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HUMANA INC (HUM)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 delivered an adjusted net loss per share of $2.16 (GAAP EPS: -$5.76) on $29.213B in GAAP revenue, largely driven by a higher consolidated benefit ratio (91.5%) and incremental Stars investments; management said results were “in line with expectations” and consistent with prior guidance for FY 2024 adjusted EPS of $16.21 .
  • FY 2025 guidance: adjusted EPS approximately $16.25, consolidated revenue $126–$128B (+~8% YoY), Insurance segment benefit ratio 90.1%–90.5%, consolidated operating cost ratio 11.3%–11.7%; management expects Q1 to contribute ~60%–65% of full-year adjusted earnings and Insurance benefit ratio of ~87.5% in Q1 .
  • Membership reset: Individual MA membership expected to decline ~550,000 in 2025 (vs. prior “down a few hundred thousand”), including exits of certain unprofitable plans/counties; PDP membership expected to grow ~200,000; Medicaid membership expected +175,000 to +250,000 .
  • Strategic posture: Committed to achieving ≥3% pretax margins in individual MA over time (Stars recovery remains a key swing factor); capital deployment prudence (no buybacks contemplated; dividend flat in 2025) and “a few hundred million” of incremental operational excellence investments to strengthen Stars, clinical execution, and efficiency .
  • Stock-relevant catalysts: magnitude of MA membership reset, Q1 earnings front-loaded by IRA/benefit design seasonality, visibility on 2026 Stars/legal outcomes, and execution of pricing/operational improvements in MA and CenterWell .

What Went Well and What Went Wrong

What Went Well

  • Full-year adjusted EPS landed at $16.21, in line with initial guidance; management emphasized a “solid finish” to 2024 despite Stars investments .
  • CenterWell growth and operations: Q4 CenterWell revenue $5.130B and adjusted income from operations $385M; primary care footprint and patients grew meaningfully in 2024, aided by clinic adds and attractive acquisitions .
  • Stars execution momentum: Humana closed ~650,000 care gaps in Q4, testing new tactics that showed strong progress in member outreach, provider gap closure, and vendor performance headed into the 2025 measurement year (payment 2028) .

What Went Wrong

  • Elevated medical loss: consolidated GAAP benefit ratio increased to 91.5% in Q4 (adjusted 91.3%), reflecting elevated MA/state-based cost trends and mix; GAAP pretax loss was $(862)M and adjusted pretax loss $(296)M .
  • D-SNP attrition higher than expected, lowering recapture rates post plan exits and creating uncertainty under 2025 SEP rule changes; Jan 2025 D-SNP membership fell to ~814,000 .
  • Medicaid margin headwinds in newer states (still in the “J-curve” phase), with modest improvement expected in 2025 but profitability not yet achieved across the footprint; specialty drug spend remained elevated and stable exiting Q4 .

Financial Results

Revenue and EPS (chronological: oldest → newest)

MetricQ4 2023Q2 2024Q3 2024Q4 2024
Revenue (GAAP, $USD Billions)$26.462 $29.540 $29.397 $29.213
Revenue (Adjusted, $USD Billions)$25.734 $29.380 $29.300 $29.199
GAAP EPS ($)-$4.42 $5.62 $3.98 -$5.76
Adjusted EPS ($)-$0.11 $6.96 $4.16 -$2.16

Consolidated Margins (chronological: oldest → newest)

MetricQ4 2023Q2 2024Q3 2024Q4 2024
Benefit Ratio (GAAP, %)90.7% 89.0% 89.9% 91.5%
Benefit Ratio (Adjusted, %)90.5% 88.9% 89.8% 91.3%
Operating Cost Ratio (GAAP, %)14.6% 10.8% 11.5% 14.4%
Operating Cost Ratio (Adjusted, %)12.9% 10.5% 11.3% 13.2%

Segment Performance (chronological: oldest → newest)

MetricQ4 2023Q2 2024Q3 2024Q4 2024
Insurance Revenue (GAAP, $USD Billions)$25.565 $28.525 $28.370 $28.170
Insurance Benefit Ratio (Adjusted, %)91.4% 89.4% 90.5% 91.9%
Insurance Operating Cost Ratio (Adjusted, %)10.9% 8.3% 9.1% 11.0%
Insurance Income from Ops (Adjusted, $USD Millions)-$361 $826 $329 -$575
CenterWell Revenue (GAAP, $USD Billions)$4.710 $4.947 $5.041 $5.130
CenterWell Income from Ops (Adjusted, $USD Millions)$445 $394 $439 $385

