Form 8-K HUMANA INC For: Feb 04

February 4, 2015 6:08 AM

�

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC�20549

�

FORM 8-K

�

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(D)

OF THE SECURITIES EXCHANGE ACT OF 1934

Date of report (Date of earliest event reported):�February 4, 2015

�

Humana Inc.

(Exact Name of Registrant as Specified in Its Charter)

�

Delaware

(State or Other Jurisdiction

of Incorporation)

�

1-5975

�

61-0647538

(Commission

File Number)

�

(IRS Employer

Identification No.)

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500 West Main Street, Louisville, KY	�	40202
(Address of Principal Executive Offices)	�	(Zip Code)

502-580-1000

(Registrant�s Telephone Number, Including Area Code)

�

(Former Name or Former Address, if Changed Since Last Report)

�

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

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Written communications pursuant to Rule 425 under the Securities Act (17�CFR�230.425)

�

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

�

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17�CFR�240.14d-2(b))

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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17�CFR�240.13e-4(c))

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Item�2.02

Results of Operations and Financial Condition.

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Item�7.01

Regulation FD Disclosure.

Humana Inc. issued a press release this morning reporting financial results for the period ended December�31, 2014 and reaffirming financial projections for 2015. In addition, the Company has posted a detailed earnings release related to the same period to the Investor Relations portion of the Company�s website at www.humana.com. A copy of each release is attached hereto as Exhibit 99.1 and 99.2, respectively, and each release is incorporated herein by reference.

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Item�9.01

Financial Statements and Exhibits.

�

(d)

Exhibits:

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Exhibit No.	��	Description

99.1	��	Press Release

99.2	��	Earnings Release and Statistical Pages

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned hereunto duly authorized.

�


HUMANA INC.

BY:	�	/s/ Cynthia H. Zipperle
	�	Cynthia H. Zipperle
	�	Vice President, Chief Accounting Officer and Controller
	�	(Principal Accounting Officer)

Dated: February 4, 2015

INDEX TO EXHIBITS

�


Exhibit No.	��	Description

99.1	��	Press Release

99.2	��	Earnings Release and Statistical Pages

Exhibit 99.1

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n e w s��r e l e a s e		Humana Inc.
		500 West Main Street
		P.O. Box 1438
		Louisville,�KY�40201-1438
		http://www.humana.com


� FOR MORE INFORMATION CONTACT:	�	�	��
� Regina Nethery
Humana Investor Relations
(502) 580-3644 e-mail: [email protected]
� Tom Noland
Humana Corporate Communications
(502) 580-3674 e-mail: [email protected]

Humana Reports Fourth Quarter and Full Year 2014 Financial Results;

Reaffirms 2015 Financial Guidance

�

2014 Adjusted EPS^(a)of $7.51 consistent with management expectations (excluding $0.15 per share of expenses related to early retirement of debt)

�

2015 EPS guidance of $8.50 to 9.00 reaffirmed, a growth rate of approximately 17 percent from 2014 Adjusted�EPS^(a)

�

2015 individual Medicare Advantage membership growth estimate reaffirmed at 300,000 to 350,000, up approximately 13�percent versus 2014

�

2015 individual Medicare stand-alone PDP membership growth estimate reaffirmed at 400,000 to 450,000, up approximately 11�percent versus 2014

LOUISVILLE, KY (February 4, 2015) � Humana Inc. (NYSE: HUM) today reported diluted earnings per common share (EPS) for the quarter ended December�31, 2014 (4Q14)�of $0.94, compared to a loss of $0.19 per share for the quarter ended December�31, 2013 (4Q13). For the year ended December�31, 2014 (FY14) the company reported EPS of $7.36 compared to $7.73 for the year ended December�31, 2013 (FY13). The company also reported adjusted results^(a)for these periods as follows:

�

��

Consolidated Results of Operations

($ in millions except EPS)

��

4Q14
Pretax
Income

�

��

4Q13
Pretax
Income
(Loss)

�

��

4Q14�EPS

�

4Q13�EPS

�

GAAP

��

287

��

)�

��

0.94

��

�

0.19

)�

Expenses associated with early retirement of debt�(a)

��

�

��

�

��

�

0.15

��

�

��

Reserve strengthening for closed block of long-term care insurance policies�(a)

��

�

��

��

�

243

��

�

��

��

�

0.99

��

�

��

�

��

�

Adjusted (non-GAAP)�(a)

324

��

194

��

1.09

��

0.80

��

�

��

�

��

�

Effective tax rate

�

49.5

%�

�

39.4

%�

�

��

Consolidated Results of Operations

($ in millions except EPS)

��

FY14
Pretax
Income

�

��

FY13
Pretax
Income

�

��

FY14�EPS

�

FY13�EPS

�

GAAP

��

2,170

��

1,921

��

7.36

��

�

7.73

��

Expenses associated with early retirement of debt�(a)

��

�

��

�

��

�

0.15

��

�

��

Reserve strengthening for closed block of long-term care insurance policies�(a)

��

�

��

��

�

243

��

�

��

��

�

0.99

��

�

��

�

��

�

Adjusted (non-GAAP)�(a)

2,207

��

2,164

��

7.51

��

8.72

��

�

��

�

��

�

Effective tax rate

�

47.2

%�

�

35.9

%�

Adjusted pretax income of $324 million in 4Q14 increased $130 million, or 67.0 percent versus $194 million for 4Q13 primarily due to improved year-over-year results in each of the company�s business segments. Adjusted EPS of $1.09 for 4Q14 increased $0.29 per share, or 36.3 percent versus $0.80 in 4Q13, reflecting the improved pretax results as well as the impact of a lower weighted average share count due to the company�s share repurchase program.

Adjusted pretax income of $2.21 billion for FY14 increased $43 million, or 2.0 percent versus $2.16 billion for FY13 as higher earnings in the company�s Healthcare Services segment were substantially offset by the anticipated lower year-over-year results in the company�s Retail and Employer Group segments. As also anticipated, Adjusted EPS of $7.51 for FY14 decreased $1.21 per share, or 13.9�percent, versus $8.72 in FY13, primarily due to changes in segment pretax results, partially offset by the impact of share repurchase activity.

The company reaffirmed its estimate for EPS for the year ending December�31, 2015 (FY15) to be in the range of $8.50 to $9.00. The company�s 2015 EPS estimate reflects expected strong growth and operating efficiencies in the company�s Medicare offerings, year-over-year improvement in the Healthcare Services businesses, break-even results in its HumanaOne business and reduced investment spending in state-based^(b) contracts, partially offset by the tax implications of the expected increase in the non-deductible health insurance industry fee and a reduction in 2015 Medicare rates.

�This past year was particularly dynamic considering Medicare rate reductions, increased income taxes, the launch of healthcare exchanges and our entry into state-based contracts,� said Bruce D. Broussard, President and Chief Executive Officer of Humana.��Our 2014 results in the face of these challenges, combined with strong 2015 membership growth, demonstrate the strength of our consumer-focused strategy and integrated care delivery model.�We are pleased with our projected growth trajectory and believe we are well positioned for success in 2015 and beyond.�

Detailed press release

Humana�s full detailed earnings press release has been posted to the company�s Investor Relations site and may be accessed at http://phx.corporate-ir.net/phoenix.zhtml?c=92913&p=irol-IRHome 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).

Footnotes

�

(a)

Adjusted financial results included in this earnings press release include: (1)�for 2014, Adjusted Pretax Income and Adjusted EPS, which in each case excludes approximately $37 million of pretax expense, or $0.15 per share, as applicable, associated with the early retirement of debt in the fourth quarter of 2014 (which related to the company�s October 2014 redemption of its $500 million aggregate principal amount of 6.45% senior unsecured notes due June�1, 2016, and (2)�for 2013, Adjusted Pretax Income and Adjusted EPS, which in each case excludes $243 million of pretax expense, net of reinsurance, or $0.99 per share, as applicable, for strengthening of the company�s future policy benefit reserves related to the closed block of long-term care insurance policies. This closed block of policies was acquired in connection with the company�s acquisition of KMG America in late 2007. No policies in this block have been sold since 2005. The Company has included these financial measures (not in accordance with Generally Accepted Accounting Principles (GAAP)) in its summary of financial results within this earnings press release as 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.�Neither of the excluded items described herein are a recurring part of the company�s operating plan.�Consequently, management uses these non-GAAP financial measures as

�

�	an indicator of business performance, as well as for operational planning and decision making purposes.�Non-GAAP financial measures should be considered in addition to, but not as a substitute for, or superior to, financial measures prepared in accordance with GAAP.

(b)	State-based contracts include the company�s operations and membership associated with Medicaid benefits provided for dual-eligible, Temporary Assistance for Needy Families (TANF), and Long-Term Support Services (LTSS) programs.

Conference Call�& Virtual Slide Presentation

Humana will host a conference call, as well as a virtual slide presentation, at 9:00 a.m. eastern time today to discuss its financial results for the quarter and the company�s expectations for future earnings. A live virtual presentation (audio with slides) may be accessed via Humana�s Investor Relations page at www.humana.com. The company suggests web participants sign on at least 15 minutes in advance of the call. The company also suggests web participants visit the site well in advance of the call to run a system test and to download any free software needed to view the presentation.

All parties interested in the audio-only portion of the conference call are invited to dial 888-625-7430. No password is required. The company suggests participants dial in at least ten minutes in advance of the call. For those unable to participate in the live event, the virtual presentation archive may be accessed via the Historical Webcasts�& Presentations section of the Investor Relations page at www.humana.com.

Cautionary Statement

This news release includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. When used in investor presentations, press releases, Securities and Exchange Commission (SEC) filings, and in oral statements made by or with the approval of one of Humana�s executive officers, the words or phrases like �expects,� �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:

�

If Humana does not design and price its products properly and competitively, if the premiums Humana receives are insufficient to cover the cost of health care services delivered to its members, if the company is unable to implement clinical initiatives to provide a better health care 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. These estimates, however, involve extensive judgment, and have considerable inherent variability because they are extremely sensitive to changes in claim payment patterns and medical cost trends.

�

If Humana fails to effectively implement its operational and strategic initiatives, particularly its Medicare initiatives, state-based contract strategy, and its participation in the new health insurance exchanges, 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.

�

If Humana fails to properly maintain the integrity of its data, to strategically implement new information systems, to protect Humana�s proprietary rights to its systems, or to defend against cyber-security attacks, the company�s business may be materially adversely affected.

�

Humana�s business may be materially adversely impacted by the adoption of a new coding set for diagnoses (commonly known as ICD-10), the implementation of which has been deferred to at least October�1, 2015.

�

Humana is involved in various legal actions, or disputes that could lead to legal actions (such as, among other things, provider contract disputes relating to rate adjustments resulting from the Balanced Budget and Emergency Deficit Control Act of 1985, as amended, commonly referred to as �sequestration�; other provider contract disputes; and qui tam litigation brought by individuals on behalf of the government) and governmental and internal investigations, 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 health care 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.

�

The Health Care Reform Law, including The Patient Protection and Affordable Care Act and The Health Care and Education Reconciliation Act of 2010, could have a material adverse effect on Humana�s results of operations, including restricting revenue, enrollment and premium growth in certain products and market segments, 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 participation in the new federal and state health care exchanges, which entail uncertainties associated with mix, volume of business, and the operation of premium stabilization programs, which are subject to federal administrative action, could adversely affect the company�s results of operations, financial position, and cash flows.

�

Humana�s business activities are subject to substantial government regulation. New laws or regulations, or changes in existing laws or regulations or their manner of application could increase the company�s cost of doing business and may adversely affect the company�s business, profitability 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 in addition to those the company faces with its core health benefits businesses.

�

Changes in the prescription drug industry pricing benchmarks may adversely affect Humana�s financial performance.

�

If Humana does not continue to earn and retain purchase discounts and volume rebates from pharmaceutical manufacturers at current levels, Humana�s gross margins may decline.

�

Humana�s ability to obtain funds from 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.

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, 2013;

�

Form 10-Q for the quarter ended March�31, 2014,�June�30, 2014, and September�30, 2014;

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Form 8-Ks filed during 2014 and 2015.

About Humana

Humana Inc., headquartered in Louisville, Ky., is a leading health and well-being company focused on making it easy for people to achieve their best health with clinical excellence through coordinated care. The company�s strategy integrates care delivery, the member experience, and clinical and consumer insights to encourage engagement, behavior change, proactive clinical outreach and wellness for the millions of people we serve across the country.

