01—Abstract
Summary
Summary of the 10-Q filed April 24, 2024. Cited figures are marked; the original filing is the authoritative source.
Humana Inc. reported net income attributable to Humana of $741 milliona, or $6.11 per diluted common share, for the three months ended March 31, 2024, compared with $1,239 million, or $9.87 per diluted share, in the 2023 quarter.
Total revenues rose to $29.611 billionb from $26.742 billion, driven by premiums revenue of $28.261 billion, up $2.711 billion, or 10.6%. The earnings decline reflects a benefit ratio of 88.9%, up from 85.5%, as higher Medicare Advantage medical cost trends outpaced pricing, partly offset by favorable prior-period reserve development of $535 million and an operating cost ratio that improved to 10.4% from 11.2%. The filing also notes that the quarter was significantly affected by put/call valuation adjustments on non-consolidating minority interest investments of $131 million.
Balance sheet and liquidity changed meaningfully. Cash and cash equivalents rose to $5.910 billionc from $4.694 billion at year-end 2023, while long-term debt increased to $12.390 billion from $10.213 billion after the company issued $2.2 billion in net proceeds of senior notes in March 2024. Operating cash flow was $423 million, down from $6.687 billion a year earlier, which the filing attributes mainly to the early receipt of a $6.6 billion Medicare premium remittance in March 2023.
The company repurchased $702 milliond of common stock during the quarter and had $2.96 billion remaining under its repurchase authorization as of April 23, 2024. Membership trends show individual Medicare Advantage growing 395,900 members, or 7.7%, to 5,548,900, while Medicare stand-alone PDP membership fell 609,300, or 20.6%, and commercial fully-insured and ASO membership declined sharply as the company exits its Employer Group Commercial Medical Products business. The filing also flags ongoing risks, including the Final RADV Rule, which Humana is challenging in litigation and which the company states could have a material adverse effect on results.
02—Key points
Key Highlights
- Net income attributable to Humana fell to $741 million ($6.11 per diluted share) from $1.239 billion ($9.87 per diluted share) in the prior-year quarter.
- Total revenues increased 10.7% to $29.611 billion, led by premiums revenue of $28.261 billion, up 10.6%.
- Benefit ratio rose 340 basis points to 88.9% on higher Medicare Advantage medical cost trends; operating cost ratio improved 80 basis points to 10.4%.
- Cash and cash equivalents increased to $5.910 billion; the company issued $2.2 billion in net proceeds of senior notes in March 2024.
- Operating cash flow of $423 million compared with $6.687 billion in the prior-year quarter, which benefited from an early $6.6 billion Medicare premium receipt.
- Individual Medicare Advantage membership grew 7.7% to 5,548,900, while Medicare stand-alone PDP membership declined 20.6%.
- The company repurchased $702 million of common shares in the quarter and had $2.96 billion of repurchase authorization remaining as of April 23, 2024.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2024filed April 24, 2024Financial Statements
Q1 FY2024 against Q1 FY2023
| Line item | Q1 FY2024Q1 FY2023 | Change |
|---|---|---|
| Revenue | $29.61B$26.74B | +10.7% |
| SG&A Expenses | $3.04B$2.98B | +2.1% |
| Operating Income | $1.24B$1.72B | −28.1% |
| Interest Expense | $159.00M$113.00M | +40.7% |
| Net Income | $741.00M$1.24B | −40.2% |
| EPS (Basic) | $6.13$9.91 | −38.1% |
| EPS (Diluted) | $6.11$9.87 | −38.1% |
| Shares Outstanding (Basic) | 120.98M125.00M | −3.2% |
| Shares Outstanding (Diluted) | 121.27M125.56M | −3.4% |
05—Questions
Frequently Asked Questions
Why did Humana's earnings decline so sharply year over year?
Benefits expense rose 14.9% to $25.124 billion, lifting the benefit ratio to 88.9% from 85.5%. The filing attributes this mainly to higher Medicare Advantage medical cost trends, partly offset by pricing and benefit design changes and $535 million of favorable prior-period reserve development. Income from operations fell 28.1% to $1.236 billion.
How did the company's debt and liquidity change?
Long-term debt increased to $12.390 billion from $10.213 billion after March 2024 senior note issuances of $1.3 billion due 2031 and $1.0 billion due 2054, with net proceeds of $2.2 billion used for general corporate purposes, including repaying commercial paper. Commercial paper outstanding fell to $0.3 billion from $0.9 billion, and the company had $2.482 billion and $1.5 billion of remaining capacity under its two revolving credit agreements.
Why was operating cash flow so much lower than last year?
Operating cash flow was $423 million compared with $6.687 billion in the 2023 quarter. The filing states the prior-year figure was significantly impacted by the early receipt of a $6.6 billion Medicare premium remittance in March 2023, because the April 2023 payment date fell on a weekend.
What are the main regulatory risks disclosed?
The filing highlights the CMS Final RADV Rule, which eliminates the Fee-for-Service Adjuster and is expected to apply to audits beginning with payment year 2018. Humana and its subsidiary filed suit in September 2023 seeking to set the rule aside, and the company states it could have a material adverse effect on results. The filing also discloses a qui tam suit and a Department of Justice information request related to risk adjustment.
How is membership changing across Humana's segments?
Individual Medicare Advantage and group Medicare Advantage grew 7.7% and 7.9%, respectively. Commercial fully-insured membership fell 79.0% and commercial ASO fell 81.3%, reflecting the planned exit from the Employer Group Commercial Medical Products business, which is being phased over 18 to 24 months from February 2023. Total medical membership declined 5.7% to 16,174,700.
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