• Adjusted EPS Guidance: Approximately $16.25 for the full year.
• Insurance Segment Benefit Ratio: Expected to be between 90.1% to 90.5%.
• G&A Costs: Slightly better than expectations due to timing of costs.
• Primary Care Growth: Added 30 new centers through acquisition and partnership.
• Medication Adherence Campaigns: Achieved a 30% to 50% reduction in members with late refills year over year.
• Care Gaps Closure: Expected to close gaps in care by 25% year over year.

• Warning! GuruFocus has detected 3 Warning Signs with PPG.

Release Date: April 30, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Humana Inc (NYSE:HUM) reaffirmed its full-year guidance and reported Q1 performance ahead of plan, indicating a strong start to 2025.
• The company is making significant progress in clinical excellence, with efforts to close care gaps and improve medication adherence showing promising results.
• Humana Inc (NYSE:HUM) is experiencing robust growth in its CenterWell and Medicaid businesses, with notable patient and membership increases.
• Operational efficiencies are improving, with AI technology enhancing customer service interactions and reducing call times.
• The company is strategically focusing on long-term earnings power by targeting higher lifetime value segments and improving margins through renewal cycles.

Negative Points

• There is ongoing uncertainty regarding the litigation related to CMS' 2026 star ratings, which could impact future financial performance.
• The timing of certain expenses has shifted, potentially affecting financial results in the upcoming quarters.
• The company faces challenges in achieving its 3% MA margin target, with the outcome heavily dependent on the Stars ratings.
• There is a need to manage external regulatory headwinds and market dynamics, which could impact operational strategies.
• The Medicaid business, while growing, requires careful navigation of state rate adjustments and potential mismatches.

Q & A Highlights

Q: How much of your investments moved out of Q1, and did Q1 come in line with your expectations? A: Celeste Mellet, Chief Financial Officer: Most of the impact of the incremental investments flowed through the MLR in the first quarter was only about 10 basis points. Many of the Stars investments ramped later in the quarter, and we expect them to be higher in the second through the fourth quarters. The expectations for the level of investments in the year remain the same, just later in the year versus the first quarter.

Q: Can you provide an update on your path to the 3% MA margin target and the impact of the Stars ruling? A: James Rechtin, President and CEO: We are focused on getting back to a 3% margin. The exact timing is tied to the outcome on Stars. There is no meaningful change or update from what we've communicated in the past.

Q: Can you provide more color on your experience in Part D relative to expectations, specifically regarding the pace that seniors are tracking into the catastrophic phase? A: Celeste Mellet, Chief Financial Officer: Trends across our business are consistent with our expectations. On the pharmacy side, we are seeing low double-digit growth, which is consistent with our expectations. We have seen higher trends in oncology, which were contemplated in our guidance.

Q: Can you provide an overview of the integration strategies between the Insurance segment and CenterWell, and share performance trends on some of the cohorts? A: James Rechtin, President and CEO: We are seeing strong patient growth in CenterWell, both from adding clinics and within existing clinics. The integration between CenterWell and the Insurance segment contributes positively to Stars performance, accurate diagnosis, and member retention. George Renaudin, President, Insurance: We are seeing better health outcomes, reduced ER visits, and better care adherence, which leads to positive Stars results and higher retention.

Q: What drove outperformance in the CenterWell segment earnings? A: Celeste Mellet, Chief Financial Officer: About a third of our beat in the quarter was driven by CenterWell, predominantly by PCO and pharmacy. Some of the outperformance was timing-related, but there is a portion that could be durable, such as favorable pharmacy drug mix and higher-than-expected patient growth.

Q: How are you thinking about the state rate mismatch in Medicaid and utilization trends? A: George Renaudin, President, Insurance: Medicaid is performing in line with expectations, with strong growth and modest improvement in margins as rates adjust to reflect recent trends. We have visibility to 76% of our rate for this year and feel good about our projections.

Q: Can you talk about the level of visibility you have on medical trends and the cadence of earnings throughout 2025? A: Celeste Mellet, Chief Financial Officer: Trends are developing as expected, with data through the end of April showing no surprises. Earnings will be front-loaded due to IRA, with higher earnings in the first quarter and lower in subsequent quarters. The guidance anticipates a doc fix in the third or fourth quarter, which could impact the end of the year.

Q: Is there any change in your thinking about the expected J curve of CenterWell's primary care cohort maturation post-v28? A: James Rechtin, President and CEO: There is no structural impairment to the performance of CenterWell businesses. We have operationalized efforts to offset the impact of v28, and we expect J curves to mature as before.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.