EX-99.2 4 stats7-03.htm STATISTICAL PAGES stats7-03

Humana Inc.

Page 1 of 10

In thousands

June 30,

Percent

Ending Medical Membership

2003

2002

Difference

Change

Commercial:

Fully insured

2,350.40

2,319.60

30.8

1.3

ASO

670.3

627.5

42.8

6.8

Total Commercial

3,020.70

2,947.10

73.6

2.5

Government:

Medicare+Choice

324.2

354.1

-29.9

-8.4

Medicaid

492.7

487.9

4.8

1

TRICARE

1,750.80

1,761.00

-10.2

-0.6

TRICARE ASO

1,052.50

1,021.90

30.6

3

Total Government

3,620.20

3,624.90

-4.7

-0.1

Total ending medical membership

6,640.90

6,572.00

68.9

1

June 30,

Percent

Ending Specialty Membership

2003

2002

Difference

Change

Commercial:

Dental-fully insured

745.7

777.4

-31.7

-4.1

Dental-ASO

365.1

308.3

56.8

18.4

Total Dental

1,110.80

1,085.70

25.1

2.3

Group life

510.5

529.7

-19.2

-3.6

Short-term disability

20.7

22.8

-2.1

-9.2

Total ending specialty membership

1,642.00

1,638.20

3.8

0.2

Three months ended

Six months ended

June 30,

June 30,

Premiums

2003

2002

2003

2002

Commercial:

Fully insured medical

$1,551,619

$1,353,273

$3,088,572

$2,696,534

Specialty

78,935

83,814

157,538

166,541

Total Commercial

1,630,554

1,437,087

3,246,110

2,863,075

Government:

Medicare+Choice

630,432

662,480

1,266,274

1,334,666

Medicaid

116,005

113,234

237,235

224,487

TRICARE

536,414

530,938

1,006,735

963,323

Total Government

1,282,851

1,306,652

2,510,244

2,522,476

Total premiums

$2,913,405

$2,743,739

$5,756,354

$5,385,551

Three months ended

Six months ended

June 30,

June 30,

Administrative services fees

2003

2002

2003

2002

Commercial

$30,356

$25,576

$59,946

$50,723

Government

41,312

38,255

72,858

78,121

Total Administrative services fees

$71,668

$63,831

$132,804

$128,844

Humana Inc.

 

 

 

Page 2 of 10

Dollars in thousands, except per share results

 

 

 

 

 

 

 

 

 

 

---------------------------- Three months ended --------------------------

 

 

 

 

 

 

 

 

Adjusted

 

 

June 30,

Unusual

June 30,

June 30,

Consolidated Statements of Income

2003

Item

2003

2002

Revenues:

 

 

 

 

  Premiums

$ 2,913,405

$       -

$ 2,913,405

$ 2,743,739

  Administrative services fees

71,668

-

71,668

63,831

  Investment income

43,228

(15,200)

28,028

22,681

  Other income

1,657

-

1,657

1,689

     Total revenues

3,029,958

(15,200)

3,014,758

2,831,940

Operating expenses:

 

 

 

 

  Medical

2,444,977

-

2,444,977

2,316,188

  Selling, general and administrative

448,537

-

448,537

414,433

  Depreciation

25,550

-

25,550

26,306

  Other intangible amortization

2,903

-

2,903

3,931

     Total operating expenses

2,921,967

-

2,921,967

2,760,858

Income from operations

107,991

(15,200)

92,791

71,082

  Interest expense

3,801

-

3,801

4,377

Income before income taxes

104,190

(15,200)

88,990

66,705

  Provision for income taxes

34,914

(5,092)

29,822

21,346

Net income

$ 69,276

$ (10,108)

$ 59,168

$ 45,359

 

 

 

 

 

 

 

 

 

 

Basic earnings per common share

$ 0.44

$ (0.06)

$ 0.38

$ 0.28

Diluted earnings per common share

$ 0.43

$ (0.06)

$ 0.37

$ 0.27

 

 

 

 

 

Shares used in computing basic earnings per common share (000's)

