September 23, 2014

Humana Inc.
Current Recommendation

NEUTRAL

Prior Recommendation

Outperform

Date of Last Change

09/04/2013

Current Price (09/22/14)

$134.78

Target Price

$142.00

(HUM-NYSE)
SUMMARY
Humana s strength lies in its prudent capital management,
focus on expansion and growth through acquisitions and
diversification, although the weak financial position raises
concern. The second quarter earnings were in line with
the Zacks Consensus Estimate but declined year over
year due to investments in health care exchanges and
high specialty drug costs. Higher Retail segment
membership and Medicare Advantage membership in the
Employer Group segment drove top line. Moreover,
consistent inorganic growth initiatives and capital
deployments raise optimism. The overhang of litigations,
competitive pressure and high debt levels are still
setbacks. The dependence on Medicare Advantage plans
and adverse impact of healthcare reform raise operational
risks. Nevertheless, strong Medicare business and stable
credit ratings are positives. We maintain our Neutral
recommendation on the stock.

SUMMARY DATA
52-Week High
52-Week Low
One-Year Return (%)
Beta
Average Daily Volume (sh)

$134.91
$91.21
41.92
0.70
994,947

Shares Outstanding (mil)

Market Capitalization ($mil)
Short Interest Ratio (days)
Institutional Ownership (%)
Insider Ownership (%)

154
$20,756
2.95
93
1

Annual Cash Dividend

Dividend Yield (%)

$1.12
0.83

5-Yr. Historical Growth Rates

Sales (%)
Earnings Per Share (%)
Dividend (%)

7.6
7.2
3.8

P/E using TTM EPS

20.2

P/E using 2014 Estimate

17.4

P/E using 2015 Estimate

15.2

Zacks Rank *: Short Term

1 3 months outlook

3 - Hold

Average,

Risk Level *
Type of Stock
Industry
Zacks Industry Rank *

Large-Blend
Med-Hmo
154 out of 267

ZACKS CONSENSUS ESTIMATES

Revenue Estimates
(In millions of $)

2012
2013
2014
2015

Q1

Q2

Q3

Q4

Year

(Mar)

(Jun)

(Sep)

(Dec)

(Dec)

10,219 A

9,699 A

9,651 A

9,557 A

39,126 A

10,486 A

10,321 A

11,712 A

12,222 A

10,319 A

10,187A

41,313 A

12,307 E

12,450 E

48,661 E
53,590 E

Earnings Per Share Estimates

(EPS is operating earnings before non-recurring items, but including employee
stock options expenses)

Q1
(Mar)

2012
2013
2014
2015

Q2
(Jun)

Q3
(Sep)

Q4
(Dec)

Year
(Dec)

