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Humana Reports Third Quarter 2011 Financial Results, Provides 2012 Financial Guidance
  • Third quarter EPS of $2.67 included $0.13 of favorable prior-period reserve development
  • Full-year 2011 EPS raised to $8.35 to $8.40; includes $0.57 of favorable prior-year reserve development
  • 2012 EPS guidance range of $7.40 to $7.60

LOUISVILLE, Ky., Oct 31, 2011 (BUSINESS WIRE) -- Humana Inc. (NYSE: HUM) today reported diluted earnings per common share (EPS) for the quarter ended September 30, 2011 (3Q11) of $2.67, compared to $2.32 per share for the quarter ended September 30, 2010 (3Q10). For the nine months ended September 30, 2011 (YTD11) the company reported $7.24 in EPS compared to $5.84 for the nine months ended September 30, 2010 (YTD10). Comparison of operating results for these periods is affected by the items noted below:

Consolidated Results of Operations

($ in millions except EPS)

3Q11 Pretax

Income

3Q10 Pretax

Income

3Q11 EPS 3Q10 EPS
GAAP $ 698.7 $ 622.3 $ 2.67 $ 2.32
Favorable prior-period medical claims reserve development (a) (33.9 ) (83.8 ) (0.13 ) (0.31 )
Non-GAAP (b) $ 664.8 $ 538.5 $ 2.54 $ 2.01
Consolidated Results of Operations

($ in millions except EPS)

YTD11 Pretax

Income

YTD10 Pretax

Income

YTD11 EPS YTD10 EPS
GAAP $ 1,922.0 $ 1,575.1 $ 7.24 $ 5.84
Write-down of certain DAC (c) - 147.5 - 0.55
Favorable prior-year medical claims reserve development (a) (150.7 ) (193.5 ) (0.57 ) (0.72 )
Non-GAAP (b) $ 1,771.3 $ 1,529.1 $ 6.67 $ 5.67

The company anticipates EPS of approximately $8.35 to $8.40 for the year ending December 31, 2011 (FY11) versus its previous estimate of $7.50 to $7.60. This increase in FY11 EPS guidance primarily reflects lower projected benefit expense ratios in the company's Retail and Employer Group Segments and higher average Medicare membership.

Looking ahead to the year ending December 31, 2012 (FY12), the company projects EPS to be in the range of $7.40 to $7.60, exclusive of any future share repurchases. The company has strengthened the value proposition to the Medicare beneficiaries it serves through stable premiums and benefits in its Medicare Advantage and stand-alone PDP offerings in FY12 through its usual Medicare bid margin reset. As a result of improving its Medicare value proposition membership gains in these Medicare offerings are anticipated to be strong in the coming year.

"Our favorable results in the third quarter and year to date reflect strong operating performance across multiple businesses," said Michael B. McCallister, Humana's chairman of the board and chief executive officer. "In Medicare, our clear focus on strong financial protection and higher quality coordinated health care for seniors represents a powerful value proposition, and continues to drive membership growth, now nearly 4.5 million people."

Consolidated Highlights

Revenues - 3Q11 consolidated revenues were $9.30 billion, an increase of 11 percent from $8.35 billion in 3Q10, with total premiums and services revenue also up 11 percent compared to the prior year's quarter. The year-over-year increase in premiums and services revenue primarily reflected an increase in the revenues in both the company's Retail and Health and Well-Being Services segments.

YTD11 consolidated revenues rose 10 percent to $27.78 billion from $25.32 billion in YTD10 with total premiums and services revenue also up 10 percent compared to the prior year's period, driven primarily by increases in the same segments as the third quarter year-over-year increase.

Benefit expenses - The 3Q11 consolidated benefit ratio (benefit expenses as a percent of premiums) of 80.7 percent decreased by 90 basis points from 81.6 percent for the prior year's quarter due primarily to a decline in the Retail segment benefit ratio as described below. The consolidated benefit ratio for YTD11 of 82.2 percent decreased by 20 basis points from the YTD10 consolidated benefit ratio of 82.4 percent primarily due to the declines in the benefit ratios for the Retail and Employer Group Segments.

Favorable prior-period medical claims reserve development impacted the consolidated benefit ratio year-over-year comparisons as follows:

Consolidated Benefit Ratio 3Q11 3Q10 YTD11 YTD10
GAAP 80.7 % 81.6 % 82.2 % 82.4 %
Favorable prior-period medical claims reserve development (a) 0.4 % 1.1 % 0.6 % 0.8 %
Non-GAAP (b) 81.1 % 82.7 % 82.8 % 83.2 %

Operating costs - The consolidated operating cost ratio (operating costs as a percent of total revenues less investment income) of 14.8 percent for 3Q11 compares to 12.1 percent in 3Q10 primarily reflecting the company's December 2010 acquisition of Concentra Inc. (Concentra) and increased expenses associated with the Medicare sales season for 2012 offerings which began a month earlier than in the prior year.

The YTD11 consolidated operating cost ratio of 13.9 percent increased 130 basis points from that for YTD10 of 12.6 percent primarily due to the same factors impacting the third quarter year-over-year comparison.

The write-down of certain DAC during the second quarter of 2010 impacted the consolidated year-over-year operating cost ratio comparisons as follows:

Consolidated operating cost ratio 3Q11 3Q10 YTD11 YTD10
GAAP 14.8 % 12.1 % 13.9 % 12.6 %
Write-down of certain DAC (c) - - - (0.6 %)
Non-GAAP (b) 14.8 % 12.1 % 13.9 % 12.0 %

Retail Segment Highlights

Pretax results:

  • Retail Segment pretax income of $541.4 million in 3Q11 compares to $447.9 million in 3Q10. This increase was primarily due to increased average individual Medicare membership and a lower benefit ratio partially offset by a higher operating cost ratio. For YTD11, pretax earnings for the Retail Segment of $1.26 billion increased by $222.9 million versus YTD10 pretax earnings for the segment of $1.04 billion. Comparison of operating results for these periods was also affected by the items noted below:
Retail Segment Results

($ in millions)

3Q11 Pretax

Income

3Q10 Pretax

Income

YTD11 Pretax

Income

YTD10 Pretax

Income

GAAP $ 541.4 $ 447.9 $ 1,261.5 $ 1,038.6
Write-down of certain DAC (c) - - - 147.5
Favorable prior-period medical claims reserve development (a) (32.0 ) (62.9 ) (103.7 ) (164.9 )
Non-GAAP (b) $ 509.4 $ 385.0 $ 1,157.8 $ 1,021.2

Enrollment:

  • Individual Medicare Advantage membership was 1,613,400 at September 30, 2011, an increase of 151,200 members, or 10 percent from 1,462,200 at September 30, 2010 primarily due to a successful enrollment season associated with the 2011 plan year as well as age-in enrollment throughout the year. Individual Medicare Advantage membership has increased 152,700 or 10 percent through September 2011 from 1,460,700 at December 31, 2010.
  • Membership in the company's individual stand-alone Prescription Drug Plans (PDPs) was 2,478,100 at September 30, 2011, up 789,900 or 47 percent compared to 1,688,200 at September 30, 2010 and up 807,800 or 48 percent from 1,670,300 at December 31, 2010. These increases resulted from higher gross sales primarily during the 2011 enrollment season, particularly for the company's low-price-point Humana-Walmart plan offering, supplemented by dual-eligible and age-in enrollments throughout the year.
  • HumanaOne(R) medical membership increased to 424,000 at September 30, 2011, an increase of 49,100, or 13 percent, from 374,900 at September 30, 2010 and an increase of 51,700 or 14 percent, from 372,300 at December 31, 2010.
  • Membership in individual specialty products(d) of 755,600 at September 30, 2011 increased 55 percent from 487,000 at September 30, 2010 and up 245,600 or 48 percent from 510,000 at December 31, 2010 driven primarily by increased sales in dental and vision offerings.

Premiums and services revenue:

  • 3Q11 premiums and services revenue for the Retail Segment was $5.40 billion, an increase of 13 percent from $4.79 billion in 3Q10. The increase was primarily the result of 10 percent higher average Medicare Advantage membership year over year.

Benefit expenses:

  • The 3Q11 benefit ratio for the Retail Segment was 78.7 percent, a decrease of 230 basis points from 81.0 percent in 3Q10. The year over year decrease in the benefit ratio is primarily due to continued progress with cost-reduction and outcome-enhancing strategies, including care coordination and disease management, combined with an increased percent of Retail membership from stand-alone PDPs that carry a lower benefit ratio. Favorable prior-period reserve development impacted the year-over-year comparison of the benefit ratio for this segment as follows:
Retail Segment Benefit Ratio 3Q11 3Q10
GAAP 78.7 % 81.0 %
Favorable prior-period medical claims reserve development (a) 0.6 % 1.3 %
Non-GAAP (b) 79.3 % 82.3 %

Operating costs:

  • The Retail Segment's operating cost ratio of 11.2 percent in 3Q11 increased 160 basis points from 9.6 percent in 3Q10. The increase was primarily the result of higher expenses associated with the Medicare sales season for 2012 offerings, which began a month earlier than in the prior year, as well as a higher percentage of average membership in stand-alone PDP offerings. Stand-alone PDPs carry a higher operating cost ratio than other Medicare products.

