Humana Inc. (HUM) Earnings Call Transcript & Summary

Hello, and welcome to the Humana Inc. Annual Shareholders' Meeting. Please note that all participants are in listen only mode and that today's meeting is being recorded. It is now my pleasure to turn today's meeting over to Kurt Hilzinger. The floor is yours.

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, Vice President, Associate General Counsel and Corporate Secretary of the company, will act as Secretary of the meeting. Joining us on stage is Bruce Broussard, Humana's President and Chief Executive Officer. I'd like to welcome all stockholders and guests to this meeting, including those stockholders participating through our webcast. 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. And in fairness to all stockholders, please do not address the meeting until recognized and limit your remarks to no longer than 3 minutes. At this time, I'd ask Joe to give a report of the Secretary.

Mr. Chairman, the record date for voting at this meeting was the close of business on February 28, 2023. Affidavit will be incorporated into the minutes of this meeting, attesting that notice of the meeting was properly given, that the 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. Stockholder list shows that holders of 125,074,627 shares of common stock of the company are entitled to be voted 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 will provide a report on current corporate affairs. We will then allow time to review and respond to questions from stockholders, if any, which are germane to the business of the company. Joe, please begin with a report of the items of business for today's meeting.

There are 4 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 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, 2023; third, an advisory vote with respect to the compensation of the company's named executive officers as disclosed in the proxy materials; and fourth, an advisory vote with respect to the frequency with which future stockholder votes on the compensation of the named executive officers will be held.

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 raise your hand and the inspectors of election will provide you with a ballot. I'd like to now introduce the members of the Board of Directors, all of whom are present via webcast or in person. For those attending in person, as I call your name, please stand and be recognized. Bruce Broussard; Dr. RaQuel Bono; Dr. David Feinberg; Dr. Wayne Frederick; [Technical Difficulty] John Garratt; Karen Katz; [Technical Difficulty]; Marcy Klevorn; Jorge Mesquita; [Technical Difficulty] Brad Smith. We'll now close the polls. Joe, 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 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, 2023. The advisory vote with respect to the compensation of the company's named executive officers has been approved and stockholders have recommended an annual advisory vote with respect to future stockholder votes on the compensation of the named executive officers.

Thank you, Joe. I'll now entertain a motion to adjourn.

So moved.

All in favor? [Voting]

Opposed? [Voting]

The motion is carried. The 2023 Annual Meeting of Stockholders is now adjourned.

The 2023 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 will describe in our filings with the SEC.

Thank you, Joe, and welcome, everybody. I will just make a few opening comments about just where we are with Humana. First, our purpose of health first, it really describes our objectives, and that is both to help our customers be healthy, our company be healthy and also our teammates. And we've been on a strategy for quite a number of years around the integrated strategy, which is about providing quality health insurance integrated with providing health services. Over the last year, we've made great progress on both. First, this year, we've established 2 segments: our health insurance segment and in addition, our CenterWell segment, representing really the strategy and what we're about as a company around health first. Second, we also decided to exit the commercial business. That decision was really around where we most have the best opportunities and are capable of serving the most customers. And then third, we did appoint 2 leaders to each of these divisions, one George Renaudin and the other one is Sanjay Shetty. And we really are looking forward to continuing to grow both of those businesses, which I'll get into a little bit of detail here. As you look at the company over the last few years, we have grown at a 15% compounded growth rate for our earnings per share and 13% from a revenue point of view. As you look from transition from 2021 to 2022, our earnings per share grew actually at 22% as a result of strong customer growth, which I'll go into a minute, but also the deployment of capital, allowing us to grow at a much faster rate than our revenue. As you look at our customer growth, which really leads by our Medicare Advantage growth. You'll see that we are continuing to grow faster than the industry. For the last 4 years, we've grown at 10.4% compared to 9.7% for the industry. That continued in 2023. We've had a wonderful year this year, and we will exceed actually 15% growth as we complete 2023. As you look at the other parts of the business, we continue to be oriented to our quality scores, which today represent 96% of our members are in 4-star plans or greater. We continue to grow organically our Medicaid membership by winning the Louisiana and Ohio Medicaid program. And then third, we're one of the only ones to really complete the TRICARE award. There is 2, but one is being contested, the West and the East is the one that [ we are looking forward ] to continuing to be a strong partner [Technical Difficulty] the government. CenterWell primary care continues to grow. It added -- grew our patients by 14%. And today, we are the largest senior-focused primary care organization in the country with 250,000 patients. And our CenterWell Home, which has just been recently renamed, it [Technical Difficulty] used to be Kindred, today represents about 350,000 patients annually, [Technical Difficulty] the largest home health company. And lastly, our CenterWell Pharmacy continues to grow and has a leading [Technical Difficulty] mail order rate of 38.6%, which is really allowing us to service our customers in a much more integrated fashion by not only offering primary care home, but also pharmacy. And then lastly, I'll just say that our quality continues as being recognized by many in the industry. I won't go through all these, but it just gives you a flavor, not only about our quality from our customer point of view, but also from our employee engagement and in addition, the clinical outcomes that we [Technical Difficulty] strive to achieve on a daily basis. I want to thank our 75,000 teammates of all the success that we've had over the last number of years, and we look forward to continuing to drive that success our shareholders [Technical Difficulty] With that, I'll open it up to any questions that are in the room, and we will take questions at this time.

My name is -- Mr. Chair. My name is Jacob Franklin. I present [indiscernible] Union Pension Funds that collectively hold 180,114 shares of Humana common stock. As long-term shareholders, we support the Board, its governance practices and executive compensation plan. Questions related to the executive compensation plan, the U.S. Securities and Exchange Commission has instituted and disclosed requirements concerning compensation actually paid to senior executives and pay versus performance illustrations. Has the preparation of these disclosures prompted any committee reconsideration of its proxies concerning the mix of compensation provided to senior executives, the financial and quality of metrics used in the plan or the target compensation levels for our named executive officers?

What was the question?

Has the preparation of the disclosures prompted any committee reconsideration of its practices concerning the mix or compensation provided to senior executives, the financial and qualitative metrics used in the plan or the target compensation levels for named executive officers pertaining to the U.S. Securities and Exchange Commission has instituted new disclosures, requirements concerning compensations [Technical Difficulty] senior executives and [Technical Difficulty]?

Yes. So we -- obviously, we have the organization Comp Committee [Technical Difficulty] that agenda during the proxy statement [Technical Difficulty]. We work along with the legal counsel. [Technical Difficulty] We look at the metrics very carefully to make sure they're aligned properly with the objectives and the goals of the company shareholders and we feel like we're doing a pretty good job on it at this point. Any other questions in the audience? I will turn it back over to you.

Well, I think on behalf of the Board and everyone here, we extend our appreciation for everyone attending the meeting today. And as a reminder, we welcome regular stockholder feedback and can be reached through our Investor Relations team at any time. And thank you, everyone, for coming.

And you may now disconnect.