goodwill and other charges related to the
income and interest termination of the South Region contract
expense) of $50 million to $75 million
Commercial Segment Approximately $120 million $125 million to $175 million Segment-level results include the impact of
pretax earnings investment income and interest expense
Cash flows from $1.3 billion to $1.5 billion $1.1 billion to $1.3 billion
operations
Capital expenditures Approximately $175 million Approximately $200 million
Effective tax rate Approximately 35% Approximately 36%
Shares used in Approximately 169 million Approximately 170 million Excludes impact of potential future share
computing full-year repurchases
EPS
Humana Inc. Statistical Schedules And Supplementary Information 3Q09 Earnings Release S-1
Humana Inc. Statistical Schedules and Supplementary Information 3Q09 Earnings Release Contents Page Description S-3-4 Consolidated Statements of Income S-5 Consolidated Balance Sheets S-6-7 Consolidated Statements of Cash Flows S-8 Key Income Statement Ratios and Segment Operating Results S-9 Membership Detail S-10-11 Premiums and Administrative Services Fees Detail S-12 Percentage of Ending Membership under Capitation Arrangements S-13 Investments S-14-16 Benefits Payable S-17 Footnotes S-2
Humana Inc.
Consolidated Statements of Income
In thousands, except per common share results
Three Months Ended September 30,
Dollar Percentage
2009 2008 Change Change
Revenues:
Premiums $ 7,444,122 $ 6,991,569 $ 452,553 6.5 %
Administrative services fees 133,732 114,401 19,331 16.9 %
Investment income (loss) 74,861 (16,773 ) 91,634 546.3 %
Other revenue 64,104 58,973 5,131 8.7 %
Total revenues 7,716,819 7,148,170 568,649 8.0 %
Operating expenses:
Benefits 6,111,351 5,810,613 300,738 5.2 %
Selling, general and administrative 1,047,773 979,223 68,550 7.0 %
Depreciation 52,897 46,371 6,526 14.1 %
Other intangible amortization 9,191 9,755 (564 ) -5.8 %
Total operating expenses 7,221,212 6,845,962 375,250 5.5 %
Income from operations 495,607 302,208 193,399 64.0 %
Interest expense 26,259 19,348 6,911 35.7 %
Income before income taxes 469,348 282,860 186,488 65.9 %
Provision for income taxes 167,829 99,852 67,977 68.1 %
Net income $ 301,519 $ 183,008 $ 118,511 64.8 %
Basic earnings per common share $ 1.80 $ 1.10 $ 0.70 63.6 %
Diluted earnings per common share $ 1.78 $ 1.09 $ 0.69 63.3 %
Shares used in computing basic earnings per common share 167,404 166,647
Shares used in computing diluted earnings per common share 169,246 168,578
S-3
Humana Inc.
Consolidated Statements of Income
In thousands, except per common share results
Nine Months Ended September 30,
Dollar Percentage
2009 2008 Change Change
Revenues:
Premiums $ 22,557,943 $ 20,810,922 $ 1,747,021 8.4 %
Administrative services fees 368,308 339,344 28,964 8.5 %
Investment income 219,745 154,007 65,738 42.7 %
Other revenue 181,373 154,463 26,910 17.4 %
Total revenues 23,327,369 21,458,736 1,868,633 8.7 %
Operating expenses:
Benefits 18,748,206 17,667,129 1,081,077 6.1 %
Selling, general and administrative 3,115,918 2,845,709 270,209 9.5 %
Depreciation 152,250 133,469 18,781 14.1 %
Other intangible amortization 28,330 27,073 1,257 4.6 %
Total operating expenses 22,044,704 20,673,380 1,371,324 6.6 %
Income from operations 1,282,665 785,356 497,309 63.3 %
Interest expense 79,605 53,554 26,051 48.6 %
Income before income taxes 1,203,060 731,802 471,258 64.4 %
Provision for income taxes 414,044 258,728 155,316 60.0 %
Net income $ 789,016 $ 473,074 $ 315,942 66.8 %
Basic earnings per common share $ 4.72 $ 2.83 $ 1.89 66.8 %
Diluted earnings per common share $ 4.67 $ 2.79 $ 1.88 67.4 %
Shares used in computing basic earnings per common share 167,250 167,328
Shares used in computing diluted earnings per common share 168,858 169,392
S-4
Humana Inc.
