Humana declares quarterly cash dividend, anticipates first quarter diluted EPS of $1.86

Humana Inc. (NYSE: HUM) announced today that it has realigned its business segments to more closely reflect the company's evolving business model. Effective immediately, the company will be managing and reporting its operating results using the following segments: Retail, Employer Group, and Health and Well-Being Services. The company will also disclose results for Other Businesses. Restated historical segment financials for 2010 quarters are included with this press release.

“We are confident in our ability to pay quarterly cash dividends and execute a more robust share repurchase program while maintaining appropriate levels of capital in our subsidiaries and funding potential acquisitions and investments that reflect our long-term strategy.”

The company also announced that its Board of Directors has approved a quarterly cash dividend policy and has declared a cash dividend to stockholders of $0.25 per share payable on July 28, 2011 to stockholders of record on June 30, 2011. Humana's Board has also replaced its previously approved share repurchase authorization of up to $250 million (approximately $100 million of which was still outstanding as of April 25, 2011) with a new authorization for repurchases of up to $1 billion by June 30, 2013.

"We have realigned our businesses to better serve our customers. The new financial reporting format not only reflects this change but also provides better transparency into our operating units," said Michael B. McCallister, Humana's chairman of the board and chief executive officer. "We are also pleased to expand our capital deployment plans as further demonstration of our confidence in Humana's future."

"Through prudent and strict capital conservation over the past several years, Humana significantly strengthened its capital position to fund its growth in membership, revenue and geography," said James H. Bloem, Humana's senior vice president, chief financial officer and treasurer. "We are confident in our ability to pay quarterly cash dividends and execute a more robust share repurchase program while maintaining appropriate levels of capital in our subsidiaries and funding potential acquisitions and investments that reflect our long-term strategy."

Humana will release its detailed financial results for the quarter ended March 31, 2011 (1Q11) on Monday, May 2, 2011 and now anticipates 1Q11 diluted earnings per common share (EPS) of $1.86, exceeding the company's previous guidance of $1.15 to $1.20 per share. The better-than-expected results primarily related to a lower-than-expected benefit ratio for the quarter and included the impact of favorable prior-year development in medical claims reserves of $0.31 per share. Humana has also revised its guidance for full-year 2011 EPS to a range of $6.70 to $6.90, up from its previous guidance range of $5.95 to $6.15 per share.

Overview of Humana's Businesses

Humana is a leading health care company that offers a wide range of insurance products and health and wellness services that incorporate an integrated approach to lifelong well-being. By leveraging the strengths of its core businesses, Humana believes it can better explore opportunities for existing and emerging adjacencies in health care that can further enhance wellness opportunities for the millions of people across the nation with whom the company has relationships.

Retail Segment

This segment is comprised of products sold on a retail basis to individuals including the following medical and supplemental benefit plans:

Medicare Advantage and stand-alone PDPs

Humana offers a wide variety of Medicare Advantage and stand-alone Prescription Drug Plans (PDPs) across the nation. These plans provide people with Medicare choices that include plans with more benefits than Original Medicare, an affordable monthly premium, an extensive list of doctors, hospitals and other health care providers in many areas (including worldwide coverage for emergency care), and more predictable costs that are easier for members to budget. Medicare Advantage offerings also include health and wellness programs, disease management and complex case management - all subject to quality ratings by the Centers for Medicare and Medicaid Services (CMS). Drug coverage is available on a stand-alone basis or as part of a Medicare Advantage offering. All Humana Medicare Advantage plans have annual out-of-pocket maximums, protecting beneficiaries against catastrophic costs.

Individual Coverage

Humana's portfolio of individual health plans, marketed under the HumanaOne® brand, make it easy for individuals and families to select a plan according to their own personal preferences, lifestyles and budgets. HumanaOne plans are designed specifically for self-employed entrepreneurs, small-business employees, part-time workers, students and early retirees. The HumanaOne plan portfolio includes a broad spectrum of major medical benefits with multiple in-network coinsurance levels and annual deductible choices - all soon to be supported through HumanaVitality®'s innovative offerings that are expected to enhance loyalty by promoting wellness through reward programs. Because of Humana's extensive network of doctors and hospitals, HumanaOne policyholders who move to a different state can take their plan with them, and in most cases, those who work or travel away from home can receive in-network benefits by seeing Humana-contracted doctors, hospitals and other healthcare providers across the country.

The HumanaOne plans can be further customized with optional benefits such as dental, vision, life, and a broad portfolio of financial protection products.

Employer Group Segment

This segment is comprised of products sold to employer groups including the following medical and supplemental benefit plans:

Employer Group Coverage

Humana's products give employers ways to save while offering employees freedom of choice along with decision tools that both employers and employees need to make smart, money-saving decisions. Humana plans integrate clinical programs, plan designs, communication tools and spending accounts. Humana's plan portfolio includes a broad spectrum of major medical benefits with multiple in-network coinsurance levels and annual deductible choices that employers of all sizes can offer to their employees on either a fully insured or self-funded basis. As with Humana's individual products, the employer group offerings will soon include HumanaVitality's innovative wellness offerings.

