99.1
|
Press Release
|
HUMANA INC.
BY: /s/ Cynthia H. Zipperle
Cynthia H. Zipperle
Vice President, Chief Accounting Officer
and Controller
(Principal Accounting Officer)
|
99.1
|
Press Release
|
|
n e w s r e l e a s e Humana Inc.
|
·
|
Performance in core businesses continues to exceed expectations; FY16 EPS guidance raised
|
·
|
Individual commercial medical business remains very challenging
|
FY16 financial guidance
|
Diluted earnings per common share (EPS) (a)
|
||
Projected results excluding Individual business
|
Projected Individual business results
|
Total projected results
|
|
Generally Accepted Accounting Principles (GAAP) previous guidance
|
$8.57
|
($0.25)
|
At least $8.32
|
Changes in projected operating performance:
|
|||
Medicare Advantage individual business
|
0.76
|
-
|
0.76
|
Healthcare Services businesses
|
0.29
|
-
|
0.29
|
Individual business
|
-
|
(1.08)
|
(1.08)
|
Certain other lines of business (b)
|
0.31
|
-
|
0.31
|
Transaction and integration costs for 2Q16 not previously estimated
|
(0.16)
|
(0.16)
|
|
Adoption of new accounting standard for tax effect of stock-based compensation retroactively impacting the first quarter of 2016
|
0.12
|
-
|
0.12
|
GAAP guidance as of July 21, 2016
|
$9.89
|
($1.33)
|
At least $8.56
|
Transaction and integration costs through 2Q16 (c)
|
0.37
|
-
|
At least 0.37
|
Amortization of identifiable intangibles (c)
|
0.32
|
-
|
0.32
|
Adjusted (non-GAAP) guidance as of July 21, 2016(c)
|
$10.58
|
($1.33)
|
At least $9.25
|
2Q16 financial guidance
|
EPS
|
GAAP previous guidance
|
At least $2.06
|
Changes in projected operating performance
|
0.13
|
Transaction and integration costs for 2Q16 not previously estimated
|
(0.16)
|
GAAP guidance as of July 21, 2016
|
Approximately $2.03
|
Transaction and integration costs (c)
|
0.16
|
Amortization of identifiable intangibles (c)
|
0.09
|
Adjusted (non-GAAP) guidance as of July 21, 2016 (c)
|
Approximately $2.28
|
(a)
|
Income tax expense included in determining per diluted common share amounts reflects certain permanent tax differences primarily including the non-deductibility of the health insurer industry fee.
|
(b)
|
The better-than-expected operating performance for certain other businesses primarily relates to the company’s group Medicare Advantage, group commercial (including military services), state-based contracts and stand-alone Prescription Drug Plan businesses.
|
(c)
|
Adjusted EPS guidance for FY16 excludes pretax transaction and integration costs associated with the pending transaction with Aetna of $61 million, or $0.37 per diluted common share, as well as $78 million pretax, or $0.32 per diluted common share associated with amortization expense for identifiable intangibles. Adjusted EPS guidance for 2Q16 also excludes these same items including transaction and integration costs of $26 million pretax, or $0.16 per diluted common share, and amortization expense of $20 million pretax, or $0.09 per diluted common share. Transaction and integration costs beyond those incurred in the first half of 2016 are to be determined.
|
(d)
|
As previously disclosed, in the fourth of 2015, the company recorded a PDR related to certain of its Individual policies. During 2Q16, the company expects to record an increase to its FY16 estimate for the PDR in 2Q16 which would negatively impact earnings for that quarter.
|
•
|
Humana’s transaction with Aetna is subject to various closing conditions, including governmental and regulatory approvals as well as other uncertainties and there can be no assurances as to whether and when it may be completed.
|
•
|
The merger agreement between Humana and Aetna prohibits Humana from pursuing alternative transactions to the pending transaction with Aetna.
|
•
|
The number of shares of Aetna common stock that Humana’s stockholders will receive in the transaction is based on a fixed exchange ratio. Because the market price of Aetna’s common stock will fluctuate, Humana’s stockholders cannot be certain of the value of the portion of the transaction consideration to be paid in Aetna’s common stock.
|
•
|
While the transaction with Aetna is pending, Humana is subject to business uncertainties and contractual restrictions that could materially adversely affect Humana’s results of operations, financial position and cash flows or result in a loss of employees, customers, members or suppliers.
|
•
|
Failure to consummate the transaction with Aetna could negatively impact Humana’s results of operations, financial position and cash flows.
|
•
|
If Humana does not design and price its products properly and competitively, if the premiums Humana receives are insufficient to cover the cost of health care services delivered to its members, if the company is unable to implement clinical initiatives to provide a better health care experience for its members, lower costs and appropriately document the risk profile of its members, or if its estimates of benefits expense 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. We continually review estimates of future payments relating to benefit expenses for services incurred in the current and prior periods and make necessary adjustments to our reserves, including premium deficiency reserves, where appropriate. These estimates, however, involve extensive judgment, and have considerable inherent variability because they are extremely sensitive to changes in claim payment patterns and medical cost trends, so any reserves we may establish, including premium deficiency reserves, may be insufficient.
|
|
•
|
If Humana fails to effectively implement its operational and strategic initiatives, particularly its Medicare initiatives, state-based contract strategy, and its participation in the new health insurance exchanges, the company’s business may be materially adversely affected, which is of particular importance given the concentration of the company’s revenues in these products.
|
|
•
|
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 the adoption of a new coding set for diagnoses (commonly known as ICD-10), the implementation of which became effective on October 1, 2015.
|
|
•
|
Humana is involved in various legal actions, or disputes that could lead to legal actions (such as, among other things, provider contract disputes relating to rate adjustments resulting from the Balanced Budget and Emergency Deficit Control Act of 1985, as amended, commonly referred to as “sequestration”; other provider contract disputes; and qui tam litigation brought by individuals on behalf of the government) and governmental and internal investigations, any of which, if resolved unfavorably to the company, could result in substantial monetary damages or changes in its business practices. Increased litigation and negative publicity could also 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 including, among other things, loss of material government contracts, governmental audits and investigations, potential inadequacy of government-determined payment rates, potential restrictions on profitability, including by comparison of profitability of the company’s Medicare Advantage business to non-Medicare Advantage business, or other changes in the governmental programs in which Humana participates.
|
|
•
|
The Health Care Reform Law, 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, lowering the company’s Medicare payment rates and increasing the company’s expenses associated with a non-deductible health insurance industry fee and other assessments; the company’s financial position, including the company's ability to maintain the value of its goodwill; and the company’s cash flows.
|
|
•
|
Humana’s participation in the new federal and state health care exchanges, which entail uncertainties associated with mix, volume of business, and the operation of premium stabilization programs, which are subject to federal administrative action, could adversely affect 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.
|
|
•
|
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 certain of its licensed 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.
|
•
|
The securities and credit markets may experience volatility and disruption, which may adversely affect Humana’s business.
|
•
|
Form 10-K for the year ended December 31, 2015,
|
•
|
Form 10-Q for the period ended March 31, 2016 and
|
•
|
Form 8-Ks filed during 2016.
|
·
|
Annual reports to stockholders
|
·
|
Securities and Exchange Commission filings
|
·
|
Most recent investor conference presentations
|
·
|
Quarterly earnings news releases
|
·
|
Calendar of events
|
·
|
Corporate Governance information
|