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Humana Reports Third Quarter 2007 Financial Results

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LOUISVILLE, Ky.--(BUSINESS WIRE)--Oct. 29, 2007--Humana Inc. (NYSE: HUM):

    --  EPS for third quarter 2007 of $1.78 including $0.25 per share
        from items not expected to recur in future periods

    --  2007 EPS guidance revised to $4.75 to $4.80 including $0.25
        per share described above

    --  2008 EPS projected to be $5.30 to $5.50

Humana Inc. (NYSE: HUM) today reported financial results for the quarter ended September 30, 2007 (3Q07) including diluted earnings per common share (EPS) of $1.78, significantly above the company's previous guidance for 3Q07 EPS of $1.45 to $1.50. The company earned $0.95 per share for the quarter ended September 30, 2006 (3Q06). The company's 3Q07 EPS included earnings of $0.25 per share(a) that are not anticipated to recur in future periods. The company's 3Q07 performance was also $0.05 per share better than expected due to ongoing improvements in the company's Commercial operations and stand-alone Medicare Prescription Drug Plans (PDPs) that are expected to positively impact fourth quarter 2007 and full-year 2008 results.

The company now estimates EPS for the year ending December 31, 2007 (FY07E) will be in the range of $4.75 to $4.80 versus $2.90 for the year ended December 31, 2006 (FY06). The company also projects its EPS for the year ending December 31, 2008 (FY08E) to be in the range of $5.30 to $5.50, an increase of 10 to 16 percent over FY07E EPS, or 16 to 22 percent(a)(c) versus the non-GAAP EPS for FY07E.

"Strong performance in both our business segments fueled a successful third quarter," said Michael B. McCallister, Humana's president and chief executive officer. "Most importantly, the quarter positioned us well to extend our industry-leading growth in both revenues and earnings through 2008 and beyond."

For the nine months ended September 30, 2007 (YTD07) the company reported $3.48 in EPS compared to $1.98 for the nine months ended September 30, 2006 (YTD06). Results for YTD07 on a non-GAAP basis were $3.23 per diluted share(a)(c). Results for YTD06 included approximately $0.19 per share of venture capital gains that did not recur in YTD07. The year-over-year increase in YTD07 financial results was primarily due to better operating performance in both business segments.

Revenues - 3Q07 consolidated revenues rose 12 percent to $6.32 billion from $5.65 billion in 3Q06, with total premium and administrative services fees up 11 percent compared to the prior year's quarter. This year-over-year increase was primarily driven by higher average Medicare membership versus 3Q06.

YTD07 consolidated revenues rose 20 percent to $18.95 billion from $15.76 billion in YTD06 with total premium and administrative services fees up 20 percent compared to the prior year's period, also primarily driven by higher average enrollment in the company's Medicare plans.

Medical costs - The 3Q07 consolidated medical expense ratio (medical expenses as a percent of premium revenues or MER) of 81.3 percent was 280 basis points lower than the 3Q06 MER of 84.1 percent, the combined result of a 360 basis point decline in the Government Segment MER (including a 150 basis point benefit from favorable prior year claims development(a)) and a 70 basis point decline in the Commercial Segment MER.

The consolidated MER for YTD07 of 83.8 percent was 50 basis points lower than the YTD06 consolidated MER of 84.3 percent, substantially due to the same factors driving the year-over-year improvement in 3Q07.

Selling, general, & administrative (SG&A) expenses - The 3Q07 consolidated SG&A expense ratio (SG&A expenses as a percent of premiums, administrative services fees and other revenue) increased 20 basis points to 13.3 percent for 3Q07 from 13.1 percent in 3Q06. The year-over-year increase was primarily the result of a higher SG&A expense ratio in both of the company's business segments.

The SG&A expense ratio for YTD07 of 13.2 percent was 100 basis points lower than that for YTD06 of 14.2 percent primarily driven by efficiency and productivity gains associated with higher average medical membership year to date.

    Government Segment Results

    Pretax results:

    --  Government Segment pretax earnings were $416.3 million in 3Q07
        compared to $207.0 million in 3Q06. This segment's pretax
        earnings for 3Q07 on a non-GAAP basis were $347.4
        million(a)(c). As expected, the year-over-year improvement in
        segment pretax earnings primarily reflects a more normal MER
        pattern for the Part D benefit for 2007 as well as
        administrative cost efficiency associated with higher average
        Medicare medical membership. The extended enrollment period
        for this benefit during 2006 distorted the claims pattern
        associated with the beneficiaries' progression through the
        Part D benefit stages in the prior year.

    --  For YTD07, pretax earnings for the Government Segment of
        $723.0 million increased by $396.4 million, or 121 percent
        versus YTD06 pretax earnings for the segment of $326.6
        million, primarily reflecting the same factors impacting the
        year-over-year comparison for the third quarter.

    Enrollment:

    --  Medicare Advantage membership grew to 1,138,000 at September
        30, 2007, an increase of 145,000, or 15 percent, from
        September 30, 2006 and less than 1 percent versus June 30,
        2007. Average Medicare Advantage membership for 3Q07 was up 15
        percent compared to that for 3Q06. The company's expanded
        participation in various Medicare products and markets
        combined with the company's increased sales and marketing
        efforts for these programs led to the higher membership level
        year over year.

    --  Membership in the company's stand-alone PDPs totaled 3,459,700
        at September 30, 2007 compared to 3,521,000 at September 30,
        2006 and 3,440,100 at June 30, 2007.

    --  TRICARE membership of 2,857,400 at September 30, 2007 was
        essentially unchanged from both September 30, 2006 and June
        30, 2007.

    --  Medicaid membership of 566,600 at September 30, 2007 increased
        154,000 from September 30, 2006 due primarily to the award of
        a new Puerto Rico regional ASO contract during the fourth
        quarter of 2006, partially offset by eligible Puerto Rico
        Medicaid members choosing to move into the Medicare Advantage
        program. Medicaid membership was essentially unchanged
        compared to the June 30, 2007 total of 567,600.

    Premiums and administrative services fees:

    --  Medicare Advantage premiums of $2.83 billion in 3Q07 increased
        19 percent compared to $2.37 billion in 3Q06, primarily the
        result of higher average membership.

    --  Medicare stand-alone Part D premiums of $890.4 million in 3Q07
        increased 5 percent compared to $851.4 million in 3Q06,
        primarily the result of annual rate increases and changes in
        premiums associated with Part D risk-share accruals.

    --  TRICARE premiums and administrative services fees during 3Q07
        increased $81.0 million to $731.8 million compared to $650.8
        million in 3Q06.

    Medical Expenses:

    --  The Government Segment MER decreased 360 basis points to 81.4
        percent in 3Q07 compared to 85.0 percent in the prior year's
        quarter. This decrease reflects a more normalized MER pattern
        for the Medicare Part D benefit for 2007 as well as the impact
        of favorable prior year claims development. The extended
        enrollment period for this benefit during the prior year
        distorted the claims pattern associated with the
        beneficiaries' progression through the Part D benefit stages
        in 2006.

    --  During 3Q07 the company realized approximately $68.9 million
        in favorable prior year claims development that it does not
        anticipate recurring in future periods, with approximately
        $54.0 million related to Medicare Part D claims and the
        remainder associated with TRICARE claims. The Medicare Part D
        development primarily related to the resolution of first-year
        Part D implementation matters including enrollment
        discrepancies and the related impact on claim estimates. The
        remainder of this favorable prior year claims development
        primarily related to the adjustment of certain TRICARE
        reserves as a result of the settlement of claims payment
        accuracy provisions for prior option periods.

    SG&A Expenses:

    --  The Government Segment's SG&A expense ratio for 3Q07 of 10.2
        percent was 10 basis points higher than that for 3Q06 of 10.1
        percent. This segment's SG&A expense ratio increased 20 basis
        points on a sequential basis as lower SG&A expenses were
        slightly outpaced by adjustments to revenues associated with
        risk adjustment and Part D risk-share accruals.

