Humana Reports First Quarter 2014 Financial Results; Reaffirms 2014 Financial Guidance
May 7, 2014
1Q14 EPS of $2.35 reflected solid results in Medicare Advantage,
commercial group, and government businesses
2014 EPS guidance of $7.25 to $7.75 reaffirmed
2014 Medicare Advantage membership growth estimate raised to 395,000
2014 Medicare stand-alone PDP membership growth estimate raised to
550,000 to 600,000
2014 individual commercial membership growth estimate raised to
350,000 to 500,000
Favorable Medicare utilization partially offset by cost of new
specialty drug for the treatment of Hepatitis C
LOUISVILLE, Ky.--(BUSINESS WIRE)--
Humana Inc. (NYSE: HUM) today reported diluted earnings per common share
(EPS) for the quarter ended March 31, 2014 (1Q14) of $2.35, compared to
diluted earnings per common share (EPS) of $2.95 for the quarter ended
March 31, 2013 (1Q13). Results from 1Q13 included $0.41 per diluted
common share of benefit from the settlement of contract claims with the
Department of Defense related to previously-disclosed litigation and the
absence of the impact of sequestration for the company’s Medicare
The company reaffirmed its estimate for EPS for the year ending December
31, 2014 (FY14) to be in the range of $7.25 to $7.75. The company’s 2014
EPS estimate now reflects a continuing expectation of improved
performance from the company’s Medicare Advantage, commercial group and
government businesses, higher than expected specialty drug costs for
treatment of Hepatitis C, additional planned investments in clinical
initiatives and lower investment spending and startup expenses for the
company’s health care exchange business.
“Our first quarter results reflect our success in growing membership and
timely engagement with our members, assisting them with their health
conditions, especially chronic conditions. Our progress with our
clinical programs has provided members stable benefits and improving
quality ratings,” said Bruce D. Broussard, President and Chief Executive
Officer of Humana. “We expect the strength of our integrated care
delivery strategy combined with expanding enrollment opportunities,
especially in our newer offerings, to position the company for further
growth in a challenging Medicare funding environment.”
During 1Q14, the company executed share repurchases of $11 million, or
100,000 of its outstanding shares, at an average price of $113.44 per
share under a previous share repurchase authorization. In April 2014,
the Board of Directors replaced its previous share repurchase
authorization (of which approximately $569 million remained unused) with
a new $1 billion repurchase authorization with an expiration date of
June 30, 2016.
Humana will host a conference call, as well as a virtual slide
presentation, at 9:00 a.m. eastern time today to discuss its financial
results for the quarter and the company’s expectations for future
earnings. A live virtual presentation (audio with slides) may be
accessed via Humana’s Investor Relations page at www.humana.com.
The company suggests web participants sign on at least 15 minutes in
advance of the call. The company also suggests web participants visit
the site well in advance of the call to run a system test and to
download any free software needed to view the presentation.
All parties interested in the audio-only portion of the conference call
are invited to dial 888-625-7430. No password is required. The company
suggests participants dial in at least ten minutes in advance of the
call. For those unable to participate in the live event, the virtual
presentation archive may be accessed via the Historical Webcasts &
Presentations section of the Investor Relations page at www.humana.com.
This news release includes forward-looking statements 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 health care services delivered to its members, if
the company is unable to implement clinical initiatives to provide a
better health care 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. Humana estimates the costs of
its benefit expense payments, and designs and prices its products
accordingly, using actuarial methods and assumptions based upon, among
other relevant factors, claim payment patterns, medical cost
inflation, and historical developments such as claim inventory levels
and claim receipt patterns. These estimates, however, involve
extensive judgment, and have considerable inherent variability because
they are extremely sensitive to changes in claim payment patterns and
medical cost trends.
If Humana fails to effectively implement its operational and strategic
initiatives, particularly its Medicare initiatives, state-based
contract strategy, and its participation in the new health insurance
exchanges, the company’s business may be materially adversely
affected, which is of particular importance given the concentration of
the company’s revenues in these products.
If Humana fails to properly maintain the integrity of its data, to
strategically implement new information systems, to protect Humana’s
proprietary rights to its systems, or to defend against cyber-security
attacks, the company’s business may be materially adversely affected.
