Humana's Q4 Earnings: A Mixed Bag of Growth and Caution

Humana Inc. (NYSE: HUM), one of the leading health insurance and complementary medical services companies in the United States, reported its fourth-quarter 2024 earnings on Tuesday, February 11, 2025. The company's financial performance was a mix of positive and negative developments, with some key takeaways for investors to consider.

Revenue Growth and Membership Numbers

Humana's revenue for the quarter ended December 31, 2024, was $29.19 billion, up 13.5% year-over-year from $25.73 billion. This growth was primarily driven by higher per-member Medicare premiums and Medicare Advantage and state-based contracts membership growth. However, the company also experienced a decline in stand-alone PDP membership and a decline in membership in the group commercial medical business as a result of its decision to exit the business.

The company ended the fourth quarter with 16.35 million in total medical membership, compared to 16.86 million a year ago. Individual Medicare Advantage membership reached 5.66 million, up from 5.67 million a year ago.



Adjusted Benefit Ratio and Guidance

Humana's insurance segment adjusted benefit ratio for the fourth quarter was 91.9%, which includes a 20-basis point increase related to incremental Star Ratings investments. The company expects its insurance segment's benefit ratio guidance for 2025 to be approximately 90.1-90.5%.

For 2025, Humana expects GAAP sales of $126 billion-$128 billion versus the consensus of $119.41 billion. Sales guidance includes Insurance segment sales of $121 billion-$123 billion and CenterWell segment sales of $20.5 billion-$21.5 billion. The insurer expects individual Medicare Advantage annual membership decline of approximately 550,000, or approximately 10%, from 2024, inclusive of the company's decision to exit certain unprofitable plans and counties. Humana reaffirms its 2025 adjusted EPS outlook of $16.25 versus the consensus of $16.71.

2025 Profit Outlook and Strategic Initiatives

Humana's 2025 profit outlook, as projected by the company, is approximately $16.25 on an Adjusted basis, which is a significant decline from its historical performance. To meet or exceed these expectations, Humana plans to implement several strategic initiatives, including resetting pricing and membership, exiting unprofitable plans and counties, expanding Medicaid and CenterWell services, and allocating resources to value creation initiatives.

In conclusion, Humana's Q4 earnings report offers a mixed bag of growth and caution. While the company experienced revenue growth and maintained its membership numbers, its adjusted benefit ratio and 2025 profit outlook raise concerns. Investors should closely monitor Humana's progress in implementing its strategic initiatives and assess the effectiveness of these plans in achieving its profit outlook. As always, it is essential to stay informed about the company's developments and maintain a balanced perspective when evaluating its investment potential.