01—Abstract
Summary
Summary of the 10-Q filed October 30, 2024. Cited figures are marked; the original filing is the authoritative source.
Humana Inc. reported net income attributable to Humana of $480 milliona, or $3.98 per diluted share, for the three months ended September 30, 2024, down from $832 million, or $6.71 per diluted share, in the 2023 quarter.
For the nine months ended September 30, 2024, net income attributable to Humana was $1.90 billionb, or $15.72 per diluted share, versus $3.03 billion, or $24.26 per diluted share, a year earlier. Total revenues rose to $29.40 billion for the quarter and $88.55 billion for the nine months, driven primarily by higher premiums. The decline in earnings reflects a benefit ratio of 89.9% for the quarter versus 86.6% a year earlier, which the filing attributes mainly to elevated Medicare Advantage and state-based contracts medical cost trends.
Membership and segment trends show growth in Individual Medicare Advantage (5,659,200 members, up 5.3%) and state-based contracts, offset by sharp declines in Medicare stand-alone PDP (down 19.8%) and commercial fully-insured membership (down 93.7%) as Humana exits its Employer Group Commercial Medical Products business, which the company expects to finalize in the first half of 2025. Insurance segment income from operations fell to $274 millionc in the quarter from $722 million, while CenterWell income from operations was $382 million versus $400 million. Operating cash flow for the nine months was $3.49 billion, compared with $11.12 billion in the prior-year period, which included an early receipt of a $7.1 billion Medicare premium remittance in September 2023.
The filing also highlights legal and regulatory matters. Humana settled the Steven Scott qui tam suit on August 15, 2024 for $90 milliond. The company is challenging CMS's Final RADV Rule in litigation and, in October 2024, filed suit over the 2025 Star Ratings.
Management states that about 25% of Medicare Advantage members are in plans rated 4-star or higher for 2025, compared with 94% based on 2024 Star Ratings, which could significantly affect revenues and cash flows if the lawsuit is unsuccessful. The company also repurchased $750 million of common stock during the nine months and had a remaining authorization of $2.93 billion as of October 29, 2024.
02—Key points
Key Highlights
- Net income attributable to Humana was $480 million ($3.98 diluted EPS) for Q3 2024, versus $832 million ($6.71) in Q3 2023; nine-month net income was $1.90 billion ($15.72) versus $3.03 billion ($24.26).
- Benefit ratio rose to 89.9% in the Q3 2024 quarter from 86.6%, primarily due to elevated Medicare Advantage and state-based contracts medical cost trends.
- Total revenues were $29.40 billion for the quarter and $88.55 billion for the nine months, with premiums revenue of $27.95 billion for the quarter.
- Individual Medicare Advantage membership reached 5,659,200 (up 5.3%), while Medicare stand-alone PDP membership fell 19.8% and commercial fully-insured membership fell 93.7% due to the Employer Group exit.
- Humana settled the Steven Scott qui tam suit on August 15, 2024 by paying the United States $90 million.
- Approximately 25% of Medicare Advantage members are in plans rated 4-star or higher for 2025, compared with 94% based on 2024 Star Ratings; Humana has sued to set aside the 2025 Star Ratings.
- Nine-month operating cash flow was $3.49 billion versus $11.12 billion, which included an early $7.1 billion Medicare premium receipt in September 2023; the company issued $2.25 billion in senior notes in March 2024.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2024filed October 30, 2024Financial Statements
Q3 FY2024 against Q3 FY2023
| Line item | Q3 FY2024Q3 FY2023 | Change |
|---|---|---|
| Revenue | $29.40B$26.42B | +11.3% |
| SG&A Expenses | $3.34B$3.27B | +2.1% |
| Operating Income | $728.00M$1.21B | −39.6% |
| Net Income | $480.00M$832.00M | −42.3% |
| EPS (Basic) | $3.99$6.74 | −40.8% |
| EPS (Diluted) | $3.98$6.71 | −40.7% |
| Shares Outstanding (Basic) | 120.41M123.43M | −2.4% |
| Shares Outstanding (Diluted) | 120.76M123.98M | −2.6% |
05—Questions
Frequently Asked Questions
Why did Humana's earnings decline in the third quarter of 2024?
The filing attributes the decline mainly to a higher benefit ratio, which rose to 89.9% from 86.6%, driven by elevated Medicare Advantage and state-based contracts medical cost trends. Income from operations fell to $728 million from $1.21 billion, and the 2023 quarter included a favorable tax-related comparison and other items.
What is the status of Humana's Star Ratings and related lawsuit?
Based on 2025 Star Ratings released in October 2024, about 25% of Medicare Advantage members are in plans rated 4-star or higher, compared with 94% for 2024. Humana filed suit seeking to set aside and vacate the 2025 ratings, but the filing states there is no assurance it will prevail. An unsuccessful outcome could affect 2026 quality bonus payments and revenues, operating results, and cash flows.
How is the Employer Group Commercial Medical Products exit affecting Humana?
Humana expects to finalize the exit of this business in the first half of 2025. Commercial fully-insured medical membership fell by 383,400 members (93.7%) and commercial ASO medical membership fell by 261,900 members (92.1%) year over year as of September 30, 2024.
What legal and regulatory risks does the filing disclose?
The filing discloses the Final RADV Rule litigation, which Humana believes violates the Administrative Procedure Act and could have a material adverse effect; a DOJ Medicare Risk Adjustment information request; and a securities class action filed in June 2024 alleging misleading statements about Medicare Advantage medical costs. Humana states it will vigorously defend these matters and cannot predict outcomes.
What is Humana's liquidity and capital return position?
Cash and cash equivalents were $5.12 billion at September 30, 2024. Humana repurchased $750 million of common stock in the nine months and paid $323 million in dividends. Its remaining repurchase authorization was $2.93 billion as of October 29, 2024, and it declared a quarterly dividend of $0.885 per share payable January 31, 2025.
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