Employer Group Segment Highlights

Pretax results:

  • Employer Group Segment pretax income of $45.9 million in 3Q11 compares to $79.0 million in 3Q10. For YTD11, pretax earnings for the Employer Group Segment of $293.0 million increased by $32.8 million versus YTD10 pretax earnings for the segment of $260.2 million. Favorable prior-period reserve development impacted the year-over-year comparisons of the pretax income for this segment as follows:
Employer Group Segment Results

($ in millions)

3Q11 Pretax

Income

3Q10 Pretax

Income

YTD11 Pretax

Income

YTD10 Pretax

Income

GAAP $45.9 $79.0 $293.0 $260.2
Favorable prior-period medical claims reserve development (a) (8.7) (20.9) (41.7) (28.6)
Non-GAAP (b) $37.2 $58.1 $251.3 $231.6

Enrollment:

  • Group Medicare Advantage membership was 315,500 at September 30, 2011, an increase of 12,900 members, or 4 percent, from 302,600 at September 30, 2010, and an increase of 14,200 or 5 percent, from 301,300 at December 31, 2010.
  • Group fully-insured commercial medical membership declined to 1,181,300 at September 30, 2011, a decrease of 76,600 or 6 percent, from 1,257,900 at September 30, 2010, and a decrease of 70,900 or 6 percent, from 1,252,200 at December 31, 2010. This decline primarily reflected the company's continued dedication to pricing discipline in a highly competitive environment for large group business partially offset by small group business membership gains. Approximately 56 percent of the company's group fully-insured commercial medical membership was in small group accounts at September 30, 2011 versus 47 percent at September 30, 2010 and 48 percent at December 31, 2010.
  • Group administrative services only (ASO) commercial medical membership declined to 1,287,000 at September 30, 2011, a decrease of 173,300 or 12 percent from 1,460,300 at September 30, 2010, and a decrease of 166,600 or 11 percent, from 1,453,600 at December 31, 2010. This decline reflected a continuation of discipline in pricing services for self-funded accounts amid a highly competitive environment.
  • Membership in Employer Group specialty products(d) of 6,419,300 at September 30, 2011 decreased 1 percent from 6,502,700 at September 30, 2010, and decreased 98,200 or 2 percent, from 6,517,500 at December 31, 2010.

Premiums and services revenue:

  • 3Q11 premiums and services revenue for the Employer Group Segment were $2.32 billion, flat from $2.32 billion in 3Q10 as reduced commercial fully-insured membership was offset by higher Medicare Advantage per-member per-month premiums.

Benefit expenses:

  • 3Q11 benefit ratio for the Employer Group Segment was 83.5 percent, an increase of 150 basis points, from 82.0 percent for 3Q10. The year over year increase in the benefit ratio primarily reflects both the impact of prior-period reserve development and a higher percentage of members in group Medicare Advantage plans which carry a higher benefit ratio than commercial fully-insured accounts. Favorable prior-period reserve development impacted the year-over-year comparison of the benefit ratio for this segment as follows:
Employer Group Segment Benefit Ratio 3Q11 3Q10
GAAP 83.5 % 82.0 %
Favorable prior-period medical claims reserve development (a) 0.3 % 1.0 %
Non-GAAP (b) 83.8 % 83.0 %

Operating costs:

  • The Employer Group Segment's operating cost ratio of 17.5 percent in 3Q11 improved from 17.6 percent in 3Q10 primarily reflecting administrative scale efficiencies associated with a 5 percent increase in average fully-insured Medicare Advantage group membership.

Health and Well-Being Services Segment Highlights

Pretax results:

  • Health and Well-Being Services Segment pretax income of $83.6 million in 3Q11 increased 11 percent compared to $75.5 million in 3Q10 reflecting growth in the company's pharmacy solutions business as well as the addition of the Concentra business acquired in December 2010.
  • For YTD11, pretax earnings for the Health and Well-Being Services Segment of $267.7 million increased by $93.1 million versus YTD10 pretax earnings for the segment of $174.6 million, reflecting the same factors as those affecting the quarterly year-over-year comparisons.

Revenues:

  • Revenues of $2.83 billion in 3Q11 for the Health and Well-Being Services Segment increased 29 percent from $2.19 billion in 3Q10. This increase was primarily due to growth in the company's pharmacy solutions business together with the December 2010 acquisition of the company's Concentra business.

Operating costs:

  • The Health and Well-Being Services Segment's operating cost ratio of 96.3 percent in 3Q11 was relatively unchanged from 96.2 percent in 3Q10.

Balance Sheet

  • At September 30, 2011, the company had cash, cash equivalents, and investment securities of $13.58 billion compared to $10.77 billion at June 30, 2011 which included a $1.80 billion benefit from the early receipt of the October 2011 Medicare premium payment from the Centers for Medicare and Medicaid Services (CMS) (e).
  • Parent company cash and investments of $634.4 million at September 30, 2011 decreased $356.0 million from $990.4 billion at June 30, 2011 primarily due to share repurchases during 3Q11.
  • Debt-to-total capitalization at September 30, 2011 was 17.5 percent, down 50 basis points compared to 18.0 percent at June 30, 2011 primarily driven by higher capitalization associated with 3Q11 earnings.

Cash Flows from Operations

  • Cash flows provided by operations for 3Q11 of $2.92 billion compared to $1.21 billion in 3Q10. Cash flows provided by operations for YTD11 totaled $3.88 billion compared to $2.29 billion in YTD10. The company also evaluates operating cash flows on a non-GAAP basis:
Net cash provided by operating activities

(in millions)

3Q11

Cash Flows

3Q10

Cash Flows

YTD11

Cash Flows

YTD10

Cash Flows

GAAP $ 2,919.3 $ 1,209.2 $ 3,876.0 $ 2,289.2
Timing of premium payment from CMS (e) (1,795.6 )

-

(1,795.6 )

-

Non-GAAP (b) $ 1,123.7 $ 1,209.2 $ 2,080.4 $ 2,289.2

The year over year decrease in the non-GAAP cash flows from operations is due to the negative effect on cash flows of changes in working capital accounts, partially offset by higher net income year over year.

Share Repurchase Program and Cash Dividend

  • In April 2011, the company's Board of Directors replaced its previous share repurchase authorization with a new authorization for share repurchases of up to $1 billion. During 3Q11, the company repurchased 3,381,200 of its outstanding shares at an average price per share of $70.62. As of October 31, 2011, approximately $561 million of the April 2011 share repurchase authorization was remaining, with an expiration date of June 30, 2013.
  • In April 2011, the company's Board of Directors also initiated a quarterly cash dividend policy. A cash dividend payment of $40.7 million, or $0.25 per share, for stockholders of record as of September 30, 2011, was paid on October 28, 2011. In October 2011, the company's Board of Directors also approved a cash dividend of $0.25 per share payable January 31, 2012 to stockholders of record as of December 30, 2011.

Footnotes

(a) Actuarial standards require the use of assumptions based on moderately adverse experience, which generally results in favorable reserve development, or reserves that are considered redundant. When the Company recognizes a release of the redundancy, we disclose the amount that is not in the ordinary course of business.

(b) The Company has included certain financial measures that are not in accordance with Generally Accepted Accounting Principles (GAAP) in its summary of financial results within this earnings press release. The company believes that these non-GAAP measures, when presented in conjunction with 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.

(c) During the second quarter of 2010, the company recognized an impairment of deferred acquisition cost (DAC) assets associated with its Individual Major Medical line of business of $147.5 million. The related DAC included amounts associated with commissions, underwriting and other policy issuance costs. Given then impending changes to this business associated with health insurance reform, a substantial portion of the DAC was determined to be not recoverable from future income.

(d) The company provides a full range of insured specialty products including dental, vision and other supplemental health and financial protection products. Members included in these products may not be unique to each product since members have the ability to enroll in multiple products. Other supplemental benefits include life, disability, and fixed benefit products including cancer and critical illness policies.

(e) Generally, when the first day of a month falls on a weekend or holiday, with the exception of January 1 (New Year's Day), the company receives this payment at the end of the previous month. Therefore the year-to-date 2011 period included ten monthly Medicare payments compared to only nine monthly Medicare payments during the 2010 period.

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 http://www.humana.com. The company suggests web participants sign on at least 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 at least 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 http://www.humana.com.