�

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

�

Annual reports to stockholders

�

Securities and Exchange Commission filings

�

Most recent investor conference presentations

�

Quarterly earnings news releases

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Replays of most recent earnings release conference calls

�

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

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Corporate Governance information

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Exhibit 99.2

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n e w s��r e l e a s e		Humana Inc.
		500�West�Main�Street
		P.O. Box 1438
		Louisville,�KY�40201-1438
		http://www.humana.com


� FOR MORE INFORMATION CONTACT:	�	�	��
� Regina Nethery
Humana Investor Relations
(502) 580-3644 e-mail: [email protected]
� Tom Noland
Humana Corporate Communications
(502) 580-3674 e-mail: [email protected]

Humana Reports Fourth Quarter and Full Year 2014 Financial Results;

Reaffirms 2015 Financial Guidance

�

2014 Adjusted EPS^(a)of $7.51 consistent with management expectations (excluding $0.15 per share of expenses related to early retirement of debt)

�

2015 EPS guidance of $8.50 to 9.00 reaffirmed, a growth rate of approximately 17 percent from 2014 Adjusted�EPS^(a)

�

2015 individual Medicare Advantage membership growth estimate reaffirmed at 300,000 to 350,000, up approximately 13�percent versus 2014

�

2015 individual Medicare stand-alone PDP membership growth estimate reaffirmed at 400,000 to 450,000, up approximately 11�percent versus 2014

�

��

Consolidated Results of Operations

($ in millions except EPS)

��

4Q14
Pretax
Income

�

��

4Q13
Pretax
Income
(Loss)

�

��

4Q14�EPS

�

4Q13�EPS

�

GAAP

��

287

��

)�

��

0.94

��

�

0.19

)�

Expenses associated with early retirement of debt�(a)

��

�

��

�

��

�

0.15

��

�

��

Reserve strengthening for closed block of long-term care insurance policies�(a)

��

�

��

��

�

243

��

�

��

��

�

0.99

��

�

��

�

��

�

Adjusted (non-GAAP) (a)

324

��

194

��

1.09

��

0.80

��

�

��

�

��

�

Effective tax rate

�

49.5

%�

�

39.4

%�

�

��

Consolidated Results of Operations

($ in millions except EPS)

��

FY14
Pretax
Income

�

��

FY13
Pretax
Income

�

��

FY14�EPS

�

FY13�EPS

�

GAAP

��

2,170

��

1,921

��

7.36

��

�

7.73

��

Expenses associated with early retirement of debt�(a)

��

�

��

�

��

�

0.15

��

�

��

Reserve strengthening for closed block of long-term care insurance policies�(a)

��

�

��

��

�

243

��

�

��

��

�

0.99

��

�

��

�

��

�

Adjusted (non-GAAP) (a)

2,207

��

2,164

��

7.51

��

8.72

��

�

��

�

��

�

Effective tax rate

�

47.2

%�

�

35.9

%�

Adjusted pretax income of $2.21 billion for FY14 increased $43 million, or 2.0 percent versus $2.16 billion for FY13 as higher earnings in the company�s Healthcare Services segment were substantially offset by the anticipated lower year-over-year results in the company�s Retail and Employer Group segments. As also anticipated, Adjusted EPS of $7.51 for FY14 decreased $1.21 per share, or 13.9 percent, versus $8.72 in FY13, primarily due to changes in segment pretax results, partially offset by the impact of share repurchase activity.

CONSOLIDATED HIGHLIGHTS

Total revenues

Consolidated total revenues (including investment income) for 4Q14 were $12.33 billion, an increase of 21.0 percent from $10.19 billion in 4Q13, with total premiums and services revenue up 21.2 percent compared to the prior year�s quarter. The year-over-year increase in premiums and services revenue was primarily driven by higher medical membership in the Retail segment and higher group Medicare Advantage membership in the Employer Group segment.

�

FY14 consolidated total revenues (including investment income) rose $7.19 billion, or 17.4 percent, to $48.50 billion from $41.31 billion in FY13 with total premiums and services revenues of $48.12 billion up $7.18 billion, or 17.5 percent, from $40.94 billion in the prior year period. The FY14 increase reflects the same factors impacting the fourth quarter year-over-year comparison, partially offset by the impact of sequestration which became effective April�1, 2013.

Consolidated benefits expense

The 4Q14 consolidated benefit ratio (benefits expense as a percent of premiums) of 83.4 percent decreased by 240 basis points from 85.8 percent for the prior year�s quarter primarily due to the $243 million ($0.99 per share) in incremental pretax benefits expense for reserve strengthening in the company�s closed block of long-term care insurance policies in 4Q13 not recurring in 4Q14. The company also experienced favorable prior-year medical claims reserve development of $78 million in 4Q14 compared to $42 million in 4Q13.

The FY14 consolidated benefit ratio of 83.0 percent decreased by 90 basis points from 83.9 percent in FY13 primarily reflecting the same factor impacting the fourth quarter year-over-year comparison. The company experienced favorable prior-year medical claims reserve development of $518 million in FY14 compared to $474 million in FY13.

As shown in the table below, the $243 million reserve strengthening had an approximate 260 basis point impact on the 4Q13 benefit ratio and an approximate 70 basis point impact on the FY13 benefit ratio, as reported.

�

Consolidated Benefit Ratio

��

4Q14
Benefit
Ratio

�

4Q13
Benefit
Ratio

�

FY14
Benefit
Ratio

�

FY13
Benefit
Ratio

�

Benefit ratio as reported

��

�

83.4

%�

�

85.8

%�

�

83.0

%�

�

83.9

%�

Impact of reserve strengthening for closed block of long-term care insurance policies�(a)

��

�

��

��

�

(2.6

%)�

�

��

��

�

(0.7

%)�

��

�

Adjusted (non-GAAP) (a)

��

�

83.4

%�

�

83.2

%�

�

83.0

%�

�

83.2

%�

��

�

Consolidated operating expenses

The consolidated operating cost ratio (operating costs as a percent of total revenues less investment income) of 17.3 percent for 4Q14 decreased from 18.9 percent in 4Q13, primarily reflecting lower ratios in the Retail and Employer Group segments.

The FY14 consolidated operating cost ratio of 15.9 percent increased from 15.5 percent in FY13, primarily reflecting higher ratios in the Retail and Employer Group segments.

Balance sheet

At December�31, 2014, the company had cash, cash equivalents, and investment securities of $11.48 billion, down $1.26 billion from $12.74 billion at September�30, 2014, primarily reflecting common stock repurchases made by the company in the open market and under an accelerated stock repurchase program in 4Q14 and redemption of senior unsecured notes as discussed further below.

�

Parent company cash and short-term investments of $1.41 billion at December�31, 2014 decreased $1.08 billion from $2.49 billion at September�30, 2014, primarily due to the same factors impacting the consolidated comparisons as noted above.

At December�31, 2014, net receivables of $679 million were associated with premium stabilization programs, commonly referred to as the 3Rs^(c). Approximately 86 percent of these net receivables related to reinsurance recoverables under the 3Rs. At December�31, 2014, net receivables for the 3Rs were as follows:

�


Net Amounts Accrued for the 3Rs ($ in millions)	��	12/31/14 Balances		�
Reinsurance recoverables	��	$	586	��
Net risk adjustment settlement	��	�	42	��
Net risk corridor settlement	��	�	51	��
	��	�	�	�
Total Net Amounts Accrued for the 3Rs	��	$	679	��
	��	�	�	�

Days in claims payable of 44.7 at December�31, 2014 decreased from 47.5 days at September�30, 2014 primarily due to a seasonal decline in processed and unprocessed claims inventories, and higher provider capitation payments during 4Q14.

Debt-to-total capitalization at December�31, 2014 was 28.4 percent, down from 30.0 percent at September�30, 2014, primarily reflecting the company�s previously-disclosed redemption in October 2014 of its $500 million 6.45 percent senior unsecured notes due June�1, 2016. The company recognized a pretax loss on extinguishment of debt of approximately $37 million in October 2014 for the redemption of these notes. Additionally, in October 2014, the company entered into a commercial paper program that allows it to issue short-term, unsecured commercial paper notes in amounts not to exceed $1 billion with the net proceeds expected to be used for general corporate purposes, including repurchasing shares of its common stock. As of December�31, 2014, the company had no balance outstanding on its commercial paper program.

Cash flows from operations

Cash flows provided by operations for 4Q14 were $193 million compared to cash flows used in operations of $16 million in 4Q13, due primarily to changes in working capital.

For FY14, cash flows provided by operations totaled $1.62 billion versus $1.72 billion in cash flows from operations during FY13. The year-over-year decline primarily reflected lower net income and the impact of changes in working capital including higher receivables associated with the 3Rs, partially offset by an increase in benefits payable from growth in membership.

Share repurchases and cash dividends

In September 2014, the company�s Board of Directors approved a new $2 billion share repurchase authorization with an expiration date of December�31, 2016 replacing its previous $1 billion share repurchase authorization (of which approximately $816 million remained unused). As previously announced, the company expects to repurchase $1 billion of its outstanding shares no later than June�30, 2015 under this authorization. As of February�4, 2015, approximately $1.37 billion of the current repurchase authorization was remaining.

�

In November 2014, the company entered into an agreement with a third party financial institution to effect a $500 million accelerated stock repurchase program as part of the $2 billion share repurchase authorized in September 2014. The actual number of shares repurchased under the agreement will be determined based on a volume-weighted average price of the company�s common stock during the purchase period. Settlement of approximately $100 million of repurchases under the accelerated stock repurchase program remains pending, and the company continues to expect final settlement by the end of the first quarter of 2015.

During 4Q14, the company executed share repurchases of $500 million (including $400 million of shares repurchased under the accelerated stock repurchase program described above), or approximately 3,829,700 of its outstanding shares, at an average price of $130.56 per share under its existing share repurchase authorization. The company executed repurchases of 5,702,300 shares for $730 million during FY14 compared to 5,774,500 shares for $502 million during FY13.

The company paid cash dividends to its stockholders totaling $43 million in both 4Q14 and 4Q13, and paid $172 million during FY14 compared to $168 million in FY13.

RETAIL SEGMENT

This segment consists of Medicare and commercial fully-insured medical and specialty health insurance benefits, including dental, vision, and other supplemental health and financial protection products, marketed directly to individuals, and includes the company�s contract with CMS to administer the Limited Income Newly Eligible Transitions (LI-NET) program and contracts with various states to provide dual eligible, Temporary Assistance for Needy Families (TANF), and Long-Term Support Services (LTSS) benefits.

Retail Segment Highlights

Enrollment:

�

Individual Medicare Advantage membership was 2,446,200, including 18,300 dual eligible members from state-based contracts, as of December�31, 2014, an increase of 377,500, or 18.2 percent, from 2,068,700 at December�31, 2013, primarily due to net membership additions associated with the 2014 plan year, particularly HMO offerings, as well as dual-eligible members from state-based contracts in Virginia and Illinois.

�

January 2015 individual Medicare Advantage membership approximated 2,703,000, up approximately 257,000, or 10.5 percent, from December�31, 2014, reflecting net membership additions during the recently completed Annual Election Period (AEP) for Medicare beneficiaries.

�

Membership in the company�s individual stand-alone Prescription Drug Plans (PDPs) was 3,989,500 as of December�31, 2014, an increase of 717,800, or 21.9 percent, from 3,271,700 at December�31, 2013. These increases primarily resulted from growth in the company�s low-priced Humana-Walmart plan offering.

�

January 2015 individual stand-alone PDP membership (excluding LI-NET) grew to approximately 4,220,000, an increase of approximately 230,500, or 5.8 percent, from December�31, 2014 with growth primarily due to higher membership in the Humana-Walmart plan offering.

�

HumanaOne membership increased to 1,016,200 at December�31, 2014, an increase of 510,800, or 101.1 percent, from 505,400 at December�31, 2013. The membership growth primarily reflected new sales, both on-exchange and off-exchange, of plans compliant with the changes mandated by health care reform.

�

State-based Medicaid membership increased to 298,500 at December�31, 2014, an increase of 213,000 or 249.1 percent, from 85,500 at December�31, 2013. This increase was primarily driven by the addition of membership from state-based contracts for Florida Medicaid and LTSS business.

�

Membership in individual specialty products^(d) was 1,165,800 at December�31, 2014, an increase of 123,300, or 11.8 percent, from 1,042,500 at December�31, 2013, primarily due to increased membership in dental and vision offerings.

Premiums and services revenue:

�

The 4Q14 premiums and services revenue for the Retail segment was $8.69 billion, an increase of 27.2 percent from $6.83 billion in 4Q13. The increase resulted primarily from an 18.4 percent increase in average individual Medicare Advantage membership year over year, along with membership growth in the company�s health care exchange and state-based Medicaid businesses and stand-alone PDP plans.

�

For FY14, premium and services revenue for the Retail segment was $33.99 billion, an increase of 24.9 percent from $27.22 billion in FY13, primarily reflecting the same factors impacting the year-over-year comparison for the fourth quarter.

Benefits expense:

�

The 4Q14 benefit ratio for the Retail segment of 83.3 percent increased 60 basis points from 82.7 percent in 4Q13 primarily due to higher specialty prescription drug costs associated with a new treatment for Hepatitis C, higher planned clinical investment spending, higher benefit ratios associated with members from state-based contracts, and higher flu-related costs, partially offset by increased membership in clinical programs and inclusion of the health insurance industry fee in the pricing of the company�s products.

�

Retail segment benefits expense for 4Q14 included the beneficial effect of $55 million in favorable prior-year development compared to $28 million in 4Q13. FY14 benefits expense for the segment included the beneficial effect of $385 million in favorable prior-year development compared to $332 million in FY13.

�

The FY14 benefit ratio for the Retail segment of 84.3 percent was 10 basis points higher than the FY13 ratio of 84.2 percent, primarily reflecting the same factors impacting the fourth quarter year-over-year comparisons.

