Humana(HUM) - 2024 Q3 - Quarterly Report

Financial Performance - Net income attributable to Humana was $0.5 billion, or$3.98 per diluted common share, for the three months ended September 30, 2024, compared to $0.8 billion, or$6.71 per diluted common share, for the same period in 2023[152] - Net income attributable to Humana was $1.9 billion, or$15.72 per diluted common share, for the nine months ended September 30, 2024, compared to $3.0 billion, or$24.26 per diluted common share, for the same period in 2023[152] - Net income decreased by $350 million (42.2$480 million in Q3 2024, with diluted earnings per share dropping to $3.98 from$6.71 in Q3 2023[161] - Consolidated premiums revenue increased by $2.9 billion (11.4$28.0 billion in Q3 2024 compared to $25.1 billion in Q3 2023, driven by higher Medicare premiums and membership growth[162][163] - Consolidated services revenue grew by$87 million (8.6%) to $1.1 billion in Q3 2024, primarily due to growth in the primary care business, partially offset by the v28 risk model revision[164] - Investment income increased by$35 million (11.4%) to $343 million in Q3 2024, driven by higher interest income on debt securities[164] - Consolidated benefits expense rose by$3.4 billion (15.5%) to $25.1 billion in Q3 2024, with the benefit ratio increasing by 330 basis points to 89.9$68 million (2.1%) to $3.3 billion in Q3 2024, with the operating cost ratio decreasing by 100 basis points to 11.5$9 million (4.5%) to $210 million in Q3 2024, primarily due to capital expenditures[170] - Interest expense rose by$55 million (48.2%) to $169 million in Q3 2024, driven by higher interest rates and increased average debt balances[171] - The effective income tax rate increased to 24.4$24 million of favorable prior-period medical claims reserve development in Q3 2024, reducing the ratio by approximately 10 basis points[166] Membership and Business Segments - Approximately 3,984,900 members, or 70%, of individual Medicare Advantage members were in value-based relationships under the integrated care delivery model as of September 30, 2024, compared to 3,727,500 members, or 69%, at September 30, 2023[151] - Individual Medicare Advantage membership increased by 284,800 members, or 5.3%, primarily due to membership additions from the previous Annual Election Period (AEP), including a net increase of 71,600 D-SNP members, or 8.2%[176] - Group Medicare Advantage membership grew by 36,400 members, or 7.1%, driven by growth in small and medium group accounts[177] - Medicare stand-alone PDP membership decreased by 570,100 members, or 19.8%, due to intensified competition[177] - State-based contracts and other membership increased by 181,500 members, or 14.4%, reflecting new contract implementations partially offset by membership loss from the public health emergency unwind[178] - Commercial fully-insured medical membership decreased by 383,400 members, or 93.7%, and commercial ASO medical membership decreased by 261,900 members, or 92.1%, due to the planned exit of the Employer Group Commercial Medical Products business[179] - Specialty membership decreased by 397,500 members, or 8.0%, primarily due to non-renewal of dental and vision plans as a result of exiting the Employer Group Commercial Medical Products business[180] - The company anticipates finalizing the exit from the Employer Group Commercial Medical Products business in the first half of 2025[140] - The Medicare Part D benefit design results in a decreasing benefit ratio as the year progresses, with the PDP benefit ratio generally decreasing as the year progresses[147] - The company's integrated care delivery model aims to improve health outcomes and affordability, with a focus on primary, physician-directed care for members[151] Insurance Segment Performance - The Employer Group Commercial Fully-Insured business increased the Insurance segment benefit ratio by 10 basis points for the three months ended September 30, 2024, and by 20 basis points for the same period in 2023[148] - The Employer Group Commercial Fully-Insured business increased the Insurance segment operating cost ratio by 10 basis points for the three months ended September 30, 2024, and by 40 basis points for the same period in 2023[150] - Insurance segment premiums revenue increased by $2.9 billion, or 11.4$8.2 billion, or 10.8%, in the 2024 period, driven by higher per member Medicare premiums and