- Introduces a mid-term Adjusted EPS target of $37.00 per diluted
common share for the year ending December 31, 2025, representing a
compelling 14 percent compounded annual growth rate over the
company’s updated FY 2022 Adjusted EPS outlook
- Expects to deliver continued earnings growth in 2026 and beyond
at or above the EPS growth trends reflected in its new mid-term
Adjusted EPS target
- Raises FY 2022 GAAP EPS guidance to ‘approximately $23.08’ from
its previous estimate of ‘approximately $20.30’, while also
increasing FY 2022 Adjusted EPS guidance to ‘approximately $25.00’
from the previous guidance of ‘approximately $24.75’, reflecting 21
percent growth over 2021
As previously disclosed, Humana Inc. (NYSE: HUM) will host a
virtual Investor Day today, Thursday, September 15, 2022, at 8:30
a.m. eastern time. The Investor Day will include presentations by
senior management focusing on Humana’s value creation framework as
the company continues to gain operational momentum and advance its
strategy for sustainable leadership in the value-based care
industry.
Adjusted EPS Target for FY
2025
As part of today’s virtual Investor Day, the company is
introducing a mid-term Adjusted EPS target of $37.00 per diluted
common share for the year ending December 31, 2025 (FY 2025),
representing a compelling 14 percent compounded annual growth rate
over the company’s updated FY 2022 Adjusted EPS outlook.
The company expects to grow enterprise earnings approximately 10
percent per year, before factoring in an additional 1 to 2 percent
of anticipated earnings growth driven by the company’s commitment
to improving operating leverage by approximately 20 basis points
annually, on a business mix adjusted basis. In addition, Humana
expects capital deployment to contribute approximately 2 percent to
annual EPS growth.
“We are confident in our ability to deliver compelling,
sustainable earnings growth, both in the near and longer term which
will continue to drive shareholder value. Our strong competitive
positioning and unique capabilities in the highly attractive
individual Medicare Advantage market, coupled with the opportunity
to scale and further integrate our CenterWell healthcare services
capabilities, positions us for durable leadership in the
value-based care industry,” said Bruce D. Broussard, Humana’s
President and Chief Executive Officer. “Additionally, our sharpened
focus on driving ongoing operating efficiencies enabled by our $1
billion value creation initiative and efficient capital deployment
drive visibility into the medium- and longer-term outlook. We
expect to deliver $37.00 Adjusted EPS in 2025 and continued
earnings growth in 2026 and beyond at or above the EPS growth
trends reflected in our new mid-term target.”
FY 2022 GAAP and Adjusted EPS
Guidance
Humana today increased its GAAP and Adjusted EPS guidance for
the year ending December 31, 2022 (FY 2022). FY 2022 GAAP EPS
guidance was increased to ‘approximately $23.08’ from its previous
estimate of ‘approximately $20.30’, while Adjusted EPS was
increased to ‘approximately $25.00’ from the previous guidance of
‘approximately $24.75’.
The updated Adjusted guidance reflects 21 percent growth
compared to FY 2021 Adjusted EPS results and is driven by the
continued lower-than-expected medical cost trends in the company’s
Medicare Advantage and Medicaid businesses and the lack of a
COVID-19 headwind materializing to date. Importantly, the company
no longer deems it necessary to hold a discrete COVID-19 headwind
in its full year guide. As a result, it has now released the
remaining $0.50 explicit COVID-19 headwind embedded in its previous
FY 2022 Adjusted EPS guidance. The company is raising its FY 2022
Adjusted EPS guide by $0.25 to ‘approximately $25.00’ today, with
the assumption that it will invest the remaining $0.25 in
additional marketing for the 2023 Medicare Advantage Annual
Election Period if the dollars are not needed to cover items such
as a higher-than-expected flu season, should it emerge.
Detailed components of the company’s FY2022 financial guidance
updated today will be provided in the company’s third quarter 2022
earnings release on November 2, 2022.
A reconciliation of GAAP to Adjusted EPS for the company’s FY
2022 projections as well as comparable numbers for the year ended
December 31, 2021 (FY 2021) is shown below:
Diluted Earnings Per Common
Share
FY 2022
Guidance(a)
FY 2021 (b)
Generally Accepted Accounting
Principles (GAAP)
approximately
$23.08
$22.67
Amortization of identifiable
intangibles
0.43
0.39
Gain on Kindred at Home equity method
investment
-
(8.73)
Put/call valuation adjustments associated
with company's non-consolidating minority interest investments
(0.18)
3.56
Transaction and integration costs
0.61
0.72
Change in fair market value of publicly
traded equity securities
1.03
2.03
Charges associated with productivity
initiatives related to the previously disclosed $1 billion value
creation plan
1.45
-
Estimated net gain on the sale of Kindred
at Home’s Hospice and Personal Care divisions
(1.42)
-
Adjusted (non-GAAP) – FY 2022
projected; FY 2021 reported
approximately
$25.00
$20.64
Investor Day Logistics
Presentations will begin at 8:30 a.m. Eastern. The Investor Day
webcast and virtual presentation may be accessed via Humana’s
Investor Relations page at https://humana.gcs-web.com/. The company
suggests web participants sign on approximately 15 minutes in
advance of the event. The company also suggests web participants
visit the site in advance to run a system test and to download any
free software needed.
