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Humana Annual Report, Year Ended Dec 31, 2003

Filing Date
Filed March 5, 2004
Period End
December 31, 2003
Security
HUM
In the record · 2016–202610-K1110-Q328-K199

HUM filed 11 annual reports (10-K), 32 quarterly reports (10-Q) and 199 current reports (8-K) between 2016 and 2026.

  1. Material agreement8-K · May ’17May ’17
  2. Material agreement8-K · Aug ’19Aug ’19
  3. Leadership change8-K · Mar ’22Mar ’22
  4. Leadership change8-K · Dec ’25Dec ’25

01—Abstract

Summary

Summary of the 10-K filed March 5, 2004. Cited figures are marked; the original filing is the authoritative source.

Humana Inc., headquartered in Louisville, Kentucky, reported 2003 revenues of $12.2 billiona and net income of $228.9 million, or $1.41 per diluted share, up from $142.8 million, or $0.85 per diluted share, in 2002.

Total premiums rose 8.2% to $11.8 billionb, driven mainly by the Commercial segment, where premium revenues increased 12.4% to $6.6 billion on higher fully insured per-member premiums. The company served approximately 6.8 million medical members and 1.7 million specialty members at year-end. The medical expense ratio improved slightly to 83.5% from 83.6%, and cash flow from operations was $413.1 million.

The Government segment remains a large part of the business, with about 42%c of premiums and administrative services fees derived from federal government contracts. The company was awarded the South Region TRICARE contract in August 2003, and the TRICARE transition is scheduled to begin in July 2004, with membership expected to temporarily fall to 1.5 million before rising to 2.8 million in November 2004. The Medicare+Choice business faces changes under the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, which Humana expects to produce an 8% to 10% increase in total per-member premiums in 2004.

The company also has a pending acquisition of Ochsner Health Plan, expected to close in the second quarter of 2004. The filing notes several ongoing legal matters, including a managed care class action in which the trial is scheduled for September 13, 2004, and an antitrust settlement requiring increased physician reimbursement of $20 milliond in 2004, $15 million in 2005 and $10 million in 2006. The company has not paid cash dividends since February 1993 and plans to retain earnings for growth.

02—Key points

Key Highlights

  1. Total revenues of $12.2 billion in 2003, up from $11.3 billion in 2002; net income of $228.9 million, or $1.41 per diluted share, versus $0.85 in 2002.
  2. Commercial segment premium revenues rose 12.4% to $6.6 billion, supported by per-member premium increases in the 12% to 14% range on fully insured business.
  3. Medical expense ratio of 83.5% for 2003, down 10 basis points from 83.6% in 2002; Commercial segment ratio improved to 82.9%.
  4. Approximately 42% of premiums and administrative services fees came from federal government contracts, with TRICARE accounting for about 18.6% of premiums.
  5. TRICARE South Region contract awarded in August 2003, with transition beginning July 2004 and membership expected to reach 2.8 million by November 2004.
  6. Pending acquisition of Ochsner Health Plan, expected to close in the second quarter of 2004; the company anticipates 2004 Commercial fully insured per-member premium increases of 8% to 10%.
  7. Cash and investments of $2.93 billion at December 31, 2003; stockholders' equity of $1.84 billion; 3.7 million shares repurchased for $44.1 million in 2003.

03—Questions

Frequently Asked Questions

  1. How did Humana's profitability change in 2003?

    Net income increased to $228.9 million, or $1.41 per diluted share, from $142.8 million, or $0.85 per diluted share, in 2002. The filing attributes the increase primarily to significant improvement in operating earnings for the Commercial segment and lower expenses for asset impairments and other unusual items.

  2. What is the outlook for TRICARE and the Government segment?

    Humana was awarded the South Region TRICARE contract, and transition to the new regions is scheduled to begin July 1, 2004 for Regions 2 and 5 and August 1, 2004 for Regions 3 and 4. TRICARE membership is expected to temporarily decline to 1.5 million in July 2004 and increase to 2.8 million in November 2004, which will also temporarily reduce revenues. The company does not believe these contract changes will have a material adverse effect on its financial position, results of operations, or cash flows.

  3. What impact is the Medicare Prescription Drug, Improvement, and Modernization Act expected to have?

    The company expects an 8% to 10% increase in total per-member premiums in 2004, with a corresponding increase in medical costs. Membership in MedicareAdvantage is expected to rise to approximately 340,000 to 360,000 by the end of 2004. The company does not believe the 2004 financial benefit will be material, though it sees new opportunities.

  4. Does Humana pay dividends?

    No. Humana has not declared or paid cash dividends on its common stock since February 1993, does not presently intend to pay dividends, and plans to retain earnings for future operations and growth.

  5. What significant legal matters does Humana face?

    Humana is a defendant in a managed care class action brought on behalf of physicians, with a trial date set for September 13, 2004, and the company intends to defend it vigorously. The company also settled an Ohio and Kentucky physician antitrust matter by agreeing to increase physician reimbursement by $20 million in 2004, $15 million in 2005 and $10 million in 2006. Management does not believe pending actions will have a material adverse effect, though such outcomes cannot be predicted with certainty.

04—Continue

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