Humana's diversified portfolio of specialty products not only has the benefit of helping employers and employees manage costs; the company believes these products can also have a very real impact on future health outcomes. As with individual policies, employers can customize their offerings with optional benefits such as dental, vision, life, and a broad portfolio of financial protection products.

Group Medicare Advantage and PDPs

Employers that provide post-retirement health care benefits can lower the cost of care and improve well-being for their retirees by replacing Medicare wrap or Medicare supplement products with Medicare Advantage or stand-alone PDPs from Humana. These products offer the same types of benefits and services available to members in Humana's individual Medicare plans and can be tailored to closely match an employer's post-retirement benefit structure. These sustainable solutions help reduce both employer cash outlays and liability accruals associated with such benefits.

Health and Well-Being Services Segment

This segment is comprised of stand-alone businesses that promote health and well-being. These services are sold to other Humana businesses, external health plan members and other employers or individuals and include the following:

Pharmacy Solutions

Humana Pharmacy Solutions® (HPS) has evolved from managing traditional prescription drug coverage for both individuals and employer groups to providing a broad array of pharmacy solutions. In addition to pharmacy benefits with member-focused strategies to yield savings in pharmacy and total health expense, HPS operates prescription home delivery services for mail order, specialty drugs and diabetic supplies (through RightSourceRx®), as well as research service (through Competitive Health Analytics). Members are provided access to the medicine they need while also being offered solutions for clinically proven, therapeutically equivalent treatments.

Primary Care Services

Humana's Concentra® subsidiary delivers occupational medicine, urgent care, physical therapy, and wellness services to employees and the general public through its operation of medical centers and worksite medical facilities. Concentra provides Humana entry into the primary care space on a national scale, offering additional means for achieving health and wellness solutions and providing an expandable platform for growth with a management team experienced in physician practice management and alternate site care.

In addition to Concentra, Humana's primary care services also include its CAC Medical Centers (CAC) in South Florida. CAC operates full-service, multi-specialty medical centers staffed by primary care physicians and medical specialists practicing cardiology, endocrinology, geriatric medicine, internal medicine, ophthalmology, neurology, and podiatry.

Home Care Services

Through its community-based, multi-disciplinary model, Humana Cares® provides innovative and holistic care coordination services for individuals living with multiple chronic conditions, individuals with disabilities, fragile and aging-in-place Humana Cares participants and their care givers. Humana Cares believes these services enable people to better manage their health, preserve their independence, improve their quality of life and ensure high levels of satisfaction with their care experience.

Integrated Wellness Services

LifeSynch®, a Humana subsidiary, empowers health behavior changes to improve quality of life. Through an innovative suite of integrated products, LifeSynch looks at the total health picture of the individual and offers a holistic approach that integrates behavioral health services with wellness programs, and employee assistance programs and work-life services. LifeSynch's integrated wellness services include Hummingbird Coaching®, a pioneer in scalable, affordable and results-driven coaching that offers a comprehensive turn-key coaching program, an enhancement to a medically based coaching protocol and a platform that makes coaching programs more efficient.

HumanaVitality, a Humana joint venture with Discovery Holdings Ltd., will provide Humana members with the tools and support believed necessary to help them make healthy choices and achieve lifelong well-being through access to the comprehensive science-based Vitality wellness solution. The company expects HumanaVitality to be available to certain of its members in mid-2011. HumanaVitality's product design encourages healthy behaviors that reduce long-term health care costs by rewarding members for improving their health. This comprehensive integrated approach to lifestyle improvement has demonstrated quantifiable success in changing people's behavior and lowering the economic costs of chronic illnesses. A key element of the program includes a sophisticated health-behavior-change model supported by an actuarially sound incentive program.

Other Businesses

Other Businesses are not sold to employers or individuals and do not meet quantitative thresholds for separate reporting. Such businesses include the following:

Military Services

Humana Military has been a Department of Defense contractor for the administration of the TRICARE program since July 1, 1996. In August 2003, Humana Military was awarded the contract to provide health-benefits support and services to active duty and retired military and their eligible family members in the ten-state South Region. The third-generation TRICARE program contract for the South Region was awarded to Humana Military in February 2011.

Medicaid

Humana's Medicaid business consists of contracts in Puerto Rico and Florida, with more than 90 percent of the company's Medicaid membership in Puerto Rico.

LI-NET Pharmacy Program

Humana administers CMS's Limited Income Newly Eligible Transition (LI-NET) program. This program allows individuals who receive Medicare's low-income subsidy to also receive immediate prescription drug coverage at the point of sale if they are not already enrolled in a Medicare Part D plan. CMS temporarily enrolls newly identified individuals with both Medicare and Medicaid into the LI-NET program, and subsequently transitions each member into a Medicare Part D plan.

Closed Block of Long-Term Care Insurance

Humana acquired a closed block of long-term care insurance policies in connection with its acquisition of KMG America Corporation in 2007. No new policies have been sold related to this book of business since 2005.

Eliminations/Corporate

This includes interest income, interest expense and certain corporate expenses not identifiable to a specific line of business as well as intersegment eliminations.