Humana Reports 2012 2Q Financial Results, Up 4%

 

LOUISVILLE, Ky.--(BUSINESS WIRE)-- Humana Inc. (NYSE: HUM) today reported diluted earnings per common share (EPS) for the quarter ended June 30, 2012 (2Q12) of $2.16, compared to $2.71 per share for the quarter ended June 30, 2011 (2Q11). For the six months ended June 30, 2012 (1H12) the company reported $3.65 in EPS compared to $4.57 for the six months ended June 30, 2011 (1H11).

Results for 2Q12 and 1H12 included $0.18 per share in expenses related to the previously-disclosed settlement of a litigation matter. Prior-year favorable medical claims reserve development for 2Q12 of $0.15 per share compared to $0.12 per share in 2Q11. Results for 1H12 and 1H11 included $0.18 per share and $0.44 per share, respectively, of prior-year favorable medical claims reserve development.

The company lowered EPS guidance for the year ending December 31, 2012 (FY12) to a range of $6.90 to $7.10 versus its previous estimate of $7.38 to $7.58. This reduction in FY12 EPS guidance primarily reflects higher-than-previously expected individual Medicare Advantage benefit ratios associated with new members and increased utilization for both new and existing members.

"Our company's strategy is sound, though we are disappointed by the need to lower our full-year earnings guidance," said Michael B. McCallister, Humana's Chairman of the Board and Chief Executive Officer. "We believe the steps we are taking to address certain short-term operational challenges will put us back on the path for sustainable earnings growth moving forward."

Consolidated Highlights

Revenues – 2Q12 consolidated revenues were $9.70 billion, an increase of $415 million, or 4 percent from $9.28 billion in 2Q11, with total premiums and services revenue of $9.60 billion up $407 million, or 4 percent compared to $9.19 billion in the prior year's quarter. The increase in consolidated revenues was primarily due to related increases in the Retail and Employer Group segments driven by increases in average membership of the company's individual and group Medicare Advantage plans. These increases were partially offset by the company's new South Region TRICARE contract being accounted for as self-funded versus fully-insured for the previous contract. This new contract became effective on April 1, 2012.

1H12 consolidated revenues rose $1.44 billion, or 8 percent to $19.92 billion from $18.48 billion in 1H11 with total premiums and services revenue of $19.73 billion also up 8 percent, increasing $1.43 billion compared to $18.30 billion in the prior year's period, driven primarily by the same factors as the second quarter year-over-year increase.

Benefit expenses – The 2Q12 consolidated benefit ratio (benefit expenses as a percent of premiums) of 83.5 percent increased 140 basis points from 82.1 percent for the prior year's quarter due primarily to higher year-over-year benefit ratios for the Retail and Employer Group segments. The consolidated benefit ratio for 1H12 of 84.5 percent increased by 150 basis points from the 1H11 consolidated benefit ratio of 83.0 percent primarily due to the same factors impacting the 2Q12 year-over-year comparison.

Operating costs – The consolidated operating cost ratio (operating costs as a percent of total revenues less investment income) of 14.4 percent increased 140 basis points for 2Q12 compared to 13.0 percent in 2Q11. The increased year-over-year ratio primarily reflects the impact of the accounting for the company's new South Region TRICARE contract discussed above.

The 1H12 consolidated operating cost ratio of 14.0 percent increased 60 basis points from 13.4 percent for 1H11 primarily due to the same factor impacting the second quarter year-over-year comparison.

Retail Segment Highlights

Pretax results:

• Retail Segment pretax income of $367 million in 2Q12 decreased $136 million from $503 million in 2Q11. For 1H12, pretax earnings for the Retail Segment of $482 million decreased by $238 million versus 1H11 pretax earnings for the segment of $720 million. These decreases were primarily driven by year-over-year increases in both the segment's benefit ratio and its operating cost ratio during 2Q12 and 1H12.

Enrollment:

• Individual Medicare Advantage membership was 1,895,800 at June 30, 2012, an increase of 293,300 members, or 18 percent, from 1,602,500 at June 30, 2011. Individual Medicare Advantage membership has increased 255,500 or 16 percent from 1,640,300 at December 31, 2011.
• The company acquired 12,100 members with the acquisition of MD Care effective December 30, 2011 and 62,600 members from the acquisition of Arcadian Management Services, Inc. (Arcadian) effective March 31, 2012. As previously announced, the company expects to divest approximately 12,600 members acquired with Arcadian effective January 1, 2013 in accordance with the company's previously disclosed agreement with the United States Department of Justice.
• Membership in the company's individual stand-alone Prescription Drug Plans (PDPs) of 2,896,800 at June 30, 2012 was up 488,100, or 20 percent compared to 2,408,700 at June 30, 2011 and up 356,400, or 14 percent, from 2,540,400 at December 31, 2011. These increases resulted primarily from growth in the company's Humana-Walmart plan offering.
• HumanaOne® medical membership increased to 443,800 at June 30, 2012, an increase of 40,100 or 10 percent, from 403,700 at June 30, 2011 and an increase of 10,200, or 2 percent, from 433,600 at December 31, 2011.
• Membership in individual specialty products^(a) of 906,200 at June 30, 2012 increased 225,700, or 33 percent, from 680,500 at June 30, 2011 and increased 123,700, or 16 percent from 782,500 at December 31, 2011. Both the sequential and year-over-year increases were primarily driven by increased sales in dental offerings.

Premiums and services revenue:

• 2Q12 premiums and services revenue for the Retail Segment totaled $6.28 billion, an increase of $882 million, or 16 percent from $5.40 billion in 2Q11. The increase was primarily the result of year-over-year membership growth for individual Medicare Advantage plans.

Benefit expenses:

• The 2Q12 benefit ratio for the Retail Segment was 84.1 percent, an increase of 270 basis points from 81.4 percent in 2Q11. The increase was primarily driven by the planned increase associated with positioning for Health Care Reform funding changes and minimum medical loss ratio requirements, a higher-than-previously expected Medicare Advantage benefit ratio associated with new members and increased utilization for both new and existing members as well as a year-over-year increase in clinicians and other health care quality expenditures given the continued growth in membership.
• Retail Segment prior-year favorable medical claims reserve development for 2Q12 of $24 million compared to $32 million in 2Q11 lowered the related benefit ratio by 40 basis points in 2Q12 and 60 basis points in 2Q11.

Operating costs:

• The Retail Segment's operating cost ratio of 10.0 percent in 2Q12 increased 90 basis points from 9.1 percent in 2Q11 reflecting higher year-over-year clinical, provider and technological infrastructure spending.

Employer Group Segment Highlights

Pretax results:

• Employer Group Segment pretax income of $114 million in 2Q12 increased $6 million compared to $108 million in 2Q11 as the benefit of a lower operating cost ratio during 2Q12 more than offset the year-over-year impact of a higher benefit ratio. For 1H12, pretax earnings for the Employer Group Segment of $235 million decreased by $12 million versus 1H11 pretax earnings for the segment of $247 million primarily reflecting a year-over-year increase in this segment's benefit ratio partially offset by a lower operating cost ratio compared to 1H11.

Enrollment:

• Group Medicare Advantage membership was 388,400 at June 30, 2012, an increase of 78,700 members, or 25 percent, from 309,700 at June 30, 2011, and an increase of 70,200, or 22 percent, from 318,200 at December 31, 2011. These increases primarily reflect the addition of a large group retiree account that became effective January 1, 2012.
• Group fully-insured commercial medical membership of 1,196,900 at June 30, 2012, increased 10,700, or 1 percent from 1,186,200 at June 30, 2011 and 16,700, or 1 percent from 1,180,200 at December 31, 2011. Second quarter year-over-year and year-to-date changes primarily reflected growth in small group membership being partially offset by declines in large group business.
• Group ASO commercial medical membership declined to 1,228,800 at June 30, 2012, a decrease of 84,800, or 6 percent, from 1,313,600 at June 30, 2011 and a decrease of 63,500, or 5 percent, from 1,292,300 at December 31, 2011. These declines reflected a continuation of pricing discipline in a highly competitive environment for self-funded accounts.
• Membership in Employer Group specialty products^(a) of 6,957,800 at June 30, 2012 increased 288,200, or 4 percent, from 6,669,600 at June 30, 2011 and increased 425,200, or 7 percent from 6,532,600 at December 31, 2011 primarily due to increased cross-sales of such products and growth in stand-alone specialty product sales.