Medicare Advantage membership growth[181] - Insurance segment services revenue decreased by $31 million, or 12.1$15 million, or 2.1%, in the 2024 period[182] - The Insurance segment benefit ratio increased by 300 basis points to 90.6% in the 2024 quarter and to 89.8% in the 2024 period, primarily due to elevated Medicare Advantage and state-based contracts medical cost trends[183] - The Insurance segment operating cost ratio decreased by 120 basis points to 9.2% in the 2024 quarter and by 130 basis points to 8.6% in the 2024 period, driven by scale efficiencies and administrative cost reductions[184] CenterWell Segment Performance - CenterWell services revenue increased by $118 million (15.5$877 million in Q3 2024 compared to $759 million in Q3 2023, driven by growth in the primary care business[187] - CenterWell intersegment revenues grew by$263 million (6.7%) to $4.2 billion in Q3 2024, primarily due to expansion in the home solutions business and growth in the primary care business[188] - CenterWell income from operations decreased by$18 million (4.5%) to $382 million in Q3 2024, primarily due to the impact of the v28 risk model revision[186] - The operating cost ratio for the CenterWell segment increased by 100 basis points to 91.3$5.1 billion at September 30, 2024, up from $4.7 billion at December 31, 2023[192] - Net cash provided by operating activities decreased by$7.6 billion to $3.5 billion in the nine months ended September 30, 2024, compared to$11.1 billion in the same period in 2023[193] - Total net capital expenditures, excluding acquisitions, were $421 million in the nine months ended September 30, 2024, down from$721 million in the same period in 2023[198] - The company issued $2.25 billion in senior notes in March 2024, with net proceeds of$2.23 billion used for general corporate purposes, including repayment of existing debt[203] - Medicare receivables decreased by $137 million to$1.29 billion at September 30, 2024, reflecting membership growth and timing of CMS risk-adjustment model collections[196] - The company repurchased $213 million principal amount of senior notes for approximately$196 million cash under a Rule 10b5-1 Repurchase Plan in 2023[204] - Issued $500 million of 5.700$750 million of 5.500% senior notes due 2053, with net proceeds of $1.2 billion used for debt repayment and general corporate purposes[206] - Net repayments from commercial paper issuance were$895 million in 2024, while net proceeds from issuance were $1.6 billion in 2023, with a maximum outstanding principal of$2.7 billion in 2024[206] - Repurchased $750 million and$980 million of common shares in 2024 and 2023, respectively, and acquired $18 million and$31 million of shares related to employee stock plans in the same periods[207] - Paid dividends of $323 million and$320 million to stockholders in 2024 and 2023, respectively[207] - Cash, cash equivalents, and short-term investments at the parent company increased to $609 million at September 30, 2024, from$510 million at December 31, 2023[214] - State-regulated subsidiaries had aggregate statutory capital and surplus of $13.5 billion, exceeding minimum regulatory requirements of$10.6 billion as of June 30, 2024[216] - Net unrealized loss position decreased by $448 million to$846 million at September 30, 2024, from $1,294 million at December 31, 2023, with gross unrealized losses of$998 million due to rising interest rates[218] - Average duration of the investment portfolio increased to 3.3 years at September 30, 2024, from 3.0 years at December 31, 2023, with a 1% interest rate increase potentially decreasing fair value by 803 million[219] - Investment-grade credit rating at September 30, 2024, was BBB by S&P and Baa2 by Moody's, with potential downgrades triggering interest rate increases on 250 million of senior notes[213] - Ordinary dividends paid to the parent company totaled approximately $0.5 billion during the nine months ended September 30, 2024[216] Value Creation and Strategic Initiatives - Charges related to value creation initiatives were$55 million and $151 million for the three and nine months ended September 30, 2024, respectively, and$52 million for the three and nine months ended September 30, 2023[141] - The company is evaluating the impact of the SEC's final regulation on climate-related disclosures, which is effective for the annual report for the year ended December 31, 2025[158]