Humana Reports Fourth Quarter and Year 2001 Results
* Fourth quarter net income of $35.1 million, or $.21 per diluted share, a 32 percent increase over last year's fourth quarter net income. * Full year 2001 net income of $117.2 million, or $.70 per diluted share, a 30 percent increase over 2000.
LOUISVILLE, Ky., Feb 4, 2002 /PRNewswire-FirstCall via COMTEX/ --- Humana Inc. (NYSE: HUM) today reported earnings of $.21 per diluted share for the fourth quarter ended December 31, 2001 versus $.16 per diluted share for the fourth quarter of 2000. Earnings per diluted share for the year ended December 31, 2001 were $.70 compared to $.54 for the prior year.Net income for the fourth quarter of 2001 was $35.1 million compared to net income of $26.5 million for the same period in the prior year, a 32 percent increase. Net income for the year ended December 31, 2001 of $117.2 million compares with $90.1 million in the year ended December 31, 2000, a 30 percent increase. Income before income taxes for the fourth quarter was up 63 percent to $54.9 million versus $33.6 million a year ago. Comparable results for the years ended December 31, 2001 and 2000 were $183.1 million and $114.0 million, respectively, a 61 percent improvement.
"The associates of Humana are dedicated to ensuring we consistently deliver not only quality products and services to our customers, but innovation that adds value both today and in the future for those customers," said Michael B. McCallister, Humana's president and chief executive officer. "We're pleased that our financial results are clearly demonstrating how the commitment to adding value for our customers also can translate into improved value for our shareholders."
Revenue and Membership
Revenue in the fourth quarter was $2.62 billion versus $2.58 billion in the fourth quarter of 2000. Fourth quarter revenues increased sequentially from $2.61 billion in the third quarter of 2001. Total medical membership at December 31, 2001 was 6,435,800 versus 5,298,700 a year ago and 6,428,600 at September 30, 2001.
Fourth quarter premium revenues for the Commercial segment totaled $1.34 billion consistent with the same period in 2000 and an increase over $1.31 billion in the third quarter 2001. Medical membership for the Commercial segment decreased by 16,700 members to 2,893,800 at December 31, 2001 from 2,910,500 at September 30, 2001. Fully insured medical business within the segment averaged premium yields of 10 to 11 percent for the fourth quarter of 2001 compared to 13 to 14 percent for the fourth quarter of 2000 and 11 to 12 percent in the third quarter of 2001. Premium yields for the fourth quarter of 2001 include the effect of the year-over-year comparison to premiums during the fourth quarter of 2000 when significant focal rate increases were implemented, primarily in Colorado and Texas.
Government segment premium revenues totaled $1.21 billion in the fourth quarter of 2001 versus $1.19 billion for the prior year's quarter and $1.23 billion in the third quarter of 2001. The company's Medicare+Choice line averaged premium yields of 10 to 11 percent during the fourth quarter versus 6 to 7 percent in the prior year's quarter and 10 to 11 percent in the third quarter of 2001. Medicare+Choice membership at December 31, 2001 was 393,900 versus 406,100 at September 30, 2001, a decline of 12,200 members. TRICARE premium revenues increased to $405.3 million in the fourth quarter of 2001 versus $221.7 million in the prior year's quarter. TRICARE premium revenues for the third quarter of 2001 approximated $398.7 million. The year over year increase in TRICARE premium revenues is primarily attributable to the company's acquisition of the TRICARE regions 2 and 5 business on May 31, 2001.
Medical and SG&A Expenses and Taxes
The company's medical expense ratio (medical expenses as a percent of premium revenues) for the fourth quarter, was 82.9 percent versus a ratio of 83.7 percent for the same period in 2000 and a ratio of 83.3 percent in the third quarter of 2001.
Medical cost trends for the commercial fully insured medical line of business were in the 10 to 12 percent range for the fourth quarter of 2001. Medicare+Choice medical cost trends for the fourth quarter 2001 ranged from 5 to 7 percent.
An increase in the percentage of revenues from administrative services fees resulted in a sequential increase of 50 basis points in the company's selling, general and administrative ("SG&A") expense ratio (SG&A expenses as a percent of premiums and administrative services fees) to 15.9 percent. This compares to 15.4 percent in the third quarter of 2001 and a ratio of 15.0 percent in the year-ago quarter.
The company's effective tax rate of 36 percent for the fourth quarter of 2001 is unchanged from the first three quarters of 2001 and compares to 21 percent for each of the 2000 quarters. The lower effective tax rate for 2000 related primarily to the disposition of the company's workers' compensation business.
