UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 1-5975
HUMANA INC.
(Exact name of registrant as specified in its charter)
Delaware 61-0647538
(State or other jurisdiction (I.R.S. Employer
of incorporation organization) Identification No.)
500 West Main Street, Louisville, Kentucky 40202
(Address of principal executive offices) (Zip Code)
(502) 580-1000
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange
Act of 1934 during the preceding 12 months, and (2) has been subject to
such filing requirements for the past 90 days.
YES X NO
_______ _______
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Outstanding at
Class of Common Stock November 8, 1995
_____________________ ________________
$.16 2/3 par value 161,888,113 shares
1 of 19
HUMANA INC.
F0RM 10-Q
September 30, 1995
Page of
Form 10-Q
_________
Part I: Financial Information
_____________________________
Item 1. Financial Statements
Condensed Consolidated Statement of Income for
the quarters and nine months ended September
30, 1995 and 1994 3
Condensed Consolidated Balance Sheet at
September 30, 1995 and December 31, 1994 4
Condensed Consolidated Statement of Cash
Flows for the nine months ended September
30, 1995 and 1994 5
Notes to Condensed Consolidated
Financial Statements 6-7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8-15
Part II: Other Information
___________________________
Items 1 to 6 16-17
Exhibits
_______
Ratio of Earnings to Fixed Charges 18
Financial Data Schedule 19
2
HUMANA INC.
CONDENSED CONSOLIDATED STATEMENT OF INCOME
For the quarters and nine months ended
September 30, 1995 and 1994
Unaudited
(Dollars in millions except per share results)
Quarter Nine months
_________________ _________________
1995 1994 1995 1994 (a)
____ ____ ____ ____
Revenues:
Premiums $ 1,072 $ 906 $ 3,145 $ 2,656
Interest 20 17 58 45
Other income 2 3 9 11
Total revenues 1,094 926 3,212 2,712
Operating expenses:
Medical costs 885 736 2,571 2,175
Selling, general and
administrative 126 111 376 324
Depreciation and
amortization 16 13 46 37
Unusual charge 18
Total operating
expenses 1,027 860 2,993 2,554
Income from operations 67 66 219 158
Interest expense
(recovery) 2 1 6 (26)
Income before income
taxes 65 65 213 184
Provision for
income taxes 22 23 72 56
Net income $ 43 $ 42 $ 141 $ 128
Earnings per common share $ .27 $ .27 $ .87 $ .80
Shares used in earnings
per common share
computation (000) 162,334 161,053 162,210 160,790
(a) Results for the nine months ended September 30, 1994, include the
favorable effect of a settlement of tax disputes with the
Internal Revenue Service partially offset by the write-down of a
non-operational asset.
See accompanying notes.
3
HUMANA INC.
CONDENSED CONSOLIDATED BALANCE SHEET
Unaudited
(Dollars in millions except per share amounts)
September 30, December 31,
1995 1994
_____________ ____________
Assets
Current assets:
Cash and cash equivalents $ 622 $ 272
Marketable securities 323 609
Premiums receivable, less
allowance for loss of $22 -
September 30, 1995 and $20 -
December 31, 1994 88 74
Deferred income taxes 41 45
Other 69 38
Total current assets 1,143 1,038
Property and equipment, net 319 317
Long-term marketable securities 469 322
Cost in excess of net tangible
assets acquired 158 155
Deferred income taxes 46 56
Other 77 69
Total assets $ 2,212 $ 1,957
Liabilities and Common Stockholders' Equity
Current liabilities:
Medical costs payable $ 552 $ 527
Trade accounts payable and
accrued expenses 167 233
Unearned premium revenues 116
Income taxes payable 59 56
Total current liabilities 894 816
Professional liability and other
obligations 94 83
Total liabilities 988 899
Contingencies
Common stockholders' equity:
Common stock, $.16 2/3 cents par;
authorized 300,000,000 shares;
issued and outstanding
161,860,802 shares - September 30, 1995
and 161,330,064 shares - December 31,
1994 27 27
Other 1,197 1,031
Total common stockholders' equity 1,224 1,058
Total liabilities and
common stockholders' equity $ 2,212 $ 1,957
See accompanying notes.