KPIs and Operating Metrics

KPIDec 31 2023Sep 30 2024Dec 31 2024Jan 2025
Individual MA Membership (Millions)5.409 5.659 5.662 5.217
D‑SNP Membership (Millions)0.871 0.940 0.937 0.814
PDP Membership (Millions)2.849 2.316 2.288 2.465
Days in Claims Payable (Days)41.4 40.7 37.8 —

Additional: FY 2024 operating cash flows were $2.966B .

Results vs Wall Street Consensus

MetricActual Q4 2024Consensus Q4 2024
Revenue ($USD Billions)$29.213 Unavailable – S&P Global query failed
Adjusted EPS ($)-$2.16 Unavailable – S&P Global query failed

Note: Wall Street consensus via S&P Global was unavailable at the time of query due to provider limits.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Adjusted EPSFY 2025“at least in line with 2024 results” ~$16.25 Maintained trajectory; quantified midpoint
GAAP EPSFY 2025N/A~$15.88 New quantitative GAAP EPS
Consolidated RevenueFY 2025N/A$126–$128B New range; +~8% YoY midpoint
Insurance Benefit RatioFY 2025FY 2024 ~90% 90.1%–90.5% Slightly higher at midpoint
Consolidated Operating Cost RatioFY 2025FY 2024 Adjusted 11.3% 11.3%–11.7% +20 bps at midpoint
Q1 SeasonalityQ1 2025N/AQ1 ~60%–65% of full-year adj. earnings; Insurance BR ~87.5% New disclosure
Individual MA MembershipFY 2025Down “a few hundred thousand” Down ~550,000 Lowered
PDP MembershipFY 2025~Flat (~2.0M) +~200,000 Raised
Medicaid MembershipFY 2025~200,000 2024 increase +175,000 to +250,000 New 2025 range
Net Investment IncomeFY 2025N/ADown ~$100M YoY New headwind
Share RepurchasesFY 2025Active in 2024 (repurchases $817M) None contemplated Paused
DividendFY 2025N/AFlat per share Stability
CapexFY 2025~$600M FY 2024 ~$650M Slight increase

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 2024)Previous Mentions (Q3 2024)Current Period (Q4 2024)Trend
Stars recoveryHighlighted higher admissions and maintained Adjusted EPS guidance; ramping operational initiatives Lawsuit filed; acknowledged threshold uncertainty; expanded initiatives in outreach/vendor tech; progress in PCO ~650k care gaps closed; positive Q4 operational progress; 2026 still uncertain, focus shifts to 2027/2028 Improving execution; thresholds remain a risk
IRA/Part D dynamicsIRA plan liability addressed; premium stabilization demo; margin focus Continued discipline; early PDP positioning for 2025 Expect Q1 earnings front-loaded due to IRA/benefit design; PDP +200k, margin cautious Seasonality shift; cautious margin stance
MA pricing/marginsConfident in 2025 pricing; margin expansion expected despite declines in MA members Reiterated 2025 margin expansion; Adjusted EPS at least in line Reset pricing/membership; aim for ≥3% pretax MA margins over time; 2025 a critical step Multi-year improvement; short-term resets
D‑SNP attrition/SEP rulesRedeterminations largely complete; retention assumptions detailed D‑SNP growth YTD; cautioned dynamics Lower recapture; SEP rule change increases uncertainty; D‑SNP down ~123k in Jan Near-term headwind; strategic repricing needed
Medicaid expansion/J‑curveOklahoma/Indiana implementations; footprint to 9 states Michigan intent to award; growth moderated to ~200k Footprint now 10 active states (Virginia in 2025); GA/TX intents; 175k–250k 2025 growth; margins modestly improving as mix matures Scaling; margins improving over time
Specialty drug trendNoted higher net inpatient costs; ongoing trend management Elevated specialty drug spend Elevated and stable; priced/forecasted appropriately Persistent headwind; stable outlook
Group MA marginsN/AIndustry evolving; rate-guarantee contracts rolling off 2025 pressure; improvement expected in 2026 via pricing renewals Near-term pressure; medium-term relief