    Commercial Segment Results

    Pretax results:

    --  Commercial Segment pretax earnings were $62.2 million in 3Q07
        compared to $42.4 million in 3Q06. Commercial Segment
        operating earnings in 3Q07 continue to reflect the company's
        commitment to underwriting discipline and strategic growth in
        select lines of business.

    --  For YTD07, pretax earnings for the Commercial Segment of
        $207.4 million were $13.1 million, or 7 percent higher than
        YTD06 pretax earnings for the segment of $194.3 million
        primarily reflecting the same factors driving year-over-year
        improvement for 3Q07.

    Enrollment:

    --  Commercial Segment medical membership of 3,299,100 at
        September 30, 2007 was essentially unchanged from both
        September 30, 2006 and June 30, 2007.

    --  Membership in strategic areas of commercial growth rose as
        follows during 3Q07 compared to 3Q06: Individual product
        membership increased 28 percent, Smart plans and other
        consumer offerings grew 27 percent, Small Group business
        membership was up 2 percent, and ASO business was 1 percent
        higher than the prior year.

    Premiums and administrative services fees:

    --  Premiums and administrative services fees for the Commercial
        Segment increased 2 percent to $1.61 billion in 3Q07 compared
        to $1.58 billion in the prior year's quarter, primarily due to
        the effect of per-member premium increases being partially
        offset by lower average fully insured group membership.

    --  Commercial Segment medical premiums for fully-insured groups
        increased approximately 6 percent on a per-member basis during
        3Q07 compared to 3Q06.

    Medical Expenses:

    --  In 3Q07, the Commercial Segment MER of 81.0 percent was 70
        basis points lower than the 3Q06 MER of 81.7 percent,
        primarily reflecting an increase in the percentage of
        Individual and Small Group members comprising our fully
        insured book, improving medical cost utilization trends, and
        the company's continued commitment to underwriting discipline.

    SG&A Expenses:

    --  The Commercial Segment SG&A expense ratio of 21.8 percent for
        3Q07 compares to 20.5 percent in 3Q06, primarily the combined
        result of higher average Individual and ASO membership and
        administrative costs associated with increased business for
        the company's mail order pharmacy. Average Individual product
        membership rose 25 percent and average ASO membership
        increased 2 percent versus the prior year's quarter.

    Balance Sheet

    --  Cash and cash equivalents declined $1.14 billion or 31 percent
        sequentially. The early receipt of the July Medicare premium
        payment from the Centers for Medicare and Medicaid Services
        (CMS) during June 2007 resulted in the receipt of only two
        months of premium from CMS during the third quarter of 2007.
        This timing also resulted in a corresponding sequential
        decline in unearned premium revenues during 3Q07.

    --  Unearned revenues of $177.1 million decreased 87 percent from
        the June 30, 2007 balance of $1.36 billion also due to the
        timing of the receipts of Medicare premiums from CMS.

    --  Debt-to-total capitalization at September 30, 2007 was 25.7
        percent, down 40 basis points from June 30, 2007 due primarily
        to higher capitalization associated with 3Q07 earnings.

    --  The company's working capital at September 30, 2007 included
        approximately $721.8 million in net Part D risk-share payables
        to CMS associated with the company's Medicare Advantage and
        stand-alone PDP offerings. Approximately $725.5 million of
        this net liability related to Part D plan offerings for the
        year ended December 31, 2006.

    --  Days in claims payable excluding the impact of Medicare
        stand-alone PDPs were up slightly to 63.4 days at September
        30, 2007 from 62.4 days at June 30, 2007.

    Cash Flows from Operations

Cash flows used in operations for 3Q07 of $637.7 million compared to cash flows used in operations of $391.0 million in 3Q06.

Cash flows from operations
($ in millions)                      3Q07     3Q06    YTD07    YTD06
----------------------------------------------------------------------
Cash flows provided by operations
 in accordance with Generally
 Accepted Accounting Principles
 (GAAP)                            ($637.7) ($391.0) $1,414.1 $1,151.8
----------------------------------------------------------------------
Timing of premium payment from
 CMS(b)                             1,175.3  1,031.8       --       --
----------------------------------------------------------------------
Non-GAAP cash flows provided by
 operations(b)(c)                    $537.6   $640.8 $1,414.1 $1,151.8
----------------------------------------------------------------------

The company also evaluates operating cash flows on a non-GAAP basis(b)(c). Non-GAAP cash flows provided by operations declined to $537.6 million(b)(c) in 3Q07 from $640.8 million(b)(c) in 3Q06 driven primarily by changes in working capital more than offsetting the impact of higher operating earnings.

Footnotes

(a) As described more fully in the "Government Segment Results - Medical Expenses" section of this press release during 3Q07 the company realized pretax earnings of approximately $68.9 million ($0.25 per share) associated with the resolution of favorable claims development in its Government Segment related to prior year issues that are not anticipated to recur in future periods. A reconciliation of GAAP to non-GAAP amounts related to this favorable development and the company's reason for this non-GAAP disclosure are included in the statistical pages of this earnings press release.

(b) When reviewing and analyzing Humana's operating cash flows, company management applies the CMS premium payment in each month to match the corresponding disbursements. To do otherwise distorts meaningful analysis of the company's operating cash flow. Therefore, decisions such as management's forecasting and business plans regarding cash flow use this non-GAAP financial measure.

(c) The company believes that these non-GAAP measures, when presented in conjunction with the comparable GAAP measures, are useful to both management and its investors in analyzing the company's ongoing business and operating performance. Internally, management uses these non-GAAP financial measures as indicators of business performance, as well as for operational planning and decision making purposes. Non-GAAP financial measures should be considered in addition to, but not as a substitute for, or superior to, financial measures prepared in accordance with GAAP.

Conference Call & Virtual Slide Presentation

Humana will host a conference call, as well as a virtual slide presentation, at 9:00 a.m. eastern time today to discuss its financial results for the quarter and the company's expectations for future earnings. A live virtual presentation (audio with slides) 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.

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. For those unable to participate in the live event, the virtual presentation archive may be accessed via the Historical Webcasts & Presentations section of the Investor Relations page at www.humana.com.

Cautionary Statement

This news release contains statements and earnings guidance points that are forward-looking. The forward-looking items herein are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking items may be significantly impacted by certain risks and uncertainties described in the following documents filed by Humana with the Securities and Exchange Commission

        --  Form 10-K for the year ended December, 31, 2006,

        --  Form 10-Qs for the quarters ended March 31, 2007 and June
            30, 2007,

        --  Form 8-Ks filed during 2007.

    About Humana

Humana Inc., headquartered in Louisville, Kentucky, is one of the nation's largest publicly traded health benefits companies, with approximately 11.3 million medical members. Humana offers a diversified portfolio of health insurance products and related services - through traditional and consumer-choice plans - to employer groups, government-sponsored plans, and individuals.

Over its 46-year history, Humana has consistently seized opportunities to meet changing customer needs. Today, the company is a leader in consumer engagement, providing guidance that leads to lower costs and a better health plan experience throughout its diversified customer portfolio.

More information regarding Humana is available to investors via the Investor Relations page of the company's web site at www.humana.com, including copies of:


    --  Annual reports to stockholders;

    --  Securities and Exchange Commission filings;

    --  Most recent investor conference presentations;

    --  Quarterly earnings news releases;

    --  Replay of most recent earnings release conference calls;

    --  Calendar of events (includes upcoming earnings conference call
        dates and times, as well as planned interaction with research
        analysts and institutional investors);

    --  Corporate Governance information.

