Humana Reports Third Quarter and First Nine Months of 2001 Results
LOUISVILLE, Ky., Oct. 29 /PRNewswire/ -- Humana Inc. (NYSE: HUM) today reported earnings of $.18 per diluted share for the third quarter ended September 30, 2001 versus $.14 per diluted share for the third quarter of 2000. Earnings per diluted share for the first nine months were $.49 compared to $.38 a year ago.
Net income for the third quarter of 2001 was $30 million compared to net income of $23 million for the same period in the prior year, a 30 percent increase. Net income for the first nine months of $82 million compares with $63 million in the same period a year ago, also a 30 percent increase. Income before income taxes for the quarter was up 62 percent to $47 million versus $29 million a year ago. Comparable results for the nine months ended September 30, 2001 and 2000 were $128 million and $80 million, respectively, a 60 percent improvement.
"Humana's strategy continues to drive operational improvements as well as progressive consumer-centrism," said Michael B. McCallister, Humana's president and chief executive officer. "The consumer-centric approach to our business, fueled by comprehensive e-business initiatives, allows us to strengthen our relationships with members, providers and employers, increasing members' involvement in health care decision-making."
Revenue and Membership
Revenue in the third quarter was $2.61 billion versus $2.64 billion in the third quarter of 2000. Third quarter revenues improved 5 percent sequentially from $2.50 billion in the second quarter of 2001. Total medical membership at September 30, 2001 was 6,428,600 versus 5,447,600 a year ago and 6,463,000 at June 30, 2001.
Humana exited numerous non-core markets and products in the latter part of 2000, accounting for the year over year decline in third quarter revenues. Those markets and products were deemed non-core because they either lacked potential for profitability or did not fit into the company's strategic focus, or both.
Third quarter premium revenues for the Commercial segment totaled $1.31 billion compared to $1.37 billion for the same period in 2000 and $1.29 billion in the second quarter 2001. Medical membership for the Commercial segment increased by 19,100 members to 2,910,500 at September 30, 2001 from 2,891,400 at June 30, 2001. Fully insured medical business within the segment averaged premium yields of 11.9 percent for the third quarter of 2001 compared to 13.5 percent for the third quarter of 2000 and 12.7 percent in the second quarter of 2001. Premium yields for the third quarter of 2001 include the negative impact of the year-over-year comparison to higher premiums during the third quarter of 2000 due to significant focal rate increases in Colorado and Texas implemented at that time.
Government segment premium revenues totaled $1.23 billion in the third quarter of 2001 versus $1.22 billion for the prior year's quarter and $1.15 billion in the second quarter of 2001. The company's Medicare+Choice line averaged premium yields of 10.2 percent during the third quarter versus 5.5 percent in the prior year's quarter and 8.8 percent in the second quarter of 2001. Medicare+Choice membership at September 30, 2001 was 406,100 versus 418,000 at June 30, 2001, a decline of 11,900 members. TRICARE premium revenues increased to $399 million in the third quarter versus $238 million in the prior year's quarter. TRICARE premium revenues for the second quarter of 2001 approximated $294 million. The year over year and sequential increases in TRICARE premium revenues are primarily attributable to the company's acquisition of the TRICARE regions 2 and 5 business on May 31, 2001. The company's TRICARE membership of 2,655,400 as of September 30, 2001 was essentially unchanged from June 30, 2001.
Medical and SG&A Expenses and Taxes
The company's medical expense ratio (medical expenses as a percent of premium revenues) for the third quarter was 83.3 percent, versus a ratio of 84.2 percent for the same period in 2000 and a ratio of 83.9 percent in the second quarter of 2001.
Medical cost trends for the commercial fully insured medical line of business were in the 9 to 10 percent range for the third quarter of 2001, unchanged from both the first two quarters of 2001.
