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Form 8-K HUMANA INC For: Jul 28

July 28, 2021 7:08 AM EDT

n e w s r e l e a s e
Exhibit 99.1
Humana Inc.
500 West Main Street
P.O. Box 1438
Louisville, KY 40202
http://www.humana.com
FOR MORE INFORMATION CONTACT:
Amy Smith
Humana Investor Relations
(502) 580-2811
e-mail: Amysmith@humana.com
humanalogoa05b.jpg
Mark Taylor
Humana Corporate Communications
(317) 753-0345
e-mail: MTaylor108@humana.com



Humana Reports Second Quarter 2021 Financial Results;
Maintains Full Year 2021 Adjusted EPS Financial Guidance

Reports 2Q21 earnings per diluted common share of $4.55 on a GAAP basis, $6.89 on an Adjusted basis; reports YTD 2021 EPS of $10.94 on a GAAP basis, $14.56 on an Adjusted basis
Updates FY 2021 EPS guidance to a range of $24.97 to $25.47 on a GAAP basis, maintains $21.25 to $21.75 on Adjusted basis; while acknowledging the continued heightened uncertainty surrounding the ongoing pandemic
Reaffirms FY 2021 expected individual Medicare Advantage membership growth range of approximately 425,000 to 475,000 members
Reflects solid fundamentals in the company's businesses, offset by continued impacts of the COVID-19 pandemic; year-over-year comparisons materially impacted by the significant, temporary deferral of care in 2Q20 amid the pandemic


LOUISVILLE, KY (July 28, 2021) – Humana Inc. (NYSE: HUM) today reported consolidated pretax income and diluted earnings per common share for the quarter ended June 30, 2021 (2Q21) versus the quarter ended June 30, 2020 (2Q20) and for the six months ended June 30, 2021 (YTD 2021) versus the six months ended June 30, 2020 (YTD 2020) as noted in the tables below.


Consolidated income before income taxes and equity in earnings (pretax income) In millions
2Q21 (a)2Q20 (b)YTD 2021 (c)YTD 2020 (d)
Generally Accepted Accounting Principles (GAAP)$738 $2,586 $1,778 $3,303 
Amortization associated with identifiable intangibles15 22 30 43 
Put/call valuation adjustments associated with company's non-consolidating minority interest investments419 (227)534 70 
Transaction and integration costs associated with pending Kindred at Home acquisition22 22 
Change in fair market value of publicly-traded equity securities(63) 22 
Adjusted (non-GAAP)$1,131 $2,381 $2,386 $3,416 


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Diluted earnings per common share (EPS)2Q21 (a)2Q20 (b)YTD 2021 (c)YTD 2020 (d)
GAAP$4.55 $13.75 $10.94 $17.31 
Amortization associated with identifiable intangibles0.09 0.13 0.18 0.26 
Put/call valuation adjustments associated with company's non-consolidating minority interest investments2.49 (1.32)3.18 0.40 
Transaction and integration costs associated with pending Kindred at Home acquisition0.13 — 0.13 — 
Change in fair market value of publicly-traded equity securities(0.37)— 0.13 — 
Adjusted (non-GAAP)$6.89 $12.56 $14.56 $17.97 

The company has included financial measures throughout this earnings release that are not in accordance with GAAP. Management believes that these 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. Consequently, management uses these non-GAAP (Adjusted) financial measures as indicators of the company’s business performance, as well as for operational planning and decision making purposes. Non-GAAP (Adjusted) financial measures should be considered in addition to, but not as a substitute for, or superior to, financial measures prepared in accordance with GAAP. All financial measures in this press release are in accordance with GAAP unless otherwise indicated. Please refer to the footnotes for a detailed description of each item adjusted out of GAAP financial measures to arrive at a non-GAAP (Adjusted) financial measure.

“Humana’s fundamentals remain strong, with the core of our business continuing to perform well. We believe our operating discipline in 2021, combined with the depth of our planning for the 2022 Medicare Advantage Annual Election Period, puts us in a strong position for financial growth in 2022,” said Bruce D. Broussard, Humana’s President and Chief Executive Officer. "This year, we continue to focus on delivering strong operating performance, while navigating a dynamic environment due to the ongoing COVID-19 pandemic, all while staying true to our commitment to delivering the highest quality healthcare experience for our members and patients."

Summary of Quarterly Results

Both 2Q21 and YTD 2021 results reflect solid fundamentals across all lines of business while the company continues to navigate the impacts of the COVID-19 pandemic. The year-over-year comparisons in GAAP and Adjusted pretax results, on both a quarter and YTD basis, were materially impacted by the significant, temporary deferral of care in 2020 resulting from stay-at-home orders, physical distancing measures, and other restrictions implemented to reduce the spread of COVID-19, as well as the impact of COVID-19 testing and treatment costs on 2Q20 and YTD 2020 results.

The year-over-year changes in GAAP and Adjusted EPS for 2Q21 and YTD 2021 reflect the same factors that impacted the GAAP and Adjusted consolidated pretax results comparisons, as well as the beneficial tax impact of the termination of the health insurance industry fee (HIF) in 2021 and a lower number of shares used to compute EPS, primarily reflective of share repurchases.

Humana’s 2Q21 and YTD 2021 GAAP results of operations were further impacted by put/call valuation adjustments associated with the company's non-consolidating minority interest investments, the change in the fair market value of publicly-traded equity securities (primarily Oak Street Health, Inc.), and transaction and integration costs associated with the pending Kindred at Home acquisition. The put/call valuation adjustments included the impact of the termination of the put/call agreement related to Kindred at Home as a result of the transaction announced on April 27, 2021. The impact of these changes have been excluded in the company’s Adjusted (non-GAAP) consolidated results of operations as detailed in the tables above.

The company expects to record a mark to market gain, currently expected to approximate $1 billion, on its existing 40 percent ownership of Kindred at Home. The anticipated gain will be recorded upon closing of the Kindred at Home transaction, which is expected in the third quarter of 2021.

Please refer to the tables above, as well as the consolidated and segment highlight sections in the detailed earnings release for additional discussion of the factors impacting the year-over-comparisons.
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In addition, below is a summary of key consolidated and segment statistics comparing 2Q21 to 2Q20 and YTD 2021 and YTD 2020.
Humana Inc. Summary of Quarterly Results
(dollars in millions, except per share amounts)
2Q21 (a)2Q20 (b)YTD 2021 (c)YTD 2020 (d)
Consolidated results:
Revenues - GAAP$20,645$19,083$41,313$38,018
Revenues - Adjusted$20,582$19,083$41,335$38,018
Pretax income - GAAP$738$2,586$1,778$3,303
Pretax income - Adjusted$1,131$2,381$2,386$3,416
Diluted EPS - GAAP$4.55$13.75$10.94$17.31
Diluted EPS - Adjusted$6.89$12.56$14.56$17.97
Benefits expense ratio - GAAP85.8 %76.4 %85.9 %80.7 %
Operating cost ratio - GAAP10.3 %12.4 %10.0 %11.8 %
Operating cash flows - GAAP$360$3,067($477)$3,541
Parent company cash and short term investments$1,269$2,452
Debt-to-total capitalization32.6 %35.1 %
Retail segment results:
Revenues - GAAP$18,545$16,961$37,193$33,723
Benefits expense ratio - GAAP87.0 %78.3 %87.3 %82.4 %
Operating cost ratio - GAAP8.3 %9.7 %8.0 %9.4 %
Segment earnings - GAAP$836$1,989$1,630$2,674
Segment earnings - Adjusted$840$1,993$1,638$2,682
Group and Specialty segment results:
Revenues - GAAP$1,718$1,835$3,455$3,700
Benefits expense ratio - GAAP82.6 %67.0 %78.6 %73.1 %
Operating cost ratio - GAAP23.9 %23.8 %23.4 %23.4 %
Segment earnings - GAAP$40$287$214$392
Segment earnings - Adjusted$41$288$216$394
Healthcare Services segment results:
Revenues - GAAP$7,524$6,941$14,722$14,026
Operating cost ratio - GAAP95.8 %95.1 %95.9 %95.6 %
Segment earnings - GAAP$311$317$580$567
Adjusted earnings before interest, taxes, depreciation and amortization (Adjusted EBITDA) (e)$388$390$717$709
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2021 Earnings Guidance

Humana is revising its GAAP EPS guidance range for the year ending December 31, 2021 (FY 2021) to $24.97 to $25.47 from the previous range of $19.62 to $20.12. The revised GAAP EPS guidance reflects the following:

the YTD 2021 impact of the company's non-consolidating minority interest put/call valuation adjustments,
the YTD 2021 change in the fair market value of publicly-traded equity securities held by the company,
estimated impact of transaction and integration costs associated with the pending Kindred at Home acquisition, and
a mark to market gain, currently expected to approximate $1 billion, associated with the company's existing 40 percent minority ownership of Kindred at Home; the gain will be recorded upon closing of the Kindred at Home transaction, which is anticipated in the third quarter of 2021.

Humana is maintaining its FY 2021 Adjusted EPS guidance range of $21.25 to $21.75, while continuing to acknowledge the heightened uncertainty surrounding the ongoing pandemic as it respects COVID hospitalization trends and the rate at which non-COVID utilization normalizes. The company’s FY 2021 Adjusted EPS guidance assumes a $600 million COVID related headwind that is expected to be largely offset by favorable operating items. In addition, this guidance assumes non-COVID utilization will run 2.5 percent below baseline in the back half of the year, including an assumption of minimal COVID testing and treatment costs for the remainder of the year.

Humana GAAP and Adjusted results for FY 2020 are shown below for comparison.


Diluted earnings per common share
FY 2021
 Guidance (f)
FY 2020 (g)
GAAP$24.97 to $25.47$25.31 
Amortization of identifiable intangibles0.39 0.51 
Put/call valuation adjustments associated with company's non-consolidating minority interest investments3.180.60 
Estimated mark to market gain associated with existing 40 percent minority ownership of Kindred at Home(7.73)— 
Transaction and integration costs associated with pending Kindred at Home acquisition0.31— 
Change in fair market value of publicly-traded equity securities0.13(4.32)
Receipt of commercial risk corridor receivables previously written off, net (3.35)
Adjusted (non-GAAP) – FY 2021 projected; FY 2020 reported$21.25 to $21.75$18.75 
Detailed Press Release
Humana’s full earnings press release including the statistical pages has been posted to the company’s Investor Relations site and may be accessed at https://humana.gcs-web.com/ or via a current report on Form 8-K filed by the company with the Securities and Exchange Commission this morning (available at www.sec.gov or on the company’s website).
Conference Call
Humana will host a conference call at 9:00 a.m. Eastern time today to discuss its financial results for the quarter and the company’s expectations for future earnings.
All parties interested in the company’s 2Q21 earnings conference call are invited to dial 888-625-7430. No password is required. The audio-only webcast of the 2Q21 earnings call may be accessed via Humana’s Investor Relations page at humana.com. The company suggests participants for both the conference call and those listening via the web dial in or sign on at least 15 minutes in advance of the call.
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For those unable to participate in the live event, the archive will be available in the Historical Webcasts and Presentations section of the Investor Relations page at humana.com, approximately two hours following the live webcast. Telephone replays will also be available from approximately 12:15 p.m. Eastern time on July 28, 2021 until 10:59 p.m. Eastern time on September 28, 2021 and can be accessed by dialing 855-859-2056 and providing the conference ID #1741749.

Footnotes
(a) 2Q21 Adjusted results exclude the following:
Amortization expense for identifiable intangibles of approximately $15 million pretax, or $0.09 per diluted common share; GAAP measures affected in this release include consolidated pretax, EPS, and segment earnings (for respective amortization expense for the Retail and Group and Specialty segments).
Put/call valuation adjustments of approximately $419 million, or $2.49 per diluted common share, associated with Humana’s non-consolidating minority interest investments, including the impact of the termination of the put/call agreement related to Kindred at Home as a result of the transaction announced on April 27, 2021. GAAP measures affected in this release include consolidated pretax and EPS.
Transaction and integration costs associated with pending Kindred at Home acquisition of approximately $22 million, or $0.13 per diluted common share; GAAP measure affected in this release include consolidated pretax, EPS, and the consolidated operating cost ratio.
Change in fair market value of publicly-traded equity securities of $63 million, or $0.37 per diluted common share. Humana adjusts for the market gains and losses of its publicly-traded equity investments (primarily Oak Street Health, Inc.) each period because while investments are strategic decisions for the company, management's measure of performance is primarily focused on operational results rather than fair value of such investments. Also, management does not forecast changes in fair value of its equity investments. Accordingly, the company believes it is useful to adjust GAAP EPS for the market gains and losses of publicly-traded equity securities. GAAP measures affected in this release include consolidated pretax, EPS, and consolidated revenues.

(b) 2Q20 Adjusted results exclude the following:
Amortization expense for identifiable intangibles of approximately $22 million pretax, or $0.13 per diluted common share; GAAP measures affected in this release include consolidated pretax, EPS, and segment earnings (for respective amortization expense for the Retail and Group and Specialty segments).
Put/call valuation adjustments of approximately $227 million, or $1.32 per diluted common share, associated with Humana’s non-consolidating minority interest investments. GAAP measures affected in this release include consolidated pretax and EPS.

(c) YTD 2021 Adjusted results exclude the following:
Amortization expense for identifiable intangibles of approximately $30 million pretax, or $0.18 per diluted common share; GAAP measures affected in this release include consolidated pretax, EPS, and segment earnings (for respective amortization expense for the Retail and Group and Specialty segments).
Put/call valuation adjustments of approximately $534 million, or $3.18 per diluted common share, associated with Humana’s non-consolidating minority interest investments, including the impact of the termination of the put/call agreement related to Kindred at Home as a result of the transaction announced on April 27, 2021. GAAP measures affected in this release include consolidated pretax and EPS.
Transaction and integration costs associated with pending Kindred at Home acquisition of approximately $22 million, or $0.13 per diluted common share; GAAP measure affected in this release include consolidated pretax, EPS, and the consolidated operating cost ratio.
Change in fair market value of publicly-traded equity securities of $22 million, or $0.13 per diluted common share. Humana adjusts for the market gains and losses of its publicly-traded equity investments (primarily Oak Street Health, Inc.) each period because while investments are strategic decisions for the company, management's measure of performance is primarily focused on operational results rather than fair value of such investments. Also, management does not forecast changes in fair value of its equity investments. Accordingly,
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the company believes it is useful to adjust GAAP EPS for the market gains and losses of publicly-traded equity securities. GAAP measures affected in this release include consolidated pretax, EPS, and consolidated revenues.