Premiums and services revenue:

• 2Q12 premiums and services revenue for the Employer Group Segment totaled $2.62 billion, an increase of $309 million, or 13 percent from $2.31 billion in 2Q11 due primarily to the result of increased group Medicare Advantage membership year over year.

Benefit expenses:

• The 2Q12 benefit ratio for the Employer Group Segment was 82.2 percent, an increase of 100 basis points from 81.2 percent in 2Q11 primarily due to higher average group Medicare membership year over year. Group Medicare benefit ratios generally carry a higher benefit ratio than commercial group medical products.
• Employer Group Segment prior-year favorable medical claims reserve development for 2Q12 of $12 million compared to unfavorable development of $8 million in 2Q11. As a result, this segment's benefit ratio was lowered by 50 basis points in 2Q12 and increased by 40 basis points in 2Q11.

Operating costs:

• The Employer Group Segment's operating cost ratio of 15.9 percent in 2Q12 decreased 90 basis points from 16.8 percent in 2Q11 reflecting increased year-over-year membership in the company's group Medicare Advantage products which generally carry a lower operating cost ratio than the company's fully-insured commercial group products, as well as savings associated with operating cost reduction initiatives.

Health and Well-Being Services Segment Highlights

Pretax results:

• Health and Well-Being Services Segment pretax income of $131 million in 2Q12 rose $43 million compared to $88 million in 2Q11 reflecting growth in the company's pharmacy solutions business, including higher utilization of the company's RightSourceRx® mail-order pharmacy by the company's members. For 1H12, pretax earnings for the Health and Well-Being Services Segment of $263 million increased by $78 million versus 1H11 pretax earnings for the segment of $185 million.

Script volume:

• Script volumes for the Retail and Employer Group Segments' membership increased to approximately 59 million in 2Q12, up 8 million, or 15 percent, versus 2Q11 scripts of approximately 51 million. The year-over-year increase primarily reflects growth associated with higher average medical membership for 2Q12 than in 2Q11.

Services revenue:

• Services revenue of $3.22 billion in 2Q12 for the Health and Well-Being Services Segment increased $484 million, or 18 percent from $2.73 billion in 2Q11. This increase was primarily driven by growth in the company's Medicare Advantage membership, who use the company's pharmacy benefit management services under its health plan offerings, as well as increased utilization of RightSourceRx mail-order pharmacy by the company's membership across all product lines.

Operating costs:

• The Health and Well-Being Services Segment's operating cost ratio of 95.2 percent in 2Q12 decreased 80 basis points from 96.0 percent in 2Q11 reflecting better administrative cost leverage and improved wholesale drug costs associated with higher script volumes in the company's RightSourceRx mail-order pharmacy.

Other Businesses Highlights

• On April 1, 2012, the company's new South Region TRICARE contract became effective with the Department of Defense (DoD). The company's new contract is structured similar to self-funded products versus a fully-insured structure for the company's previous South RegionTRICARE contract with the DoD. This change resulted in significant volatility in year-over-year comparisons for the company's Other Businesses.
• During 2Q12, the company incurred benefit expenses of approximately $46 million, or $0.18 per share, related to the resolution of certain previously-disclosed litigation involving Humana Military Healthcare Services, Inc.

Balance Sheet

• At June 30, 2012, the company's cash, cash equivalents, and investment securities of $13.53 billion, increased $285 million, or 2 percent from $13.25 billion at March 31, 2012.
• Parent company cash and investments of $1.28 billion at June 30, 2012 increased $1.06 billion from $225 million at March 31, 2012, primarily reflecting dividends to the parent company from the operating subsidiaries. These dividends were partially offset by share repurchases and the payment of a cash dividend to stockholders during the second quarter.
• Days in claims payable were 51.0 at June 30, 2012, up 0.9 days from 50.1 at March 31, 2012.
• Debt-to-total capitalization at June 30, 2012 was 16.1 percent, down 30 basis points compared to 16.4 percent at March 31, 2012 primarily driven by higher capitalization associated with second quarter earnings.

Cash Flows from Operations

Cash flows provided by operations for 2Q12 totaled $706 million compared to cash flows provided by operations of $161 million in 2Q11. For the first half of 2012, cash flows provided by operations totaled $3.05 billion versus $957 million in cash flows from operations during the first half of 2011. The company also evaluates operating cash flows on a non-GAAP^(b) basis:

Net cash provided by operating activities (in millions)		2Q12				2Q11			1H12				1H11
GAAP		$	706			$	161		$	3,052			$	957
CMS Medicare premium payment timing (c)			(118	)		-				(2,133	)		-
Non-GAAP (b)		$	588			$	161		$	919			$	957

The year over year decrease in the non-GAAP^(b) cash flows from operations is due to the effect on cash flows of changes in working capital accounts.

Share Repurchase Program and Cash Dividend

• During 2Q12, the company repurchased 1,579,000 of its outstanding shares at an average price per share of $79.94 in connection with a share repurchase authorization for up to $1 billion approved by the company's Board of Directors in April 2012. As of June 30, 2012, $874 million of the April 2012 share repurchase authorization was remaining, with an expiration date of June 30, 2014.
• A cash dividend payment of approximately $42 million, or $0.26 per share, for stockholders of record as of June 29, 2012, was paid on July 27, 2012 as approved by the company's Board of Directors in accordance with its quarterly cash dividend policy.

Footnotes

(a)	The company provides a full range of insured specialty products including dental, vision and other supplemental products. Members included in these products may not be unique to each product since members have the ability to enroll in multiple products. Other supplemental benefits include life, disability, and fixed benefit products including cancer and critical illness policies.
(b)	The Company has included certain financial measures that are not in accordance with Generally Accepted Accounting Principles (GAAP) in its summary of financial results within this earnings press release. The company believes that these non-GAAP measures, when presented in conjunction with comparable GAAP measures, are useful to both management and its investors in analyzing the company's ongoing business and operating performance. Internally, management uses these non-GAAP financial measures as indicators of business performance, as well as for operational planning and decision making purposes. Non-GAAP financial measures should be considered in addition to, but not as a substitute for, or superior to, financial measures prepared in accordance with GAAP.
(c)	Generally, when the first day of a month falls on a weekend or holiday, with the exception of January 1 (New Year's Day), the company receives this payment at the end of the previous month. Therefore 1Q12 included four monthly Medicare payments compared to only three monthly Medicare payments in 1Q11. While 2Q12 included three monthly payments as did 2Q11 the three payments in 2Q12 were related to May, June and July versus April, May, and June in 2Q11.

Conference Call & Virtual Slide Presentation

Humana will host a conference call, as well as a virtual slide presentation, at 5:00 p.m. eastern time today to discuss its financial results for the quarter and the company's expectations for future earnings. A live virtual presentation (audio with slides) may be accessed via Humana's Investor Relations page at www.humana.com. The company suggests web participants sign on at least 15 minutes in advance of the call. The company also suggests web participants visit the site well in advance of the call to run a system test and to download any free software needed to view the presentation.

All parties interested in the audio-only portion of the conference call are invited to dial 888-625-7430. No password is required. The company suggests participants dial in at least ten minutes in advance of the call. For those unable to participate in the live event, the virtual presentation archive may be accessed via the Historical Webcasts & Presentations section of the Investor Relations page at www.humana.com.

