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HUMANA INC (HUM)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 2025 delivered solid execution with Adjusted EPS of $3.24 and Insurance segment benefit ratio of 91.1%, in line with guidance; GAAP EPS was $1.62 as non-core items weighed on GAAP results .
  • Results beat Wall Street: Adjusted EPS ($3.24 vs $2.83*) and revenue ($32.65B vs $32.01B*) modestly exceeded consensus; EBITDA also ran ahead ($0.871B vs $0.818B*) driven by CenterWell strength and disciplined MA pricing .
  • FY25 outlook reaffirmed for Adjusted EPS (“approximately $17.00”) and Insurance segment benefit ratio (90.1%-90.5%); GAAP EPS lowered to “approximately $12.26” as the company added ~$150M of incremental investments to accelerate transformation .
  • Membership trajectory improved: FY25 Individual MA decline now ~425k (better than “up to 500k” prior) on stronger retention and sales; CenterWell Primary Care patients up 56.6k YTD (~15%) with pharmacy growth ahead of expectations .
  • Near-term investor catalysts: AEP narrative (mix shifting to 4+ Stars contracts and own/digital channels), updated FY25 GAAP/benefit ratio fourth-quarter shape (Insurance BR ~93.5%), balance sheet optimization (Enclara sale), and dividend of $0.885 payable Jan 30, 2026 .

What Went Well and What Went Wrong

What Went Well

  • Adjusted earnings and revenue beat expectations; fundamentals (revenue and medical/Rx cost trends) tracked in line, enabling higher targeted investments while staying within FY25 Adjusted EPS guidance .
  • CenterWell momentum: Primary Care patients +56.6k YTD to 447.1k and pharmacy volumes/Direct-to-Consumer growth exceeding expectations; management: “CenterWell Pharmacy continues to drive strong growth across payor agnostic offerings” .
  • Individual MA pricing/benefit strategy delivering underlying margin stability and better retention; updated FY25 MA decline improved to ~425k on stronger retention and sales .

What Went Wrong

  • GAAP EPS fell to $1.62 vs $3.98 YoY, reflecting value-creation/one-time items and a higher consolidated operating cost ratio (12.6% vs 11.5% YoY) as mix shifts and investments weighed on GAAP metrics .
  • Insurance benefit ratio rose to 91.1% (vs 90.6% YoY) on mix (Medicaid/PDP carry higher BR) and incremental investments; IRA Part D seasonality also pressured quarterly comparisons .
  • Stars headwind remains for BY26; court rejected Humana’s challenge to 2025 Stars ratings, with management reiterating recovery efforts and confidence in returning to top quartile by BY28 .

Financial Results

MetricQ3 2024Q2 2025Q3 2025 ActualConsensus (Q3 2025)
Revenue ($USD Billions)$29.40 $32.39 $32.65 $32.01*
GAAP EPS ($)$3.98 $4.51 $1.62 $2.83*
Adjusted EPS ($)$4.16 $6.27 $3.24 $2.83*
Consolidated Benefit Ratio (%)89.9% 89.7% 91.1% N/A
Consolidated Operating Cost Ratio (%)11.5% 11.0% 12.6% N/A

Note: Values with asterisks retrieved from S&P Global.

SegmentQ3 2024Q3 2025
Insurance Revenues ($USD Billions)$28.37 $31.19
Insurance Benefit Ratio (%)90.6% 91.1%
Insurance Operating Cost Ratio (%)9.2% 9.1%
Insurance Income from Operations ($USD Millions)$274 $251
CenterWell Revenues ($USD Billions)$5.04 $5.88
CenterWell Operating Cost Ratio (%)91.3% 93.9%
CenterWell Income from Operations ($USD Millions)$382 $305

