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14
Humana Reports First Quarter 2024 Financial Results; Affirms Full Year Adjusted 2024 Financial Guidance
Reports 1Q24 earnings per share (EPS) of
Revises FY 2024 EPS guidance to 'approximately
Raises 2024 individual Medicare Advantage annual membership growth by 50,000 to now anticipate annual growth of approximately 150,000, or 2.8 percent
Continues successful track record of organic expansion in Medicaid with recent contract wins in
Publishes prepared management remarks to Investor Relations page of www.humana.com ahead of this morning's
Consolidated income before income taxes and equity in net earnings (pretax results) In millions
1Q24 (a)
1Q23 (a)
Generally Accepted Accounting Principles (GAAP)
Amortization associated with identifiable intangibles
16
18
Put/call valuation adjustments associated with company's non-consolidating minority interest investments
131
53
Transaction and integration costs
-
(51
)
Change in fair market value of publicly-traded equity securities
-
(1
)
Impact of exit of employer group commercial medical products business
1
(81
)
Value creation initiatives
29
-
Adjusted (non-GAAP)
Net earnings per share (EPS)
1Q24 (a)
1Q23 (a)
GAAP
Amortization associated with identifiable intangibles
0.13
0.14
Put/call valuation adjustments associated with company's non-consolidating minority interest investments
1.08
0.42
Transaction and integration costs
-
(0.41
)
Change in fair market value of publicly-traded equity securities
-
(0.01
)
Impact of exit of employer group commercial medical products business
0.01
(0.64
)
Value creation initiatives
0.24
-
Tax impact of non-GAAP adjustments
(0.34
)
0.01
Adjusted (non-GAAP)
Refer to the 'Footnotes' section included herein for further explanation on disclosures for Adjusted (non-GAAP) financial measures, as well as additional reconciliations.
Please refer to the tables above, as well as the consolidated and segment highlight sections in the detailed earnings release for additional discussion of the factors impacting the year-over-comparisons.
In addition, a summary of key consolidated and segment statistics comparing 1Q24 to 1Q23 follows.
($ in millions, except per share amounts)
1Q24 (a)
1Q23 (a)
CONSOLIDATED
Revenues
Revenues - Adjusted (non-GAAP)
Pretax results
Pretax results - Adjusted (non-GAAP)
EPS
EPS - Adjusted (non-GAAP)
Benefit ratio
88.9
%
85.5
%
Benefit ratio - Adjusted (non-GAAP)
88.9
%
85.9
%
Operating cost ratio
10.4
%
11.2
%
Operating cost ratio - Adjusted (non-GAAP)
10.2
%
10.9
%
Operating cash flows
Operating cash flows - Adjusted (non-GAAP) (b)
Parent company cash and short term investments
Debt-to-total capitalization
45.1
%
41.1
%
Days in Claims Payable (DCP)
42.5
41.2
INSURANCE SEGMENT
Revenues
Revenues - Adjusted (non-GAAP)
Benefit ratio
89.3
%
86.1
%
Benefit ratio - Adjusted (non-GAAP)
89.4
%
86.4
%
Operating cost ratio
8.3
%
9.4
%
Operating cost ratio - Adjusted (non-GAAP)
8.2
%
9.0
%
Income from operations
Income from operations - Adjusted (non-GAAP)
CENTERWELL SEGMENT
Revenues
Operating cost ratio
93.0
%
91.6
%
Income from operations
Income from operations - Adjusted (non-GAAP)
Refer to the 'Footnotes' section included herein for further explanation on disclosures for Adjusted (non-GAAP) financial measures, as well as reconciliations.
FY 2024 Earnings Guidance
Humana revised its GAAP EPS guidance for the year ending
Diluted earnings per common share
FY 2024
Guidance (d)
GAAP
approximately
Amortization of identifiable intangibles
0.49
Put/call valuation adjustments associated with company's non-consolidating minority interest investments
1.08
Impact of exit of employer group commercial medical products business
0.90
Value creation initiatives
0.24
Cumulative net tax impact of non-GAAP adjustments
(0.64
)
Adjusted (non-GAAP) - FY 2024 projected
approximately
Refer to the 'Footnotes' section included herein for further explanation on disclosures for Adjusted (non-GAAP) financial measures, as wellas additional reconciliations.
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/opens new window or via a current report on Form 8-K filed by the company with the
Conference Call
Humana will host a live question and answer session for analysts at
To participate via phone, please register in advance at this link - https://register.vevent.com/register/BI6d7513be1a494bbb82b4b8caa62d3b2fopens new window.
Upon registration, telephone participants will receive a confirmation email detailing how to join the conference call, including the dial-in number and a unique registrant ID that can be used to access the call.
A webcast of the 1Q24 earnings call may also 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 (https://humana.gcs-web.com/events-and-presentationsopens new window), approximately two hours following the live webcast.
Footnotes
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 corresponding GAAP measures, provide a comprehensive perspective to more accurately compare and analyze the company's core operating performance over time. Consequently, management uses these non-GAAP (Adjusted) financial measures as consistent and uniform indicators of the company's core business operations from period to period, as well as for planning and decision-making purposes and in determination of incentive compensation. 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 earnings 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 non-GAAP (Adjusted) financial measures.
(a) For the periods covered in this earnings press release, the following items are excluded from the non-GAAP financial measures described above, as applicable:
Amortization associated with identifiable intangibles - Since amortization varies based on the size and timing of acquisition activity, management believes this exclusion provides a more consistent and uniform indicator of performance from period to period. For all periods shown within this earnings release, GAAP measures affected include consolidated pretax results, EPS, and Insurance and CenterWell segments income from operations. The table below discloses respective period amortization expense for each segment.