$1.49 A

$2.16 A

$2.62 A

$1.19 A

$7.46 A

$2.95 A

$2.63 A

$2.31 A

-$0.19A

$7.70 A

$2.35 A

$2.19 A

$2.04 E

$1.15 E

$7.73 E
$8.86 E

Projected EPS Growth - Next 5 Years %

* Definition / Disclosure on last page

2014 Zacks Investment Research, All Rights reserved.

www.Zacks.com

111 North Canal Street, Chicago IL 60606

OVERVIEW
Founded in 1964 and headquartered in Louisville, KY., Humana Inc. is one of the largest health care plan
providers in the United States. Humana provides health insurance benefits under Health Maintenance
Organization (HMO), Private Fee-For-Service (PFFS), and Preferred Provider Organization (PPO) plans.
In addition to these, the company provides other benefits with specialty products including dental, vision,
and other supplementary benefits. Humana had approximately 13.6 million members in its medical
benefit plans, coupled with approximately 7.8 billion members in its specialty products at the end of Jun
2014.
During the first quarter of 2013, Humana realigned its business segments to reflect the evolving business
model. The company renamed its previous Health and Well-Being Services segment to Healthcare
Services . The segment included services offered to health plan members and third parties that promote
health and wellness, including primary care, pharmacy, integrated wellness, and home care services.
This business unit is now part of the Employer Group segment. Humana generates its premiums from the
Retail segment, Employer Group and Other Businesses, while service revenues are generated from
Retail, Employer Group, Healthcare Services and Other Businesses.
The Retail segment consists of Medicare and commercial fully insured medical and specialty health
insurance benefits, including dental, vision, and other supplemental health and financial protection
products, marketed directly to individuals.
The Employer Group segment consists of Medicare and commercial fully insured medical and specialty
health insurance benefits, including dental, vision, and other supplemental health and financial protection
products, as well as administrative services only (ASO) products marketed to employer groups.
The Other Businesses category consists of the Military services, primarily the TRICARE South region
contract, Medicaid, and long-term care businesses as well as the contract with Centers for Medicare &
Medicaid Services (CMS) to administer the Limited Income Newly Eligible Transition (LI-NET) program.
Humana remains focused on consistent inorganic growth. On Dec 21, 2010, Humana acquired
Concentra Inc., a private health care company based in Addison, for $804.7 million in cash.
On Sep 19, 2011, Humana s subsidiary, Concentra Inc., acquired four urgent care medical centers in
Atlanta from NextCare Inc. Further, in Dec 2011, the company acquired health care analytics company,
Antiva Health.
On Jan 4, 2012, Humana acquired California-based MD Care. MD Care is a Medicare Advantage (MA)
health maintenance organization that operates in four southern-California counties, namely Los Angeles,
Orange, San Bernardino and Riverside. It offers Medicare Advantage medical, prescription drug and
special needs plans.
On Apr 2, 2012, Humana acquired Arcadian Management Services, a Medicare Advantage health
maintenance organization for undisclosed terms. California-based Arcadian is a privately-held
organization that specializes in providing high-quality health care services to its members, most of whom
dwell in small and medium-sized communities.
Humana was obligated to divest Arcadian s Medicare Advantage business in Arizona, Arkansas,
Louisiana, Oklahoma and Texas. Humana completed the divestitures on Jan 3, 2013.
On Jul 9, 2012, Humana acquired chronic-care provider SeniorBridge for an undisclosed amount. The
purchase deal was announced in Nov 2011. NY-based SeniorBridge is a healthcare provider, which

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offers in-home care to seniors with chronic diseases such as Alzheimer s disease, Parkinson s disease
and congestive heart failure.
On Nov 5, 2012, Humana acquired Certify Data Systems, which facilitates exchange of healthcare data
between healthcare providers and patients.
On Dec 21, 2012, Humana acquired Metropolitan Health Networks Inc a FL-based medical services
organization for $850 million. The company paid $11.25 per share in cash to shareholders of
Metropolitan Health. Additionally, Humana will settle the outstanding debt of the acquired company.
On Sep 6, 2013, Humana acquired American Eldercare Inc., one of the major nursing home diversion
services providers in Florida.