4
HUMANA INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
For the nine months ended September 30, 1995 and 1994
Unaudited
(Dollars in millions)
1995 1994
____ ____
Cash flows from operating activities:
Net income $ 141 $ 128
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 46 37
Deferred income taxes 2 57
Unusual charge 18
Changes in operating assets and
liabilities 68 111
Other 2
Net cash provided by operating activities 257 353
Cash flows from investing activities:
Purchase and disposition of property and
equipment, net (36) (16)
Acquisition of health plan assets (3) (37)
Change in marketable securities 128 (209)
Net cash provided by (used in)
investing activities 89 (262)
Cash flows from financing activities:
Other 4 3
Net cash provided by financing
activities 4 3
Increase in cash and cash equivalents 350 94
Cash and cash equivalents at beginning
of period 272 372
Cash and cash equivalents at end of period $ 622 $ 466
Interest payments (refunds), net $ 3 $ (20)
Income tax payments, net $ 63 $ 1
See accompanying notes.
5
HUMANA INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Unaudited
(A) Basis of Presentation
The accompanying financial statements are presented in accordance with
the requirements of Form 10-Q and consequently do not include all of the
disclosures normally required by generally accepted accounting
principles or those normally made in an annual report on Form 10-K.
Accordingly, for further information, the reader of this Form 10-Q may
wish to refer to the Form 10-K of Humana Inc. (the "Company") for the
year ended December 31, 1994.
The financial information has been prepared in accordance with the
Company's customary accounting practices and has not been audited. In
the opinion of management, the information presented reflects all
adjustments necessary for a fair statement of interim results. All such
adjustments are of a normal and recurring nature.
(B) Contingencies
The Company provides medical services to Medicare risk members under
contracts with the Health Care Financing Administration ("HCFA") that
are renewed for a one-year term each December 31 unless terminated 90
days prior thereto. The loss of these contracts or significant changes
in the Medicare program as a result of legislative action, including
reductions in payments or increases in benefits without corresponding
increases in payments, would have a material adverse effect on the
revenues, profitability and business prospects of the Company. Although
pending legislation could significantly lower the actual rate of
increase, the Company's January 1, 1996 average rate of increase as
reported by HCFA (weighted average for the members and markets served)
under these contracts approximates 9 percent. Over the last five years,
annual increases have ranged from as low as 2 percent in January 1991 to
as high as 12 percent in January 1993, with an average of 6 percent.
During 1994, the Company's South Florida health plan (the "Plan") was
denied accreditation by the National Committee for Quality Assurance
("NCQA"). The Company has implemented various corrective action
procedures developed to resolve the issues identified and expects no
material effects on its results of operations, financial position or
cash flows as a result of the NCQA accreditation denial.
Resolution of various loss contingencies, including litigation pending
against the Company in the ordinary course of business, is not expected
to have a material adverse effect on its results of operations,
financial position or cash flows.
6
HUMANA INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
Unaudited
(C) Subsequent Events
On August 16, 1995, the Company began an all cash tender offer to
acquire all of the outstanding common stock of EMPHESYS Financial Group,
Inc. ("EMPHESYS"). On October 11, 1995, as a result of all conditions
of the tender offer being met, including obtaining all necessary
regulatory approvals and the attainment by EMPHESYS of certain specified
financial and operational targets, the tender offer was closed and all
shares tendered (16,890,756 or 99 percent of EMPHESYS shares
outstanding) were acquired. Under Delaware law, the remaining
stockholders are entitled to receive the same merger consideration as
those who tendered their shares.
The aggregate purchase price of approximately $650 million was funded by
the Company through available cash and bank borrowings. The bank
borrowings, which totalled approximately $250 million, were pursuant to
a credit agreement dated as of September 26, 1995, among the Company,
Chemical Bank, as agent, and several other banks (the "Credit
Agreement"). The Credit Agreement, which expires September 25, 2000,
provides for a $600 million revolving line of credit at terms generally
more favorable than those existing under the prior agreement.
On October 19, 1995, a wholly owned subsidiary of the Company entered
into a stock purchase agreement to acquire certain operating
subsidiaries of Coastal Physician Group, Inc. ("Coastal") for
approximately $50 million which is to be funded with available cash.