(d) YTD 2020 Adjusted results exclude the following:
Amortization expense for identifiable intangibles of approximately $43 million pretax, or $0.26 per diluted common share; GAAP measures affected in this release include consolidated pretax, EPS, and segment earnings (for respective amortization expense for the Retail and Group and Specialty segments).
Put/call valuation adjustments of approximately $70 million, or $0.40 per diluted common share, associated with Humana’s non-consolidating minority interest investments. GAAP measures affected in this release include consolidated pretax and EPS.

(e) The Healthcare Services segment Adjusted earnings before interest, taxes, depreciation and amortization (Adjusted EBITDA) includes GAAP segment earnings with adjustments to add back depreciation and amortization expense, interest expense, and income taxes. The Adjusted EBITDA includes results from all lines of business within the segment. The Adjusted EBITDA also includes the impact of Humana’s 40 percent minority interest in Kindred at Home and the strategic partnership with Welsh, Carson, Anderson & Stowe (WCAS) to develop and operate senior-focused, payor-agnostic, primary care centers.

(f) FY 2021 Adjusted EPS projections exclude the following:
Amortization expense for identifiable intangibles of $0.39 per diluted common share.
Put/call valuation adjustments of $3.18 per diluted common share related to Humana’s non-consolidating minority interest investments, including the impact of the termination of the put/call agreement related to Kindred at Home as a result of the transaction announced on April 27, 2021. FY 2021 GAAP EPS guidance excludes the impact of future value changes of these put/call options as the future value changes cannot be estimated.
Estimated mark to market gain of approximately $7.73 per diluted common share associated with the company's existing 40 percent minority ownership of Kindred at Home; the gain will be recorded upon closing of the Kindred at Home transaction, which is anticipated in the third quarter of 2021.
Estimated transaction and integration costs associated with pending Kindred at Home acquisition of approximately $0.31 per diluted common share.
Change in the fair market value of equity securities of $0.13 per diluted common share. The future value of publicly-traded equity securities, their impact on GAAP EPS, and the related non-GAAP adjustment will fluctuate on the public trading value of the stock. The guidance set forth herein assumes no further change in the fair value of these investments.

(g) FY 2020 Adjusted results exclude the following:
• Amortization expense for identifiable intangibles of $0.51 per diluted common share.
• Put/call valuation adjustments of $0.60 per diluted common share associated with Humana's non-consolidating minority interest investments.
• Change in fair market value of publicly-traded equity securities of $4.32 per diluted common share.
• Net adjustment of $3.35 per diluted common share, related to the receipt of unpaid risk corridor payments associated with the losses incurred by the company under the ACA business from 2014 to 2016 (previously written off).

Cautionary Statement
This news release includes forward-looking statements regarding Humana 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,” “believes,” “anticipates,” “intends,” “likely will result,” “estimates,” “projects” or variations of such words and similar expressions are intended to identify such forward-looking statements.

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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:

If Humana does not design and price its products properly and competitively, if the premiums Humana receives are insufficient to cover the cost of healthcare services delivered to its members, if the company is unable to implement clinical initiatives to provide a better healthcare experience for its members, lower costs and appropriately document the risk profile of its members, or if its estimates of benefits expense 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. The company continually reviews estimates of future payments relating to benefit expenses for services incurred in the current and prior periods and makes necessary adjustments to its reserves, including premium deficiency reserves, where appropriate. These estimates involve extensive judgment, and have considerable inherent variability because they are extremely sensitive to changes in claim payment patterns and medical cost trends. Accordingly, Humana's reserves may be insufficient.
If Humana fails to effectively implement its operational and strategic initiatives, particularly its Medicare initiatives and state-based contract strategy, the company’s business may be materially adversely affected, which is of particular importance given the concentration of the company’s revenues in these products. In addition, there can be no assurances that the company will be successful in maintaining or improving its Star ratings in future years.
If Humana fails to properly maintain the integrity of its data, to strategically maintain existing or implement new information systems, to protect Humana’s proprietary rights to its systems, or to defend against cyber-security attacks or prevent other privacy or data security incidents that result in security breaches that disrupt our operations or in the unintended dissemination of sensitive personal information or proprietary or confidential information, the company’s business may be materially adversely affected.
Humana is involved in various legal actions, or disputes that could lead to legal actions (such as, among other things, provider contract disputes and qui tam litigation brought by individuals on behalf of the government), governmental and internal investigations, and routine internal review of business processes any of which, if resolved unfavorably to the company, could result in substantial monetary damages or changes in its business practices. Increased litigation and negative publicity could also increase the company’s cost of doing business.
As a government contractor, Humana is exposed to risks that may materially adversely affect its business or its willingness or ability to participate in government healthcare programs including, among other things, loss of material government contracts, governmental audits and investigations, potential inadequacy of government determined payment rates, potential restrictions on profitability, including by comparison of profitability of the company’s Medicare Advantage business to non-Medicare Advantage business, or other changes in the governmental programs in which Humana participates. Changes to the risk-adjustment model utilized by CMS to adjust premiums paid to Medicare Advantage, or MA, plans according to the health status of covered members, including proposed changes to the methodology used by CMS for risk adjustment data validation audits that fail to address adequately the statutory requirement of actuarial equivalence, if implemented, could have a material adverse effect on our operating results, financial position and cash flows.
Humana's business activities are subject to substantial government regulation. New laws or regulations, or legislative, judicial, or regulatory changes in existing laws or regulations or their manner of application could increase the company's cost of doing business and have a material adverse effect on Humana’s results of operations (including restricting revenue, enrollment and premium growth in certain products and market segments, restricting the company’s ability to expand into new markets, increasing the company’s medical and operating costs by, among other things, requiring a minimum benefit ratio on insured products, lowering the company’s Medicare payment rates and increasing the company’s expenses associated with a non-deductible health insurance industry fee and other assessments); the company’s financial position (including the company’s ability to maintain the value of its goodwill); and the company’s cash flows.
Humana’s failure to manage acquisitions, divestitures and other significant transactions successfully may have a material adverse effect on the company’s results of operations, financial position, and cash flows.
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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 pharmacy business is highly competitive and subjects it to regulations and supply chain risks 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.
Humana’s ability to obtain funds from certain of its licensed 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.
The securities and credit markets may experience volatility and disruption, which may adversely affect Humana’s business.
The spread of, and response to, the novel coronavirus, or COVID-19, underscores certain risks Humana faces, including those discussed above, and the ongoing, heightened uncertainty created by the pandemic precludes any prediction as to the ultimate adverse impact to Humana of COVID-19.

To the extent that the spread of COVID-19 is not contained, the premiums the company charges may prove to be insufficient to cover the cost of health care services delivered to its members, which may increase significantly as a result of higher utilization rates of medical facilities and services and other increases in associated hospital and pharmaceutical costs. Humana may also experience increased costs or decreased revenues if, as a result of the company’s members being unable or unwilling to see their providers due to actions taken to mitigate the spread of COVID-19, Humana is unable to implement clinical initiatives to manage health care costs and chronic conditions of its members, and appropriately document their risk profiles. In addition, Humana is offering, and has been mandated by legislative and regulatory action (including the Families First Act and CARES Act) to provide, certain expanded benefit coverage to its members, such as waiving out of pocket costs for COVID-19 testing and treatment. Humana is also taking actions designed to help provide financial and administrative relief for the health care provider community. Such measures and any further steps taken by Humana, or governmental action, to continue to respond to and address the ongoing impact of COVID-19 (including further expansion or modification of the services delivered to its members, the adoption or modification of regulatory requirements associated with those services and the costs and challenges associated with ensuring timely compliance with such requirements), to provide further relief for the health care provider community, or in connection with the relaxation of stay-at-home and physical distancing orders and other restrictions on movement and economic activity, including the potential for widespread testing and therapeutic treatments and the distribution and administration of COVID-19 vaccines, could adversely impact the company’s profitability.

The spread and impact of COVID-19, or actions taken to mitigate this spread, could have material and adverse effects on Humana’s ability to operate effectively, including as a result of the complete or partial closure of facilities or labor shortages. Disruptions in public and private infrastructure, including communications, availability of in-person sales and marketing channels, financial services and supply chains, could materially and adversely disrupt the company’s normal business operations. Humana has transitioned a significant subset of its employee population to a remote work environment in an effort to mitigate the spread of COVID-19, as have a number of the company’s third-party service providers, which may exacerbate certain risks to Humana’s business, including an increased demand for information technology resources, increased risk of phishing and other cybersecurity attacks, and increased risk of unauthorized dissemination of sensitive personal information or proprietary or confidential information about the company or its members or other third-parties. The outbreak of COVID-19 has severely impacted global economic activity, including the businesses of some of Humana’s commercial customers, and caused significant volatility and negative pressure in the financial markets. In addition to disrupting Humana’s operations, these developments may adversely affect the timing of commercial customer premium collections and corresponding claim payments, the value of the company’s investment portfolio, or future liquidity needs.

The ongoing, heightened uncertainty created by the pandemic precludes any prediction as to the ultimate adverse impact to Humana of COVID-19. Humana is continuing to monitor the spread of COVID-19, changes to
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the company’s benefit coverages, and the ongoing costs and business impacts of dealing with COVID-19, including the potential costs and impacts associated with lifting or reimposing restrictions on movement and economic activity, the timing and degree in resumption of demand for deferred healthcare services, the pace of administration of COVID-19 vaccines and the effectiveness of those vaccines, and related risks. The magnitude and duration of the pandemic and its impact on Humana’s business, results of operations, financial position, and cash flows is uncertain, but such impacts could be material to the company’s business, results of operations, financial position and cash flows.

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, 2020;

Form 10-Q for the quarter ended March 31, 2021; and

Form 8-Ks filed during 2021.
About Humana
Humana Inc. (NYSE: HUM) is committed to helping our millions of medical and specialty members achieve their best health. Our successful history in care delivery and health plan administration is helping us create a new kind of integrated care with the power to improve health and well-being and lower costs. Our efforts are leading to a better quality of life for people with Medicare, families, individuals, military service personnel, and communities at large.
To accomplish that, we support physicians and other health care professionals as they work to deliver the right care in the right place for their patients, our members. Our range of clinical capabilities, resources and tools – such as in-home care, behavioral health, pharmacy services, data analytics and wellness solutions – combine to produce a simplified experience that makes health care easier to navigate and more effective.
More information regarding Humana is available to investors via the Investor Relations page of the company’s website at humana.com, including copies of:

Annual reports to stockholders
Securities and Exchange Commission filings
Most recent investor conference presentations
Quarterly earnings news releases and conference calls
Calendar of events
Corporate Governance information

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n e w s r e l e a s e
Exhibit 99.2
Humana Inc.
500 West Main Street
P.O. Box 1438
Louisville, KY 40202
http://www.humana.com
FOR MORE INFORMATION CONTACT:
Amy Smith
Humana Investor Relations
(502) 580-2811
e-mail: Amysmith@humana.com
humanalogoa051.jpg
Mark Taylor
Humana Corporate Communications
(317) 753-0345
e-mail: MTaylor108@humana.com

Humana Reports Second Quarter 2021 Financial Results;
Maintains Full Year 2021 Adjusted EPS Financial Guidance

Reports 2Q21 earnings per diluted common share of $4.55 on a GAAP basis, $6.89 on an Adjusted basis; reports YTD 2021 EPS of $10.94 on a GAAP basis, $14.56 on an Adjusted basis
Updates FY 2021 EPS guidance to a range of $24.97 to $25.47 on a GAAP basis, maintains $21.25 to $21.75 on Adjusted basis; while acknowledging the continued heightened uncertainty surrounding the ongoing pandemic
Reaffirms FY 2021 expected individual Medicare Advantage membership growth range of approximately 425,000 to 475,000 members
Reflects solid fundamentals in the company's businesses, offset by continued impacts of the COVID-19 pandemic; year-over-year comparisons materially impacted by the significant, temporary deferral of care in 2Q20 amid the pandemic

LOUISVILLE, KY (July 28, 2021) – Humana Inc. (NYSE: HUM) today reported consolidated pretax income and diluted earnings per common share for the quarter ended June 30, 2021 (2Q21) versus the quarter ended June 30, 2020 (2Q20) and for the six months ended June 30, 2021 (YTD 2021) versus the six months ended June 30, 2020 (YTD 2020) as noted in the tables below.


Consolidated income before income taxes and equity in earnings (pretax income) In millions
2Q21 (a)2Q20 (b)YTD 2021 (c)YTD 2020 (d)
Generally Accepted Accounting Principles (GAAP)$738 $2,586 $1,778 $3,303 
Amortization associated with identifiable intangibles15 22 30 43 
Put/call valuation adjustments associated with company's non-consolidating minority interest investments419 (227)534 70 
Transaction and integration costs associated with pending Kindred at Home acquisition22 22 
Change in fair market value of publicly-traded equity securities(63) 22 
Adjusted (non-GAAP)$1,131 $2,381 $2,386 $3,416 

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Diluted earnings per common share (EPS)2Q21 (a)2Q20 (b)YTD 2021 (c)YTD 2020 (d)
GAAP$4.55 $13.75 $10.94 $17.31 
Amortization associated with identifiable intangibles0.09 0.13 0.18 0.26 
Put/call valuation adjustments associated with company's non-consolidating minority interest investments2.49 (1.32)3.18 0.40 
Transaction and integration costs associated with pending Kindred at Home acquisition0.13 — 0.13 — 
Change in fair market value of publicly-traded equity securities(0.37)— 0.13 — 
Adjusted (non-GAAP)$6.89 $12.56 $14.56 $17.97 
The company has included financial measures throughout this earnings release that are not in accordance with GAAP. Management believes that these 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. Consequently, management uses these non-GAAP (Adjusted) financial measures as indicators of the company’s business performance, as well as for operational planning and decision making purposes. Non-GAAP (Adjusted) financial measures should be considered in addition to, but not as a substitute for, or superior to, financial measures prepared in accordance with GAAP. All financial measures in this press release are in accordance with GAAP unless otherwise indicated. Please refer to the footnotes for a detailed description of each item adjusted out of GAAP financial measures to arrive at a non-GAAP (Adjusted) financial measure.

