Humana Inc. (HUM) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by. Welcome to the Humana Annual Meeting of Stockholders Call. [Operator Instructions] I would now like to hand the conference to your speaker today, Kurt Hilzinger. Please go ahead, sir.

The meeting will please come to order. I'm Kurt Hilzinger, Chairman of the Board of Humana Inc., and I will act as Chairman of this meeting. Joe Ruschell, Associate Vice President, Assistant General Counsel and Corporate Secretary of the company, will act as Secretary of the meeting. I'd like to begin by welcoming all stockholders and guests. Thank you for attending and for being flexible and understanding, as we move from an in-person format towards a virtual setting in light of the ongoing public health concerns regarding the COVID-19 outbreak. Please be advised that all materials that would have been made available to you in person, including the company's most recently filed proxy statement and annual report on Form 10-K are available electronically as links within the webcast. In addition, we have made available the rules of conduct for this meeting, which we ask participants to follow so that we may conduct the meeting in an orderly fashion. As outlined in the rules of conduct, I wish to remind you that only stockholders may address the meeting. If a stockholder has a comment or question about one of the matters on the agenda to be voted on, he or she may submit their comment or question within the field provided in the web portal at or before the time the matters are before the meeting for consideration. We will respond to comments or questions related to the agenda matters before the stockholder meeting period closes. At this time, I'd like to ask Joe to give a report of the Corporate Secretary.

Thank you, Mr. Chairman. The record date for voting at this meeting was the close of business on February 24, 2020. An affidavit will be incorporated into the minutes of this meeting, attesting that notice of this meeting was properly given, that a stockholder list, as of the record date, has been maintained for review and that the inspectors of election appointed by the Board of Directors have been duly sworn in. The stockholder list shows that holders of 132,123,850 shares of common stock of the company are entitled to vote at this meeting. Based on a preliminary report, I have been informed by the inspectors of election that a quorum is present.

Thank you. The meeting is therefore properly convened for the transaction of business. Following the business portion of this meeting, Bruce Broussard, Humana's President and Chief Executive Officer, will provide a report on current corporate affairs. We will then allow time to review and respond to questions submitted by stockholders, if any, that are unrelated to the business items on the agenda and which are germane to the business of the company. You may submit those questions at any time during the nonbusiness portion of the meeting. Joe, please begin with a report on the items of business for today's meeting.

There are 3 items of business being considered at today's meeting, each of which has been moved for approval by the Board of Directors and seconded by proxy. First, the election of 12 Directors of the company as identified in the proxy material for this meeting. Second, the ratification of PricewaterhouseCoopers LLP as the company's independent registered public accounting firm for the year ending December 31, 2020. And third, an advisory vote with respect to the compensation of the company's named executive officers as disclosed in the proxy materials.

Thank you. We'll now open the window for voting. If there are any stockholders present who have not already voted by proxy or who wish to change their previous proxy vote, then please use the voting options within the virtual meeting to record your vote at this time. Joe, have there been any questions submitted related to today's business items?

Mr. Chairman, no questions have been submitted related to items of business.

Thank you. I'd now like to introduce members of our Board of Directors who are in attendance today: Bruce Broussard; Frank Bisignano; Frank D'Amelio; Roy Dunbar; Dr. Wayne Fredrick; John Garratt; David Jones, Jr.; Karen Katz, William McDonald, James O'Brien and Marissa Peterson.

The polls are now closed. The inspectors of election have presented their preliminary report to me, a copy of which will be filed with the minutes of this meeting. According to the preliminary report, each of the Director nominees has been elected; PricewaterhouseCoopers has been ratified as the company's independent registered public accounting firm for the year ending December 31, 2020; and the advisory vote with respect to the compensation of the company's named executive officers has been approved.

Thank you, Joe. There being no further business to come before the meeting, the 2020 Annual Meeting of Stockholders is now adjourned.

At this time, Bruce Broussard, Humana's President and Chief Executive Officer, will make some remarks. Let me remind you that we may make forward-looking statements during this portion of the meeting, including predictions, projections or other statements about future events. Actual results may differ materially from these forward-looking statements because of a variety of risks and uncertainties about our business, which we described in our filings with the Securities and Exchange Commission.

