- Reports 2Q22 earnings per diluted common share of $5.48 on a GAAP basis, Adjusted EPS of $8.67; reports YTD 2022 EPS of $12.77 on a GAAP basis, $16.70 on an Adjusted basis
- Updates FY 2022 EPS guidance to ‘approximately $20.30′ on a GAAP basis; raises to ‘approximately $24.75’ on an Adjusted basis, representing growth of 20 percent over FY 2021 Adjusted EPS
- Reaffirms FY 2022 expected individual Medicare Advantage membership growth range of approximately 150,000 to 200,000
LOUISVILLE, Ky.–(BUSINESS WIRE)–Humana Inc. (NYSE: HUM) today reported consolidated pretax results and diluted earnings per common share for the quarter ended June 30, 2022 (2Q22) versus the quarter ended June 30, 2021 (2Q21) and for the six months ended June 30, 2022 (YTD 2022) versus the six months ended June 30, 2021 (YTD 2021) as noted in the tables below.
|
Consolidated income before income taxes and equity in net earnings (pretax results) In millions |
2Q22 (a) |
2Q21 (b) |
YTD 2022 (c) |
YTD 2021 (d) |
||||
|
Generally Accepted Accounting Principles (GAAP) |
$1,122 |
|
$738 |
|
$2,342 |
|
$1,778 |
|
|
Amortization associated with identifiable intangibles |
18 |
|
15 |
|
36 |
|
30 |
|
|
Put/call valuation adjustments associated with company’s non-consolidating minority interest investments |
(8 |
) |
419 |
|
(29 |
) |
534 |
|
|
Transaction and integration costs |
36 |
|
22 |
|
53 |
|
22 |
|
|
Change in fair market value of publicly-traded equity securities |
62 |
|
(63 |
) |
170 |
|
22 |
|
|
Charges associated with productivity initiatives related to the previously disclosed $1 billion value creation plan |
203 |
|
— |
|
203 |
|
— |
|
|
Adjusted (non-GAAP) |
$1,433 |
|
$1,131 |
|
$2,775 |
|
$2,386 |
|
|
Diluted earnings per common share (EPS) |
2Q22 (a) |
2Q21 (b) |
YTD 2022 (c) |
YTD 2021 (d) |
||||
|
GAAP |
$5.48 |
|
$4.55 |
|
$12.77 |
|
$10.94 |
|
|
Amortization associated with identifiable intangibles |
0.11 |
|
0.09 |
|
0.22 |
|
0.18 |
|
|
Put/call valuation adjustments associated with company’s non-consolidating minority interest investments |
(0.05 |
) |
2.49 |
|
(0.18 |
) |
3.18 |
|
|
Transaction and integration costs |
0.22 |
|
0.13 |
|
0.32 |
|
0.13 |
|
|
Change in fair market value of publicly-traded equity securities |
0.37 |
|
(0.37 |
) |
1.03 |
|
0.13 |
|
|
Charges associated with productivity initiatives related to the previously disclosed $1 billion value creation plan |
1.23 |
|
— |
|
1.23 |
|
— |
|
|
Tax provision related to the pending sale of Kindred at Home’s Hospice and Personal Care divisions |
1.31 |
|
— |
|
1.31 |
|
— |
|
|
Adjusted (non-GAAP) |
$8.67 |
|
$6.89 |
|
$16.70 |
|
$14.56 |
|
“We are pleased with our significant progress in growing the business, including our primary care clinics and our organic expansion of Medicaid membership, combined with the initial rollout of our value-based home care,” said Bruce D. Broussard, Humana’s President and Chief Executive Officer. “In addition, our strong 2022 EPS growth of 20 percent, and the investments our one billion-dollar value initiative allowed us to make in our 2023 Medicare Advantage product offerings demonstrate our commitment to balancing our long-term membership and earnings growth targets.”
Please refer to the tables above, as well as the consolidated and segment highlight sections in the detailed earnings release for additional discussion of the factors impacting the year-over-comparisons.