The subsidiaries to be acquired operate 47 primary care centers, which
serve approximately 75,000 Commercial and Medicare risk members of the
Company, in South Florida and Tampa. The transaction, which is subject
to regulatory approvals, is expected to close in the fourth quarter of
1995.
7
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Humana Inc. ("Humana" or the "Company") offers managed health care
products which integrate management with the delivery of health care
services through a network of providers who share financial risk or who
have incentives to deliver quality, cost-effective medical services.
These products are marketed primarily through health maintenance
organizations ("HMOs") and preferred provider organizations ("PPOs")
that encourage or require the use of contracting providers. HMOs and
PPOs also control health care costs by various means including the use
of utilization controls such as pre-admission approval for hospital
inpatient services and pre-authorization of outpatient surgical
procedures.
The Company's HMO and PPO products are marketed primarily to employer
and other groups ("Commercial") as well as Medicaid and Medicare-
eligible individuals. The products marketed to Medicare-eligible
individuals are either HMO products that provide managed care services
which include all Medicare benefits and, in certain circumstances,
additional managed care services that are not included in Medicare
benefits ("Medicare risk") or indemnity insurance policies that
supplement Medicare benefits ("Medicare supplement").
On October 11, 1995, the Company completed its acquisition of EMPHESYS
Financial Group, Inc. ("EMPHESYS"), a commercial group health insurer,
for a total purchase price of approximately $650 million. EMPHESYS is a
leading provider of a broad range of managed care medical products to
small businesses, and also provides group life, dental and disability
income insurance. EMPHESYS' revenues for the twelve months ended
June 30, 1995, were approximately $1.6 billion. For the six months
ended June 30, 1995, EMPHESYS' medical loss ratio was 75.1 percent and
its administrative cost ratio was 21.7 percent. For the same six-month
period, Humana's medical loss ratio was 81.3 percent and its
administrative cost ratio was 13.5 percent. EMPHESYS' medical loss and
administrative cost ratios were different from Humana's because of
differences in the nature of each entity's products, customer base
and the manner in which its products and services are distributed to
those customers. At September 30, 1995, EMPHESYS had 1.3 million
medical members.
Results of Operations
_____________________
Third Quarter Ended September 30, 1995 and 1994
The Company's premium revenues increased 18.4 percent to $1.1 billion
for the quarter ended September 30, 1995, compared to $906 million for
the same period in 1994. This growth was due to same-store Commercial
membership gains, a 4.6 percent increase in Medicare risk premium rates
and the December 1994 acquisition of CareNetwork, Inc. Premium revenues
associated with this acquisition totaled approximately $41 million for
the quarter ended September 30, 1995. Partially reducing these
increases was the effect of a 2.0 percent reduction of Commercial
premium rates. Including EMPHESYS, management anticipates that
Commercial premium rates will continue to decrease at approximately the
same rate for the remainder of 1995.
8
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations, continued
Membership in the Company's Commercial products increased 60,900 or 3.5
percent during the third quarter ended September 30, 1995. On a same-
store basis, Commercial membership for the quarter ended September 30,
1995, increased 59,000 compared to 22,700 for the same period in 1994.
The Company also added 7,700 Medicare risk members. Medicare supplement
membership declined 2,800 members during the quarter ended September 30,
1995. For all of 1995, management anticipates same-store Commercial
product membership gains approximating 19 to 20 percent and Medicare
risk product membership gains approximating 7 percent. It is
anticipated that EMPHESYS' medical and specialty product membership will
remain flat for the remainder of 1995.
The medical loss ratio for the quarter ended September 30, 1995, was
82.6 percent compared to 81.3 percent for the same period in 1994. The
increase was due primarily to an increase in non-hospital and outpatient
services costs associated with the Company's Commercial product.
Although the medical loss ratio for the third quarter of 1995 increased
over the third quarter of 1994, medical costs per member per month
during the third quarter of 1995 were flat with those of the second
quarter of 1995. Patient days per thousand members for the quarter
ended September 30, 1995, decreased 2.7 percent from the same period a
year ago to 252 days per thousand for the Commercial product and
decreased 1.0 percent to 1,327 days per thousand for the Medicare risk
product. With the inclusion of EMPHESYS, the medical loss ratio of the
Company for the fourth quarter of 1995 is expected to be below that of
Humana prior to the EMPHESYS acquisition.
