Humana Inc. (NYSE:HUM) is a leading health and well-being company committed to putting health first for teammates, customers, and the company. Through Humana insurance services and CenterWell health care services, Humana makes it easier for the millions of people it serves to achieve their best health by delivering the care and service they need, when they need it.
Business Overview
Humana's strong performance in recent years is a testament to its strategic focus and execution. In 2023, the company reported annual revenue of $106.4 billion, a testament to its scale and market presence. Net income for the year reached $2.49 billion, showcasing Humana's ability to generate robust profitability. The company's annual operating cash flow of $3.98 billion and free cash flow of $2.98 billion further highlight its financial strength and liquidity.
Financials
In the first quarter of 2024, Humana continued its solid performance, reporting revenue of $29.6 billion, up 10.7% from the prior-year period. Net income for the quarter was $739 million, or $6.11 per diluted share. The company's operating cash flow for the quarter was $423 million, while free cash flow was $209 million.
Segment Performance
Humana's two reportable segments, Insurance and CenterWell, reflect the company's diversified business model. The Insurance segment, which includes Medicare benefits, Medicaid, and commercial insurance products, generated $28.5 billion in revenue in the first quarter of 2024, up 10.6% year-over-year. The CenterWell segment, which encompasses Humana's pharmacy, primary care, and home solutions operations, contributed $787 million in services revenue during the quarter, a 4.0% increase compared to the same period in 2023.
Medicare Advantage Business
The company's Medicare Advantage business continues to be a key driver of growth, with individual Medicare Advantage membership increasing 7.7% year-over-year to 5.55 million as of March 31, 2024. Humana's focus on value-based care and its integrated care delivery model have been instrumental in attracting and retaining Medicare Advantage members, with approximately 69% of individual Medicare Advantage members in value-based relationships as of the end of the first quarter.
Other Business Lines
Humana's state-based Medicaid business, which accounted for 7% of total premiums and services revenue in the first quarter of 2024, has also been a source of growth, with the company recently winning new contracts in Florida, Texas, and Virginia. The company's Military services business, primarily its TRICARE T2017 East Region contract, contributed 1% of total premiums and services revenue during the quarter.
CenterWell Segment
The company's CenterWell segment has been a key focus area, with the segment's services revenue increasing 4.0% year-over-year in the first quarter. Humana's strategic partnerships, such as its collaboration with Welsh, Carson, Anderson & Stowe to develop and operate senior-focused, payor-agnostic primary care centers, have been instrumental in expanding its healthcare services capabilities.
Liquidity
Humana's financial position remains strong, with a debt-to-capitalization ratio of 45.1% as of March 31, 2024. The company's investment portfolio, consisting primarily of high-quality fixed-maturity securities, had a weighted average S&P credit rating of AA- at the end of the first quarter. Humana's liquidity position is also robust, with $5.9 billion in cash and cash equivalents as of March 31, 2024.
Outlook
Looking ahead, Humana has reaffirmed its full-year 2024 adjusted EPS guidance of approximately $16 per share, while increasing its individual Medicare Advantage membership growth outlook by 50,000 to 150,000 net new members. The company has acknowledged the dynamic and challenging industry environment, but remains confident in the strong core fundamentals and growth outlook for the Medicare Advantage market.
Humana's long-term margin target of at least 3% for its individual Medicare Advantage business reflects the company's commitment to pricing discipline and margin recovery. The company is actively evaluating plan-level pricing decisions and the expected impact on membership, while also exploring opportunities to drive productivity and support adjusted EPS growth in 2025 and beyond.
Recent Developments
The company's expansion of its partnership with Google Cloud to further modernize its cloud infrastructure and leverage cutting-edge AI capabilities is another strategic initiative aimed at accelerating innovation in healthcare and improving member experiences.
Conclusion
Overall, Humana's diversified business model, focus on value-based care, and strategic investments in healthcare services and technology position the company well to navigate the dynamic industry landscape and deliver long-term value for its shareholders.