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HUMANA INC (HUM)·Q2 2025 Earnings Summary

Executive Summary

  • Raised FY 2025 Adjusted EPS guidance to approximately $17.00 from approximately $16.25 and increased consolidated revenue guidance to at least $128B; GAAP EPS guidance reduced to approximately $13.77 reflecting non-operating adjustments .
  • Q2 2025 delivered $32.39B revenue (+9.7% YoY) and Adjusted EPS of $6.27; Insurance segment benefit ratio was 89.9% in line with “~90%” expectations .
  • MA membership attrition tracking better: full-year individual MA decline now “up to 500,000” vs prior ~550,000, aided by bounce-back members and recapture of ~43% of members from exited plans .
  • CenterWell strength was a key upside driver (Specialty Pharmacy volumes/drug mix; broader DtC partners including Weight Watchers) and Primary Care patient growth now guided to 50–70k net for FY25 (15% at midpoint) .
  • Near-term stock catalysts: the guidance raise and CenterWell momentum; watch Q3 seasonality (adjusted earnings 15–20% of FY) and benefit ratio “just above 91%” alongside STARS quiet period and litigation updates .

What Went Well and What Went Wrong

What Went Well

  • CenterWell outperformed on Specialty Pharmacy (higher volumes and favorable mix; gained access to 17 LDDs; MMIT Patient Choice award), and expanded DtC partnerships (NovoCare, Ro, LifeMD, WeightWatchers) exceeding FY25 expectations .
  • Insurance revenue ahead of plan driven by better-than-anticipated individual MA membership, improving FY25 Insurance revenue to at least $123B (from $121–$123B) .
  • Member experience and interoperability: Epic MyChart integration streamlines access to plan details for >3M members; prior-auth reductions and faster decisions signal operational improvements and provider-friendly posture .

What Went Wrong

  • Individual MA membership lower YTD (down ~432,500), reflecting exits of unprofitable plans/counties impacting ~560,000 members; though recapture improved to ~43% and bounce-backs increased post-AEP/OEP .
  • CenterWell Home Health admissions growth below initial expectations; same-store admissions now guided to low-single-digit increase vs prior mid-to-high single-digit due to episodic pressure, partially offset by productivity and OneHome profitability .
  • GAAP EPS guidance lowered to approximately $13.77 (from ~$14.68) due to non-operating items (e.g., put/call fair value, impairment charges), despite stronger adjusted performance .

Financial Results

Consolidated results vs prior periods

MetricQ4 2024Q1 2025Q2 2025
Revenues ($USD Billions)$29.213 $32.112 $32.388
GAAP EPS ($)($5.76) $10.30 $4.51
Adjusted EPS ($)($2.16) $11.58 $6.27
Operating Cost Ratio (GAAP)14.4% 10.6% 11.0%

Insurance segment margins trend

MetricQ4 2024Q1 2025Q2 2025
Insurance Segment Benefit Ratio (GAAP)92.1% 87.4% 89.9%

Q2 2025 vs Wall Street consensus (S&P Global)

MetricConsensusActual
EPS (Adjusted, $)5.867*6.27
Revenue ($USD Billions)31.850*32.388
Values retrieved from S&P Global.*

Segment breakdown (YoY)

Segment Revenues ($USD Billions)Q2 2024Q2 2025
Insurance$28.525 $31.094
CenterWell$4.947 $5.537

KPIs

KPIJun 30, 2024Dec 31, 2024Jun 30, 2025
Individual MA Members (000s)5,617.6 5,661.8 5,229.3
Group MA Members (000s)544.9 545.7 570.0
Stand-alone PDP (000s)2,341.2 2,288.2 2,427.1
State-based Contracts (000s)1,392.3 1,459.9 1,582.9
CenterWell Primary Care Patients (000s)331.9 390.5 430.3
CenterWell Primary Care Centers299 344 335