The administrative cost ratio was 13.3 percent and 13.7 percent for the
quarters ended September 30, 1995 and 1994, respectively. The reduction
is the result of increased premium revenues as well as efforts to
control administrative cost spending. With the inclusion of EMPHESYS,
the administrative cost ratio of the Company is expected to be above
that of Humana prior to the EMPHESYS acquisition.
Interest income totaled $20 million and $17 million for the quarters
ended September 30, 1995 and 1994, respectively. The increase is
attributable to higher yields earned in the third quarter of 1995
compared to the same period in 1994, as well as increased levels of
cash, cash equivalents and marketable securities. The tax equivalent
yield on invested assets approximated 8.1 percent and 6.6 percent for
the quarters ended September 30, 1995 and 1994, respectively.
The Company's income before income taxes totaled $65 million for the
quarters ended September 30, 1995 and 1994, respectively. Net income
increased to $43 million or $.27 per share from $42 million or $.27 per
share for the quarters ended September 30, 1995 and 1994, respectively.
9
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations, continued
Management anticipates that the inclusion of EMPHESYS will be
accretive to the fourth quarter of 1995 net income and earnings per
share (after consideration of depreciation, amortization and interest
costs associated with the acquisition).
Nine months Ended September 30, 1995 and 1994
The Company's premium revenues increased 18.4 percent to $3.1 billion
for the nine months ended September 30, 1995, compared to $2.7 billion
for the same period in 1994. This growth was due to same-store
membership gains, a 5.1 percent increase in Medicare risk premium rates
and the 1994 acquisitions of CareNetwork, Inc. and Group Health
Association. Premium revenues associated with these acquisitions
totaled approximately $257 million for the nine months ended September
30, 1995, compared to approximately $116 million for the nine months
ended September 30, 1994. Partially reducing these increases was the
effect of a 1.3 percent reduction of Commercial premium rates.
Including EMPHESYS, management anticipates that Commercial premium rates
will continue to decrease at approximately the same rate for the
remainder of 1995.
Membership in the Company's Commercial products increased 251,900 or
16.5 percent during the nine months ended September 30, 1995. On a
same-store basis, Commercial membership for the nine months ended
September 30, 1995, increased 239,900 compared to 78,100 for the same
period in 1994. The Company also added 16,900 Medicare risk members and
169,300 members in its administrative services product. Medicare
supplement membership declined 12,600 members during the nine months
ended September 30, 1995. For all of 1995, management anticipates same-
store Commercial product membership gains approximating 19 to 20 percent
and Medicare risk product membership gains approximating 7 percent. It
is anticipated that EMPHESYS' medical and specialty product membership
will remain flat for the remainder of 1995.
The medical loss ratio for the nine months ended September 30, 1995 was
81.8 percent compared to 81.9 percent for the same period in 1994. The
improvement was the result of decreased hospital utilization in both the
Commercial and Medicare risk products and Medicare risk premium rate
increases which exceeded the rate of growth of physician and other
medical services costs during the first quarter of 1995. During both
the second and third quarters of 1995, utilization of non-hospital and
outpatient services associated with the Company's Commercial product
have increased when compared to the same quarters of 1994 and the first
quarter of 1995. However, medical costs per member per month during the
third quarter of 1995 were flat with those of the second quarter of
1995. With the inclusion of EMPHESYS, the medical loss ratio of the
Company for the fourth quarter of 1995 is expected to be below that of
Humana prior to the EMPHESYS acquisition.
10
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations, continued
The administrative cost ratio was 13.5 percent and 13.6 percent for the
nine months ended September 30, 1995 and 1994, respectively. The
reduction is the result of increased premium revenues as well as efforts
to control administrative cost spending. With the inclusion of
EMPHESYS, the administrative cost ratio of the Company is expected to be
above that of Humana prior to the acquisition of EMPHESYS.
Interest income totaled $58 million and $45 million for the nine months
ended September 30, 1995 and 1994, respectively. The increase is
attributable to higher yields earned in the nine months of 1995 compared
to the same period in 1994, as well as increased levels of cash, cash
equivalents and marketable securities. The tax equivalent yield on
invested assets approximated 7.8 percent and 6.4 percent for the nine
months ended September 30, 1995 and 1994, respectively.
