Humana (HUM) Q3 2024 earnings summary

Executive summary

• Q3 2024 results exceeded expectations, with strong individual Medicare Advantage (MA) membership growth and robust CenterWell Primary Care performance; full-year individual MA membership growth guidance increased to 265,000, or 5% year-over-year.

• Adjusted EPS for Q3 2024 was $4.16, with full-year 2024 Adjusted EPS guidance raised to at least $16.00; GAAP EPS for Q3 was $3.98, and YTD GAAP EPS was $15.72, both down year-over-year.

• Net income for Q3 2024 was $480 million, down from $832 million in Q3 2023, impacted by valuation adjustments, value creation charges, and a $90 million litigation settlement.

• Investments are being made in Stars, growth, admin cost efficiency, and medical cost management, balancing near-term earnings with long-term value.

• The company is finalizing its exit from the Employer Group Commercial Medical Products business by the first half of 2025.

Financial highlights

• Q3 2024 consolidated revenues rose to $29.4 billion, up 11.3% year-over-year; nine-month revenues reached $88.5 billion.

• Q3 2024 premiums revenue increased 11.4% to $28.0 billion; benefit ratio increased to 89.9% from 86.6% in Q3 2023, driven by elevated MA and state-based contract medical cost trends.

• Operating cost ratio improved to 11.5% in Q3 2024 from 12.5% in Q3 2023; investment income grew 11.4% to $343 million.

• Adjusted operating cost ratio is expected to decrease by 30 basis points for the year, driven by efficiency initiatives including AI.

• Cash and cash equivalents were $5.1 billion at September 30, 2024, up from $4.7 billion at year-end 2023.

Outlook and guidance

• 2024 Adjusted EPS guidance raised to at least $16.00; GAAP EPS guidance updated to at least $12.89.

• 2025 Adjusted EPS anticipated to be at least in line with 2024, with formal guidance to be provided with Q4 2024 results.

• Individual MA membership projected to decline by a few hundred thousand in 2025 due to plan and county exits.

• 2025 MA product is priced for margin expansion, but investments may keep earnings progression flat year-over-year.

• Management notes a significant decline in 2025 Medicare Advantage Star Ratings, which may negatively impact 2026 quality bonus payments and future revenues.