Humana’s business may be materially adversely impacted by CMS’s
adoption of a new coding set for diagnoses (commonly known as ICD-10),
the implementation of which has been deferred to at least October 1,
Humana is involved in various legal actions, or disputes that could
lead to legal actions (such as, among other things, provider contract
disputes relating to rate adjustments resulting from the Balanced
Budget and Emergency Deficit Control Act of 1985, as amended, commonly
referred to as “sequestration”; other provider contract disputes; and
qui tam litigation brought by individuals on behalf of the government)
and governmental and internal investigations, any of which, if
resolved unfavorably to the company, could result in substantial
monetary damages. Increased litigation and negative publicity could
also increase the company’s cost of doing business.
As a government contractor, Humana is exposed to risks that may
materially adversely affect its business or its willingness or ability
to participate in government health care programs including, among
other things, loss of material government contracts, governmental
audits and investigations, potential inadequacy of
government-determined payment rates, potential restrictions on
profitability, including by comparison of profitability of the
company’s Medicare Advantage business to non-Medicare Advantage
business, or other changes in the governmental programs in which
The Health Care Reform Law, including The Patient Protection and
Affordable Care Act and The Health Care and Education Reconciliation
Act of 2010, could have a material adverse effect on Humana’s results
of operations, including restricting revenue, enrollment and premium
growth in certain products and market segments, restricting the
company’s ability to expand into new markets, increasing the company's
medical and operating costs by, among other things, requiring a
minimum benefit ratio on insured products, lowering the company’s
Medicare payment rates and increasing the company’s expenses
associated with a non-deductible health insurance industry fee and
other assessments; the company’s financial position, including the
company's ability to maintain the value of its goodwill; and the
company’s cash flows. In addition, if Humana is unable to adjust its
business model to address the non-deductible health insurance industry
fee and other assessments, including the three-year commercial
reinsurance fee, such as through the reduction of the company’s
operating costs, there can be no assurance that the non-deductible
health insurance industry fee and other assessments would not have a
material adverse effect on the company’s results of operations,
financial position, and cash flows.
Humana’s participation in, and the operational functionality of, the
new federal and state health care exchanges, which have experienced
certain technical difficulties in their early implementation and which
entail uncertainties associated with mix and volume of business, could
adversely affect the company’s results of operations, financial
position, and cash flows.
Humana’s business activities are subject to substantial government
regulation. New laws or regulations, or changes in existing laws or
regulations or their manner of application could increase the
company’s cost of doing business and may adversely affect the
company’s business, profitability and cash flows.
Any failure to manage operating costs could hamper Humana’s
Any failure by Humana to manage acquisitions and other significant
transactions successfully may have a material adverse effect on its
results of operations, financial position, and cash flows.
If Humana fails to develop and maintain satisfactory relationships
with the providers of care to its members, the company’s business may
be adversely affected.
Humana’s pharmacy business is highly competitive and subjects it to
regulations in addition to those the company faces with its core
health benefits businesses.
Changes in the prescription drug industry pricing benchmarks may
adversely affect Humana’s financial performance.
If Humana does not continue to earn and retain purchase discounts and
volume rebates from pharmaceutical manufacturers at current levels,
Humana’s gross margins may decline.
Humana’s ability to obtain funds from certain of its licensed
subsidiaries is restricted by state insurance regulations.
Downgrades in Humana’s debt ratings, should they occur, may adversely
affect its business, results of operations, and financial condition.
Changes in economic conditions could adversely affect Humana’s
business and results of operations.
The securities and credit markets may experience volatility and
disruption, which may adversely affect Humana’s business.
Given the current economic climate, Humana’s stock and the stock of
other companies in the insurance industry may be increasingly subject
to stock price and trading volume volatility.
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
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:
Form 10-K for the year ended December 31, 2013;
Form 8-Ks filed during 2014.
Humana Inc., headquartered in Louisville, Ky., is a leading health and
well-being company focused on making it easy for people to achieve their
best health with clinical excellence through coordinated care. The
company’s strategy integrates care delivery, the member experience, and
clinical and consumer insights to encourage engagement, behavior change,
proactive clinical outreach and wellness for the millions of people we
serve across the country.
More information regarding Humana is available to investors via the
Investor Relations page of the company’s web site at www.humana.com,
including copies of:
Annual reports to stockholders
Securities and Exchange Commission filings
Most recent investor conference presentations
Quarterly earnings news releases
Replays of most recent earnings release conference calls
Calendar of events (including upcoming earnings conference call dates
and times, as well as planned interaction with research analysts and