“Humana’s fundamentals remain strong, with the core of our business continuing to perform well. We believe our operating discipline in 2021, combined with the depth of our planning for the 2022 Medicare Advantage Annual Election Period, puts us in a strong position for financial growth in 2022,” said Bruce D. Broussard, Humana’s President and Chief Executive Officer. "This year, we continue to focus on delivering strong operating performance, while navigating a dynamic environment due to the ongoing COVID-19 pandemic, all while staying true to our commitment to delivering the highest quality healthcare experience for our members and patients."
Summary of Quarterly Results

Both 2Q21 and YTD 2021 results reflect solid fundamentals across all lines of business while the company continues to navigate the impacts of the COVID-19 pandemic. The year-over-year comparisons in GAAP and Adjusted pretax results, on both a quarter and YTD basis, were materially impacted by the significant, temporary deferral of care in 2020 resulting from stay-at-home orders, physical distancing measures, and other restrictions implemented to reduce the spread of COVID-19, as well as the impact of COVID-19 testing and treatment costs on 2Q20 and YTD 2020 results.

The year-over-year changes in GAAP and Adjusted EPS for 2Q21 and YTD 2021 reflect the same factors that impacted the GAAP and Adjusted consolidated pretax results comparisons, as well as the beneficial tax impact of the termination of the health insurance industry fee (HIF) in 2021 and a lower number of shares used to compute EPS, primarily reflective of share repurchases.

Humana’s 2Q21 and YTD 2021 GAAP results of operations were further impacted by put/call valuation adjustments associated with the company's non-consolidating minority interest investments, the change in the fair market value of publicly-traded equity securities (primarily Oak Street Health, Inc.), and transaction and integration costs associated with the pending Kindred at Home acquisition. The put/call valuation adjustments included the impact of the termination of the put/call agreement related to Kindred at Home as a result of the transaction announced on April 27, 2021. The impact of these changes have been excluded in the company’s Adjusted (non-GAAP) consolidated results of operations as detailed in the tables above.

The company expects to record a mark to market gain, currently expected to approximate $1 billion, on its existing 40 percent ownership of Kindred at Home. The anticipated gain will be recorded upon closing of the Kindred at Home transaction, which is expected in the third quarter of 2021.

Please refer to the tables above, as well as the consolidated and segment highlight sections that follow for additional discussion of the factors impacting the year-over-year comparisons.
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In addition, below is a summary of key consolidated and segment statistics comparing 2Q21 to 2Q20 and YTD 2021 and YTD 2020.
Humana Inc. Summary of Quarterly Results
(dollars in millions, except per share amounts)
2Q21 (a)2Q20 (b)YTD 2021 (c)YTD 2020 (d)
Consolidated results:
Revenues - GAAP$20,645$19,083$41,313$38,018
Revenues - Adjusted$20,582$19,083$41,335$38,018
Pretax income - GAAP$738$2,586$1,778$3,303
Pretax income - Adjusted$1,131$2,381$2,386$3,416
Diluted EPS - GAAP$4.55$13.75$10.94$17.31
Diluted EPS - Adjusted$6.89$12.56$14.56$17.97
Benefits expense ratio - GAAP85.8 %76.4 %85.9 %80.7 %
Operating cost ratio - GAAP10.3 %12.4 %10.0 %11.8 %
Operating cash flows - GAAP$360$3,067($477)$3,541
Parent company cash and short term investments$1,269$2,452
Debt-to-total capitalization32.6 %35.1 %
Retail segment results:
Revenues - GAAP$18,545$16,961$37,193$33,723
Benefits expense ratio - GAAP87.0 %78.3 %87.3 %82.4 %
Operating cost ratio - GAAP8.3 %9.7 %8.0 %9.4 %
Segment earnings - GAAP$836$1,989$1,630$2,674
Segment earnings - Adjusted$840$1,993$1,638$2,682
Group and Specialty segment results:
Revenues - GAAP$1,718$1,835$3,455$3,700
Benefits expense ratio - GAAP82.6 %67.0 %78.6 %73.1 %
Operating cost ratio - GAAP23.9 %23.8 %23.4 %23.4 %
Segment earnings - GAAP$40$287$214$392
Segment earnings - Adjusted$41$288$216$394
Healthcare Services segment results:
Revenues - GAAP$7,524$6,941$14,722$14,026
Operating cost ratio - GAAP95.8 %95.1 %95.9 %95.6 %
Segment earnings - GAAP$311$317$580$567
Adjusted earnings before interest, taxes, depreciation and amortization (Adjusted EBITDA) (e)$388$390$717$709

2021 Earnings Guidance

Humana is revising its GAAP EPS guidance range for the year ending December 31, 2021 (FY 2021) to $24.97 to $25.47 from the previous range of $19.62 to $20.12. The revised GAAP EPS guidance reflects the following:

the YTD 2021 impact of the company's non-consolidating minority interest put/call valuation adjustments,
the YTD 2021 change in the fair market value of publicly-traded equity securities held by the company,
estimated impact of transaction and integration costs associated with the pending Kindred at Home acquisition, and
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a mark to market gain, currently expected to approximate $1 billion, associated with the company's existing 40 percent minority ownership of Kindred at Home; the gain will be recorded upon closing of the Kindred at Home transaction, which is anticipated in the third quarter of 2021.

Humana is maintaining its FY 2021 Adjusted EPS guidance range of $21.25 to $21.75, while continuing to acknowledge the heightened uncertainty surrounding the ongoing pandemic as it respects COVID hospitalization trends and the rate at which non-COVID utilization normalizes. The company’s FY 2021 Adjusted EPS guidance assumes a $600 million COVID related headwind that is expected to be largely offset by favorable operating items. In addition, this guidance assumes non-COVID utilization will run 2.5 percent below baseline in the back half of the year, including an assumption of minimal COVID testing and treatment costs for the remainder of the year.

Humana GAAP and Adjusted results for FY 2020 are shown below for comparison.

Additional FY 2021 guidance points are included in the table beginning on page 20 of this earnings release.


Diluted earnings per common share
FY 2021
 Guidance (f)
FY 2020 (g)
GAAP$24.97 to $25.47$25.31 
Amortization of identifiable intangibles0.39 0.51 
Put/call valuation adjustments associated with company's non-consolidating minority interest investments3.180.60 
Estimated mark to market gain associated with existing 40 percent minority ownership of Kindred at Home(7.73)— 
Transaction and integration costs associated with pending Kindred at Home acquisition0.31— 
Change in fair market value of publicly-traded equity securities0.13(4.32)
Receipt of commercial risk corridor receivables previously written off, net (3.35)
Adjusted (non-GAAP) – FY 2021 projected; FY 2020 reported$21.25 to $21.75$18.75 

Humana Consolidated Highlights
Consolidated revenues
Consolidated revenues2Q21 (a)2Q20 (b)YTD 2021 (c)YTD 2020 (d)
GAAP$20,645 $19,083 $41,313 $38,018 
Change in fair market value of publicly-traded equity securities(63)— 22 — 
Adjusted (non-GAAP)$20,582 $19,083 $41,335 $38,018 
GAAP consolidated revenues for 2Q21 were $20.65 billion, an increase of $1.56 billion, or 8 percent, from $19.08 billion in 2Q20. Total premiums and services revenues of $20.47 billion in 2Q21 increased $1.46 billion, or 8 percent, from $19.01 billion in 2Q20. The favorable year-over-year comparisons were primarily driven by the following factors:
individual Medicare Advantage and state-based contracts membership growth; and
higher per member individual Medicare Advantage premiums as a result of the improving CMS benchmark rate for 2021, net of Medicare Risk Adjustment (MRA) headwinds resulting from COVID-19 related utilization disruption in 2020.
These increases were partially offset by declining year-over-year stand-alone PDP, group commercial medical, and group Medicare Advantage membership.
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GAAP consolidated revenues for YTD 2021 increased $3.30 billion, or 9 percent, to $41.31 billion from $38.02 billion in YTD 2020. Total YTD 2021 premiums and services revenues rose to $41.06 billion, increasing $3.27 billion, or 9 percent, from $37.79 billion in the prior year period. The YTD 2021 increases were primarily driven by the same factors impacting the quarterly comparison, as well as the impact of Medicare sequestration relief (not enacted until 2Q20) in the first quarter of 2021 .
Adjusted consolidated revenues for 2Q21 and YTD 2021 were impacted by the same factors affecting the GAAP comparisons while excluding the impact of the factor detailed in the table above.
Consolidated benefits expense
The 2Q21 and YTD 2021 GAAP consolidated benefit ratios were 85.8 percent and 85.9 percent, respectively, compared to the 2Q20 and YTD 2020 GAAP consolidated benefit ratios of 76.4 percent and 80.7 percent, respectively.

The year-over-year increase in the quarterly and YTD GAAP comparisons reflect the following factors:

the significant impact of the deferral of non-essential care, net of COVID-19 treatment and testing costs and the company's pandemic relief efforts in 2Q20, amid the COVID-19 pandemic,
the termination in 2021 of the non-deductible HIF which, along with a portion of the related tax benefit, was contemplated in the pricing and benefit design of the company's products, and

the impact in 2Q21 and YTD 2021 associated with the competitive nature of the group Medicare Advantage business, particularly in large group accounts that were recently procured, as well as in the stand-alone PDP business.

These factors were partially offset by higher favorable prior period medical claims reserve development (Prior Period Development) in 2021 as further described below.

Prior Period Medical Claims Reserve Development (Prior Period Development)
Consolidated Prior Period Development (in millions)
Favorable (unfavorable)
First
Quarter
Second
Quarter
YTD
Prior Period Development from prior years recognized in 2021$555$164$719
Prior Period Development from prior years recognized in 2020$284$(49)$235
As anticipated, Humana experienced a higher level of favorable Prior Period Development in 2Q21 and YTD 2021 as a result of the reversal of actions taken in 2020, including the suspension of certain financial recovery programs for a period of time. The suspension during 2020 was intended to provide financial and administrative relief for providers facing unprecedented strain as a result of the COVID-19 pandemic.
Favorable Prior Period Development in 2Q21 decreased the consolidated benefit ratio by 80 basis points while unfavorable Prior Period Development in 2Q20 increased the consolidated benefit ratio by 30 basis points. Favorable Prior Period Development decreased the YTD 2021 ratio by 180 basis points and decreased the YTD 2020 consolidated benefit ratio by 60 basis points.
Consolidated operating expenses
The 2Q21 GAAP consolidated operating cost ratio (operating costs as a percent of total revenues less investment income) of 10.3 percent decreased 210 basis points from the 2Q20 ratio of 12.4 percent. The decrease was primarily related to the following factors:
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termination of the non-deductible HIF in 2021, which increased the consolidated GAAP operating cost ratio by approximately 150 basis points in 2Q20,
the impact to the 2Q20 ratio as a result of a $150 million contribution to the Humana Foundation to support communities served by the company particularly those with social and health disparities,
lower COVID-19 related administrative costs in 2Q21 compared to 2Q20; administrative costs in 2Q20 included costs associated with personal protective equipment, member response efforts, and the build-out of infrastructure necessary to support employees working remotely,
scale efficiencies associated with growth in the company's Medicare Advantage membership, and
operating cost efficiencies in 2Q21 driven by previously implemented productivity initiatives.
These factors were partially offset by continued strategic investments made to position the company for long-term success.
The YTD 2021 GAAP consolidated operating cost ratio of 10.0 percent decreased 180 basis points from 11.8 percent in YTD 2020. The decrease was primarily impacted by the same factors influencing the second quarter GAAP comparison. The non-deductible HIF increased the YTD 2020 consolidated GAAP operating cost ratio by approximately 160 basis points.
Balance sheet
At June 30, 2021, the company had cash, cash equivalents, and investment securities of $18.03 billion, down approximately $220 million, or 1 percent, from $18.25 billion at March 31, 2021 primarily resulting from capital expenditures, acquisitions, the repayment of commercial paper, and cash dividends to shareholders, partially offset by the impact of operating cash flows and favorable fair value adjustments to the company's investments. Detailed changes are outlined in the company’s quarterly consolidated statement of cash flows on page S-6 of the statistical supplement included in this release.
At June 30, 2021, cash and short-term investments held at the parent company of $1.27 billion increased approximately $723 million, or 132 percent, from $547 million at March 31, 2021. The sequential change primarily reflects dividends received from certain subsidiaries, along with an increase in non-regulated subsidiary earnings in the company's Healthcare Services segment. These increases were partially offset by capital expenditures, cash dividends to shareholders, and capital contributions to certain subsidiaries.
Days in claims payable (DCP) of 45.0 days at June 30, 2021 was unchanged from March 31, 2021 but decreased 6.2 days from 51.2 days at June 30, 2020.
2Q20 DCP was impacted by the timing of benefits expense in 2Q20 which was meaningfully depressed early in the quarter before beginning to rebound. The depressed utilization in 2Q20 reduced the average benefit expense per day for the quarter, but did not have a comparable impact on reserves which were weighted to June 2020 when utilization reached its peak for the 2Q20 quarter. Depressed utilization in 2Q20 also led to higher provider surplus accruals related to the company's risk sharing arrangements.
Changes are outlined in the DCP rollforward on page S-18 of the statistical supplement included in this release.
Debt-to-total capitalization at June 30, 2021 was 32.6 percent, down 130 basis points from 33.9 percent at March 31, 2021. The sequential decrease primarily resulted from the repayment of commercial paper and the impact of 2Q21 earnings.
The company’s long-term debt-to-total capitalization target of approximately 35 percent is expected to allow the company to maintain its investment grade credit rating while providing significant financial flexibility. At times, the company's debt-to-total capitalization will exceed this target due to the timing of share repurchases, debt
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issuance, and acquisitions, including, for example, the Kindred at Home transaction announced on April 27, 2021 that is expected to close in the third quarter of 2021.
Operating cash flows
GAAP cash flows provided by operations of $360 million in 2Q21 compared to GAAP cash flows provided by operations of $3.07 billion in 2Q20, a decrease of $2.71 billion year over year. The decline primarily resulted from the negative impact of working capital items, including the significant COVID-19 impact to benefits payable in 2Q20 as a result of higher provider surplus accruals from the company’s risk sharing arrangements, as well as the delayed payment of estimated 2Q20 federal income taxes until the third quarter of 2020 in accordance with the CARES Act and the impact of lower earnings in 2Q21 compared to 2Q20.
GAAP cash flows used in operations for YTD 2021 totaled $477 versus GAAP cash flows provided by operations of $3.54 billion for YTD 2020, a decrease of $4.01 billion year over year. The year-over-year decline resulted from the negative impact of working capital items and lower earnings in YTD 2021 compared to YTD 2020. The YTD 2021 cash flows were significantly impacted by changes to working capital levels, primarily as a result of prior year disruptions caused by COVID-19. These impacts include paying down claims inventory and capitation for provider surplus amounts earned in 2020, as well as additional provider support. The year-over-year YTD comparison further reflects the impact of the delayed payment of estimated 2Q20 federal income taxes until the third quarter of 2020.
Share repurchases
In December 2020, the company entered into separate agreements with two third-party financial institutions to effect an aggregate $1.75 billion accelerated stock repurchase (ASR) program as part of the $3.00 billion repurchase program authorized by the Board of Directors on July 30, 2019. Under the terms of this program, which was completed in 2Q21, the company repurchased a total of approximately 4,366,500 of its outstanding shares at an average price of $400.78.
The company did not complete any open-market share repurchase transactions during 2Q21.
In February 2021, Humana's Board of Directors approved a $3.00 billion share repurchase authorization with an expiration date of February 18, 2024, replacing the previous $3.00 billion share repurchase authorization (of which approximately $250 million remained unused). As of July 27, 2021, the company had a remaining repurchase authorization of $3.00 billion.
Cash dividends
The company paid cash dividends to its stockholders of $90 million in 2Q21 versus $83 million in 2Q20. Cash dividends of $173 million were paid to the company's stockholders during YTD 2021 compared to $156 million million in YTD 2020. The year-over-year quarter and YTD growth reflects increases in the per share dividend amounts, including the increase to $0.70 per share from $0.625 per share as approved by the company's Board of Directors in February 2021, as well as the increase to $0.625 per share from $0.55 per share approved in February 2020.

