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Humana Reports Fourth Quarter 2019 Financial Results; Provides Full Year 2020 Financial Guidance

February 5, 2020 GMT

LOUISVILLE, Ky.--(BUSINESS WIRE)--Feb 5, 2020--

Humana Inc. (NYSE: HUM) today reported consolidated pretax income and diluted earnings per common share (EPS) for the quarter ended December 31, 2019 (4Q19) versus the quarter ended December 31, 2018 (4Q18) and for the year ended December 31, 2019 (FY 2019) versus the year ended December 31, 2018 (FY 2018) as follows:

Consolidated income before income taxes and equity in earnings (pretax income)In millions

4Q19 (a)

4Q18 (b)

FY 2019 (c)

FY 2018 (d)

Generally Accepted Accounting Principles (GAAP)

$593

 

$436

 

$3,456

 

$2,063

 

Amortization associated with identifiable intangibles

17

 

20

 

70

 

90

 

Put/call valuation adjustments associated with 40% minority interest in Kindred at Home

(289

)

22

 

(506

)

33

 

Charges associated with workforce optimization

1

 

 

47

 

 

Loss on sale of KMG America Corporation (KMG), a wholly-owned subsidiary

 

 

 

786

 

Segment losses (earnings) associated with the Individual Commercial segment

 

2

 

 

(74

)

Adjusted (non-GAAP)

$322

 

$480

 

$3,067

 

$2,898

 

Diluted earnings per common share (EPS)

4Q19 (a)

4Q18 (b)

FY 2019 (c)

FY 2018 (d)

GAAP

$3.84

 

$2.58

 

$20.10

 

$12.16

 

Amortization associated with identifiable intangibles

0.10

 

0.11

 

0.40

 

0.49

 

Put/call valuation adjustments associated with 40% minority interest in Kindred at Home

(1.67

)

0.13

 

(2.89

)

0.18

 

Charges associated with workforce optimization

0.01

 

 

0.26

 

 

(Favorable adjustment) loss on sale of KMG, a wholly-owned subsidiary

 

(0.17

)

 

2.41

 

Segment earnings associated with the Individual Commercial segment

 

 

 

(0.41

)

Adjustments to provisional estimates for the income tax effects related to the tax reform law enacted on December 22, 2017 (Tax Reform Law)

 

 

 

(0.28

)

Adjusted (non-GAAP)

$2.28

 

$2.65

 

$17.87

 

$14.55

 

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.

“We are pleased with our 2019 performance, particularly our success in balancing and executing on multiple priorities as we grew membership, improved the quality and productivity of our operations, and continued to invest in the long-term,” said Bruce D. Broussard, Humana’s President and Chief Executive Officer. “You’ll find evidence of these efforts in our improved Net Promoter Score - and in the related, and numerous, awards we received for customer experience. In addition, we had strong membership growth, with a record number of our members now in 4+ Star Plans. All the while, we made appreciable progress in advancing our technology, primary care and home strategies.”

Summary of 4Q19 Results

GAAP and Adjusted EPS results for both the quarter and the year exceeded management’s expectations driven by continued outperformance in the company’s Medicare Advantage business.

In year-over-year comparisons for both 4Q19 and FY 2019, the company’s GAAP and Adjusted pretax income and EPS results were favorably impacted by the solid performance of the company’s Medicare Advantage business and Healthcare Services segment, with further benefit from achieving significant operating cost efficiencies in 2019 as a result of previously implemented productivity initiatives. These year-over-year favorable impacts were partially offset by the strategic investments in the company’s integrated care delivery model; the impact of higher compensation accruals for the Annual Incentive Plan (AIP) offered to employees across all levels of the company; lower Group and Specialty segment earnings; increased spending associated with the 2020 Medicare Annual Election Period (AEP); and the impact of workforce optimization.

The year-over-year changes in GAAP and Adjusted EPS for 4Q19 and FY 2019 were further positively impacted by a lower tax rate primarily resulting from the suspension of the health insurance industry fee (HIF) in 2019, as well as a lower number of shares used to compute EPS, primarily reflective of share repurchases.

Please refer to the tables above and the consolidated and segment highlight sections in the detailed earnings release for additional discussion of the factors impacting year-over-year results. In addition, below is a summary of key consolidated and segment statistics comparing 4Q19 to 4Q18 and FY 2019 to FY 2018.

Humana Inc. Summary of Quarterly and YTD Results
(dollars in millions, except per share amounts)

4Q19 (a)

4Q18 (b)

FY 2019 (c)

FY 2018 (d)

Consolidated results:

 

 

 

 

Revenues - GAAP

$16,295

$14,168

$64,888

$56,912

Pretax income - GAAP

$593

$436

$3,456

$2,063

Pretax income - Adjusted

$322

$480

$3,067

$2,898

EPS - GAAP

$3.84

$2.58

$20.10

$12.16

EPS - Adjusted

$2.28

$2.65

$17.87

$14.55

Benefits expense ratio - GAAP

86.6%

83.4%

85.6%

83.5%

Operating cost ratio - GAAP

13.2%

15.0%

11.5%

13.3%

Operating cost ratio - Adjusted

13.2%

15.0%

11.4%

13.3%

Operating cash flows - GAAP

$512

($333)

$5,284

$2,173

Parent company cash and short term investments

$1,361

$578

 

 

Debt-to-total capitalization

32.0%

37.4%

 

 

Retail segment results:

 

 

 

 

Revenues - GAAP

$14,207

$12,036

$56,466

$48,255

Benefits expense ratio - GAAP

86.3%

84.0%

86.4%

85.1%

Operating cost ratio - GAAP

11.6%

12.9%

9.4%

11.1%

Segment earnings - GAAP

$275

$339

$2,235

$1,733

Segment earnings - Adjusted

$279

$343

$2,251

$1,752

Group and Specialty segment results:

 

 

 

 

Revenues - GAAP

$1,875

$1,909

$7,525

$7,679

Benefits expense ratio - GAAP

95.2%

84.6%

86.0%

79.7%

Operating cost ratio - GAAP

22.4%

23.9%

22.0%

23.6%

Segment (losses) earnings - GAAP

($146)

($11)

$28

$361

Segment (losses) earnings - Adjusted

($145)

($10)

$32

$366

Healthcare Services segment results:

 

 

 

 

Revenues - GAAP

$6,696

$6,191

$25,783

$23,811

Operating cost ratio - GAAP

96.8%

96.8%

96.4%

96.3%

Segment earnings - GAAP

$178

$160

$789

$754

Adjusted earnings before interest, taxes, depreciation and amortization (Adjusted EBITDA) (e)

$241

$223

$1,056

$969

2020 Earnings Guidance

The company provided its GAAP and Adjusted EPS guidance for the year ending December 31, 2020 (FY 2020) as detailed below. GAAP and Adjusted results for FY 2019 are also shown for comparison.

Diluted earnings per common share

FY 2020
Guidance (f)

FY 2019 (c)

GAAP

$17.76 to $18.26

 

$20.10

 

Amortization of identifiable intangibles

0.49

 

0.40

 

Put/call valuation adjustments associated with 40% minority interest in Kindred at Home

-

 

(2.89

)

Charges associated with workforce optimization

-

 

0.26

 

Adjusted (non-GAAP) – FY 2020 projected; FY 2019 reported

$18.25 to 18.75

 

$17.87

 

“We enter 2020 with positive momentum from strong 2019 results and industry-leading individual Medicare Advantage membership growth,” said Brian A. Kane, Chief Financial Officer. “Seniors are increasingly choosing Medicare Advantage plans, and Humana’s value proposition, consumer orientation and strong brand resonate in the market as we work to drive better clinical outcomes for our members supporting our strong earnings growth and reinvestment in our products. We expect 2020 to be another good year for the company with solid top and bottom line growth notwithstanding the return of the health insurance industry fee.”

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.

All parties interested in the company’s 4Q19 earnings conference call are invited to dial 888-625-7430. No password is required. The audio-only webcast of the 4Q19 earnings call may 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. Telephone replays will also be available from approximately 12:15 p.m. Eastern time on February 5, 2020 until 11:59 p.m. Eastern time on April 5, 2020 and can be accessed by dialing 855-859-2056 and providing the conference ID #2179917.

Footnotes

(a) 4Q19 Adjusted results exclude the following:

(b) 4Q18 Adjusted results exclude the following:

(c) FY 2019 Adjusted results exclude the following:

(d) FY 2018 Adjusted results exclude the following:

(e) The Healthcare Services segment Adjusted EBITDA includes GAAP segment earnings with adjustments to add back depreciation and amortization expense, interest expense, and income taxes. The Adjusted EBITDA includes results from all lines of business within the segment, as well as the impact of Humana’s 40% minority interest in Kindred at Home.

(f) FY 2020 Adjusted EPS projections exclude the following:

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:

In making forward-looking statements, Humana is not undertaking to address or update them in future filings or communications regarding its business or results. In light of these risks, uncertainties, and assumptions, the forward-looking events discussed herein may or may not occur. There also may be other risks that the company is unable to predict at this time. Any of these risks and uncertainties may cause actual results to differ materially from the results discussed in the forward-looking statements.

Humana advises investors to read the following documents as filed by the company with the SEC for further discussion both of the risks it faces and its historical performance:

About Humana

Humana Inc. (NYSE: HUM) is committed to helping our millions of medical and specialty members achieve their best health. Our successful history in care delivery and health plan administration is helping us create a new kind of integrated care with the power to improve health and well-being and lower costs. Our efforts are leading to a better quality of life for people with Medicare, families, individuals, military service personnel, and communities at large.

To accomplish that, we support physicians and other health care professionals as they work to deliver the right care in the right place for their patients, our members. Our range of clinical capabilities, resources and tools – such as in-home care, behavioral health, pharmacy services, data analytics and wellness solutions – combine to produce a simplified experience that makes health care easier to navigate and more effective.

More information regarding Humana is available to investors via the Investor Relations page of the company’s website at humana.com, including copies of:

 

View source version on businesswire.com:https://www.businesswire.com/news/home/20200205005185/en/

CONTACT: Amy Smith

Humana Investor Relations

(502) 580-2811

e-mail:Amysmith@humana.comAlex Kepnes

Humana Corporate Communications

(502) 580-2990

e-mail:Akepnes@humana.com

KEYWORD: KENTUCKY UNITED STATES NORTH AMERICA

INDUSTRY KEYWORD: GENERAL HEALTH PROFESSIONAL SERVICES HEALTH INSURANCE

SOURCE: Humana Inc.

Copyright Business Wire 2020.

PUB: 02/05/2020 06:30 AM/DISC: 02/05/2020 06:30 AM

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