Management Commentary

  • “We were pleased with Humana’s solid finish to the year, while also reaffirming our outlook for 2025.” – Jim Rechtin, President & CEO .
  • “Accordingly, today we provided Adjusted EPS guidance for 2025 of ‘approximately $16.25’... our guidance assumes consolidated revenue in a range of $126 to $128 billion.” – Prepared remarks .
  • “First, the majority of the improvement [in the ratio] is driven from the MA plan exit… [plus] adjustments to benefits… and favorable calendar… [drag] from business mix changes… IRA impact… and incremental investments.” – Celeste Mellet, CFO, on 2025 benefit ratio drivers .
  • “We remain confident in our expectation that our 2025 MA pricing will drive the intended underlying margin improvement… anticipate full year Individual MA membership losses of approximately 550,000.” – Prepared remarks .

Q&A Highlights

  • 2025 Insurance benefit ratio drivers: CFO detailed improvement from plan exits/benefit changes/calendar vs drags from Medicaid mix, IRA claims/revenue dynamics, and incremental investments; modeling left to analysts .
  • Path to ≥3% pretax margin: CEO emphasized need for competitive Stars, normalized rates, clinical excellence, and G&A optimization; steady progress expected through/after 2026 .
  • Incremental investments: “a few hundred million” focused on Stars, clinical excellence, membership strategies; mix between benefit ratio and OpEx to be updated through the year .
  • D‑SNP and SEP rules: Lower recapture rates and higher attrition; ~30k D‑SNP losses due to redeterminations; pricing strategy prioritized high-LTV membership .
  • PDP: Early data consistent with pricing; participation in premium stabilization demo; growth of ~200k members; earnings seasonality skewed to Q1 due to IRA and deductibles .
  • Group MA: Margin pressure in 2025 due to contract cycles; pricing actions expected to improve margins in 2026 .

Estimates Context

  • S&P Global Wall Street consensus for Q4 2024 revenue and EPS was unavailable at the time of query due to provider limits. Consequently, comparisons to consensus could not be presented in this report.
  • Based on management commentary, Q4 results were “consistent with expectations” and FY 2024 adjusted EPS landed at $16.21, in line with guidance .

Key Takeaways for Investors

  • Earnings cadence shifts in 2025: Expect outsized Q1 contribution (~60%–65% of full-year adjusted EPS) due to IRA seasonality and benefit design changes; prepare for front-loaded earnings profile .
  • Margin trajectory: 2025 is a “reset” year—MA pricing/membership actions plus incremental investments lay groundwork for multi-year margin expansion toward ≥3% pretax MA margin; short-term optics include higher Insurance benefit ratio (90.1%–90.5%) and slightly higher OpEx ratio .
  • Membership mix: ~550k Individual MA decline focuses the book on profitability; watch D‑SNP performance and SEP dynamics through 2025 for recapture and attrition trends .
  • Stars recovery: Operational progress is visible (650k care gaps closed), but industry thresholds remain the biggest variable for 2026; 2027/2028 planning assumes buffer vs cut points .
  • Medicaid scaling: Footprint expansion and maturing mix (45% of 2025 revenue from <3-year states) imply modest margin improvement in 2025 and stronger potential longer term as contracts mature and rates adjust .
  • PDP: Expect ~200k membership increase and cautious margin stance given IRA changes; early utilization appears aligned with pricing assumptions .
  • Capital deployment: No buybacks contemplated and dividend held flat in 2025; focus on balance sheet prudence and selective CenterWell/Medicaid growth investments .

Appendix: Additional Data Points

  • Consolidated pretax results Q4 2024: GAAP $(862)M; Adjusted $(296)M .
  • Insurance segment adjusted benefit ratio Q4 2024: 91.9% (includes 20 bps Stars investments) .
  • FY 2025 segment guidance snapshot: Insurance income from operations (GAAP) $1.5B–$2.0B; CenterWell income from operations (GAAP) $1.0B–$1.5B; CenterWell non-GAAP $1.2B–$1.7B; effective tax rate ~25% .