Humana’s Retail Segment
This segment consists of the company’s Medicare benefits, marketed to individuals directly or via group Medicare accounts, as well as its Medicare Supplement and state-based contracts businesses. State-based contracts include those with various states to provide services under the Medicaid program, including Temporary Assistance for Needy Families (TANF), dual eligible, and Long-Term Support Services benefits. In addition, this segment also includes the company’s contract with Centers for Medicare & Medicaid Services (CMS) to administer the Limited Income Newly Eligible Transition prescription drug plan (PDP) program.
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Retail segment revenues:
The 2Q21 revenues for the Retail segment were $18.55 billion, an increase of $1.58 billion, or 9 percent, from $16.96 billion in 2Q20 primarily reflecting the following items:
individual Medicare Advantage and state-based contracts membership growth; and
higher per member individual Medicare Advantage premiums as a result of the improving CMS benchmark rate for 2021, net of MRA headwinds resulting from COVID-19 related utilization disruption in 2020.
These favorable items were partially offset by the decline in membership in the company's stand-alone PDP and group Medicare Advantage offerings.
The YTD 2021 revenues for the Retail segment were $37.19 billion, up $3.47 billion, or 10 percent, from $33.72 billion in YTD 2020 primarily driven by the same factors impacting the quarterly comparison, as well as the impact of Medicare sequestration relief (not enacted until 2Q20) in the first quarter of 2021.
Retail segment enrollment:
Individual Medicare Advantage membership was 4,341,600 as of June 30, 2021, a net increase of 464,400 or 12 percent, from 3,877,200 as of June 30, 2020, and up 378,900, or 10 percent, from 3,962,700 as of December 31, 2020. The increases were primarily due to membership additions associated with the most recent Annual Election Period (AEP) and Open Election Period (OEP) for Medicare beneficiaries, as well as the impact of Dual Eligible Special Need Plans (D-SNP) membership added as a result of the Independent Care Health Plan (iCare) acquisition in the first quarter of 2021. Membership growth was further impacted by continued enrollment resulting from special elections, age-ins, and D-SNP members following the respective OEPs.
The 2021 OEP sales period, which ran from January 1 to March 31, 2021, added approximately 36,000 members compared to the 2020 OEP that added approximately 30,000 members.
Individual Medicare Advantage membership includes 532,900 D-SNP members as of June 30, 2021, a net increase of 167,600, or 46 percent, from 365,300 as of June 30, 2020, and up 126,800, or 31 percent, from 406,100 as of December 31, 2020.
Group Medicare Advantage membership was 557,300 as of June 30, 2021, a net decrease of 51,000, or 8 percent, from 608,300 at June 30, 2020, and down 55,900, or 9 percent, from 613,200 as of December 31, 2020. These anticipated decreases reflect the net loss of certain large accounts in January 2021, partially offset by continued growth in small group accounts.
Membership in the company’s stand-alone PDP offerings was 3,653,100 as of June 30, 2021, a net decrease of 235,300, or 6 percent, from 3,888,400 as of June 30, 2020, and down 213,600, or 6 percent, from 3,866,700 as of December 31, 2020. These anticipated declines were primarily the result of the Walmart Value plan no longer being the low cost leader in 2021.
State-based contracts and other membership (including dual-eligible demonstration members) was 877,300 as of June 30, 2021, a net increase of 188,100, or 27 percent, from 689,200 at June 30, 2020, and up 104,900, or 14 percent, from 772,400 at December 31, 2020. These increases primarily reflect the additional enrollment resulting from the economic downturn due to the COVID-19 pandemic, as well as the recently completed iCare acquisition in Wisconsin.


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Retail segment benefits expense:
The 2Q21 and YTD 2021 GAAP Retail segment benefit ratios of 87.0 percent and 87.3 percent, respectively, compared to the 2Q20 and YTD 2020 GAAP Retail segment benefit ratios of 78.3 percent and 82.4 percent, respectively. The year-over-year quarterly and YTD increases in the segment benefit ratio primarily reflect the following items:
the significant impact of the deferral of non-essential care, net of COVID-19 treatment and testing costs and the company's pandemic relief efforts in 2Q20, amid the COVID-19 pandemic,

the termination in 2021 of the non-deductible HIF which, along with a portion of the related tax benefit, was contemplated in the pricing and benefit design of the company's products, and
the impact in 2Q21 and YTD 2021 associated with the competitive nature of the group Medicare Advantage business, particularly in large group accounts that were recently procured, as well as in the stand-alone PDP business.
These factors were partially offset by higher favorable Prior Period Development in 2021 as further described below.
Prior Period Development
Retail Segment Prior Period Development (in millions)
Favorable (unfavorable)
First
Quarter
Second
Quarter
YTD
Prior Period Development from prior years recognized in 2021$463$156$619
Prior Period Development from prior years recognized in 2020$238$(33)$205
As anticipated, Humana experienced a higher level of favorable Prior Period Development in 2Q21 and YTD 2021 as a result of the reversal of actions taken in 2020, including the suspension of certain financial recovery programs for a period of time. The suspension during 2020 was intended to provide financial and administrative relief for providers facing unprecedented strain as a result of the COVID-19 pandemic.
The Retail segment's favorable Prior Period Development in 2Q21 decreased the segment benefit ratio by 80 basis points compared to the unfavorable Prior Period Development in 2Q20 increasing the ratio by 20 basis points. Favorable Prior Period Development decreased the YTD 2021 ratio by 170 basis points while decreasing the YTD 2020 ratio by 60 basis points.
Retail segment operating costs:
The Retail segment’s GAAP operating cost ratio of 8.3 percent in 2Q21 decreased 140 basis points from 9.7 percent in 2Q20. The year-over-year comparison was positively impacted by the following factors:
termination of the non-deductible HIF in 2021, which increased the 2Q20 Retail segment GAAP operating cost ratio by approximately 160 basis points,
lower COVID-19 related administrative costs in 2Q21 compared to 2Q20, as previously discussed,
scale efficiencies associated with growth in the company's individual Medicare Advantage membership, and
operating cost efficiencies in 2Q21 driven by previously implemented productivity initiatives.
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These improvements were partially offset by continued strategic investments made to position the company for long-term success.
The Retail segment's YTD 2021 GAAP operating cost ratio of 8.0 percent decreased 140 basis points from 9.4 percent in YTD 2020 primarily reflecting the same factors that impacted the year-over-year comparison for the second quarter. The non-deductible HIF impacted the segment's YTD 2020 operating cost ratio by approximately 160 basis points.
Retail segment results:
Retail segment earnings
in millions
2Q21 (a)2Q20 (b)YTD 2021 (c)YTD 2020 (d)
GAAP$836 $1,989 $1,630 $2,674 
Amortization associated with identifiable intangibles4 8 
Adjusted (non-GAAP)$840 $1,993 $1,638 $2,682 
The year-over-year unfavorable comparison of GAAP segment earnings, for both quarter and YTD, resulted from the same factors that led to the segment's higher benefit ratio, partially offset by the segment's lower operating cost ratio.

Humana’s Group and Specialty Segment
This segment consists of the company’s employer group fully-insured commercial medical products and specialty insurance benefits marketed to individuals and groups, including dental, vision, and life insurance benefits. In addition, the segment also includes the company’s administrative services only (ASO) products and its military services businesses.
Group and Specialty segment revenues:
The 2Q21 revenues for the Group and Specialty segment were $1.72 billion, down $117 million, or 6 percent, year over year from $1.84 billion in 2Q20. This decrease was primarily due to the anticipated decline in the company's fully-insured group commercial membership, partially offset by higher per member premiums across the fully-insured commercial business.
The YTD 2021 revenues for the Group and Specialty segment were $3.46 billion, down $245 million, or 7 percent, from $3.70 billion in YTD 2020 primarily reflecting the same factors that impacted the year-over-year second quarter comparison.
Group and Specialty segment enrollment:
Group fully-insured commercial medical membership was 706,100 at June 30, 2021, a decrease of 114,700, or 14 percent, from 820,800 at June 30, 2020, and down 71,300, or 9 percent, from 777,400 at December 31, 2020. These declines reflect lower small group quoting activity and sales attributable to depressed economic activity from the COVID-19 pandemic, partially offset by higher retention of existing customers, particularly in larger groups. The portion of group fully-insured commercial medical membership in small group accounts (2-99 sized employer groups) was approximately 52 percent at June 30, 2021 compared to 54 percent at December 31, 2020 and 57 percent at June 30, 2020.
Group ASO commercial medical membership was 497,800 at June 30, 2021, a decrease of 8,400, or 2 percent, from 506,200 at June 30, 2020, and down 7,100, or 1 percent, from 504,900 at December 31, 2020. Small group membership comprised 45 percent of group ASO medical membership at June 30, 2021, at December 31, 2020, and at June 30, 2020. Membership as of June 30, 2021 reflects intensified competition for small group accounts, partially offset by strong retention among large group accounts.
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Military services membership was 6,038,500 at June 30, 2021, an increase of 5,200 from 6,033,300 at June 30, 2020, and up 39,800, or 1 percent, from 5,998,700 at December 31, 2020. Membership includes military service members, retirees, and their families to whom the company is providing healthcare services under the current TRICARE East Region contract.
Membership in specialty products(h) was 5,327,500 at June 30, 2021, a decrease of 17,400 from 5,344,900, at June 30, 2020, but up 17,200 from 5,310,300 at December 31, 2020. The year-over-year membership decline reflects the loss of dental and vision groups cross-sold with medical, as reflected in the loss of group fully-insured commercial medical membership described above, as well as the loss of certain groups with stand-alone dental and vision. The YTD increase in specialty membership resulted from higher vision membership partially offset by a decline in dental members. As previously discussed, both the year-over-year and YTD changes also reflect the impact of the economic downturn driven by the COVID-19 pandemic.
Group and Specialty segment benefits expense:
The 2Q21 and YTD 2021 GAAP segment benefit ratios of 82.6 percent and 78.6 percent, respectively, compared to the 2Q20 and YTD 2020 GAAP segment benefit ratios of 67.0 percent and 73.1 percent, respectively. The year-over-year quarterly and YTD increases in the segment benefit ratio were primarily due to the following factors:
the significant impact of the deferral of non-essential care, net of COVID-19 treatment and testing costs and the company's pandemic relief efforts in 2Q20, amid the COVID-19 pandemic; and
the termination in 2021 of the non-deductible HIF which, along with a portion of the related tax benefit, was contemplated in the pricing and benefit design of the company's products.
These increases were partially offset by higher favorable Prior Period Development in the segment in 2021 as further described below, as well as deliberate pricing and benefit design efforts to increase profitability and position the commercial business for long-term success.
Prior Period Development
Group and Specialty segment Prior Period Development (in millions) Favorable (unfavorable)First QuarterSecond QuarterYTD
Prior Period Development from prior years recognized in 2021$92$8$100
Prior Period Development from prior years recognized in 2020$46$(16)$30
As anticipated, Humana experienced a higher level of favorable Prior Period Development in 2Q21 and YTD 2021 as a result of the suspension of certain financial recovery programs for a period of time in 2020. The suspension during 2020 was intended to provide financial and administrative relief for providers facing unprecedented strain as a result of the COVID-19 pandemic.
The Group and Specialty segment's favorable Prior Period Development in 2Q21 decreased the segment benefit ratio by 50 basis points compared to the unfavorable Prior Period Development in 2Q20 increasing the ratio by 100 basis points. Favorable Prior Period Development decreased the YTD 2021 ratio by 330 basis points while decreasing the YTD 2020 ratio by 90 basis points.
Group and Specialty segment operating costs:
The Group and Specialty segment’s GAAP operating cost ratio was 23.9 percent in 2Q21, an increase of 10 basis points from 23.8 percent in 2Q20, primarily reflecting the continued strategic investments made to position the company for long-term success.
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The impact of the strategic investments was partially offset by the following:
termination of the non-deductible HIF in 2021, which increased the 2Q20 Group and Specialty segment GAAP operating cost ratio by approximately 130 basis points,
lower COVID-19 related administrative costs in 2Q21 compared to 2Q20, as previously discussed, and
operating cost efficiencies in 2Q21 driven by previously implemented productivity initiatives.
The Group and Specialty segment's GAAP operating cost ratio of 23.4 percent for YTD 2021 was unchanged from the YTD 2020 GAAP operating cost ratio. The year-over-year comparison reflects the same factors influencing the second quarter comparison. The non-deductible HIF impacted the segment's YTD 2020 operating cost ratio by approximately 130 basis points.
Group and Specialty segment results:
Group and Specialty segment earnings
In millions
2Q21 (a)2Q20 (b)YTD 2021 (c)YTD 2020 (d)
GAAP$40 $287 $214 $392 
Amortization associated with identifiable intangibles1 2 
Adjusted (non-GAAP)$41 $288 $216 $394 
The unfavorable year-over-year GAAP segment earnings comparison, for both quarter and YTD, resulted from the same factors that led to the segment's higher benefit ratio.

