Humana Inc. (NYSE: HUM) today reported consolidated pretax income and diluted earnings per common share (EPS) for the quarter ended September 30, 2019 (3Q19) versus the quarter ended September 30, 2018 (3Q18) and for the nine months ended September 30, 2019 (YTD 2019) versus the nine months ended September 30, 2018 (YTD 2018) as follows:
Consolidated pretax income
YTD 2019 (c)
YTD 2018 (d)
Generally Accepted Accounting Principles (GAAP)
Amortization associated with identifiable intangibles
Put/call valuation adjustments associated with 40% minority interest in Kindred at Home
Charges associated with workforce optimization
(Gain) loss on sale of KMG America Corporation (KMG), a wholly-owned subsidiary
Segment earnings associated with the Individual Commercial segment
Diluted earnings per common share (EPS)
(Gain) loss on sale of KMG, a wholly-owned subsidiary
Adjustments to provisional estimates for the income tax effects related to the tax reform law enacted on December 22, 2017 (Tax Reform Law)
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.
"Our results to date through the third quarter of 2019 are a testament to our focus on operational excellence and to the maturity of our strategy," said Bruce D. Broussard, Humana's President and Chief Executive Officer. "We are seeing a number of positive outcomes as a result of our discipline and focus in these areas including improvements in quality as reflected in our strong Star scores and CMS program audit results, and the experience of our members, with increased net promoter scores. Highlighting this success is our significant individual Medicare Advantage membership growth which is now projected to exceed half a million members for the full year. Important too, we continue to reap the benefits of a highly engaged and dedicated workforce that makes these results possible."
Summary of 3Q19 Results
GAAP and Adjusted pretax income and EPS results for both the quarter and year-to-date (YTD) exceeded management's expectations, fueled by continued strong performance in the company's Medicare Advantage business. As expected, the year over year comparison of quarterly results was negatively impacted by weekday seasonality.
Year-over-year GAAP pretax income and EPS comparisons, for both the quarter and YTD, were favorably impacted by the solid results in the company's Medicare Advantage business and Healthcare Services segment, as well as by the previously implemented productivity initiatives that led to significant operating cost efficiencies in 2019. 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; and the impact of workforce optimization.
The year-over-year changes in GAAP and Adjusted EPS for 3Q19 and YTD 2019 were further positively impacted by the suspension of the health insurance industry fee (HIF) in 2019, as well as a lower numbers 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 3Q19 to 3Q18 and YTD 2019 to YTD 2018.
Humana Inc. Summary of Quarterly and YTD Results
(dollars in millions, except per share amounts)
Revenues - GAAP
Pretax income - GAAP
Pretax income - Adjusted
EPS - GAAP
EPS - Adjusted
Benefits expense ratio - GAAP
Operating cost ratio - GAAP
Operating cost ratio - Adjusted
Operating cash flows - GAAP
Operating cash flows - Adjusted
Parent company cash and short term investments
Retail segment results:
Segment earnings - GAAP
Segment earnings - Adjusted
Group and Specialty segment results:
Healthcare Services segment results:
Adjusted earnings before interest, taxes, depreciation and amortization (Adjusted EBITDA) (e)
2019 Earnings Guidance
Humana today raised its GAAP and Adjusted EPS guidance for the year ended December 31, 2019 (FY19). The company now expects FY19 GAAP EPS guidance to be approximately $18.32, while Adjusted EPS is expected to be approximately $17.75.
A reconciliation of GAAP to Adjusted EPS for the company's FY19 projections, as well as comparable numbers for the year ended December 31, 2018 (FY18), is shown below for comparison.
Diluted earnings per common share
FY19 Guidance (f)
Amortization of identifiable intangibles
Loss on sale of KMG, a wholly -owned subsidiary
Adjustments to provisional estimates for the income tax effects related to the Tax Reform Law
Adjusted (non-GAAP) - FY19 projected
"Our strong operational execution and financial performance in 2019, including well above market individual Medicare Advantage membership growth of 17%, have positioned us for a solid 2020 from both a Medicare Advantage membership and earnings per share growth perspective," said Brian A. Kane, Chief Financial Officer.
Star Quality Ratings
As previously disclosed, in October 2019, the Centers for Medicare and Medicaid Services (CMS) published its updated Medicare Star Ratings for bonus year 2021. Humana has 3.7 million members, or 92% of its Medicare Advantage membership as of August 2019, enrolled in 18 contracts that received a 4-star rating or above. In addition, Humana received a 5 out of 5-star rating for its CarePlus Health Plans, Inc. contract in Florida and received a 4.5-star rating for six Medicare Advantage contracts offered in 19 states, which cover approximately 1.3 million members. The continued improvement in Humana's Star Ratings reflect the company's enterprise-wide focus on driving quality and improved health outcomes.
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).
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 3Q19 earnings conference call are invited to dial 888-625-7430. No password is required. The audio-only webcast of the 3Q19 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 2:00 p.m. Eastern time on November 6, 2019 until 10:59 p.m. Eastern time on January 1, 2020 and can be accessed by dialing 855-859-2056 and providing the conference ID #2376476.
(a) 3Q19 Adjusted results exclude the following:
(b) 3Q18 Adjusted results exclude the following:
(c) YTD 2019 Adjusted results exclude the following:
(d) YTD 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) FY19 Adjusted EPS projections exclude the following:
(g) FY18 Adjusted results exclude the following:
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 (News - Alert)) 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:
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:
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