Humana (HUM) investor relations material

Strategic priorities and margin outlook

• Commitment to restoring Medicare margins to at least 3% and earnings power by 2028 remains unchanged, requiring benefit adjustments to match funding and medical cost trends.

• Lifetime value of members is emphasized, with retention prioritized due to higher economic value in later years.

• Medicare and CenterWell businesses must each be independently profitable, but together enhance overall economics and retention incentives.

• Industry-wide benefit adjustments are expected in response to funding not keeping pace with medical cost trends, with a focus on minimizing member disruption.

Membership growth, mix, and retention

• Over 1 million new members added during AEP, with about 70% being switchers, who are more economically favorable in year one than new-to-MA members.

• 70% of new members are in four-star or better contracts, and 75% come through higher-quality sales channels, reflecting deliberate actions to improve membership quality.

• Sales channel optimization included trimming lower-performing call centers and broker partners to focus on retention and quality.

• HMO/PPO mix remains consistent with previous years.

Margin profiles and product performance

• Switchers have the highest margins, followed by returning members, with new-to-MA members having the lowest due to coding and acquisition costs.

• D-SNP margins remain higher than non-D-SNP, with overall margin improvement expected across the membership due to rate notice, trend benders, and operational efficiency.

• PPO products can be profitable if priced and structured appropriately, with recent years focused on correcting prior aggressive pricing.