Cautionary Statement

This news release includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. When used in investor presentations, press releases, Securities and Exchange Commission (SEC) filings, and in oral statements made by or with the approval of one of Humana's executive officers, the words or phrases like "expects," "anticipates," "intends," "likely will result," "estimates," "projects" or variations of such words and similar expressions are intended to identify such forward-looking statements. These forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties, and assumptions, including, among other things, information set forth in the "Risk Factors" section of the company's SEC filings, a summary of which includes but is not limited to the following:

  • Health insurance reform legislation, including The Patient Protection and Affordable Care Act and The Health Care and Education Reconciliation Act of 2010, could have a material adverse effect on Humana's results of operations, including restricting revenue, enrollment and premium growth in certain products and market segments, increasing the company's medical and administrative costs by, among other things, requiring a minimum benefit ratio, lowering the company's Medicare payment rates and increasing the company's expenses associated with a non-deductible federal premium tax; financial position, including the company's ability to maintain the value of its goodwill; and cash flows. In addition, if the new non-deductible federal premium tax is imposed as enacted, and if Humana is unable to adjust its business model to address this new tax, there can be no assurance that the non-deductible federal premium tax would not have a material adverse effect on the company's results of operations, financial position, and cash flows.
  • If Humana does not design and price its products properly and competitively, if the premiums Humana charges are insufficient to cover the cost of health care services delivered to its members, or if its estimates of benefit expenses are inadequate, Humana's profitability could be materially adversely affected. Humana estimates the costs of its benefit expense payments, and designs and prices its products accordingly, using actuarial methods and assumptions based upon, among other relevant factors, claim payment patterns, medical cost inflation, and historical developments such as claim inventory levels and claim receipt patterns. These estimates, however, involve extensive judgment, and have considerable inherent variability that is extremely sensitive to payment patterns and medical cost trends.
  • If Humana fails to effectively implement its operational and strategic initiatives, including its Medicare initiatives, the company's business may be materially adversely affected, which is of particular importance given the concentration of the company's revenues in the Medicare business.
  • If Humana fails to properly maintain the integrity of its data, to strategically implement new information systems, or to protect Humana's proprietary rights to its systems, the company's business may be materially adversely affected.
  • Humana is involved in various legal actions and governmental and internal investigations, including without limitation, an ongoing internal investigation related to certain aspects of its Florida subsidiary operations, the outcome of any of which could result in substantial monetary damages, penalties, fines or other sanctions. Increased litigation or regulatory action and any related negative publicity could increase the company's cost of doing business.
  • Humana's business activities are subject to substantial government regulation and related audits for compliance, including, among others, existing audits regarding Medicare risk adjustment data. New laws or regulations, or changes in existing laws or regulations or their manner of application, including the methodology that may be used by the government in implementing results of risk adjustment audits, could increase the company's cost of doing business and may adversely affect the company's business, profitability and financial condition. In addition, as a government contractor, Humana is exposed to additional risks that may adversely affect the company's business or the company's willingness to participate in government health care programs.
  • On February 25, 2011, the Department of Defense TRICARE Management Activity, or TMA, awarded the TRICARE South Region contract to Humana. On March 7, 2011, the competing bidder filed a protest of the award with the Government Accountability Office. Also on March 7, 2011, as provided in the Federal Acquisition Regulations, TMA issued a stop work order to Humana in connection with the award. On June 14, 2011, the GAO upheld the award of the contract to Humana and TMA subsequently lifted the stop work order. On June 21, 2011, the competing bidder filed a complaint in the United States Court of Federal Claims objecting to the award of the contract to Humana. On October 14, 2011, the Court upheld the award of the contract to Humana, and the competing bidder has until December 13, 2011, to appeal in the Court of Appeals for the Federal Circuit. As a result of the award of the TRICARE South Region contract to the company, Humana no longer expects a goodwill impairment to occur during the second half of 2011. Ultimate disposition of the contract award is, however, subject to the resolution of any additional actions the unsuccessful bidder may take.
  • Any failure to manage administrative costs could hamper Humana's profitability.
  • Any failure by Humana to manage acquisitions and other significant transactions successfully may have a material adverse effect on its results of operations, financial position, and cash flows.
  • If Humana fails to develop and maintain satisfactory relationships with the providers of care to its members, the company's business may be adversely affected.
  • Humana's mail order pharmacy business is highly competitive and subjects it to regulations in addition to those the company faces with its core health benefits businesses.
  • Changes in the prescription drug industry pricing benchmarks may adversely affect Humana's financial performance.
  • If Humana does not continue to earn and retain purchase discounts and volume rebates from pharmaceutical manufacturers at current levels, Humana's gross margins may decline.
  • Humana's ability to obtain funds from its subsidiaries is restricted by state insurance regulations.
  • Downgrades in Humana's debt ratings, should they occur, may adversely affect its business, results of operations, and financial condition.
  • Federal government contracts account for a substantial portion of Humana's revenue and earnings. A delay by Congress in raising the federal government's debt ceiling, should it occur, could lead to a reduction, suspension or cancellation of federal government spending that could, in turn, have a material adverse effect on Humana's business and profitability.
  • Changes in economic conditions could adversely affect Humana's business and results of operations.
  • The securities and credit markets may experience volatility and disruption, which may adversely affect Humana's business.
  • Given the current economic climate, Humana's stock and the stock of other companies in the insurance industry may be increasingly subject to stock price and trading volume volatility.

In making forward-looking statements, Humana is not undertaking to address or update them in future filings or communications regarding its business or results. In light of these risks, uncertainties, and assumptions, the forward-looking events discussed herein may or may not occur. There also may be other risks that the company is unable to predict at this time. Any of these risks and uncertainties may cause actual results to differ materially from the results discussed in the forward-looking statements.

Humana advises investors to read the following documents as filed by the company with the SEC for further discussion both of the risks it faces and its historical performance:

  • Form 10-K for the year ended December 31, 2010;
  • Form 10-Q for the quarters ended March 31, 2011 and June 30, 2011;
  • Form 8-Ks filed during 2011.

About Humana

Humana Inc., headquartered in Louisville, Kentucky, is a leading health care company that offers a wide range of insurance products and health and wellness services that incorporate an integrated approach to lifelong well-being. By leveraging the strengths of its core businesses, Humana believes it can better explore opportunities for existing and emerging adjacencies in health care that can further enhance wellness opportunities for the millions of people across the nation with whom the company has relationships.

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

  • Annual reports to stockholders;
  • Securities and Exchange Commission filings;
  • Most recent investor conference presentations;
  • Quarterly earnings news releases;
  • Replays of most recent earnings release conference calls;
  • Calendar of events (including upcoming earnings conference call dates and times, as well as planned interaction with research analysts and institutional investors);
  • Corporate Governance information
(in accordance with For the year ending December 31, 2011 For the year ending December 31, 2012 Comments
Generally Accepted (see key assumptions below) (excludes impact of pending
Accounting Principles) acquisitions)
Diluted earnings per Full year 2011: $8.35 to $8.40 Full year 2012: $7.40 to $7.60 Excludes the impact of future share

common share (EPS)

repurchases
Anticipates weighted average
shares outstanding of 168 million
for 2011 and 166 million for 2012
Revenues Consolidated revenues: $36.5 billion to $37.0 Consolidated revenues: $38.25 billion to Includes expected investment
billion $38.75 billion income in the range of $360
million to $365 million for 2011
and $375 million to $395 million
for 2012
Total revenues: Total revenues: Segment-level revenues include
Retail Segment: $21.0 billion to $21.5 billion Retail Segment: $23.75 billion to $24.25 intersegment amounts that
billion eliminate in consolidation
Employer Group Segment: $9.0 billion to Employer Group Segment: $10.25 billion to
$9.5 billion $10.75 billion
Health and Well-Being Services Segment: Health and Well-Being Services Segment:
$11.0 billion to $11.3 billion $13.5 billion to $14.0 billion
Other Businesses: $4.75 billion to $5.25 Other Businesses: $2.5 billion to $2.75 billion Assumes new TRICARE South
billion Region contract will be accounted
for on an ASO basis
Ending medical membership Retail Segment: Retail Segment:
versus prior year end Medicare Advantage: Up 145,000 to Medicare Advantage: Up 145,000 to

155,000

155,000

Medicare stand-alone PDPs: Up 880,000 to Medicare stand-alone PDPs: Up 500,000 to

885,000

600,000

HumanaOne: Up approximately 65,000 HumanaOne: Up approximately 65,000
Employer Group Segment: Employer Group Segment:
Medicare Advantage: Up approximately Medicare Advantage: Up approximately

15,000

55,000 to 75,000
Commercial medical fully-insured: Down Commercial medical fully-insured: Up
75,000 to 85,000

50,000 to 60,000

Commercial medical ASO: Down 160,000 Commercial medical ASO: Down 40,000 to
to 170,000