Humana’s Healthcare Services Segment
This segment includes services offered to the company’s health plan members as well as to third parties, including pharmacy solutions, provider services, and clinical programs, such as home health and other services and capabilities to promote wellness and advance population health, including the company's non-consolidating minority interest investments in Kindred at Home and the strategic partnership with Welsh, Carson, Anderson & Stowe (WCAS) to develop and operate senior-focused, payor-agnostic, primary care centers.
Services offered by this segment are designed to enhance the healthcare experience overall. These services may lead to lower utilization associated with improved member health and/or lower drug costs.
Healthcare Services segment revenues:
Revenues of $7.52 billion in 2Q21 for the Healthcare Services segment increased by $583 million, or 8 percent, from $6.94 billion in 2Q20. The year-over-year quarterly comparison was favorably impacted by the following factors:
the company's strong individual Medicare Advantage and state-based contracts membership growth; and
higher revenues associated with the company's provider business.
These factors were partially offset by the following:
loss of intersegment revenues associated with the decline in stand-alone PDP and group Medicare Advantage membership as previously discussed; and
the impact of increased pharmacy revenues in 2Q20 as a result of the company allowing early prescription refills to permit members to prepare for extended supply needs due to COVID-19 restrictions.
12


YTD 2021 revenues for the Healthcare Services segment were $14.72 billion, an increase of $696 million, or 5 percent, from $14.03 billion in YTD 2020. The year-over-year increase was primarily due to the same factors affecting the year-over-year comparison for the second quarter, along with the favorable impact of additional pharmacy revenues associated with the Enclara Healthcare acquisition as YTD 2021 included six months of results compared YTD 2020 including only five months.
Healthcare Services segment operating costs:
The Healthcare Services segment’s operating cost ratio of 95.8 percent in 2Q21 increased 70 basis points from the 2Q20 ratio of 95.1 percent. The year-over-year increase resulted from the following factors:

increased administrative costs in the pharmacy operations as a result of incremental spend to accelerate growth within the business,

additional shipping costs incurred in pharmacy operations to ensure members' timely receipt of prescriptions, and

increased utilization levels in the company's provider business in 2Q21 compared to depressed levels in 2Q20 amid the COVID-19 pandemic.

These increased costs were partially offset by the following factors:

the impact on the 2Q20 ratio associated with COVID-19 administrative related costs, including expenses associated with additional safety measures taken for the company's pharmacy, provider, and clinical teams who continued to provide services to members throughout the crisis; and

operational improvement in the company's provider services business, largely related to Conviva, along with operating cost efficiencies driven by previously implemented productivity initiatives in 2Q21.

The Healthcare Services segment’s YTD 2021 operating cost ratio of 95.9 percent increased 30 basis points from 95.6 percent in YTD 2020 as a result of the same factors affecting the second quarter comparison, as well as the impact of pharmacy labor-related overtime costs due to weather disruptions occurring in the first quarter of 2021.
Healthcare Services segment operating statistics:
Medicare Advantage and dual demonstration program membership enrolled in a Humana care management program(i) was 947,400 at June 30, 2021, up 5 percent from 901,000 at June 30, 2020 and up 4 percent from 910,600 at December 31, 2020. These increases were primarily driven by growth in Special Needs Plans (SNP) membership, partially offset by improved predictive modeling leading to a reduction in members being managed by legacy care management programs.
Pharmacy script volume on an adjusted 30-day equivalent basis of 129 million for 2Q21 increased 11 percent compared to 116 million for 2Q20. Pharmacy script volume of 255 million for YTD 2021 increased 8 percent compared to 236 million for YTD 2020. Theses increases were primarily driven by higher individual Medicare Advantage and state-based contracts membership, partially offset by the decline in stand-alone PDP and group Medicare Advantage membership and the impact of early prescription refills in 2Q20 as members prepared for extended supply needs in response to COVID-19 restrictions.
Mail-order penetration increased by 30 basis points to 30.1 percent in 2Q21 from 29.8 percent in 2Q20, while also increasing 30 basis points to 29.8 percent in YTD 2021 from 29.5 percent in YTD 2020. The improvement reflects the investments within pharmacy operations to drive mail-order penetration. Strong pharmacy volumes continue to highlight that members value the convenience and cost savings of mail-order delivery.
13


Healthcare Services segment results:
Healthcare Services segment results
(in millions)
2Q212Q20YTD 2021YTD 2020
GAAP segment earnings$311 $317 $580 $567 
Depreciation and amortization expense46 51 91 99 
Interest and taxes31 22 46 43 
Adjusted EBITDA (e)$388 $390 $717 $709 
The Healthcare Services segment’s 2Q21 GAAP segment earnings slightly decreased by $6 million, or 2 percent, to $311 million compared to GAAP segment earnings of $317 million in 2Q20. The decline resulted from the same factors that led to the segment's increased operating cost ratio in 2Q21, partially offset by higher earnings from Kindred at Home.
Adjusted EBITDA in 2Q21 for the Healthcare Services segment of $388 million was inline with the 2Q20 Adjusted EBITDA. The year-over-year comparison of Adjusted EBITDA primarily resulted from the same factors that impacted the quarterly GAAP segment results comparison while excluding the impact of the factors detailed in the table above.
The Healthcare Services segment’s GAAP segment earnings in YTD 2021 increased $13 million, or 2 percent, to $580 million compared to GAAP segment earnings of $567 million in YTD 2020 primarily reflecting improved operating performance in the provider business, as well as higher earnings from Kindred at Home in YTD 2021.
Adjusted EBITDA in YTD 2021 for the Healthcare Services segment of $717 million was up $8 million, or 1 percent, compared to Adjusted EBITDA of $709 million in YTD 2020. The favorable year-over-year comparison of Adjusted EBITDA primarily resulted from the same factors that impacted the YTD GAAP segment results comparison while excluding the impact of the factors detailed in the table above.
Conference Call
Humana will host a conference call at 9:00 a.m. Eastern time today to discuss its financial results for the quarter and the company’s expectations for future earnings.
All parties interested in the company’s 2Q21 earnings conference call are invited to dial 888-625-7430. No password is required. The audio-only webcast of the 2Q21 earnings call may be accessed via Humana’s Investor Relations page at humana.com. The company suggests participants for both the conference call and those listening via the web dial in or sign on at least 15 minutes in advance of the call.
For those unable to participate in the live event, the archive will be available in the Historical Webcasts and Presentations section of the Investor Relations page at humana.com, approximately two hours following the live webcast. Telephone replays will also be available from approximately 12:15 p.m. Eastern time on July 28, 2021 until 10:59 p.m. Eastern time on September 28, 2021 and can be accessed by dialing 855-859-2056 and providing the conference ID #1741749.
Footnotes
(a) 2Q21 Adjusted results exclude the following:
Amortization expense for identifiable intangibles of approximately $15 million pretax, or $0.09 per diluted common share; GAAP measures affected in this release include consolidated pretax, EPS, and segment earnings (for respective amortization expense for the Retail and Group and Specialty segments).
Put/call valuation adjustments of approximately $419 million, or $2.49 per diluted common share, associated with Humana’s non-consolidating minority interest investments, including the impact of the
14


termination of the put/call agreement related to Kindred at Home as a result of the transaction announced on April 27, 2021. GAAP measures affected in this release include consolidated pretax and EPS.
Transaction and integration costs associated with pending Kindred at Home acquisition of approximately $22 million, or $0.13 per diluted common share; GAAP measure affected in this release include consolidated pretax, EPS, and the consolidated operating cost ratio.
Change in fair market value of publicly-traded equity securities of $63 million, or $0.37 per diluted common share. Humana adjusts for the market gains and losses of its publicly-traded equity investments (primarily Oak Street Health, Inc.) each period because while investments are strategic decisions for the company, management's measure of performance is primarily focused on operational results rather than fair value of such investments. Also, management does not forecast changes in fair value of its equity investments. Accordingly, the company believes it is useful to adjust GAAP EPS for the market gains and losses of publicly-traded equity securities. GAAP measures affected in this release include consolidated pretax, EPS, and consolidated revenues.

(b) 2Q20 Adjusted results exclude the following:
Amortization expense for identifiable intangibles of approximately $22 million pretax, or $0.13 per diluted common share; GAAP measures affected in this release include consolidated pretax, EPS, and segment earnings (for respective amortization expense for the Retail and Group and Specialty segments).
Put/call valuation adjustments of approximately $227 million, or $1.32 per diluted common share, associated with Humana’s non-consolidating minority interest investments. GAAP measures affected in this release include consolidated pretax and EPS.

(c) YTD 2021 Adjusted results exclude the following:
Amortization expense for identifiable intangibles of approximately $30 million pretax, or $0.18 per diluted common share; GAAP measures affected in this release include consolidated pretax, EPS, and segment earnings (for respective amortization expense for the Retail and Group and Specialty segments).
Put/call valuation adjustments of approximately $534 million, or $3.18 per diluted common share, associated with Humana’s non-consolidating minority interest investments, including the impact of the termination of the put/call agreement related to Kindred at Home as a result of the transaction announced on April 27, 2021. GAAP measures affected in this release include consolidated pretax and EPS.
Transaction and integration costs associated with pending Kindred at Home acquisition of approximately $22 million, or $0.13 per diluted common share; GAAP measure affected in this release include consolidated pretax, EPS, and the consolidated operating cost ratio.
Change in fair market value of publicly-traded equity securities of $22 million, or $0.13 per diluted common share. Humana adjusts for the market gains and losses of its publicly-traded equity investments (primarily Oak Street Health, Inc.) each period because while investments are strategic decisions for the company, management's measure of performance is primarily focused on operational results rather than fair value of such investments. Also, management does not forecast changes in fair value of its equity investments. Accordingly, the company believes it is useful to adjust GAAP EPS for the market gains and losses of publicly-traded equity securities. GAAP measures affected in this release include consolidated pretax, EPS, and consolidated revenues.

(d) YTD 2020 Adjusted results exclude the following:
Amortization expense for identifiable intangibles of approximately $43 million pretax, or $0.26 per diluted common share; GAAP measures affected in this release include consolidated pretax, EPS, and segment earnings (for respective amortization expense for the Retail and Group and Specialty segments).
Put/call valuation adjustments of approximately $70 million, or $0.40 per diluted common share, associated with Humana’s non-consolidating minority interest investments. GAAP measures affected in this release include consolidated pretax and EPS.

(e) The Healthcare Services segment Adjusted earnings before interest, taxes, depreciation and amortization (Adjusted EBITDA) includes GAAP segment earnings with adjustments to add back depreciation and amortization expense, interest expense, and income taxes. The Adjusted EBITDA includes results from all lines of business
15


within the segment. The Adjusted EBITDA also includes the impact of Humana’s 40 percent minority interest in Kindred at Home and the strategic partnership with Welsh, Carson, Anderson & Stowe (WCAS) to develop and operate senior-focused, payor-agnostic, primary care centers.

(f) FY 2021 Adjusted EPS projections exclude the following:
Amortization expense for identifiable intangibles of $0.39 per diluted common share.
Put/call valuation adjustments of $3.18 per diluted common share related to Humana’s non-consolidating minority interest investments, including the impact of the termination of the put/call agreement related to Kindred at Home as a result of the transaction announced on April 27, 2021. FY 2021 GAAP EPS guidance excludes the impact of future value changes of these put/call options as the future value changes cannot be estimated.
Estimated mark to market gain of approximately $7.73 per diluted common share associated with the company's existing 40 percent minority ownership of Kindred at Home; the gain will be recorded upon closing of the Kindred at Home transaction, which is anticipated in the third quarter of 2021.
Estimated transaction and integration costs associated with pending Kindred at Home acquisition of approximately $0.31 per diluted common share.
Change in the fair market value of equity securities of $0.13 per diluted common share. The future value of publicly-traded equity securities, their impact on GAAP EPS, and the related non-GAAP adjustment will fluctuate on the public trading value of the stock. The guidance set forth herein assumes no further change in the fair value of these investments.

(g) FY 2020 Adjusted results exclude the following:
• Amortization expense for identifiable intangibles of $0.51 per diluted common share.
• Put/call valuation adjustments of $0.60 per diluted common share associated with Humana's non-consolidating minority interest investments.
• Change in fair market value of publicly-traded equity securities of $4.32 per diluted common share.
• Net adjustment of $3.35 per diluted common share, related to the receipt of unpaid risk corridor payments associated with the losses incurred by the company under the ACA business from 2014 to 2016 (previously written off).

(h) The company provides a full range of insured specialty products including dental, vision, and life insurance benefits marketed to individuals and groups. Members included in these products may not be unique to each product since members have the ability to enroll in multiple products.