Humana Inc. - Earnings Guidance Points as of October 29, 2007

(in accordance with      For the year   For the year   Comments
 Generally Accepted       ending         ending
 Accounting Principles)   December 31,   December 31,
                          2007           2008(1)
                                         (1)assumes
                                         closing of
                                         pending KMG
                                         America
                                         ("KMG")
                                         acquisition
                                         in late 2007
----------------------------------------------------------------------
Diluted earnings per     Full year      Full year      2007 EPS
 common share (EPS)       2007: $4.75    2008: $5.30    includes $0.25
                          to $4.80       to $5.50       per share of
                         4Q07: $1.27 to                 earnings that
                          $1.32                         are not
                                                        anticipated to
                                                        recur in 2008
----------------------------------------------------------------------
Revenues                 Consolidated   Consolidated
                          revenues:      revenues: $28
                          Approximately  billion to
                          $25 billion    $30 billion

                         Premiums and   Premiums and
                         ASO fees:      ASO fees:
                         Medicare       Medicare
                          Advantage:     Advantage:
                          Approximately  $13 billion
                          $11 billion;   to $14
                                         billion;
                         Medicare       Medicare
                          stand-alone    stand-alone
                          PDPs:          PDPs:
                          Approximately  Approximately
                          $3.5 billion;  $3.4 billion;
                         TRICARE:       TRICARE: $3.1
                          Approximately  billion to
                          $3 billion;    $3.3 billion;
                         Commercial:    Commercial:    2008 includes
                          Approximately  $7.2 billion   $200 million
                          $6.5 billion   to $7.7        for KMG
                                         billion        premiums &
                                                        fees

                         Investment     Investment     2008 includes
                          income:        income: $360   $20 million
                          Approximately  million to     for KMG
                          $305 million   $380 million   investment
                                                        income

                         Other revenue: Other revenue: Other revenue
                          $150 million   $200 million   primarily
                          to $155        to $250        relates to
                          million        million        revenues
                                                        associated
                                                        with the
                                                        company's mail
                                                        order
                                                        pharmacy;
                                                        related
                                                        administrative
                                                        costs are in
                                                        SG&A expenses







----------------------------------------------------------------------
Ending medical           Medicare       Medicare
 membership (fully-       Advantage: Up  Advantage: Up
 insured and ASO          approximately  200,000 to
 combined)                130,000 from   250,000 from
                          prior year     prior year

                         Medicare       Medicare
                          stand-alone    stand-alone
                          PDPs: 3.4      PDPs: 3.1
                          million to     million to
                          3.5 million    3.2 million

                         TRICARE: No    TRICARE: No
                          material       material
                          change from    change from
                          prior year     prior year

                         Medicaid: No   Medicaid: No
                          material       material
                          change from    change from
                          prior year     prior year

                         Commercial: Up Commercial: Up
                          approximately  approximately
                          50,000 from    50,000 to
                          prior year     75,000 from
                                         prior year
----------------------------------------------------------------------
Medical costs            Total Medicare Total Medicare Medicare
                          products: MER  products: MER  Advantage and
                          of             in the range   stand-alone
                          approximately  of 83% to 84%  PDP combined
                          83%


                         Commercial     Commercial
                          fully-insured  fully-insured
                          groups:        groups:
                          Medical cost   Medical cost
                          trends in the  trends and
                          range of 4.5%  premium
                          to 5.0%;       yields in
                          premium        line with
                          yields in      prior year
                          line with
                          medical cost
                          trends

                         Secular        Secular
                          Commercial     Commercial
                          medical cost   medical cost
                          trend          trend
                          components as  components:
                          follows:       no material
                          inpatient      change from
                          hospital       2007
                          utilization -
                          flat to 1
                          percent;
                          inpatient and
                          outpatient
                          hospital
                          rates - mid
                          to upper
                          single
                          digits;
                          outpatient
                          hospital
                          utilization -
                          low to mid
                          single
                          digits;
                          physician -
                          mid single
                          digits; and
                          pharmacy -
                          high single
                          to low double
                          digits.
----------------------------------------------------------------------
Selling, general &       Consolidated   Consolidated   SG&A expenses
 administrative expenses  SG&A expense   SG&A expense   as a percent
                          ratio of       ratio of       of premiums,
                          13.5% to 14%   13.5% to 14%   administrative
                                                        costs, and
                                                        other revenue
----------------------------------------------------------------------
Depreciation &           Approximately  $215 million
 amortization             $180 million   to $220
                                         million
----------------------------------------------------------------------
Interest expense         Approximately  $85 million to
                          $70 million    $90 million
----------------------------------------------------------------------
Pretax results           Total Medicare Total Medicare Medicare
                          products:      products:      Advantage and
                          Operating      Operating      stand-alone
                          margin of      margin of      PDP combined
                          approximately  approximately
                          5%             5%

                         TRICARE:       TRICARE:
                          Operating      Operating
                          margin of      margin of
                          approximately  2.5% to 3.5%
                          4%

                         Commercial     Commercial     Net investment
                          Segment:       Segment:       income is
                          Pretax         Pretax         included in
                          earnings of    earnings of    segment-level
                          $240 million   $280 million   totals only
                          to $250        to $300
                          million        million
----------------------------------------------------------------------
Cash flows from          $1.2 billion   $1.5 billion
 operations               to $1.4        to $1.8
                          billion        billion
----------------------------------------------------------------------
Capital expenditures     Approximately  Approximately
                          $220 million   $225 million
----------------------------------------------------------------------
Effective tax rate       36% to 37%     36% to 37%
----------------------------------------------------------------------
Shares used in computing Approximately  Approximately
 full-year EPS            170 million    173 million
----------------------------------------------------------------------
                                 S-1
                             Humana Inc.
                        Statistical Schedules
                                 And
                      Supplementary Information
                        3Q07 Earnings Release

                                       S-2
   Humana Inc.
   Statistical Schedules and Supplementary Information
   3Q07 Earnings Release

   Contents

   Page     Description
   -------- ----------------------------------------------------------

   S-3-4    Consolidated Statements of Income
   S-5      Consolidated Balance Sheets
   S-6-7    Consolidated Statements of Cash Flows
   S-8      Key Income Statement Ratios and Segment Operating Results
   S-9      Membership Detail
   S-10-11  Premiums and Administrative Services Fees Detail
   S-12     Percentage of Ending Membership under Capitation
             Arrangements
   S-13-15  Medical Claims Reserves
   S-16     GAAP to Non-GAAP Reconciliation
   S-17     Footnotes
                                 S-3
Humana Inc.
Consolidated Statements of Income
In thousands, except per common share results

                             ---------------------
                              Three Months Ended
                                 September 30,
                             ---------------------

                             ----------             Dollar  Percentage
                                2007       2006     Change    Change
                             --------------------- -------------------
Revenues:
 Premiums                    $6,092,841 $5,486,368 $606,473      11.1%
 Administrative services
  fees                          101,531     86,332   15,199      17.6%
 Investment income               82,362     62,474   19,888      31.8%
 Other revenue                   42,850     14,610   28,240     193.3%
                             --------------------- --------
     Total revenues           6,319,584  5,649,784  669,800      11.9%
                             --------------------- --------
Operating expenses:
 Medical                      4,953,862  4,616,002  337,860       7.3%
 Selling, general and
  administrative                829,023    729,722   99,301      13.6%
 Depreciation                    37,771     32,562    5,209      16.0%
 Other intangible
  amortization                    4,479      5,115    (636)     -12.4%
                             --------------------- --------
     Total operating
      expenses                5,825,135  5,383,401  441,734       8.2%
                             --------------------- --------
Income from operations          494,449    266,383  228,066      85.6%
Interest expense                 15,947     17,009  (1,062)      -6.2%
                             --------------------- --------
Income before income taxes      478,502    249,374  229,128      91.9%
Provision for income taxes      176,124     90,176   85,948      95.3%
                             --------------------- --------
Net income                     $302,378   $159,198 $143,180      89.9%
                             ===================== ========

Basic earnings per common
 share                            $1.81      $0.97    $0.84      86.6%
Diluted earnings per common
 share                            $1.78      $0.95    $0.83      87.4%

Shares used in computing
 basic earnings per common
 share                          167,188    164,387
Shares used in computing
 diluted earnings per common
 share                          170,051    168,376
                             ----------
                                 S-4
Humana Inc.
Consolidated Statements of Income
In thousands, except per common share results

                         -----------------------
                           Nine Months Ended
                              September 30,
                         -----------------------