REASONS TO BUY
Humana s Medicare business, which covers Medicare Advantage and Medicare Part D
Prescription Drug Plan (PDP) contracts with the federal government, accounted for approximately
81% of the total premiums and service revenues in 2009, 83% in 2010, 65% in 2011, 72% in 2012
74% in 2013 and 74% in the first half of 2014. Moreover, the Medicare Part D PDP in
collaboration with the Wal-Mart Stores Humana Walmart-preferred Rx plans allows Humana s
Medicare beneficiaries to save substantially more on premiums, prescription medication copayments and cost-shares compared to the previous drug plans. The plan has amplified the
individual Medicare stand-alone PDP membership noticeably due to its competitive pricing, which
is evident from the 52.1% year over year membership growth in 2011, 17.5% in 2012, around 7%
in 2013 and 20.5% in the first half of 2014. Growth has been driven by membership additions for
the Humana-Walmart plan offering. The raised guidance for Medicare stand-alone PDP
membership in 2014 to 575,000 625,000 from 550,000 600,000 further raises optimism. Its
recent endeavors towards increasing memberships, services and revenues are also promising. In
2013, Humana allied with Tokyo-based Astellas Scientific and Medical Affairs Inc. and others like
Boehringer Ingelheim Pharmaceuticals and Greenway Medical Technologies Inc. The growing
membership base provides the company with greater leverage to expand the network of PPO and
HMO providers. Through increased memberships, the company expects to provide HMOs in
around 65 new counties by 2015.
Humana has been expanding its business platform over the last several years. The company has
developed various commercial products designed to provide choices to employers who are facing
substantial premium increases driven by medical cost inflation. The alliance with CareSource in
Mar 2012 has helped expand services in Kentucky and some Long-Term Support Service (LTSS)
regions in Florida since second-quarter 2013. The addition of the Kentucky Medicaid Contract,
Florida TANF contract and the Florida LTSS contracts increased state-based Medicaid
membership by 130.9% year over year as of Jun 30, 2014. The company began offering its
services in Illinois in first-quarter and Virginia in the second quarter of 2014 that boosted the
Retail segment Individual Medicare Advantage membership. This is in line with the company s
expectations to cater to new members in Ohio, Illinois, Virginia and Florida in the first nine months
of 2014. Additionally, the Accountable Care agreements with St. Luke s University Health Network
and Regional HealthPlus in Dec 2013 Health4 in Mar 2014, UC San Diego Health System in Jun
2014, Tenet Healthcare in Jul 2014, Health Choice Preferred Network and Nebraska Health
network in Aug 2014, Iora Health in Sep 2016 and partnership with CoverMyMeds in Feb 2014
are all in line with the company s agenda to provide high-quality care to medical members at an
affordable price. Moreover, with the acquisitions of Arcadian, SeniorBridge, Concentra, MD Care,
Metropolitan Health and Antiva Health, Humana has increased its focus on its core business as a
health care provider, expanded its Medicare coverage, enhanced the quality and network of its
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healthcare services, and reduced its exposure to health care overhaul regulations. Additionally,
investment in trend vendor initiatives like Humana Chronic Cares Program and in-home care for
Humana members has fetched solid membership in 2013, with expectations of higher returns in
the upcoming quarters as well. Further, the acquisition of American Eldercare in Sep 2013 has
enhanced the core capabilities of Humana. We believe that an expansion of Humana s services in
Pennsylvania and provision of cost-effective care should enhance the company s membership
base, thereby paving the way for more revenue generation.
Humana has maintained a strong cash and short-term investment position over the past several
years, while efficiently deploying excess capital. This is evident from the 3.7% dividend increase
in Apr 2014, after a hike of 3.85% in Apr 2013 and 4% in Apr 2012. Further in Sep 2014, Humana
authorized a $2 billion share repurchase program, replacing its old $1 billion authorization, which
had $782 million remaining. This authorization will expire by Dec 2016. The company has issued
$1.75 billion worth of debts to fund this repurchase and intends to buy back $1 billion worth of
shares by mid-2015. We believe the pace of share repurchases and financial support from the
aforementioned debt will aid the timely completion of the share repurchase program. Going
ahead, we expect the company to continue strengthening its financials by boosting its cash
position and capital leverage. This in turn should help Humana to absorb the capital expenditure
and augment shareholder value, besides enhancing confidence in the stock.
Humana retains the confidence of the ratings agencies on the back of steady earnings coupled
with a strong capitalization. In Sep 2014, Moody s assigned the latest $1.75 billion debt issuance
at Baa3 , affirmed the existing debt ratings at Baa3 and IFS ratings of Humana s subsidiaries at
A3 with a stable outlook. In Aug 2014, Humana s financial strength, medium sized market
position, targeted capitalization and financial leverage, as well as strong liquidity and interest
coverage prompted Fitch to affirm its BBB debt rating on the company s senior unsecured notes
and the insurer financial strength rating of A on its insurance subsidiaries with a stable outlook.
In Sep 2014, A.M. Best also assigned the latest issuance with a bbb- rating and affirmed the
existing financial strength ratings, issuer credit ratings and debt ratings of Humana and its
operating subsidiaries with a stable outlook. In Dec 2012, S&P had rated these notes at BBB ,
reflecting Humana s strong market share in Medicare Advantage and Medicare Part D, robust
risk-adjusted capitalization, financial flexibility and strong growth trends.
The U.S. Department of Defense (DoD) has been awarding its TRICARE South Region contract
to Humana in order to administer health benefits to soldiers and their families in the 10-state
South region since 2003. However, the DoD initially awarded the current contract to a division of
Minnesota-based UnitedHealth Group Inc. After continuous protests by Humana, DoD reviewed
their decision and awarded the $23.5 billion 5-year contract to the company on Feb 25, 2011. The
new contract came into effect on Apr 1, 2012. Although TRICARE contributed 9.8% of the
company s premiums and services revenues in 2011, 3% in 2012, 1% in 2013 and in the first half
of 2014, the loss of contract would adversely affect the company's future revenue resources,
market retention and operating leverage.