(i) Includes Medicare Advantage (including Special Needs Plans (SNP)) and dual-eligible demonstration program members enrolled in one of Humana’s care programs. These members may be enrolled in Humana At Home Chronic Care Program (HCCP), Humana At Home Remote Monitoring, or an Advance Illness Support program. Members included in these programs may not be unique to each program since members have the ability to enroll in multiple programs. In addition, the members in the HCCP program may receive varying levels of care management based on their health status and needs, ranging from active care management to ongoing monitoring.
Cautionary Statement

This news release includes forward-looking statements regarding Humana 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,” “believes,” “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:
16


If Humana does not design and price its products properly and competitively, if the premiums Humana receives are insufficient to cover the cost of healthcare services delivered to its members, if the company is unable to implement clinical initiatives to provide a better healthcare experience for its members, lower costs and appropriately document the risk profile of its members, or if its estimates of benefits expense 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. The company continually reviews estimates of future payments relating to benefit expenses for services incurred in the current and prior periods and makes necessary adjustments to its reserves, including premium deficiency reserves, where appropriate. These estimates involve extensive judgment, and have considerable inherent variability because they are extremely sensitive to changes in claim payment patterns and medical cost trends. Accordingly, Humana's reserves may be insufficient.
If Humana fails to effectively implement its operational and strategic initiatives, particularly its Medicare initiatives and state-based contract strategy, the company’s business may be materially adversely affected, which is of particular importance given the concentration of the company’s revenues in these products. In addition, there can be no assurances that the company will be successful in maintaining or improving its Star ratings in future years.
If Humana fails to properly maintain the integrity of its data, to strategically maintain existing or implement new information systems, to protect Humana’s proprietary rights to its systems, or to defend against cyber-security attacks or prevent other privacy or data security incidents that result in security breaches that disrupt our operations or in the unintended dissemination of sensitive personal information or proprietary or confidential information, the company’s business may be materially adversely affected.
Humana is involved in various legal actions, or disputes that could lead to legal actions (such as, among other things, provider contract disputes and qui tam litigation brought by individuals on behalf of the government), governmental and internal investigations, and routine internal review of business processes any of which, if resolved unfavorably to the company, could result in substantial monetary damages or changes in its business practices. Increased litigation and negative publicity could also increase the company’s cost of doing business.
As a government contractor, Humana is exposed to risks that may materially adversely affect its business or its willingness or ability to participate in government healthcare programs including, among other things, loss of material government contracts, governmental audits and investigations, potential inadequacy of government determined payment rates, potential restrictions on profitability, including by comparison of profitability of the company’s Medicare Advantage business to non-Medicare Advantage business, or other changes in the governmental programs in which Humana participates. Changes to the risk-adjustment model utilized by CMS to adjust premiums paid to Medicare Advantage, or MA, plans according to the health status of covered members, including proposed changes to the methodology used by CMS for risk adjustment data validation audits that fail to address adequately the statutory requirement of actuarial equivalence, if implemented, could have a material adverse effect on our operating results, financial position and cash flows.
Humana's business activities are subject to substantial government regulation. New laws or regulations, or legislative, judicial, or regulatory changes in existing laws or regulations or their manner of application could increase the company's cost of doing business and have a material adverse effect on Humana’s results of operations (including restricting revenue, enrollment and premium growth in certain products and market segments, restricting the company’s ability to expand into new markets, increasing the company’s medical and operating costs by, among other things, requiring a minimum benefit ratio on insured products, lowering the company’s Medicare payment rates and increasing the company’s expenses associated with a non-deductible health insurance industry fee and other assessments); the company’s financial position (including the company’s ability to maintain the value of its goodwill); and the company’s cash flows.
17


Humana’s failure to manage acquisitions, divestitures and other significant transactions successfully may have a material adverse effect on the company’s 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 pharmacy business is highly competitive and subjects it to regulations and supply chain risks 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.
Humana’s ability to obtain funds from certain of its licensed 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.
The securities and credit markets may experience volatility and disruption, which may adversely affect Humana’s business.
The spread of, and response to, the novel coronavirus, or COVID-19, underscores certain risks Humana faces, including those discussed above, and the ongoing, heightened uncertainty created by the pandemic precludes any prediction as to the ultimate adverse impact to Humana of COVID-19.

To the extent that the spread of COVID-19 is not contained, the premiums the company charges may prove to be insufficient to cover the cost of health care services delivered to its members, which may increase significantly as a result of higher utilization rates of medical facilities and services and other increases in associated hospital and pharmaceutical costs. Humana may also experience increased costs or decreased revenues if, as a result of the company’s members being unable or unwilling to see their providers due to actions taken to mitigate the spread of COVID-19, Humana is unable to implement clinical initiatives to manage health care costs and chronic conditions of its members, and appropriately document their risk profiles. In addition, Humana is offering, and has been mandated by legislative and regulatory action (including the Families First Act and CARES Act) to provide, certain expanded benefit coverage to its members, such as waiving out of pocket costs for COVID-19 testing and treatment. Humana is also taking actions designed to help provide financial and administrative relief for the health care provider community. Such measures and any further steps taken by Humana, or governmental action, to continue to respond to and address the ongoing impact of COVID-19 (including further expansion or modification of the services delivered to its members, the adoption or modification of regulatory requirements associated with those services and the costs and challenges associated with ensuring timely compliance with such requirements), to provide further relief for the health care provider community, or in connection with the relaxation of stay-at-home and physical distancing orders and other restrictions on movement and economic activity, including the potential for widespread testing and therapeutic treatments and the distribution and administration of COVID-19 vaccines, could adversely impact the company’s profitability.

The spread and impact of COVID-19, or actions taken to mitigate this spread, could have material and adverse effects on Humana’s ability to operate effectively, including as a result of the complete or partial closure of facilities or labor shortages. Disruptions in public and private infrastructure, including communications, availability of in-person sales and marketing channels, financial services and supply chains, could materially and adversely disrupt the company’s normal business operations. Humana has transitioned a significant subset of its employee population to a remote work environment in an effort to mitigate the spread of COVID-19, as have a number of the company’s third-party service providers, which may exacerbate certain risks to Humana’s business, including an increased demand for information technology resources, increased risk of phishing and other cybersecurity attacks, and increased risk of unauthorized dissemination of sensitive personal information or proprietary or confidential information about the company or its members or other third-parties. The outbreak of COVID-19 has severely impacted global economic activity, including the businesses of some of Humana’s commercial customers, and caused significant volatility and negative pressure in the financial markets. In addition to disrupting Humana’s operations, these developments may adversely affect the timing of
18


commercial customer premium collections and corresponding claim payments, the value of the company’s investment portfolio, or future liquidity needs.
The ongoing, heightened uncertainty created by the pandemic precludes any prediction as to the ultimate adverse impact to Humana of COVID-19. Humana is continuing to monitor the spread of COVID-19, changes to the company’s benefit coverages, and the ongoing costs and business impacts of dealing with COVID-19, including the potential costs and impacts associated with lifting or reimposing restrictions on movement and economic activity, the timing and degree in resumption of demand for deferred healthcare services, the pace of administration of COVID-19 vaccines and the effectiveness of those vaccines, and related risks. The magnitude and duration of the pandemic and its impact on Humana’s business, results of operations, financial position, and cash flows is uncertain, but such impacts could be material to the company’s business, results of operations, financial position and cash flows.
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, 2020;
Form 10-Q for the quarter ended March 31, 2021; and
Form 8-Ks filed during 2021.
About Humana
Humana Inc. (NYSE: HUM) is committed to helping our millions of medical and specialty members achieve their best health. Our successful history in care delivery and health plan administration is helping us create a new kind of integrated care with the power to improve health and well-being and lower costs. Our efforts are leading to a better quality of life for people with Medicare, families, individuals, military service personnel, and communities at large.
To accomplish that, we support physicians and other health care professionals as they work to deliver the right care in the right place for their patients, our members. Our range of clinical capabilities, resources and tools – such as in-home care, behavioral health, pharmacy services, data analytics and wellness solutions – combine to produce a simplified experience that makes health care easier to navigate and more effective.
More information regarding Humana is available to investors via the Investor Relations page of the company’s website at humana.com, including copies of:
Annual reports to stockholders
Securities and Exchange Commission filings
Most recent investor conference presentations
Quarterly earnings news releases and conference calls
Calendar of events
Corporate Governance information




19



In accordance
with GAAP
unless
otherwise
noted
Humana Inc.
Full-Year 2021 Projections
As of July 28, 2021
(includes impact of Kindred at Home acquisition, expected to close in the third quarter of 2021)
Comments
Diluted earnings
per common
share (EPS)
GAAP $24.97 to $25.47
(was $19.62 to $20.12)
•     Non-GAAP adjustments noted in footnote (f).

Adjustments~($3.72)
(was $1.63)
Non-GAAP$21.25 to $21.75
(no change)
Total revenuesConsolidated$82.5 billion to $83.5 billion
(was $80.3 billion to $81.9 billion)
•    Consolidated and segment-level revenue projections include expected investment income.
•    Segment-level revenues include amounts that eliminate in consolidation.


Retail segment $73.5 billion to $74.3 billion
(was $72.6 billion to $73.7 billion)
Group and Specialty segment$6.7 billion to $7.0 billion
(was $6.6 billion to $7.1 billion)
Healthcare Services segment $31.2 billion to $32.0 billion
(was $30.2 billion to $30.5 billion)
Change in year-end medical membership from prior year end
Individual Medicare Advantage: Up ~425,000 to 475,000 (no change)
Group Medicare Advantage: Down ~50,000 (no change)
Medicare stand-alone PDP: Down ~300,000 (no change)
State-based contracts: Up ~100,000 to ~125,000 (was Up ~50,000 to Up ~100,000)
Group commercial medical: Down ~100,000 (no change)
•    State-based contracts include membership in Florida, Kentucky, Illinois, Wisconsin, and South Carolina. Guidance assumes the extension of the Public Health Emergency remains in effect through the end of 2021.
•    Group commercial medical membership includes fully-insured and ASO (self-insured).
Benefit Ratio
Retail segment
 87.5% to 88.5%
(no change)
•    Ratio calculation: benefits expense as a percent of premiums revenues.

Group and Specialty segment   82.7% to 83.2%
( was 83.2% to 83.7%)
Consolidated operating cost ratio
GAAP: 11.8% to 12.3% (was 10.0% to 11.0%)
Adjusted: 11.7% to 12.2% (was 10.0% to 11.0%)

•    Ratio calculation: operating costs excluding depreciation and amortization as a percent of revenues excluding investment income.





20


In accordance
with GAAP
unless
otherwise
noted
Humana Inc.
Full-Year 2021 Projections
As of July 28, 2021
(includes impact of Kindred at Home acquisition, expected to close in the third quarter of 2021)

Comments
Segment resultsRetail segment earnings $2.1 billion to $2.3 billion
(no change)
•    No material impact to segment earnings anticipated from non-GAAP adjustments.

Group and Specialty segment earnings$100 million to $150 million
(was $75 million to $125 million)
Healthcare Services Adjusted EBITDA
 $1.50 billion to $1.55 billion
(was $1.45 billion to $1.5 billion)
Effective tax rateGAAP: 16.2% to 16.8% (was 22.1% to 22.7%)
Adjusted: 22.1% to 22.7% (no change)
GAAP rate reflects the impact of a non-taxable mark to market gain associated with the company's existing 40 percent minority ownership of Kindred at Home (expected in third quarter of 2021)
Weighted average share count for diluted EPS 128.6 million to 129.6 million (no change)
Cash flows from operations$4.0 billion to $4.5 billion (no change)
Capital expenditures$1.1 billion to $1.2 billion (no change)

21




Humana Inc.
Statistical Schedules
And
Supplementary Information
2Q21 Earnings Release



S-1


Humana Inc.
Statistical Schedules and Supplementary Information 2Q21 Earnings Release
Contents
Consolidated Financial Statements
1.Consolidated Statements of Income (S-3 - S-4)
2.Consolidated Balance Sheets (S-5)
3.Consolidated Statements of Cash Flows (S-6- S-7)
Operating Results Detail
4.Consolidating Statements of Income - Quarter (S-8 - S-9)
5.Consolidating Statements of Income - YTD (S-10 - S-11)
6.Ending Membership Detail (S-12)
7.Premiums and Services Revenue Detail (S-13 - S-14)
8.Healthcare Services Segment and Provider Partner Metrics (S-15)
9.Healthcare Services Segment Metrics (S-16)
 Balance Sheet Detail
10.Benefits Payable Detail and Statistics (S-17 - S-18)
Footnotes (S-19)

S-2


Humana Inc.
Consolidated Statements of Income
Dollars in millions, except per common share results
 For the three months ended June 30,
DollarPercentage
 20212020ChangeChange
Revenues:
Premiums$19,978 $18,556 $1,422 7.7 %
Services491 450 41 9.1 %
Investment income176 77 99 128.6 %
Total revenues20,645 19,083 1,562 8.2 %
Operating expenses:
Benefits17,149 14,175 2,974 21.0 %
Operating costs2,116 2,354 (238)-10.1 %
Depreciation and amortization144 119 25 21.0 %
Total operating expenses19,409 16,648 2,761 16.6 %
Income from operations1,236 2,435 (1,199)-49.2 %
Interest expense79 76 3.9 %
Other expense (income), net (A)419 (227)646 284.6 %
Income before income taxes and equity in net earnings738 2,586 (1,848)-71.5 %
Provision for income taxes183 783 (600)-76.6 %
Equity in net earnings (B)33 25 32.0 %
Net income$588 $1,828 $(1,240)-67.8 %
Basic earnings per common share$4.57 $13.83 $(9.26)-67.0 %
Diluted earnings per common share$4.55 $13.75 $(9.20)-66.9 %
Shares used in computing basic earnings per common share (000’s)128,692 132,248 
Shares used in computing diluted earnings per common share (000’s)129,387 133,023 






S-3



Humana Inc.
Consolidated Statements of Income
Dollars in millions, except per common share results
 For the six months ended June 30,
DollarPercentage
 20212020ChangeChange
Revenues:
Premiums$40,102 $36,918 $3,184 8.6 %
Services957 874 83 9.5 %
Investment income254 226 28 12.4 %
Total revenues41,313 38,018 3,295 8.7 %
Operating expenses:
Benefits34,445 29,804 4,641 15.6 %
Operating costs4,123 4,471 (348)-7.8 %
Depreciation and amortization286 234 52 22.2 %
Total operating expenses38,854 34,509 4,345 12.6 %
Income from operations2,459 3,509 (1,050)-29.9 %
Interest expense147 136 11 8.1 %
Other expense, net (A)534 70 464 662.9 %
Income before income taxes and equity in net earnings1,778 3,303 (1,525)-46.2 %
Provision for income taxes416 1,035 (619)-59.8 %
Equity in net earnings (B)54 33 21 63.6 %
Net income$1,416 $2,301 $(885)-38.5 %