157,395

157,395

157,395

164,853

Shares used in computing diluted earnings per common share (000's)

161,149

161,149

161,149

168,860

 

 

 

 

 

Key Ratios

 

 

 

 

 

 

 

 

 

Medical expense ratio

 

 

 

 

  Commercial

83.0%

-

83.0%

83.9%

  Government

85.1%

-

85.1%

85.0%

     Total

83.9%

-

83.9%

84.4%

 

 

 

 

 

Selling, general, and administrative expense ratio

 

 

 

 

  Commercial

16.8%

-

16.8%

16.4%

  Government

12.7%

-

12.7%

13.0%

     Total

15.0%

-

15.0%

14.8%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Humana Inc.

 

 

 

Page 3 of 10

Dollars in thousands, except per share results

 

 

 

 

 

 

 

 

 

 

---------------------------- Six months ended --------------------------

 

 

 

 

 

 

 

 

Adjusted

 

 

June 30,

Unusual

June 30,

June 30,

Consolidated Statements of Income

2003

Items

2003

2002

Revenues:

 

 

 

 

  Premiums

$ 5,756,354

$        -

$ 5,756,354

$ 5,385,551

  Administrative services fees

132,804

-

132,804

128,844

  Investment income

69,045

(15,200)

53,845

46,989

  Other income

3,471

-

3,471

3,138

     Total revenues

5,961,674

(15,200)

5,946,474

5,564,522

Operating expenses:

 

 

 

 

  Medical

4,816,411

-

4,816,411

4,510,727

  Selling, general and administrative

895,582

-

895,582

849,497

  Depreciation

52,759

-

52,759

52,171

  Other intangible amortization

6,834

-

6,834

7,862

  Restructuring charge

30,760

(30,760)

-

-

     Total operating expenses

5,802,346

(30,760)

5,771,586

5,420,257

Income from operations

159,328

15,560

174,888

144,265

Interest expense

7,736

-

7,736

8,781

Income before income taxes

151,592

15,560

167,152

135,484

  Provision for income taxes

51,086

6,874

57,960

43,355

Net income

$ 100,506

$ 8,686

$ 109,192

$ 92,129

 

 

 

 

 

 

 

 

 

 

Basic earnings per common share (A)

$ 0.64

$ 0.06

$ 0.69

$ 0.56

Diluted earnings per common share (A)

$ 0.62

$ 0.05

$ 0.68

$ 0.55

 

 

 

 

 

Shares used in computing basic earnings per common share (000's)

157,565

157,565

157,565

164,555

Shares used in computing diluted earnings per common share (000's)

160,982

160,982

160,982

168,274

 

 

 

 

 

Key Ratios

 

 

 

 

 

 

 

 

 

Medical expense ratio

 

 

 

 

  Commercial

82.2%

-

82.2%

82.9%

  Government

85.6%

-

85.6%

84.7%

     Total

83.7%

-

83.7%

83.8%

 

 

 

 

 

Selling, general, and administrative expense ratio

 

 

 

 

  Commercial

16.8%

-

16.8%

17.0%

  Government

13.2%

-

13.2%

13.6%

     Total

15.2%

-

15.2%

15.4%

 

 

 

 

 

(A) Mathematical differences due to rounding in earnings per share calculations.

 

 

 

 

Humana Inc.

Page 4 of 10

Dollars in thousands, except per share results

---------------------------- Three months ended --------------------------

Adjusted

June 30,

Unusual

June 30,

June 30,

Operating Results by Segment

2003

Item

2003

2002

Commercial:

Income before income taxes

$ 43,757

$ (12,423)

$ 31,334

$ 14,893

Interest expense

3,105

-

3,105

3,197

Depreciation and amortization

17,744

-

17,744

17,463

Commercial EBITDA *

64,606

(12,423)

52,183

35,553

Government:

Income before income taxes

60,433

(2,777)

57,656

51,812

Interest expense

696

-

696

1,180

Depreciation and amortization

10,709

-

10,709

12,774

Government EBITDA *

71,838

(2,777)