KPIs and Operating Metrics

KPIQ3 2024Q2 2025Q3 2025
Individual MA Members (000s)5,659.2 5,229.3 5,237.3
PDP Members (000s)2,315.7 2,427.1 2,446.2
CenterWell Primary Care Patients (000s)344.2 430.3 447.1
Pharmacy Generic Dispense Rate (Medicare, %)91.0 (Q1 ref) 90.7 90.4
Pharmacy Mail-Order Penetration (Medicare, %)28.1 26.0 25.9
Home Same-Store Admissions YoY (%)+3.2% +0.7% +3.2%
Days in Claims Payable (days)40.7 36.5 33.2
Debt-to-total capitalization (%)42.3 40.7 40.3

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
GAAP EPSFY 2025~$13.77 (as of 2Q25) ~$12.26 Lowered
Adjusted EPSFY 2025~$17.00 (as of 2Q25) ~$17.00 Maintained
Insurance Segment Benefit RatioFY 202590.1%–90.5% 90.1%–90.5% (top end likely with +40 bps investments) Maintained (shape updated)
Insurance Segment Benefit Ratio4Q 2025N/A~93.5% New disclosure
Consolidated RevenuesFY 2025At least $128B No change; at least $128B Maintained
Insurance RevenuesFY 2025At least $123B No change; at least $123B Maintained
CenterWell RevenuesFY 2025At least $21.5B No change; at least $21.5B Maintained
Individual MA MembershipFY 2025 change YoYDecline “up to 500k” Decline ~425k Raised (better)
State-based Contracts MembershipFY 2025 change YoY+175k to +250k ~+160k Lowered
Consolidated Operating Cost Ratio (GAAP)FY 202511.3%–11.7% 11.6%–12.1% Raised
Effective Tax RateFY 2025~25% GAAP ~20% GAAP Lowered
Incremental InvestmentsFY 2025+$100M (as of 2Q) +$150M additional (additive to prior) Raised
DividendNext paymentN/A$0.885 payable Jan 30, 2026 Announced

Earnings Call Themes & Trends

TopicQ1 2025 (Q-2 relative)Q2 2025 (Q-1 relative)Q3 2025 (Current)Trend
MA pricing & marginReset pricing; focus on sustainable margins; MA pretax margin target ≥3% over time Raised Adj EPS; BR ~90%; pricing/benefit changes offset trend; continued confidence Confidence in pricing; managing growth for LTV/NPV; expect individual MA pretax margin doubling in 2026 (ex-Stars) Improving margin trajectory (ex-Stars)
Stars programInitiatives underway; return to industry-leading over time Progress in key measures; mitigation activities BY27 disappointing but as planned; strong improvement trends; top quartile targeted by BY28 Operational improvement underway
AEP growth/mixFoundation for retention; stabilizing benefits Better-than-expected MA membership vs plan Sales at high end; improved channel mix (own/digital), more 4+ Stars contracts, fewer plan-to-plan Quality of growth improving
CenterWell expansionPrimary Care +27.3k patients; pharmacy DtC partnerships Outperformance in pharmacy; patients +39.8k; LDD access wins Primary Care +56.6k YTD; pharmacy Specialty and DtC ahead of expectations Strong, broad-based growth
MedicaidGrowth +106k; procurements (IL FIDE) +85k YTD; Virginia launch; FY growth +175k–250k +161k YTD; FY growth now ~+160k; prep for MI HIDE SNP/IL FIDE/South Carolina duals carve-in Growth moderated in 2025; pipeline intact
AI/technology & operationsN/A explicitlyValue creation initiatives Agentic AI platform (Agent Assist), Genpact outsourcing; >$100M savings expected over few years Efficiency programs scaling
Capital deploymentPrudent; debt raised Raised revolver to $5.0B; buybacks only for SBC dilution Enclara sale; pursuing non-core asset sales; debt-to-cap 40.3% target; pending The Villages Health acquisition Optimize balance sheet; selective M&A

Management Commentary

  • “We delivered solid results in the third quarter (3Q25) with Adjusted EPS of $3.24... Fundamentals in the quarter, including revenue and medical cost trends, are in line with expectations.” (Prepared remarks) .
  • “We remain committed to achieving individual MA pretax margin of ‘at least 3%’ over time... and continue to anticipate doubling individual MA pretax margin in 2026 (normalizing for Stars).” .
  • “CenterWell Pharmacy continues to drive strong growth across payor agnostic offerings with increased Specialty volumes and strong Direct to Consumer growth, both exceeding previous expectations in 3Q25.” .
  • “We have... a newly introduced agentic AI platform... helping to improve call accuracy and deliver faster response times... expect these items to generate greater than $100 million of savings over a few years.” (Call) .