�

Operating costs:

�

The Retail segment�s operating cost ratio of 14.3 percent in 4Q14 decreased 20 basis points from 14.5 percent in 4Q13.�The decrease primarily resulted from the year-over-year decline in investment spending for healthcare exchanges and state-based contracts, certain LTSS contracts related to American Eldercare moving from Administrative Services Only (ASO) to fully-insured capitated arrangements, and scale efficiencies associated with growth in the company�s Medicare and individual commercial membership, partially offset by the non-deductible health insurance industry fee mandated by health care reform. The non-deductible health insurance industry fee increased the Retail segment�s operating cost ratio by approximately 120 basis points in 4Q14.

�

The Retail segment�s operating cost ratio of 12.4 percent for FY14 was up 150 basis points compared to 10.9 percent for FY13, primarily reflecting the non-deductible health insurance industry fee mandated by health care reform and investment spending for healthcare exchanges and state-based contracts, partially offset by scale efficiencies associated with growth in the company�s Medicare and individual commercial membership. The non-deductible health insurance industry fee increased the Retail segment�s operating cost ratio by approximately 120 basis points in FY14.

Pretax results:

�

Retail segment pretax income of $185 million in 4Q14 compared to $177 million in 4Q13, an increase of $8 million, reflecting a decrease in the operating cost ratio, partially offset by an increase in the segment�s benefit ratio.

�

For FY14, pretax income for the Retail Segment of $1.10 billion decreased by $185 million from FY13 pretax earnings of $1.28 billion. The FY14 decrease primarily reflected higher benefit and operating cost ratios year over year.

EMPLOYER GROUP SEGMENT

This segment consists of Medicare and commercial fully-insured medical and specialty health insurance benefits, including dental, vision, and voluntary benefit products, as well as ASO products and health and wellness solutions businesses primarily marketed to employer groups.^(e)

Employer Group Segment Highlights

Enrollment:

�

Fully-insured group Medicare Advantage membership was 489,700 at December�31, 2014, an increase of 60,600, or 14.1 percent, from 429,100 at December�31, 2013, primarily due to the addition of a new large group account.

�

Group fully-insured commercial medical membership was 1,235,500 at December�31, 2014, relatively unchanged from 1,237,000 at December�31, 2013, as higher small group business (less than 100 lives) membership year over year was offset by lower membership in large group accounts. Approximately 65 percent of group fully-insured commercial medical membership was in small group accounts at December�31, 2014, versus 63 percent at September�30, 2014, and 61 percent at December�31, 2013.

�

Group ASO commercial medical membership was 1,104,300 at December�31, 2014, a decline of 58,500, or 5.0 percent, from 1,162,800 at December�31, 2013. This decline reflects continued discipline in pricing of services for self-funded accounts amid a highly competitive environment.

�

Membership in Employer Group specialty products was 6,502,700 at December�31, 2014, a decline of 278,100, or 4.1�percent, from 6,780,800 at December�31, 2013. This decrease resulted primarily from declines in dental membership related to the company�s planned discontinuance of certain unprofitable product distribution partnerships.

�

Membership in HumanaVitality^�, the company�s wellness and loyalty rewards program, was 3,856,800 at December�31, 2014, an increase of 1,025,800, or 36.2 percent from 2,831,000 at December�31, 2013 primarily due to the addition of group Medicare members as well as individual Medicare Advantage and HumanaOne membership growth.

Premiums and services revenue:

�

The 4Q14 premiums and services revenue for the Employer Group segment was $3.11 billion, up 9.2 percent from $2.85�billion in 4Q13, primarily reflecting the impacts of higher average group Medicare Advantage membership.

�

For FY14, premium and services revenue for the Employer Group segment was $12.38 billion, an increase of 9.1 percent from $11.34 billion in FY13, reflecting the same factor impacting the year-over-year comparison for the fourth quarter, along with higher fully-insured group medical premiums per member that more than offset a slight decrease in membership for this line of business.

Benefits expense:

�

The 4Q14 benefit ratio for the Employer Group segment was 87.1 percent, a decrease of 40 basis points from 87.5�percent for 4Q13. The year-over-year decrease in the benefit ratio primarily reflected the inclusion of the health insurance industry fee and other health care reform related taxes and fees in pricing, partially offset by higher utilization, primarily due to costs associated with a new treatment for Hepatitis C and higher flu-related costs, as well as the continuing impact of transitional policy changes, which allowed employers to continue offering plans that are not compliant with health care reform.

�

Employer Group segment benefits expense for 4Q14 included the beneficial effect of $22 million in favorable prior-year development compared to $14 million in 4Q13. FY14 benefits expense for the segment included the beneficial effect of $132�million in favorable prior-year development compared to $138 million in FY13.

�

The FY14 benefits ratio for the Employer Group segment of 83.9 percent increased from the 83.5�percent ratio for FY13, primarily reflecting higher utilization due to costs associated with

�

�	a new treatment for Hepatitis C, as well as the continuing impact of transitional policy changes, partially offset by the inclusion of the health insurance industry fee and other health care reform related taxes and fees in pricing.

Operating costs:

�

The Employer Group segment�s operating cost ratio was 16.4 percent in 4Q14, a decrease of 140 basis points from 17.8�percent in 4Q13, primarily reflecting an increase in group Medicare Advantage membership which generally carries a lower operating cost ratio than commercial group medical membership, as well as operating cost efficiencies. These decreases were partially offset by the impact of the non-deductible health insurance industry fee and other fees mandated by health care reform and a higher percentage of small group commercial business which carries a higher operating cost ratio than large group business. The non-deductible health insurance industry fee increased the Employer Group segment�s operating cost ratio by approximately 110 basis points in 4Q14.

�

The Employer Group segment�s operating cost ratio of 16.1 percent for FY14 was up 20 basis points compared to 15.9�percent for FY13 primarily reflecting the impact of the non-deductible health insurance industry fee and other fees mandated by health care reform and a higher percentage of small group commercial business, partially offset by an increase in group Medicare Advantage membership, as well as operating cost efficiencies. The non-deductible health insurance industry fee increased the Employer Group segment�s operating cost ratio by approximately 120 basis points in FY14.

Pretax results:

�

The 4Q14 Employer Group segment pretax loss of $14 million improved from a pretax loss of $72 million in 4Q13, primarily reflecting an improvement in the segment�s benefit and operating cost ratios.

�

For FY14, pretax income for the Employer Group Segment of $314 million decreased by $36 million versus FY13 pretax earnings of $350 million. The FY14 decrease primarily reflects the increase in the segment�s benefit and operating cost ratios.

HEALTHCARE SERVICES SEGMENT

This segment includes services primarily offered to the company�s health plan members as well as to third parties including pharmacy solutions, provider services, home based services, integrated behavioral health services, and predictive modeling and informatics services.^(e)

Healthcare Services Segment Highlights

Revenues:

�

Revenue of $5.29 billion in 4Q14 for the Healthcare Services segment increased $1.12 billion, or 26.9 percent, from $4.17�billion in 4Q13, primarily due to substantial growth in the company�s Medicare membership which resulted in higher utilization of the pharmacy solutions and home based services businesses.

�

For FY14, revenue for the Healthcare Services segment was $20.02 billion, an increase of 26.0 percent from $15.89�billion in FY13, primarily reflecting the same factors impacting the year-over-year comparison for the fourth quarter.

�

Operating costs:

�

The Healthcare Services segment�s operating cost ratio was 96.4 percent in 4Q14, an increase of 40 basis points from 96.0 percent in 4Q13, primarily reflecting investment in the home based services business and growth in other businesses across the segment associated with the company�s growing Medicare enrollment from the recently completed AEP, partially offset by operating efficiencies in the pharmacy solutions businesses.

�

The Healthcare Services segment�s operating cost ratio of 95.5 percent for FY14 was down 30 basis points from 95.8 percent for FY13 primarily reflecting the improvement in the ratio for the pharmacy solutions businesses, partially offset by the investment in home based services and other businesses across the segment.

Operating statistics:

�

Primary care providers in value-based (shared risk and path to risk) relationships of approximately 42,300 at December�31, 2014, increased 25.9 percent from 33,600 at December�31, 2013, primarily driven by the company�s focus on increasing the number of members served through these value-based relationships. At December�31, 2014, 53.2 percent of the company�s individual Medicare Advantage members were in value-based relationships, compared to 49.5 percent at December�31, 2013.

�

Membership in the Humana Chronic Care Program rose to 420,700 at December�31, 2014, up 50.1 percent from 280,200 members at December�31, 2013, reflecting enhanced predictive modeling capabilities and focus on proactive clinical outreach and member engagement, particularly for the company�s Medicare Advantage membership.

�

Pharmacy script volumes of 85.3�million for the quarter ended December�31, 2014 increased 20.3 percent compared to 70.9�million for the quarter ended December�31, 2013, driven primarily by higher average medical membership. Pharmacy script volumes of 329.0�million for the year ended December�31, 2014 increased 19.9 percent compared to 274.3�million for the year ended December�31, 2013, driven primarily by the same factor impacting the year-over-year comparison for the fourth quarter.

Pretax results:

�

Healthcare Services segment pretax income of $146 million in 4Q14 increased from $130 million in 4Q13, primarily due to revenue growth from the pharmacy solutions and home based services businesses, partially offset by investments in the home based services business associated with the company�s growing Medicare enrollment from the recently completed AEP.

�

For FY14, pretax income for the Healthcare Services segment of $739 million increased by $218 million from FY13 pretax earnings of $521 million, primarily reflecting a 30 basis point decline in the segment�s operating cost ratio on a higher revenue base that reflects the leveraging of strong growth correlated to higher Medicare membership.

�

OTHER BUSINESSES

The Other Businesses category consists of the company�s military services business and closed-block long-term care insurance policies. The military services business consists primarily of the company�s TRICARE South Region contract.

Other Businesses Highlights

Pretax results:

�

Other Businesses reported a pretax income of $22 million in 4Q14 versus a pretax loss of $244 million in 4Q13, primarily reflecting the $243 million of reserves strengthening for the company�s closed block of long-term care insurance policies in 4Q13.

�

For FY14, Other Businesses reported pretax income of $78 million which increased $271 million compared to a pretax loss of $193 million in FY13, primarily reflecting the same factor impacting the year-over-year comparison for the fourth quarter. In addition, the year-over-year comparison reflects the loss of the company�s Medicaid contracts in Puerto Rico effective September�30, 2013 and a reduction of benefits expense related to a favorable settlement of contract claims with the DoD associated with previously-disclosed litigation in FY13.

Footnotes

�

(a)

Adjusted financial results included in this earnings press release include: (1)�for 2014, Adjusted Pretax Income and Adjusted EPS, which in each case excludes approximately $37 million of pretax expense, or $0.15 per share, as applicable, associated with the early retirement of debt in the fourth quarter of 2014 (which related to the company�s October 2014 redemption of its $500 million aggregate principal amount of 6.45% senior unsecured notes due June�1, 2016, and (2)�for 2013, Adjusted Pretax Income, Adjusted EPS, and Adjusted Consolidated Benefit Ratio, which in each case excludes $243 million of pretax expense, net of reinsurance, or $0.99 per share, as applicable, for strengthening of the company�s future policy benefit reserves related to the closed block of long-term care insurance policies. This closed block of policies was acquired in connection with the company�s acquisition of KMG America in late 2007. No policies in this block have been sold since 2005. The Company has included these financial measures (not in accordance with Generally Accepted Accounting Principles (GAAP)) in its summary of financial results within this earnings press release as 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.�Neither of the excluded items described herein are a recurring part of the company�s operating plan.�Consequently, management uses these non-GAAP financial measures as an indicator of business performance, as well as for operational planning and decision making purposes.�Non-GAAP financial measures should be considered in addition to, but not as a substitute for, or superior to, financial measures prepared in accordance with GAAP.

(b)	State-based contracts include the company�s operations and membership associated with Medicaid benefits provided for dual-eligible, Temporary Assistance for Needy Families (TANF), and Long-Term Support Services (LTSS) programs.

(c)

Under health care reform, premium stabilization programs, commonly referred to as the 3Rs, became effective January�1, 2014. These programs include a permanent risk adjustment program, a transitional reinsurance program, and a temporary risk corridors program designed to more evenly spread the financial risk borne by issuers and to mitigate the risk that issuers would have mispriced products. In each case, operation of the program is subject to federal administrative action.

(d)

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

(e)

On January 1, 2014, the company made minor reclassifications to certain of its businesses from its Healthcare Services segment to its Employer Group segment to correspond with internal management reporting changes. The company�s reportable segments remain the same and prior period segment financial information has been recast to conform to the 2014 presentation.

�

Conference Call�& Virtual Slide Presentation

Cautionary Statement

�

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.

�

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 in addition to those the company faces with its core health benefits businesses.

�

Changes in the prescription drug industry pricing benchmarks may adversely affect Humana�s financial performance.

�

If Humana does not continue to earn and retain purchase discounts and volume rebates from pharmaceutical manufacturers at current levels, Humana�s gross margins may decline.

�

Humana�s ability to obtain funds from 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.

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, 2013;

�

Form 10-Q for the quarter ended March�31, 2014,�June�30, 2014, and September�30, 2014;

�

Form 8-Ks filed during 2014 and 2015.