69,061

65,766

Consolidated:

Net income

69,276

(10,108)

59,168

45,359

Provision for income taxes

34,914

(5,092)

29,822

21,346

Income before income taxes

104,190

(15,200)

88,990

66,705

Interest expense

3,801

-

3,801

4,377

Depreciation and amortization

28,453

-

28,453

30,237

Consolidated EBITDA *

$ 136,444

$ (15,200)

$ 121,244

$ 101,319

---------------------------- Six months ended --------------------------

Adjusted

June 30,

Unusual

June 30,

June 30,

Operating Results by Segment

2003

Items

2003

2002

Commercial:

Income before income taxes

$ 80,996

$ 5,429

$ 86,425

$ 40,988

Interest expense

6,168

-

6,168

6,256

Depreciation and amortization

36,972

-

36,972

34,630

Commercial EBITDA *

124,136

5,429

129,565

81,874

Government:

Income before income taxes

70,596

10,131

80,727

94,496

Interest expense

1,568

-

1,568

2,525

Depreciation and amortization

22,621

-

22,621

25,403

Government EBITDA *

94,785

10,131

104,916

122,424

Consolidated:

Net income

100,506

8,686

109,192

92,129

Provision for income taxes

51,086

6,874

57,960

43,355

Income before income taxes

151,592

15,560

167,152

135,484

Interest expense

7,736

-

7,736

8,781

Depreciation and amortization

59,593

-

59,593

60,033

Consolidated EBITDA *

$ 218,921

$ 15,560

$ 234,481

$ 204,298

* EBITDA represents earnings (including investment and other income) before interest expense, income taxes, depreciation

and amortization. EBITDA is not a measure under accounting principles generally accepted in the United States and may

not be similar to EBITDA measures of other companies. We believe EBITDA is an important indicator of the cash content

of the Company's operating income, and as such the quality of net income. Accordingly, we believe the most directly

comparable GAAP measure is net income and, therefore, we have reconciled consolidated EBITDA to consolidated net

income. Because income taxes are not allocated to the segments, we have reconciled segment EBITDA to income

before income taxes.

Humana Inc.

Page 5 of 10

Dollars in thousands, except per share results

June 30,

March 31,

December 31,

Consolidated Balance Sheets

2003

2003

2002

Assets

Current assets:

Cash and cash equivalents

$ 754,942

$ 532,652

$ 721,357

Investment securities

1,399,220

1,411,356

1,405,833

Receivables, net:

Premiums

402,821

472,972

348,562

Administrative services fees

36,688

55,726

68,316

Other

223,800

258,481

250,857

Total current assets

2,817,471

2,731,187

2,794,925

Property and equipment, net

417,446

423,465

459,842

Other assets:

Long-term investment securities

329,178

312,517

288,724

Goodwill

776,874

776,874

776,874

Other

152,885

185,144

279,665

Total other assets

1,258,937

1,274,535

1,345,263

Total assets

$ 4,493,854

$ 4,429,187

$ 4,600,030

Liabilities and Stockholders' Equity

Current liabilities:

Medical and other expenses payable

$ 1,287,364

$ 1,226,043

$ 1,142,131

Trade accounts payable and accrued expenses

455,541

512,723

552,689

Book overdraft

79,536

84,579

94,882

Unearned premium revenues

100,445

117,604

335,757

Short-term debt

265,000

265,000

265,000

Total current liabilities

2,187,886

2,205,949

2,390,459

Long-term debt

334,610

334,328

339,913

Other long-term liabilities

265,098

268,131

263,184

Total liabilities

2,787,594

2,808,408

2,993,556

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;

172,263,921 shares issued at June 30, 2003

28,708

28,562

28,556

Capital in excess of par value

938,648

931,460

931,089

Retained earnings

821,383

752,107

720,877

Accumulated other comprehensive income

29,839

23,257

22,455

Unearned restricted stock compensation

(1,469)

(3,961)

(6,516)

Treasury stock, at cost, 10,606,303 shares at June 30, 2003

(110,849)

(110,646)

(89,987)

Total stockholders' equity

1,706,260

1,620,779

1,606,474

Total liabilities and stockholders' equity

$ 4,493,854

$ 4,429,187

$ 4,600,030

Debt to total capitalization ratio

26.0%

27.0%

27.4%

Humana Inc.