50,000

Benefit ratios Retail Segment: 81.5% to 82.0% Retail Segment: 83.5 % to 84.5% Benefit expenses as a percent of
Employer Group Segment: 82.5% to 83.0% Employer Group Segment: 84.5% to 85.5% premiums
Operating cost ratios Consolidated: Approximately 14.5% Consolidated: 14.5% to 15.0% Operating costs as a percent of total
Health & Well-Being Services Segment: Health & Well-Being Services Segment: revenues excluding investment
96.0% to 96.5% 96.0% to 96.5% income
Consolidated ratio assumes new
TRICARE South Region contract
will be accounted for on an ASO
basis
Consolidated depreciation $300 million to $310 million $310 million to $320 million Approximately $35 million for 2011

and amortization (cash

and $40 million for 2012 is

flows statement)

expected to be included in
benefits expense on the income
statement

Consolidated interest

Approximately $110 million $105 million to $110 million

expense

Detailed pretax results and Retail Segment: $1.5 billion to $1.52 billion; Retail Segment: $1.3 billion to $1.35 billion;
margins approximately 7% pretax margin 5.4% to 5.6% pretax margin
Employer Group Segment: $235 million to Employer Group Segment: $100 million to
$240 million; approximately 2.5% pretax $150 million; 1.0% to 1.5% pretax margin
margin
Health and Well-Being Services Segment: Health and Well-Being Services Segment:
$340 million to $350 million; $425 million to $475 million; 3.0% to 3.5%
approximately 3% pretax margin pretax margin

Effective Tax Rate

Approximately 36.5% Approximately 36.5% to 37.0%
Cash flows from operations $2.0 billion to $2.2 billion $1.8 billion to $2.0 billion
Capital expenditures Approximately $305 million Approximately $350 million
Key Assumptions Affecting 2012 Guidance
(guidance midpoints used for simplicity)
Current FY11 EPS Guidance $ 8.37
Favorable prior year medical claims reserve development (all segments) (a) (0.57 )
Current FY11 EPS Guidance (non-GAAP) (b) 7.80
Retail Segment:
Reset of Medicare margins ($0.80 )
Impact of changes in average medical membership 0.45

Total Retail Segment changes

(0.35 )
Employer Group Segment:
Increase in Commercial medical cost trends (0.35 )
Impact of changes in average medical membership 0.10
Total Employer Group Segment changes (0.25 )
Health and Well-Being Services Segment:
Growth in Humana Pharmacy Solutions and other businesses 0.40
Other Businesses and Corporate:
New TRICARE South Region contract (0.20 )
Lower weighted average shares outstanding 0.10
FY12 EPS Guidance $ 7.50

(a)

Actuarial standards require the use of assumptions based on moderately adverse experience, which generally results in favorable reserve development, or reserves that are considered redundant. When the Company recognizes a release of the redundancy, we disclose the amount that is not in the ordinary course of business.

(b)

The Company has included certain financial measures that are not in accordance with Generally Accepted Accounting Principles (GAAP) in its summary of financial results within this earnings press release. The company believes that these non-GAAP measures, when presented in conjunction with 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.
Humana Inc.
Statistical Schedules
And
Supplementary Information
3Q11 Earnings Release

S-1

Humana Inc.
Statistical Schedules and Supplementary Information
3Q11 Earnings Release
Contents

Page

Description

S-3-4 Consolidated Statements of Income
S-5 3Q11 Segment Financial Information
S-6 YTD11 Segment Financial Information
S-7 3Q10 Segment Financial Information
S-8 YTD10 Segment Financial Information
S-9 Consolidated Balance Sheets
S-10-11 Consolidated Statements of Cash Flows
S-12 Key Income Statement Ratios and Segment Operating Results
S-13 Membership Detail
S-14-15 Premiums and Services Revenue Detail
S-16 Medicare Summary
S-17 Investments
S-18-20 Benefits Payable
S-21 Footnotes

S-2

Humana Inc.
Consolidated Statements of Income
In thousands, except per common share results
Three Months Ended September 30,
Dollar Percentage
2011 2010 Change Change
Revenues:
Premiums $ 8,852,536 $ 8,134,645 $ 717,891 8.8 %
Services 356,212 128,917 227,295 176.3 %
Investment income 91,895 87,250 4,645 5.3 %
Total revenues 9,300,643 8,350,812 949,831 11.4 %
Operating expenses:
Benefits 7,146,530 6,641,264 505,266 7.6 %
Operating costs 1,361,657 1,002,398 359,259 35.8 %
Depreciation and amortization 66,671 58,717 7,954 13.5 %
Total operating expenses 8,574,858 7,702,379 872,479 11.3 %
Income from operations 725,785 648,433 77,352 11.9 %
Interest expense 27,065 26,143 922 3.5 %
Income before income taxes 698,720 622,290 76,430 12.3 %
Provision for income taxes 253,960 229,069 24,891 10.9 %
Net income $ 444,760 $ 393,221 $ 51,539 13.1 %
Basic earnings per common share $ 2.71 $ 2.35 $ 0.36 15.3 %
Diluted earnings per common share $ 2.67 $ 2.32 $ 0.35 15.1 %
Shares used in computing basic earnings per common share (000's) 164,121 167,574
Shares used in computing diluted earnings per common share (000's) 166,580 169,582

S-3

Humana Inc.
Consolidated Statements of Income
In thousands, except per common share results
Nine Months Ended September 30,
Dollar Percentage
2011 2010 Change Change
Revenues:
Premiums $ 26,468,203 $ 24,673,259 $ 1,794,944 7.3 %
Services 1,034,663 394,639 640,024 162.2 %
Investment income 272,626 252,495 20,131 8.0 %
Total revenues 27,775,492 25,320,393 2,455,099 9.7 %
Operating expenses:
Benefits 21,761,052 20,327,742 1,433,310 7.1 %
Operating costs 3,809,905 3,156,945 652,960 20.7 %
Depreciation and amortization 200,561 181,957 18,604 10.2 %
Total operating expenses 25,771,518 23,666,644 2,104,874 8.9 %
Income from operations 2,003,974 1,653,749 350,225 21.2 %
Interest expense 81,956 78,679 3,277 4.2 %
Income before income taxes 1,922,018 1,575,070 346,948 22.0 %
Provision for income taxes 701,795 583,005 118,790 20.4 %
Net income $ 1,220,223 $ 992,065 $ 228,158 23.0 %
Basic earnings per common share $ 7.34 $ 5.90 $ 1.44 24.4 %
Diluted earnings per common share $ 7.24 $ 5.84 $ 1.40 24.0 %
Shares used in computing basic earnings per common share (000's) 166,138 168,082
Shares used in computing diluted earnings per common share (000's) 168,558 169,964

S-4

Humana Inc.
3Q11 Segment Financial Information
In thousands
Health and
Employer Well-Being Other Eliminations/
Retail Group Services Businesses Corporate Consolidated
Revenues - external customers
Premiums:
Medicare Advantage $ 4,566,087 $ 802,957 $ - $ - $ - $ 5,369,044
Medicare stand-alone PDP 578,786 1,910 - 42,524 - 623,220
Total Medicare 5,144,873 804,867 - 42,524 - 5,992,264
Fully-insured 221,632 1,185,285 - - - 1,406,917
Specialty 33,149 235,050 - - - 268,199
Military services - - - 943,984 - 943,984
Medicaid and other (A) - - - 241,172 - 241,172
Total premiums 5,399,654 2,225,202 - 1,227,680 - 8,852,536
Services revenue:
Provider - - 233,608 - - 233,608
ASO and other (B) 4,597 88,699 - 26,444 - 119,740
Pharmacy - - 2,864 - - 2,864
Total services revenue 4,597 88,699 236,472 26,444 - 356,212
Total revenues - external customers 5,404,251 2,313,901 236,472 1,254,124 - 9,208,748
Intersegment revenues
Services - 3,715 2,129,915 - (2,133,630 ) -
Products - - 461,213 - (461,213 ) -
Total intersegment revenues - 3,715 2,591,128 - (2,594,843 ) -
Investment income 19,023 11,879 - 14,324 46,669 91,895
Total revenues 5,423,274 2,329,495 2,827,600 1,268,448 (2,548,174 ) 9,300,643
Operating expenses:
Benefits 4,249,209 1,856,934 - 1,116,702 (76,315 ) 7,146,530
Operating costs 602,878 405,853 2,723,334 121,574 (2,491,982 ) 1,361,657
Depreciation and amortization 29,738 20,851 20,701 2,450 (7,069 ) 66,671
Total operating expenses 4,881,825 2,283,638 2,744,035 1,240,726 (2,575,366 ) 8,574,858
Income from operations 541,449 45,857 83,565 27,722 27,192 725,785
Interest expense - - - - 27,065 27,065
Income before income taxes $ 541,449 $ 45,857 $ 83,565 $ 27,722 $ 127 $ 698,720
Benefit ratio 78.7 % 83.5 % 91.0 % 80.7 %
Operating cost ratio 11.2 % 17.5 % 96.3 % 9.7 % 14.8 %

