- Adjusted EPS(a) of $7.75 for full year
2015 and $1.45 for 4Q 2015, in-line with management’s
expectations
- During 4Q 2015, the company recorded a
premium deficiency reserve totaling $176 million pretax, or $0.74
per share, related to certain of its 2016 individual commercial
policies
- 2016 Adjusted EPS(a) guidance of at
least $8.85 reflects expected significant improvement in the
company’s individual Medicare Advantage business and excludes
amortization of identifiable intangibles
- 2016 projected net membership growth in
individual Medicare Advantage of 100,000 to 120,000
- 2016 projected net membership growth in
stand-alone PDP offerings of 300,000 to 330,000
- 4Q 2015 cash flows from operations up
75 percent from 4Q 2014
Humana Inc. (NYSE: HUM) today reported diluted earnings per
common share (EPS) for the quarter ended December 31, 2015 (4Q
2015) of $0.67 compared to $0.94 for the quarter ended December 31,
2014 (4Q 2014). For the year ended December 31, 2015 (FY15) the
company reported EPS of $8.44 compared to $7.36 for the year ended
December 31, 2014 (FY14).
The company has included certain adjusted financial measures
throughout this earnings press release. Adjusted pretax income and
Adjusted EPS for 4Q 2015 and FY15 and the comparable prior year
periods were as follows (a):
Consolidated pretax income (in
millions)
4Q 2015 4Q 2014
FY15 FY14
Generally Accepted Accounting Principles (GAAP)
$246 $287
$2,431 $2,170 Premium
deficiency reserve (PDR) for certain 2016 individual commercial
policies
176 -
176 -
Costs associated with pending transaction with Aetna Inc. (Aetna)
12 -
23 - Gain related to
sale of Concentra Inc. (Concentra)
(3) -
(270) - Expenses associated with early
retirement of debt
- 37
-
37
Adjusted (non-GAAP) (a) $431 $324
$2,360 $2,207
Diluted earnings per common share (EPS) 4Q
2015 4Q 2014
FY15 FY14
GAAP
$0.67 $0.94
$8.44 $7.36
PDR for certain 2016 individual commercial policies
0.74 -
0.74 - Costs associated
with pending transaction with Aetna
0.08 -
0.14 - Gain related to sale of Concentra
(0.04) -
(1.57) -
Expenses associated with early retirement of debt
-
0.15
- 0.15
Adjusted (non-GAAP)
(a) $1.45 $1.09
$7.75
$7.51
The higher year-over-year Adjusted consolidated pretax income
for the quarter and full year reflected higher operating results
from the Group and Healthcare Services segments and higher
investment income associated with the repositioning of the
investment portfolio in FY15, partially offset by lower operating
results in the Retail segment. Further discussion of the drivers of
the business segments’ operating results are discussed in the
sections below highlighting each segment.
The higher year-over-year Adjusted EPS for the quarter and full
year reflected the same factors impacting Adjusted consolidated
pretax income as well as the beneficial impact of a lower share
count in 4Q 2015 and FY15 compared to the same periods in 2014,
partially offset by a higher effective tax rate associated with the
expected increase in the non-deductible health insurance industry
fee.
“Our commitment to our integrated care delivery strategy is
strong,” said Bruce D. Broussard, Humana’s President and Chief
Executive Officer. “That commitment combined with the operational
corrections we made in 2015 provides us a solid trajectory to
achieve our target margins for each of our businesses over time,
including 4.5 to 5 percent for individual Medicare Advantage. We
will continue to balance our business segment margins with the
growth in our Healthcare Services businesses to engage our members
and drive quality outcomes, resulting in the greatest enterprise
value. Further, we are pleased with progress to date on the pending
transaction with Aetna and continue to expect it to close in the
latter half of 2016.”
“Humana faced challenges across a number of fronts in 2015,”
added Brian A. Kane, Senior Vice President and Chief Financial
Officer. “However, the strength of our clinical model together with
strong administrative cost discipline helped us not only manage
these challenges in 2015, but together with targeted pricing and
other operational actions, helped position us for meaningful margin
improvement in our core individual Medicare Advantage business for
2016 as well as attractive growth in both revenues and EPS in 2017
and beyond.”