The Company's income before income taxes totaled $213 million for the
nine months ended September 30, 1995, compared to $173 million for the
nine months ended September 30, 1994. Income before income taxes for
1994 excludes $29 million related to the favorable settlement of tax
disputes with the Internal Revenue Service ( the "IRS") and an $18
million charge related to the write-down of a nonoperational asset.
Excluding the effects of the nonrecurring items described above, net
income increased to $141 million or $.87 per share from $111 million or
$.70 per share for the nine months ended September 30, 1995 and 1994,
respectively. Management anticipates that the inclusion of EMPHESYS
will be accretive to the fourth quarter of 1995 net income and earnings
per share (after consideration of depreciation, amortization, and
interest costs associated with the acquisition).
Liquidity
_________
Cash provided by the Company's operations totaled $257 million for the
nine months ended September 30, 1995, compared to $353 million for the
nine months ended September 30, 1994. The timing of the receipt of
Medicare risk premiums increased cash provided by operations by $116
million and $5 million for the nine months ended September 30, 1995 and
1994, respectively. Excluding the effect of the timing of Medicare risk
premiums, cash provided by operations was $141 million and $348 million
for the nine months ended September 30, 1995 and 1994, respectively.
The decrease in cash provided by operations was primarily attributable
to the timing of payments for medical costs and other payables as well
as inclusion in 1994 of the settlement of tax disputes with the IRS.
In connection with the acquisition of EMPHESYS, the Company borrowed
approximately $250 million pursuant to a $600 million credit agreement
consummated in September 1995.
11
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations, continued
On October 19, 1995, a wholly owned subsidiary of the Company agreed to
acquire 47 primary care centers in South Florida and Tampa for
approximately $50 million, which is to be funded with available cash.
The transaction, which is subject to certain regulatory approvals, is
expected to close in the fourth quarter of 1995.
The Company's subsidiaries operate in states which require certain
levels of equity and regulate the payment of dividends to the parent
company. As a result, the Company's ability to use operating
subsidiaries' cash flows is restricted to the extent that the
subsidiaries' ability to pay dividends to its parent company requires
regulatory approval.
Management anticipates that borrowings under the line of credit as well
as $57 million of debt assumed in the EMPHESYS acquisition will be
repaid from future operating cash flows of the Company. In addition,
management believes that existing working capital, remaining funds
available under the Credit Agreement and future operating cash flows are
sufficient to meet liquidity needs, allow the Company to continue to
pursue acquisition and expansion opportunities and fund capital
requirements.
Capital Resources
_________________
The Company's ongoing capital expenditures relate primarily to the
addition or expansion of medical care facilities used by either employed
or affiliated physicians as well as administrative facilities and
related computer information systems necessary for activities such as
claims processing, billing and collections, medical utilization review
and customer service.
Excluding acquisitions, planned capital spending in 1995 will
approximate $45 to $50 million compared to $39 million in 1994.
Management believes that its capital spending program is adequate to
expand, improve and equip its existing business.
12
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations, continued
1995 1994
____ ____
Commercial members enrolled at:
March 31 1,664,600 1,381,100
June 30 1,719,300 1,386,100
September 30 1,780,200 1,408,800
December 31 1,528,300
Medicare risk members enrolled at:
March 31 292,500 276,600
June 30 296,600 281,200
September 30 304,300 286,400
December 31 287,400
Medicare supplement members enrolled at:
March 31 126,100 144,100
June 30 121,900 139,000
September 30 119,100 134,700
December 31 131,700
Administrative services members enrolled at:
March 31 228,400 75,500
June 30 264,400 81,300
September 30 262,800 79,100
December 31 93,500