Cautionary Statement

This news release includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. When used in investor presentations, press releases, Securities and Exchange Commission (SEC) filings, and in oral statements made by or with the approval of one of Humana's executive officers, the words or phrases like "expects," "anticipates," "intends," "likely will result," "estimates," "projects" or variations of such words and similar expressions are intended to identify such forward-looking statements. These forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties, and assumptions, including, among other things, information set forth in the "Risk Factors" section of the company's SEC filings, a summary of which includes but is not limited to the following:

• If Humana does not design and price its products properly and competitively, if the premiums Humana charges are insufficient to cover the cost of health care services delivered to its members, or if its estimates of benefit expenses are inadequate, Humana's profitability could be materially adversely affected. Humana estimates the costs of its benefit expense payments, and designs and prices its products accordingly, using actuarial methods and assumptions based upon, among other relevant factors, claim payment patterns, medical cost inflation, and historical developments such as claim inventory levels and claim receipt patterns. These estimates, however, involve extensive judgment, and have considerable inherent variability that is extremely sensitive to payment patterns and medical cost trends.
• If Humana fails to effectively implement its operational and strategic initiatives, including its Medicare initiatives, the company's business may be materially adversely affected, which is of particular importance given the concentration of the company's revenues in the Medicare business.
• If Humana fails to properly maintain the integrity of its data, to strategically implement new information systems, to protect Humana's proprietary rights to its systems, or to defend against cyber-security attacks, the company's business may be materially adversely affected.
• Humana's business may be materially adversely impacted by CMS's adoption of a new coding set for diagnoses.
• Humana is involved in various legal actions and governmental and internal investigations, including without limitation, an ongoing internal investigation and litigation and government requests for information related to certain aspects of its Florida subsidiary operations, any of which, if resolved unfavorably to the company, could result in substantial monetary damages. Increased litigation and negative publicity could increase the company's cost of doing business.
• As a government contractor, Humana is exposed to risks that may materially adversely affect its business or its willingness or ability to participate in government health care programs.
• Recently enacted health insurance reform, including The Patient Protection and Affordable Care Act and The Health Care and Education Reconciliation Act of 2010, could have a material adverse effect on Humana's results of operations, including restricting revenue, enrollment and premium growth in certain products and market segments, restricting the company's ability to expand into new markets, increasing the company's medical and operating costs by, among other things, requiring a minimum benefit ratio on insured products (and particularly how the ratio may apply to Medicare plans, including aggregation, credibility thresholds, and its possible application to prescription drug plans), lowering the company's Medicare payment rates and increasing the company's expenses associated with a non-deductible federal premium tax and other assessments; financial position, including the company's ability to maintain the value of its goodwill; and cash flows. In addition, if the new non-deductible federal premium tax and other assessments, including a three-year commercial reinsurance fee, were imposed as enacted, and if Humana is unable to adjust its business model to address these new taxes and assessments, such as through the reduction of the company's operating costs, there can be no assurance that the non-deductible federal premium tax and other assessments would not have a material adverse effect on the company's results of operations, financial position, and cash flows.
• Humana's business activities are subject to substantial government regulation. New laws or regulations, or changes in existing laws or regulations or their manner of application could increase the company's cost of doing business and may adversely affect the company's business, profitability and cash flows.
• Any failure to manage administrative costs could hamper Humana's profitability.
• Any failure by Humana to manage acquisitions and other significant transactions successfully may have a material adverse effect on its results of operations, financial position, and cash flows.
• If Humana fails to develop and maintain satisfactory relationships with the providers of care to its members, the company's business may be adversely affected.
• Humana's pharmacy business is highly competitive and subjects it to regulations in addition to those the company faces with its core health benefits businesses.
• Changes in the prescription drug industry pricing benchmarks may adversely affect Humana's financial performance.
• If Humana does not continue to earn and retain purchase discounts and volume rebates from pharmaceutical manufacturers at current levels, Humana's gross margins may decline.
• Humana's ability to obtain funds from its subsidiaries is restricted by state insurance regulations.
• Downgrades in Humana's debt ratings, should they occur, may adversely affect its business, results of operations, and financial condition.
• Changes in economic conditions could adversely affect Humana's business and results of operations.
• The securities and credit markets may experience volatility and disruption, which may adversely affect Humana's business.
• Given the current economic climate, Humana's stock and the stock of other companies in the insurance industry may be increasingly subject to stock price and trading volume volatility.

In making forward-looking statements, Humana is not undertaking to address or update them in future filings or communications regarding its business or results. In light of these risks, uncertainties, and assumptions, the forward-looking events discussed herein may or may not occur. There also may be other risks that the company is unable to predict at this time. Any of these risks and uncertainties may cause actual results to differ materially from the results discussed in the forward-looking statements.

Humana advises investors to read the following documents as filed by the company with the SEC for further discussion both of the risks it faces and its historical performance:

• Form 10-K for the year ended December 31, 2011;
• Form 10-Q for the quarter ending March 31, 2012;
• Form 8-Ks filed during 2012.

About Humana

Humana Inc., headquartered in Louisville, Kentucky, is a leading health care company that offers a wide range of insurance products and health and wellness services that incorporate an integrated approach to lifelong well-being. By leveraging the strengths of its core businesses, Humana believes it can better explore opportunities for existing and emerging adjacencies in health care that can further enhance wellness opportunities for the millions of people across the nation with whom the company has relationships.

More information regarding Humana is available to investors via the Investor Relations page of the company's web site at www.humana.com, including copies of:

• Annual reports to stockholders;
• Securities and Exchange Commission filings;
• Most recent investor conference presentations;
• Quarterly earnings news releases;
• Replays of most recent earnings release conference calls;
• Calendar of events (including upcoming earnings conference call dates and times, as well as planned interaction with research analysts and institutional investors);
• Corporate Governance information

Humana Inc. – Earnings Guidance Points as of July 30, 2012

(in accordance with	For the year ending December 31, 2012	Comments
Generally Accepted
Accounting Principles)
Diluted earnings	Full year 2012: $6.90 to $7.10	Projections exclude the impact of future share
per common share (EPS)	Third quarter 2012: $2.00 to $2.10	repurchases
		Projections anticipate weighted average
		shares outstanding of 165 million
Revenues	Consolidated revenues: $39.0 billion to $39.5 billion	Includes expected investment income in the
		range of $375 million to $395 million
	Total revenues:	Segment-level revenues include intersegment
	Retail Segment: $24.5 billion to $25.0 billion	amounts that eliminate in consolidation
	Employer Group Segment: $10.5 billion to $11.0 billion
	Health and Well-Being Services Segment: $13.1 billion to $13.3 billion
	Other Businesses: $2.50 billion to $2.75 billion
Ending medical	Retail Segment:
membership versus	Medicare Advantage: Up 270,000 to 280,000
prior year end	Medicare stand-alone PDPs: Up 420,000 to 520,000
	HumanaOne: Up 25,000 to 35,000
	Medicare Supplement: Up 30,000 to 40,000
	Employer Group Segment:
	Medicare Advantage: Up approximately 80,000
	Commercial Fully Insured: Up 35,000 to 45,000
	Commercial ASO: Down 50,000 to 60,000
Benefit ratios	Retail Segment: 84.2% to 85.2%	Benefit expenses as a percent of premiums
	Employer Group Segment: 84.0% to 85.0%
Operating cost ratios	Consolidated: 14.75% to 15.25%	Consolidated operating costs as a percent of
	Health & Well-Being Services Segment: 95.25% to 95.75%	total revenues excluding investment income
Consolidated depreciation	$330 million to $345 million	Approximately $40 million is expected to be
and amortization (cash		included in benefits expense on the income
flows)		statement
Consolidated interest	Approximately $105 million
expense
Detailed pretax results	Retail Segment:	Segment-level pretax results and margins
	$1.0 billion to $1.1 billion; 4.2% to 4.4% pretax margin	include the impact of net investment income
	Employer Group Segment:
	$205 million to $215 million; Approximately 2% pretax margin
	Health and Well-Being Services Segment:
	$505 million to $515 million; 3.75% to 4.25% pretax margin
Effective Tax Rate	Approximately 36.7%
Cash flows from	$1.6 billion to $1.8 billion
operations
Capital expenditures	Approximately $375 million

Humana Inc.