S-5

Humana Inc.
YTD11 Segment Financial Information
In thousands
Health and
Employer Well-Being Other Eliminations/
Retail Group Services Businesses Corporate Consolidated
Revenues - external customers
Premiums:
Medicare Advantage $ 13,645,876 $ 2,364,306 $ - $ - $ - $ 16,010,182
Medicare stand-alone PDP 1,737,603 5,638 - 195,604 - 1,938,845
Total Medicare 15,383,479 2,369,944 - 195,604 - 17,949,027
Fully-insured 628,811 3,600,476 - - - 4,229,287
Specialty 88,504 697,934 - - - 786,438
Military services - - - 2,801,999 - 2,801,999
Medicaid and other (A) - - - 701,452 - 701,452
Total premiums 16,100,794 6,668,354 - 3,699,055 - 26,468,203
Services revenue:
Provider - - 671,055 - - 671,055
ASO and other (B) 11,364 267,902 - 76,659 - 355,925
Pharmacy - - 7,683 - - 7,683
Total services revenue 11,364 267,902 678,738 76,659 - 1,034,663
Total revenues - external customers 16,112,158 6,936,256 678,738 3,775,714 - 27,502,866
Intersegment revenues
Services - 10,313 6,324,992 - (6,335,305 ) -
Products - - 1,329,722 - (1,329,722 ) -
Total intersegment revenues - 10,313 7,654,714 - (7,665,027 ) -
Investment income 56,968 35,287 - 39,999 140,372 272,626
Total revenues 16,169,126 6,981,856 8,333,452 3,815,713 (7,524,655 ) 27,775,492
Operating expenses:
Benefits 13,193,598 5,408,049 - 3,375,461 (216,056 ) 21,761,052
Operating costs 1,625,423 1,216,685 8,004,784 351,145 (7,388,132 ) 3,809,905
Depreciation and amortization 88,598 64,101 60,927 6,802 (19,867 ) 200,561
Total operating expenses 14,907,619 6,688,835 8,065,711 3,733,408 (7,624,055 ) 25,771,518
Income from operations 1,261,507 293,021 267,741 82,305 99,400 2,003,974
Interest expense - - - - 81,956 81,956
Income before income taxes $ 1,261,507 $ 293,021 $ 267,741 $ 82,305 $ 17,444 $ 1,922,018
Benefit ratio 81.9 % 81.1 % 91.3 % 82.2 %
Operating cost ratio 10.1 % 17.5 % 96.1 % 9.3 % 13.9 %

S-6

Humana Inc.
3Q10 Segment Financial Information
In thousands
Health and
Employer Well-Being Other Eliminations/
Retail Group Services Businesses Corporate Consolidated
Revenues - external customers
Premiums:
Medicare Advantage $ 4,075,532 $ 723,378 $ - $ - $ - $ 4,798,910
Medicare stand-alone PDP 504,929 1,153 - 73,501 - 579,583
Total Medicare 4,580,461 724,531 - 73,501 - 5,378,493
Fully-insured 189,503 1,275,945 - - - 1,465,448
Specialty 21,663 216,814 - - - 238,477
Military services - - - 873,588 - 873,588
Medicaid and other (A) - - - 178,639 - 178,639
Total premiums 4,791,627 2,217,290 - 1,125,728 - 8,134,645
Services revenue:
Provider - - 3,815 - - 3,815
ASO and other (B) 3,116 94,884 - 27,102 - 125,102
Pharmacy - - - - - -
Total services revenue 3,116 94,884 3,815 27,102 - 128,917
Total revenues - external customers 4,794,743 2,312,174 3,815 1,152,830 - 8,263,562
Intersegment revenues
Services - 3,224 1,843,235 - (1,846,459 ) -
Products - - 342,777 - (342,777 ) -
Total intersegment revenues - 3,224 2,186,012 - (2,189,236 ) -
Investment income 21,265 11,165 - 11,482 43,338 87,250
Total revenues 4,816,008 2,326,563 2,189,827 1,164,312 (2,145,898 ) 8,350,812
Operating expenses:
Benefits 3,879,424 1,818,752 - 1,021,082 (77,994 ) 6,641,264
Operating costs 461,038 407,117 2,106,079 118,551 (2,090,387 ) 1,002,398
Depreciation and amortization 27,625 21,704 8,211 2,664 (1,487 ) 58,717
Total operating expenses 4,368,087 2,247,573 2,114,290 1,142,297 (2,169,868 ) 7,702,379
Income from operations 447,921 78,990 75,537 22,015 23,970 648,433
Interest expense - - - - 26,143 26,143
Income (loss) before income taxes $ 447,921 $ 78,990 $ 75,537 $ 22,015 $ (2,173 ) $ 622,290
Benefit ratio 81.0 % 82.0 % 90.7 % 81.6 %
Operating cost ratio 9.6 % 17.6 % 96.2 % 10.3 % 12.1 %

S-7

Humana Inc.
YTD10 Segment Financial Information
In thousands
Health and
Employer Well-Being Other Eliminations/
Retail Group Services Businesses Corporate Consolidated
Revenues - external customers
Premiums:
Medicare Advantage $ 12,241,366 $ 2,259,733 $ - $ - $ - $ 14,501,099
Medicare stand-alone PDP 1,512,738 3,443 - 342,649 - 1,858,830
Total Medicare 13,754,104 2,263,176 - 342,649 - 16,359,929
Fully-insured 551,581 3,904,705 - - - 4,456,286
Specialty 58,853 663,055 - - - 721,908
Military services - - - 2,603,950 - 2,603,950
Medicaid and other (A) - - - 531,186 - 531,186
Total premiums 14,364,538 6,830,936 - 3,477,785 - 24,673,259
Services revenue:
Provider - - 9,869 - - 9,869
ASO and other (B) 8,457 294,241 - 82,072 - 384,770
Pharmacy - - - - - -
Total services revenue 8,457 294,241 9,869 82,072 - 394,639
Total revenues - external customers 14,372,995 7,125,177 9,869 3,559,857 - 25,067,898
Intersegment revenues
Services - 9,892 5,674,965 - (5,684,857 ) -
Products - - 936,673 - (936,673 ) -
Total intersegment revenues - 9,892 6,611,638 - (6,621,530 ) -
Investment income 62,002 32,412 - 31,363 126,718 252,495
Total revenues 14,434,997 7,167,481 6,621,507 3,591,220 (6,494,812 ) 25,320,393
Operating expenses:
Benefits 11,796,751 5,586,593 - 3,125,564 (181,166 ) 20,327,742
Operating costs 1,512,779 1,250,446 6,427,167 348,611 (6,382,058 ) 3,156,945
Depreciation and amortization 86,826 70,219 19,703 8,684 (3,475 ) 181,957
Total operating expenses 13,396,356 6,907,258 6,446,870 3,482,859 (6,566,699 ) 23,666,644
Income from operations 1,038,641 260,223 174,637 108,361 71,887 1,653,749
Interest expense - - - - 78,679 78,679
Income (loss) before income taxes $ 1,038,641 $ 260,223 $ 174,637 $ 108,361 $ (6,792 ) $ 1,575,070
Benefit ratio 82.1 % 81.8 % 89.9 % 82.4 %
Operating cost ratio 10.5 % 17.5 % 97.1 % 9.8 % 12.6 %

S-8

Humana Inc.
Consolidated Balance Sheets
Dollars in thousands, except share amounts
September 30, December 31, Sequential Change
2011 2010 Dollar Percent
Assets
Current assets:
Cash and cash equivalents $ 4,019,405 $ 1,673,137
Investment securities 7,864,637 6,872,767
Receivables, net 1,036,317 959,018
Securities lending invested collateral 5,486 49,636
Other 706,493 583,141
Total current assets 13,632,338 10,137,699 $ 3,494,639 34.5 %
Property and equipment, net 850,888 815,337
Long-term investment securities 1,695,943 1,499,672
Goodwill 2,579,916 2,567,809
Other 1,140,644 1,082,736
Total assets 19,899,729 16,103,253 $ 3,796,476 23.6 %
Liabilities and Stockholders' Equity
Current liabilities:
Benefits payable 3,868,428 3,469,306
Trade accounts payable and accrued expenses 2,332,638 1,624,832
Book overdraft 298,587 409,385
Securities lending payable 11,482 55,693
Unearned revenues 2,005,366 185,410
Total current liabilities 8,516,501 5,744,626 $ 2,771,875 48.3 %
Long-term debt 1,661,552 1,668,849
Future policy benefits payable 1,580,585 1,492,855
Other long-term liabilities 283,121 272,867
Total liabilities 12,041,759 9,179,197 $ 2,862,562 31.2 %
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; 192,804,649 issued at September 30, 2011