For those unable to participate in the live event, the replay
will be available in the Historical Webcasts and Presentations
section of the Investor Relations page at humana.com approximately
4 hours following the live webcast.
Footnotes
The company has included financial measures throughout this
press 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 financial
measures as indicators of the company’s business performance, as
well as for operational planning and decision-making purposes.
Non-GAAP 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.
(a) FY 2022 projected Adjusted results
exclude the following:
- Amortization expense for identifiable intangibles of
approximately $0.43 per diluted common share.
- Put/call valuation adjustments of approximately $0.18 per
diluted common share, associated with Humana’s non-consolidating
minority interest investments as of June 30, 2022. FY 2022 GAAP EPS
guidance excludes the impact of future value changes of these
put/call options as the future value changes cannot be
estimated.
- Transaction and integration costs of approximately $0.61 per
diluted common share.
- Change in fair market value of publicly traded equity
securities of $1.03 per diluted common share as of June 30, 2022.
The future value of publicly traded equity securities, their impact
on GAAP EPS, and the related non-GAAP adjustment will fluctuate on
the public trading value of the stock. The guidance set forth
herein assumes no further change in the fair value of these
investments.
- Estimated charges of $1.45 per diluted common share, primarily
associated with initiatives undertaken related to the company's
previously disclosed $1 billion value creation plan to create
capacity to fund growth and investment in its Medicare Advantage
business and further expansion of its Healthcare Services
capabilities in 2023. FY 2022 GAAP EPS guidance excludes the future
impact of potential charges related to the value creation
plan.
- Estimated net gain of $1.42 per diluted common share related to
the sale of Kindred at Home's Hospice and Personal Care divisions
in August 2022.
(b) FY 2021 Adjusted results exclude the
following:
- Amortization expense for identifiable intangibles of
approximately $0.39 per diluted common share.
- Gain associated with Kindred at Home equity method investment
of approximately $8.73 per diluted common share; the gain was
recorded upon closing of the Kindred at Home transaction in August
2021.
- Put/call valuation adjustments of approximately $3.56 per
diluted common share, associated with Humana’s non-consolidating
minority interest investments, including the impact of the
termination of the put/call agreement related to Kindred at Home as
a result of the transaction announced on April 27, 2021.
- Transaction and integration costs of approximately $0.72 per
diluted common share.
- Change in fair market value of publicly traded equity
securities of $2.03 per diluted common share.
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:
- If Humana does not design and price its products properly and
competitively, if the premiums Humana receives are insufficient to
cover the cost of healthcare services delivered to its members, if
the company is unable to implement clinical initiatives to provide
a better healthcare 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. The company
continually reviews estimates of future payments relating to
benefit expenses for services incurred in the current and prior
periods and makes necessary adjustments to its reserves, including
premium deficiency reserves, where appropriate. These estimates
involve extensive judgment, and have considerable inherent
variability because they are extremely sensitive to changes in
claim payment patterns and medical cost trends. Accordingly,
Humana's reserves may be insufficient.
- If Humana fails to effectively implement its operational and
strategic initiatives, particularly its Medicare initiatives and
state-based contract strategy, 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. In addition, there can be no assurances that the company
will be successful in maintaining or improving its Star ratings in
future years.
- If Humana fails to properly maintain the integrity of its data,
to strategically maintain existing or implement new information
systems, to protect Humana’s proprietary rights to its systems, or
to defend against cyber-security attacks or prevent other privacy
or data security incidents that result in security breaches that
disrupt the company's operations or in the unintentional
dissemination of sensitive personal information or proprietary or
confidential information, the company’s business may be materially
adversely affected.
- Humana is involved in various legal actions, or disputes that
could lead to legal actions (such as, among other things, provider
contract disputes and qui tam litigation brought by individuals on
behalf of the government), governmental and internal
investigations, and routine internal review of business processes
any of which, if resolved unfavorably to the company, could result
in substantial monetary damages or changes in its business
practices. 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 healthcare 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
Humana participates. Changes to the risk-adjustment model utilized
by CMS to adjust premiums paid to Medicare Advantage, or MA, plans
according to the health status of covered members, including
proposed changes to the methodology used by CMS for risk adjustment
data validation audits that fail to address adequately the
statutory requirement of actuarial equivalence, if implemented,
could have a material adverse effect on the company's operating
results, financial position and cash flows.