Total members enrolled at:
March 31 2,311,600 1,877,300
June 30 2,402,200 1,887,600
September 30 2,466,400 1,909,000
December 31 2,040,900
13
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations, continued
Supplemental Consolidated Statement of Quarterly Income
(Dollars in millions except per share results)
1995
_____________________________________
First Second Third Total
_____________________________________
Revenues:
Premiums:
Commercial $ 614 $ 633 $ 652 $ 1,899
Medicare risk 384 389 395 1,168
Medicare supplement 27 26 25 78
Total premiums 1,025 1,048 1,072 3,145
Interest 19 19 20 58
Other income 4 3 2 9
Total revenues 1,048 1,070 1,094 3,212
Operating expenses:
Medical costs 826 860 885 2,571
Selling, general and
administrative 125 125 126 376
Depreciation and amortization 15 15 16 46
Total operating expenses 966 1,000 1,027 2,993
Income from operations 82 70 67 219
Interest expense 2 2 2 6
Income before income taxes 80 68 65 213
Provision for income taxes 27 23 22 72
Net income $ 53 $ 45 $ 43 $ 141
Earnings per common share $ .32 $ .28 $ .27 $ .87
Medical loss ratio 80.6% 82.1% 82.6% 81.8%
Administrative cost ratio 13.7% 13.4% 13.3% 13.5%
14
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations, continued
Supplemental Consolidated Statement of Quarterly Income
(Dollars in millions except per share results)
1994
_________________________________________
First Second Third Fourth Total
_____ ______ _____ ______ _____
Revenues:
Premiums:
Commercial $ 480 $ 518 $ 521 $ 537 $ 2,056
Medicare risk 342 350 357 357 1,406
Medicare supplement 31 29 28 26 114
Total premiums 853 897 906 920 3,576
Interest 13 15 17 17 62
Other income 3 5 3 5 16
Total revenues 869 917 926 942 3,654
Operating expenses:
Medical costs 703 736 736 743 2,918
Selling, general and
administrative 102 111 111 112 436
Depreciation and
amortization 12 12 13 13 50
Total operating expenses 817 859 860 868 3,404
Income from operations 52 58 66 74 250
Interest expense 1 1 1 1 4
Income before income taxes 51 57 65 73 246
Provision for income taxes 19 20 23 25 87
Net income $ 32 $ 37 $ 42 $ 48 $ 159
Earnings per common share $ .20 $ .23 $ .27 $ .30 $ 1.00
Medical loss ratio 82.4% 81.9% 81.3% 80.8% 81.6%
Administrative cost ratio 13.4% 13.6% 13.7% 13.6% 13.6%
Note: Second quarter and total results exclude the favorable effect of a
settlement of tax disputes with the Internal Revenue Service
partially offset by the write-down of a nonoperational asset.
15
Part II: Other Information
Items 1 - 4:
None
Item 5: Other Information
See Note (C) of Notes To Condensed Consolidated Financial
Statements regarding the acquisition of EMPHESYS Financial
Group, Inc.
Item 6: Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 12 - Statement re: Computation of Ratio of
Earnings to Fixed Charges
Exhibit 27 - Financial Data Schedule
(b) On October 25, 1995, the Company filed a report on Form
8-K regarding the acquisition of EMPHESYS Financial Group,
Inc. which was consummated on October 11, 1995.
16
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HUMANA INC.
Date: November 13, 1995 /s/ James E. Murray
James E. Murray
Vice President and Controller
(Principal Accounting Officer)
Date: November 13, 1995 /s/ Arthur P. Hipwell
Arthur P. Hipwell
Senior Vice President and
General Counsel
17
Exhibit 12
HUMANA INC.
RATIO OF EARNINGS TO FIXED CHARGES
For the quarters and nine months ended September 30, 1995 and
1994
Quarter Ended Nine Months Ended
September 30, September 30,
_________________________________________
1995 1994 1995 1994
____ ____ ____ ____
Earnings:
Income
before
income
taxes $ 65 $ 65 $ 213 $ 184
Fixed
charges 3 3 10 7
$ 68 $ 68 $ 223 $ 191
Fixed charges:
Interest
charged to
expense $ 2 $ 1 $ 6 $ 3
One-third
of rent
expense 1 2 4 4
$ 3 $ 3 $ 10 $ 7
Ratio of
earnings
to fixed
charges 21.7 27.2 22.9 26.1
For the purpose of determining earnings in the calculation of the
ratio of earnings to fixed charges (the "Ratio"), earnings have
been increased by the provision for income taxes and fixed
charges. Fixed charges consist of interest expense on borrowings
and one-third (the proportion deemed representative of the
interest portion) of rent expense. For purposes of calculating
the Ratio, 1994 interest expense excludes the impact of a
nonrecurring item related to the second quarter favorable
settlement of tax disputes with the Internal Revenue Service.
18
5