Statistical Schedules

And

Supplementary Information

2Q12 Earnings Release

S-1

Humana Inc.
Statistical Schedules and Supplementary Information
2Q12 Earnings Release
Contents
Page	Description
S-3-4	Consolidated Statements of Income
S-5-6	Quarterly Segment Financial Information
S-7-8	YTD Segment Financial Information
S-9	Consolidated Balance Sheets
S-10-11	Consolidated Statements of Cash Flows
S-12	Key Income Statement Ratios and Segment Operating Results
S-13	Pharmacy Statistics
S-14	Membership Detail
S-15-16	Premiums and Services Revenue Detail
S-17	Medicare Summary
S-18	Investments
S-19-21	Benefits Payable
S-22	Footnotes
S-2

 

Humana Inc.
Consolidated Statements of Income
In millions, except per common share results
		Three Months Ended June 30,
								Dollar				Percentage
		2012			2011			Change				Change
Revenues:
Premiums		$	9,166		$	8,849		$	317			3.6	%
Services			434			344			90			26.2	%
Investment income			99			91			8			8.8	%
Total revenues			9,699			9,284			415			4.5	%
Operating expenses:
Benefits			7,652			7,269			383			5.3	%
Operating costs			1,384			1,193			191			16.0	%
Depreciation and amortization			73			68			5			7.4	%
Total operating expenses			9,109			8,530			579			6.8	%
Income from operations			590			754			(164	)		-21.8	%
Interest expense			26			28			(2	)		-7.1	%
Income before income taxes			564			726			(162	)		-22.3	%
Provision for income taxes			208			266			(58	)		-21.8	%
Net income		$	356		$	460		$	(104	)		-22.6	%
Basic earnings per common share		$	2.19		$	2.76		$	(0.57	)		-20.7	%
Diluted earnings per common share		$	2.16		$	2.71		$	(0.55	)		-20.3	%
Shares used in computing basic earnings per common share (000's)			162,816			167,021
Shares used in computing diluted earnings per common share (000's)			164,639			169,560
S-3

Humana Inc.
Consolidated Statements of Income
In millions, except per common share results
		Six Months Ended June 30,
								Dollar				Percentage
		2012			2011			Change				Change
Revenues:
Premiums		$	18,941		$	17,616		$	1,325			7.5	%
Services			784			679			105			15.5	%
Investment income			193			180			13			7.2	%
Total revenues			19,918			18,475			1,443			7.8	%
Operating expenses:
Benefits			16,002			14,614			1,388			9.5	%
Operating costs			2,767			2,449			318			13.0	%
Depreciation and amortization			143			134			9			6.7	%
Total operating expenses			18,912			17,197			1,715			10.0	%
Income from operations			1,006			1,278			(272	)		-21.3	%
Interest expense			52			55			(3	)		-5.5	%
Income before income taxes			954			1,223			(269	)		-22.0	%
Provision for income taxes			350			448			(98	)		-21.9	%
Net income		$	604		$	775		$	(171	)		-22.1	%
Basic earnings per common share		$	3.70		$	4.64		$	(0.94	)		-20.3	%
Diluted earnings per common share		$	3.65		$	4.57		$	(0.92	)		-20.1	%
Shares used in computing basic earnings per common share (000's)			163,267			167,146
Shares used in computing diluted earnings per common share (000's)			165,363			169,547
S-4

Humana Inc.
2Q12 Segment Financial Information
In millions
										Health and
						Employer				Well-Being				Other				Eliminations/
		Retail				Group				Services				Businesses				Corporate				Consolidated
Revenues - external customers
Premiums:
Medicare Advantage		$	5,308			$	1,011			$	-			$	-			$	-			$	6,319
Medicare stand-alone PDP			672				2				-				73				-				747
Total Medicare			5,980				1,013				-				73				-				7,066
Fully-insured			250				1,247				-				-				-				1,497
Specialty			42				262				-				-				-				304
Military services			-				-				-				44				-				44
Medicaid and other (A)			-				-				-				255				-				255
Total premiums			6,272				2,522				-				372				-				9,166
Services revenue:
Provider			-				-				245				-				-				245
ASO and other (B)			5				89				-				91				-				185
Pharmacy			-				-				4				-				-				4
Total services revenue			5				89				249				91				-				434
Total revenues - external customers			6,277				2,611				249				463				-				9,600
Intersegment revenues
Services			1				4				2,377				-				(2,382	)			-
Products			-				-				591				-				(591	)			-
Total intersegment revenues			1				4				2,968				-				(2,973	)			-
Investment income			20				10				-				15				54				99
Total revenues			6,298				2,625				3,217				478				(2,919	)			9,699
Operating expenses:
Benefits			5,273				2,074				-				406				(101	)			7,652
Operating costs			625				417				3,064				123				(2,845	)			1,384
Depreciation and amortization			33				20				22				4				(6	)			73
Total operating expenses			5,931				2,511				3,086				533				(2,952	)			9,109
Income from operations			367				114				131				(55	)			33				590
Interest expense			-				-				-				-				26				26
Income (loss) before income taxes		$	367			$	114			$	131			$	(55	)		$	7			$	564
Benefit ratio			84.1	%			82.2	%							109.1	%							83.5	%
Operating cost ratio (C)			10.0	%			15.9	%			95.2	%			26.6	%							14.4	%
S-5

Humana Inc.
2Q11 Segment Financial Information
In millions
										Health and
						Employer				Well-Being				Other				Eliminations/
		Retail				Group				Services				Businesses				Corporate				Consolidated
Revenues - external customers
Premiums:
Medicare Advantage		$	4,555			$	764			$	-			$	-			$	-			$	5,319
Medicare stand-alone PDP			601				2				-				77				-				680
Total Medicare			5,156				766				-				77				-				5,999
Fully-insured			206				1,217				-				-				-				1,423
Specialty			30				233				-				-				-				263
Military services			-				-				-				935				-				935
Medicaid and other (A)			-				-				-				229				-				229
Total premiums			5,392				2,216				-				1,241				-				8,849
Services revenue:
Provider			-				-				222				-				-				222
ASO and other (B)			4				87				-				28				-				119
Pharmacy			-				-				3				-				-				3
Total services revenue			4				87				225				28				-				344
Total revenues - external customers			5,396				2,303				225				1,269				-				9,193
Intersegment revenues
Services			-				3				2,074				-				(2,077	)			-
Products			-				-				434				-				(434	)			-
Total intersegment revenues			-				3				2,508				-				(2,511	)			-
Investment income			19				12				-				13				47				91
Total revenues			5,415				2,318				2,733				1,282				(2,464	)			9,284
Operating expenses:
Benefits			4,390				1,800				-				1,149				(70	)			7,269
Operating costs			490				387				2,625				111				(2,420	)			1,193
Depreciation and amortization			32				23				20				3				(10	)			68
Total operating expenses			4,912				2,210				2,645				1,263				(2,500	)			8,530
Income from operations			503				108				88				19				36				754
Interest expense			-				-				-				-				28				28
Income before income taxes		$	503			$	108			$	88			$	19			$	8			$	726
Benefit ratio			81.4	%			81.2	%							92.6	%							82.1	%
Operating cost ratio (C)			9.1	%			16.8	%			96.0	%			8.7	%							13.0	%
S-6