In addition, below is a summary of key consolidated and segment statistics comparing 2Q22 to 2Q21 and YTD 2022 to YTD 2021.
|
Humana Inc. Summary of Results |
2Q22 (a) |
2Q21 (b) |
YTD 2022 (c) |
YTD 2021 (d) |
||||
|
CONSOLIDATED |
|
|
|
|
||||
|
Revenues – GAAP |
$23,662 |
|
$20,645 |
|
$47,632 |
|
$41,313 |
|
|
Revenues – Adjusted |
$23,724 |
|
$20,582 |
|
$47,802 |
|
$41,335 |
|
|
Pretax income – GAAP |
$1,122 |
|
$738 |
|
$2,342 |
|
$1,778 |
|
|
Pretax income – Adjusted |
$1,433 |
|
$1,131 |
|
$2,775 |
|
$2,386 |
|
|
Diluted EPS – GAAP |
$5.48 |
|
$4.55 |
|
$12.77 |
|
$10.94 |
|
|
Diluted EPS – Adjusted |
$8.67 |
|
$6.89 |
|
$16.70 |
|
$14.56 |
|
|
Benefits expense ratio – GAAP |
85.8 |
% |
85.8 |
% |
86.1 |
% |
85.9 |
% |
|
Operating cost ratio – GAAP |
13.4 |
% |
10.3 |
% |
12.7 |
% |
10.0 |
% |
|
Operating cost ratio – Adjusted |
12.5 |
% |
10.3 |
% |
12.2 |
% |
10.0 |
% |
|
Operating cash flows – GAAP |
$959 |
|
$360 |
|
$1,261 |
|
($477 |
) |
|
Parent company cash and short term investments |
$800 |
|
$1,269 |
|
|
|
||
|
Debt-to-total capitalization |
45.3 |
% |
32.6 |
% |
|
|
||
|
|
|
|
|
|
||||
|
RETAIL SEGMENT |
|
|
|
|
||||
|
Revenues – GAAP |
$20,946 |
|
$18,545 |
|
$42,297 |
|
$37,193 |
|
|
Benefits expense ratio – GAAP |
87.0 |
% |
87.0 |
% |
87.5 |
% |
87.3 |
% |
|
Operating cost ratio – GAAP |
8.2 |
% |
8.3 |
% |
8.1 |
% |
8.0 |
% |
|
Segment earnings – GAAP |
$929 |
|
$836 |
|
$1,713 |
|
$1,630 |
|
|
Segment earnings – Adjusted |
$932 |
|
$840 |
|
$1,721 |
|
$1,638 |
|
|
|
|
|
|
|
||||
|
GROUP AND SPECIALTY SEGMENT |
|
|
|
|
||||
|
Revenues – GAAP |
$1,584 |
|
$1,718 |
|
$3,197 |
|
$3,455 |
|
|
Benefits expense ratio – GAAP |
76.3 |
% |
82.6 |
% |
75.5 |
% |
78.6 |
% |
|
Operating cost ratio – GAAP |
26.3 |
% |
23.9 |
% |
26.0 |
% |
23.4 |
% |
|
Segment earnings – GAAP |
$101 |
|
$40 |
|
$233 |
|
$214 |
|
|
Segment earnings – Adjusted |
$102 |
|
$41 |
|
$235 |
|
$216 |
|
|
|
|
|
|
|
||||
|
HEALTHCARE SERVICES SEGMENT |
|
|
|
|
||||
|
Revenues – GAAP |
$8,962 |
|
$7,524 |
|
$17,650 |
|
$14,722 |
|
|
Operating cost ratio – GAAP |
94.5 |
% |
95.8 |
% |
94.4 |
% |
95.9 |
% |
|
Segment earnings attributable to Humana- GAAP |
$436 |
|
$311 |
|
$882 |
|
$580 |
|
|
Adjusted earnings before interest, taxes, depreciation and amortization (Adjusted EBITDA) (e) |
$486 |
|
$388 |
|
$985 |
|
$717 |
|
|
|
|
|
|
|
||||
2022 Earnings Guidance
2Q22 Adjusted EPS of $8.67 represents 26 percent growth over 2Q21 and is approximately $1.00 higher than the company’s previous expectations. The outperformance was driven primarily by:
- better-than-anticipated medical cost trends in the company’s individual Medicare Advantage and Medicaid businesses, partially offset by higher than expected non-inpatient utilization in group Medicare Advantage; and
- lower-than-anticipated administrative costs, some of which was timing in nature.
