Humana(US:HUM)2022-11-01 16:00Financial Performance - Humana Inc. reported a net income of $1.2 billion, or $9.39 per diluted common share, for the three months ended September 30, 2022, compared to $1.5 billion, or $11.84 per diluted common share, for the same period in 2021[144]. - For the nine months ended September 30, 2022, net income was $2.8 billion, or $22.16 per diluted common share, down from $2.9 billion, or $22.77 per diluted common share, in 2021[144]. - Net income for Q3 2022 was $1.2 billion, a decrease of 22.1% compared to $1.5 billion in Q3 2021, while net income for the first nine months of 2022 was $2.8 billion, down 4.3% from $2.9 billion in the same period of 2021[152]. - Diluted earnings per common share for Q3 2022 were $9.39, down 20.7% from $11.84 in Q3 2021, and for the first nine months of 2022, it was $22.16, a decrease of 2.7% from $22.77 in the same period of 2021[152]. Revenue Growth - Total revenues for Q3 2022 were $22.8 billion, a 10.2% increase from $20.7 billion in Q3 2021, and total revenues for the first nine months of 2022 reached $70.4 billion, up 13.6% from $62.0 billion in the same period of 2021[152]. - Consolidated premiums revenue increased by $1.6 billion, or 8.0%, from $19.9 billion in Q3 2021 to $21.5 billion in Q3 2022, and increased by $6.5 billion, or 10.8%, from $60.0 billion in the first nine months of 2021 to $66.4 billion in 2022, primarily due to growth in individual Medicare Advantage membership and higher premiums[154]. - Consolidated services revenue rose by $314 million, or 37.2%, from $845 million in Q3 2021 to $1.2 billion in Q3 2022, and increased by $2.0 billion, or 109.3%, from $1.8 billion in the first nine months of 2021 to $3.8 billion in 2022, mainly driven by home solutions revenues following the acquisition of KAH[155]. Membership and Market Position - Approximately 3,145,200 members, or 69%, of individual Medicare Advantage members were in value-based relationships as of September 30, 2022, up from 2,979,800 members, or 68%, in 2021[143]. - As of October 2022, 4.9 million members, or 96%, of existing Medicare Advantage membership were in contracts rated 4-stars or higher[144]. - Individual Medicare Advantage membership grew by 166,900 members, or 3.8%, from September 30, 2021, to September 30, 2022, driven by membership additions from the Annual Election Period[168]. - State-based Medicaid membership increased by 189,800 members, or 20.9%, from September 30, 2021, to September 30, 2022, due to the suspension of state eligibility redetermination efforts[170]. Expenses and Cost Management - Operating expenses for Q3 2022 totaled $21.6 billion, an increase of 7.8% from $20.1 billion in Q3 2021, with total operating expenses for the first nine months of 2022 reaching $66.8 billion, up 13.3% from $58.9 billion in the same period of 2021[152]. - Consolidated benefits expense rose by $1.1 billion, or 6.2%, from $17.3 billion in Q3 2021 to $18.4 billion in Q3 2022, and increased by $5.3 billion, or 10.3%, from $51.8 billion in the first nine months of 2021 to $57.1 billion in 2022[157]. - Consolidated operating costs increased by $458 million, or 17.6%, from $2.6 billion in Q3 2021 to $3.1 billion in Q3 2022, and by $2.4 billion, or 35.6%, from $6.7 billion in the first nine months of 2021 to $9.1 billion in 2022[160]. Strategic Transactions - The company acquired the remaining 60% interest in Kindred at Home for an enterprise value of $8.2 billion, with a transaction price of approximately $5.8 billion[129]. - Humana completed the sale of a 60% interest in Kindred at Home Hospice for cash proceeds of approximately $2.7 billion, recognizing a pre-tax gain of $240 million[131]. - The company recorded charges of $82 million and $285 million for the three and nine months ended September 30, 2022, related to cost-saving and productivity initiatives[133]. Tax and Interest Expenses - The effective tax rate for the first nine months of 2022 was 22.5%, up from 15.4% in the same period of 2021, indicating a higher tax burden on earnings[152]. - Interest expense increased by 15.9% in Q3 2022 to $102 million from $88 million in Q3 2021, reflecting higher borrowing costs[152]. - Interest expense rose by $14 million, or 15.9%, from $88 million in Q3 2021 to $102 million in Q3 2022, and by $58 million, or 24.7%, from $235 million in the first nine months of 2021 to $293 million in 2022, attributed to borrowings for the KAH acquisition[163]. Investment Performance - Investment income increased by $205 million, or 621.2%, from a loss of $33 million in Q3 2021 to an income of $172 million in Q3 2022, primarily due to lower mark-to-market losses and higher interest income[156]. - The net unrealized position of the investment portfolio decreased by $1,962 million, from a net unrealized gain of $57 million at December 31, 2021, to a net unrealized loss of $1,905 million at September 30, 2022[224]. - At September 30, 2022, the company reported gross unrealized losses of $1,906 million on its investment portfolio, primarily due to an increase in market interest rates[224]. - A 1% increase in interest rates would generally decrease the fair value of the company's securities by approximately $794 million at September 30, 2022[225]. Cash Flow and Capital Management - Cash and cash equivalents increased to approximately $13.6 billion at September 30, 2022, from $3.4 billion at December 31, 2021[195]. - Cash flows provided by operations were $9.7 billion in the 2022 period, an increase of $7.4 billion from $2.4 billion in the 2021 period[196]. - Total capital expenditures, excluding acquisitions, were $862 million in the 2022 period compared to $945 million in the 2021 period[202]. - Net cash provided by financing activities was $444 million in the 2022 period, compared to $3.7 billion in the 2021 period[195]. - Dividends paid to stockholders increased to $291 million during the 2022 period from $263 million in the 2021 period[210].