Humana Inc.

What they do

The Insurance segment sells Medicare benefits to individuals and group Medicare accounts, stand-alone prescription drug plans and the LI-NET drug plan contract with CMS, state-based Medicaid and dual eligible contracts, and specialty products such as dental and vision, plus the Military services business (primarily the T-5 East Region contract) and the operations of its PBM business. The CenterWell segment provides pharmacy solutions, primary care, and home solutions designed to support health plan members and third parties. The company describes an integrated care delivery model that unites care, member engagement, and data analytics, including helping providers move from fee-for-service to value-based arrangements. During 2025, 83% of total premiums and services revenue came from federal government contracts, including 14% from individual Medicare Advantage contracts in Florida covering approximately 1.0 million members.

Revenue drivers

• Insurance segment - Medicare — Consists of Medicare benefits marketed to individuals or directly via group Medicare accounts, and is the core of the company's premium revenue; the segment also carries the CMS LI-NET prescription drug plan contract and state-based Medicaid contracts.
• Insurance segment - specialty and military — Includes specialty health insurance benefits such as dental, vision, and other supplemental products marketed to individuals and employer groups, the Military services business (primarily the T-5 East Region contract), and the operations of the PBM business.
• CenterWell — Houses pharmacy solutions, primary care, and home solutions operations, with services intended to enhance the healthcare experience and potentially lower utilization and drug costs; senior primary care has been expanding, with YTD growth of 130,900 patients, or 27 percent.
• Federal government contracts — 83 percent of 2025 total premiums and services revenue came from contracts with the federal government, including 14 percent from individual Medicare Advantage contracts in Florida with CMS.

Recent performance

For the quarter ended June 30, 2026, Humana reported GAAP income before income taxes and equity in net losses of $952 million and GAAP diluted EPS of $5.73, versus $741 million and $4.51 in the second quarter of 2025. Adjusted pretax results were $1,248 million in 2Q26 compared with $1,017 million in 2Q25, and adjusted EPS was $7.61 versus $6.27. For the six months ended June 30, 2026, GAAP EPS was $15.55 and adjusted EPS was $17.91, compared with $14.81 and $17.85 in the first half of 2025. The 2Q26 Insurance segment GAAP benefit ratio was 91.2 percent, which management said was in line with its guidance of slightly above 91 percent.

Strategy

Humana is executing a substantial multi-year transformation program intended to re-align its cost structure, operating model, and technology footprint with evolving market conditions, and it recorded value creation charges of $56 million and $154 million for the three and six months ended June 30, 2026. The company finalized its exit from the Employer Group Commercial Medical Products business in 2025, determining that business was no longer positioned to sustainably meet commercial members' needs or support long-term strategic plans. It is pursuing strategic expansion of its CenterWell and Medicaid footprints, including the February 13, 2026 acquisition of MaxHealth, a Florida-focused primary care platform, for approximately $908 million net of cash acquired, and the award of a statewide Illinois Medicaid managed care contract expected to go live in January 2027. Management continues to expect additional value creation charges over the course of the program.

Risks

• Benefit expense estimation and pricing — Humana estimates benefit costs using actuarial methods and assumptions, and premiums are generally fixed for one-year periods, so costs exceeding projections generally are not recovered through higher premiums in the contract year.
• Federal government concentration — 83 percent of 2025 total premiums and services revenue came from federal government contracts, including 14 percent from individual Medicare Advantage contracts in Florida with CMS, exposing results to changes in those programs.
• Star Ratings headwind — The company's FY 2026 Adjusted EPS guidance anticipates a year-over-year decline as a result of the Star Ratings headwind for Bonus Year 2026, net of mitigation.
• Transformation and impairment charges — Humana recorded value creation charges of $449 million in 2025 and $154 million in the first half of 2026, plus separate impairment charges of $253 million in 2025 and $21 million in the first half of 2026, and expects additional charges over the course of the program.

Outlook

Humana affirmed its FY 2026 Adjusted EPS guidance of at least $9.00 while revising GAAP EPS guidance to at least $6.52 from the previous estimate of at least $8.36. Management affirmed FY 2026 Insurance segment benefit ratio guidance of 92.75 percent, plus or minus 25 basis points, and reaffirmed FY 2026 individual Medicare Advantage membership growth of approximately 25 percent over 2025, driven by new sales and improved retention from its customer-led benefit strategy and changes to its customer service approach. The FY 2026 Adjusted EPS guidance anticipates a year-over-year decline due to the Star Ratings headwind for Bonus Year 2026, net of mitigation.