                         -----------               Dollar   Percentage
                            2007        2006       Change     Change
                         ----------------------- ---------------------
Revenues:
 Premiums                $18,320,654 $15,272,329 $3,048,325      20.0%
 Administrative services
  fees                       294,488     248,721     45,767      18.4%
 Investment income           227,941     211,943     15,998       7.5%
 Other revenue               108,111      28,325     79,786     281.7%
                         ----------------------- ----------
     Total revenues       18,951,194  15,761,318  3,189,876      20.2%
                         ----------------------- ----------
Operating expenses:
 Medical                  15,358,280  12,879,429  2,478,851      19.2%
 Selling, general and
  administrative           2,476,092   2,204,471    271,621      12.3%
 Depreciation                122,100      94,027     28,073      29.9%
 Other intangible
  amortization                14,478      15,152      (674)      -4.4%
                         ----------------------- ----------
     Total operating
      expenses            17,970,950  15,193,079  2,777,871      18.3%
                         ----------------------- ----------
Income from operations       980,244     568,239    412,005      72.5%
Interest expense              49,931      47,335      2,596       5.5%
                         ----------------------- ----------
Income before income
 taxes                       930,313     520,904    409,409      78.6%
Provision for income
 taxes                       339,848     188,502    151,346      80.3%
                         ----------------------- ----------
Net income                  $590,465    $332,402   $258,063      77.6%
                         ======================= ==========

Basic earnings per
 common share                  $3.55       $2.03      $1.52      74.9%
Diluted earnings per
 common share                  $3.48       $1.98      $1.50      75.8%

Shares used in computing
 basic earnings per
 common share                166,538     163,736
Shares used in computing
 diluted earnings per
 common share                169,535     167,746
                         -----------

                                 S-5
Humana Inc.
Consolidated Balance Sheets
Dollars in thousands, except share amounts


                                September 30,  June 30,   December 31,
                                    2007         2007         2006
                                --------------------------------------
Assets
Current assets:
 Cash and cash equivalents         $2,585,670  $3,720,769   $1,740,304
 Investment securities              3,475,300   3,323,536    3,192,273
 Receivables, net:
    Premiums                          685,242     685,479      667,657
    Administrative services
     fees                              12,556      12,074       13,284
 Securities lending collateral        830,589   1,346,065      627,990
 Other                              1,612,467   1,318,003    1,091,465
                                --------------------------------------
    Total current assets            9,201,824  10,405,926    7,332,973
Property and equipment, net           570,798     569,412      545,004
Other assets:
 Long-term investment
  securities                          420,769     400,775      414,877
 Goodwill                           1,330,585   1,330,585    1,310,631
 Other                                548,530     628,267      524,011
                                --------------------------------------
    Total other assets              2,299,884   2,359,627    2,249,519
                                --------------------------------------
Total assets                      $12,072,506 $13,334,965  $10,127,496
                                ======================================

Liabilities and Stockholders'
 Equity
Current liabilities:
 Medical and other expenses
  payable                          $2,881,329  $2,954,146   $2,488,261
 Trade accounts payable and
  accrued expenses                  2,253,504   2,084,463    1,626,658
 Book overdraft                       253,356     289,646      293,605
 Securities lending payable           830,589   1,346,065      627,990
 Unearned revenues                    177,080   1,355,017      155,298
                                --------------------------------------
    Total current liabilities       6,395,858   8,029,337    5,191,812
Long-term debt                      1,292,858   1,189,570    1,269,100
Other long-term liabilities           644,913     740,560      612,698
                                ------------- ----------- ------------
    Total liabilities               8,333,629   9,959,467    7,073,610
                                --------------------------------------
Commitments and contingencies
Stockholders' equity:
 Preferred stock, $1 par;
  10,000,000 shares authorized,
  none issued                               -           -            -
 Common stock, $0.16 2/3 par;
  300,000,000 shares
  authorized; 185,973,713
  issued at September 30, 2007         30,995      30,833       30,491
 Capital in excess of par value     1,462,953   1,422,370    1,357,077
 Retained earnings                  2,499,563   2,197,185    1,909,098
 Accumulated other
  comprehensive loss                 (11,042)    (38,112)     (13,205)
 Treasury stock, at cost,
  16,541,384 shares at
  September 30, 2007                (243,592)   (236,778)    (229,575)
                                --------------------------------------
  Total stockholders' equity        3,738,877   3,375,498    3,053,886
                                --------------------------------------
Total liabilities and
 stockholders' equity             $12,072,506 $13,334,965  $10,127,496
                                ======================================

Debt-to-total capitalization
 ratio                                  25.7%       26.1%        29.4%


                                                   Sequential Change
                                                  --------------------
                                                     Dollar    Percent
                                                  --------------------
Assets
Current assets:
 Cash and cash equivalents
 Investment securities
 Receivables, net:
    Premiums
    Administrative services fees
 Securities lending collateral
 Other
    Total current assets                          ($1,204,102)  -11.6%
Property and equipment, net
Other assets:
 Long-term investment securities
 Goodwill
 Other
    Total other assets
Total assets                                      ($1,262,459)   -9.5%

Liabilities and Stockholders' Equity
Current liabilities:
 Medical and other expenses payable
 Trade accounts payable and accrued expenses
 Book overdraft
 Securities lending payable
 Unearned revenues
    Total current liabilities                     ($1,633,479)  -20.3%
Long-term debt
Other long-term liabilities
    Total liabilities                             ($1,625,838)  -16.3%
Commitments and contingencies
Stockholders' equity:
 Preferred stock, $1 par; 10,000,000 shares
  authorized, none issued
 Common stock, $0.16 2/3 par; 300,000,000 shares
  authorized; 185,973,713 issued at September 30,
  2007
 Capital in excess of par value
 Retained earnings
 Accumulated other comprehensive loss
 Treasury stock, at cost, 16,541,384 shares at
  September 30, 2007
  Total stockholders' equity                          $363,379   10.8%
Total liabilities and stockholders' equity        ($1,262,459)   -9.5%

Debt-to-total capitalization ratio
                                 S-6
Humana Inc.
Consolidated Statements of Cash Flows
Dollars in thousands
----------------------------------------------------------------------
                         Three Months Ended
                             September 30,
                       ------------------------

                       -----------                Dollar    Percentage
                          2007        2006        Change      Change
                       ----------------------- -----------------------
Cash flows from
 operating activities
 Net income              $302,378    $159,198
 Adjustments to
  reconcile net income
  to net cash used in
  operating
  activities:
     Depreciation and
      amortization         42,250      37,677
     Stock-based
      compensation         10,604       9,350
     (Benefit)
      provision for
      deferred income
      taxes                (9,168)     23,495
     Changes in
      operating assets
      and liabilities
      excluding the
      effects of
      acquisitions:
         Receivables         (245)     37,448
         Other assets      69,395     (29,713)
         Medical and
          other
          expenses
          payable         (72,817)    105,300
         Other
          liabilities     200,732     293,274
         Unearned
          revenues     (1,177,937) (1,023,958)
     Other                 (2,845)     (3,088)
                       -----------------------
Net cash used in
 operating activities    (637,653)   (391,017)   ($246,636)     -63.1%
                       -----------------------

Cash flows from
 investing activities
 Acquisitions, net of
  cash acquired              (501)       (431)
 Purchases of property
  and equipment           (41,339)    (54,629)
 Proceeds from sales
  of property and
  equipment                11,862       7,296
 Purchases of
  investment
  securities             (758,695) (1,246,843)
 Proceeds from
  maturities of
  investment
  securities              321,304     467,620
 Proceeds from sales
  of investment
  securities              328,275     506,870
 Change in securities
  lending collateral      515,476    (676,476)
                       -----------------------
Net cash provided by
 (used in) investing
 activities               376,382    (996,593)  $1,372,975      137.8%
                       -----------------------

Cash flows from
 financing activities
 Receipts from CMS
  contract deposits       464,703     382,787
 Withdrawals from CMS
  contract deposits      (885,541)   (634,437)
 Borrowings under
  credit agreement        475,000     150,000
 Repayments under
  credit agreement       (400,000)          -
 Repayment of senior
  notes                         -    (300,000)
 Debt issue costs               -      (1,971)
 Change in book
  overdraft               (36,290)      9,420
 Change in securities
  lending payable        (515,476)    676,476
 Common stock
  repurchases              (6,814)    (10,633)
 Tax benefit from
  stock-based
  compensation             12,272      17,135
 Proceeds from stock
  option exercises and
  other                    18,318      21,603
                       -----------------------
Net cash (used in)
 provided by financing
 activities              (873,828)    310,380  ($1,184,208)    -381.5%
                       -----------------------