32,133 31,707
Capital in excess of par value 1,913,665 1,737,207
Retained earnings 6,667,005 5,529,001
Accumulated other comprehensive income 279,844 120,584
Treasury stock, at cost, 29,300,843 shares at September 30, 2011 (1,034,677 ) (494,443 )
Total stockholders' equity 7,857,970 6,924,056 $ 933,914 13.5 %
Total liabilities and stockholders' equity $ 19,899,729 $ 16,103,253 $ 3,796,476 23.6 %
Debt-to-total capitalization ratio 17.5 % 19.4 %

S-9

Humana Inc.
Consolidated Statements of Cash Flows
Dollars in thousands
Three Months Ended September 30,
Dollar Percentage
2011 2010 Change Change
Cash flows from operating activities
Net income $ 444,760 $ 393,221

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization 74,581 64,557
Net realized capital gains (2,146 ) (4,310 )
Stock-based compensation 11,800 12,477
Benefit from deferred income taxes (9,316 ) (34,656 )

Changes in operating assets and liabilities excluding the effects of acquisitions:

Receivables 510,075 517,074
Other assets (30,292 ) 46,045
Benefits payable (84,757 ) (102,812 )
Other liabilities 189,823 301,608
Unearned revenues 1,800,482 4,398
Other 14,305 11,607
Net cash provided by operating activities 2,919,315 1,209,209 $ 1,710,106 141.4 %
Cash flows from investing activities
Acquisitions, net of cash acquired (2,700 ) (8,451 )
Purchases of property and equipment (86,745 ) (61,005 )
Purchases of investment securities (765,270 ) (823,184 )
Proceeds from maturities of investment securities 352,858 478,569
Proceeds from sales of investment securities 193,455 207,630
Change in securities lending collateral 24,054 13,512
Net cash used in investing activities (284,348 ) (192,929 ) ($91,419 ) -47.4 %
Cash flows from financing activities
Receipts from CMS contract deposits 880,474 439,622
Withdrawals from CMS contract deposits (843,397 ) (473,679 )
Change in book overdraft 81,300 1,313
Change in securities lending payable (24,054 ) (13,512 )
Common stock repurchases (239,446 ) (50,301 )
Excess tax benefit from stock-based compensation 959 142
Dividends paid (41,494 ) -
Proceeds from stock option exercises and other 2,272 4,005
Net cash used in financing activities (183,386 ) (92,410 ) ($90,976 ) -98.4 %
Increase in cash and cash equivalents 2,451,581 923,870
Cash and cash equivalents at beginning of period 1,567,824 1,998,982
Cash and cash equivalents at end of period $ 4,019,405 $ 2,922,852

S-10

Humana Inc.
Consolidated Statements of Cash Flows
Dollars in thousands
Nine Months Ended September 30,
Dollar Percentage
2011 2010 Change Change
Cash flows from operating activities
Net income $ 1,220,223 $ 992,065

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization 225,164 196,603
Net realized capital gains (7,255 ) (12,286 )
Stock-based compensation 52,778 52,104
Provision for (benefit from) deferred income taxes 12,102 (115,923 )

Changes in operating assets and liabilities excluding the effects of acquisitions:

Receivables (77,299 ) 15,592
Other assets (205,092 ) 119,728
Benefits payable 399,122 504,337
Other liabilities 391,892 520,771
Unearned revenues 1,819,931 (15,073 )
Other 44,414 31,253
Net cash provided by operating activities 3,875,980 2,289,171 $ 1,586,809 69.3 %
Cash flows from investing activities
Acquisitions, net of cash acquired (13,652 ) (10,120 )
Purchases of property and equipment (215,926 ) (152,432 )
Purchases of investment securities (2,667,353 ) (3,582,352 )
Proceeds from maturities of investment securities 1,084,062 1,492,601
Proceeds from sales of investment securities 625,461 1,298,912
Change in securities lending collateral 44,211 88,321
Net cash used in investing activities (1,143,197 ) (865,070 ) ($278,127 ) -32.2 %
Cash flows from financing activities
Receipts from CMS contract deposits 2,135,321 1,319,874
Withdrawals from CMS contract deposits (1,909,875 ) (1,117,655 )
Change in book overdraft (110,798 ) (133,235 )
Change in securities lending payable (44,211 ) (88,321 )
Common stock repurchases (540,234 ) (108,170 )
Excess tax benefit from stock-based compensation 12,246 1,406
Dividends paid (41,494 ) -
Proceeds from stock option exercises and other 112,530 11,264
Net cash used in financing activities (386,515 ) (114,837 ) ($271,678 ) -236.6 %
Increase in cash and cash equivalents 2,346,268 1,309,264
Cash and cash equivalents at beginning of period 1,673,137 1,613,588
Cash and cash equivalents at end of period $ 4,019,405 $ 2,922,852

S-11

Humana Inc.
Key Income Statement Ratios and Segment Operating Results
Dollars in thousands
Three Months Ended September 30, Nine Months Ended September 30,
Percentage Percentage
2011 2010 Difference Change 2011 2010 Difference Change
Benefit ratio
Retail 78.7 % 81.0 % -2.3 % 81.9 % 82.1 % -0.2 %
Employer Group 83.5 % 82.0 % 1.5 % 81.1 % 81.8 % -0.7 %
Other Businesses 91.0 % 90.7 % 0.3 % 91.3 % 89.9 % 1.4 %
Consolidated 80.7 % 81.6 % -0.9 % 82.2 % 82.4 % -0.2 %
Operating cost ratio (C)
Retail 11.2 % 9.6 % 1.6 % 10.1 % 10.5 % -0.4 %
Employer Group 17.5 % 17.6 % -0.1 % 17.5 % 17.5 % 0.0 %
Health and Well-Being Services 96.3 % 96.2 % 0.1 % 96.1 % 97.1 % -1.0 %
Other Businesses 9.7 % 10.3 % -0.6 % 9.3 % 9.8 % -0.5 %
Consolidated 14.8 % 12.1 % 2.7 % 13.9 % 12.6 % 1.3 %
Detail of pretax income
Retail $ 541,449 $ 447,921 $ 93,528 20.9 % $ 1,261,507 $ 1,038,641 $ 222,866 21.5 %
Employer Group $ 45,857 $ 78,990 ($33,133 ) -41.9 % $ 293,021 $ 260,223 $ 32,798 12.6 %
Health and Well-Being Services $ 83,565 $ 75,537 $ 8,028 10.6 % $ 267,741 $ 174,637 $ 93,104 53.3 %
Other Businesses $ 27,722 $ 22,015 $ 5,707 25.9 % $ 82,305 $ 108,361 ($26,056 ) -24.0 %
Consolidated

$

698,720

$

622,290 $ 76,430 12.3 %

$

1,922,018

$

1,575,070 $ 346,948 22.0 %

S-12

Humana Inc.
Membership Detail
In thousands
Ending Average 3Q11 Ending Year-over-year Change Ending Sequential Change
September 30, 2011 September 30, 2010 Amount Percent June 30, 2011 Amount Percent
Medical Membership:
Retail
Medicare Advantage 1,613.4 1,610.2 1,462.2 151.2 10.3 % 1,602.5 10.9 0.7 %
Medicare stand-alone PDPs 2,478.1 2,456.0 1,688.2 789.9 46.8 % 2,408.7 69.4 2.9 %
Individual commercial 424.0 417.5 374.9 49.1 13.1 % 403.7 20.3 5.0 %
Medicare Supplement 56.7 55.5 37.8 18.9 50.0 % 52.9 3.8 7.2 %
Total Retail 4,572.2 4,539.2 3,563.1 1,009.1 28.3 % 4,467.8 104.4 2.3 %
Employer Group
Medicare Advantage 287.9 287.0 274.2 13.7 5.0 % 282.0 5.9 2.1 %
Medicare Advantage ASO 27.6 27.6 28.4 (0.8 ) -2.8 % 27.7 (0.1 ) -0.4 %
Medicare stand-alone PDPs 4.2 4.2 2.4 1.8 75.0 % 4.1 0.1 2.4 %
Fully-insured medical commercial 1,181.3 1,179.2 1,257.9 (76.6 ) -6.1 % 1,186.2 (4.9 ) -0.4 %
ASO commercial 1,287.0 1,292.3 1,460.3 (173.3 ) -11.9 % 1,313.6 (26.6 ) -2.0 %
Total Employer Group 2,788.0 2,790.3 3,023.2 (235.2 ) -7.8 % 2,813.6 (25.6 ) -0.9 %
Other Businesses
Military Services 3,025.9 3,024.9 3,031.1 (5.2 ) -0.2 % 3,015.2 10.7 0.4 %
Medicaid and other 621.5 619.8 457.1 164.4 36.0 % 619.2 2.3 0.4 %
LI-NET (D) 74.6 75.6 95.0 (20.4 ) -21.5 % 87.0 (12.4 ) -14.3 %
Total Other Businesses 3,722.0 3,720.3 3,583.2 138.8 3.9 % 3,721.4 0.6 0.0 %
Total Medical Membership 11,082.2 11,049.8 10,169.5 912.7 9.0 % 11,002.8 79.4 0.7 %
Specialty Membership:
Retail
Dental - fully-insured 564.7 547.8 363.6 201.1 55.3 % 512.5 52.2 10.2 %
Vision 79.3 76.4 49.2 30.1 61.2 % 70.8 8.5 12.0 %
Other supplemental benefits (E) 111.6 106.8 74.2 37.4 50.4 % 97.2 14.4 14.8 %
Total Retail 755.6 731.0 487.0 268.6 55.2 % 680.5 75.1 11.0 %
Employer Group
Dental - fully-insured 2,259.5 2,264.5 2,242.2 17.3 0.8 % 2,250.3 9.2 0.4 %
Dental - ASO 876.9 868.9 1,236.5 (359.6 ) -29.1 % 1,220.7 (343.8 ) -28.2 %
Vision 2,272.8 2,262.1 2,159.2 113.6 5.3 % 2,227.0 45.8 2.1 %
Other supplemental benefits (E) 1,010.1 993.7 864.8 145.3 16.8 % 971.6 38.5 4.0 %
Total Employer Group 6,419.3 6,389.2 6,502.7 (83.4 ) -1.3 % 6,669.6 (250.3 ) -3.8 %
Total Specialty Membership 7,174.9 7,120.2 6,989.7 185.2 2.6 % 7,350.1 (175.2 ) -2.4 %

