Humana (HUM) Q2 2024 earnings summary

Executive summary

• Second quarter 2024 results exceeded expectations, driven by strong Medicare Advantage (MA) and Medicaid growth, higher member risk scores, favorable claims development, and lower administrative expenses, though higher inpatient costs and elevated Medicare Advantage medical cost trends weighed on results.

• Net income attributable to shareholders was $679 million ($5.62 per diluted share) for Q2 2024, down from $959 million ($7.66 per share) in Q2 2023, with year-to-date GAAP EPS at $11.74 and Adjusted EPS at $14.19.

• Full-year 2024 Adjusted EPS guidance is reaffirmed at approximately $16.00, while GAAP EPS guidance was revised to approximately $12.81, reflecting ongoing inpatient cost pressures and value creation initiative charges.

• Strategic focus remains on operating discipline, multi-year planning, leveraging automation and technology, and digital innovation to drive cost efficiencies and sustainable earnings.

• The company is phasing out its Employer Group Commercial Medical Products business over 18–24 months, resulting in significant membership declines.

Financial highlights

• Q2 2024 consolidated revenues were $29.54 billion, up 10.4% year-over-year, with first half revenues at $59.2 billion; premiums revenue rose 10.4% to $28.1 billion, driven by higher Medicare premiums and membership growth.

• Adjusted EPS for Q2 2024 was $6.96, surpassing internal and consensus estimates, though down from $8.94 in Q2 2023.

• Medicare Advantage membership growth forecast was raised by 75,000 to 225,000, or 4.2% for the year, with Medicaid membership on track for a 250,000 increase.

• Benefit ratio for Q2 2024 increased to 89.0% from 86.3% a year ago, while the operating cost ratio improved to 10.8% from 11.8%.

• Pharmacy volumes are in line with plan, with cost-to-fill improvements, especially in specialty pharmacy; CenterWell and home business saw strong patient and admission growth.

Outlook and guidance

• Full-year 2024 Adjusted EPS guidance is reaffirmed at approximately $16.00, with benefit ratio guidance at about 90%, prudently assuming higher inpatient costs persist.

• 2025 outlook expects Adjusted EPS growth and margin expansion, with a target to return to a 3% normalized margin in Medicare Advantage by 2027, despite anticipated declines in individual MA membership due to plan and county exits.

• Management remains confident in 2025 bid assumptions and will provide formal 2025 guidance on the fourth quarter earnings call.