Decrease in cash and
 cash equivalents      (1,135,099) (1,077,230)
Cash and cash
 equivalents at
 beginning of period    3,720,769   2,258,464
                       -----------------------

Cash and cash
 equivalents at end of
 period                $2,585,670  $1,181,234
                       =======================
                                 S-7
Humana Inc.
Consolidated Statements of Cash Flows
Dollars in thousands
                          Nine Months Ended
                             September 30,
                       ------------------------

                       -----------                Dollar    Percentage
                          2007        2006        Change      Change
                       ----------------------- -----------------------
Cash flows from
 operating activities
 Net income              $590,465    $332,402
 Adjustments to
  reconcile net income
  to net cash provided
  by operating
  activities:
     Depreciation and
      amortization        136,578     109,179
     Stock-based
      compensation         30,868      24,401
     (Benefit)
      provision for
      deferred income
      taxes               (33,179)     22,269
     Changes in
      operating assets
      and liabilities
      excluding the
      effects of
      acquisitions:
         Receivables      (16,857)     (5,509)
         Other assets     (57,072)   (389,013)
         Medical and
          other
          expenses
          payable         393,068     632,063
         Other
          liabilities     335,155     465,993
         Unearned
          revenues         21,782      20,892
     Other                 13,286     (60,866)
                       -----------------------
Net cash provided by
 operating activities   1,414,094   1,151,811     $262,283       22.8%
                       -----------------------

Cash flows from
 investing activities
 Acquisitions, net of
  cash acquired           (27,506)    (26,362)
 Purchases of property
  and equipment          (156,056)   (136,602)
 Proceeds from sales
  of property and
  equipment                15,934       9,452
 Purchases of
  investment
  securities           (2,631,990) (3,505,391)
 Proceeds from
  maturities of
  investment
  securities            1,091,260   1,478,017
 Proceeds from sales
  of investment
  securities            1,254,878   1,219,555
 Change in securities
  lending collateral     (202,599)   (869,715)
                       -----------------------
Net cash used in
 investing activities    (656,079) (1,831,046)  $1,174,967       64.2%
                       -----------------------

Cash flows from
 financing activities
 Receipts from CMS
  contract deposits     1,948,062   1,427,849
 Withdrawals from CMS
  contract deposits    (2,109,523) (1,370,862)
 Borrowings under
  credit agreement      1,185,000     250,000
 Repayments under
  credit agreement     (1,160,000)   (300,000)
 Proceeds from
  issuance of senior
  notes                         -     498,545
 Repayment of senior
  notes                         -    (300,000)
 Debt issue costs               -      (5,796)
 Change in book
  overdraft               (40,249)      1,239
 Change in securities
  lending payable         202,599     869,715
 Common stock
  repurchases             (14,017)    (15,570)
 Tax benefit from
  stock-based
  compensation             26,826      30,791
 Proceeds from stock
  option exercises and
  other                    48,653      42,542
                       -----------------------
Net cash provided by
 financing activities      87,351   1,128,453  ($1,041,102)     -92.3%
                       -----------------------

Increase in cash and
 cash equivalents         845,366     449,218
Cash and cash
 equivalents at
 beginning of period    1,740,304     732,016
                       -----------------------

Cash and cash
 equivalents at end of
 period                $2,585,670  $1,181,234
                       =======================
                                 S-8
Humana Inc.
Key Income Statement Ratios and Segment Operating Results
Dollars in thousands


                 --------------------------------
                 Three Months Ended September 30,
                 --------------------------------

                 ----------------------
                                                            Percentage
                          2007            2006   Difference   Change
                 ------------------------------- ---------------------
Medical expense
 ratio
    Government
     Segment                      81.4%    85.0%      -3.6%
    Commercial
     Segment                      81.0%    81.7%      -0.7%
    Consolidated                  81.3%    84.1%      -2.8%

Selling,
 general, and
 administrative
 expense ratio
    Government
     Segment                      10.2%    10.1%       0.1%
    Commercial
     Segment                      21.8%    20.5%       1.3%
    Consolidated                  13.3%    13.1%       0.2%


Detail of Pretax
 Income
    Government
     Segment                   $416,299 $207,004   $209,295     101.1%
    Commercial
     Segment                     62,203   42,370     19,833      46.8%
                 ------------------------------- ----------
    Consolidated               $478,502 $249,374   $229,128      91.9%
                 =============================== ==========

Detail of Pretax
 Margins
    Government
     Segment                       9.0%     5.1%       3.9%
    Commercial
     Segment                       3.7%     2.6%       1.1%
    Consolidated                   7.6%     4.4%       3.2%


                  -------------------------------
                  Nine Months Ended September 30,
                  -------------------------------

                  ---------------------
                                                            Percentage
                          2007            2006   Difference   Change
                  ------------------------------ ---------------------
Medical expense
 ratio
    Government
     Segment                      85.0%    85.5%      -0.5%
    Commercial
     Segment                      80.4%    81.6%      -1.2%
    Consolidated                  83.8%    84.3%      -0.5%

Selling,
 general, and
 administrative
 expense ratio
    Government
     Segment                      10.3%    11.6%      -1.3%
    Commercial
     Segment                      21.4%    19.8%       1.6%
    Consolidated                  13.2%    14.2%      -1.0%


Detail of Pretax
 Income
    Government
     Segment                   $722,954 $326,557   $396,397     121.4%
    Commercial
     Segment                    207,359  194,347     13,012       6.7%
                  ------------------------------ ----------
    Consolidated               $930,313 $520,904   $409,409      78.6%
                  ============================== ==========

Detail of Pretax
 Margins
    Government
     Segment                       5.2%     3.0%       2.2%
    Commercial
     Segment                       4.2%     3.9%       0.3%
    Consolidated                   4.9%     3.3%       1.6%
                                 S-9
Humana Inc.
Membership Detail
In thousands


                                          ---------
                                           Ending             Ending
                                          September Average  September
                                           30, 2007  - 3Q07   30, 2006
                                          ----------------------------
Medical Membership:
Government Segment:
   Medicare Advantage - HMO                   451.7    452.4     455.4
   Medicare Advantage - PPO                    71.1     69.5      71.1
   Medicare Advantage - PFFS                  615.2    616.5     466.5
                                          ----------------------------
       Total Medicare Advantage             1,138.0  1,138.4     993.0
                                          ----------------------------
   Medicare - PDP - Standard                2,148.9  2,146.9   2,081.7
   Medicare - PDP - Enhanced                1,085.1  1,081.5   1,021.6
   Medicare - PDP - Complete                  225.7    228.0     417.7
                                          ----------------------------
       Total Medicare stand-alone PDPs      3,459.7  3,456.4   3,521.0
                                          ----------------------------
           Total Medicare                   4,597.7  4,594.8   4,514.0
                                          ----------------------------
   TRICARE insured                          1,720.4  1,720.4   1,721.3
   TRICARE ASO                              1,137.0  1,137.2   1,141.4
                                          ----------------------------
       Total TRICARE                        2,857.4  2,857.6   2,862.7
                                          ----------------------------
   Medicaid insured                           383.8    383.8     412.6
   Medicaid ASO                               182.8    184.0         -
                                          ----------------------------
       Total Medicaid                         566.6    567.8     412.6
                                          ----------------------------
   Total Government Segment                 8,021.7  8,020.2   7,789.3
                                          ----------------------------
Commercial Segment:
   Fully-insured medical:
       Group                                1,530.2  1,530.1   1,597.1
       Individual                             223.7    216.5     175.4
       Medicare supplement                     11.3     10.2       7.4
                                          ----------------------------
   Total fully-insured medical              1,765.2  1,756.8   1,779.9
   ASO                                      1,533.9  1,546.1   1,512.0
                                          ----------------------------
   Total Commercial Segment                 3,299.1  3,302.9   3,291.9
                                          ----------------------------