About Humana

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

�

Annual reports to stockholders

�

Securities and Exchange Commission filings

�

Most recent investor conference presentations

�

Quarterly earnings news releases

�

Replays of most recent earnings release conference calls

�

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

�

Corporate Governance information

�

Humana Inc. � Earnings Guidance Points as of February 4, 2015

�


*(in accordance with Generally* *Accepted Accounting Principles)*	��	For the year ending December�31, 2015 (FY15)	��	Comments
Diluted earnings per common share	��	$8.50 to $9.00	��
� Revenues	��		��	� Revenues include expected interest income.
� Consolidated	��	� $54.5 billion to $55.0 billion	��	� Revenues include expected interest income.
� Segments	��		��
� Retail Segment	��	� $39.75 billion to $40.25 billion	��	� Segment-level revenues include intersegment amounts that eliminate in consolidation.
� Employer Group Segment	��	� $12.0 billion to $13.0 billion	��

Healthcare Services Segment	��	$22.5 billion to $23.5 billion	��

Consolidated investment income	��	$350 million to $400 million	��	Investment income is included in revenue guidance above.
� Benefit ratios	��		��	� Benefits expense as a percent of premiums.
� Retail Segment	��	� 83.5% to 84.5%	��	� Benefits expense as a percent of premiums.

Employer Group Segment	��	83.5% to 84.5%	��
� Operating cost ratios	��		��	� Operating costs as a percent of total revenues excluding investment income.
� Consolidated	��	14.5% to 15.5%	��
� Healthcare Services Segment	��	� 95.5% to 96.0%	��
� Consolidated depreciation and amortization (D&A)	��		��	� Certain D&A is included in benefits expense on the income statement but shown as a non-cash item on the cash flows statement.
� Income statement	��	� $370 million to $390 million	��
� Cash flows statement	��	� $490 million to $510 million	��
� Consolidated interest expense	��	� $185 million to $190 million	��

Pretax results	��		��	Segment-level pretax results include the impact of net investment income.

Retail Segment	��	$1.425 billion to $1.525 billion	��	FY15 includes $0.30 to $0.35 per share of investment spending related to state-based contracts.
� Employer Group Segment	��	� $275 million to $325 million	��
� Healthcare Services Segment	��	� $775 million to $825 million	��

Effective Tax Rate	��	48.75% to 49.75%	��	Reflects the non-deductibility of the industry fee.
� Weighted average shares for diluted earnings per common share	��	� Approximately 150 million	��	� Reflects impact of repurchases.

Cash flows from operations	��	$1.7 billion to $2.0 billion	��

�

Humana Inc. � Earnings Guidance Points as of February 4, 2015

�


*(in accordance with Generally* *Accepted Accounting Principles)*	��	For the year ending December�31, 2015 (FY15)	��	Comments
Premium Stabilization Program Net Receivables	��	$275 million to $350 million	��	Approximately 90% related to the reinsurance program

Capital expenditures	��	$575 million to $625 million	��

Commercial group fully-insured medical cost trend	��	5.5% to 6.5%	��	Includes higher costs versus the prior year associated with new treatments for Hepatitis C

Ending medical membership; and changes	��		��

Retail Segment	��		��

Medicare Advantage (MA)	��	2,746,200 to 2,796,200; Up 300,000 to 350,000	��	Includes MA membership sold directly to individuals as well as dual-eligible MA members from state-based contracts.

Medicare stand-alone PDPs	��	4,282,100 to 4,332,100; Up 400,000 to 450,000	��	Medicare stand-alone PDPs exclude Limited Income Newly Eligible Transitions (LI-NET) membership.

State-based Medicaid	��	298,500 to 303,500; Flat to Up 5,000	��	Includes Medicaid Temporary Assistance for Needy Families (TANF) which contracts are generally reinsured through partnering relationships, and Long-Term Support Services (LTSS) membership from state-based contracts.

Individual commercial	��	926,200 to 936,200; Down 80,000 to 90,000	��	Includes membership expectations for both on-exchange and off-exchange enrollment.

Medicare Supplement	��	166,900 to 176,900; Up 35,000 to 45,000	��

Employer Group Segment	��		��

Medicare Advantage	��	479,700 to 489,700; Flat to Down 10,000	��

Commercial fully-insured	��	1,190,500 to 1,200,500; Down 35,000 to 45,000	��

Commercial ASO	��	679,300 to 704,300; Down 400,000 to 425,000	��

�

Humana Inc.

Statistical Schedules

And

Supplementary Information

4Q14 Earnings Release

�

S-1

Humana Inc.

Statistical Schedules and Supplementary Information

4Q14 Earnings Release

Contents

�


Page	��	Description

S-3-4	��	Consolidated Statements of Income
S-5-6	��	Quarterly Segment Financial Information
S-7-8	��	FY Segment Financial Information
S-9	��	Consolidated Balance Sheets
S-10-11	��	Consolidated Statements of Cash Flows
S-12	��	Key Income Statement Ratios and Segment Operating Results
S-13-15	��	Healthcare Services Segment Metrics
S-16	��	Membership Detail
S-17-18	��	Premiums and Services Revenue Detail
S-19	��	Medicare Summary
S-20	��	Investments
S-21-23	��	Benefits Payable Detail and Statistics
S-24	��	Footnotes

�

S-2

Humana Inc.

Consolidated Statements of Income

Dollars in millions, except per common share results

�

��

Three�Months�Ended�December�31,

�

��

2014

�

��

2013

�

Dollar
Change

�

Percentage
Change

�

Revenues:

��

�

Premiums

��

11,685

��

9,562

��

�

2,123

��

�

22.2

%�

Services

��

�

544

��

�

528

��

�

��

�

3.0

%�

Investment income

��

�

��

�

��

�

��

�

2.1

%�

��

�

��

�

Total revenues

��

�

12,328

��

�

10,187

��

�

2,141

��

�

21.0

%�

��

�

��

�

Operating expenses:

��

�

Benefits

��

�

9,749

��

�

8,203

��

�

1,546

��

�

18.8

%�

Operating costs

��

�

2,121

��

�

1,908

��

�

213

��

�

11.2

%�

Depreciation and amortization

��

�

��

�

��

�

)�

�

-3.3

%�

��

�

��

�

Total operating expenses

��

�

11,957

��

�

10,201

��

�

1,756

��

�

17.2

%�

��

�

��

�

Income (loss) from operations

��

�

371

��

�

(14

)�

�

385

��

�

2750.0

%�

Interest expense

��

�

��

�

��

�

��

�

140.0

%�

��

�

��

�

Income (loss) before income taxes

��

�

287

��

�

(49

)�

�

336

��

�

685.7

%�

Provision (benefit) for income taxes

��

�

142

��

�

(19

)�

�

161

��

�

847.4

%�

��

�

��

�

Net income (loss)

��

145

��

(30

)�

�

175

��

�

583.3

%�

��

�

��

�

Basic earnings (loss) per common share

��

0.96

��

(0.19

)�

�

1.15

��

�

605.3

%�

Diluted earnings (loss) per common share

��

0.94

��

(0.19

)�

�

1.13

��

�

594.7

%�

Shares used in computing basic earnings per common share (000�s)

��

�

151,732

��

�

155,933

��

�

Shares used in computing diluted earnings per common share (000�s)

��

�

153,572

��

�

155,933

��

�

S-3

Humana Inc.

Consolidated Statements of Income

Dollars in millions, except per common share results

�

��

Year�Ended�December�31,

�

��

�

��

2014

�

��

2013

�

��

Dollar
Change

�

Percentage
Change

�

Revenues:

��

�

Premiums

��

45,959

��

38,829

��

7,130

��

�

18.4

%�

Services

��

�

2,164

��

�

2,109

��

�

��

�

2.6

%�

Investment income

��

�

377

��

�

375

��

�

��

�

0.5

%�

��

�

��

�

��

�

Total revenues

�

48,500

��

�

41,313

��

�

7,187

��

�

17.4

%�

��

�

��

�

��

�

Operating expenses:

Benefits

�

38,166

��

�

32,564

��

�

5,602

��

�

17.2

%�

Operating costs

�

7,639

��

�

6,355

��

�

1,284

��

�

20.2

%�

Depreciation and amortization

�

333

��

�

333

��

�

��

�

0.0

%�

��

�

��

�

��

�

Total operating expenses

�

46,138

��

�

39,252

��

�

6,886

��

�

17.5

%�

��

�

��

�

��

�

Income from operations

�

2,362

��

�

2,061

��

�

301

��

�

14.6

%�

Interest expense

�

192

��

�

140

��

�

��

�

37.1

%�

��

�

��

�

��

�

Income before income taxes

�

2,170

��

�

1,921

��

�

249

��

�

13.0

%�

Provision for income taxes

�

1,023

��

�

690

��

�

333

��

�

48.3

%�

��

�

��

�

��

�

Net income

1,147

��

1,231

��

(84

)�

�

-6.8

%�

��

�

��

�

��

�

Basic earnings per common share

7.44

��

7.81

��

(0.37

)�

�

-4.7

%�

Diluted earnings per common share

7.36

��

7.73

��

(0.37

)�

�

-4.8

%�

Shares used in computing basic earnings per common share (000�s)

�

154,187

��

�

157,503

��

Shares used in computing diluted earnings per common share (000�s)

�

155,874

��

�

159,151

��

�

S-4

Humana Inc.

4Q14 Segment Financial Information

In millions

�

��

Retail

�

Employer
Group

�

Healthcare
Services

�

Other
Businesses

�

Eliminations/
Corporate

�

Consolidated

�

Revenues - external customers

��

�

Premiums:

��

�

Medicare Advantage

��

6,498

�

1,359

��

�

��

�

��

�

��

�

7,857

��

Medicare stand-alone PDP

��

�

790

�

��

�

��

�

��

�

��

�

792

��

�

Total Medicare

��

�

7,288

�

1,361

��

�

��

�

��

�

��

�

8,649

��

�

Fully-insured

��

�

902

�

1,354

��

�

��

�

��

�

��

�

2,256

��

Specialty

��

�

274

��

�

��

�

��

�

��

�

338

��

Military services

��

�

��

�

��

�

��

�

��

�

��

�

��

Medicaid and other (A)

��

�

429

�

��

�

��

�

��

�

��

�

438

��

�

Total premiums

��

�

8,683

�

2,989

��

�

��

�

��

�

��

�

11,685

��

�

Services revenue:

��

�

Provider

��

�

��

�

��

�

284

��

�

��

�

��

�

290

��

ASO and other (B)

��

�

��

�

��

�

132

��

�

��

�

227

��

Pharmacy

��

�

��

�

��

�

��

�

��

�

��

�

��

�

Total services revenue

��

�

��

�

311

��

�

132

��

�

��

�

544

��

�

Total revenues - external customers

��

�

8,685

�

3,088

��

�

311

��

�

145

��

�

��

�

12,229

��

�

Intersegment revenues

��

�

Services

��

�

��

�

��

�

3,982

��

�

��

�

(4,003

)�

�

��

Products

��

�

��

�

��

�

997

��

�

��

�

(997

)�

�

��

�

Total intersegment revenues

��

�

��

�

��

�

4,979

��

�

��

�

(5,000

)�

�

��

�

Investment income

��

�

��

�

��

�

��

�

��

�

��

�

Total revenues

��

�

8,705

�

3,121

��

�

5,290

��

�

160

��

�

(4,948

)�

�

12,328

��

�

Operating expenses:

��

�

Benefits

��

�

7,237

�

2,602

��

�

��

�

��

�

(121

)�

�

9,749

��

Operating costs

��

�

1,241

�

509

��

�

5,097

��

�

104

��

�

(4,830

)�

�

2,121

��

Depreciation and amortization

��

�

��

�

��

�

��

�

(29

)�

�

��

�

Total operating expenses

��

�

8,520

�

3,135

��

�

5,144

��

�

138

��

�

(4,980

)�

�

11,957

��

�

Income (loss) from operations

��

�

185

�

(14

)�

�

146

��

�

��

�

��

�

371

��

Interest expense

��

�

��

�

��

�

��

�

��

�

��

�

��

�

Income (loss) before income taxes

��

185

�

(14

)�

�

146

��

�

��

�

(52

)�

�

287

��

�

Benefit ratio

��

�

83.3

�

87.1

%�

�

83.4

%�

Operating cost ratio

��

�

14.3

�

16.4

%�

�

96.4

%�

�

71.7

%�

�

17.3

%�

�

S-5

Humana Inc.