2016 Earnings Guidance
Humana expects Adjusted EPS for the year ending December 31,
2016 (FY16) of at least $8.85 as noted below. For comparability to
FY16 Adjusted EPS guidance, FY15 Adjusted EPS is recast below to
also adjust for the exclusion of amortization of identifiable
intangibles to align with reporting methods used across the managed
care sector.
Diluted earnings per common
share
FY16E
FY15 Recast
GAAP $8.53 $8.44 PDR for certain 2016
individual commercial policies
- 0.74 Costs
associated with pending transaction with Aetna
To be
determined 0.14 Gain related to sale of Concentra
- (1.57) Amortization of identifiable intangibles
0.32 0.39
Adjusted (non-GAAP) (a)
$8.85 $8.14
The more significant items impacting expected Adjusted EPS for
FY16 versus Adjusted EPS for FY15 are summarized as follows:
Significant items expected to impact
year-over-year change
Estimated EPS Recast FY15 Adjusted EPS
$8.14 Projected change in operating performance:
Individual Medicare Advantage 1.18 Individual
commercial including the beneficial effect of the PDR 0.99
Healthcare Services segment excluding provider services business
0.15 Group Medicare Advantage (0.61) Provider
services businesses excluding Concentra (0.17) All other
operations, net (b) (0.30) Lower earnings from sale of
Concentra in June 2015 (0.10) Investment income
(0.43)
Projected FY16 Adjusted EPS $8.85
Additionally, as previously disclosed, as a result of the
pending transaction with Aetna, the company suspended its share
repurchase program on July 2, 2015 and thus the company does not
anticipate any benefit from share repurchase activity in FY16. In
September 2014, the company’s Board of Directors approved a new $2
billion share repurchase authorization that replaced its previous
$1 billion authorization. Share repurchases in the latter part of
2014 and the first half of 2015 under the new authorization
resulted in $0.30 per share of higher earnings for FY15.
First quarter 2016 Adjusted EPS is projected to be at least
$1.80, reflecting the change in quarterly seasonality related to
the PDR as well as the impact of the leap year. Adjusted EPS for
the remaining quarters of 2016 is expected to generally mirror the
percentage distribution of Adjusted EPS among the last three
quarters of FY15.
Aetna Transaction
As previously announced, Humana entered into a definitive merger
agreement with Aetna on July 2, 2015 under which, at the closing,
Aetna will acquire each outstanding common share of Humana for $125
in cash and 0.8375 of an Aetna common share. At separate special
stockholder meetings each held on October 19, 2015, Humana
stockholders approved the adoption of the Aetna merger agreement
and Aetna shareholders approved the issuance of the Aetna common
stock in the transaction.
The transaction is subject to customary closing conditions,
including the expiration of the Hart-Scott-Rodino anti-trust
waiting period and approvals of certain state Departments of
Insurance and other regulators. The company continues to expect the
transaction to close in the second half of 2016.
Conference Call
Given the pending transaction with Aetna, the company is not
hosting a conference call in conjunction with its 4Q 2015 earnings
release and does not expect to do so for future quarters. Please
direct any questions regarding this earnings release to Humana
Investor Relations or Humana Corporate Communications.
Detailed press release
Humana’s full earnings press release including the statistical
pages has been posted to the company’s Investor Relations site and
may be accessed at
http://phx.corporate-ir.net/phoenix.zhtml?c=92913&p=irol-IRHome
or via a current report on Form 8-K filed by the company with the
Securities and Exchange Commission this morning (available at
www.sec.gov or on the company’s website).
View source
version on businesswire.com: http://www.businesswire.com/news/home/20160210005330/en/
Humana Inc.Investor RelationsRegina Nethery,
502-580-3644Rnethery@humana.comorCorporate CommunicationsTom
Noland, 502-580-3674Tnoland@humana.com
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