Medicare+Choice medical cost trends for the third quarter 2001 ranged from 5 to 7 percent, compared to a 3 to 5 percent trend for the first two quarters of 2001. The favorable effects of the exit from the 45 Medicare+Choice counties combined with the effect of significant benefit reductions, both effective January 1, 2001, were partially offset by a shift in the geographic mix of membership during the most recent quarter.
An increase in the percentage of average non-risk membership resulted in a sequential increase of 60 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 15.4 percent. This compares to 14.8 percent in the second quarter of 2001 and a ratio of 14.7 percent in the year-ago quarter.
The company's effective tax rate of 36 percent for the third quarter of 2001 is unchanged from the first two quarters of 2001 and compares to 21 percent for each of the 2000 quarters. The lower effective tax rate for 2000 related to the disposition of the company's workers' compensation business.
Days in claims payable
Days in claims payable for the third quarter of 49.1 days include the full quarter's impact of the acquisition of the TRICARE regions 2 and 5 business on May 31, 2001. Excluding the impact of that acquisition, days in claims payable for the third quarter of 2001 increased to 46.9 from 46.1 for the second quarter of 2001.
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 $95 million in the third quarter of 2001.
Summary of operating results for the three months ended September 30:
2001 2000
Revenues $ 2,611,000,000 $ 2,635,000,000
Income before income taxes $ 47,000,000 $ 29,000,000
Net income $ 30,000,000 $ 23,000,000
Basic earnings per common share $ .18 $ .14
Diluted earnings per common share $ .18 $ .14
Shares used in basic earnings
per common share computation 164,110,000 165,380,000
Shares used in diluted earnings
per common share computation 166,743,000 165,690,000
Summary of operating results for the nine months ended September 30:
2001 2000
Revenues $ 7,572,000,000 $ 8,019,000,000
Income before income taxes $ 128,000,000 $ 80,000,000
Net income $ 82,000,000 $ 63,000,000
Basic earnings per common share $ .50 $ .38
Diluted earnings per common share $ .49 $ .38
Shares used in basic earnings
per common share computation 164,088,000 166,957,000
Shares used in diluted earnings
per common share computation 166,864,000 167,094,000
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:
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Form 10-K for the year ended December 31, 2000;
* Form 10-Qs for the quarters ended March 31, 2001 and June 30, 2001;
* Form S-3 (No. 333-63384) as amended.
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:
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Copies of annual report to stockholders, Form 10-K, Form 10-Qs, and proxy statement;
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Copy of most recent investor presentation;
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Copies of quarterly earnings press releases;
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Audio archive of the most recent earnings release conference call;
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Calendar of events (includes upcoming earnings conference call dates, related conference call access number, and planned participation in investor conferences).
Humana Inc.
In thousands
September 30, Percent
Ending Medical Membership 2001 2000 Difference Change
Commercial:
Fully insured 2,332.7 2,639.6 (306.9) (11.6)
ASO 577.8 647.3 (69.5) (10.7)
Total Commercial 2,910.5 3,286.9 (376.4) (11.5)
Government:
Medicare+Choice 406.1 513.1 (107.0) (20.9)
Medicaid 456.6 584.4 (127.8) (21.9)
TRICARE 1,712.7 1,063.2 649.5 61.1
TRICARE ASO 942.7 -- 942.7 100.0
Total Government 3,518.1 2,160.7 1,357.4 62.8
Total ending medical membership 6,428.6 5,447.6 981.0 18.0
September 30, Percent
Ending Specialty Membership 2001 2000 Difference Change
Commercial:
Dental 1,676.4 1,675.9 0.5 0.0
Group life 564.2 685.1 (120.9) (17.6)
Short-term disability 27.1 33.5 (6.4) (19.1)
Total ending specialty membership 2,267.7 2,394.5 (126.8) (5.3)
Three months ended Nine months ended
September 30, September 30,
Premiums 2001 2000 2001 2000
Commercial:
Fully insured medical $1,231 $1,294 $3,683 $3,963
Specialty 76 72 227 219
Medicare supplement -- -- -- 29
Total Commercial 1,307 1,366 3,910 4,211
Government:
Medicare+Choice 721 828 2,191 2,468
Medicaid 114 156 358 515
TRICARE 399 238 936 671
Total Government 1,234 1,222 3,485 3,654
Total premiums $2,541 $2,588 $7,395 $7,865
Average Medical Membership
Commercial:
Fully insured 2,318.8 2,724.8 2,362.2 2,870.5
ASO 569.7 661.6 555.3 656.3
Medicare supplement -- -- -- 27.2
Total Commercial 2,888.5 3,386.4 2,917.5 3,554.0
Government:
Medicare+Choice 408.8 517.3 420.6 514.9
Medicaid 464.9 585.1 491.9 632.8
TRICARE 1,714.4 1,063.2 1,359.6 1,058.0
TRICARE ASO 940.5 -- 495.2 --
Total Government 3,528.6 2,165.6 2,767.3 2,205.7
Total average medical membership 6,417.1 5,552.0 5,684.8 5,759.7
Humana Inc.