S-13

Humana Inc.
Premiums and Services Revenue Detail
Dollars in thousands, except per member per month
Per Member per Month (F)
Three Months Ended September 30, Three Months Ended September 30,
Dollar Percentage
2011 2010 Change Change 2011 2010
Premiums and Services Revenue
Retail:
Medicare Advantage $ 4,566,087 $ 4,075,532 $ 490,555 12.0 % $ 945 $ 929
Medicare stand-alone PDPs 578,786 504,929 73,857 14.6 % $ 79 $ 99
Individual commercial 194,364 171,382 22,982 13.4 % $ 155 $ 153
Medicare Supplemental 27,268 18,121 9,147 50.5 % $ 164 $ 162
Specialty 33,149 21,663 11,486 53.0 % $ 15 $ 15
ASO & other services (B) 4,597 3,116 1,481 47.5 %
Total Retail 5,404,251 4,794,743 609,508 12.7 %
Employer Group:
Medicare Advantage 802,957 723,378 79,579 11.0 % $ 933 $ 881
Medicare stand-alone PDPs 1,910 1,153 757 65.7 % $ 152 $ 160
Fully-insured medical commercial 1,185,285 1,275,945 (90,660 ) -7.1 % $ 335 $ 336
Specialty 235,050 216,814 18,236 8.4 % $ 14 $ 14
ASO & other services (B) 92,414 98,108 (5,694 ) -5.8 %
Total Employer Group 2,317,616 2,315,398 2,218 0.1 %
Health and Well-Being Services:
Pharmacy solutions 2,484,186 2,079,329 404,857 19.5 %
Primary care services 277,030 56,746 220,284 388.2 %
Home care services 20,904 9,413 11,491 122.1 %
Integrated wellness services 45,480 44,339 1,141 2.6 %
Total Health and Well-Being Services 2,827,600 2,189,827 637,773 29.1 %
Other Businesses:
Military services (G) 967,863 895,756 72,107 8.0 % $ 181 $ 165
LI-NET (D) 42,524 73,501 (30,977 ) -42.1 % $ 187 $ 265
Medicaid and other (H) 243,737 183,573 60,164 32.8 % $ 130 $ 131
Total Other Businesses 1,254,124 1,152,830 101,294 8.8 %

S-14

Humana Inc.
Premiums and Services Revenue Detail
Dollars in thousands, except per member per month
Per Member per Month (F)
Nine Months Ended September 30, Nine Months Ended September 30,
Dollar Percentage
2011 2010 Change Change 2011 2010
Premiums and Services Revenue
Retail:
Medicare Advantage $ 13,645,876 $ 12,241,366 $ 1,404,510 11.5 % $ 947 $ 935
Medicare stand-alone PDPs 1,737,603 1,512,738 224,865 14.9 % $ 81 $ 98
Individual commercial 553,191 499,817 53,374 10.7 % $ 155 $ 150
Medicare Supplemental 75,620 51,764 23,856 46.1 % $ 161 $ 163
Specialty 88,504 58,853 29,651 50.4 % $ 15 $ 15
ASO & other services (B) 11,364 8,457 2,907 34.4 %
Total Retail 16,112,158 14,372,995 1,739,163 12.1 %
Employer Group:
Medicare Advantage 2,364,306 2,259,733 104,573 4.6 % $ 929 $ 933
Medicare stand-alone PDPs 5,638 3,443 2,195 63.8 % $ 152 $ 159
Fully-insured medical commercial 3,600,476 3,904,705 (304,229 ) -7.8 % $ 339 $ 331
Specialty 697,934 663,055 34,879 5.3 % $ 14 $ 13
ASO & other services (B) 278,215 304,133 (25,918 ) -8.5 %
Total Employer Group 6,946,569 7,135,069 (188,500 ) -2.6 %
Health and Well-Being Services:
Pharmacy solutions 7,346,561 6,336,725 1,009,836 15.9 %
Primary care services 795,952 126,736 669,216 528.0 %
Home care services 55,829 24,652 31,177 126.5 %
Integrated wellness services 135,110 133,394 1,716 1.3 %
Total Health and Well-Being Services 8,333,452 6,621,507 1,711,945 25.9 %
Other Businesses:
Military services (G) 2,868,630 2,670,959 197,671 7.4 % $ 179 $ 165
LI-NET (D) 195,604 342,649 (147,045 ) -42.9 % $ 243 $ 331
Medicaid and other (H) 711,480 546,249 165,231 30.2 % $ 126 $ 131
Total Other Businesses 3,775,714 3,559,857 215,857 6.1 %

S-15

Humana Inc.
Medicare Summary
In thousands, except per member per month
Per Member per Month (F)
Three Months Ended September 30, Year-over-year Change Three Months Ended September 30,
2011 2010 Amount Percent 2011 2010
Premiums
Medicare Advantage $ 5,369,044 $ 4,798,910 $ 570,134 11.9 % $ 943

$

921

Medicare stand-alone PDPs 623,220 579,583 43,637 7.5 % $ 82

$

108

Total Medicare $ 5,992,264 $ 5,378,493 $ 613,771 11.4 %
Per Member per Month (F)
Nine Months Ended September 30, Year-over-year Change Nine Months Ended September 30,
2011 2010 Amount Percent 2011 2010
Premiums and Services Revenue
Medicare Advantage $ 16,010,182 $ 14,501,099 $ 1,509,083 10.4 % $ 944

$

934

Medicare stand-alone PDPs 1,938,845 1,858,830 80,015 4.3 % $ 87

$

113

Total Medicare $ 17,949,027 $ 16,359,929 $ 1,589,098 9.7 %
Ending Ending Year-over-year Change Ending Year-to-date Change
September 30, 2011 September 30, 2010 Amount Percent December 31, 2010 Amount Percent
Fully-Insured Membership
Medicare Advantage 1,901.3 1,736.4 164.9 9.5 % 1,733.8 167.5 9.7 %
Medicare stand-alone PDPs 2,556.9 1,785.6 771.3 43.2 % 1,758.8 798.1 45.4 %
Total Medicare 4,458.2 3,522.0 936.2 26.6 % 3,492.6 965.6 27.6 %

S-16

Humana Inc. Fair value
Investments
Dollars in thousands
9/30/2011 6/30/2011 12/31/2010
Investment Portfolio:
Cash & cash equivalents $ 4,019,405 $ 1,567,824 $ 1,673,137
Investment securities 7,864,637 7,609,737 6,872,767
Long-term investments 1,695,943 1,592,919 1,499,672
Total investment portfolio $ 13,579,985 $ 10,770,480 $ 10,045,576
Duration (I) 3.10 3.84 3.96
Average Credit Rating AA AA- AA
Securities Lending Invested Collateral Portfolio:
Cash & cash equivalents $ 5,486 $ 29,737 $ 24,638
Asset-backed securities - - 24,998
$ 5,486 $ 29,737 $ 49,636
Average Credit Rating AAA AAA AAA
Investment Portfolio Detail:
Cash and cash equivalents $ 4,019,405 $ 1,567,824 $ 1,673,137
U.S. Government and agency obligations
U.S. Treasury and agency obligations 880,719 822,787 711,613
U.S. Government residential mortgage-backed 1,768,245 1,794,099 1,634,014
U.S. Government commercial mortgage-backed 33,407 29,937 29,165
Total U.S. Government and agency obligations 2,682,371 2,646,823 2,374,792
Tax-exempt municipal securities
Pre-refunded 329,005 329,598 343,913
Insured 633,319 628,344 597,165
Other 1,741,925 1,510,888 1,440,450
Auction rate securities 21,440 21,053 51,806
Total tax-exempt municipal securities 2,725,689 2,489,883 2,433,334
Residential mortgage-backed
Prime residential mortgages 44,512 46,684 52,474
Alt-A residential mortgages 1,946 2,002 2,178
Sub-prime residential mortgages 970 1,063 1,235
Total residential mortgage-backed 47,428 49,749 55,887
Commercial mortgage-backed 387,911 414,963 321,031
Asset-backed securities 107,453 117,385 149,751
Corporate securities
Financial services 898,349 984,504 891,390
Other 2,706,046 2,494,016 2,140,921
Total corporate securities 3,604,395 3,478,520 3,032,311
Redeemable preferred stocks 5,333 5,333 5,333
Total investment portfolio $ 13,579,985 $ 10,770,480 $ 10,045,576

