Humana (HUM) Q3 2024 earnings summary

Executive summary

• Q3 2024 net income was $480 million ($3.98 per diluted share), down from $832 million ($6.71 per share) in Q3 2023; nine-month net income was $1.9 billion ($15.72 per share), down from $3.0 billion ($24.26 per share) year-over-year.

• Q3 2024 GAAP EPS was $3.98 and Adjusted EPS was $4.16; YTD 2024 GAAP EPS was $15.72 and Adjusted EPS was $18.35, both down year-over-year.

• Revenue for Q3 2024 rose 11.3% year-over-year to $29.4 billion, and for the nine months ended September 30, 2024, revenue increased 10.8% to $88.5 billion.

• 2024 individual Medicare Advantage annual membership growth forecast was raised by 40,000 to approximately 265,000, or 5%.

• Results were impacted by put/call valuation adjustments, value creation initiative charges, and a $90 million litigation settlement.

Financial highlights

• Q3 2024 premiums revenue increased 11.4% to $28.0 billion; nine-month premiums revenue rose 10.8% to $84.4 billion.

• Q3 2024 benefit ratio increased to 89.9% from 86.6% in Q3 2023; nine-month benefit ratio rose to 89.2% from 86.2% year-over-year, driven by elevated Medicare Advantage and state-based contract medical cost trends.

• Operating cost ratio improved to 11.5% in Q3 2024 from 12.5% in Q3 2023; nine-month ratio improved to 10.9% from 11.8%.

• Investment income grew 11.4% in Q3 2024 to $343 million and 19.9% for the nine months to $929 million.

• Operating cash flows for YTD 2024 were $3.5 billion, down from $11.1 billion YTD 2023, mainly due to timing of CMS premium payments.

Outlook and guidance

• FY 2024 GAAP EPS guidance updated to at least $12.89; Adjusted EPS guidance to at least $16.00.

• 2025 Medicare Advantage product is priced for margin expansion, but investments may keep earnings progression flat year-over-year.

• Management notes a significant decline in 2025 Medicare Advantage Star Ratings, which may negatively impact 2026 quality bonus payments and future revenues.

• 2025 guidance will reflect flexibility to invest while maintaining at least flat performance.

• The exit from the Employer Group Commercial Medical Products business is anticipated to be completed in the first half of 2025.