ROB STUYCK
rstuyck@cleveland-research.com
(216) 649-7210
ADAM DOEHREL
adoehrel@cleveland-research.com
(216) 649-7189
NICK FROSTINO
nfrostino@cleveland-research.com
(216) 649-7319
February 6, 2025
Humana (HUM: $290.53 - NEUTRAL)
Important disclosures can be found in Appendix
HUM: Outlook Remains Mixed Going Into 2025 (Cleveland Research)
Key Points
1. Feedback indicates 2025 MA enrollment is likely tracking in line with guidance
2. Hearing Med Supp market may see margin pressure in 2025 due to guaranteed issues
3. Utilization pressure appears to have continued through 4Q and feedback indicates it’s unlikely to abate near-term
Read Through To The Model
• Modeling HUM’s 2025 MA enrollment to decline -250k yr/yr or -4% compared to guidance of being down a few
hundred thousand yr/yr.
• Expect HUM’s 2025 PDP enrollment to grow 1.5% yr/yr compared to guidance of flat.
• Modeling 2025 MLR of 89.5%, down -80bps yr/yr, and Insurance operating costs to be flat yr/yr
• 2025 EPS estimate of $16.58 is $0.15 below consensus and compares guidance of >$16
Conclusion
Our research indicates HUM is likely seeing mixed trends across the business entering 2025. MA enrollment for HUM
appears to have largely been in line with expectations as HUM likely offset slightly softer member retention with increased
marketing investments late in AEP and during OEP. Additionally HUM likely saw some modest benefit from competitors’
plan suppressions and commission cuts.
MLR/utilization trends also appear mixed as the ongoing yr/yr pressures appear to have persisted through 4Q. In addition,
we are hearing expectations for similar utilization trends throughout 2025. Overall, we are modeling 2025 EPS of $16.58
which is $0.15 below consensus and compares to management guidance of >$16.
Highlights:
Feedback On AEP Performance Indicates Largely Inline Enrollment; Hearing Of Some Med Supp Concerns
• Our research indicates HUM likely performed in line with expectations for 2025 MA lives to be down several
hundred thousand. Feedback indicates while AEP was at or slightly below expectations, which was likely offset by
stronger OEP performance.
• Our research indicates HUM saw slightly worse member retention both from those impacted by plan terminations
as well as some members choosing to switch on their own.
• While other carriers made meaningful cuts to commissions and plan listings/suppressions during AEP, channel
feedback indicates HUM remained comfortable with plan margin and enrollment trends.
Humana Inc. Earnings and Market Data Summary
CRC Consensus CRC Consensus
1Q24 - $7.23 1Q25E $6.16 $6.95 Shares Outstanding 120.4 ROE (Latest Quarter) 7.9%
2Q24 - $6.96 2Q25E $6.54 $6.71 Market Cap (mm) $35,585 Book Value/Share $145.87
3Q24 - $4.16 3Q25E $3.64 $4.29 52-Week High $406.46 Debt/Cap 38.9%
4Q24E -$2.27 -$2.20 4Q25E $0.18 -$1.16 52-Week Low $213.31 Revenue (Trailing 4Qs) $115,010
Dec-24E $16.08 $16.15 Dec-25E $16.58 $16.73 AVG Daily Volume 1,555,664 5-Year Growth Rate 7.9%
Humana (HUM) - CRC
February 6, 2025
Page 2
ROB STUYCK
rstuyck@cleveland-research.com
(216) 649-7210
ADAM DOEHREL
adoehrel@cleveland-research.com
(216) 649-7189
NICK FROSTINO
nfrostino@cleveland-research.com
(216) 649-7319
• Additionally, feedback indicated late in AEP and during OEP, HUM provided incremental marketing support to
help boost enrollment which likely helped drive strong OEP results.
• Overall, we are modeling HUM’s 2025 MA enrollment to decline -250k yr/yr or -4% compared to guidance of being
down a few hundred thousand yr/yr.
• PDP feedback indicates CNC and CI likely gained share during AEP due to low-priced premium products. Our
research indicates HUM also likely gained share, though to a lesser extent. Feedback indicates HUM offered a
balanced mix of competitively priced premiums, broker commissions, and attractive formularies.
• Overall, we are modeling HUM’s 2025 PDP enrollment to grow 1.5% yr/yr compared to guidance of flat.
• Feedback on Med Supp margin during AEP has been cautious. With the increase in disenrolled members this year
across MA, there are more members eligible for Guaranteed Issue. We are hearing this contributed to higher Med
Supp sales during AEP. We are hearing of instances in several geographies where HUM’s Med Supp has seen
strong enrollment of potentially higher-risk members. Consequently, Med Supp may add some risk to 2025 MLR.
2025 MA Utilization Outlook Likely To Reflect Continued 2024 Trends
• Feedback indicates MA utilization trends in 2024 are likely to persist at similar rates throughout 2025.
• We are hearing of continued drivers to this stronger utilization environment including surgery volumes (both IP
and OP) as well as specialty pharmacy utilization.
• Overall it appears trend is unlikely to abate near term.
• Feedback indicates IRA implementation and the CMS rate notice for 2025 are likely offsetting most of the benefit
cuts by HUM and others. Consequently, we expect modest margin growth yr/yr for HUM’s Insurance segment,
largely driven by plan exits and SG&A management.
• We are modeling 2025 MLR of 89.5%, down -80bps yr/yr and Insurance operating costs to be flat yr/yr.
• Initial feedback on the 2026 CMS rate notice indicates the 4.3% increase is slightly better than plans expected and
may potentially be increased should CMS incorporate more data from 2H24 in the final rate notice.
Humana (HUM) - CRC
February 6, 2025
Page 3
ROB STUYCK
rstuyck@cleveland-research.com
(216) 649-7210
ADAM DOEHREL
adoehrel@cleveland-research.com
(216) 649-7189
NICK FROSTINO
nfrostino@cleveland-research.com
(216) 649-7319
APPENDIX
Important Disclosures
Companies Mentioned
Humana Inc – (HUM: $290.53 - Neutral)
Cigna Group – (CI: $293.31 – Neutral)
Centene Corp – (CNC: $60.73 – Not Covered)
Cleveland Research Company - Ratings Distribution
Rating
Percent
Buy
25%
Neutral
75%
Underperform
0%
Disclosures
Buy: The stock’s return is expected to exceed the market due to superior fundamentals and positive catalysts.
Underperform: The stock’s total return is expected to underperform the market due to weak fundamentals and a lack of catalysts.
Neutral: The stock is expected to be in line with the market due to full valuation and/or a lack of catalysts.
Valuation and Risk: Price targets are established under various valuation methods including P/E, P/S, EV/EBITDA on financial estimates based on forward earnings.
Price targets are not established for every stock. The price target’s effectiveness may be affected by various outside factors. Risk assessments can be found in the most
recent research on these stocks.
Other Disclosures: We, Rob Stuyck, Adam Doehrel, and Nick Frostino, certify that the views expressed in the research report(s) accurately reflect our personal views
about the subject security(s). Further, we certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendations or
views contained in the research report(s). CRC, its principals and partners, have investments and own a minority interest in a fund manager which may or may not have
a position in this security in the funds it manages and oversees. Cleveland Research Company provides no investment banking services of any type on this or any company.
Proprietary research and Information contained herein which forms the basis for findings or opinions expressed by Cleveland Research Company may be used by
Cleveland Research for other purposes in the course of compensated consulting and other services rendered to third parties. The information transmitted is intended
only for the person or entity to which it is addressed. Any review, retransmission, dissemination or other use of, or taking of any action in reliance upon, this information
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