Importantly, utilization in the company’s core individual Medicare Advantage business is running favorable to expectations. The lower utilization trends and lack of COVID-19 headwind seen to date allow the company to raise its FY 2022 Adjusted EPS guide by $0.25 to ‘approximately $24.75’, while still maintaining a $0.50 EPS COVID-19 headwind for the back half of the year.
In addition, the revised guide contemplates the company making approximately $0.75 EPS of additional marketing and distribution investments in the back half of the year to further support its improved 2023 Medicare Advantage value proposition. Finally, the revised guide anticipates covering $0.65 EPS dilution related to the pending divestiture of the company’s 60 percent ownership of Kindred at Home’s Hospice and Personal Care divisions, which is expected to close in the third quarter.
The company’s updated full year guidance reflects a compelling 20 percent growth in adjusted earnings for FY 2022 while funding additional investments to support its long-term growth. If additional favorability emerges in the back half of the year, including the remaining $0.50 in embedded COVID-19 headwind, the company will be prudent in balancing investments key to long-term growth and additional shareholder returns in 2022. The company is focused on maximizing long-term value and will be transparent in its approach.
|
Diluted earnings per common share |
FY 2022 Guidance (f) |
FY 2021 (g) |
||
|
GAAP |
approximately |
|
$22.67 |
|
|
Amortization of identifiable intangibles |
0.43 |
|
0.39 |
|
|
Gain on Kindred at Home equity method investment |
— |
|
(8.73 |
) |
|
Put/call valuation adjustments associated with company’s non-consolidating minority interest investments |
(0.18 |
) |
3.56 |
|
|
Transaction and integration costs |
0.63 |
|
0.72 |
|
|
Change in fair market value of publicly-traded equity securities |
1.03 |
|
2.03 |
|
|
Charges associated with productivity initiatives related to the previously disclosed $1 billion value creation plan |
1.23 |
|
— |
|
|
Tax provision related to the pending sale of Kindred at Home’s Hospice and Personal Care divisions |
1.31 |
|
— |
|
|
Adjusted (non-GAAP) – FY 2022 projected; FY 2021 reported |
approximately |
|
$20.64 |
|
Management Transitions
After a long and successful career at Humana, Alan Wheatley, Retail Segment President, will be transitioning from his role at the end of the year. Humana proactively develops succession plans for key business leaders, and we are fortunate to have a number of seasoned leaders within the Retail organization who will take on expanded responsibilities, while we also initiate an external search for a new senior executive leader with a broader role. Alan will serve as a strategic advisor into next year to ensure a seamless transition. We will share more detail about these changes on our second quarter earnings call.
“Alan’s imprints on the company over the last 31 years are significant,” said Broussard. “He pioneered Humana as a leader in Medicare Advantage when the program was in its infancy and it’s a legacy that thrives and endures today.”
“The company has experienced rapid growth and transformation, and I’m incredibly proud to have been part of it,” said Wheatley. “It’s been an honor to work with the team to build a strong company, and one that’s guided by a purpose in helping millions of people achieve their best health. The company’s unique strategic position and strong execution capabilities, make for an exciting future beginning with our upcoming annual enrollment period.”
Detailed Press Release
Humana’s full earnings press release including the statistical pages has been posted to the company’s Investor Relations site and may be accessed at https://humana.gcs-web.com/ or via a current report on Form 8-K filed by the company with the Securities and Exchange Commission this morning (available at www.sec.gov or on the company’s website).
Conference Call
Humana will host a conference call at 9:00 a.m. Eastern time today to discuss its financial results for the quarter and the company’s expectations for future earnings.
To participate via phone, please register in advance at this link – https://register.vevent.com/register/BI9b70f6bf789c4b3fac9c5b4341adec6a.