Total medical membership                   11,320.8 11,323.1  11,081.2
                                          ============================


Specialty Membership (all Commercial
 Segment)
                                          ---------
   Dental - fully-insured                     974.7    975.6     960.5
   Dental - ASO                               499.3    503.9     488.2
                                          ----------------------------
       Total dental                         1,474.0  1,479.5   1,448.7
   Group life                                 444.3    442.7     436.1
   Short-term disability                       11.8     11.9      14.9
                                          ----------------------------
Total specialty membership                  1,930.1  1,934.1   1,899.7
                                          ============================


                               ---------------          --------------
                               Year-over-year            Sequential
                                    Change      Ending      Change
                               --------------- June 30, --------------
                               Amount  Percent   2007   Amount Percent
                               --------------- -------- --------------
Medical Membership:
Government Segment:
   Medicare Advantage - HMO      (3.7)   -0.8%    452.4  (0.7)   -0.2%
   Medicare Advantage - PPO       0.0     0.0%     66.9   4.2     6.3%
   Medicare Advantage - PFFS    148.7    31.9%    614.4   0.8     0.1%
                               -------         -------- ------
       Total Medicare
        Advantage               145.0    14.6%  1,133.7   4.3     0.4%
                               -------         -------- ------
   Medicare - PDP - Standard     67.2     3.2%  2,131.0  17.9     0.8%
   Medicare - PDP - Enhanced     63.5     6.2%  1,075.9   9.2     0.9%
   Medicare - PDP - Complete   (192.0)  -46.0%    233.2  (7.5)   -3.2%
                               -------         -------- ------
       Total Medicare stand-
        alone PDPs              (61.3)   -1.7%  3,440.1  19.6     0.6%
                               -------         -------- ------
           Total Medicare        83.7     1.9%  4,573.8  23.9     0.5%
                               -------         -------- ------
   TRICARE insured               (0.9)   -0.1%  1,717.6   2.8     0.2%
   TRICARE ASO                   (4.4)   -0.4%  1,150.6 (13.6)   -1.2%
                               -------         -------- ------
       Total TRICARE             (5.3)   -0.2%  2,868.2 (10.8)   -0.4%
                               -------         -------- ------
   Medicaid insured             (28.8)   -7.0%    384.9  (1.1)   -0.3%
   Medicaid ASO                 182.8   100.0%    182.7   0.1     0.1%
                               -------         -------- ------
       Total Medicaid           154.0    37.3%    567.6  (1.0)   -0.2%
                               -------         -------- ------
   Total Government Segment     232.4     3.0%  8,009.6  12.1     0.2%
                               -------         -------- ------
Commercial Segment:
   Fully-insured medical:
       Group                    (66.9)   -4.2%  1,533.0  (2.8)   -0.2%
       Individual                48.3    27.5%    205.0  18.7     9.1%
       Medicare supplement        3.9    52.7%      8.3   3.0    36.1%
                               -------         -------- ------
   Total fully-insured
    medical                     (14.7)   -0.8%  1,746.3  18.9     1.1%
   ASO                           21.9     1.4%  1,532.4   1.5     0.1%
                               -------         -------- ------
   Total Commercial Segment       7.2     0.2%  3,278.7  20.4     0.6%
                               -------         -------- ------

Total medical membership        239.6     2.2% 11,288.3  32.5     0.3%
                               =======         ======== ======


Specialty Membership (all
 Commercial Segment)
   Dental - fully-insured        14.2     1.5%    978.1  (3.4)   -0.3%
   Dental - ASO                  11.1     2.3%    499.9  (0.6)   -0.1%
                               -------         -------- ------
       Total dental              25.3     1.7%  1,478.0  (4.0)   -0.3%
   Group life                     8.2     1.9%    439.8   4.5     1.0%
   Short-term disability         (3.1)  -20.8%     12.2  (0.4)   -3.3%
                               -------         -------- ------
Total specialty membership       30.4     1.6%  1,930.0   0.1     0.0%
                               =======         ======== ======
                                 S-10
Humana Inc.
Premiums and Administrative Services Fees Detail
Dollars in thousands, except per member per month

                                                            ----------
                                                            Per Member
                                                             per Month
                                                                (A)
                                                              Three
                                                              Months
                                                              Ended
                   Three Months Ended                        September
                      September 30,                             30,
                  ---------------------                     ----------

                  ----------             Dollar  Percentage
                     2007       2006     Change    Change   2007  2006
                  --------------------- ------------------- ----------
Premium revenues
Government
 Segment:
 Medicare
  Advantage       $2,825,587 $2,366,206 $459,381      19.4%  $827 $799
 Medicare stand-
  alone PDPs         890,420    851,398   39,022       4.6%   $86  $82
                  --------------------- --------
     Total
      Medicare     3,716,007  3,217,604  498,403      15.5%
 TRICARE insured
  (B)                714,173    639,657   74,516      11.6%  $138 $124
 Medicaid insured    135,609    128,018    7,591       5.9%  $118 $103
                  --------------------- --------
 Total Government
  Segment
  premiums         4,565,789  3,985,279  580,510      14.6%
                  --------------------- --------
Commercial
 Segment:
 Fully-insured
  medical          1,418,884  1,397,945   20,939       1.5%  $269 $260
 Specialty           108,168    103,144    5,024       4.9%   $22  $21
                  --------------------- --------
 Total Commercial
  Segment
  premiums         1,527,052  1,501,089   25,963       1.7%
                  --------------------- --------
Total premium
 revenues         $6,092,841 $5,486,368 $606,473      11.1%
                  ===================== ========


Administrative
 services fees
 TRICARE ASO (B)     $17,675    $11,136   $6,539      58.7%    $5   $3
 Medicaid ASO          2,165          -    2,165     100.0%    $4    -
                  --------------------- --------
 Total Government
  Segment             19,840     11,136    8,704      78.2%
 Commercial
  Segment             81,691     75,196    6,495       8.6%   $13  $12
                  --------------------- --------
Total
 administrative
 services fees      $101,531    $86,332  $15,199      17.6%
                  ===================== ========
                                 S-11
Humana Inc.
Premiums and Administrative Services Fees Detail
Dollars in thousands, except per member per month



                        -----------------------
                          Nine Months Ended
                             September 30,
                        -----------------------

                        -----------               Dollar    Percentage
                           2007        2006       Change      Change
                        ----------------------- ----------------------
Premium revenues
Government Segment:
 Medicare Advantage      $8,372,736  $6,196,455 $2,176,281       35.1%
 Medicare stand-alone
  PDPs                    2,848,105   2,168,310    679,795       31.4%
                        ----------------------- -----------
   Total Medicare        11,220,841   8,364,765  2,856,076       34.1%
 TRICARE insured (B)      2,166,428   1,898,038    268,390       14.1%
 Medicaid insured           397,420     386,643     10,777        2.8%
                        ----------------------- -----------
 Total Government
  Segment premiums       13,784,689  10,649,446  3,135,243       29.4%
                        ----------------------- -----------
Commercial Segment:
 Fully-insured medical    4,211,771   4,316,523   (104,752)      -2.4%
 Specialty                  324,194     306,360     17,834        5.8%
                        ----------------------- -----------
 Total Commercial
  Segment premiums        4,535,965   4,622,883    (86,918)      -1.9%
                        ----------------------- -----------
Total premium revenues  $18,320,654 $15,272,329 $3,048,325       20.0%
                        ======================= ===========


Administrative services
 fees
 TRICARE ASO (B)            $47,504     $33,471    $14,033       41.9%
 Medicaid ASO                 6,397           -      6,397      100.0%
                        ----------------------- -----------
 Total Government
  Segment                    53,901      33,471     20,430       61.0%
 Commercial Segment         240,587     215,250     25,337       11.8%
                        ----------------------- -----------
Total administrative
 services fees             $294,488    $248,721    $45,767       18.4%
                        ======================= ===========