4Q13 Segment Financial Information (Recast) (C)

In millions

�

��

Retail

�

Employer
Group

�

Healthcare
Services

�

Other
Businesses

�

Eliminations/
Corporate

�

Consolidated

�

Revenues - external customers

��

�

Premiums:

��

�

Medicare Advantage

��

5,621

��

�

1,167

��

�

��

�

��

�

��

�

6,788

��

Medicare stand-alone PDP

��

�

739

��

�

��

�

��

�

��

�

��

�

741

��

�

Total Medicare

��

�

6,360

��

�

1,169

��

�

��

�

��

�

��

�

7,529

��

�

Fully-insured

��

�

304

��

�

1,298

��

�

��

�

��

�

��

�

1,602

��

Specialty

��

�

��

�

272

��

�

��

�

��

�

��

�

327

��

Military services

��

�

��

�

��

�

��

�

��

�

��

�

��

Medicaid and other (A)

��

�

101

��

�

��

�

��

�

��

�

��

�

101

��

�

Total premiums

��

�

6,820

��

�

2,739

��

�

��

�

��

�

��

�

9,562

��

�

Services revenue:

��

�

Provider

��

�

��

�

��

�

293

��

�

��

�

��

�

299

��

ASO and other (B)

��

�

��

�

��

�

��

�

112

��

�

��

�

209

��

Pharmacy

��

�

��

�

��

�

��

�

��

�

��

�

��

�

Total services revenue

��

�

��

�

��

�

313

��

�

112

��

�

��

�

528

��

�

Total revenues - external customers

��

�

6,829

��

�

2,833

��

�

313

��

�

115

��

�

��

�

10,090

��

�

Intersegment revenues

��

�

Services

��

�

��

�

��

�

3,102

��

�

��

�

(3,116

)�

�

��

Products

��

�

��

�

��

�

753

��

�

��

�

(753

)�

�

��

�

Total intersegment revenues

��

�

��

�

��

�

3,855

��

�

��

�

(3,869

)�

�

��

�

Investment income

��

�

��

�

��

�

��

�

��

�

��

�

��

�

Total revenues

��

�

6,848

��

�

2,858

��

�

4,168

��

�

129

��

�

(3,816

)�

�

10,187

��

�

Operating expenses:

��

�

Benefits

��

�

5,642

��

�

2,396

��

�

��

�

267

��

�

(102

)�

�

8,203

��

Operating costs

��

�

992

��

�

507

��

�

4,000

��

�

��

�

(3,690

)�

�

1,908

��

Depreciation and amortization

��

�

��

�

��

�

��

�

��

�

(19

)�

�

��

�

Total operating expenses

��

�

6,671

��

�

2,930

��

�

4,038

��

�

373

��

�

(3,811

)�

�

10,201

��

�

Income (loss) from operations

��

�

177

��

�

(72

)�

�

130

��

�

(244

)�

�

)�

�

(14

)�

Interest expense

��

�

��

�

��

�

��

�

��

�

��

�

��

�

Income (loss) before income taxes

��

177

��

�

(72

)�

�

130

��

�

(244

)�

�

(40

)�

�

(49

)�

��

�

Benefit ratio

��

�

82.7

%�

�

87.5

%�

�

85.8

%�

Operating cost ratio

��

�

14.5

%�

�

17.8

%�

�

96.0

%�

�

86.1

%�

�

18.9

%�

�

S-6

Humana Inc.

FY 2014 Segment Financial Information

In millions

�

��

Retail

�

Employer
Group

�

Healthcare
Services

�

Other
Businesses

�

Eliminations/
Corporate

�

Consolidated

�

Revenues - external customers

��

�

Premiums:

��

�

Medicare Advantage

��

25,941

��

�

5,490

��

�

��

�

��

�

��

�

31,431

��

Medicare stand-alone PDP

��

�

3,396

��

�

��

�

��

�

��

�

��

�

3,404

��

�

Total Medicare

��

�

29,337

��

�

5,498

��

�

��

�

��

�

��

�

34,835

��

�

Fully-insured

��

�

3,265

��

�

5,339

��

�

��

�

��

�

��

�

8,604

��

Specialty

��

�

256

��

�

1,098

��

�

��

�

��

�

��

�

1,354

��

Military services

��

�

��

�

��

�

��

�

��

�

��

�

��

Medicaid and other (A)

��

�

1,096

��

�

��

�

��

�

��

�

��

�

1,147

��

�

Total premiums

��

�

33,954

��

�

11,935

��

�

��

�

��

�

��

�

45,959

��

�

Services revenue:

��

�

Provider

��

�

��

�

��

�

1,183

��

�

��

�

��

�

1,206

��

ASO and other (B)

��

�

��

�

339

��

�

��

�

481

��

�

��

�

859

��

Pharmacy

��

�

��

�

��

�

��

�

��

�

��

�

��

�

Total services revenue

��

�

��

�

362

��

�

1,282

��

�

481

��

�

��

�

2,164

��

�

Total revenues - external customers

��

�

33,993

��

�

12,297

��

�

1,282

��

�

551

��

�

��

�

48,123

��

�

Intersegment revenues

��

�

Services

��

�

��

�

��

�

14,984

��

�

��

�

(15,062

)�

�

��

Products

��

�

��

�

��

�

3,749

��

�

��

�

(3,749

)�

�

��

�

Total intersegment revenues

��

�

��

�

��

�

18,733

��

�

��

�

(18,811

)�

�

��

�

Investment income

��

�

��

�

��

�

��

�

��

�

197

��

�

377

��

�

Total revenues

��

�

34,069

��

�

12,419

��

�

20,015

��

�

611

��

�

(18,614

)�

�

48,500

��

�

Operating expenses:

��

�

Benefits

��

�

28,608

��

�

10,019

��

�

��

�

113

��

�

(574

)�

�

38,166

��

Operating costs

��

�

4,209

��

�

1,987

��

�

19,121

��

�

405

��

�

(18,083

)�

�

7,639

��

Depreciation and amortization

��

�

154

��

�

��

�

155

��

�

��

�

(90

)�

�

333

��

�

Total operating expenses

��

�

32,971

��

�

12,105

��

�

19,276

��

�

533

��

�

(18,747

)�

�

46,138

��

�

Income from operations

��

�

1,098

��

�

314

��

�

739

��

�

��

�

133

��

�

2,362

��

Interest expense

��

�

��

�

��

�

��

�

��

�

192

��

�

192

��

�

Income before income taxes

��

1,098

��

�

314

��

�

739

��

�

��

�

(59

)�

�

2,170

��

�

Benefit ratio

��

�

84.3

%�

�

83.9

%�

�

83.0

%�

Operating cost ratio

��

�

12.4

%�

�

16.1

%�

�

95.5

%�

�

73.5

%�

�

15.9

%�

�

S-7

Humana Inc.

FY 2013 Segment Financial Information (Recast) (C)

In millions

�

��

Retail

�

Employer
Group

�

Healthcare
Services

�

Other
Businesses

�

Eliminations/
Corporate

�

Consolidated

�

Revenues - external customers

��

�

Premiums:

��

�

Medicare Advantage

��

22,481

��

�

4,710

��

�

��

�

��

�

��

�

27,191

��

Medicare stand-alone PDP

��

�

3,025

��

�

��

�

��

�

��

�

��

�

3,033

��

�

Total Medicare

��

�

25,506

��

�

4,718

��

�

��

�

��

�

��

�

30,224

��

�

Fully-insured

��

�

1,160

��

�

5,117

��

�

��

�

��

�

��

�

6,277

��

Specialty

��

�

210

��

�

1,095

��

�

��

�

��

�

��

�

1,305

��

Military services

��

�

��

�

��

�

��

�

��

�

��

�

��

Medicaid and other (A)

��

�

328

��

�

��

�

��

�

670

��

�

��

�

998

��

�

Total premiums

��

�

27,204

��

�

10,930

��

�

��

�

695

��

�

��

�

38,829

��

�

Services revenue:

��

�

Provider

��

�

��

�

��

�

1,221

��

�

��

�

��

�

1,242

��

ASO and other (B)

��

�

��

�

338

��

�

��

�

454

��

�

��

�

808

��

Pharmacy

��

�

��

�

��

�

��

�

��

�

��

�

��

�

Total services revenue

��

�

��

�

359

��

�

1,280

��

�

454

��

�

��

�

2,109

��

�

Total revenues - external customers

��

�

27,220

��

�

11,289

��

�

1,280

��

�

1,149

��

�

��

�

40,938

��

�

Intersegment revenues

��

�

Services

��

�

��

�

��

�

11,808

��

�

��

�

(11,859

)�

�

��

Products

��

�

��

�

��

�

2,803

��

�

��

�

(2,803

)�

�

��

�

Total intersegment revenues

��

�

��

�

��

�

14,611

��

�

��

�

(14,662

)�

�

��

�

Investment income

��

�

��

�

��

�

��

�

��

�

200

��

�

375

��

�

Total revenues

��

�

27,294

��

�

11,382

��

�

15,891

��

�

1,208

��

�

(14,462

)�

�

41,313

��

�

Operating expenses:

��

�

Benefits

��

�

22,914

��

�

9,124

��

�

��

�

935

��

�

(409

)�

�

32,564

��

Operating costs

��

�

2,963

��

�

1,806

��

�

15,223

��

�

446

��

�

(14,083

)�

�

6,355

��

Depreciation and amortization

��

�

134

��

�

102

��

�

147

��

�

��

�

(70

)�

�

333

��

�

Total operating expenses

��

�

26,011

��

�

11,032

��

�

15,370

��

�

1,401

��

�

(14,562

)�

�

39,252

��

�

Income (loss) from operations

��

�

1,283

��

�

350

��

�

521

��

�

(193

)�

�

100

��

�

2,061

��

Interest expense

��

�

��

�

��

�

��

�

��

�

140

��

�

140

��

�

Income (loss) before income taxes

��

1,283

��

�

350

��

�

521

��

�

(193

)�

�

(40

)�

�

1,921

��

�

Benefit ratio

��

�

84.2

%�

�

83.5

%�

�

83.9

%�

Operating cost ratio

��

�

10.9

%�

�

15.9

%�

�

95.8

%�

�

38.8

%�

�

15.5

%�

�

S-8

Humana Inc.

Consolidated Balance Sheets

Dollars in millions, except share amounts

�

��

December�31,

�

December�31,

�

YTD Change

�

��

2014

�

2013

�

Dollar

�

��

Percent

�

Assets

��

�

��

Current assets:

��

�

��

Cash and cash equivalents

��

1,935

��

�

1,138

��

�

��

Investment securities

��

�

7,598

��

�

8,090

��

�

��

Receivables, net

��

�

1,168

��

�

950

��

�

��

Other current assets

��

�

4,011

��

�

2,122

��

�

��

�

��

Total current assets

��

�

14,712

��

�

12,300

��

�

2,412

��

�

19.6

%�

Property and equipment, net

��

�

1,419

��

�

1,218

��

�

��

Long-term investment securities

��

�

1,949

��

�

1,710

��

�

��

Goodwill

��

�

3,711

��

�

3,733

��

�

��

Other long-term assets

��

�

1,675

��

�

1,774

��

�

��

�

��

Total assets

��

23,466

��

�

20,735

��

�

2,731

��

�

13.2

%�

��

�

��

Liabilities and Stockholders� Equity

��

�

��

Current liabilities:

��

�

��

Benefits payable

��

4,475

��

�

3,893

��

�

��

Trade accounts payable and accrued expenses

��

�

2,185

��

�

1,821

��

�

��

Book overdraft

��

�

334

��

�

403

��

�

��

Unearned revenues

��

�

361

��

�

206

��

�

��

�

��

Total current liabilities

��

�

7,355

��

�

6,323

��

�

1,032

��

�

16.3

%�

Long-term debt

��

�

3,825

��

�

2,600

��

�

��

Future policy benefits payable

��

�

2,349

��

�

2,207

��

�

��

Other long-term liabilities

��

�

291

��

�

289

��

�

��

�

��

Total liabilities

��

�

13,820

��

�

11,419

��

�

2,401

��

�

21.0

%�

��

�

��

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; 197,951,551 issued at December�31, 2014

��

�

��

�

��

�

��

Capital in excess of par value

��

�

2,330

��

�

2,267

��

�

��

Retained earnings

��

�

9,916

��

�

8,942

��

�

��

Accumulated other comprehensive income

��

�

223

��

�

158

��

�

��

Treasury stock, at cost, 48,347,541 shares at December�31, 2014

��

�

(2,856

)�

�

(2,084

)�

�

��

�

��

Total stockholders� equity

��

�

9,646

��

�

9,316

��

�

330

��

�

3.5

%�

��

�

��

Total liabilities and stockholders� equity

��

23,466

��

�

20,735

��

�

2,731

��

�

13.2

%�

��

�

��

Debt-to-total capitalization ratio

��

�

28.4

%�

�

21.8

%�

�

��

Return on Invested Capital (ROIC) based on Net Operating Profit After Tax (NOPAT) - trailing 12 months

��

�

10.0

%�

�

11.3

%�

�

��

�

S-9

Humana Inc.