Dollars in millions, except per share results
Three months ended Nine months ended
September 30, September 30,
Summarized Operating Results 2001 2000 2001 2000
Revenues:
Premiums $ 2,541 $ 2,588 $ 7,395 $ 7,865
Administrative services fees 40 19 87 68
Investment and other income 30 28 90 86
Total revenues 2,611 2,635 7,572 8,019
Operating expenses:
Medical 2,118 2,179 6,172 6,664
Selling, general and administrative 399 382 1,133 1,144
Depreciation 24 23 69 63
Goodwill amortization 13 13 41 40
Other intangible amortization 4 2 9 6
Total operating expenses 2,558 2,599 7,424 7,917
Income from operations 53 36 148 102
Interest expense 6 7 20 22
Income before income taxes 47 29 128 80
Provision for income taxes 17 6 46 17
Net income $ 30 $ 23 $82 $63
Basic earnings per common share $ 0.18 $ 0.14 $ 0.50 $ 0.38
Diluted earnings per common share $ 0.18 $ 0.14 $ 0.49 $ 0.38
Shares used in basic earnings per
common share computation (000) 164,110 165,380 164,088 166,957
Shares used in diluted earnings per
common share computation (000) 166,743 165,690 166,864 167,094
Medical expense ratio 83.3% 84.2% 83.5% 84.7%
Selling, general and administrative
expense ratio 15.4% 14.7% 15.1% 14.4%
Historical Operating Results 1Q00 2Q00 3Q00 4Q00
Revenues:
Premiums $ 2,611 $ 2,666 $ 2,588 $ 2,530
Administrative services fees 28 21 19 19
Investment and other income 30 28 28 29
Total revenues 2,669 2,715 2,635 2,578
Operating expenses:
Medical 2,220 2,265 2,179 2,118
Selling, general and administrative 380 382 382 381
Depreciation 19 21 23 22
Goodwill amortization 13 14 13 14
Other intangible amortization 2 2 2 2
Total operating expenses 2,634 2,684 2,599 2,537
Income from operations 35 31 36 41
Interest expense 8 7 7 7
Income before income taxes 27 24 29 34
Provision for income taxes 6 5 6 7
Net income $ 21 $ 19 $ 23 $ 27
Basic earnings per common share $ 0.13 $ 0.11 $ 0.14 $ 0.16
Diluted earnings per common share $ 0.13 $ 0.11 $ 0.14 $ 0.16
Shares used in basic earnings per
common share computation (000) 167,752 167,740 165,380 164,026
Shares used in diluted earnings per
common share computation (000) 167,852 167,740 165,690 166,445
Medical expense ratio 85.0% 85.0% 84.2% 83.7%
Selling, general and administrative
expense ratio 14.4% 14.2% 14.7% 15.0%
Historical Operating Results 1Q01 2Q01 3Q01
Revenues:
Premiums $ 2,413 $ 2,441 $ 2,541
Administrative services fees 21 26 40
Investment and other income 30 30 30
Total revenues 2,464 2,497 2,611
Operating expenses:
Medical 2,007 2,047 2,118
Selling, general and
administrative 369 365 399
Depreciation 23 22 24
Goodwill amortization 14 14 13
Other intangible amortization 2 3 4
Total operating expenses 2,415 2,451 2,558
Income from operations 49 46 53
Interest expense 7 7 6
Income before income taxes 42 39 47
Provision for income taxes 15 14 17
Net income $ 27 $ 25 $ 30
Basic earnings per common share $ 0.16 $ 0.15 $ 0.18
Diluted earnings per common share $0.16 $ 0.15 $ 0.18
Shares used in basic earnings per
common share computation (000) 164,055 164,099 164,110
Shares used in diluted earnings per
common share computation (000) 167,373 166,475 166,743
Medical expense ratio 83.2% 83.9% 83.3%
Selling, general and administrative
expense ratio 15.2% 14.8% 15.4%
Humana Inc.