Days in claims payable
Days in claims payable for the fourth quarter of 2001 of 47.4 includes the effects of the timing of payments made to the company's pharmacy benefits management vendor and adjustments related to the TRICARE regions 2 and 5 acquisition in May 2001. Excluding the impact of those items during the quarter, days in claims payable were slightly improved sequentially.
Cash flows
Excluding the timing of the receipt of the Medicare premium payment from the Centers for Medicare and Medicaid Services (CMS), cash flows provided by operations totaled $100.2 million in the fourth quarter of 2001 and $165.8 million for the year ended December 31, 2001 compared to $45.4 million in the fourth quarter 2000 and $87.2 million for the year ended December 31, 2000.
Guidance
The company continues to anticipate diluted earnings per share of $1.15 to $1.19 for 2002, including $.31 per share from the implementation of the new goodwill accounting rules.
Commercial segment medical membership (fully-insured and ASO) for the first quarter of 2002 is now expected to increase by 55,000 to 75,000 members.
"Our sales efforts, service levels and pricing discipline are working together to deliver our innovative products to an expanding customer base, resulting in improved financial performance," said James H. Bloem, senior vice president and chief financial officer.
Conference Call
Humana will host a conference call, as well as a virtual slide presentation, at 9:00 a.m. EST today to discuss its financial results for the quarter and earnings guidance.
All parties interested in the audio only portion of the conference call are invited to dial 888-625-7430. No password is required. The company suggests participants dial in approximately ten minutes in advance of the call.
A live virtual presentation (audio with slides) will be available and may be accessed via Humana's Investor Relations page at www.humana.com. The company suggests web participants sign on approximately 15 minutes in advance of the call. The company also suggests web participants visit the site well in advance of the call to run a system test and to download any free software needed to view the presentation.
For those unable to participate in the live event, the virtual presentation archive will be available in the Presentations section of the Investor Relations page at www.humana.com, approximately two hours following the live web cast. An audio recording of the conference call will be available in the Audio Archives located on the Investor Relations page at www.humana.com approximately two hours after the live call.
This news release contains forward-looking statements. The forward-looking statements made in this news release are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements may be significantly impacted by certain risks and uncertainties described in the following documents, as filed by Humana with the Securities and Exchange Commission:
* Form 10-K for the year ended December 31, 2000;
* Form 10-Qs for the quarters ended March 31, 2001, June 30, 2001, and
September 30, 2001.
Summary of operating results for the three months ended December 31:
2001 2000
Revenues $2,622,716,000 $2,577,691,000
Income before income taxes $54,856,000 $33,602,000
Net income $35,108,000 $26,546,000
Basic earnings per common share $.21 $.16
Diluted earnings per common share $.21 $.16
Medical expense ratio 82.9% 83.7%
Summary of operating results for the year ended December 31:
2001 2000
Revenues $10,194,886,000 $10,595,950,000
Income before income taxes $183,080,000 $113,990,000
Net income $117,171,000 $90,052,000
Basic earnings per common share $.71 $.54
Diluted earnings per common share $.70 $.54
Medical expense ratio 83.3% 84.5%
Humana Inc., headquartered in Louisville, Kentucky, is one of the nation's
largest publicly traded health benefits companies, with approximately 6.4
million medical members located primarily in 18 states and Puerto Rico. Humana
offers coordinated health insurance coverage and related services -- through
traditional and Internet based plans -- to employer groups and
government-sponsored plans.
More information regarding Humana is available via the Internet at www.humana.com, including on-line:
* Copies of annual report to stockholders, Form 10-K, Form 10-Qs, and
proxy statement;
* Copy of most recent investor presentation;
* Copies of quarterly earnings press releases;
* Audio archive of the most recent earnings release conference call;
* Calendar of events (includes upcoming earnings conference call dates,
related conference call access number, and planned participation in
investor conferences).
Humana Inc.