Upon registration, telephone participants will receive a confirmation email detailing how to join the conference call, including the dial-in number and a unique registrant ID that can be used to access the call. A webcast of the 2Q22 earnings call may also be accessed via Humana’s Investor Relations page at humana.com. The company suggests participants for both the conference call and those listening via the web dial in or sign on at least 15 minutes in advance of the call.
For those unable to participate in the live event, the archive will be available in the Historical Webcasts and Presentations section of the Investor Relations page at humana.com, approximately two hours following the live webcast.
Footnotes
The company has included financial measures throughout this earnings release that are not in accordance with GAAP. Management believes that these measures, when presented in conjunction with the comparable GAAP measures, are useful to both management and its investors in analyzing the company’s ongoing business and operating performance. Consequently, management uses these non-GAAP (Adjusted) financial measures as indicators of the company’s business performance, as well as for operational planning and decision making purposes. Non-GAAP (Adjusted) financial measures should be considered in addition to, but not as a substitute for, or superior to, financial measures prepared in accordance with GAAP. All financial measures in this press release are in accordance with GAAP unless otherwise indicated. Please refer to the footnotes for a detailed description of each item adjusted out of GAAP financial measures to arrive at a non-GAAP (Adjusted) financial measure.
(a) 2Q22 Adjusted results exclude the following:
- Amortization expense for identifiable intangibles of approximately $18 million pretax, or $0.11 per diluted common share. GAAP measures affected in this release include consolidated pretax, EPS, and segment earnings (including amortization expense of $3 million in the Retail segment and $1 million in the Group and Specialty segment).
- Put/call valuation adjustments of approximately $8 million pretax, or $0.05 per diluted common share, associated with Humana’s non-consolidating minority interest investments. GAAP measures affected in this release include consolidated pretax and EPS.
- Transaction and integration costs of approximately $36 million pretax, or $0.22 per diluted common share; GAAP measure affected in this release include consolidated pretax, EPS, and the consolidated operating cost ratio.
- Change in fair market value of publicly-traded equity securities of $62 million pretax, or $0.37 per diluted common share. GAAP measures affected in this release include consolidated pretax, EPS, and consolidated revenues.
- Charges of $203 million pretax, or $1.23 per diluted common share, primarily related to asset and software impairment and abandonment, as a result of initiatives undertaken associated with the company’s previously disclosed $1 billion value creation plan to create capacity to fund growth and investment in its Medicare Advantage business and further expansion of its Healthcare Services capabilities in 2023. GAAP measures affected in this release include consolidated pretax, EPS, and the consolidated operating cost ratio.
- Impact of $1.31 per diluted common share related to the recognition of a deferred tax liability in connection with the held-for-sale classification of Kindred at Home’s Hospice and Personal Care divisions resulting from the company’s pending sale of the business. EPS is the only GAAP measure affected in this release.
|
Consolidated revenues (in millions) |
2Q22 (a) |
2Q21 (b) |
YTD 2022 (c) |
YTD 2021 (d) |
||||
|
GAAP |
$23,662 |
$20,645 |
|
$47,632 |
$41,313 |
|||
|
Change in fair market value of publicly-traded equity securities |
62 |
(63 |
) |
170 |
22 |
|||
|
Adjusted (non-GAAP) |
$23,724 |
$20,582 |
|
$47,802 |
$41,335 |
|||
|
Operating cost ratio |
2Q22 (a) |
2Q21 (b) |
YTD 2022 (c) |
YTD 2021 (d) |
||||
|
GAAP |
13.4 |
% |
10.3 |
% |
12.7 |
% |
10.0 |
% |
|
Transaction and integration costs |
(0.1 |
)% |
— |
% |
(0.1 |
)% |
— |
% |
|
Charges associated with productivity initiatives related to the previously disclosed $1 billion value creation plan |
(0.8 |
)% |
— |
% |
(0.4 |
)% |
— |
% |
|
Adjusted (non-GAAP) |
12.5 |
% |
10.3 |
% |
12.2 |
% |
10.0 |
% |
(b) 2Q21 Adjusted results exclude the following:
- Amortization expense for identifiable intangibles of approximately $15 million pretax, or $0.09 per diluted common share. GAAP measures affected in this release include consolidated pretax, EPS, and segment earnings (including amortization expense of $4 million in the Retail segment and $1 million in the Group and Specialty segment).