1Q24
1Q23
Insurance segment
CenterWell segment
Put/call valuation adjustments associated with company's non-consolidating minority interest investments - These amounts are the result of fair value measurements associated with the company's
Transaction and integration costs - The transaction and integration costs primarily relate to the acquisition of Kindred at Home in 2021 and the subsequent divestiture of Gentiva (formerly Kindred) Hospice in 2022. For 1Q23, GAAP measures affected include consolidated pretax results, EPS, and the consolidated operating cost ratio.
Change in fair market value of publicly-traded equity securities - These gains and losses are a result of market and economic conditions that are unrelated to the company's core business operations. For 1Q23, GAAP measures affected include consolidated pretax results, EPS, and consolidated revenues (specifically investment income).
Impact of exit of employer group commercial medical products business - Prior period segment financial information has been recast to exclude the impact of the exit of the employer group commercial medical products business as announced by Humana on
Value creation initiatives - These charges relate to the company's ongoing initiative to drive additional value for the enterprise through cost saving, productivity initiatives, and value creation from previous investments, and primarily consist of asset impairment and severance charges. For 1Q24, GAAP measures affected in this release include consolidated pretax results, EPS, and the consolidated operating cost ratio.
Cumulative net tax impact of non-GAAP adjustments - This adjustment represents the cumulative net impact of the corresponding tax benefit or expense related to the aforementioned items excluded from the applicable GAAP measures. For all periods presented in this earnings release, EPS is the sole GAAP measure affected.
In addition to the reconciliations shown on pages 1 and 2 of this release, the following are reconciliations of GAAP to Adjusted (non-GAAP) measures described above and disclosed within this earnings release:
Revenues
Revenues - CONSOLIDATED
(in millions)
1Q24
1Q23
GAAP
Change in fair market value of publicly-traded equity securities
-
(1
)
Impact of exit of employer group commercial medical products business
(279
)
(1,089
)
Adjusted (non-GAAP)
Revenues - INSURANCE SEGMENT
(in millions)
1Q24
1Q23
GAAP
Impact of exit of employer group commercial medical products business
(279
)
(1,089
)
Adjusted (non-GAAP)
Benefit Ratio
Benefit ratio - CONSOLIDATED
1Q24
1Q23
GAAP
88.9
%
85.5
%
Impact of exit of employer group commercial medical products business
-
%
0.4
%
Adjusted (non-GAAP)
88.9
%
85.9
%
Benefit ratio - INSURANCE SEGMENT
1Q24
1Q23
GAAP
89.3
%
86.1
%
Impact of exit of employer group commercial medical products business
0.1
%
0.3
%
Adjusted (non-GAAP)
89.4
%
86.4
%
Operating Cost Ratio
Operating cost ratio - CONSOLIDATED
1Q24
1Q23
GAAP
10.4
%
11.2
%
Impact of exit of employer group commercial medical products business
(0.1
)%
(0.3
)%
Value creation initiatives
(0.1
)%
-
%
Adjusted (non-GAAP)
10.2
%
10.9
%
Operating cost ratio - INSURANCE SEGMENT
1Q24
1Q23
GAAP
8.3
%
9.4
%
Impact of exit of employer group commercial medical products business
(0.1
)%
(0.4
)%
Adjusted (non-GAAP)
8.2
%
9.0
%
Income from Operations
Income from operations - INSURANCE SEGMENT
1Q24
1Q23
GAAP
Amortization associated with identifiable intangibles
Impact of exit of employer group commercial medical products business
1
(81
)
Adjusted (non-GAAP)
(b) Generally, when the first day of a month falls on a weekend or holiday, with the exception ofJanuary 1 (New Year's Day ), the company receives its monthly Medicare premium payment from CMS on the last business day of the previous month. On a GAAP basis, this can result in certain quarterly cash flows from operations including more or less than three monthly payments. Consequently, when this occurs, the company reports Adjusted cash flows from operations to reflect three payments in each quarter to match the related expenses.
Net cash from operating activities
(in millions)
1Q24
1Q23
GAAP
Timing of premium payment from CMS
-
(6,649
)
Adjusted (non-GAAP)
(c) The CenterWell segment Adjusted income from operations includes an adjustment to add back depreciation and amortization expense to the segment's GAAP income from operations since such an adjustment is commonly utilized for valuation purposes within the healthcare delivery industry.
Income from operations - CENTERWELL SEGMENT
(in millions)
1Q24
1Q23
GAAP
Depreciation and amortization expense
53
49
Adjusted (non-GAAP)
(d) FY 2024 projected Adjusted results exclude the future impact of items that cannot be estimated at this time.
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,
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
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, including its Medicare initiatives, which are of particular importance given the concentration of the company's revenues in these products, state-based contract strategy, the growth of its CenterWell business, and its integrated care delivery model, the company's business may be materially adversely affected. 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, or the third-party service providers on which it relies, 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, contain such attacks when they occur, 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 plans or retrospective recovery by CMS of previously paid premiums as a result of the final rule related to the risk adjustment data validation audit methodology published by CMS on
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.
Volatility or disruption in the securities and credit markets may significantly and adversely affect the value of our investment portfolio and the investment income that we derive from this portfolio.
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
Form 10-K for the year ended
About Humana
Humana Investor Relations
(502) 580-2652
e-mail: LStamper@humana.com opens new window
(317) 753-0345
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