In thousands
December 31, Percent
Ending Medical Membership 2001 2000 Difference Change
Commercial:
Fully insured 2,301.3 2,545.8 (244.5) (9.6)
ASO 592.5 612.8 (20.3) (3.3)
Total Commercial 2,893.8 3,158.6 (264.8) (8.4)
Government:
Medicare+Choice 393.9 494.2 (100.3) (20.3)
Medicaid 490.8 575.6 (84.8) (14.7)
TRICARE 1,714.6 1,070.3 644.3 60.2
TRICARE ASO 942.7 - 942.7 100.0
Total Government 3,542.0 2,140.1 1,401.9 65.5
Total ending medical membership 6,435.8 5,298.7 1,137.1 21.5
December 31, Percent
Ending Specialty Membership 2001 2000 Difference Change
Commercial:
Dental 1,690.7 1,665.9 24.8 1.5
Group life 546.1 646.9 (100.8) (15.6)
Short-term disability 25.2 32.0 (6.8) (21.3)
Total ending specialty membership 2,262.0 2,344.8 (82.8) (3.5)
Three months ended Year ended
December 31, December 31,
Premiums 2001 2000 2001 2000
Commercial:
Fully insured medical $1,258,530 $1,271,422 $4,941,888 $5,234,340
Specialty 78,174 73,117 304,714 291,315
Medicare supplement - - - 29,262
Total Commercial 1,336,704 1,344,539 5,246,602 5,554,917
Government:
Medicare+Choice 718,987 817,908 2,909,478 3,286,351
Medicaid 83,431 145,923 441,324 660,988
TRICARE 405,264 221,667 1,341,557 892,375
Total Government 1,207,682 1,185,498 4,692,359 4,839,714
Total premiums $2,544,386 $2,530,037 $9,938,961 $10,394,631
Average Medical Membership
Commercial:
Fully insured 2,307.4 2,571.9 2,348.5 2,795.9
ASO 588.4 624.8 563.5 648.4
Medicare supplement - - - 40.9
Total Commercial 2,895.8 3,196.7 2,912.0 3,485.2
Government:
Medicare+Choice 397.1 500.3 414.8 511.2
Medicaid 327.6 578.2 450.9 619.1
TRICARE 1,714.6 1,070.3 1,448.4 1,061.1
TRICARE ASO 942.7 - 607.0 -
Total Government 3,382.0 2,148.8 2,921.1 2,191.4
Total average medical
membership 6,277.8 5,345.5 5,833.1 5,676.6
Humana Inc.
Dollars in thousands, except per share results
Three months ended Year ended
December 31, December 31,
Consolidated Statements
of Operations 2001 2000 2001 2000
Revenues:
Premiums $2,544,386 $2,530,037 $9,938,961 $10,394,631
Administrative
services fees 49,317 19,334 137,090 86,298
Investment and other
income 29,013 28,320 118,835 115,021
Total revenues 2,622,716 2,577,691 10,194,886 10,595,950
Operating expenses:
Medical 2,108,187 2,118,225 8,279,844 8,781,998
Selling, general and
administrative 412,469 381,543 1,545,129 1,524,799
Depreciation 24,302 22,129 92,929 84,361
Goodwill amortization 13,949 12,444 55,065 51,934
Other intangible
amortization 4,119 2,967 13,537 10,253
Total operating
expenses 2,563,026 2,537,308 9,986,504 10,453,345
Income from operations 59,690 40,383 208,382 142,605
Interest expense 4,834 6,781 25,302 28,615
Income before income
taxes 54,856 33,602 183,080 113,990
Provision for income
taxes 19,748 7,056 65,909 23,938
Net income $35,108 $26,546 $117,171 $90,052
Basic earnings per
common share $0.21 $0.16 $0.71 $0.54
Diluted earnings per
common share $0.21 $0.16 $0.70 $0.54
Shares used in basic
earnings per common
share computation (000) 164,020 164,026 164,071 166,224
Shares used in diluted
earnings per common
share computation (000) 167,396 166,445 167,308 166,932
Medical expense ratio 82.9% 83.7% 83.3% 84.5%
Selling, general and
administrative expense
ratio 15.9% 15.0% 15.3% 14.5%
EBITDA * $102,060 $77,923 $369,913 $289,153
* EBITDA is defined as earnings (including investment and other income)
before interest expense, income taxes, depreciation and
amortization.
Humana Inc.