- Humana's business activities are subject to substantial
government regulation. New laws or regulations, or legislative,
judicial, or regulatory changes in existing laws or regulations or
their manner of application could increase the company's cost of
doing business and 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.
- Humana’s failure to manage acquisitions, divestitures and other
significant transactions successfully may have a material adverse
effect on the company’s 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 faces significant competition in attracting and
retaining talented employees. Further, managing succession for, and
retention of, key executives is critical to the Company’s success,
and its failure to do so could adversely affect the Company’s
businesses, operating results and/or future performance.
- Humana’s pharmacy business is highly competitive and subjects
it to regulations and supply chain risks 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.
- 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.
- The securities and credit markets may experience volatility and
disruption, which may adversely affect Humana’s business.
- The spread of, and response to, the novel coronavirus, or
COVID-19, underscores certain risks Humana faces, including those
discussed above, and the ongoing, heightened uncertainty created by
the pandemic precludes any prediction as to the ultimate adverse
impact to Humana of COVID-19. As the COVID-19 pandemic continues,
the premiums the company charges may prove to be insufficient to
cover the cost of health care services delivered to its members,
each of which could be impacted by many factors, including the
impacts that Humana has experienced, and may continue to
experience, to its revenues due to limitations on its ability to
implement clinical initiatives to manage health care costs and
chronic conditions of its members, and appropriately document their
risk profiles, as a result of the company’s members being unable or
unwilling to see their providers due to actions taken to mitigate
the spread of COVID-19; increased costs that may result from higher
utilization rates of medical facilities and services and other
increases in associated hospital and pharmaceutical costs; and
shifts in the company’s premium and medical claims cost trends to
reflect the demographic impact of higher mortality during the
COVID-19 pandemic. In addition, Humana is offering, and has been
mandated by legislative and regulatory action (including the
Families First Act and CARES Act) to provide, certain expanded
benefit coverage to its members, such as waiving, or reimbursing,
certain costs for COVID-19 testing, vaccinations and treatment.
These measures taken by Humana, or governmental action, to respond
to the ongoing impact of COVID-19 (including further expansion or
modification of the services delivered to its members, the adoption
or modification of regulatory requirements associated with those
services and the costs and challenges associated with ensuring
timely compliance with such requirements), and the potential for
widespread testing, treatments and the distribution and
administration of COVID-19 vaccines, could adversely impact the
company’s profitability. The spread and impact of COVID-19 and
additional variants, or actions taken to mitigate this spread,
could have material and adverse effects on Humana’s ability to
operate effectively, including as a result of the complete or
partial closure of facilities or labor shortages. Disruptions in
public and private infrastructure, including communications,
availability of in-person sales and marketing channels, financial
services and supply chains, could materially and adversely disrupt
the company’s normal business operations. A significant subset of
the company's and the company's third party providers' employee
population are in a remote work environment in an effort to
mitigate the spread of COVID-19, which may exacerbate certain risks
to Humana’s business, including an increased demand for information
technology resources, increased risk of phishing and other
cybersecurity attacks, and increased risk of unauthorized
dissemination of sensitive personal, proprietary, or confidential
information. The continued COVID-19 pandemic has severely impacted
global economic activity, including the businesses of some of
Humana’s commercial customers, and caused significant volatility
and negative pressure in the financial markets. In addition to
disrupting Humana’s operations, these developments may adversely
affect the timing of commercial customer premium collections and
corresponding claim payments, the value of the company’s investment
portfolio, or future liquidity needs. The ongoing, heightened
uncertainty created by the pandemic precludes any prediction as to
the ultimate adverse impact to Humana of COVID-19. Humana is
continuing to monitor the spread of COVID-19, changes to the
company’s benefit coverages, and the ongoing costs and business
impacts of dealing with COVID-19, including the potential costs and
impacts associated with lifting or reimposing restrictions on
movement and economic activity, the timing and degree in resumption
of demand for deferred healthcare services, the pace of
administration of COVID-19 vaccines and the effectiveness of those
vaccines, and related risks. The magnitude and duration of the
pandemic remain uncertain, and its impact on Humana’s business,
results of operations, financial position, and cash flows could be
material.
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:
- Form 10-K for the year ended December 31, 2021;
- Form 10-Q for the quarters ended March 31, 2022 and June 30,
2022; and
- Form 8-Ks filed during 2022.
About Humana
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 and conference calls
- Calendar of events
- Corporate Governance information
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220915005420/en/
Lisa Stoner Humana Investor Relations (502) 580-2652 e-mail:
LStamper@humana.com
Mark Taylor Humana Corporate Communications (317) 753-0345
e-mail: MTaylor108@humana.com
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