Page 6 of 10

Dollars in thousands

Three months ended

Six months ended

June 30,

June 30,

Consolidated Statements of Cash Flows

2003

2002

2003

2002

Cash flows from operating activities

Net income

$ 69,276

$ 45,359

$ 100,506

$ 92,129

Adjustments to reconcile net income to net

cash provided by operating activities:

Non-cash restructuring charge

-

-

30,760

-

Depreciation and amortization

28,453

30,237

59,593

60,033

Provision for deferred income taxes

7,408

10,158

11,054

23,038

Changes in operating assets and liabilities:

Receivables

89,189

(145,383)

40,636

(191,193)

Other assets

(28,312)

(25,330)

(22,627)

(27,728)

Medical and other expenses payable

61,321

44,326

145,233

108,303

Other liabilities

(31,057)

(5,878)

(60,069)

(16,682)

Unearned revenues

(17,159)

(4,320)

(235,312)

(242,078)

Other

(17,623)

7,053

(16,508)

10,263

Net cash provided by (used in) operating activities

161,496

(43,778)

53,266

(183,915)

Timing of Medicare+Choice premium payment from CMS

-

-

205,755

216,628

Normalized net cash provided by (used in) operating activities

161,496

(43,778)

259,021

32,713

Cash flows from investing activities

Purchases of property and equipment, net

(20,843)

(24,365)

(42,477)

(56,730)

Divestiture

-

-

-

1,109

Purchases of investment securities

(716,035)

(572,962)

(2,261,276)

(998,097)

Proceeds from maturities of investment securities

188,003

62,017

384,926

177,971

Proceeds from sales of investment securities

576,928

565,540

1,897,174

869,436

Net cash provided by (used in) investing activities

28,053

30,230

(21,653)

(6,311)

Cash flows from financing activities

Proceeds from swap exchange

31,556

-

31,556

-

Net commercial paper conduit borrowings

-

2,000

-

2,000

Change in book overdraft

(5,043)

(30,151)

(15,346)

(19,478)

Common stock repurchases

(203)

-

(21,020)

-

Other

6,431

6,517

6,782

6,984

Net cash provided by (used in) provided by financing activities

32,741

(21,634)

1,972

(10,494)

Increase (decrease) in cash and cash equivalents

222,290

(35,182)

33,585

(200,720)

Cash and cash equivalents at beginning of period

532,652

485,882

721,357

651,420

Cash and cash equivalents at end of period

$ 754,942

$ 450,700

$ 754,942

$ 450,700

Humana Inc.

Page 7 of 10

Percentage of Ending Membership Under Capitation Arrangements

Commercial Segment

Government Segment

Consol.

Fully

Total

Medicare

TRICARE

Total

Total

Insured

ASO

Segment

+Choice

Medicaid

TRICARE

ASO

Segment

Medical

June 30, 2003

Capitated HMO

hospital system based A

6.2%

-

4.8%

12.5%

2.6%

-

-

1.5%

3.0%

Capitated HMO

physician group based A

3.1%

-

2.4%

1.9%

57.5%

-

-

8.0%

5.5%

Risk-sharing B

2.9%

-

2.2%

48.1%

33.8%

-

-

8.9%

5.9%

All other membership

87.8%

100.0%

90.6%

37.5%

6.1%

100.0%

100.0%

81.6%

85.6%

Total

100.0%

100.0%

100.0%

100.0%

100.0%

100.0%

100.0%

100.0%

100.0%

June 30, 2002

Capitated HMO

hospital system based A

6.7%

-

5.3%

13.3%

2.2%

-

-

1.6%

3.3%

Capitated HMO

physician group based A

3.9%

-

3.1%

3.3%

56.7%

-

-

8.0%

5.8%

Risk-sharing B

3.1%

-

2.4%

45.7%

34.3%

-

-

9.1%

6.1%

All other membership

86.3%

100.0%

89.2%

37.7%

6.8%

100.0%

100.0%

81.3%

84.8%

Total

100.0%

100.0%

100.0%

100.0%

100.0%

100.0%

100.0%

100.0%

100.0%

A - In a limited number of circumstances, we contract with hospitals and physicians to accept financial risk for a defined

