Humana Inc. (HUM) Earnings Call Transcript & Summary

Welcome to the 2021 Annual Meeting of Humana stockholders. I would like to introduce the first presenter, Kurt Hilzinger, Chairperson of the Board for Humana, Inc.

Thank you. Good morning. The meeting will please come to order. I'm Kurt Hilzinger, Chairman of the Board of Directors 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 understanding of our decision to meet virtually again this year, as we continue to prioritize the safety of our associates, stockholders and stakeholders during the ongoing pandemic. I'd also like to reiterate that our strong preference is to hold an in-person annual meeting, and we hope to return to that format in 2022. 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 question about one of the matters on the agenda to be voted on, he or she may submit their question within the field provided in the web portal at or before the time the meetings -- the matters are before the meeting for consideration. We will respond to questions related to agenda matters before the stockholder voting 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 22, 2021. 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 129,010,557 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 elections 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 follow 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 13 directors of the company as identified in the proxy materials for this meeting; second, the ratification of PricewaterhouseCoopers LLP as the company's independent registered public accounting firm for the year ending December 31, 2021; 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 wish to change their previous proxy vote, then please use the voting options within the virtual meeting to record your vote at this time. I would now like to introduce members of the Board of Directors who are in attendance today: Bruce Broussard, Dr. Raquel Bono, Frank D'Amelio, Dr. Wayne Frederick, John Garratt, David Jones, Jr., Karen Katz, Marcy Klevorn, William McDonald, Jorge Mesquita, James O'Brien, Marissa Peterson. I'll now respond to questions. Joe, have there been any questions submitted related to today's business items?

Mr. Chairman, no questions have been submitted, neither in advance of the meeting nor during the meeting, related to items of business on today's agenda.

Thank you. Since there are no questions, we'll now close the polls. Please proceed with disclosing the voting results.

By order of the Chairman, the polls are now closed. The inspectors of election have presented their preliminary report to me, a copy of which will be filed within 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, 2021, 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 2021 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 describe in our filings with the SEC.

Thank you, Joe and Kurt, and thank all our Board members for their dedication and service, and we welcome our new Board members that recently joined the Board. And I also thank our over 50,000 employees for their service to the customers. Their passion for our customers is the reason for our success. Now turning to our success. As you can see, our financial growth has been considerable. Our earnings per share growth has grown at 15%, which is above our target growth of 11% to 15% long term. Our Medicare Advantage membership, which is really at the core of our organization, grew at above industry average of 11.7%, which industry average is around 8% to 9%. Our consolidated revenue grew at about 7%. Our consolidated revenue was impacted by the exit of -- from the public exchanges in '15 and '16 time frame; a continued focus on productivity of our organization and the ability for us to continue to be efficient, allowing further improvement in our margin; and in addition, deployment of capital in JV like Kindred, which is not reflected in our revenue growth. Turning our attention to our qualitative measurements. You can see the organization continues to increase from a quality point of view. Our customer experience this year increased by 670 basis points. Our associate engagement is at 93%, a world record and a great benchmark for us as an organization when compared to 88% in 2019. Our quality performance when measured from a clinical point of view and utilizing Stars is at 92%, which is leading our national competitors and second only to Kaiser. And then in our ability to advance our strategy, we've made great progress, especially in building our Healthcare Services division, which it was recently named CenterWell. Today, through the growth in 2021 and 2020, our primary care clinics are now serving 252,000 patients, which is one of the largest dedicated Medicare Advantage primary care clinic platforms in the nation. Second, in home health, we continue to demonstrate, by evolving the clinical models delivered in the home, we are able to improve individuals' health and reduce downstream costs such as admissions and ER visits. In addition, we've also been able to demonstrate that the home is more than just the traditional home health by expanding our home services, including primary care services and emergency room service through our investments in Heal and Dispatch in 2020. But as importantly, we've made great advancement in our integration of the member experience and assisting them with their health journey. Among other things this year in our technology platform, we've been able to prove that integration through our longitudinal health record is really increasing the clinical outcomes and simplifying the experience for our customer. In the past year, we've seen 10 million touch points in our longitudinal health record, which was developed about 18 months ago. As many of you know, the Humana brand is well recognized for its innovation, for its financial growth, for its customer centricity. But in 2020, we took a large leap forward with the launch of the brand campaign of human care. Our response in the pandemic, such as eliminating out-of-pocket expenses for COVID-related care, our investment in the communities during social unrest, our distribution of 22 million safety kits, our providing of 1 million meals or the distribution of 1 million diagnostic kits during the time that the health system was shut down, reinforce our brand of simplicity and focusing on best health. But this brand is also recognized by many. Our efforts have been recognized during 2020 by many different public entities that recognize our innovation, our dedication to our customers, our continued focus on our teammates' engagement and in addition, our continued financial success. So with that, Joe, I'll turn it over to questions if there are any.

Mr. Broussard, we have not received any questions in advance of or during the meeting. I'll turn it back to Mr. Chairman to close out our time.

Thank you, Joe. Thank you, Bruce. On behalf of the Board, I'd like to extend our appreciation to stockholders for your support and investment in the company. As a reminder, we welcome regular stockholder feedback, which can be provided at any time via the company's Investor Relations website. With that, I'll now conclude today's meeting. Thanks for joining us.

Thank you. The Annual General Meeting of Stockholders for Humana, Inc. has now come to an end. Thank you for attending. You may now disconnect.