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Humana 8-K Report, Financial Results (Jan 25, 2024)

Reports
Earnings & Results·Regulation FD·Exhibits & Filings
Filing Date
Filed January 25, 2024
Period End
January 25, 2024
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. Deal closed8-K · Aug ’18Aug ’18
  2. Material agreement8-K · Mar ’20Mar ’20
  3. Leadership change8-K · Sep ’22Sep ’22
  4. Leadership change8-K · Jul ’26Jul ’26

01—Abstract

Summary

Summary of the 8-K filed January 25, 2024. Cited figures are marked; the original filing is the authoritative source.

Humana Inc. reported fourth-quarter 2023 results on January 25, 2024.

The company posted a GAAP loss per share of $4.42a for 4Q23 and an Adjusted loss per share of $0.11, versus GAAP EPS of ($0.12) and Adjusted EPS of $1.97 in 4Q22. For full-year 2023, GAAP diluted EPS was $20.00 and Adjusted EPS was $26.09, compared with $22.08 and $25.88 in 2022. Management attributed the weakness to higher Medicare Advantage medical cost trends, driven by higher-than-anticipated inpatient utilization in November and December and a further increase in non-inpatient trends.

The Insurance segment's fourth-quarter Adjusted benefits expense ratio was 91.4%, compared with 87.4% a year earlier. Initial 2024 guidance calls for GAAP diluted EPS of approximately $14.87b and Adjusted EPS of approximately $16.00, with the company assuming the higher Medicare Advantage costs persist throughout 2024. Management said it no longer believes the previously communicated $37 Adjusted EPS target for 2025 is achievable, and instead expects $6 to $10 of Adjusted EPS growth in 2025 through MA pricing actions, growth in other lines, and productivity initiatives.

Management also said it will prioritize margin recovery over membership growth near term, with individual Medicare Advantage membership growth guided at approximately 100,000 for 2024 and stand-alone PDP membership expected to decline by approximately 650,000. On the balance sheet, days in claims payable fell to 41.4 days from 45.9 days a year earlier, and debt-to-total capitalization rose to 41.8% from 42.0% at year-end 2022 on a sequential basis from 41.1% at September 30, 2023. Management has earmarked $1 billionc for share repurchases in 2024, with approximately $400 million completed to date as of the call, and the company has announced that Jim Rechtin joined as President and COO, with a planned CEO transition in the latter half of 2024.

02—Key points

Key Highlights

  1. 4Q23 GAAP loss per share of $4.42 versus ($0.12) in 4Q22; Adjusted loss per share of $0.11 versus Adjusted EPS of $1.97 in 4Q22
  2. FY 2023 GAAP diluted EPS of $20.00 and Adjusted EPS of $26.09, compared with $22.08 and $25.88 in FY 2022
  3. Initial FY 2024 guidance: GAAP EPS of approximately $14.87 and Adjusted EPS of approximately $16.00, assuming higher MA medical costs persist through 2024
  4. Insurance segment 4Q23 Adjusted benefits expense ratio of 91.4%, versus 87.4% in 4Q22; FY 2024 Insurance segment benefit ratio guided to approximately 90.0% (GAAP)
  5. No longer expects the previously communicated $37 Adjusted EPS target for 2025; now anticipates $6 to $10 of Adjusted EPS growth in 2025
  6. 2024 individual Medicare Advantage membership growth guided to approximately 100,000; stand-alone PDP membership expected to decline by approximately 650,000
  7. 4Q23 Adjusted pretax results of $79 million versus $322 million in 4Q22; FY 2023 GAAP pretax income of $3.38 billion, including $1.35 billion in senior notes issued in November 2023

03—Questions

Frequently Asked Questions

  1. Why did Humana post a loss in the fourth quarter of 2023?

    Management attributed the fourth-quarter results to an additional increase in Medicare Advantage medical cost trends, driven by higher-than-anticipated inpatient utilization in November and December and a further rise in non-inpatient trends, predominantly in physician, outpatient surgery and supplemental benefits categories. The 4Q23 GAAP pretax loss was $591 million, and the company also recorded a $91 million impairment charge in the quarter.

  2. What is Humana's initial 2024 earnings guidance?

    Humana guided to GAAP diluted EPS of approximately $14.87 and Adjusted EPS of approximately $16.00 for 2024. The guidance assumes the higher Medicare Advantage medical costs seen in 4Q23 persist throughout 2024. Guidance also includes consolidated revenues of approximately $113 billion (GAAP) and an Insurance segment benefit ratio of approximately 90.0%.

  3. Has Humana changed its 2025 earnings outlook?

    Yes. Management said it no longer believes the previously communicated $37 Adjusted EPS target for 2025 is achievable. It now intends to deliver $6 to $10 of Adjusted EPS growth in 2025 through Medicare Advantage pricing actions, earnings growth in other lines of business, and productivity and trend mitigation initiatives. Management said it will prioritize margin recovery over membership growth, so membership growth may lag industry growth in 2025.

  4. How is Humana managing its capital and balance sheet?

    Humana repurchased 3,110,000 shares in FY 2023 at an average price of $482.27, with $1.1 billion remaining under its authorization as of January 24, 2024. Management anticipates $1 billion in share repurchases in 2024, with approximately $400 million completed to date. Debt-to-total capitalization was 41.8% at December 31, 2023, up from 41.1% at September 30, 2023, and days in claims payable declined to 41.4 days.

04—Continue

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