Consolidated Statements of Cash Flows

Dollars in millions

�

��

Three�Months�Ended�December�31,

�

��

2014

�

2013

�

Dollar
Change

�

Percentage
Change

�

Cash flows from operating activities

��

�

Net income (loss)

��

145

��

�

(30

)�

�

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

��

�

Depreciation and amortization

��

�

124

��

�

114

��

�

Net realized capital gains

��

�

(11

)�

�

)�

�

Stock-based compensation

��

�

��

�

��

�

(Benefit) provision for deferred income taxes

��

�

(34

)�

�

��

�

Changes in operating assets and liabilities, net of effect of businesses acquired and dispositions:

��

�

Receivables

��

�

(164

)�

�

(125

)�

�

Other assets

��

�

��

�

(165

)�

�

Benefits payable

��

�

(201

)�

�

(178

)�

�

Other liabilities

��

�

175

��

�

289

��

�

Unearned revenues

��

�

115

��

�

��

�

Other, net

��

�

��

�

��

�

��

�

Net cash provided by (used in) operating activities

��

�

193

��

�

(16

)�

�

209

��

�

1306.3

%�

��

�

Cash flows from investing activities

��

�

Acquisitions, net of cash acquired

��

�

(15

)�

�

(26

)�

�

Purchases of property and equipment

��

�

(167

)�

�

(127

)�

�

Proceeds from sale of business

��

�

��

��

�

��

�

Purchases of investment securities

��

�

(934

)�

�

(596

)�

�

Maturities of investment securities

��

�

183

��

�

224

��

�

Proceeds from sales of investment securities

��

�

1,238

��

�

485

��

�

��

�

Net cash provided by (used in) investing activities

��

�

305

��

�

(39

)�

�

344

��

�

882.1

%�

��

�

Cash flows from financing activities

��

�

Receipts (withdrawals) from contract deposits, net

��

�

(176

)�

�

��

�

Repayments of long-term debt

��

�

(500

)�

�

��

�

Change in book overdraft

��

�

��

�

130

��

�

Common stock repurchases

��

�

(602

)�

�

(206

)�

�

Excess tax benefit from stock-based compensation

��

�

��

�

��

�

Dividends paid

��

�

(43

)�

�

(43

)�

�

Proceeds from stock option exercises and other

��

�

(16

)�

�

��

�

��

�

Net cash used in financing activities

��

�

(1,268

)�

�

(62

)�

�

1,206

)�

�

-1945.2

%�

��

�

Decrease in cash and cash equivalents

��

�

(770

)�

�

(117

)�

�

Cash and cash equivalents at beginning of period

��

�

2,705

��

�

1,255

��

�

��

�

Cash and cash equivalents at end of period

��

1,935

��

�

1,138

��

�

��

�

S-10

Humana Inc.

Consolidated Statements of Cash Flows

Dollars in millions

�

��

Year�Ended�December�31,

�

��

2014

�

2013

�

Dollar
Change

�

Percentage
Change

�

Cash flows from operating activities

��

�

Net income

��

1,147

��

�

1,231

��

�

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

��

�

Depreciation and amortization

��

�

449

��

�

426

��

�

Net realized capital gains

��

�

(20

)�

�

(22

)�

�

Stock-based compensation

��

�

��

�

��

�

(Benefit) provision for deferred income taxes

��

�

(64

)�

�

��

�

Changes in operating assets and liabilities, net of effect of businesses acquired and dispositions:

��

�

Receivables

��

�

(232

)�

�

(214

)�

�

Other assets

��

�

(952

)�

�

(330

)�

�

Benefits payable

��

�

582

��

�

109

��

�

Other liabilities

��

�

413

��

�

313

��

�

Unearned revenues

��

�

155

��

�

(24

)�

�

Other, net

��

�

��

�

��

�

��

�

Net cash provided by operating activities

��

�

1,618

��

�

1,716

��

�

)�

�

-5.7

%�

��

�

Cash flows from investing activities

��

�

Acquisitions, net of cash acquired

��

�

(18

)�

�

(187

)�

�

Purchases of property and equipment

��

�

(528

)�

�

(441

)�

�

Proceeds from sales of property and equipment

��

�

��

��

�

��

�

Proceeds from sale of business

��

�

��

�

��

�

Purchases of investment securities

��

�

(2,883

)�

�

(3,261

)�

�

Maturities of investment securities

��

�

885

��

�

1,077

��

�

Proceeds from sales of investment securities

��

�

2,409

��

�

1,592

��

�

��

�

Net cash used in investing activities

��

�

(63

)�

�

(1,182

)�

�

1,119

��

�

94.7

%�

��

�

Cash flows from financing activities

��

�

Receipts (withdrawals) from contract deposits, net

��

�

(919

)�

�

(150

)�

�

Repayments of long-term debt

��

�

(500

)�

�

��

�

Proceeds from issuance of senior notes, net

��

�

1,733

��

�

��

�

Change in book overdraft

��

�

(69

)�

�

��

�

Common stock repurchases

��

�

(872

)�

�

(531

)�

�

Excess tax benefit from stock-based compensation

��

�

��

�

��

�

Dividends paid

��

�

(172

)�

�

(168

)�

�

Proceeds from stock option exercises and other

��

�

��

�

��

�

��

�

Net cash used in financing activities

��

�

(758

)�

�

(702

)�

�

)�

�

-8.0

%�

��

�

Increase (decrease) in cash and cash equivalents

��

�

797

��

�

(168

)�

�

Cash and cash equivalents at beginning of period

��

�

1,138

��

�

1,306

��

�

��

�

Cash and cash equivalents at end of period

��

1,935

��

�

1,138

��

�

��

�

S-11

Humana Inc.

Key Income Statement Ratios and Segment Operating Results

Dollars in millions

�

Three�Months�Ended�December�31,

�

Year�Ended�December�31,

�

2014

�

2013

�

Difference

�

Percentage
Change

�

2014

�

2013

�

Difference

�

Percentage
Change

�

Benefit ratio

�

Retail

�

83.3

%�

�

82.7

%�

�

0.6

%�

�

84.3

%�

�

84.2

%�

�

0.1

%�

�

Employer Group

�

87.1

%�

�

87.5

%�

�

-0.4

%�

�

83.9

%�

�

83.5

%�

�

0.4

%�

�

Consolidated

�

83.4

%�

�

85.8

%�

�

-2.4

%�

�

83.0

%�

�

83.9

%�

�

-0.9

%�

�

Operating cost ratio

�

Retail

�

14.3

%�

�

14.5

%�

�

-0.2

%�

�

12.4

%�

�

10.9

%�

�

1.5

%�

�

Employer Group

�

16.4

%�

�

17.8

%�

�

-1.4

%�

�

16.1

%�

�

15.9

%�

�

0.2

%�

�

Healthcare Services

�

96.4

%�

�

96.0

%�

�

0.4

%�

�

95.5

%�

�

95.8

%�

�

-0.3

%�

�

Other Businesses

�

71.7

%�

�

86.1

%�

�

-14.4

%�

�

73.5

%�

�

38.8

%�

�

34.7

%�

�

Consolidated

�

17.3

%�

�

18.9

%�

�

-1.6

%�

�

15.9

%�

�

15.5

%�

�

0.4

%�

�

Detail of pretax income (loss)

�

Retail

�

185

��

�

177

��

�

��

�

4.5

%�

�

1,098

��

�

1,283

��

�

185

)�

�

-14.4

%�

Employer Group

�

)�

�

)�

�

��

�

80.6

%�

�

314

��

�

350

��

�

)�

�

-10.3

%�

Healthcare Services

�

146

��

�

130

��

�

��

�

12.3

%�

�

739

��

�

521

��

�

218

��

�

41.8

%�

Other Businesses

�

��

�

244

)�

�

266

��

�

109.0

%�

�

��

�

193

)�

�

271

��

�

140.4

%�

Consolidated

�

287

��

�

)�

�

336

��

�

685.7

%�

�

2,170

��

�

1,921

��

�

249

��

�

13.0

%�

�

S-12

Humana Inc.

Healthcare Services Segment Metrics

�

��

Quarter�Ended
December�31,�2014

�

��

Quarter�Ended
December�31,�2013

�

��

Difference

�

Quarter�Ended
September�30,�2014

�

��

Difference

�

��

�

Primary Care Providers:

��

�

��

Shared Risk (D)

��

�

��

Owned / JV

��

�

2,800

��

�

2,900

��

�

(100

)�

�

-3.4

%�

�

2,700

��

�

100

��

�

3.7

%�

Contracted

��

�

11,800

��

�

8,400

��

�

3,400

��

�

40.5

%�

�

10,600

��

�

1,200

��

�

11.3

%�

Path to Risk (E)

��

�

27,700

��

�

22,300

��

�

5,400

��

�

24.2

%�

�

25,200

��

�

2,500

��

�

9.9

%�

��

�

��

�

��

�

��

�

��

Total Value-based

��

�

42,300

��

�

33,600

��

�

8,700

��

�

25.9

%�

�

38,500

��

�

3,800

��

�

9.9

%�

��

�

��

�

��

�

��

�

��

Medicare Care Management Professionals:

��

�

��

Employed

��

�

7,800

��

�

5,500

��

�

2,300

��

�

41.8

%�

�

7,500

��

�

300

��

�

4.0

%�

Contracted

��

�

12,100

��

�

7,200

��

�

4,900

��

�

68.1

%�

�

12,100

��

�

��

�

0.0

%�

��

�

��

�

��

�

��

�

��

Total

��

�

19,900

��

�

12,700

��

�

7,200

��

�

56.7

%�

�

19,600

��

�

300

��

�

1.5

%�

��

�

��

�

��

�

��

�

��

Care Management Statistics:

��

�

��

Number of members with complex chronic conditions in Humana Chronic Care Program

��

�

420,700

��

�

280,200

��

�

140,500

��

�

379,900

��

�

40,800

��

Number of high-risk discharges enrolled in Humana Transitions Program

��

�

45,700

��

�

18,500

��

�

27,200

��

�

32,700

��

�

13,000

��

�

S-13

Humana Inc.

Healthcare Services Segment Metrics (Continued)

Script volume in thousands

�

Quarter�Ended
December�31,�2014

�

Quarter�Ended
December�31,�2013

�

Year-over-Year
Difference

�

Quarter�Ended
September�30,�2014

�

Sequential
Difference

�

Pharmacy:

�

Generic Dispense Rate

�

Retail

�

87.8

%�

�

86.2

%�

�

1.6

%�

�

87.6

%�

�

0.2

%�

�

Employer Group

�

81.4

%�

�

79.6

%�

�

1.8

%�

�

81.4

%�

�

0.0

%�

�

Total

�

87.3

%�

�

85.7

%�

�

1.6

%�

�

87.1

%�

�

0.2

%�

�

Mail-Order Penetration

Retail

�

23.7

%�

�

23.2

%�

�

0.5

%�

�

23.8

%�

�

-0.1

%�

Employer Group

�

13.3

%�

�

14.3

%�

�

-1.0

%�

�

13.4

%�

�

-0.1

%�

Total

�

22.9

%�

�

22.5

%�

�

0.4

%�

�

23.0

%�

�

-0.1

%�

�

Difference

�

Percentage
Change

�

Difference

�

Percentage
Change

�

Script volume

�

Retail

�

76,500

��

�

62,700

��

�

13,800

��

�

22.0

%�

�

75,000

��

�

1,500

��

�

2.0

%�

Employer Group

�

8,800

��

�

8,200

��

�

600

��

�

7.3

%�

�

8,500

��

�

300

��

�

3.5

%�

�

Total

�

85,300

��

�

70,900

��

�

14,400

��

�

20.3

%�

�

83,500

��

�

1,800

��

�

2.2

%�

�

S-14

Humana Inc.

Healthcare Services Segment Metrics (Continued)

Script volume in thousands

�

��

Year Ended
December�31,�2014

�

Year Ended
December�31,�2013

�

Year-over-Year
Difference

�

Pharmacy:

��

�

Generic Dispense Rate

��

�

Retail

��

�

87.5

%�

�

86.4

%�

�

1.1

%�

�

Employer Group

��

�

81.3

%�

�

79.8

%�

�

1.5

%�

�

Total

��

�

87.0

%�

�

85.8

%�

�

1.2

%�

�

��

�

Mail-Order Penetration

Retail

�

23.8

%�

�

22.9

%�

�

0.9

%�

Employer Group

�

13.4

%�

�

14.3

%�

�

-0.9

%�

Total

�

23.0

%�

�

22.2

%�

�

0.8

%�

��

�

��

�

Difference

�

Percentage
Change

�

Script volume

��

�

Retail

��

�

295,000

��

�

242,900

��

�

52,100

��

�

21.4

%�

Employer Group

��

�

34,000

��

�

31,400

��

�

2,600

��

�

8.3

%�

��

�

Total

�

329,000

��

�

274,300

��

�

54,700

��

�

19.9

%�

��

�

S-15

Humana Inc.