                                       -------------------------------
                                          Per Member per Month (A)
                                       Nine Months Ended September 30,
                                       -------------------------------

                                             2007             2006
                                       -------------------------------
Premium revenues
Government Segment:
 Medicare Advantage                                $828           $805
 Medicare stand-alone PDPs                          $91            $90
   Total Medicare
 TRICARE insured (B)                               $140           $122
 Medicaid insured                                  $115           $101
 Total Government Segment premiums
Commercial Segment:
 Fully-insured medical                             $269           $259
 Specialty                                          $22            $21
 Total Commercial Segment premiums
Total premium revenues


Administrative services fees
 TRICARE ASO (B)                                     $5             $3
 Medicaid ASO                                        $4              -
 Total Government Segment
 Commercial Segment                                 $13            $12
Total administrative services fees
                                 S-12
Humana Inc.
Percentage of Ending Membership under Capitation
 Arrangements



                         ---------------------------------------------
                                      Government Segment
                         ---------------------------------------------
                                    Medicare
                                     stand-                    Total
                         Medicare    alone                     Govt.
September 30, 2007        Advantage   PDPs   TRICARE Medicaid  Segment
------------------------ ---------------------------------------------

Capitated HMO hospital
 system based (C)              2.4%        -       -        -     0.3%
Capitated HMO physician
 group based (C)               2.0%        -       -    26.5%     2.2%
Risk-sharing (D)              24.2%        -       -    40.8%     6.3%
All other membership          71.4%   100.0%  100.0%    32.7%    91.2%
                         ---------------------------------------------
    Total medical
     membership              100.0%   100.0%  100.0%   100.0%   100.0%
                         =============================================

September 30, 2006
------------------------

Capitated HMO hospital
 system based (C)              3.1%        -       -        -     0.4%
Capitated HMO physician
 group based (C)               2.4%        -       -    34.8%     2.2%
Risk-sharing (D)              27.8%        -       -    64.5%     7.0%
All other membership          66.7%   100.0%  100.0%     0.7%    90.4%
                         ---------------------------------------------
    Total medical
     membership              100.0%   100.0%  100.0%   100.0%   100.0%
                         =============================================



                                 -------------------------
                                     Commercial Segment
                                 -------------------------
                                                   Total     Total
                                   Fully-          Comm.     Medical
September 30, 2007                 insured  ASO    Segment  Membership
-------------------------------- -------------------------------------

Capitated HMO hospital system
 based (C)                            1.4%      -     0.8%        0.5%
Capitated HMO physician group
 based (C)                            1.5%      -     0.8%        1.8%
Risk-sharing (D)                      1.5%      -     0.8%        4.7%
All other membership                 95.6% 100.0%    97.6%       93.0%
                                 -------------------------------------
    Total medical membership        100.0% 100.0%   100.0%      100.0%
                                 =====================================

September 30, 2006
--------------------------------

Capitated HMO hospital system
 based (C)                            1.9%      -     1.0%        0.6%
Capitated HMO physician group
 based (C)                            1.8%      -     1.0%        1.8%
Risk-sharing (D)                      1.4%      -     0.8%        5.1%
All other membership                 94.9% 100.0%    97.2%       92.5%
                                 -------------------------------------
    Total medical membership        100.0% 100.0%   100.0%      100.0%
                                 =====================================
                                 S-13
Humana Inc.
Detail of Medical and Other Expenses Payable Balance and Year-to-Date
 Changes
Dollars in thousands
                               -------------

                               September 30,   June 30,   December 31,
                                   2007         2007         2006
                               ---------------------------------------
Detail of medical and other
 expenses payable
 IBNR and other medical
  expenses payable (E)           $2,017,742   $2,028,722   $1,686,051
 TRICARE IBNR (F)                   323,667      308,112      318,583
 TRICARE other medical
  expenses payable (G)               89,447      100,975       94,699
 Unprocessed claim inventories
  (H)                               224,000      211,300      218,400
 Processed claim inventories
  (I)                               108,593      142,171      115,424
 Payable to pharmacy benefit
  administrator (J)                 117,880      162,866       55,104
                               ---------------------------------------
Total medical and other
 expenses payable                $2,881,329   $2,954,146   $2,488,261
                               =======================================


                               -------------
                               Nine Months   Nine Months
                                   Ended         Ended     Year Ended
                               September 30,  September   December 31,
                                    2007       30, 2006       2006
                               ---------------------------------------
Year-to-date changes in
 medical and other
 expenses payable

 Balances at January 1           $2,488,261   $1,909,682   $1,909,682

 Acquisitions                             -       21,198       21,198

 Incurred related to:
     Current year (K)            15,656,377   13,163,725   17,696,654
     Prior years - non-TRICARE
      (K)                          (215,747)    (173,223)    (178,998)
     Prior years - TRICARE (L)      (82,350)    (111,073)     (96,452)
                               ---------------------------------------
 Total incurred                  15,358,280   12,879,429   17,421,204
                               ---------------------------------------

 Paid related to:
     Current year               (13,310,165) (11,193,784) (15,532,079)
     Prior years                 (1,655,047)  (1,053,582)  (1,331,744)
                               ---------------------------------------
 Total paid                     (14,965,212) (12,247,366) (16,863,823)
                               ---------------------------------------

 Balances at end of period       $2,881,329   $2,562,943   $2,488,261
                               =======================================
                           S-14
Humana Inc.
Medical Claims Reserves Statistics


Receipt Cycle Time (M)
                                 ----------
                                                    Change Percentage
                                    2007     2006            Change
                                 ------------------------------------
 1st Quarter Average                   15.6    16.1  (0.5)      -3.1%
 2nd Quarter Average                   15.6    15.8  (0.2)      -1.3%
 3rd Quarter Average                   15.9    16.0  (0.1)      -0.6%
 4th Quarter Average                      -    15.8    N/A        N/A
                                 -------------------------
 Full Year Average                     15.7    15.9  (0.2)      -1.3%
                                 =========================



Unprocessed Claims Inventories

                                                    Number
                                                      of
                                 Estimated  Claim    Days
                                  Valuation  Item     on
             Date                  (000's)   Counts   Hand
 ----------------------------------------------------------
                    9/30/2005      $136,700 512,800     4.7
                   12/31/2005      $148,200 498,400     4.6
                    3/31/2006      $185,300 683,900     5.6
                    6/30/2006      $193,700 702,000     4.8
                    9/30/2006      $187,900 623,900     5.4
                   12/31/2006      $218,400 757,700     6.1
                    3/31/2007      $222,300 747,200     5.5
                    6/30/2007      $211,300 751,600     4.9
 ----------------------------------------------------------
                    9/30/2007      $224,000 819,100     6.1
 ----------------------------------------------------------
                                 S-15
Humana Inc.
Medical Claims Reserves Statistics (Continued)


Days in Claims Payable (N)

              Days
               in
              Claim                        DCP
  Quarter    Payable Annual  Percentage  Excluding  Annual  Percentage
    Ended     (DCP)   Change   Change    Capitation  Change   Change
----------------------------------------------------------------------
  9/30/2005     54.0  2.2     4.2%      60.8         1.7     2.9%
 12/31/2005     60.3 10.8    21.8%      66.6        11.8    21.5%
  3/31/2006     59.1  8.6    17.0%      65.5         9.4    16.8%
  6/30/2006     59.5  6.7    12.7%      65.5         6.9    11.8%
  9/30/2006     61.2  7.2    13.3%      67.1         6.3    10.4%
 12/31/2006     60.2 (0.1)   -0.2%      66.5        (0.1)   -0.2%
  3/31/2007     62.0  2.9     4.9%      67.8         2.3     3.5%
  6/30/2007     62.4  2.9     4.9%      69.7         4.2     6.4%
----------------------------------------------------------------------
  9/30/2007     63.4  2.2     3.6%      70.5         3.4     5.1%
----------------------------------------------------------------------