REASONS TO SELL
Humana has been incurring higher-than-expected expenses owing to increases in operating,
depreciation and amortization costs. Increased benefits have also led to deteriorating benefit
ratios across most operating segments. Total operating expenses have persistently increased
since 2009. It rose year over year at the rate of 4.9% in 2009, 9.3% in 2010, 8.7% in 2011, 7.6%
in 2012, 5.8% in 2013 and 16.4% in the first half of 2014. This trend is expected to continue in the
upcoming period owing to higher-than-normal distribution costs and increase in commissions.
Additionally, higher drug cost trends around the hepatitis-C drug costs will likely lead to increase
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in overall expense for full-year 2014. Humana needs to initiate cost management to avoid the
negative impact on its financial position and pressure on its cash flow. High expenses may affect
the financials adversely in the long term due to capital erosion. Meanwhile, benefit expenses are
expected to increase over the next couple of years due to the restriction on charging higher
premiums from people with pre-existing medical conditions. Moreover, such memberships have
been rising, thereby weighing on margins.
Humana operates in a highly competitive industry. The company is facing intense pricing pressure
from competitors, particularly from BlueCross BlueShield. Competitors constantly look to grab
market share by offering lower prices and new innovative services that are different from those
offered by Humana. Moreover, since a significant portion of Humana s revenues are related to
federal government health care coverage programs, including the Medicare, TRICARE and
Medicaid programs, any adverse change in the reimbursement rates could severely hamper the
operating and financial leverage of the company.
The health care reform has reduced the selling season for the Medicare Advantage plans, which
are privately administered versions of the federal health program for seniors. This is expected to
lower the sale of Medicare Advantage products, signaling bad news for Humana, since it is
heavily reliant on Medicare Advantage revenue. Moreover, as per the Health Care Reform Law,
Humana will have to pay health insurance industry fee. In this regard, the company expects to
incur a payment of $560 million in 2014 and this fee is expected to increase by 41% in 2015.
Moreover, the establishment of the minimum medical loss ratios is increasing the costs of
healthcare companies. Also, the restriction on charging higher premiums from people with preexisting medical conditions should increase the benefit expenses 2014 onwards. Further, some
provisions under Obamacare like ban on annual and lifetime coverage caps, annual fees on
health insurance companies and excise tax on high premium insurance policies will likely increase
expenses. Additionally, based on the CMS provided medical cost trend assumptions that relate to
the Medicare Advantage funding changes in 2015, Humana expects Medicare advantage funding
to decline by 2%. Overall, the provisions of the new law are likely to pressure profits as Humana
and other health insurers will be affected by the present weak demand for their products and
services.
The overhang of litigations continues to have an adverse effect on the company. Humana is
facing government probe on certain aspects related to Medicare and Medicaid operations in the
Florida region. Such litigations weigh on investors sentiment and hamper the company s goodwill.
Further capital expenditure has increased over the past few years. It increased 20% in 2010 and
55.9% in 2011, 18.5% in 2012, 7.8% in 2013 and 15.5% in the first half of 2014. Higher expenses
related to growth in provider services and pharmacy businesses in Humana s Healthcare Services
segment compelled the company to provide the 2014 capital expenditure guidance range of
$525 $575 million, much higher from the 2013 level. Additionally, medical cost inflation, resulting
from a severe flu season and higher operating costs have persistently weighed on margins over
the past years. All these factors accounted for a year-over-year operating cash flow decline of
7.2% in 2011, 7.5% in 2012, 10.8% in 2013 and 19.5% in the first half of 2014. Additionally, the
effect of the commercial risk adjustment, risk corridor and reinsurance provisions of the Health
Care Reform are affecting the operating cash flow timings adversely. Thus, operating cash flow is
expected to decline year over year for full-year 2014 as well. Moreover, the U.S. economic
weakness, which has been adversely affecting operating results and cash flow, raises skepticism
about the company s ability to engage in deleveraging activities and thereby improve the debt-tocapital ratio. Debt-to-capital ratio deteriorated to 23% in 2012 from 17% in 2011. Although the
ratio improved slightly in 2013 and the first half of 2014, the recent $1.75 billion debt issuance and
softness in the current cash flow levels raise apprehension for the future.