Consolidated Balance Sheets
Dollars in thousands, except share amounts
September 30, June 30, December 31, Sequential Change
2009 2009 2008 Dollar Percent
Assets
Current assets:
Cash and cash equivalents $1,452,006 $1,585,109 $1,970,423
Investment securities 5,899,385 4,583,423 4,203,538
Receivables, net:
Premiums 765,039 1,265,986 777,672
Administrative services fees 11,489 10,928 12,010
Securities lending invested collateral 176,692 270,120 402,399
Other 936,217 1,056,798 1,030,000
Total current assets 9,240,828 8,772,364 8,396,042 $468,464 5.3%
Property and equipment, net 679,010 691,414 711,492
Other assets:
Long-term investment securities 1,319,319 1,240,197 1,011,904
Goodwill 1,992,924 1,992,924 1,963,111
Other 969,706 987,490 959,211
Total other assets 4,281,949 4,220,611 3,934,226
Total assets $14,201,787 $13,684,389 $13,041,760 $517,398 3.8%
Liabilities and Stockholders' Equity
Current liabilities:
Benefits payable $3,365,481 $3,411,197 $3,205,579
Trade accounts payable and accrued expenses 1,532,810 1,351,689 1,077,027
Book overdraft 199,384 153,853 224,542
Securities lending payable 189,774 305,008 438,699
Unearned revenues 219,789 244,855 238,098
Total current liabilities 5,507,238 5,466,602 5,183,945 $40,636 0.7%
Long-term debt 1,680,424 1,682,654 1,937,032
Future policy benefits payable 1,171,904 1,154,317 1,164,758
Other long-term liabilities 294,018 322,538 298,835
Total liabilities 8,653,584 8,626,111 8,584,570 $27,473 0.3%
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; 31,517 31,478 31,309
189,102,289 issued at September 30, 2009
Capital in excess of par value 1,625,525 1,604,979 1,574,245
Retained earnings 4,178,952 3,877,433 3,389,936
Accumulated other comprehensive income (loss) 83,536 (86,556) (175,243)
Treasury stock, at cost, 19,269,815 shares at September 30, 2009 (371,327) (369,056) (363,057)
Total stockholders' equity 5,548,203 5,058,278 4,457,190 $489,925 9.7%
Total liabilities and stockholders' equity $14,201,787 $13,684,389 $13,041,760 $517,398 3.8%
Debt-to-total capitalization ratio 23.2% 25.0% 30.3%
S-5
Humana Inc.
Consolidated Statements of Cash Flows
Dollars in thousands
Three Months Ended September 30,
Dollar Percentage
2009 2008 Change Change
Cash flows from operating activities
Net income $ 301,519 $ 183,008
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 62,088 56,126
Net realized capital (gains) losses (4,184 ) 92,285
Stock-based compensation 15,796 14,670
Provision (benefit) for deferred income taxes 12,072 (31,983 )
Changes in operating assets and liabilities excluding the effects
of acquisitions:
Receivables 500,386 290,065
Other assets 30,545 28,280
Benefits payable (45,716 ) (43,830 )
Other liabilities 87,766 (19,893 )
Unearned revenues (25,066 ) 3,359
Other 4,905 5,188
Net cash provided by operating activities 940,111 577,275 $ 362,836 62.9 %
Cash flows from investing activities
Acquisitions, net of cash acquired (69 ) 3,746
Purchases of property and equipment (39,533 ) (67,500 )
Purchases of investment securities (2,451,044 ) (1,557,997 )
Proceeds from maturities of investment securities 197,796 144,216
Proceeds from sales of investment securities 1,152,495 1,462,238
Change in securities lending collateral 115,234 264,795
Net cash (used in) provided by investing activities (1,025,121 ) 249,498 ($1,274,619 ) -510.9 %
Cash flows from financing activities
Receipts from CMS contract deposits 499,987 585,551
Withdrawals from CMS contract deposits (481,123 ) (728,707 )
Debt issue costs - (1,182 )
Change in book overdraft 45,531 (40,285 )
Change in securities lending payable (115,234 ) (264,795 )
Common stock repurchases (2,271 ) (11,106 )
Excess tax benefit from stock-based compensation 1,473 450
Proceeds from stock option exercises and other 3,544 1,559
Net cash used in financing activities (48,093 ) (458,515 ) $ 410,422 89.5 %
(Decrease)/increase in cash and cash equivalents (133,103 ) 368,258
Cash and cash equivalents at beginning of period 1,585,109 1,174,642
Cash and cash equivalents at end of period $ 1,452,006 $ 1,542,900
S-6
Humana Inc.