Humana Inc.
YTD12 Segment Financial Information
In millions
										Health and
						Employer				Well-Being				Other				Eliminations/
		Retail				Group				Services				Businesses				Corporate				Consolidated
Revenues - external customers
Premiums:
Medicare Advantage		$	10,401			$	2,036			$	-			$	-			$	-			$	12,437
Medicare stand-alone PDP			1,332				4				-				139				-				1,475
Total Medicare			11,733				2,040				-				139				-				13,912
Fully-insured			494				2,489				-				-				-				2,983
Specialty			80				522				-				-				-				602
Military services			-				-				-				937				-				937
Medicaid and other (A)			-				-				-				507				-				507
Total premiums			12,307				5,051				-				1,583				-				18,941
Services revenue:
Provider			-				-				478				-				-				478
ASO and other (B)			11				178				-				109				-				298
Pharmacy			-				-				8				-				-				8
Total services revenue			11				178				486				109				-				784
Total revenues - external customers			12,318				5,229				486				1,692				-				19,725
Intersegment revenues
Services			1				8				4,863				-				(4,872	)			-
Products			-				-				1,175				-				(1,175	)			-
Total intersegment revenues			1				8				6,038				-				(6,047	)			-
Investment income			39				20				-				29				105				193
Total revenues			12,358				5,257				6,524				1,721				(5,942	)			19,918
Operating expenses:
Benefits			10,560				4,138				-				1,512				(208	)			16,002
Operating costs			1,253				844				6,218				239				(5,787	)			2,767
Depreciation and amortization			63				40				43				8				(11	)			143
Total operating expenses			11,876				5,022				6,261				1,759				(6,006	)			18,912
Income from operations			482				235				263				(38	)			64				1,006
Interest expense			-				-				-				-				52				52
Income (loss) before income taxes		$	482			$	235			$	263			$	(38	)		$	12			$	954
Benefit ratio			85.8	%			81.9	%							95.5	%							84.5	%
Operating cost ratio (C)			10.2	%			16.1	%			95.3	%			14.1	%							14.0	%
S-7

Humana Inc.
YTD11 Segment Financial Information
In millions
										Health and
						Employer				Well-Being				Other				Eliminations/
		Retail				Group				Services				Businesses				Corporate				Consolidated
Revenues - external customers
Premiums:
Medicare Advantage		$	9,080			$	1,560			$	-			$	-			$	-			$	10,640
Medicare stand-alone PDP			1,158				4				-				153				-				1,315
Total Medicare			10,238				1,564				-				153				-				11,955
Fully-insured			407				2,416				-				-				-				2,823
Specialty			56				463				-				-				-				519
Military services			-				-				-				1,858				-				1,858
Medicaid and other (A)			-				-				-				461				-				461
Total premiums			10,701				4,443				-				2,472				-				17,616
Services revenue:
Provider			-				-				437				-				-				437
ASO and other (B)			7				180				-				50				-				237
Pharmacy			-				-				5				-				-				5
Total services revenue			7				180				442				50				-				679
Total revenues - external customers			10,708				4,623				442				2,522				-				18,295
Intersegment revenues
Services			-				6				4,195				-				(4,201	)			-
Products			-				-				869				-				(869	)			-
Total intersegment revenues			-				6				5,064				-				(5,070	)			-
Investment income			38				24				-				25				93				180
Total revenues			10,746				4,653				5,506				2,547				(4,977	)			18,475
Operating expenses:
Benefits			8,944				3,552				-				2,258				(140	)			14,614
Operating costs			1,023				811				5,281				230				(4,896	)			2,449
Depreciation and amortization			59				43				40				5				(13	)			134
Total operating expenses			10,026				4,406				5,321				2,493				(5,049	)			17,197
Income from operations			720				247				185				54				72				1,278
Interest expense			-				-				-				-				55				55
Income before income taxes		$	720			$	247			$	185			$	54			$	17			$	1,223
Benefit ratio			83.6	%			79.9	%							91.3	%							83.0	%
Operating cost ratio (C)			9.6	%			17.5	%			95.9	%			9.1	%							13.4	%
S-8

Humana Inc.
Consolidated Balance Sheets
Dollars in millions, except share amounts
		June 30,				December 31,				Sequential Change
		2012				2011				Dollar			Percent
Assets
Current assets:
Cash and cash equivalents		$	3,869			$	1,377
Investment securities			7,882				7,743
Receivables, net			898				1,034
Other			1,422				1,027
Total current assets			14,071				11,181			$	2,890		25.8	%
Property and equipment, net			976				912
Long-term investment securities			1,783				1,710
Goodwill			2,792				2,740
Other			1,233				1,165
Total assets			20,855				17,708			$	3,147		17.8	%
Liabilities and Stockholders' Equity
Current liabilities:
Benefits payable			3,994				3,754
Trade accounts payable and accrued expenses			2,081				1,783
Book overdraft			260				306
Unearned revenues			2,341				213
Total current liabilities			8,676				6,056			$	2,620		43.3	%
Long-term debt			1,618				1,659
Future policy benefits payable			1,785				1,663
Other long-term liabilities			321				267
Total liabilities			12,400				9,645			$	2,755		28.6	%
Commitments and contingencies
Stockholders' equity:
Preferred stock, $1 par; 10,000,000 shares authorized, none issued			-				-
Common stock, $0.16 2/3 par; 300,000,000 shares authorized; 194,250,130 issued at June 30, 2012			32				32
Capital in excess of par value			2,063				1,938
Retained earnings			7,346				6,825
Accumulated other comprehensive income			327				303
Treasury stock, at cost, 32,537,691 shares at June 30, 2012			(1,313	)			(1,035	)
Total stockholders' equity			8,455				8,063			$	392		4.9	%
Total liabilities and stockholders' equity		$	20,855			$	17,708			$	3,147		17.8	%
Debt-to-total capitalization ratio			16.1	%			17.1	%
S-9

Humana Inc.
Consolidated Statements of Cash Flows
Dollars in millions
		Three Months Ended June 30,
										Dollar				Percentage
		2012				2011				Change				Change
Cash flows from operating activities
Net income		$	356			$	460
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			82				75
Net realized capital gains			(10	)			(1	)
Stock-based compensation			14				11
(Benefit from) provision for deferred income taxes			-				(6	)
Changes in operating assets and liabilities excluding the effects of acquisitions:
Receivables			432				(327	)
Other assets			(112	)			(64	)
Benefits payable			(114	)			13
Other liabilities			(1	)			(2	)
Unearned revenues			43				(14	)
Other			16				16
Net cash provided by operating activities			706				161			$	545			338.5	%
Cash flows from investing activities
Acquisitions, net of cash acquired			(20	)			(6	)
Purchases of property and equipment			(99	)			(58	)
Purchases of investment securities			(650	)			(715	)
Proceeds from maturities of investment securities			333				333
Proceeds from sales of investment securities			287				278
Net cash used in investing activities			(149	)			(168	)		$	19			11.3	%
Cash flows from financing activities
Receipts (withdrawals) from contract deposits, net			(146	)			5
Change in book overdraft			(34	)			(35	)
Common stock repurchases			(127	)			(212	)
Excess tax benefit from stock-based compensation			1				6
Dividends paid			(41	)			-
Proceeds from stock option exercises and other			3				55
Net cash used in financing activities			(344	)			(181	)			($163	)		-90.1	%
Increase (decrease) in cash and cash equivalents			213				(188	)
Cash and cash equivalents at beginning of period			3,656				1,756
Cash and cash equivalents at end of period		$	3,869			$	1,568
S-10