S-17

Humana Inc.
Detail of Benefits Payable Balance and Year-to-Date Changes
Dollars in thousands
September 30, June 30, December 31,
2011 2011 2010
Detail of benefits payable
IBNR and other benefits payable (J) $ 2,821,687 $ 2,907,995 $ 2,753,141
Unprocessed claim inventories (K) 418,800 409,900 373,800
Processed claim inventories (L) 94,599 161,246 65,283
Payable to pharmacy benefit administrator (M) 157,476 142,046 21,902
Benefits payable, excluding military services 3,492,562 3,621,187 3,214,126
Military services benefits payable (N) 375,866 331,998 255,180
Total Benefits Payable $ 3,868,428 $ 3,953,185 $ 3,469,306
Nine Months Ended Nine Months Ended Year Ended
September 30, 2011 September 30, 2010 December 31, 2010

Year-to-date changes in benefits payable, excluding military services (O)

Balances at January 1 $ 3,214,126 $ 2,943,379 $ 2,943,379
Incurred related to:
Current year 19,475,885 18,330,515 24,185,717
Prior years (P) (318,159 ) (401,250 ) (434,015 )
Total incurred 19,157,726 17,929,265 23,751,702
Paid related to:
Current year (17,009,970 ) (15,636,696 ) (21,671,345 )
Prior years (1,869,320 ) (1,824,503 ) (1,809,610 )
Total paid (18,879,290 ) (17,461,199 ) (23,480,955 )
Balances at end of period $ 3,492,562 $ 3,411,445 $ 3,214,126
Nine Months Ended Nine Months Ended Year Ended
September 30, 2011 September 30, 2010 December 31, 2010
Summary of Consolidated Benefit Expense:
Total benefit expense incurred, per above $ 19,157,726 $ 17,929,265 $ 23,751,702
Military services benefit expense 2,512,201 2,307,618 3,059,492
Future policy benefit expense (Q) 91,125 90,859 305,875
Consolidated Benefit Expense $ 21,761,052 $ 20,327,742 $ 27,117,069

S-18

Humana Inc.
Benefits Payable Statistics (R)
Receipt Cycle Time (S)
2011 2010 Change

Percentage

Change

1st Quarter Average 13.8 13.8 0.0 0.0 %
2nd Quarter Average 13.8 13.9 (0.1 ) -0.7 %
3rd Quarter Average 13.6 13.9 (0.3 ) -2.2 %
4th Quarter Average - 13.6 n/a n/a
Full Year Average 13.7 13.8 (0.1 ) -0.7 %
Unprocessed Claims Inventories
Date

Estimated Valuation

(000's)

Claim Item

Counts

Number of Days

on Hand

9/30/2009 $ 317,100 856,500 4.9
12/31/2009 $ 323,000 775,500 4.3
3/31/2010 $ 426,200 1,091,700 5.6
6/30/2010 $ 433,800 1,009,200 4.9
9/30/2010 $ 428,900 1,064,200 5.2
12/31/2010 $ 373,800 980,900 5.0
3/31/2011 $ 481,700 1,196,700 6.0
6/30/2011 $ 409,900 1,092,600 5.1
9/30/2011 $ 418,800 1,272,300 5.7

S-19

Humana Inc.
Benefits Payable Statistics (Continued) (R)
Days in Claims Payable (T)
Quarter Ended

Days in Claims

Payable (DCP)

Change Last 4

Quarters

Percentage

Change

DCP Excluding

Capitation

Change Last 4

Quarters

Percentage

Change

9/30/2009 56.2 (1.9 ) -3.3 % 62.7 (2.4 ) -3.7 %
12/31/2009 55.4 (4.0 ) -6.7 % 62.1 (4.4 ) -6.6 %
3/31/2010 54.2 (0.4 ) -0.7 % 60.8 (0.1 ) -0.2 %
6/30/2010 57.0 0.9 1.6 % 64.3 2.8 4.6 %
9/30/2010 57.8 1.6 2.8 % 64.5 1.8 2.9 %
12/31/2010 53.5 (1.9 ) -3.4 % 60.0 (2.1 ) -3.4 %
3/31/2011 55.5 1.3 2.4 % 61.8 1.0 1.6 %
6/30/2011 56.0 (1.0 ) -1.8 % 62.0 (2.3 ) -3.6 %
9/30/2011 54.2 (3.6 ) -6.2 % 59.5 (5.0 ) -7.8 %
Year-to-Date Change in Days in Claims Payable (U)
2011 2010
DCP - beginning of period 53.5 55.4
Components of change in DCP:
Change in unprocessed claims inventories (0.1 ) 0.8
Change in processed claims inventories 0.4 0.3
Change in pharmacy payment cutoff 0.5 (2.9 )
All other (0.1 ) (0.1 )
DCP - end of period 54.2 53.5

S-20

Humana Inc.
Footnotes to Statistical Schedules and Supplementary Information
3Q11 Earnings Release
(A) The Medicaid and other category includes the company's Medicaid business as well as the closed block of long-term care.
(B) The ASO and other category is primarily comprised of ASO fees and other ancillary services fees.
(C) The operating cost ratio is defined as operating costs as a percent of total revenues excluding investment income.
(D) LI-NET is the CMS Limited Income Newly Eligible Transition program, operated by Humana, to provide Part D prescription drug coverage for all uncovered
Full Duals and SSI-only beneficiaries on a retroactive basis and all uncovered LIS eligible beneficiaries on a current basis.
(E) Other supplemental benefits include life, disability, and fixed benefit products including cancer and critical illness policies.
(F) 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).
(G) Military services revenues are generally not contracted on a per-member basis.
(H) Includes premiums associated with Medicaid and the closed block of long-term care as well as services revenue.
(I) Duration is the time-weighted average of the present value of the bond portfolio cash flows.
(J) IBNR represents an estimate of benefit expenses payable for claims incurred but not reported (IBNR) at the balance sheet date. The level of IBNR is
primarily impacted by membership levels, benefit 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 benefits payable
includes amounts payable to providers under capitation arrangements.
(K) Unprocessed claim inventories represent the estimated valuation of claims received but not yet fully processed.
(L) 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.
(M) 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 8 days (8(th), 16(th), and 24th of month) and the last day of the month.
(N) Military services benefits payable primarily consist of IBNR and to a lesser extent risk share payables to the Department of Defense and liabilities
to subcontractors.
(O) The table excludes activity associated with military services benefits payable, because the federal government bears a substantial portion of the risk
associated with financing the cost of health benefits. More specifically, the risk-sharing provisions of the military services contracts with the federal
government and with subcontractors effectively limit profits and losses when actual claim experience varies from the targeted claim amount negotiated
annually. As a result of these contract provisions, the impact of changes in estimates for prior year military services benefits payable are
substantially offset by the associated changes in estimates of revenue from health care services reimbursements. As such, any impact on the company's
results of operations is reduced substantially, whether positive or negative.
(P) 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 the company's estimate of claim reserves during the quarter.
(Q) Future policy benefit expense has a related liability classified as a long-term liability on the balance sheet.
(R) Benefits reserves statistics represents fully-insured medical claims data and excludes military services claims data and specialty benefits.
(S) 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 the company's largest claim processing platforms represent approximately 92% of the company's fully-insured medical claims volume.
Pharmacy and specialty claims, including dental, vision and other supplemental benefits, are excluded from this measurement.

(T) A common metric for monitoring benefits payable levels relative to the benefit expense is days in claims payable, or DCP, which represents the benefits

payable at the end of the period divided by average benefit expenses per day in the quarterly period. Since the company has some providers under capitation

payment arrangements (which do not require a benefits payable IBNR reserve), the company has also summarized this metric excluding capitation expense.

In addition, this calculation excludes the impact of the company's military services and stand-alone PDP business.

(U) DCP fluctuates due to a number of issues, the more significant of which are detailed in this rollforward. 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
military services and Medicare stand-alone PDPs upon DCP.

S-21

SOURCE: Humana Inc.

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