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Humana Annual Report, Year Ended Dec 31, 2007

Filing Date
Filed February 25, 2008
Period End
December 31, 2007
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 February 25, 2008. Cited figures are marked; the original filing is the authoritative source.

Humana Inc., headquartered in Louisville, Kentucky, reported 2007 total revenues of $25.29 billiona and net income of $833.7 million, or $4.91 per diluted share, up from $487.4 million, or $2.90 per diluted share, in 2006.

Premium revenues rose 17.9% to $24.4 billionb, driven mainly by the Government segment, where Medicare Advantage membership grew to 1,143,000 at December 31, 2007, and total Government premium revenues increased 24.8% to $18.2 billion. Commercial segment premium revenues rose 1.3% to $6.2 billion, supported by specialty products acquired through CompBenefits and KMG America. The consolidated benefits ratio improved to 83.0% from 84.0%, and the SG&A expense ratio improved to 13.9% from 14.3%.

The company relies heavily on government contracts, which accounted for 71% of premiums and administrative services fees in 2007. Key exposures include the Florida CMS Medicare contracts (about 17% of premiums and fees), the TRICARE South Region military contract (about 12%), and Medicare Part D risk corridor settlements. Operating cash flow fell to $1.22 billionc from $1.69 billion, largely because of a $725.5 million risk corridor payment to CMS for the 2006 contract year.

Cash and investments totaled $6.69 billion, and debt rose to $1.69 billiond after 2007 acquisitions of CompBenefits ($369.1 million) and KMG America ($156.3 million cash plus $36.1 million of assumed debt). Humana has not paid cash dividends since February 1993 and plans to retain earnings.

On February 21, 2008, the Board authorized up to $150 million in share repurchases, excluding shares repurchased for employee stock plans. The company expects a 2008 SG&A expense ratio of 13.5% to 14.0% and an effective tax rate of 35.5% to 36.0%, and it anticipates Medicare Advantage membership growth of 200,000 to 250,000 members during 2008.

02—Key points

Key Highlights

  1. 2007 total revenues of $25.29 billion, up from $21.42 billion in 2006
  2. Net income of $833.7 million, or $4.91 per diluted share, versus $2.90 per diluted share in 2006
  3. Government segment premium revenues rose 24.8% to $18.2 billion; Medicare Advantage membership reached 1,143,000
  4. Benefits ratio improved to 83.0% from 84.0%; SG&A expense ratio improved to 13.9% from 14.3%
  5. Operating cash flow decreased to $1.22 billion from $1.69 billion, mainly due to a $725.5 million Part D risk corridor payment to CMS
  6. Government contracts represented 71% of premiums and administrative services fees; Florida CMS contracts about 17% and TRICARE about 12%
  7. Board authorized up to $150 million in share repurchases on February 21, 2008; no dividends since February 1993

03—One dollar

04—Financials

Financial Highlights

Figures from 10-KFY2007filed February 25, 2008
Revenue$25.29BNet Income$833.68M3.3% Net MarginEPS (Diluted)$4.91Cash & Equivalents$2.04BFree Cash Flow$985.02M

Financial Statements

Revenue$25.29B
SG&A Expenses$3.48B
Operating Income$1.36B
Interest Expense$68.88M
Net Income$833.68M
EPS (Basic)$5.00
EPS (Diluted)$4.91

05—Questions

Frequently Asked Questions

  1. How much did Humana's earnings grow in 2007?

    Net income was $833.7 million, or $4.91 per diluted common share, in 2007, compared with $487.4 million, or $2.90 per diluted share, in 2006. The filing attributes the increase primarily to higher Government segment operating earnings from increased premium revenue on higher average Medicare membership.

  2. What are the main concentration risks in Humana's business?

    Government programs accounted for 71% of premiums and administrative services fees in 2007. The Florida CMS Medicare contracts represented about 17% and the TRICARE South Region military contract about 12%. The filing notes that the TRICARE contract runs through March 31, 2009 with annual renewals at the government's option, and that a formal RFP for new TRICARE contracts is anticipated.

  3. Why did operating cash flow decline in 2007?

    Net cash provided by operating activities fell to $1,224.3 million from $1,686.7 million. The filing attributes the decline mainly to the 2007 payment of $725.5 million in risk corridor amounts to CMS for the 2006 contract year, partially offset by improved operating earnings.

  4. Does Humana pay dividends, and what capital return actions were announced?

    Humana has not declared or paid cash dividends on common stock since February 1993 and does not presently intend to pay them. On February 21, 2008, the Board authorized up to $150 million for share repurchases, excluding shares acquired for employee stock plans. In 2007 the company acquired 406,377 shares for employee stock plans at an aggregate cost of $27.4 million and made no open-market repurchases.

  5. What guidance did Humana provide for 2008?

    The filing expects Medicare Advantage membership to add between 200,000 and 250,000 members by December 31, 2008, with a shift toward PPO and HMO offerings. It expects the consolidated SG&A expense ratio to be between 13.5% and 14.0%, the effective tax rate to be between 35.5% and 36.0%, and capital expenditures of approximately $275 million excluding acquisitions.

06—Continue

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