Humana Inc.
Consolidated Statements of Cash Flows
Dollars in millions
		Six Months Ended June 30,
										Dollar				Percentage
		2012				2011				Change				Change
Cash flows from operating activities
Net income		$	604			$	775
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			160				151
Net realized capital gains			(14	)			(5	)
Stock-based compensation			54				41
(Benefit from) provision for deferred income taxes			(9	)			21
Changes in operating assets and liabilities excluding
the effects of acquisitions:
Receivables			177				(587	)
Other assets			(250	)			(175	)
Benefits payable			170				484
Other liabilities			51				202
Unearned revenues			2,077				20
Other			32				30
Net cash provided by operating activities			3,052				957			$	2,095			218.9	%
Cash flows from investing activities
Acquisitions, net of cash acquired			(76	)			(11	)
Purchases of property and equipment			(185	)			(129	)
Purchases of investment securities			(1,364	)			(1,902	)
Proceeds from maturities of investment securities			757				751
Proceeds from sales of investment securities			529				432
Net cash used in investing activities			(339	)			(859	)		$	520			60.5	%
Cash flows from financing activities
Receipts (withdrawals) from contract deposits, net			152				188
Repayment of long-term debt			(36	)			-
Change in book overdraft			(46	)			(192	)
Common stock repurchases			(278	)			(301	)
Excess tax benefit from stock-based compensation			21				11
Dividends paid			(82	)			-
Proceeds from stock option exercises and other			48				91
Net cash used in financing activities			(221	)			(203	)			($18	)		-8.9	%
Increase (decrease) in cash and cash equivalents			2,492				(105	)
Cash and cash equivalents at beginning of period			1,377				1,673
Cash and cash equivalents at end of period		$	3,869			$	1,568
S-11

Humana Inc.
Key Income Statement Ratios and Segment Operating Results
Dollars in millions
		Three Months Ended June 30,													Six Months Ended June 30,
											Percentage													Percentage
		2012			2011			Difference			Change				2012			2011			Difference			Change
Benefit ratio
Retail		84.1	%		81.4	%		2.7	%						85.8	%		83.6	%		2.2	%
Employer Group		82.2	%		81.2	%		1.0	%						81.9	%		79.9	%		2.0	%
Other Businesses		109.1	%		92.6	%		16.5	%						95.5	%		91.3	%		4.2	%
Consolidated		83.5	%		82.1	%		1.4	%						84.5	%		83.0	%		1.5	%
Operating cost ratio (C)
Retail		10.0	%		9.1	%		0.9	%						10.2	%		9.6	%		0.6	%
Employer Group		15.9	%		16.8	%		-0.9	%						16.1	%		17.5	%		-1.4	%
Health and Well-Being Services		95.2	%		96.0	%		-0.8	%						95.3	%		95.9	%		-0.6	%
Other Businesses		26.6	%		8.7	%		17.9	%						14.1	%		9.1	%		5.0	%
Consolidated		14.4	%		13.0	%		1.4	%						14.0	%		13.4	%		0.6	%
Detail of pretax income (loss)
Retail		$367			$503			($136	)		-27.0	%			$482			$720			($238	)		-33.1	%
Employer Group		$114			$108			$6			5.6	%			$235			$247			($12	)		-4.9	%
Health and Well-Being Services		$131			$88			$43			48.9	%			$263			$185			$78			42.2	%
Other Businesses		($55	)		$19			($74	)		-389.5	%			($38	)		$54			($92	)		-170.4	%
Consolidated		$564			$726			($162	)		-22.3	%			$954			$1,223			($269	)		-22.0	%
S-12

Humana Inc.
Pharmacy Metrics
Script volume in thousands
		Three Months Ended June 30,													Six Months Ended June 30,
		2012			2011			Difference							2012			2011			Difference
Generic Dispense Rate
Retail
Mail-Order		89.0	%		86.8	%		2.2	%						88.3	%		86.1	%		2.2	%
90-Day Retail		86.6	%		83.2	%		3.4	%						86.2	%		83.0	%		3.2	%
All Other		80.7	%		77.7	%		3.0	%						79.8	%		77.3	%		2.5	%
Total		84.1	%		80.8	%		3.3	%						83.3	%		80.4	%		2.9	%
Employer Group
Mail-order		74.5	%		67.5	%		7.0	%						73.3	%		67.2	%		6.1	%
90-Day Retail		81.8	%		76.1	%		5.7	%						81.2	%		76.0	%		5.2	%
All Other		73.1	%		69.4	%		3.7	%						72.5	%		69.3	%		3.2	%
Total Employer Group		75.5	%		70.7	%		4.8	%						74.8	%		70.4	%		4.4	%
											Percentage													Percentage
								Difference			Change										Difference			Change
Script volume
Retail
Mail-order		12,388			9,095			3,293			36.2	%			24,428			17,746			6,682			37.7	%
90-Day Retail		12,823			10,654			2,169			20.4	%			25,132			20,528			4,604			22.4	%
All Other		27,341			25,223			2,118			8.4	%			55,040			50,408			4,632			9.2	%
Total Retail		52,552			44,972			7,580			16.9	%			104,600			88,682			15,918			17.9	%
Employer Group
Mail-order		1,012			969			43			4.4	%			1,995			1,927			68			3.5	%
90-Day Retail		1,565			1,443			122			8.5	%			3,047			2,740			307			11.2	%
All Other		3,752			3,892			(140	)		-3.6	%			7,555			7,817			(262	)		-3.4	%
Total Employer Group		6,329			6,304			25			0.4	%			12,597			12,484			113			0.9	%
Total Retail and Employer Group		58,881			51,276			7,605			14.8	%			117,197			101,166			16,031			15.8	%
S-13

Humana Inc.
Membership Detail
In thousands
		Ending June 30, 2012		Average 2Q12		Ending June 30, 2011			Year-over-year Change						Ending December 31, 2011			Sequential Change
									Amount			Percent						Amount			Percent
Medical Membership:
Retail
Medicare Advantage		1,895.8		1,891.3		1,602.5			293.3			18.3	%		1,640.3			255.5			15.6	%
Medicare stand-alone PDPs		2,896.8		2,884.5		2,408.7			488.1			20.3	%		2,540.4			356.4			14.0	%
Individual commercial		443.8		442.8		403.7			40.1			9.9	%		433.6			10.2			2.4	%
Medicare Supplement		70.5		69.3		52.9			17.6			33.3	%		59.6			10.9			18.3	%
Total Retail		5,306.9		5,287.9		4,467.8			839.1			18.8	%		4,673.9			633.0			13.5	%
Employer Group
Medicare Advantage		360.5		359.4		282.0			78.5			27.8	%		290.6			69.9			24.1	%
Medicare Advantage ASO		27.9		27.9		27.7			0.2			0.7	%		27.6			0.3			1.1	%
Medicare stand-alone PDPs		4.4		4.4		4.1			0.3			7.3	%		4.2			0.2			4.8	%
Fully-insured medical commercial		1,196.9		1,191.2		1,186.2			10.7			0.9	%		1,180.2			16.7			1.4	%
ASO commercial		1,228.8		1,231.6		1,313.6			(84.8	)		-6.5	%		1,292.3			(63.5	)		-4.9	%
Total Employer Group		2,818.5		2,814.5		2,813.6			4.9			0.2	%		2,794.9			23.6			0.8	%
Other Businesses
Military Services		3,133.5		3,102.4		3,015.2			118.3			3.9	%		3,028.1			105.4			3.5	%
Medicaid and other		607.1		606.4		619.2			(12.1	)		-2.0	%		614.2			(7.1	)		-1.2	%
LI-NET (D)		73.3		72.8		87.0			(13.7	)		-15.7	%		73.5			(0.2	)		-0.3	%
Total Other Businesses		3,813.9		3,781.6		3,721.4			92.5			2.5	%		3,715.8			98.1			2.6	%
Total Medical Membership		11,939.3		11,884.0		11,002.8			936.5			8.5	%		11,184.6			754.7			6.7	%
Specialty Membership:
Retail
Dental - fully-insured		662.7		650.3		512.5			150.2			29.3	%		579.6			83.1			14.3	%
Vision		103.8		99.8		70.8			33.0			46.6	%		83.8			20.0			23.9	%
Other supplemental benefits (E)		139.7		137.6		97.2			42.5			43.7	%		119.1			20.6			17.3	%
Total Retail		906.2		887.7		680.5			225.7			33.2	%		782.5			123.7			15.8	%
Employer Group
Dental - fully-insured		2,416.4		2,407.5		2,250.3			166.1			7.4	%		2,283.9			132.5			5.8	%
Dental - ASO		849.4		851.3		1,220.7			(371.3	)		-30.4	%		869.9			(20.5	)		-2.4	%
Vision		2,456.3		2,442.0		2,227.0			229.3			10.3	%		2,329.6			126.7			5.4	%
Other supplemental benefits (E)		1,235.7		1,223.3		971.6			264.1			27.2	%		1,049.2			186.5			17.8	%
Total Employer Group		6,957.8		6,924.1		6,669.6			288.2			4.3	%		6,532.6			425.2			6.5	%
Total Specialty Membership		7,864.0		7,811.8		7,350.1			513.9			7.0	%		7,315.1			548.9			7.5	%
S-14

