Humana Reports First Quarter 2021 Financial Results; Reaffirms Full Year 2021 Adjusted EPS Financial Guidance

Rhea-AI Summary

Humana Inc. reported first-quarter 2021 results showing significant growth, with consolidated pretax income reaching $1,040 million compared to $717 million in Q1 2020. Diluted EPS rose to $6.39 from $3.56 year-over-year. Adjusted pretax income was $1,255 million, a notable increase from $1,035 million. The company's revenues increased to $20,668 million from $18,935 million in Q1 2020. Humana revised its GAAP EPS guidance for FY 2021 to $19.62-$20.12, down from $20.82-$21.32 but maintained its adjusted EPS guidance at $21.25-$21.75.

Positive

• Consolidated pretax income increased to $1,040 million in Q1 2021 from $717 million in Q1 2020.
• Diluted EPS rose to $6.39, up from $3.56 year-over-year.
• Total revenues grew to $20,668 million in Q1 2021, compared to $18,935 million in Q1 2020.
• Maintained FY 2021 Adjusted EPS guidance of $21.25-$21.75.

Negative

• Revised GAAP EPS guidance for FY 2021 down to $19.62-$20.12 from $20.82-$21.32.

Humana Inc. (NYSE: HUM) today reported consolidated pretax income and diluted earnings per common share for the quarter ended March 31, 2021 (1Q21) versus the quarter ended March 31, 2020 (1Q20) as noted in the tables below.

Consolidated income before income taxes and equity in earnings (pretax income) In millions	1Q21 (a)		1Q20 (b)
Generally Accepted Accounting Principles (GAAP)	$1,040		$717
Amortization associated with identifiable intangibles	15		21
Put/call valuation adjustments associated with company's non-consolidating minority interest investments	115		297
Change in fair market value of publicly-traded equity securities	85		—
Adjusted (non-GAAP)	$1,255		$1,035
Diluted earnings per common share (EPS)	1Q21 (a)		1Q20 (b)
GAAP	$6.39		$3.56
Amortization associated with identifiable intangibles	0.08		0.12
Put/call valuation adjustments associated with company's non-consolidating minority interest investments	0.69		1.72
Change in fair market value of publicly-traded equity securities	0.51		—
Adjusted (non-GAAP)	$7.67		$5.40

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’re pleased with the strong start of the year, with solid results across the company, and meaningful progress against our strategy, all while we continue to navigate the pandemic,” said Bruce D. Broussard, Humana’s President and Chief Executive Officer. “In partnership with federal, state and local governments, and with retailers and providers, we’re working to educate our members about the COVID-19 vaccines, ensuring individuals have access to a vaccine, especially those in underserved communities. Our full range of clinical capabilities, which will be even broader now with our recently announced acquisition of Kindred at Home, uniquely position us to help improve the health of our country’s most vulnerable populations. The home is highly effective not only in making access to care more convenient for people, but it also allows us to understand their environment and help them address other barriers that limit their ability to improve their health.”

Summary of Quarterly Results

The company's year-over-year changes in GAAP and Adjusted pretax results in 1Q21 were favorably impacted by solid performance across each of the company's segments, fueled by strong individual Medicare Advantage and state-based contract membership growth and improved profitability in the Group and Specialty and Healthcare Services segments.

The year-over-year changes in GAAP and Adjusted EPS for 1Q21 reflected the same factors impacting GAAP and Adjusted consolidated pretax income comparisons as well as the beneficial tax impact of the termination of the health insurance industry fee (HIF) in 2021 and a lower number of shares used to compute EPS, primarily reflective of share repurchases.

Humana’s 1Q21 GAAP results of operations were further impacted by the put/call valuation adjustments associated with the company's non-consolidating minority interest investments, along with the change in the fair market value of publicly-traded equity securities (primarily Oak Street Health, Inc.). The impact of these changes have been excluded in the company’s Adjusted (non-GAAP) consolidated results of operations as detailed in the tables above.

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, below is a summary of key consolidated and segment statistics comparing 1Q21 to 1Q20.

Humana Inc. Summary of Quarterly Results (dollars in millions, except per share amounts)	1Q21 (a)		1Q20 (b)
Consolidated results:
Revenues - GAAP	$20,668		$18,935
Revenues - Adjusted	$20,753		$18,935
Pretax income - GAAP	$1,040		$717
Pretax income - Adjusted	$1,255		$1,035
Diluted EPS - GAAP	$6.39		$3.56
Diluted EPS - Adjusted	$7.67		$5.40
Benefits expense ratio - GAAP	85.9%		85.1%
Operating cost ratio - GAAP	9.7%		11.3%
Operating cash flows - GAAP	($837)		$474
Parent company cash and short term investments	$547		$2,353
Debt-to-total capitalization	33.9%		39.2%
Retail segment results:
Revenues - GAAP	$18,648		$16,762
Benefits expense ratio - GAAP	87.7%		86.6%
Operating cost ratio - GAAP	7.8%		9.2%
Segment earnings - GAAP	$794		$685
Segment earnings - Adjusted	$798		$689
Group and Specialty segment results:
Revenues - GAAP	$1,737		$1,865
Benefits expense ratio - GAAP	74.7%		79.1%
Operating cost ratio - GAAP	22.9%		23.1%
Segment earnings - GAAP	$174		$105
Segment earnings - Adjusted	$175		$106
Healthcare Services segment results:
Revenues - GAAP	$7,198		$7,085
Operating cost ratio - GAAP	96.0%		96.0%
Segment earnings - GAAP	$269		$250
Adjusted earnings before interest, taxes, depreciation and amortization (Adjusted EBITDA) (c)	$329		$319

2021 Earnings Guidance

Humana is revising its GAAP EPS guidance range for the year ending December 31, 2021 (FY 2021) to $19.62 to $20.12 from the previous range of $20.82 to $21.32, reflecting the 1Q21 impact of the company's non-consolidating minority interest put/call valuation adjustments and the change in the fair market value of publicly-traded equity securities held by the company. While continuing to acknowledge the heightened uncertainty surrounding the ongoing pandemic, Humana is maintaining its FY 2021 Adjusted EPS guidance range of $21.25 to $21.75. GAAP and Adjusted results for FY 2020 are also shown for comparison.

Diluted earnings per common share	FY 2021 Guidance (d)		FY 2020 (e)
GAAP	$19.62 to $20.12		$25.31
Amortization of identifiable intangibles	~$0.43		0.51
Put/call valuation adjustments associated with company's non-consolidating minority interest investments	0.69		0.60
Change in fair market value of publicly-traded equity securities	0.51		(4.32)
Receipt of commercial risk corridor receivables previously written off, net	—		(3.35)
Adjusted (non-GAAP) – FY 2021 projected; FY 2020 reported	$21.25 to $21.75		$18.75

Detailed Press Release

Humana’s full earnings press release including the stat

FAQ

What were Humana Inc.'s earnings for Q1 2021?

Humana Inc. reported Q1 2021 earnings with a diluted EPS of $6.39 and consolidated pretax income of $1,040 million.

How did Humana Inc.'s revenue perform in Q1 2021?

Humana's total revenues for Q1 2021 were $20,668 million, an increase from $18,935 million in Q1 2020.

What is the revised GAAP EPS guidance for Humana Inc. for FY 2021?

Humana revised its GAAP EPS guidance for FY 2021 to a range of $19.62 to $20.12.

What is Humana Inc.'s adjusted EPS guidance for FY 2021?

Humana is maintaining its Adjusted EPS guidance for FY 2021 at $21.25 to $21.75.