set of HMO membership. In transferring this risk, we prepay these providers a monthly fixed-fee per member to

coordinate substantially all of the medical care for their capitated HMO membership, including some health benefit

administrative functions and claims processing. For these capitated HMO arrangements, we generally agree to

reimbursement rates that target a medical expense ratio ranging from 82% to 89%. Providers participating in hospital-

based capitated HMO arrangements generally receive a monthly payment for all of the services within their system for

their HMO membership. Providers participating in physician-based capitated HMO arrangements generally have

subcontracted specialist physicians and are responsible for reimbursing such hospitals and physicians for services

rendered to their HMO membership.

B - In some circumstances, we contract with physicians under risk-sharing arrangements whereby physicians have

assumed some level of risk for all or a portion of the medical costs of their HMO membership. Although these

arrangements do include capitation payments for services rendered, we process substantially all of the claims under

these arrangements.

Humana Inc.

Page 8 of 10

Medical Claim Reserves - Details and Statistics

Change in medical and other expenses payable:

The change in medical and other expenses payable is summarized as follows:

For the Six

For the Twelve

Months Ended

Months Ended

June 30, 2003

December 31, 2002

Balances at January 1

$ 1,142,131

$ 1,086,386

Incurred related to:

Current year

4,884,188

9,125,915

Prior years - TRICARE

(29,466)

25,685

(1)

Prior years - non-TRICARE (2)

(38,311)

(13,404)

Total incurred

4,816,411

9,138,196

Paid related to:

Current year

(3,684,801)

(8,002,610)

Prior years

(986,377)

(1,079,841)

Total paid

(4,671,178)

(9,082,451)

Balances at end of period

$ 1,287,364

$ 1,142,131

(1) Changes in estimates of medical expenses payable for TRICARE may result from issues that entitle us

to additional revenues derived from change orders or the bid price adjustment process, which was the

case with substantially all of the unfavorable development for prior periods recognized during 2002.

(2) Changes in estimates of non-TRICARE incurred claims for prior years recognized during 2003 and 2002

related primarily to our commercial lines of business. The impact of any reduction of "incurred related

to prior years" claims may be offset as we re-establish the "incurred related to current year". Our

reserving practice is to consistently recognize the actuarial best estimate of our ultimate liability for

our claims within a level of confidence required to meet actuarial standards. Thus, only when the

release of a prior year reserve is not offset with the same level of conservatism in estimating the current

year reserve will the redundancy reduce medical expense. We have consistently applied this

methodology in determining our best estimate for unpaid claims liability in each period.

Humana Inc.

Page 9 of 10

Dollars in thousands

Medical Claim Reserves - Details and Statistics

Medical and Other Expenses Payable Detail:

June 30,

March 31,

December 31,

2003

2003

2002

A IBNR and other medical expenses payable

$ 778,460

$ 703,910

$ 650,606

B TRICARE IBNR

232,591

232,249

212,826

C TRICARE other medical expenses payable

24,677

30,055

37,793

D Unprocessed claim inventories

92,100

99,000

92,300

E Processed claim inventories

126,516

118,300

105,422

F Payable to pharmacy benefit administrator

33,020

42,529

43,184

Total medical and other expenses payable

$ 1,287,364

$ 1,226,043

$ 1,142,131

A IBNR represents an estimate of medical expenses payable for claims incurred but not reported (IBNR) at the balance

sheet date. The level of IBNR is primarily impacted by membership levels, medical 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).

B TRICARE IBNR has increased primarily due to an increase in claim inventories at our third party claim administrator

for claims not submitted electronically.