Q&A Highlights

  • Growth strategy: Focus on customer LTV/NPV and retention; will throttle new sales to protect experience; channel mix shifting to own/digital and plans with 4+ Stars .
  • Stars recovery: Broad improvement across HEDIS/patient safety; operational stability and benefit stability expected to aid CAHPS/HOS over time .
  • Group MA and contract diversification: Deconsolidate H5216 over several cycles; retain ~91% for 2026 with recontracting to improve margin; pursue new public/private clients .
  • Market growth outlook: Expect MA market to grow mid-single digits, similar to last year; multiple levers (decommissioning plans; own distribution/marketing) to manage volume .
  • Cost trends: Medical trend mid-to-high single digits and Rx low double digits expected to continue into 2026; clinical excellence “trend vendor” opportunity a key lever .

Estimates Context

  • Q3 2025 vs consensus: Adjusted EPS $3.24 vs $2.83*, Revenue $32.65B vs $32.01B*, EBITDA $0.871B vs $0.818B*; number of estimates: EPS (25), Revenue (18). The company modestly beat across EPS, revenue, and EBITDA .
  • Implications: Beats driven by CenterWell outperformance and disciplined pricing; estimate revisions likely to reflect improved FY25 membership decline (~425k) and 4Q Insurance BR shape (~93.5%).
    Note: Values with asterisks retrieved from S&P Global.
MetricQ3 2025 ConsensusActualSurprise
Primary EPS Consensus Mean ($)2.83*3.24 +$0.41
Revenue Consensus Mean ($USD Billions)32.01*32.65 +$0.64B
EBITDA Consensus Mean ($USD Billions)0.818*0.871 +$0.053B
Primary EPS - # of Estimates25*——
Revenue - # of Estimates18*——

Key Takeaways for Investors

  • Quality-of-growth narrative improving in AEP: More sales in 4+ Stars contracts and own/digital channels should support retention, margin, and lower complaint rates—positive for 2026 trajectory despite BY26 Stars headwind .
  • Fourth-quarter shape matters: Insurance BR ~93.5% implies heavier investment/seasonality; monitor 4Q execution and any Doc Fix-related investment choices and year-end reserve dynamics (DCP timing effects) .
  • CenterWell remains a multi-year growth engine: Primary Care scale-up (447k patients) and Specialty/DtC pharmacy momentum underpin diversified earnings and enterprise LTV/NPV strategy .
  • FY25 GAAP lowered, Adjusted maintained: ~$150M incremental investments are additive yet kept within Adjusted EPS guardrails, signaling commitment to long-term clinical/operational transformation .
  • Balance sheet optimization ongoing: Enclara sale, non-core divestitures, and debt-to-cap ~40% target support optionality for selective provider M&A (e.g., The Villages Health) while maintaining prudence .
  • Watch Stars recovery cadence: Operational metrics trending favorably; updates post-hybrid season in 2Q 2026 could be a catalyst for sentiment around BY28 top quartile goal .

Additional Data and References

  • Consolidated results and reconciliations (8-K EX-99.2) and prepared remarks (EX-99.3) provide full disclosure of GAAP to non-GAAP adjustments, including value creation initiatives, minority interest valuation, litigation accruals, loss on sale, and cumulative tax impacts .
  • Balance sheet/cash flow dynamics: DCP down to 33.2 days primarily due to timing (provider-capitation accruals and IRA-driven pharmacy claim mix); operating cash flow YTD $2.573B .
  • Segment detail: Insurance revenues $31.19B; CenterWell revenues $5.88B (Q3 2025); consolidated premiums $30.71B, services $1.60B, investment income $0.338B .

Footnote: Values with asterisks retrieved from S&P Global.