Membership Detail

In thousands

�

��

Ending

�

��

Average

�

��

Ending

�

��

Year-over-Year�Change

�

Ending

�

��

Sequential�Change

�

��

December�31,�2014

�

��

4Q14

�

��

December�31,�2013

�

��

Amount

�

Percent

�

September�30,�2014

�

��

Amount

�

Percent

�

Medical Membership:

��

�

��

�

Retail

��

�

��

�

Medicare Advantage

��

�

2,446.2

��

�

2,436.7

��

�

2,068.7

��

�

377.5

��

�

18.2

%�

�

2,417.9

��

�

28.3

��

�

1.2

%�

Medicare stand-alone PDPs

��

�

3,989.5

��

�

3,977.0

��

�

3,271.7

��

�

717.8

��

�

21.9

%�

�

3,936.4

��

�

53.1

��

�

1.3

%�

Individual commercial

��

�

1,016.2

��

�

1,039.0

��

�

505.4

��

�

510.8

��

�

101.1

%�

�

1,085.8

��

�

(69.6

)�

�

-6.4

%�

State-based Medicaid (F)

��

�

298.5

��

�

292.4

��

�

85.5

��

�

213.0

��

�

249.1

%�

�

281.2

��

�

17.3

��

�

6.2

%�

Medicare Supplement

��

�

131.9

��

�

131.1

��

�

94.7

��

�

37.2

��

�

39.3

%�

�

129.2

��

�

2.7

��

�

2.1

%�

��

�

��

�

��

�

��

�

��

�

Total Retail

��

�

7,882.3

��

�

7,876.2

��

�

6,026.0

��

�

1,856.3

��

�

30.8

%�

�

7,850.5

��

�

31.8

��

�

0.4

%�

��

�

��

�

��

�

��

�

��

�

Employer Group

��

�

��

�

Medicare Advantage fully-insured

��

�

489.7

��

�

488.3

��

�

429.1

��

�

60.6

��

�

14.1

%�

�

484.9

��

�

4.8

��

�

1.0

%�

Medicare stand-alone PDPs

��

�

4.5

��

�

4.5

��

�

4.2

��

�

0.3

��

�

7.1

%�

�

4.4

��

�

0.1

��

�

2.3

%�

Fully-insured medical commercial

��

�

1,235.5

��

�

1,216.2

��

�

1,237.0

��

�

(1.5

)�

�

-0.1

%�

�

1,212.3

��

�

23.2

��

�

1.9

%�

ASO commercial

��

�

1,104.3

��

�

1,104.2

��

�

1,162.8

��

�

(58.5

)�

�

-5.0

%�

�

1,111.9

��

�

(7.6

)�

�

-0.7

%�

��

�

��

�

��

�

��

�

��

�

Total Employer Group

��

�

2,834.0

��

�

2,813.2

��

�

2,833.1

��

�

0.9

��

�

0.0

%�

�

2,813.5

��

�

20.5

��

�

0.7

%�

��

�

��

�

��

�

��

�

��

�

Other Businesses

��

�

��

�

Military services

��

�

3,090.4

��

�

3,087.4

��

�

3,101.8

��

�

(11.4

)�

�

-0.4

%�

�

3,085.6

��

�

4.8

��

�

0.2

%�

Puerto Rico Medicaid and other

��

�

35.0

��

�

35.3

��

�

23.4

��

�

11.6

��

�

49.6

%�

�

36.0

��

�

(1.0

)�

�

-2.8

%�

��

�

��

�

��

�

��

�

��

�

Total Other Businesses

��

�

3,125.4

��

�

3,122.7

��

�

3,125.2

��

�

0.2

��

�

0.0

%�

�

3,121.6

��

�

3.8

��

�

0.1

%�

��

�

��

�

��

�

��

�

��

�

Total Medical Membership

��

�

13,841.7

��

�

13,812.1

��

�

11,984.3

��

�

1,857.4

��

�

15.5

%�

�

13,785.6

��

�

56.1

��

�

0.4

%�

��

�

��

�

��

�

��

�

��

�

Detail of Individual commercial

��

�

��

�

ACA compliant:

��

�

��

�

On-Exchange

��

�

554.8

��

�

566.8

��

�

��

�

554.8

��

�

��

�

601.4

��

�

(46.6

)�

�

-7.7

%�

Off-Exchange

��

�

131.5

��

�

130.8

��

�

��

�

131.5

��

�

��

�

126.4

��

�

5.1

��

�

4.0

%�

Non-ACA compliant (legacy)

��

�

329.9

��

�

341.4

��

�

505.4

��

�

(175.5

)�

�

-34.7

%�

�

358.0

��

�

(28.1

)�

�

-7.8

%�

��

�

��

�

��

�

��

�

��

�

Total individual commercial

��

�

1,016.2

��

�

1,039.0

��

�

505.4

��

�

510.8

��

�

101.1

%�

�

1,085.8

��

�

(69.6

)�

�

-6.4

%�

��

�

��

�

��

�

��

�

��

�

Specialty Membership:

��

�

��

�

Retail

��

�

��

�

Dental - fully-insured

��

�

828.5

��

�

852.6

��

�

739.3

��

�

89.2

��

�

12.1

%�

�

876.4

��

�

(47.9

)�

�

-5.5

%�

Vision

��

�

208.4

��

�

209.1

��

�

156.5

��

�

51.9

��

�

33.2

%�

�

209.0

��

�

(0.6

)�

�

-0.3

%�

Other supplemental benefits (G)

��

�

128.9

��

�

131.2

��

�

146.7

��

�

(17.8

)�

�

-12.1

%�

�

134.1

��

�

(5.2

)�

�

-3.9

%�

��

�

��

�

��

�

��

�

��

�

Total Retail

��

�

1,165.8

��

�

1,192.9

��

�

1,042.5

��

�

123.3

��

�

11.8

%�

�

1,219.5

��

�

(53.7

)�

�

-4.4

%�

��

�

��

�

��

�

��

�

��

�

Employer Group

��

�

��

�

Dental - fully-insured

��

�

2,370.5

��

�

2,372.3

��

�

2,513.5

��

�

(143.0

)�

�

-5.7

%�

�

2,379.7

��

�

(9.2

)�

�

-0.4

%�

Dental - ASO

��

�

772.4

��

�

776.1

��

�

873.0

��

�

(100.6

)�

�

-11.5

%�

�

783.7

��

�

(11.3

)�

�

-1.4

%�

Vision

��

�

2,103.3

��

�

2,091.8

��

�

2,035.8

��

�

67.5

��

�

3.3

%�

�

2,074.7

��

�

28.6

��

�

1.4

%�

Other supplemental benefits (G)

��

�

1,256.5

��

�

1,261.8

��

�

1,358.5

��

�

(102.0

)�

�

-7.5

%�

�

1,287.2

��

�

(30.7

)�

�

-2.4

%�

��

�

��

�

��

�

��

�

��

�

Total Employer Group

��

�

6,502.7

��

�

6,502.0

��

�

6,780.8

��

�

(278.1

)�

�

-4.1

%�

�

6,525.3

��

�

(22.6

)�

�

-0.3

%�

��

�

��

�

��

�

��

�

��

�

Total Specialty Membership

��

�

7,668.5

��

�

7,694.9

��

�

7,823.3

��

�

(154.8

)�

�

-2.0

%�

�

7,744.8

��

�

(76.3

)�

�

-1.0

%�

��

�

��

�

��

�

��

�

��

�

S-16

Humana Inc.

Premiums and Services Revenue Detail

Dollars in millions, except per member per month

�

Per�Member�per�Month�(H)

�

Three�Months�Ended�December�31,

�

Three�Months�Ended�December�31,

�

Dollar

�

Percentage

�

2014

�

2013

�

Change

�

Change

�

2014

�

2013

�

Premiums and Services Revenue

�

Retail:

�

Medicare Advantage

�

6,498

��

�

5,621

��

�

877

��

�

15.6

%�

�

889

��

�

910

��

Medicare stand-alone PDPs

�

790

��

�

739

��

�

��

�

6.9

%�

�

��

�

��

Individual commercial

�

837

��

�

257

��

�

580

��

�

225.7

%�

�

269

��

�

172

��

State-based Medicaid (F)

�

429

��

�

101

��

�

328

��

�

324.8

%�

�

489

��

�

406

��

Medicare Supplemental

�

��

�

��

�

��

�

38.3

%�

�

165

��

�

166

��

Specialty

�

��

�

��

�

��

�

16.4

%�

�

��

�

��

ASO�& other services (B)

�

��

�

��

�

)�

�

-77.8

%�

�

Total Retail

�

8,685

��

�

6,829

��

�

1,856

��

�

27.2

%�

�

Employer Group:

�

Medicare Advantage fully-insured

�

1,359

��

�

1,167

��

�

192

��

�

16.5

%�

�

928

��

�

909

��

Medicare stand-alone PDPs

�

��

�

��

�

��

�

0.0

%�

�

Fully-insured medical commercial

�

1,354

��

�

1,298

��

�

��

�

4.3

%�

�

371

��

�

354

��

Specialty

�

274

��

�

272

��

�

��

�

0.7

%�

�

��

�

��

ASO�& other services (B)

�

120

��

�

108

��

�

��

�

11.1

%�

�

Total Employer Group

�

3,109

��

�

2,847

��

�

262

��

�

9.2

%�

�

Healthcare Services:

�

Pharmacy solutions

�

4,524

��

�

3,472

��

�

1,052

��

�

30.3

%�

�

Provider services

�

529

��

�

533

��

�

)�

�

-0.8

%�

�

Home based services

�

204

��

�

131

��

�

��

�

55.7

%�

�

Integrated behavioral health services

�

��

�

��

�

��

�

3.1

%�

�

Total Healthcare Services

�

5,290

��

�

4,168

��

�

1,122

��

�

26.9

%�

�

Other Businesses:

�

Military services (I)

�

115

��

�

��

�

��

�

19.8

%�

�

Puerto Rico Medicaid and other (J)

�

��

�

��

�

��

�

57.9

%�

�

Total Other Businesses

�

145

��

�

115

��

�

��

�

26.1

%�

�

S-17

Humana Inc.

Premiums and Services Revenue Detail

Dollars in millions, except per member per month

�

��

�

��

�

��

�

Per�Member�per�Month�(H)

�

��

Year�Ended�December�31,

�

��

�

Year�Ended�December�31,

�

��

�

��

�

��

Dollar

�

Percentage

�

��

�

��

2014

�

��

2013

�

��

Change

�

Change

�

2014

�

��

2013

�

Premiums and Services Revenue

��

�

��

Retail:

��

�

��

Medicare Advantage

��

25,941

��

22,481

��

3,460

��

�

15.4

%�

�

908

��

921

��

Medicare stand-alone PDPs

��

�

3,396

��

�

3,025

��

�

371

��

�

12.3

%�

�

��

�

��

Individual commercial

��

�

3,020

��

�

980

��

�

2,040

��

�

208.2

%�

�

264

��

�

171

��

State-based Medicaid (F)

��

�

1,096

��

�

328

��

�

768

��

�

234.1

%�

�

459

��

�

360

��

Medicare Supplemental

��

�

245

��

�

180

��

�

��

�

36.1

%�

�

164

��

�

165

��

Specialty

��

�

256

��

�

210

��

�

��

�

21.9

%�

�

��

�

��

ASO�& other services (B)

��

�

��

�

��

�

��

�

143.8

%�

�

��

�

��

�

��

�

��

Total Retail

��

�

33,993

��

�

27,220

��

�

6,773

��

�

24.9

%�

�

��

�

��

�

��

�

��

Employer Group:

��

�

��

Medicare Advantage fully-insured

��

�

5,490

��

�

4,710

��

�

780

��

�

16.6

%�

�

950

��

�

935

��

Medicare stand-alone PDPs

��

�

��

�

��

�

��

�

0.0

%�

�

��

Fully-insured medical commercial

��

�

5,339

��

�

5,117

��

�

222

��

�

4.3

%�

�

368

��

�

354

��

Specialty

��

�

1,098

��

�

1,095

��

�

��

�

0.3

%�

�

��

�

��

ASO�& other services (B)

��

�

440

��

�

410

��

�

��

�

7.3

%�

�

��

�

��

�

��

�

��

Total Employer Group

��

�

12,375

��

�

11,340

��

�

1,035

��

�

9.1

%�

�

��

�

��

�

��

�

��

Healthcare Services:

��

�

��

Pharmacy solutions

��

�

17,004

��

�

13,138

��

�

3,866

��

�

29.4

%�

�

��

Provider services

��

�

2,186

��

�

2,205

��

�

(19

)�

�

-0.9

%�

�

��

Home based services

��

�

692

��

�

420

��

�

272

��

�

64.8

%�

�

��

Integrated behavioral health

��

�

133

��

�

128

��

�

��

�

3.9

%�

�

��

�

��

�

��

�

��

Total Healthcare Services

��

�

20,015

��

�

15,891

��

�

4,124

��

�

26.0

%�

�

��

�

��

�

��

�

��

Other Businesses:

��

�

��

Military services (I)

��

�

412

��

�

398

��

�

��

�

3.5

%�

�

��

Puerto Rico Medicaid and other (J)

��

�

139

��

�

751

��

�

(612

)�

�

-81.5

%�

�

��

�

��

�

��

�

��

Total Other Businesses

��

551

��

1,149

��

(598

)�

�

-52.0

%�

�

��

�

��

�

��

�

��

�

S-18

Humana Inc.