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RECENT NEWS
Humana Q2 Earnings in Line with Estimates, Down Y/Y

Jul 30, 2014

Humana second-quarter 2014 operating earnings came in at $2.19 per share, in line with the Zacks
Consensus Estimate. Moreover, results compared unfavorably with $2.63 per share earned in the yearago quarter.
The year-over-year decline was due to the investments in healthcare exchanges and state-based
contracts, along with an increase in specialty drug costs related to a new treatment of Hepatitis C.
Moreover, the last comparable quarter included pre-tax expenses associated with Humana s exit from the
Puerto Rico Medicaid business in Sep 30, 2013.
Revenues at Humana for the reported quarter climbed 18.4% year over year to $12.2 billion. Higher
medical membership in the Retail segment and Medicare Advantage membership in the Employer Group
segment led to an increase in premiums and services revenues that mainly drove overall revenues in the
reported quarter. Revenues also surpassed the Zacks Consensus Estimate of $11.9 billion. However,
Humana s investment income remained flat year over year at $92 million.
Quarterly Review
Humana s consolidated benefit ratio, which reflects the percentage of benefit expenses in premium
revenues, decreased 30 basis points (bps) year over year to 83.1%. This improvement was attributable
to Humana s exit from the Puerto Rico Medicaid business in Sep 2013, partially offset by a decline in
Retail and Employer Group benefit ratios.
Humana s consolidated operating cost ratio, which reflects the percentage of operating costs in total
revenue less investment income, rose 80 bps year over year to 15.1%. The increase primarily resulted
from a rise in ratios in the Retail and Employer Group.
Quarterly Results by Segment
Retail Segment: The segment s pre-tax income declined 21.3% year over year to $329 million due to
higher benefit and operating cost ratio.
Reported premiums and services revenues increased 27.2% to $8.6 billion in the reported quarter. The
upside primarily reflects a 16.2% year-over-year increase in individual Medicare Advantage membership
and higher membership associated with healthcare exchanges.
The benefit ratio was 84.7%, deteriorating from 84.2% in the prior-year quarter. This deterioration
stemmed from a decline in favorable prior-year medical claims reserve development, increase in
specialty drug costs associated with the treatment of Hepatitis C and an increase in benefit ratios related
to the new members from healthcare exchange offerings. Operating cost ratio deteriorated 190 bps to
11.4% in the reported quarter. This deterioration stemmed mainly from marketing and distribution
expenses for Medicare Advantage members, investment spending for healthcare exchanges and new
state-based contracts, and non-deductible health insurance industry fee as per the healthcare reform.
Employer Group: This segment of Humana incurred pre-tax income of $89 million, comparing
unfavorably with $134 million in the year-ago period. This decline came from a rise in the benefit and
operating cost ratio in the segment.
The benefit ratio was 83.4%, up 90 bps year over year, reflecting a decline in the favorable prior-year
medical claims reserve development and an increase in the specialty prescription drug costs. Operating
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cost ratio increased 90 bps to 16.0% due to the effect of the non-deductible health insurance industry fee
and other fees, and an increase in the percentage of small group commercial group business with a
higher operating cost ratio than large group business.
Meanwhile, reported premiums and services revenues increased 9.2% to $3.1 billion, primarily on the
back of an increase in average group Medicare Advantage membership.
Healthcare Services: Pre-tax income for the segment rose to $206 million from $124 million in the
second quarter of 2013. The upside was attributable to higher revenues and profits from the pharmacy
solutions business and the home-based services businesses of Humana.
Revenues at this segment also rose 27% year over year to $4.97 billion, mainly on improvement in the
pharmacy solutions and home-based services businesses. Growth in the pharmacy solutions business
also improved the operating cost ratio by 80 bps year over year to 95.1% in the reported quarter.