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Adjusted EPSFY 2025~$16.25 ~$17.00 Raised
GAAP EPSFY 2025~$14.68 ~$13.77 Lowered
Consolidated RevenuesFY 2025$126–$128B At least $128B Raised
Insurance Segment RevenuesFY 2025$121–$123B At least $123B Raised
CenterWell Segment RevenuesFY 2025$20.5–$21.5B At least $21.5B Raised (floor)
Individual MA MembershipFY 2025 change vs PYDecline ~550k Decline up to 500k Raised (less decline)
Insurance Segment Benefit RatioFY 202590.1–90.5% 90.1–90.5% Maintained
Q3 Seasonality (Adj EPS)Q3 2025N/A~15–20% of FY adjusted earnings New detail
Q3 Insurance Benefit RatioQ3 2025N/AJust above 91% New detail
Effective Tax RateFY 2025~25% ~25% Maintained
Capital ExpendituresFY 2025~$650M ~$650M Maintained
Weighted Avg Diluted SharesFY 2025~121.5M ~121.0M Slightly Lower
Operating Cash FlowFY 2025$2.4–$2.9B $2.4–$2.9B Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2024 & Q1 2025)Current Period (Q2 2025)Trend
STARS/QualityCited significant decline in 2025 Stars impacting 2026 bonuses; set 2025 Adj EPS “at least in line” with 2024 .STARS litigation refiled; operational progress ongoing; entering quiet period until October .Ongoing execution; legal uncertainty persists.
Prior Authorization & InteroperabilityN/A (operational focus broadly)Accelerated efforts to reduce prior auth requirements, faster decisions, gold card; public reporting of metrics; EHR integration focus .Positive operational shift; supports retention/provider relations.
Epic/MyChart IntegrationNoted consumer experience focus; outcomes .First insurer to integrate plan info into MyChart for >3M members; centralizes benefits/coverage .Improves transparency/experience.
Specialty Pharmacy & DtCNovoCare fulfillment partnership announced in Q1 .Strong outperformance; 17 new LDDs; expanding DtC (adds WeightWatchers) .Strengthening growth and mix.
MA Product & MembershipExpected ~550k decline in individual MA (Q4/Q1 guidance) .Decline improved to “up to 500k”; bounce-back sales increased post-AEP/OEP .Better trajectory; pricing underpinning margins.
MedicaidStrategic expansion (Illinois intent to award FIDE SNP in Q1) .Launched Virginia; footprint now 10 active, 3 pending; trends in line .Growth and margin progression tracking.
Home Health ReimbursementN/A.Same-store admissions below initial target; productivity initiatives offset; proposed rule headwind discussed in Q&A .Mixed; operational mitigation in progress.
Back-office TransformationValue creation initiatives cited (Q4) .Early retirement program; outsourcing shared services; tech-enabled transformation .Accelerating cost optimization.
Regulatory/Legal (RADV)RADV risks highlighted .Limited update due to litigation; support auditing with actuarial equivalence .Unchanged risk profile.

Management Commentary

  • “We delivered a good second quarter… raising our full-year 2025 EPS outlook from approximately $16.25 to approximately $17.” — Jim Rechtin, CEO .
  • “Our outlook contemplates an additional approximately $100 million in incremental investments to improve member and patient outcomes and support operational excellence.” — Celeste Mellet, CFO .
  • “We announced new actions to simplify and streamline the prior authorization process… help ensure our members get the right care in a timely manner.” — Jim Rechtin, CEO .
  • “Humana [is] the first health insurer to integrate health plan information directly into MyChart accounts.” — George Renaudin, President of Insurance .

Q&A Highlights

  • Cost trends: Inpatient utilization and medical/Rx trends tracking in line to better end of expectations; specialty drug trend is high but as expected under IRA and pricing strategy .
  • Medicaid: Performance aligns with expectations due to LTSS orientation, state mix, and value-based network structure; expansion to 10 states active with 3 pending .
  • Investment cadence: Additional $100M incremental spend targeted at retention, AI, operational efficiency, and STARS; pulled some investments forward but mindful of operational absorption .
  • Membership growth management: Focus on long-term value and operational capacity rather than capping growth; timing of late-year growth has cost headwinds reflected in guidance .

Estimates Context

  • Q2 2025: Adjusted EPS $6.27 vs consensus $5.867*; Revenue $32.39B vs consensus $31.85B*. The beat was driven by CenterWell Specialty Pharmacy volumes/mix and better individual MA membership, with Insurance benefit ratio in line .
  • Q1 2025: Adjusted EPS $11.58 vs consensus $10.073*; Revenue $32.11B vs consensus $32.22B* (minor revenue miss amid strong earnings beat) . Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Guidance reset is meaningfully positive: FY25 Adjusted EPS to ~$17 and consolidated revenue to ≥$128B, supported by execution and CenterWell momentum; watch Q3 seasonality and benefit ratio “just above 91%” .
  • Margin trajectory: Individual MA pricing and benefit actions are supporting a more stable margin profile despite mix shifts (higher PDP/Medicaid benefit ratios); Insurance segment benefit ratio tracking within guided range .
  • CenterWell is a structural growth driver: Specialty Pharmacy access to LDDs, DtC partnerships, and Primary Care patient growth guidance lifted to 50–70k net (15% midpoint) .
  • Membership dynamics improving: Better-than-expected recapture and bounce-backs reduced expected individual MA decline to “up to 500k” from ~550k .
  • Operational transformation: Early retirement, outsourcing, and tech-enabled back office should enhance operating leverage over the multi-year horizon .
  • Regulatory watch items: STARS litigation refiled; quiet period ahead; RADV remains an overhang without new visibility; home health proposed rule could be a headwind but partially offsetable at enterprise level .
  • Trading setup: Near-term sentiment supported by estimate beats and guidance raise; monitor STARS updates in October and Q3 cadence; CenterWell outperformance is a differentiator that could underpin re-rating if sustained .