Medicare Summary

Premiums in millions, except per member per month

Membership in thousands

�

Per�Member�per�Month�(H)

�

Three�Months�Ended�December�31,

�

Year-over-year�Change

�

Three�Months�Ended�December�31,

�

2014

�

2013

�

Amount

�

Percent

�

2014

�

2013

�

Premiums

�

Medicare Advantage

�

7,857

��

�

6,788

��

�

1,069

��

�

15.7

%�

�

895

��

�

910

��

Medicare stand-alone PDPs

�

792

��

�

741

��

�

��

�

6.9

%�

�

��

�

��

�

Total Medicare

�

8,649

��

�

7,529

��

�

1,120

��

�

14.9

%�

�

Per Member per Month (H)

�

Year�Ended�December�31,

�

Year-over-year�Change

�

Year Ended December�31,

�

2014

�

2013

�

Amount

�

Percent

�

2014

�

2013

�

Premiums

�

Medicare Advantage

�

31,431

��

�

27,191

��

�

4,240

��

�

15.6

%�

�

915

��

�

924

��

Medicare stand-alone PDPs

�

3,404

��

�

3,033

��

�

371

��

�

12.2

%�

�

��

�

��

�

Total Medicare

�

34,835

��

�

30,224

��

�

4,611

��

�

15.3

%�

�

Ending

�

Ending

�

Year-over-year Change

�

December�31,�2014

�

December�31,�2013

�

Amount

�

Percent

�

Fully-Insured Membership

�

Medicare Advantage

�

2,935.9

��

�

2,497.8

��

�

438.1

��

�

17.5

%�

�

Medicare stand-alone PDPs

�

3,994.0

��

�

3,275.9

��

�

718.1

��

�

21.9

%�

�

Total Medicare

�

6,929.9

��

�

5,773.7

��

�

1,156.2

��

�

20.0

%�

�

Member Mix

�

Ending

�

Ending

�

December�31,

�

December�31,

�

December�31, 2014

�

December�31,�2013

�

2014

�

2013

�

Retail Segment Detail

�

Medicare Advantage Membership

�

HMO

�

1,327.4

��

�

1,059.7

��

�

54.3

%�

�

51.2

%�

�

PPO

�

1,118.8

��

�

1,009.0

��

�

45.7

%�

�

48.8

%�

�

Total Individual Medicare Advantage

�

2,446.2

��

�

2,068.7

��

�

100.0

%�

�

100.0

%�

�

Medicare Advantage Membership

�

Shared Risk (D)

�

709.0

��

�

561.5

��

�

29.0

%�

�

27.1

%�

�

Path to Risk (E)

�

592.0

��

�

464.4

��

�

24.2

%�

�

22.4

%�

�

Total Value-based

�

1,301.0

��

�

1,025.9

��

�

53.2

%�

�

49.5

%�

�

Other

�

1,145.2

��

�

1,042.8

��

�

46.8

%�

�

50.5

%�

�

Total Individual Medicare Advantage

�

2,446.2

��

�

2,068.7

��

�

100.0

%�

�

100.0

%�

�

S-19

Humana Inc.

Investments

Dollars in millions

�

��

Fair value

�

��

12/31/2014

�

��

9/30/2014

�

��

12/31/2013

�

Investment Portfolio:

��

Cash�& cash equivalents

��

1,935

��

2,705

��

1,138

��

Investment securities

��

�

7,598

��

�

8,088

��

�

8,090

��

Long-term investment securities

��

�

1,949

��

�

1,947

��

�

1,710

��

�

��

�

��

�

Total investment portfolio

��

11,482

��

12,740

��

10,938

��

�

��

�

��

�

Duration (K)

��

�

4.14

��

�

3.72

��

�

4.33

��

�

��

�

��

�

Average Credit Rating

��

�

AA-

��

�

AA-

��

�

AA-

��

�

��

�

��

�

Investment Portfolio Detail:

��

Cash and cash equivalents

��

1,935

��

2,705

��

1,138

��

�

��

�

��

�

U.S. Government and agency obligations

��

U.S. Treasury and agency obligations

��

�

374

��

�

852

��

�

584

��

U.S. Government residential mortgage-backed

��

�

1,477

��

�

1,546

��

�

1,792

��

U.S. Government commercial mortgage-backed

��

�

��

�

��

�

��

�

��

�

��

�

Total U.S. Government and agency obligations

��

�

1,872

��

�

2,421

��

�

2,404

��

�

��

�

��

�

Tax-exempt municipal securities

��

Pre-refunded

��

�

199

��

�

166

��

�

222

��

Insured

��

�

484

��

�

500

��

�

548

��

Other

��

�

2,376

��

�

2,472

��

�

2,188

��

Auction rate securities

��

�

��

�

��

�

��

�

��

�

��

�

Total tax-exempt municipal securities

��

�

3,068

��

�

3,151

��

�

2,971

��

�

��

�

��

�

Residential mortgage-backed

��

Prime residential mortgages

��

�

��

�

��

�

��

Alt-A residential mortgages

��

�

��

�

��

�

��

�

��

�

��

�

Total residential mortgage-backed

��

�

��

�

��

�

��

�

��

�

��

�

Commercial mortgage-backed

��

�

843

��

�

696

��

�

673

��

�

��

�

��

�

Asset-backed securities

��

�

��

�

��

�

��

�

��

�

��

�

Corporate securities

��

Financial services

��

�

772

��

�

730

��

�

825

��

Other

��

�

2,946

��

�

2,978

��

�

2,842

��

�

��

�

��

�

Total corporate securities

��

�

3,718

��

�

3,708

��

�

3,667

��

�

��

�

��

�

Total investment portfolio

��

11,482

��

12,740

��

10,938

��

�

��

�

��

�

S-20

Humana Inc.

Detail of Benefits Payable Balance and Year-to-Date Changes

Dollars in millions

�

��

December�31, 2014

�

September�30, 2014

�

December�31, 2013

�

Detail of benefits payable

��

�

IBNR and other benefits payable (L)

��

3,622

��

�

3,747

��

�

3,199

��

Unprocessed claim inventories (M)

��

�

378

��

�

453

��

�

313

��

Processed claim inventories (N)

��

�

246

��

�

268

��

�

202

��

Payable to pharmacy benefit administrator (O)

��

�

229

��

�

208

��

�

179

��

�

Total Benefits Payable

��

4,475

��

�

4,676

��

�

3,893

��

�

��

Year Ended
December�31,�2014

�

Nine�Months�Ended
September�30,�2014

�

Year�Ended
December�31,�2013

�

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

��

�

Balances at January�1, net

��

3,893

��

�

3,893

��

�

3,775

��

Acquisitions

��

�

��

��

�

��

�

��

Incurred related to:

��

�

Current year

��

�

38,641

��

�

28,827

��

�

32,711

��

Prior years (Q)

��

�

(518

)�

�

(440

)�

�

(474

)�

��

�

Total incurred

��

�

38,123

��

�

28,387

��

�

32,237

��

�

Paid related to:

��

�

Current year

��

�

(34,357

)�

�

(24,399

)�

�

(29,103

)�

Prior years

��

�

(3,262

)�

�

(3,270

)�

�

(3,021

)�

��

�

Total paid

��

�

(37,619

)�

�

(27,669

)�

�

(32,124

)�

��

�

Reinsurance recoverables

��

�

��

�

��

�

��

�

Balances at end of period

��

4,475

��

�

4,676

��

�

3,893

��

�

��

Year Ended
December�31,�2014

�

Nine Months Ended
September�30,�2014

�

Year Ended
December�31,�2013

�

Summary of Consolidated Benefit Expense:

��

�

Total benefit expense incurred, per above

��

38,123

��

�

28,387

��

�

32,237

��

Military services benefit expense

��

�

��

�

��

�

(27

)�

Future policy benefit expense (R)

��

�

��

�

��

�

354

��

�

Consolidated Benefit Expense

��

38,166

��

�

28,417

��

�

32,564

��

�

S-21

Humana Inc.

Benefits Payable Statistics (S)

�

Receipt Cycle Time (T)

��

�

��

�

��

�

��

�

��

2014

�

��

2013

�

��

Change

�

��

Percentage
Change

�

1st Quarter Average

��

�

13.6

��

�

12.5

��

�

1.1

��

�

8.8

%�

2nd Quarter Average

��

�

13.5

��

�

13.1

��

�

0.4

��

�

3.1

%�

3rd Quarter Average

��

�

13.4

��

�

13.4

��

�

��

�

0.0

%�

4th Quarter Average

��

�

13.5

��

�

13.4

��

�

0.1

��

�

0.7

%�

��

�

��

�

��

�

��

�

Full Year Average

��

�

13.5

��

�

13.1

��

�

0.4

��

�

3.1

%�

��

�

��

�

��

�

��

�

Unprocessed Claims Inventories

�

Date

��

Estimated�Valuation
(millions)

�

��

Claim�Item
Counts�(000s)

�

��

Number�of�Days
on Hand

�

12/31/2012

��

302

��

�

1,061

��

�

4.1

��

3/31/2013

��

327

��

�

1,247

��

�

4.7

��

6/30/2013

��

380

��

�

1,274

��

�

4.7

��

9/30/2013

��

404

��

�

1,879

��

�

7.4

��

12/31/2013

��

313

��

�

1,240

��

�

4.5

��

3/31/2014

��

363

��

�

1,334

��

�

4.9

��

6/30/2014

��

400

��

�

1,422

��

�

4.5

��

9/30/2014

��

453

��

�

1,778

��

�

5.2

��

�

��

�

��

�

12/31/2014

��

378

��

�

1,819

��

�

5.1

��

�

��

�

��

�

S-22

Humana Inc.

Benefits Payable Statistics (Continued) (S)

�

Days in Claims Payable (U)

��

�

��

�

Quarter Ended

��

Days�in�Claims
Payable�(DCP)

�

��

Change�Last�4
Quarters

�

Percentage
Change

�

12/31/2012

��

�

48.5

��

�

(4.0

)�

�

-7.6

%�

3/31/2013

��

�

49.0

��

�

(1.1

)�

�

-2.2

%�

6/30/2013

��

�

50.7

��

�

(0.3

)�

�

-0.6

%�

9/30/2013

��

�

49.5

��

�

(2.1

)�

�

-4.1

%�

12/31/2013

��

�

47.8

��

�

(0.7

)�

�

-1.4

%�

3/31/2014

��

�

48.0

��

�

(1.0

)�

�

-2.0

%�

6/30/2014

��

�

49.4

��

�

(1.3

)�

�

-2.6

%�

9/30/2014

��

�

47.5

��

�

(2.0

)�

�

-4.0

%�

��

�

��

�

12/31/2014

��

�

44.7

��

�

(3.1

)�

�

-6.5

%�

��

�

��

�

Year-to-Date Change in Days in Claims Payable (V)

��

YTD�4Q
2014

�

YTD�3Q
2014

�

YTD�4Q
2013

�

DCP - beginning of period

��

�

47.8

��

�

47.8

��

�

48.5

�

Components of change in DCP:

��

�

Change in unprocessed claims inventories

��

�

0.6

��

�

1.4

��

�

0.1

�

Change in processed claims inventories

��

�

0.4

��

�

0.7

��

�

(0.4

)

Change in pharmacy payment cutoff

��

�

��

��

�

0.1

��

�

0.1

�

Change in capitation/provider settlements

��

�

(3.8

)�

�

(3.2

)�

�

(0.3

)

All other

��

�

(0.3

)�

�

0.7

��

�

(0.2

)

��

�

DCP - end of period

��

�

44.7

��

�

47.5

��

�

47.8

�

��

�

S-23

Humana Inc.

Footnotes to Statistical Schedules and Supplementary Information

4Q14 Earnings Release

�

(A)	The Medicaid and other category includes the company�s Medicaid business as well as the closed block of long-term care insurance policies.

(B)	The ASO and other category is primarily comprised of ASO fees and other ancillary services fees.

(C)

On January�1, 2014, the company made minor reclassifications to certain of its businesses from its Healthcare Services segment to its Employer Group segment to correspond with internal management reporting changes. The company�s reportable segments remain the same and prior period segment financial information has been recast to conform to the 2014 presentation.

(D)

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.

(E)

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.

(F)	Includes Medicaid Temporary Assistance for Needy Families (TANF), which contracts are generally reinsured through partnering relationships, and Long-Term Support Services (LTSS) from state-based contracts.

(G)	Other supplemental benefits include life, disability, and fixed benefit products including cancer and critical illness policies.

(H)	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).

(I)	The majority of Military services revenues are generally not contracted on a per-member basis.

(J)	Includes premiums associated with Puerto Rico Medicaid and the closed block of long-term care insurance policies as well as services revenue.

(K)	Duration is the time-weighted average of the present value of the fixed income portfolio cash flows.

(L)

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

(M)	Unprocessed claim inventories represent the estimated valuation of claims received but not yet fully processed.

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

(O)	The balance due to the company�s pharmacy benefit administrator fluctuates as a result of the number of business days in the last payment cycle of the month. Payment cycles are every 8 days (8^th, 16^th, and 24th of month) and the last day of the month.

(P)	The table excludes activity associated with military services benefits payable related to the previous contract that expired March�31, 2012.

(Q)

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.

(R)	Future policy benefit expense has a related liability classified as a long-term liability on the balance sheet.

(S)	Benefits payable statistics represents fully-insured medical claims data and exclude military services claims data and specialty benefits.

(T)

The receipt cycle time measures the average length of time between when a claim was initially incurred and when the claim form was received. Receipt cycle time data for the company�s largest claim processing platforms represent approximately 97% of the company�s fully-insured medical claims volume. Pharmacy and specialty claims, including dental, vision and other supplemental benefits, are excluded from this measurement.

(U)

A common metric for monitoring benefits payable levels relative to the benefit expense is days in claims payable, or DCP, which represents the benefits payable at the end of the period divided by average benefits expense per day in the quarterly period. This metric excludes military services, Medicare stand-alone PDPs, and incremental benefits expense associated with changes in future policyholder benefits.

(V)

DCP fluctuates due to a number of factors, the more significant of which are detailed in this roll forward. 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. This metric excludes military services, Medicare stand-alone PDPs, and incremental benefits expense associated with changes in future policyholder benefits.

�

S-24

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Form 8-K HUMANA INC For: Feb 04

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