Consolidated Statements of Cash Flows
Dollars in thousands
Nine Months Ended September 30,
Dollar Percentage
2009 2008 Change Change
Cash flows from operating activities
Net income $ 789,016 $ 473,074
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 180,580 160,542
Net realized capital (gains) losses (13,734 ) 73,436
Stock-based compensation 48,818 41,835
Benefit for deferred income taxes (22,753 ) (21,411 )
Changes in operating assets and liabilities excluding the effects
of acquisitions:
Receivables 6,247 (93,320 )
Other assets 11,718 (166,931 )
Benefits payable 159,902 337,632
Other liabilities (10,681 ) (124,368 )
Unearned revenues (18,309 ) (9,098 )
Other 16,687 14,346
Net cash provided by operating activities 1,147,491 685,737 $ 461,754 67.3 %
Cash flows from investing activities
Acquisitions, net of cash acquired (12,436 ) (262,347 )
Purchases of property and equipment (122,135 ) (179,545 )
Purchases of investment securities (5,290,819 ) (5,082,141 )
Proceeds from maturities of investment securities 802,331 418,563
Proceeds from sales of investment securities 2,903,936 4,111,640
Change in securities lending collateral 248,925 801,518
Net cash used in investing activities (1,470,198 ) (192,312 ) ($1,277,886 ) -664.5 %
Cash flows from financing activities
Receipts from CMS contract deposits 1,534,629 1,774,381
Withdrawals from CMS contract deposits (1,204,536 ) (1,807,952 )
Borrowings under credit agreement - 425,000
Repayments under credit agreement (250,000 ) (1,225,000 )
Proceeds from issuance of senior notes - 749,247
Debt issue costs - (6,662 )
Change in book overdraft (25,158 ) (11,546 )
Change in securities lending payable (248,925 ) (801,518 )
Common stock repurchases (8,270 ) (105,767 )
Excess tax benefit from stock-based compensation 1,717 9,794
Proceeds from stock option exercises and other 4,833 9,045
Net cash used in financing activities (195,710 ) (990,978 ) $ 795,268 80.3 %
Decrease in cash and cash equivalents (518,417 ) (497,553 )
Cash and cash equivalents at beginning of period 1,970,423 2,040,453
Cash and cash equivalents at end of period $ 1,452,006 $ 1,542,900
S-7
Humana Inc.
Key Income Statement Ratios and Segment Operating Results
Dollars in thousands
Three Months Ended September 30, Nine Months Ended September 30,
Percentage Percentage
2009 2008 Difference Change 2009 2008 Difference Change
Benefit ratio
Government Segment 81.9 % 84.1 % -2.2 % 84.3 % 86.8 % -2.5 %
Commercial Segment 82.7 % 80.2 % 2.5 % 79.4 % 79.4 % 0.0 %
Consolidated 82.1 % 83.1 % -1.0 % 83.1 % 84.9 % -1.8 %
Selling, general, and administrative expense ratio (A)
Government Segment 10.2 % 10.2 % 0.0 % 10.0 % 10.1 % -0.1 %
Commercial Segment 24.0 % 23.0 % 1.0 % 23.9 % 22.3 % 1.6 %
Consolidated 13.7 % 13.7 % 0.0 % 13.5 % 13.4 % 0.1 %
Investment income (loss)
Government Segment $ 44,936 ($6,163 ) $ 51,099 829.1 % $ 132,894 $ 80,930 $ 51,964 64.2 %
Commercial Segment 29,925 (10,610 ) 40,535 382.0 % 86,851 73,077 13,774 18.8 %
Consolidated $ 74,861 ($16,773 ) $ 91,634 546.3 % $ 219,745 $ 154,007 $ 65,738 42.7 %
Interest expense
Government Segment $ 17,447 $ 6,969 $ 10,478 150.4 % $ 50,160 $ 18,084 $ 32,076 177.4 %
Commercial Segment 8,812 12,379 (3,567 ) -28.8 % 29,445 35,470 (6,025 ) -17.0 %
Consolidated $ 26,259 $ 19,348 $ 6,911 35.7 % $ 79,605 $ 53,554 $ 26,051 48.6 %
Detail of pretax income (loss)
Government Segment $ 474,501 $ 271,701 $ 202,800 74.6 % $ 1,045,277 $ 517,913 $ 527,364 101.8 %
Commercial Segment (5,153 ) 11,159 (16,312 ) -146.2 % 157,783 213,889 (56,106 ) -26.2 %
Consolidated $ 469,348 $ 282,860 $ 186,488 65.9 % $ 1,203,060 $ 731,802 $ 471,258 64.4 %
Detail of pretax margins
Government Segment 8.2 % 5.2 % 3.0 % 6.0 % 3.3 % 2.7 %
Commercial Segment -0.3 % 0.6 % -0.9 % 2.7 % 3.7 % -1.0 %
Consolidated 6.1 % 4.0 % 2.1 % 5.2 % 3.4 % 1.8 %
S-8
Humana Inc.