Year-to-Date Change in Days
 in Claims Payable (O)
                             ----------
                             2007       2006
                             ----------------------
DCP - 4th quarter of prior
 year                        60.2       60.3
 Components of year-to-date
  change in DCP:
     Change in claims
      receipt cycle time     (0.6)      (1.6)
     Change in unprocessed
      claims inventories      0.1        1.7
     Change in processed
      claims inventories     (0.2)       0.8
     Change in TRICARE
      reserve balances          -       (2.1)
     Change in pharmacy
      payment cutoff            -       (1.3)
     Change in provider
      payables under risk
      arrangements            2.7        1.9
     All other                1.2        0.5
                             ----------------------
DCP - current quarter        63.4       60.2
                             ======================
                               S-16
Humana Inc.
GAAP to non-GAAP Reconcilation
In thousands, except per common share results


             ----------------- ---------------- ----------------------
                                                 Forecasted EPS and
                   3Q07            3Q07 YTD           Growth Rate
             ----------------- ---------------- ----------------------
              Pretax            Pretax                         Growth
              Income     EPS    Income    EPS    2007    2008   Rate
             ----------------- ---------------- ----------------------
Consolidated
GAAP                                            $4.75   $5.30
                                                  to      to
             $478,502   $1.78  $930,313  $3.48   $4.80   $5.50 10%-16%

Non-GAAP
 adjustment
 for
 favorable
 prior year
 claims
 development ($68,878) ($0.25) ($68,878)($0.25) ($0.25)      -
             ----------------- ---------------- ------- ------

Non-GAAP (P)                                    $4.50   $5.30
                                                  to      to
             $409,624   $1.53  $861,435  $3.23   $4.55   $5.50 16%-22%
             ================= ======== ======= ======= ======


                                                --------- ---------
                                                  3Q07    3Q07 YTD
                                                --------- ---------
Government Segment                               Pretax    Pretax
                                                  Income    Income
                                                --------- ---------
GAAP                                            $416,299  $722,954

Non-GAAP adjustment for favorable prior year
 claims development                             ($68,878) ($68,878)
                                                --------- ---------

Non-GAAP (P)                                    $347,421  $654,076
                                                ========= =========
                                 S-17
Humana Inc.
Footnotes to Statistical Schedules and Supplementary Information
3Q07 Earnings Release

Footnote
----------------------------------------------------------------------
(A) Computed based on average membership for the period (i.e., monthly
     ending membership during the period divided by the number of
     months in the period).

(B) TRICARE revenues are not contracted on a per-member basis.

(C) In a limited number of circumstances, the company contracts with
     hospitals and physicians to accept financial risk for a defined
     set of HMO membership. In transferring this risk, the company
     prepays these providers a monthly fixed-fee per member to
     coordinate substantially all of the medical care for their
     capitated HMO membership, including some health benefit
     administrative functions and claims processing. For these
     capitated HMO arrangements, the company generally agrees to
     reimbursement rates that target a medical expense ratio.
     Providers participating in hospital-based capitated HMO
     arrangements generally receive a monthly payment for all of the
     services within their system for their HMO membership. Providers
     participating in physician-based capitated HMO arrangements
     generally have subcontracted specialist physicians and are
     responsible for reimbursing such physicians and hospitals for
     services rendered to their HMO membership.

(D) In some circumstances, the company contracts with physicians under
     risk-sharing arrangements whereby physicians have assumed some
     level of risk for all or a portion of the medical costs of their
     HMO membership. Although these arrangements do include capitation
     payments for services rendered, the company processes
     substantially all of the claims under these arrangements.

(E) IBNR represents an estimate of medical expenses payable for claims
     incurred but not reported (IBNR) at the balance sheet date. The
     level of IBNR is primarily impacted by membership levels, medical
     claim trends and the receipt cycle time, which represents the
     length of time between when a claim is initially incurred and
     when the claim form is received (i.e. a shorter time span results
     in lower reserves for claims IBNR). Other medical expenses
     payable includes amounts payable to providers under capitation
     arrangements.

(F) TRICARE IBNR primarily fluctuates due to medical expense inflation
     and changes in the utilization of benefits.

(G) TRICARE other medical expenses payable may include liabilities to
     subcontractors and/or risk share payables to the Department of
     Defense. The level of these balances may fluctuate from period to
     period due to the timing of payment (cutoff) and whether or not
     the balances are payables or receivables (receivables from the
     Department of Defense are classified as receivables in the
     company's balance sheet).

(H) Unprocessed claim inventories represent the estimated valuation of
     claims received but not yet fully processed. TRICARE claim
     inventories are not included in this amount as an independent
     third party administrator processes all TRICARE medical claims on
     the company's behalf. Reserves for TRICARE unprocessed claims
     inventory are included in TRICARE IBNR.

(I) Processed claim inventories represent the estimated valuation of
     processed claims that are in the post-claim-adjudication process,
     which consists of administrative functions such as audit and
     check batching and handling.

(J) The balance due to the company's pharmacy benefit administrator
     fluctuates as a result of the number of business days in the last
     payment cycle of the month. Payment cycles are every 10 days
     (10th & 20th of month) and the last day of the month.

(K) Amounts incurred related to prior years vary from previously
     estimated liabilities as the claims ultimately are settled.
     Negative amounts reported for incurred related to prior years
     result from claims being ultimately settled for amounts less than
     originally estimated (favorable development). There were no
     changes in the approach used to determine our estimate of claim
     reserves during the quarter.


(L) Changes in estimates of TRICARE incurred claims for prior years
     result primarily from claim costs and utilization levels
     developing favorably from the levels originally estimated for the
     second half of the prior year. As a result of substantial risk-
     sharing provisions with the Department of Defense and with
     subcontractors, any resulting impact on operations from the
     change in estimates of incurred related to prior years is
     substantially reduced, whether positive or negative.

(M) The receipt cycle time measures the average length of time between
     when a claim was initially incurred and when the claim form was
     received. Receipt cycle time data for our largest claim
     processing platforms represents 70% to 75% of the company's
     fully-insured claims volume. Pharmacy claims are excluded from
     this measurement.

(N) A common metric for monitoring medical claim reserve levels
     relative to the medical claims expense is days in claims payable,
     or DCP, which represents the medical claim liabilities at the end
     of the period divided by average medical expenses per day in the
     quarterly period. Since the company has some providers under
     capitation payment arrangements (which do not require a medical
     claim IBNR reserve), the company has also summarized this metric
     excluding capitation expense. In addition, this calculation
     excludes the impact of the company's stand-alone PDP business.

(O) DCP fluctuates due to a number of issues, the more significant of
     which are detailed in the rollforward of DCP from the fourth
     quarter of the prior year. Growth in certain product lines can
     also impact DCP for the quarter since a provision for claims
     would not have been recorded for members that had not yet
     enrolled earlier in the quarter, yet those members would have a
     provision and corresponding reserve recorded upon enrollment
     later in the quarter. This analysis excludes the impact of
     Medicare stand-alone PDPs upon DCP.

(P) These non-GAAP numbers exclude favorable development in the
     Government Segment related to prior year matters of approximately
     $68.9 million, or $0.25 per diluted share that are not expected
     to recur in future periods. The favorable claims development
     resulted from 1) the resolution of first year (2006) Part D
     implementation matters including enrollment discrepancies and the
     related impact on claims estimates ($54.0 million, or $0.20 per
     share) and 2) the adjustment of TRICARE reserves as a result of
     the settlement of the claims payment accuracy provision for prior
     option periods under the South contract ($14.9 million, or $0.05
     per share). The company believes that these non-GAAP measures,
     when presented in conjunction with the comparable GAAP measures,
     are useful to both management and its investors in analyzing the
     company's ongoing business and operating performance. Internally,
     management uses these non-GAAP financial measures as indicators
     of business performance, as well as for operational planning and
     decision making purposes. These non-GAAP financial measures
     should be considered in addition to, but not as a substitute for,
     or superior to, financial measures prepared in accordance with
     GAAP.


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    CONTACT: Humana Inc.
             Investor Relations:
             Regina Nethery, 502-580-3644
             Rnethery@humana.com
             or
             Corporate Communications
             Tom Noland, 502-580-3674
             Tnoland@humana.com

    SOURCE: Humana Inc.