Joe, thank you. And before -- I start, I'd like to say thank you for all the frontline caregivers for their dedication and seeing -- and serving so many of the affected individuals with this virus. Without their unselfishness efforts, this country would not be able to think about the plan of reentry. So thank you very much. Moving on to the first slide of our presentation. I would like just to say one aspect that really defines, I think, where Humana is today, and that is that it is a healthy organization. An organization that is -- our successful financial results are a result of our growing customer base, our increasing productivity via long-term investments in our integrated strategy. This balanced approach is not only benefiting our shareholders, but our employees, our customers and our governmental partners. As you look at the statistics from a financial point of view, you see strong growth. You've seen 16% EPS growth over the last 5 years. But more importantly, you've seen, in the last few years, significant growth, especially from 2018 to 2019 of 22%. We continue to grow our membership base in our most critical business, Medicare Advantage. In the last few years, since the Aetna break, we've grown our membership greater than 10% per annum. And then lastly, our revenue growth continues to be strong, especially the last year of a 14% growth. As we turn our attention to the environment at hand, the COVID-19 virus, I want to spend just a few minutes of where the company is at. As we entered the virus and began our planning in late January, we looked at the orientation around 3 areas: safety, comfort and confidence. Our initial orientation, both for our associates and for our members, is to ensure their safety. For our associates, we have moved over 50,000 individuals to -- at a work-at-home environment. That new environment brought some unique challenges for our associates, and we wanted to ensure not only their safety, but comfort. And so we helped support them through an extended PTO Bank and in addition, caregiving and babysitting allowance. As we began to have the safety of our associates, we were then able to turn to the safety of our members. The safety of our members and the [ comfort ] of our members started with ensuring that there was never a financial barrier for them to receive the appropriate care and testing for the virus, which resulted in us waiving all out-of-pocket costs for them. In addition, we've set up a dedicated outreach program for our customers. And being able to ensure that they are getting the proper lifestyle support and in addition, care, recognizing that the health care system is somewhat preoccupied by the virus. This has included shipping over close to 30,000 meals, helping individuals with prescriptions with the doctors being -- offices being shut down. In addition, helping with items like -- in behavioral health like loneliness and being able to bring virtual solutions to care, including telehealth and in-home support. And then lastly, we know this time has been challenging for many providers as a result of the health care system being oriented to the virus as opposed to the more traditional treatments. And so we wanted to ensure that our providers are being supported from a financial point of view. So we advanced close to $1 billion of cash. In addition, we've also tried to ensure that they have the time and energy to focus on giving care to individuals that are in need today, and we removed the traditional complexity both administratively and paperwork-wise. As we turn our attention from the COVID virus and how we've reacted to it, I'd like to spend a minute on what it has meant to us from a strategy point of view. It continues to reinforce the strength of our strategy. Wrapped around simplicity, expanded access points, and the ability for us to deliver care in a way that is not only trading individuals, but looking at individuals holistically. And the virus has proven that our digital strategy, our value-based approach, our distributed care models, including in primary care centers to home, to virtual is at the core of our strategy. And it's at the core of what you see coming out of the virus and the demands on the health care system. So more than ever, we believe the strategy long term that supports our belief that the integration of population health management and offering key value health services is the strength of a competitor in the future. As I talk about balance and turn our attention to the next slide, I want to talk about what that means. Our quality over the last few years has continued to increase, which as you look in 2018 and '19 from our Star scores, 92% of our plans are in 4 Stars -- members are in 4 Stars or greater plans. Secondarily, we continue to advance our value-based relationships with our providers. Today, 67% of our members are in providers that are offering value-based services. And then lastly, we could not have the success we have without our engagement of our associates. And today, our engagement level is at a record of 94% for our associates. Now those are internal stats, but externally, we see the same kind of support and recognition. And I will not read all the various different awards that the organization has gotten. We are not boasting, it is just to reconfirm our success, not only financially, but also from our customers' perspective, from our providers' perspective and from our associates' perspective. So I'll conclude and say thank you for your continuous support. And as I started out today, we believe the company is as healthy as ever, and executing in a balanced way around delivering financial results, investing for the long term and improving the experience of customers and our associates while continuing to support our partners, both governmentally and from a provider point of view. So with that, Joe, I'll end the presentation and open it up for questions.

Thank you, Bruce. At this time, we have not received any questions.

So this will conclude the business portion in the overview of the organization. Is that correct, Joe?

Yes. Thank you, Bruce. Kurt, would you like to close this out?

No, I'll let you take the privilege.

Listen, I'd just like to thank everybody in attendance for your time and interest today. Humana is on a wonderful track record, and we look forward to a terrific 2020 as well. Thank you very much for attending.

Thank you.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.