Membership Detail
In thousands
Ending Average 3Q09 Ending Year-over-year Change Ending Sequential Change
September 30, 2009 September 30, 2008 Amount Percent June 30, 2009 Amount Percent
Medical Membership:
Government Segment:
Medicare Advantage - HMO 591.0 589.7 502.3 88.7 17.7 % 586.1 4.9 0.8 %
Medicare Advantage - PPO 348.0 345.3 171.0 177.0 103.5 % 338.9 9.1 2.7 %
Medicare Advantage - PFFS 575.8 575.6 694.7 (118.9 ) -17.1 % 574.8 1.0 0.2 %
Total Medicare Advantage 1,514.8 1,510.6 1,368.0 146.8 10.7 % 1,499.8 15.0 1.0 %
Medicare - PDP - Standard 751.8 757.8 1,495.7 (743.9 ) -49.7 % 771.5 (19.7 ) -2.6 %
Medicare - PDP - Enhanced 1,087.3 1,089.9 1,433.8 (346.5 ) -24.2 % 1,095.6 (8.3 ) -0.8 %
Medicare - PDP - Complete 121.3 122.5 159.5 (38.2 ) -23.9 % 124.9 (3.6 ) -2.9 %
Total Medicare stand-alone PDPs 1,960.4 1,970.2 3,089.0 (1,128.6 ) -36.5 % 1,992.0 (31.6 ) -1.6 %
Total Medicare 3,475.2 3,480.8 4,457.0 (981.8 ) -22.0 % 3,491.8 (16.6 ) -0.5 %
Military services insured 1,754.3 1,753.6 1,734.4 19.9 1.1 % 1,753.4 0.9 0.1 %
Military services ASO 1,260.8 1,256.2 1,219.5 41.3 3.4 % 1,254.9 5.9 0.5 %
Total military services 3,015.1 3,009.8 2,953.9 61.2 2.1 % 3,008.3 6.8 0.2 %
Medicaid insured 399.8 397.5 385.1 14.7 3.8 % 393.6 6.2 1.6 %
Medicaid ASO - - 177.3 (177.3 ) -100.0 % - 0.0 0.0 %
Total Medicaid 399.8 397.5 562.4 (162.6 ) -28.9 % 393.6 6.2 1.6 %
Total Government Segment 6,890.1 6,888.1 7,973.3 (1,083.2 ) -13.6 % 6,893.7 (3.6 ) -0.1 %
Commercial Segment:
Fully-insured medical:
Group 1,474.1 1,477.5 1,596.0 (121.9 ) -7.6 % 1,499.6 (25.5 ) -1.7 %
Individual 358.8 355.0 316.8 42.0 13.3 % 347.2 11.6 3.3 %
Medicare supplement 27.8 For full details on Humana Inc (HUM) click here. Humana Inc (HUM) has Short Term PowerRatings of 5. Details on Humana Inc (HUM) Short Term PowerRatings is available at This Link.
More News:
Market Updates |
Stock Alerts |
All Trading News |
Stock Index
About TradingMarkets | Contact | Advertise | Careers | Link to Us | Site Map | Help | Terms & Conditions | Privacy Policy | Return Policy | Testimonials | Feedback
The Connors Group, Inc. ("Company") is not an investment advisory service, nor a registered investment advisor or broker-dealer and does not purport to tell or suggest which securities or currencies customers should buy or sell for themselves. The analysts and employees or affiliates of Company may hold positions in the stocks, currencies or industries discussed here. You understand and acknowledge that there is a very high degree of risk involved in trading securities and/or currencies. The Company, the authors, the publisher, and all affiliates of Company assume no responsibility or liability for your trading and investment results. Factual statements on the Company's website, or in its publications, are made as of the date stated and are subject to change without notice.
It should not be assumed that the methods, techniques, or indicators presented in these products will be profitable or that they will not result in losses. Past results of any individual trader or trading system published by Company are not indicative of future returns by that trader or system, and are not indicative of future returns which be realized by you. In addition, the indicators, strategies, columns, articles and all other features of Company's products (collectively, the "Information") are provided for informational and educational purposes only and should not be construed as investment advice. Examples presented on Company's website are for educational purposes only. Such set-ups are not solicitations of any order to buy or sell. Accordingly, you should not rely solely on the Information in making any investment. Rather, you should use the Information only as a starting point for doing additional independent research in order to allow you to form your own opinion regarding investments. You should always check with your licensed financial advisor and tax advisor to determine the suitability of any investment.
HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN INHERENT LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING AND MAY NOT BE IMPACTED BY BROKERAGE AND OTHER SLIPPAGE FEES. ALSO, SINCE THE TRADES HAVE NOT ACTUALLY BEEN EXECUTED, THE RESULTS MAY HAVE UNDER- OR OVER-COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN.
The Connors Group, Inc.
10 Exchange Place, Suite 1800
Jersey City, NJ 07302
© Copyright 2009 The Connors Group, Inc.