Basic earnings per common share
$11.00 $17.41 $(6.41)-36.8 %
Diluted earnings per common share$10.94 $17.31 $(6.37)-36.8 %
Shares used in computing basic earnings per common share (000’s)128,811 132,192 
Shares used in computing diluted earnings per common share (000’s)129,469 132,917 




S-4


Humana Inc.
Consolidated Balance Sheets
Dollars in millions, except share amounts
 June 30,December 31,Year-to-Date Change
 20212020DollarPercent
Assets
Current assets:
Cash and cash equivalents$3,378 $4,673 
Investment securities13,471 12,554 
Receivables, net2,438 1,138 
Other current assets6,503 5,276 
Total current assets25,790 23,641 $2,149 9.1 %
Property and equipment, net2,690 2,371 
Long-term investment securities1,182 1,212 
Goodwill4,914 4,447 
Equity method investments1,240 1,170 
Other long-term assets2,254 2,128 
Total assets$38,070 $34,969 $3,101 8.9 %
Liabilities and Stockholders’ Equity
Current liabilities:
Benefits payable$8,485 $8,143 
Trade accounts payable and accrued expenses4,898 4,013 
Book overdraft236 320 
Unearned revenues323 318 
Short-term debt1,109 600 
Total current liabilities15,051 13,394 $1,657 12.4 %
Long-term debt6,063 6,060 
Other long-term liabilities2,113 1,787 
Total liabilities23,227 21,241 $1,986 9.3 %
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; 198,648,742 issued at June 30, 202133 33 
Capital in excess of par value3,018 2,705 
Retained earnings21,751 20,517 
Accumulated other comprehensive income216 391 
Treasury stock, at cost, 70,144,078 shares at June 30, 2021(10,175)(9,918)
Total stockholders’ equity14,843 13,728 $1,115 8.1 %
Total liabilities and stockholders’ equity$38,070 $34,969 $3,101 8.9 %
Debt-to-total capitalization ratio32.6 %32.7 %
S-5




Humana Inc.
Consolidated Statements of Cash Flows
Dollars in millions
 For the three months ended June 30,
DollarPercentage
 20212020ChangeChange
Cash flows from operating activities
Net income$588 $1,828 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation155 128 
Amortization15 22 
Gains on investment securities, net(76)(2)
Equity in net earnings(33)(25)
Stock-based compensation45 46 
Changes in operating assets and liabilities, net of effect of businesses acquired and dispositions:
Receivables(236)(232)
Other assets216 (654)
Benefits payable(166)890 
Other liabilities(150)1,064 
Unearned revenues(2)(8)
Other, net4 10 
Net cash provided by operating activities360 3,067 ($2,707)-88.3 %
Cash flows from investing activities
Acquisitions, net of cash acquired(202)— 
Purchases of property and equipment, net(329)(226)
Purchases of investment securities(1,587)(3,005)
Maturities of investment securities935 910 
Proceeds from sales of investment securities468 669 
Net cash used in investing activities(715)(1,652)$937 56.7 %
Cash flows from financing activities
Receipts (withdrawals) from contract deposits, net168 (185)
Repayment of commercial paper, net(95)(177)
Debt issue costs(21)— 
Change in book overdraft(107)140 
Common stock repurchases(3)(8)
Dividends paid(90)(83)
Proceeds from stock option exercises and other4 
Net cash used in financing activities(144)(306)$162 -52.9 %
(Decrease) increase in cash and cash equivalents(499)1,109 
Cash and cash equivalents at beginning of period3,877 6,054 
Cash and cash equivalents at end of period$3,378 $7,163 




S-6





Humana Inc.
Consolidated Statements of Cash Flows
Dollars in millions
 
 For the six months ended June 30,DollarPercent
 20212020ChangeChange
Cash flows from operating activities
Net income$1,416 $2,301 
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Depreciation308 252 
Amortization30 43 
Gains on investment securities, net(86)(51)
Equity in net earnings(54)(33)
Stock-based compensation84 82 
Benefit for deferred income taxes (3)
Changes in operating assets and liabilities, net of effect of businesses acquired and dispositions:
Receivables(1,285)(1,185)
Other assets(879)(2,124)
Benefits payable300 1,976 
Other liabilities(301)2,267 
Unearned revenues5 19 
Other, net(15)(3)
Net cash (used in) provided by operating activities(477)3,541 ($4,018)-113.5 %
Cash flows from investing activities
Acquisitions, net of cash acquired(325)(709)
Purchases of property and equipment, net(619)(418)
Purchases of investment securities(5,307)(5,464)
Maturities of investment securities1,627 1,645 
Proceeds from sales of investment securities2,421 2,084 
Net cash used in investing activities(2,203)(2,862)$659 -23.0 %
Cash flows from financing activities
Receipts from contract deposits, net1,183 389 
Proceeds from the issuance of commercial paper, net508 21 
Proceeds from issuance of senior notes, net 1,088 
Proceeds from issuance of term loan 1,000 
Debt issue costs(21)— 
Change in book overdraft(84)85 
Common stock repurchases(33)(25)
Dividends paid(173)(156)
Proceeds from stock option exercises and other5 28 
Net cash provided by financing activities1,385 2,430 ($1,045)-43.0 %
(Decrease) increase in cash and cash equivalents(1,295)3,109 
Cash and cash equivalents at beginning of period4,673 4,054 
Cash and cash equivalents at end of period$3,378 $7,163 
S-7


Humana Inc.
Consolidating Statements of Income—For the three months ended June 30, 2021
In millions
RetailGroup and
Specialty
Healthcare
Services
Eliminations/
Corporate
Consolidated
Revenues—external customers Premiums:
Individual Medicare Advantage$14,585 $— $— $— $14,585 
Group Medicare Advantage1,775 — — — 1,775 
Medicare stand-alone PDP662 — — — 662 
Total Medicare17,022 — — — 17,022 
Fully-insured182 1,078 — — 1,260 
Specialty— 432 — — 432 
Medicaid and other (C)1,264 — — — 1,264 
Total premiums18,468 1,510 — — 19,978 
Services revenue:
Provider— — 122 — 122 
ASO and other (D)12 194 — — 206 
Pharmacy— — 163 — 163 
Total services revenue12 194 285 — 491 
Total revenues—external customers18,480 1,704 285 — 20,469 
Intersegment revenues
Services— 10 4,977 (4,987)— 
Products— — 2,261 (2,261)— 
Total intersegment revenues— 10 7,238 (7,248)— 
Investment income65 106 176 
Total revenues18,545 1,718 7,524 (7,142)20,645 
Operating expenses:
Benefits16,068 1,247 — (166)17,149 
Operating costs1,533 409 7,205 (7,031)2,116 
Depreciation and amortization108 22 41 (27)144 
Total operating expenses17,709 1,678 7,246 (7,224)19,409 
Income from operations836 40 278 82 1,236 
Interest expense— — — 79 79 
Other expense, net (A)— — — 419 419 
Income (loss) before income taxes and equity in net earnings836 40 278 (416)738 
Equity in net earnings (B)— — 33 — 33 
Segment earnings (loss)$836 $40 $311 $(416)$771 
Benefit ratio87.0 %82.6 %85.8 %
Operating cost ratio8.3 %23.9 %95.8 %10.3 %
S-8


Humana Inc.
Consolidating Statements of Income—For the three months ended June 30, 2020
In millions
RetailGroup and
Specialty
Healthcare
Services
Eliminations/
Corporate
Consolidated
Revenues—external customers Premiums:
Individual Medicare Advantage$13,005 $— $— $— $13,005 
Group Medicare Advantage1,976 — — — 1,976 
Medicare stand-alone PDP731 — — — 731 
Total Medicare15,712 — — — 15,712 
Fully-insured169 1,208 — — 1,377 
Specialty— 425 — — 425 
Medicaid and other (C)1,042 — — — 1,042 
Total premiums16,923 1,633 — — 18,556 
Services revenue:
Provider— — 105 — 105 
ASO and other (D)192 — — 198 
Pharmacy— — 147 — 147 
Total services revenue192 252 — 450 
Total revenues—external customers16,929 1,825 252 — 19,006 
Intersegment revenues
Services— 4,712 (4,718)— 
Products— — 1,977 (1,977)— 
Total intersegment revenues— 6,689 (6,695)— 
Investment income32 — 41 77 
Total revenues16,961 1,835 6,941 (6,654)19,083 
Operating expenses:
Benefits13,251 1,094 — (170)14,175 
Operating costs1,638 435 6,603 (6,322)2,354 
Depreciation and amortization83 19 46 (29)119 
Total operating expenses14,972 1,548 6,649 (6,521)16,648 
Income (loss) from operations1,989 287 292 (133)2,435 
Interest expense— — — 76 76 
Other income, net (A)— — — (227)(227)
Income before income taxes and equity in net earnings1,989 287 292 18 2,586 
Equity in net earnings (B)— — 25 — 25 
Segment earnings$1,989 $287 $317 $18 $2,611 
Benefit ratio78.3 %67.0 %76.4 %
Operating cost ratio9.7 %23.8 %95.1 %12.4 %
S-9


Humana Inc.
Consolidating Statements of Income—For the six months ended June 30, 2021
In millions
RetailGroup and
Specialty
Healthcare
Services
Eliminations/
Corporate
Consolidated
Revenues—external customers Premiums:
Individual Medicare Advantage$29,400 $— $— $— $29,400 
Group Medicare Advantage3,530 — — — 3,530 
Medicare stand-alone PDP1,326 — — — 1,326 
Total Medicare34,256 — — — 34,256 
Fully-insured360 2,177 — — 2,537 
Specialty— 866 — — 866 
Medicaid and other (C)2,443 — — — 2,443 
Total premiums37,059 3,043 — — 40,102 
Services revenue:
Provider— — 237 — 237 
ASO and other (D)17 384 — — 401 
Pharmacy— — 319 — 319 
Total services revenue17 384 556 — 957 
Total revenues—external customers37,076 3,427 556 — 41,059 
Intersegment revenues
Services— 20 9,751 (9,771)— 
Products— — 4,413 (4,413)— 
Total intersegment revenues— 20 14,164 (14,184)— 
Investment income117 127 254 
Total revenues37,193 3,455 14,722 (14,057)41,313 
Operating expenses:
Benefits32,367 2,392 — (314)34,445 
Operating costs2,984 806 14,115 (13,782)4,123 
Depreciation and amortization212 43 81 (50)286 
Total operating expenses35,563 3,241 14,196 (14,146)38,854 
Income from operations1,630 214 526 89 2,459 
Interest expense— — — 147 147 
Other expense, net (A)— — — 534 534 
Income (loss) before income taxes and equity in net earnings1,630 214 526 (592)1,778 
Equity in net earnings (B)— — 54 — 54 
Segment earnings (loss)$1,630 $214 $580 $(592)$1,832 
Benefit ratio87.3 %78.6 %85.9 %
Operating cost ratio8.0 %23.4 %95.9 %10.0 %
S-10


Consolidating Statements of Income—For the six months ended June 30, 2020
In millions
RetailGroup and
Specialty
Healthcare
Services
Eliminations/
Corporate
Consolidated
Revenues—external customers Premiums:
Individual Medicare Advantage$25,799 $— $— $— $25,799 
Group Medicare Advantage3,987 — — — 3,987 
Medicare stand-alone PDP1,486 — — — 1,486 
Total Medicare31,272 — — — 31,272 
Fully-insured332 2,437 — — 2,769 
Specialty— 854 — — 854 
Medicaid and other (C)2,023 — — — 2,023 
Total premiums33,627 3,291 — — 36,918 
Services revenue:
Provider— — 209 — 209 
ASO and other (D)10 387 — — 397 
Pharmacy— — 268 — 268 
Total services revenue10 387 477 — 874 
Total revenues—external customers33,637 3,678 477 — 37,792 
Intersegment revenues
Services— 13 9,662 (9,675)— 
Products— — 3,887 (3,887)— 
Total intersegment revenues— 13 13,549 (13,562)— 
Investment income86 — 131 226 
Total revenues33,723 3,700 14,026 (13,431)38,018 
Operating expenses:
Benefits27,715 2,405 — (316)29,804 
Operating costs3,170 864 13,403 (12,966)4,471 
Depreciation and amortization164 39 89 (58)234 
Total operating expenses31,049 3,308 13,492 (13,340)34,509 
Income (loss) from operations2,674 392 534 (91)3,509 
Interest expense— — — 136 136 
Other expense, net (A)— — — 70 70 
Income (loss) before income taxes and equity in net earnings2,674 392 534 (297)3,303 
Equity in net earnings (B)— — 33 — 33 
Segment earnings (loss)$2,674 $392 $567 $(297)$3,336 
Benefit ratio82.4 %73.1 %80.7 %
Operating cost ratio9.4 %23.4 %95.6 %11.8 %