Humana Inc.
Premiums and Services Revenue Detail
Dollars in millions, except per member per month
															Per Member per Month (F)
		Three Months Ended June 30,													Three Months Ended June 30,
								Dollar				Percentage
		2012			2011			Change				Change			2012		2011
Premiums and Services Revenue
Retail:
Medicare Advantage		$	5,308		$	4,555		$	753			16.5	%		$936		$949
Medicare stand-alone PDPs			672			601			71			11.8	%		$78		$84
Individual commercial			215			181			34			18.8	%		$162		$152
Medicare Supplemental			35			25			10			40.0	%		$168		$161
Specialty			42			30			12			40.0	%		$16		$15
ASO & other services (B)			6			4			2			50.0	%
Total Retail			6,278			5,396			882			16.3	%
Employer Group:
Medicare Advantage			1,011			764			247			32.3	%		$938		$905
Medicare stand-alone PDPs			2			2			-			0.0	%
Fully-insured medical commercial			1,247			1,217			30			2.5	%		$349		$342
Specialty			262			233			29			12.4	%		$14		$14
ASO & other services (B)			93			90			3			3.3	%
Total Employer Group			2,615			2,306			309			13.4	%
Health and Well-Being Services:
Pharmacy solutions			2,833			2,406			427			17.7	%
Primary care services			292			265			27			10.2	%
Home care services			42			18			24			133.3	%
Integrated wellness services			50			44			6			13.6	%
Total Health and Well-Being Services			3,217			2,733			484			17.7	%
Other Businesses:
Military services (G)			130			959			(829	)		-86.4	%		$8		$179
LI-NET (D)			73			77			(4	)		-5.2	%		$334		$278
Medicaid and other (H)			260			233			27			11.6	%		$140		$123
Total Other Businesses			463			1,269			(806	)		-63.5	%
S-15

Humana Inc.
Premiums and Services Revenue Detail
Dollars in millions, except per member per month
															Per Member per Month (F)
		Six Months Ended June 30,													Six Months Ended June 30,
								Dollar				Percentage
		2012			2011			Change				Change			2012		2011
Premiums and Services Revenue
Retail:
Medicare Advantage		$	10,401		$	9,080		$	1,321			14.5	%		$930		$948
Medicare stand-alone PDPs			1,332			1,158			174			15.0	%		$77		$82
Individual commercial			426			358			68			19.0	%		$161		$154
Medicare Supplemental			68			49			19			38.8	%		$167		$162
Specialty			80			56			24			42.9	%		$16		$15
ASO & other services (B)			12			7			5			71.4	%
Total Retail			12,319			10,708			1,611			15.0	%
Employer Group:
Medicare Advantage			2,036			1,560			476			30.5	%		$947		$926
Medicare stand-alone PDPs			4			4			-			0.0	%
Fully-insured medical commercial			2,489			2,416			73			3.0	%		$349		$341
Specialty			522			463			59			12.7	%		$14		$14
ASO & other services (B)			186			186			-			0.0	%
Total Employer Group			5,237			4,629			608			13.1	%
Health and Well-Being Services:
Pharmacy solutions			5,766			4,863			903			18.6	%
Primary care services			573			520			53			10.2	%
Home care services			78			34			44			129.4	%
Integrated wellness services			107			89			18			20.2	%
Total Health and Well-Being Services			6,524			5,506			1,018			18.5	%
Other Businesses:
Military services (G)			1,036			1,901			(865	)		-45.5	%		$90		$177
LI-NET (D)			139			153			(14	)		-9.2	%		$313		$265
Medicaid and other (H)			517			468			49			10.5	%		$140		$124
Total Other Businesses			1,692			2,522			(830	)		-32.9	%
S-16

Humana Inc.
Medicare Summary
Premiums in millions
Membership in thousands
																	Per Member per Month (F)
			Three Months Ended June 30,							Year-over-year Change							Three Months Ended June 30,
			2012				2011			Amount				Percent			2012			2011
Premiums
Medicare Advantage			$	6,319			$	5,319		$	1,000			18.8	%		$936			$942
Medicare stand-alone PDPs				747				680			67			9.9	%		$84			$91
Total Medicare			$	7,066			$	5,999		$	1,067			17.8	%
																	Per Member per Month (F)
			Six Months Ended June 30,							Year-over-year Change							Six Months Ended June 30,
			2012				2011			Amount				Percent			2012			2011
Premiums
Medicare Advantage			$	12,437			$	10,640		$	1,797			16.9	%		$932			$945
Medicare stand-alone PDPs				1,475				1,315			160			12.2	%		$84			$89
Total Medicare			$	13,912			$	11,955		$	1,957			16.4	%
			Ending				Ending			Year-over-year Change
			June 30, 2012				June 30, 2011			Amount				Percent
Fully-Insured Membership
Medicare Advantage				2,256.3				1,884.5			371.8			19.7	%
Medicare stand-alone PDPs				2,974.5				2,499.8			474.7			19.0	%
Total Medicare				5,230.8				4,384.3			846.5			19.3	%
S-17

Humana Inc.			Fair value
Investments
Dollars in millions
			6/30/2012			3/31/2012			12/31/2011
Investment Portfolio:
Cash & cash equivalents			$3,869			$3,656			$1,377
Investment securities			7,882			7,889			7,743
Long-term investments			1,783			1,704			1,710
Total investment portfolio			$13,534			$13,249			$10,830
Duration (I)			3.24			3.33			3.94
Average Credit Rating			AA-			AA-			AA-
Investment Portfolio Detail:
Cash and cash equivalents			$3,869			$3,656			$1,377
U.S. Government and agency obligations
U.S. Treasury and agency obligations			553			550			725
U.S. Government residential mortgage-backed			1,921			1,725			1,751
U.S. Government commercial mortgage-backed			34			33			33
Total U.S. Government and agency obligations			2,508			2,308			2,509
Tax-exempt municipal securities
Pre-refunded			294			304			332
Insured			631			645			634
Other			1,946			1,928			1,874
Auction rate securities			15			15			16
Total tax-exempt municipal securities			2,886			2,892			2,856
Residential mortgage-backed
Prime residential mortgages			36			38			41
Alt-A residential mortgages			1			2			2
Sub-prime residential mortgages			1			1			1
Total residential mortgage-backed			38			41			44
Commercial mortgage-backed			448			437			381
Asset-backed securities			44			74			83
Corporate securities
Financial services			818			867			692
Other			2,923			2,974			2,888
Total corporate securities			3,741			3,841			3,580
Redeemable preferred stocks			-			-			-
Total investment portfolio			$13,534			$13,249			$10,830
S-18