- Put/call valuation adjustments of approximately $419 million pretax, or $2.49 per diluted common share, associated with Humana’s non-consolidating minority interest investments, including the impact of the termination of the put/call agreement related to Kindred at Home as a result of the transaction announced on April 27, 2021. GAAP measures affected in this release include consolidated pretax and EPS.
- Transaction and integration costs of approximately $22 million, or $0.13 per diluted common share; GAAP measures affected in this release include consolidated pretax, EPS, and the consolidated operating cost ratio. See Operating cost ratio reconciliation above for respective period.
- Change in fair market value of publicly-traded equity securities of $63 million pretax, or $0.37 per diluted common share. GAAP measures affected in this release include consolidated pretax, EPS, and consolidated revenues. See Revenues reconciliation above for respective period.
(c) YTD 2022 Adjusted results exclude the following:
- Amortization expense for identifiable intangibles of approximately $36 million pretax, or $0.22 per diluted common share. GAAP measures affected in this release include consolidated pretax, EPS, and segment earnings (including amortization expense of $8 million in the Retail segment and $2 million in the Group and Specialty segment).
- Put/call valuation adjustments of approximately $29 million pretax, or $0.18 per diluted common share, associated with Humana’s non-consolidating minority interest investments. GAAP measures affected in this release include consolidated pretax and EPS.
- Transaction and integration costs of approximately $53 million pretax, or $0.32 per diluted common share; GAAP measure affected in this release include consolidated pretax, EPS, and the consolidated operating cost ratio. See Operating cost ratio reconciliation above for respective period.
- Change in fair market value of publicly-traded equity securities of $170 million pretax, or $1.03 per diluted common share. GAAP measures affected in this release include consolidated pretax, EPS, and consolidated revenues. See Revenues reconciliation above for respective period.
- Charges of $203 million pretax, or $1.23 per diluted common share, primarily related to asset and software impairment and abandonment, as a result of initiatives undertaken associated with the company’s previously disclosed $1 billion value creation plan to create capacity to fund growth and investment in its Medicare Advantage business and further expansion of its Healthcare Services capabilities in 2023. GAAP measures affected in this release include consolidated pretax, EPS, and the consolidated operating cost ratio.
- Impact of $1.31 per diluted common share related to the recognition of a deferred tax liability in connection with the held-for-sale classification of Kindred at Home’s Hospice and Personal Care divisions resulting from the company’s pending sale of the business. EPS is the only GAAP measure affected in this release.
d) YTD 2021 Adjusted results exclude the following:
- Amortization expense for identifiable intangibles of approximately $30 million pretax, or $0.18 per diluted common share; GAAP measures affected in this release include consolidated pretax, EPS, and segment earnings (including amortization expense of $8 million in the Retail segment and $2 million in the Group and Specialty segment).
- Put/call valuation adjustments of approximately $534 million, or $3.18 per diluted common share, associated with Humana’s non-consolidating minority interest investments, including the impact of the termination of the put/call agreement related to Kindred at Home as a result of the transaction announced on April 27, 2021. GAAP measures affected in this release include consolidated pretax and EPS.
- Transaction and integration costs of approximately $22 million, or $0.13 per diluted common share; GAAP measure affected in this release include consolidated pretax, EPS, and the consolidated operating cost ratio. See Operating cost ratio reconciliation above for respective period.
- Change in fair market value of publicly-traded equity securities of $22 million, or $0.13 per diluted common share. GAAP measures affected in this release include consolidated pretax, EPS, and consolidated revenues. See Revenues reconciliation above for respective period.