S-11


Humana Inc.
Ending Membership Detail
In thousands
    Year-over-Year Change Year to Date Change
 June 30, 2021Average 2Q21June 30, 2020AmountPercentDecember 31, 2020AmountPercent
Medical Membership:
Retail
Individual Medicare Advantage4,341.6 4,323.5 3,877.2 464.4 12.0 %3,962.7 378.9 9.6 %
Group Medicare Advantage557.3 556.9 608.3 (51.0)-8.4 %613.2 (55.9)-9.1 %
Total Medicare Advantage4,898.9 4,880.4 4,485.5 413.4 9.2 %4,575.9 323.0 7.1 %
Medicare stand-alone PDP3,653.1 3,654.5 3,888.4 (235.3)-6.1 %3,866.7 (213.6)-5.5 %
Total Medicare8,552.0 8,534.9 8,373.9 178.1 2.1 %8,442.6 109.4 1.3 %
State-based contracts and other (E)877.3 868.1 689.2 188.1 27.3 %772.4 104.9 13.6 %
Medicare Supplement330.4 329.8 324.6 5.8 1.8 %335.6 (5.2)-1.5 %
Total Retail9,759.7 9,732.8 9,387.7 372.0 4.0 %9,550.6 209.1 2.2 %
Group and Specialty
Fully-insured commercial medical706.1 711.7 820.8 (114.7)-14.0 %777.4 (71.3)-9.2 %
ASO commercial497.8 499.5 506.2 (8.4)-1.7 %504.9 (7.1)-1.4 %
Military services6,038.5 6,045.0 6,033.3 5.2 0.1 %5,998.7 39.8 0.7 %
Total Group and Specialty7,242.4 7,256.2 7,360.3 (117.9)-1.6 %7,281.0 (38.6)-0.5 %
Total Medical Membership17,002.1 16,989.0 16,748.0 254.1 1.5 %16,831.6 170.5 1.0 %
Specialty Membership (included in Group and Specialty segment):       
Dental—fully-insured (F)2,578.0 2,576.0 2,627.8 (49.8)-1.9 %2,617.6 (39.6)-1.5 %
Dental—ASO277.1 278.0 284.2 (7.1)-2.5 %284.9 (7.8)-2.7 %
Vision2,067.5 2,068.9 2,030.7 36.8 1.8 %2,005.5 62.0 3.1 %
Other supplemental benefits (G)404.9 405.1 402.2 2.7 0.7 %402.3 2.6 0.6 %
Total Specialty Membership5,327.5 5,328.0 5,344.9 (17.4)-0.3 %5,310.3 17.2 0.3 %
June 30, 2021Member Mix
June 30, 2021
June 30, 2020Member Mix
June 30, 2020
Individual Medicare Advantage Membership
HMO2,573.2 59 %2,295.6 59 %
PPO/PFFS1,768.4 41 %1,581.6 41 %
Total Individual Medicare Advantage (H)
4,341.6 100 %3,877.2 100 %
Individual Medicare Advantage Membership
Shared Risk (I)1,386.8 32 %1,200.4 31 %
Path to Risk (J)1,527.5 35 %1,351.9 35 %
Total Value-based2,914.3 67 %2,552.3 66 %
Other1,427.3 33 %1,324.9 34 %
Total Individual Medicare Advantage4,341.6 100 %3,877.2 100 %
S-12


Humana Inc.
Premiums and Services Revenue Detail
Dollars in millions, except per member per month
 For the three months ended June 30,Per Member per Month (M)
For the three months ended June 30,
DollarPercentage
 20212020ChangeChange20212020
Premiums and Services Revenue
Retail
Individual Medicare Advantage$14,585 $13,005 $1,580 12.1 %$1,124 $1,122 
Group Medicare Advantage1,775 1,976 (201)-10.2 %1,062 1,084 
Medicare stand-alone PDP662 731 (69)-9.4 %60 63 
State-based contracts and other (C)1,264 1,042 222 21.3 %485 518 
Medicare Supplement182 169 13 7.7 %184 175 
Other services12 100.0 %
Total Retail18,480 16,929 1,551 9.2 %
Group and Specialty
Fully-insured commercial medical1,078 1,208 (130)-10.8 %505 488 
Specialty (K)432 425 1.6 %29 28 
Commercial ASO & other services (D)80 78 2.6 %
Military services (L)124 120 3.3 %
Total Group and Specialty1,714 1,831 (117)-6.4 %
Healthcare Services
Pharmacy solutions6,621 6,124 497 8.1 %
Provider services739 654 85 13.0 %
Clinical programs163 163 — — %
Total Healthcare Services7,523 6,941 582 8.4 %










S-13


Humana Inc.
Premiums and Services Revenue Detail
Dollars in millions, except per member per month

 For the six months ended June 30,Per Member per Month (M)
For the six months ended June 30,
DollarPercentage
 20212020ChangeChange20212020
Premiums and Services Revenue
Retail
Individual Medicare Advantage$29,400 $25,799 $3,601 14.0 %$1,139 $1,118 
Group Medicare Advantage3,530 3,987 (457)-11.5 %1,056 1,097 
Medicare stand-alone PDP1,326 1,486 (160)-10.8 %60 63 
State-based contracts and other (C)2,443 2,023 420 20.8 %480 525 
Medicare Supplement360 332 28 8.4 %182 175 
Other services17 10 70.0 %
Total Retail37,076 33,637 3,439 10.2 %
Group and Specialty
Fully-insured commercial medical2,177 2,437 (260)-10.7 %504 480 
Specialty (K)866 854 12 1.4 %29 28 
Commercial ASO & other services (D)158 159 (1)-0.6 %
Military services (L)246 241 2.1 %
Total Group and Specialty3,447 3,691 (244)-6.6 %
Healthcare Services
Pharmacy solutions12,994 12,385 609 4.9 %
Provider services1,416 1,306 110 8.4 %
Clinical programs310 335 (25)-7.5 %
Total Healthcare Services14,720 14,026 694 4.9 %





S-14


Humana Inc.
Healthcare Services Segment and Provider Partner Metrics
June 30, 2021June 30, 2020DifferenceDecember 31, 2020Difference
Primary Care Providers:
Shared Risk (I)
Proprietary1,000 1,000 — — %900 100 11.1 %
Contracted26,500 21,900 4,600 21.0 %23,000 3,500 15.2 %
Path to Risk (J)45,800 43,600 2,200 5.0 %43,900 1,900 4.3 %
Total Value-based73,300 66,500 6,800 10.2 %67,800 5,500 8.1 %
Care Management Statistics:
Members enrolled in a Humana care management program (N)947,400 901,000 46,400 5.1 %910,600 36,800 4.0 %
Number of high-risk discharges enrolled in a post-discharge care management program (O)68,800 68,200 600 0.9 %73,600 (4,800)-6.5 %
Primary Care Centers (P)As of June 30, 2021

Centers
Primary
Care Providers
Patients Served
Humana's Care Delivery Subsidiaries172730268,500
Joint Venture and Alliance Provider Partners167310
S-15


Humana Inc.
Healthcare Services Segment Metrics
Script volume in thousands
For the three months ended
June 30, 2021
For the three months ended
June 30, 2020
Year-over-Year
Difference
For the three months ended
March 31, 2021
Sequential
Difference
Pharmacy:
Generic Dispense Rate
Retail91.5 %91.4 %0.1 %91.5 %— %
Group and Specialty88.5 %87.6 %0.9 %88.7 %-0.2 %
Mail-Order Penetration
Retail30.1 %29.8 %0.3 %29.5 %0.6 %
Group and Specialty6.2 %6.0 %0.2 %6.5 %-0.3 %
 DifferencePercentage
Change
 DifferencePercentage
Change
Script volume (Q)
129,000 116,300 12,700 10.9 %125,500 3,500 2.8 %




For the six months ended
June 30, 2021
For the six months ended
June 30, 2020
Year-over-Year
Difference
Pharmacy:
Generic Dispense Rate
Retail91.5 %91.7 %-0.2 %
Group and Specialty88.6 %87.9 %0.7 %
Mail-Order Penetration
Retail29.8 %29.5 %0.3 %
Group and Specialty6.1 %5.9 %0.2 %
 DifferencePercentage
Change
Script volume (Q)254,500 236,400 18,100 7.7 %




S-16


Humana Inc.
Detail of Benefits Payable Balance and Year-to-Date Changes
Dollars in millions
For the six months ended
June 30, 2021
For the six months ended
June 30, 2020
For the year ended
December 31, 2020
Year-to-date changes in benefits payable, excluding military services
Balances at January 1$8,143 $6,004 $6,004 
Less: Reinsurance recoverables (R) (68)(68)
Beginning balance, net of reinsurance recoverable8,143 5,936 5,936 
Acquisitions42 — — 
Incurred related to:
Current year35,164 30,039 61,941 
Prior years (S)(719)(235)(313)
Total incurred34,445 29,804 61,628 
Paid related to:
Current year(27,556)(22,665)(54,003)
Prior years(6,589)(5,098)(5,418)
Total paid(34,145)(27,763)(59,421)
Reinsurance recoverables (R) — 
Ending balance$8,485 $7,980 $8,143 



S-17


Humana Inc.
Benefits Payable Statistics (Continued) (T)
Days in Claims Payable
Quarter EndedDays in
Claims
Payable (DCP)
Change
Last 4
Quarters
Percentage
Change
6/30/202051.2 11.3 28.3 %
9/30/202048.4 5.6 13.1 %
12/31/202046.2 5.8 14.4 %
3/31/202145.0 3.7 9.0 %
6/30/202145.0 (6.2)-12.1 %





Change in Days in Claims Payable (U)1Q
2021
2Q
2021
YTD
2021
2Q
2020
Last Twelve
Months
DCP—beginning of period46.2 45.0 46.2 41.3 51.2 
Components of change in DCP:
Provider accruals (V)(0.9)0.4 (0.5)7.0 (4.3)
                  Medical fee-for-service (W)(1.1)0.1 (1.0)2.4 (2.0)
Pharmacy (X)1.0 (0.3)0.7 (0.2)0.3 
Processed claims inventory (Y)— (0.2)(0.2)0.6 0.1 
Other (Z)(0.2)— (0.2)0.1 (0.3)
DCP—end of period45.0 45.0 45.0 51.2 45.0 
Total change from beginning of period(1.2)— (1.2)9.9 (6.2)
S-18


Humana Inc.
Footnotes to Statistical Schedules and Supplementary Information
2Q21 Earnings Release
(A)Put/call valuation adjustments associated with the company's non-consolidating minority interest investments.
(B)Net earnings associated with the company's non-consolidating minority interest investments.
(C)The Medicaid and other category includes premiums associated with the company’s Medicaid business, as well as premiums associated with the health plan's direct contracting entity.
(D)The ASO and other category is primarily comprised of Administrative Services Only (ASO) fees and other ancillary services fees, including military services unless separately disclosed.
(E)Includes Medicaid Temporary Assistance for Needy Families (TANF), dual-eligible demonstration, and Long-Term Support Services (LTSS) from state-based contracts, as well as members associated with the health plan's direct contracting entity.
(F)Fully-insured dental membership as reported does not include Humana members that have a Medicare Advantage plan that includes an embedded dental benefit. Costs associated with these dental benefits, however, are recorded in the Group and Specialty segment earnings results.
(G)Other supplemental benefits include group life policies.
(H)Members and plans connected to Humana's recent Independent Care Health Plan (iCare) acquisition are being integrated into the company's systems, as such, there may be fluctuations in the value-based care distribution as the integration effort is finalized.
(I)In certain circumstances, the company contracts with providers to accept financial risk for a defined set of Medicare Advantage 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 Medicare Advantage members assigned or attributed to their provider panel, including some health benefit administrative functions and claims processing. For these capitated Shared Risk arrangements, the company generally agrees to payment rates that target a benefit expense ratio. The result is a high level of engagement on the part of the provider.
(J)A Path to Risk provider is one who has a high level of engagement and participates in one of Humana’s pay-for-performance programs (Model Practice or Medical Home) or has a risk contract in place with a trigger (future date or membership threshold) which has not yet been met. In addition to earning incentives, these providers may also have a shared savings component by which they can share in achieved surpluses when the actual cost of the medical services provided to patients assigned or attributed to their panel is less than the agreed upon medical expense target.
(K)Specialty per member per month is computed based on reported specialty premiums and average fully-insured specialty membership for the period. Included with specialty premiums are stop-loss ASO premiums.
(L)The amounts primarily reflect services revenues under the TRICARE East Region contract that generally are contracted on a per-member basis.
(M)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).
(N)Includes Medicare Advantage (including Special Needs Plans (SNP)) and dual-eligible demonstration program members enrolled in one of Humana’s care programs. These members may be enrolled in Humana At Home Chronic Care Program (HCCP), Humana At Home Remote Monitoring, or an Advance Illness Support program. Members included in these programs may not be unique to each program since members have the ability to enroll in multiple programs. In addition, the members in the HCCP program may receive varying levels of care management based on their health status and needs, ranging from active care management to ongoing monitoring.
(O)Reflects discharges enrolled in Humana’s 30-day care management services, which supports members after they are discharged home from a hospital or other facility. The program is aimed at individuals at high-risk for re-hospitalization. Care managers visit and call members at home to ensure they have and understand correct prescriptions, their doctors are informed about members’ changed status, and that members are either self-managing adequately or are referred to appropriate ongoing services.
(P)Humana's care delivery subsidiaries include Conviva and CenterWell Senior Primary Care. The centers, primary care providers, and patients served counts include (i) the operations of our medical center business through both employed physicians and care providers, and through third party management service organizations and professional groups with whom we contract to arrange for and manage certain clinical services, (ii) clinics and operations managed by CenterWell Senior Primary Care in connection with a strategic partnership with Welsh, Carson, Anderson & Stowe, and (iii) those associated with MSO/IPA relationships with Conviva.
(Q)Script volume is presented on an adjusted 30-day equivalent basis. This includes all scripts processed by the Humana pharmacy benefit manager (PBM).
(R)Represents reinsurance recoverables associated with the company’s state-based Medicaid contract in Kentucky.
(S)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 medical claim reserves during the quarter.
(T)A common metric for monitoring benefits payable levels relative to benefits expense is days in claims payable (DCP). The company calculates DCP using the quarterly reported benefits expense and benefits payable balances as presented within the company’s consolidated financial statements.
(U)DCP fluctuates due to a number of factors, 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 medical claims reserve recorded upon enrollment later in the quarter.
(V)Provider accruals represent portions of capitation payments set aside to pay future settlements for capitated providers. Related settlements generally happen over a 12-month period.
(W)Represents medical and specialty claims incurred but not reported (IBNR) for non-pharmacy fully-insured products.
(X)Represents pharmacy claims expense including payments to the company’s pharmacy benefit manager for prescription drugs filled on behalf of Humana’s members, as well as government subsidized programs from Medicare Part D such as low income cost and reinsurance subsidies, as well as coverage gap discount programs.
(Y)Includes processed claims that are in the post claim adjudication process, which consists of operating functions such as audit, check batching and check handling. These claims are included in IBNR lags, but have not yet been mailed or released from Humana.
(Z)Includes non-lagged reserves such as ASO stop loss, life reserves, and accidental death and dismemberment/accident and health. Also includes an explicit provision for uncertainty (also called a provision for adverse deviation) intended to ensure the unpaid claim liabilities are adequate under moderately adverse conditions.
S-19


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