Humana Inc.
Detail of Benefits Payable Balance and Year-to-Date Changes
Dollars in millions
			June 30,				June 30,				December 31,
			2012				2011				2011
Detail of benefits payable
IBNR and other benefits payable (J)			$3,085				$2,795				$2,759
Unprocessed claim inventories (K)			310				410				280
Processed claim inventories (L)			359				274				209
Payable to pharmacy benefit administrator (M)			163				142				167
Benefits payable, excluding military services			3,917				3,621				3,415
Military services benefits payable (N)			77				332				339
Total Benefits Payable			$3,994				$3,953				$3,754
			Six Months Ended				Six Months Ended				Year Ended
			June 30, 2012				June 30, 2011				December 31, 2011
Year-to-date changes in benefits payable, excluding military services (O)
Balances at January 1			$3,415				$3,214				$3,214
Acquisitions			70								29
Incurred related to:
Current year			15,169				13,158				25,821
Prior years (P)			(181	)			(284	)			(372	)
Total incurred			14,988				12,874				25,449
Paid related to:
Current year			(11,805	)			(10,083	)			(22,729	)
Prior years			(2,751	)			(2,384	)			(2,548	)
Total paid			(14,556	)			(12,467	)			(25,277	)
Balances at end of period			$3,917				$3,621				$3,415
			Six Months Ended				Six Months Ended				Year Ended
			June 30, 2012				June 30, 2011				December 31, 2011
Summary of Consolidated Benefit Expense:
Total benefit expense incurred, per above			$14,988				$12,874				$25,449
Military services benefit expense			890				1,671				3,247
Future policy benefit expense (Q)			124				69				127
Consolidated Benefit Expense			$16,002				$14,614				$28,823
S-19

Humana Inc.
Benefits Payable Statistics (R)
Receipt Cycle Time (S)
			2012			2011			Change				Percentage Change
1st Quarter Average			13.0			13.8			(0.8	)			-5.8	%
2nd Quarter Average			13.7			13.8			(0.1	)			-0.7	%
3rd Quarter Average						13.6			n/a				n/a
4th Quarter Average						14.0			n/a				n/a
Full Year Average			13.4			13.8			(0.4	)			-2.9	%
Unprocessed Claims Inventories
Date			Estimated Valuation (millions)			Claim Item Counts (000s)			Number of Days on Hand
6/30/2010			$434			1,009			4.9
9/30/2010			$429			1,064			5.2
12/31/2010			$374			981			5.0
3/31/2011			$482			1,197			6.0
6/30/2011			$410			1,093			5.1
9/30/2011			$419			1,272			5.7
12/31/2011			$280			599			2.8
3/31/2012			$376			1,028			4.2
6/30/2012			$310			1,077			4.2
S-20

Humana Inc.
Benefits Payable Statistics (Continued) (R)
Days in Claims Payable (T)
Quarter Ended			Days in Claims Payable (DCP)			Change Last 4 Quarters				Percentage Change
6/30/2010			57.0			0.9				1.6	%
9/30/2010			57.8			1.6				2.8	%
12/31/2010			53.5			(1.9	)			-3.4	%
3/31/2011			55.5			1.3				2.4	%
6/30/2011			56.0			(1.0	)			-1.8	%
9/30/2011			54.2			(3.6	)			-6.2	%
12/31/2011			52.5			(1.0	)			-1.9	%
3/31/2012			50.1			(5.4	)			-9.7	%
6/30/2012			51.0			(5.0	)			-8.9	%
Year-to-Date Change in Days in Claims Payable (U)
										2012					2011
DCP - beginning of period										52.5					53.5
Components of change in DCP:
Change in unprocessed claims inventories										0.1					(2.3	)
Change in processed claims inventories										1.9					1.4
Change in pharmacy payment cutoff										(0.2	)				0.6
Change in capitation/provider settlements										(3.0	)				(0.7	)
All other										(0.3	)
DCP - end of period										51.0					52.5
S-21

Humana Inc. Footnotes to Statistical Schedules and Supplementary Information 2Q12 Earnings Release
(A)	The Medicaid and other category includes the company's Medicaid business as well as the closed block of long-term care.
(B)	The ASO and other category is primarily comprised of ASO fees and other ancillary services fees.
(C)	The operating cost ratio is defined as operating costs as a percent of total revenues excluding investment income.
(D)	LI-NET is the CMS Limited Income Newly Eligible Transition program, operated by Humana, to provide Part D prescription drug coverage for all uncovered Full Duals and SSI-only
	beneficiaries on a retroactive basis and all uncovered LIS eligible beneficiaries on a current basis.
(E)	Other supplemental benefits include life, disability, and fixed benefit products including cancer and critical illness policies.
(F)	Computed based on average membership for the period (i.e., monthly ending membership during the period divided by the number of months in the period).
(G)	Military services revenues are generally not contracted on a per-member basis.
(H)	Includes premiums associated with Medicaid and the closed block of long-term care as well as services revenue.
(I)	Duration is the time-weighted average of the present value of the fixed income portfolio cash flows.
(J)	IBNR represents an estimate of benefit expenses payable for claims incurred but not reported (IBNR) at the balance sheet date. The level of IBNR is primarily impacted by membership
	levels, benefit claim trends and the receipt cycle time, which represents the length of time between when a claim is initially incurred and when the claim form is received (i.e. a shorter time
	span results in lower reserves for claims IBNR). Other benefits payable includes amounts payable to providers under capitation arrangements.
(K)	Unprocessed claim inventories represent the estimated valuation of claims received but not yet fully processed.
(L)	Processed claim inventories represent the estimated valuation of processed claims that are in the post-claim-adjudication process, which consists of administrative functions such as audit
	and check batching and handling.
(M)	The balance due to the company's pharmacy benefit administrator fluctuates as a result of the number of business days in the last payment cycle of the month. Payment cycles are every 8
	days (8th, 16th, and 24th of month) and the last day of the month.
(N)	Military services benefits payable primarily consist of IBNR and to a lesser extent risk share payables to the Department of Defense and liabilities to subcontractors.
(O)	The table excludes activity associated with military services benefits payable because the federal government bears a substantial portion of the risk associated with financing the cost of
	health benefits. More specifically, the risk-sharing provisions of the military services contracts with the federal government and with subcontractors effectively limit profits and losses when
	actual claim experience varies from the targeted claim amount negotiated annually. As a result of these contract provisions, the impact of changes in estimates for prior year military
	services benefits payable are substantially offset by the associated changes in estimates of revenue from health care services reimbursements. As such, any impact on the company's
	results of operations is reduced substantially, whether positive or negative.
(P)	Amounts incurred related to prior years vary from previously estimated liabilities as the claims ultimately are settled. Negative amounts reported for incurred related to prior years result from
	claims being ultimately settled for amounts less than originally estimated (favorable development). There were no changes in the approach used to determine the company's estimate of
	claim reserves during the quarter.
(Q)	Future policy benefit expense has a related liability classified as a long-term liability on the balance sheet.
(R)	Benefits reserves statistics represents fully-insured medical claims data and excludes military services claims data and specialty benefits.
(S)	The receipt cycle time measures the average length of time between when a claim was initially incurred and when the claim form was received. Receipt cycle time data for the company's
	largest claim processing platforms represent approximately 95% of the company's fully-insured medical claims volume. Pharmacy and specialty claims, including dental, vision and other
	supplemental benefits, are excluded from this measurement.
(T)	A common metric for monitoring benefits payable levels relative to the benefit expense is days in claims payable, or DCP, which represents the benefits payable at the end of the period
	divided by average benefit expenses per day in the quarterly period.
(U)	DCP fluctuates due to a number of issues, the more significant of which are detailed in this rollforward. Growth in certain product lines can also impact DCP for the quarter since a provision
	for claims would not have been recorded for members that had not yet enrolled earlier in the quarter, yet those members would have a provision and corresponding reserve recorded upon
	enrollment later in the quarter. This analysis excludes the impact of military services and Medicare stand-alone PDPs upon DCP.
	S-22

 

Humana Investor Relations
Regina Nethery, 502-580-3644
Rnethery@humana.com
or
Humana Corporate Communications
Tom Noland, 502-580-3674
Tnoland@humana.com

Source: Humana Inc.

Copyright:	Copyright Business Wire 2012
Source:	Business Wire, Inc.
Wordcount:	11316

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31 Jul, 2012

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Source: http://insurancenewsnet.com/article.aspx?id=352137&type=lifehealth
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