(e) The Healthcare Services segment Adjusted earnings before interest, taxes, depreciation and amortization (Adjusted EBITDA) includes GAAP segment earnings attributable to Humana with adjustments to add back depreciation and amortization expense, interest expense, and income taxes. Adjusted EBITDA includes results from all lines of business within the segment. Adjusted EBITDA also includes the impact of Humana’s minority interest related to the strategic partnership with Welsh, Carson, Anderson & Stowe (WCAS) to develop and operate senior-focused, payor-agnostic, primary care centers. Prior periods reflect the impact of Humana’s previous 40 percent minority interest in Kindred at Home. In August 2021, Humana completed the acquisition of the remaining 60 percent ownership of Kindred at Home and accordingly, now consolidates its results.
|
Healthcare Services segment results (in millions) |
2Q22 |
2Q21 |
YTD 2022 |
YTD 2021 |
||||
|
Segment earnings attributable to Humana- GAAP |
$436 |
$311 |
$882 |
$580 |
||||
|
Depreciation and amortization expense |
50 |
46 |
103 |
91 |
||||
|
Interest and taxes |
— |
31 |
— |
46 |
||||
|
Adjusted EBITDA |
$486 |
$388 |
$985 |
$717 |
||||
(f) FY 2022 projected Adjusted results exclude the following:
- Amortization expense for identifiable intangibles of approximately $0.43 per diluted common share.
- Put/call valuation adjustments of approximately $0.18 per diluted common share, associated with Humana’s non-consolidating minority interest investments. FY 2022 GAAP EPS guidance excludes the impact of future value changes of these put/call options as the future value changes cannot be estimated.
- Transaction and integration costs of approximately $0.63 per diluted common share.
- Change in fair market value of publicly-traded equity securities of $1.03 per diluted common share. The future value of publicly-traded equity securities, their impact on GAAP EPS, and the related non-GAAP adjustment will fluctuate on the public trading value of the stock. The guidance set forth herein assumes no further change in the fair value of these investments.
- Estimated charges of $1.23 per diluted common share, primarily associated with initiatives undertaken related to the company’s previously disclosed $1 billion value creation plan to create capacity to fund growth and investment in its Medicare Advantage business and further expansion of its Healthcare Services capabilities in 2023. FY 2022 GAAP EPS guidance excludes the future impact of potential charges related to the value creation plan.
- Impact of $1.31 per diluted common share related to the recognition of a deferred tax liability in connection with the held-for-sale classification of Kindred at Home’s Hospice and Personal Care divisions resulting from the company’s pending sale of the business.
(g) FY 2021 Adjusted results exclude the following:
- Amortization expense for identifiable intangibles of approximately $0.39 per diluted common share.
- Gain associated with Kindred at Home equity method investment of approximately $8.73 per diluted common share; the gain was recorded upon closing of the Kindred at Home transaction in August 2021.
- Put/call valuation adjustments of approximately $3.56 per diluted common share, associated with Humana’s non-consolidating minority interest investments, including the impact of the termination of the put/call agreement related to Kindred at Home as a result of the transaction announced on April 27, 2021.
- Transaction and integration costs of approximately $0.72 per diluted common share.
- Change in fair market value of publicly-traded equity securities of $2.03 per diluted common share.
Cautionary Statement
This news release includes forward-looking statements regarding Humana within the meaning of the Private Securities Litigation Reform Act of 1995. When used in investor presentations, press releases, Securities and Exchange Commission (SEC) filings, and in oral statements made by or with the approval of one of Humana’s executive officers, the words or phrases like “expects,” “believes,” “anticipates,” “intends,” “likely will result,” “estimates,” “projects” or variations of such words and similar expressions are intended to identify such forward-looking statements.
These forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties, and assumptions, including, among other things, information set forth in the “Risk Factors” section of the company’s SEC filings, a summary of which includes but is not limited to the following:
- If Humana does not design and price its products properly and competitively, if the premiums Humana receives are insufficient to cover the cost of healthcare services delivered to its members, if the company is unable to implement clinical initiatives to provide a better healthcare experience for its members, lower costs and appropriately document the risk profile of its members, or if its estimates of benefits expense are inadequate, Humana’s profitability could be materially adversely affected.
Contacts
Lisa Stoner
Humana Investor Relations
(502) 580-2652
e-mail: LStamper@humana.com
Mark Taylor
Humana Corporate Communications
(317) 753-0345
e-mail: MTaylor108@humana.com