Dollars in millions
September 30, December 31,
Financial Position 2001 2000
Assets:
Cash and investments $2,258 $2,307
Property and equipment, net 453 435
Other assets 1,463 1,425
Total assets $4,174 $4,167
Liabilities and equity:
Medical and other expenses payable $1,130 $1,181
Other liabilities 991 1,026
Debt 589 600
Equity 1,464 1,360
Total liabilities and equity $4,174 $4,167
Three months ended Nine months ended
September 30, September 30,
Cash Flows 2001 2000 2001 2000
Cash flows from operating activities
Net income $ 30 $ 23 $ 82 $ 63
Adjustments to reconcile net income
to net
cash provided by (used in)
operating activities:
Depreciation and amortization 41 38 119 109
Provision for deferred income
taxes 14 17 40 18
Payment for government audit
settlement -- -- (8) (15)
Changes in operating assets and
liabilities excluding
effects of acquisitions and
divestitures:
Premiums receivable (14) 47 16 8
Other assets 10 3 12 (13)
Medical and other expenses
payable 9 (126) (156) (145)
Workers' compensation run-out
claims reduction -- -- -- (30)
Other liabilities 24 81 10 27
Unearned premium revenues (30) (307) (55) (259)
Other 3 3 -- (2)
Net cash provided by (used in)
operating activities 87 (221) 60 (239)
Timing of receipt of
Medicare+Choice premium payment
from CMS 8 270 5 251
Workers' compensation run-out
claims reduction -- -- -- 30
Pro forma net cash provided by
operating activities 95 49 65 42
Cash flows from investing activities
Acquisitions, net of cash and cash
equivalents acquired -- (6) (32) (12)
Divestitures, net of cash and cash
equivalents disposed -- (23) -- 32
Purchases of property and
equipment (29) (26) (82) (99)
Proceeds from sale of property and
equipment -- -- -- 14
Purchases of marketable securities (491) (232) (1,359) (744)
Proceeds from maturities of
marketable securities 165 92 421 365
Proceeds from sales of marketable
securities 294 59 965 260
Net cash used in investing
activities (61) (136) (87) (184)
Cash flows from financing activities
Revolving credit agreement
repayments (250) -- (250) --
Net commercial paper repayments (60) (6) (80) (77)
Proceeds from issuance of senior
notes 296 -- 296 --
Change in book overdraft (27) (36) (8) (86)
Common stock repurchases (2) (26) (2) (26)
Other 6 -- 5 (2)
Net cash used in financing
activities (37) (68) (39) (191)
Decrease in cash and cash
equivalents (11) (425) (66) (614)
Cash and cash equivalents at
beginning of period 603 789 658 978
Cash and cash equivalents at end
of period $ 592 $ 364 $ 592 $ 364
SOURCE Humana Inc.