Other Business: The other business segment reported a pre-tax income of $17 million, comparing
favorably with a pre-tax loss of $30 million in the year-ago quarter. The improvement was largely
attributable to the absence of expenses related to the loss of the Medicaid contracts in Puerto Rico.
Financial Update
Humana s operating cash outflow was $200 million in the second quarter of 2014 against a cash inflow of
$173 million in the second quarter of 2013. Receivables that were recorded in the reported quarter
associated with the premium stabilization programs and lower net income mainly led to the downside.
As of Jun 30, 2014, cash, cash equivalents and investment securities of Humana were $9.2 billion, lower
than $10.94 billion as of Dec 31, 2013. The decline was owing to the funding of the working capital
requirements associated with the PartD reinsurance subsidies and an increase in receivables related to
the premium stabilization programs.
The debt-to-capital ratio of Humana as of Jun 30, 2014 was 20.6%, representing a 120 bps improvement
from 21.8% as of Dec 31, 2013. The improvement was due to higher capitalization related to earnings in
the second quarter of 2014.
Share Repurchase Update
In Apr 2014, the board of directors of Humana replaced the previous $1 billion share repurchase
authorization with a new $1 billion program. The previous authorization had shares worth $569 million
remaining to be repurchased. The new program is scheduled to expire on Jun 30, 2016.
During the second quarter of 2014, Humana spent $101 million to buy back 0.8 million shares. Currently,
the company is left with shares worth approximately $899 million under this program.
On Sep 16, 2014, Humana approved a $2 billion share repurchase authorization. This buyback will
replace the previous program of $1 billion, which had $782 million remaining to be repurchased. The
latest share repurchase program is scheduled to expire on Dec 31, 2016.
2014 Outlook
Humana reiterated its earnings per share (EPS) guidance for 2014 in the range of $7.25 to $7.75 on
revenues of $47 billion to $49 billion. This is on expectations of a consistently strong performance by the
existing operations of Humana, higher-than-expected specialty drug costs for Hepatitis C treatment,
increase in planned investments in clinical initiatives and a decline in investment spending and start-up
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costs for the healthcare exchange business. The guidance lies below the Zacks Consensus Estimate of
$7.86 for 2014. Additionally, operating cost ratio is expected to be in the range of 15.4% 16.0%.
Dividend Update
On Aug 27, 2014, the board of directors of Humana declared a quarterly cash dividend of $0.28 per
share, payable on Oct 31, 2014, to shareholders of record as of Sep 30, 2014.
Business Update
On Aug 26, 2014, Humana announced an Accountable Care alliance with the Nebraska Health Network.
As part of the agreement, Humana, in association with Health Network of Nebraska, the healthcare
delivery organization jointly owned by Methodist Health System, The Nebraska Medical Center and their
affiliated physicians, will form an Accountable Care Organization (ACO) in Jan 2015 to cater to MA
members in the greater Omaha area.
On Aug 19, 2014, Humana formed an ACO with one of the divisions of IASIS Healthcare, namely Health
Choice Preferred Network. As part of the deal, Humana, in association with Health Choice, will launch the
Accountable Care program in the counties of Salt Lake, Davis, Utah and Weber to serve Humana
Medicare Advantage members.
On Aug 5, 2014, Humana s wellness and rewards program HumanaVitality launched a mobile application
to help its members with employer-sponsored insurance plans to form and track personal wellness goals.
On Sep 16, 2014, Humana partnered with Iora Health to form an ACO in Arizona and Washington.
Senior Notes Update
On Sep 16, 2014, Humana issued $1.75 billion of senior notes comprising 2.625% $400 million notes due
Oct 1, 2019, 3.850% $600 million notes due Oct 1, 2024 and 4.950% $750 million notes due Oct 1, 2044.
Humana expects to generate $1.73 billion in net proceeds from the debt issuance, which the company
intends to deploy for redeeming $500 million 6.45% senior notes due Jun 2016, funding the $2 billion
buyback program and for future share buybacks. The remaining proceeds will be utilized for general
corporate purposes.