C TRICARE other medical expense payable may include liabilities to subcontractors and/or risk share payables to the

Department of Defense. The level of these balances may fluctuate from period to period due to the timing of payment

(cutoff) and whether or not the balances are payables or receivables (receivables from the Department of Defense

are classified as "receivables" in our balance sheet).

D Unprocessed claim inventories represent the estimated valuation of claims received but not yet fully processed.

TRICARE claim inventories are not included in this amount as an independent third party administrator processes

all TRICARE medical claims on our behalf. Reserves for TRICARE claims inventory are included in TRICARE IBNR.

E 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.

F The balance due to our pharmacy benefit administrator fluctuates due to bi-weekly payments and the month-end

cutoff.

Receipt Cycle Time:

Due to increasing electronic connectivity and other efficiencies gained by our providers with regards to the claim

submission process, the average length of time between when a claim was initially incurred and when the claim form

was received has generally shortened over the past several years. Below is a summary:

Average # of Days from Incurred Date to Receipt Date (1)

2003

2002

Change

% Change

1st Quarter Average

17.1

19.0

(1.9)

-10.0%

2nd Quarter Average

16.7

18.1

(1.4)

-7.7%

3rd Quarter Average

-

17.3

n/a

n/a

4th Quarter Average

-

16.9

n/a

n/a

Full Year Average

16.9

17.8

(0.9)

-5.1%

(1) Receipt cycle time data for our 2 largest claim processing platforms representing approximately 90% of our

claims volume.

Humana Inc.

Page 10 of 10

Medical Claim Reserves - Details and Statistics

Unprocessed Claim Inventories:

The estimated valuation and number of claims on hand that are yet to be processed are as follows:

Estimated

Number

Valuation

Claim Item

of Days

Date

(000)

Counts

On Hand

12/31/2001

$ 125,400

518,100

5.0

03/31/2002

$ 121,000

559,600

5.2

06/30/2002

$ 110,300

513,100

4.8

09/30/2002

$ 108,800

496,200

4.8

12/31/2002

$ 92,300

424,200

4.5

03/31/2003

$ 99,000

421,700

4.4

06/30/2003

$ 92,100

446,600

4.7

Days in Claims Payable (Quarterly):

A common metric for monitoring medical claim reserve levels relative to the medical claim expenses is days in claims

payable, or DCP, which represents the medical claim liabilities at the end of the period divided by average medical

expenses per day in the quarterly period. Since we have some providers under capitation payment arrangements (which

do not require a medical claim IBNR reserve), we have also summarized this metric excluding capitation expenses.

Days

DCP

in Claims

Annual

Excluding

Annual

Quarter Ended

Payable (DCP)

Change

% Change

Capitation

Change

% Change

12/31/2001

47.4

(3.9)

-7.6%

57.1

(4.4)

-7.2%

03/31/2002

47.2

(2.3)

-4.6%

56.2

(3.4)

-5.7%

06/30/2002

46.8

(3.1)

-6.2%

55.3

(4.7)

-7.8%

09/30/2002

46.6

(2.5)

-5.1%

55.3

(3.9)

-6.6%

12/31/2002

45.2

(2.2)

-4.6%

53.3

(3.8)

-6.7%

03/31/2003

46.5

(0.7)

-1.5%

54.7

(1.5)

-2.7%

06/30/2003

47.9

1.1

2.4%

56.2

0.9

1.6%

This metric fluctuates due to all of the issues reviewed above, including the change in the receipt cycle time, the change

in medical claim inventories, the change in TRICARE liability balances, and the timing of our bi-weekly payment

to our pharmacy benefits administrator. An annual recap follows:

2003

2002

4th quarter-prior year

45.2

47.4

Impact of change in claim receipt cycle time

(0.3)

(2.6)

Impact of change in unprocessed claim inventories

0.0

(1.3)

Impact of changing TRICARE reserve balances

0.7

0.3

Impact of change in pharmacy payment cutoff

(0.4)

0.7

All other

2.7

0.7

Year to date-current year

47.9

45.2