Dollars in thousands, except per share results
December 31, September 30, December 31,
Consolidated Balance Sheets 2001 2001 2000
Assets
Current assets:
Cash and cash equivalents $651,420 $591,833 $657,562
Investment securities 1,389,596 1,391,654 1,408,522
Premium receivable, net 322,064 282,334 205,260
Deferred income taxes 64,221 37,077 67,205
Other 195,637 190,900 195,517
Total current assets 2,622,938 2,493,798 2,534,066
Property and equipment, net 461,761 453,443 434,620
Other assets:
Long-term investment
securities 280,320 274,470 240,064
Goodwill 776,874 793,115 789,541
Deferred income taxes 36,582 82,900 102,767
Other 225,163 246,019 205,920
Total other assets 1,318,939 1,396,504 1,338,292
Total assets $4,403,638 $4,343,745 $4,306,978
Liabilities and Stockholders' Equity
Current liabilities:
Medical and other expenses
payable $1,086,386 $1,130,146 $1,181,027
Trade accounts payable and accrued
expenses 479,140 437,926 428,556
Book overdraft 152,757 140,934 148,563
Unearned premium revenues 325,040 282,946 333,305
Short-term debt 263,856 271,120 599,952
Total current liabilities 2,307,179 2,263,072 2,691,403
Debt 315,489 317,537 -
Professional liability and other
obligations 273,021 299,237 255,154
Total liabilities 2,895,689 2,879,846 2,946,557
Commitments and contingencies
Stockholders' equity:
Preferred stock - - -
Common stock 28,451 28,446 28,450
Capital in excess of par value 922,437 921,728 922,653
Retained earnings 578,122 543,014 460,951
Accumulated other comprehensive
income (loss) 11,670 6,466 (8,509)
Unearned restricted stock
compensation (17,882) (20,988) (29,177)
Treasury stock, at cost (14,849) (14,767) (13,947)
Total stockholders' equity 1,507,949 1,463,899 1,360,421
Total liabilities and stockholders'
equity $4,403,638 $4,343,745 $4,306,978
Humana Inc.
Dollars in thousands
Three months ended Year ended
December 31, December 31,
Consolidated Statements of
Cash Flows 2001 2000 2001 2000
Cash flows from operating
activities
Net income $35,108 $26,546 $117,171 $90,052
Adjustments to reconcile
net income to net
cash provided by operating
activities:
Depreciation and
amortization 42,370 37,540 161,531 146,548
Provision for deferred
income taxes 15,816 1,254 56,104 19,287
Payment for government
audit settlement - - (8,000) (14,526)
Changes in operating
assets and liabilities
excluding effects
of acquisitions
and divestitures:
Premiums receivable (35,052) 2,399 (18,797) 9,933
Other assets (3,651) 4,261 8,184 (20,234)
Medical and other
expenses payable (23,632) (50,664) (179,539) (195,891)
Workers' compensation
run-out claims
reduction - - - (18,064)
Other liabilities 17,220 11,341 27,456 36,866
Unearned premium
revenues 42,094 243,226 (13,397) (16,050)
Other (1,153) 2,967 (1,755) 2,483
Net cash provided by
operating activities 89,120 278,870 148,958 40,404
Timing of Medicare+Choice
premium payment from CMS 11,049 (233,444) 16,815 16,689
Workers' compensation run-
out claims reduction - - - 30,064
Pro forma net cash
provided by operating
activities 100,169 45,426 165,773 87,157
Cash flows from investing
activities
Acquisitions, net of cash
and cash equivalents
acquired 3,341 (703) (29,359) (12,910)
Divestitures, net of cash
and cash equivalents
disposed 420 (3,250) 1,470 28,517
Purchases of property and
equipment (32,798) (35,724) (114,971) (135,067)
Proceeds from sale of
property and equipment - 7,343 - 21,163
Purchases of marketable
securities (514,806) (461,362) (1,874,482) (1,205,129)
Proceeds from maturities
of marketable securities 204,871 177,676 626,369 543,062
Proceeds from sales of
marketable securities 307,646 321,995 1,272,166 582,339
Net cash (used in)
provided by investing
activities (31,326) 5,975 (118,807) (178,025)
Cash flows from financing
activities
Revolving credit agreement
(repayments) borrowings (270,000) 520,000 (520,000) 520,000
Net commercial paper
conduit borrowings 263,000 - 263,000 -
Net commercial paper
repayments - (529,794) (79,952) (606,261)
Proceeds from issuance of
senior notes - - 299,277 -
Debt issue costs (3,876) - (7,116) -
Change in book overdraft 11,823 19,781 4,193 (66,618)
Common stock repurchases - (82) (1,867) (26,431)
Other 846 (1,068) 6,172 (3,794)
Net cash provided by (used
in) financing activities 1,793 8,837 (36,293) (183,104)
Increase/(decrease) in
cash and cash equivalents 59,587 293,682 (6,142) (320,725)
Cash and cash equivalents
at beginning of period 591,833 363,880 657,562 978,287
Cash and cash equivalents
at end of period $651,420 $657,562 $651,420 $657,562
SOURCE Humana Inc.
CONTACT: Regina Nethery, Investor Relations, +1-502-580-3644, or
Rnethery@humana.com, or Tom Noland, Corporate Communications, +1-502-580-3674,
or Tnoland@humana.com, both of Humana Inc.