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VALUATION
The shares of Humana currently trade at 17.4x our 2014 earnings estimate, a 7% discount to the 18.6x
industry average. On a price-to-book basis, the shares trade at 2.0x, at a 9% discount to the 2.2x industry
average. The valuation on a price-to-book basis looks attractive, given the trailing 12-month ROE of
12.5%, which is above the industry average of 3.0%.
Our six-month target price of $142.00 equates to 18.4x our earnings estimate for 2014. Combined with
the $1.12 per share annual dividend, this target price implies an expected total return of 5.8% over that
period. This is consistent with our Neutral recommendation on the shares.
Additionally, the quantitative Zacks Rank for Humana is currently 3 , indicating no clear directional
pressure on the shares over the near term. Short interest ratio is currently 3.0 days.

Key Indicators

P/E
F1

P/E
F2

Est. 5-Yr
EPS Gr%

P/CF
(TTM)

P/E
(TTM)

P/E
5-Yr
High
(TTM)

Humana Inc. (HUM)

17.4

15.2

8.0

11.5

20.2

16.8

6.5

Industry Average
S&P 500

18.6
17.2

14.8
16.1

13.3
10.7

9.9
15.4

19.5
18.5

45.9
27.7

8.8
12.0

13.8
15.1
41.2
22.6

7.2
7.5
9.2
6.8

10.2
12.7
11.7
11.4
12.9
9.9
14.0
13.1
10.3
15.8
17.5
21.4
17.5
19.2
23.6
15.5
20.4
14.5
17.7
22.5
TTM is trailing 12 months; F1 is 2014 and F2 is 2015, CF is operating cash flow

Aetna Inc. (AET)

WellPoint Inc. (WLP)
Centene Corp. (CNC)
Health Net Inc. (HNT)

P/E
5-Yr
Low
(TTM)

P/B
Last
Qtr.

P/B
5-Yr High

P/B
5-Yr Low

ROE
(TTM)

D/E
Last Qtr.

Div Yield
Last Qtr.

Humana Inc. (HUM)

2.0

2.0

1.1

12.5

0.3

0.9

5.7

Industry Average
S&P 500

2.2
4.6

2.2
9.8

2.2
3.2

3.0
23.1

0.5
NA

0.8
1.9

3.4
NA

Equity Research

EV/EBITDA
(TTM)

HUM | Page 9

Earnings Surprise and Estimate Revision History

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DISCLOSURES & DEFINITIONS

The analysts contributing to this report do not hold any shares of HUM. The EPS and revenue forecasts are the Zacks Consensus
estimates. Additionally, the analysts contributing to this report certify that the views expressed herein accurately reflect the analysts personal
views as to the subject securities and issuers. Zacks certifies that no part of the analysts compensation was, is, or will be, directly or indirectly,
related to the specific recommendation or views expressed by the analyst in the report. Additional information on the securities mentioned in this
report is available upon request. This report is based on data obtained from sources we believe to be reliable, but is not guaranteed as to
accuracy and does not purport to be complete. Because of individual objectives, the report should not be construed as advice designed to meet
the particular investment needs of any investor. Any opinions expressed herein are subject to change. This report is not to be construed as an
offer or the solicitation of an offer to buy or sell the securities herein mentioned. Zacks or its officers, employees or customers may have a
position long or short in the securities mentioned and buy or sell the securities from time to time. Zacks uses the following rating system for the
securities it covers. Outperform- Zacks expects that the subject company will outperform the broader U.S. equity market over the next six to
twelve months. Neutral- Zacks expects that the company will perform in line with the broader U.S. equity market over the next six to twelve
months. Underperform- Zacks expects the company will under perform the broader U.S. Equity market over the next six to twelve months. The
current distribution of Zacks Ratings is as follows on the 1116 companies covered: Outperform - 16.7%, Neutral - 77.4%, Underperform 5.4%.
Data is as of midnight on the business day immediately prior to this publication.
Our recommendation for each stock is closely linked to the Zacks Rank, which results from a proprietary quantitative model using trends in
earnings estimate revisions. This model is proven most effective for judging the timeliness of a stock over the next 1 to 3 months. The model
assigns each stock a rank from 1 through 5. Zacks Rank 1 = Strong Buy. Zacks Rank 2 = Buy. Zacks Rank 3 = Hold. Zacks Rank 4 = Sell. Zacks
Rank 5 = Strong Sell. We also provide a Zacks Industry Rank for each company which provides an idea of the near-term attractiveness of a
company s industry group. We have 264 industry groups in total. Thus, the Zacks Industry Rank is a number between 1 and 264. In terms of
investment attractiveness, the higher the rank the better. Historically, the top half of the industries has outperformed the general market. In
determining Risk Level, we rely on a proprietary quantitative model that divides the entire universe of stocks into five groups, based on each
th
stock s historical price volatility. The first group has stocks with the lowest values and are deemed Low Risk, while the 5 group has the highest
values and are designated High Risk. Designations of Below-Average Risk, Average Risk, and Above-Average Risk correspond to the
second, third, and fourth groups of stocks, respectively.

Research Analyst

Rageshree Bose

Copy Editor

Ananya Sarkar

Content Ed.

Meenakshi Sharma

Lead Analyst

Meenakshi Sharma

QCA

Tanuka De

Equity Research

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