UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September~~June 30, ~~2021~~2022


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 1-5975

HUMANA INC.


(Exact name of registrant as specified in its charter)


Delaware						61-0647538
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

500 West Main Street

Louisville, Kentucky 40202

(Address of principal executive offices, including zip code)

(502) 580-1000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol	Name of each exchange on which registered
Common stock, $0.16 2/3 par value	HUM	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date.


Class of Common Stock			Outstanding at ~~September~~June 30, ~~2021~~2022
$0.16 2/3 par value			~~128,534,291~~126,553,698 shares

Table of Contents

Humana Inc.

FORM 10-Q

~~SEPTEMBER~~JUNE 30, ~~2021~~2022

INDEX


		Page
Part I: Financial Information
Item 1.	Financial Statements (Unaudited)

	Condensed Consolidated Balance Sheets at ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020~~2021	3

	Condensed Consolidated Statements of Income for the three and ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020~~2021	4

	Condensed Consolidated Statements of Comprehensive Income for the three and ~~nine~~six months ended ~~months ended September~~June 30, ~~2021~~2022 and ~~2020~~2021	5

	Condensed Consolidated Statements of Stockholders' Equity for the three ~~and nine~~ and six months ended ~~ended September~~June 30, ~~2021~~2022 and ~~2020~~2021	6

	Condensed Consolidated Statements of Cash Flows for the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020~~2021	8

	Notes to Condensed Consolidated Financial Statements	10

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	37

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	5957

Item 4.	Controls and Procedures	5957

Part II: Other Information

Item 1.	Legal Proceedings	6058

Item 1A.	Risk Factors	6058

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	6058

Item 3.	Defaults Upon Senior Securities	6159

Item 4.	Mine Safety Disclosures	6159

Item 5.	Other Information	6159

Item 6.	Exhibits	6260

	Signatures	6361

	Certifications

Humana Inc.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

September 30,
2021 December 31, 2020
(in millions, except share amounts)
ASSETS
Current assets:
Cash and cash equivalents $ 4,304 $ 4,673
Investment securities 13,719 12,554
Receivables, less allowance for doubtful accounts of $82 in 2021
    and $72 in 2020
1,879 1,138
Other current assets 5,913 5,276
Total current assets 25,815 23,641
Property and equipment, net 2,898 2,371
Long-term investment securities 1,095 1,212
Equity method investments 143 1,170
Goodwill 10,806 4,447
Other long-term assets 4,563 2,128
Total assets $ 45,320 $ 34,969
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Benefits payable $ 8,758 $ 8,143
Trade accounts payable and accrued expenses 4,957 4,013
Book overdraft 240 320
Unearned revenues 277 318
Short-term debt 795 600
Total current liabilities 15,027 13,394
Long-term debt 11,466 6,060
Other long-term liabilities 2,545 1,787
Total liabilities 29,038 21,241
Stockholders’ equity:
Preferred stock, $1 par; 10,000,000 shares authorized; none issued — —
Common stock, $0.16 2/3 par; 300,000,000 shares authorized;
  198,648,742 shares issued at September 30, 2021 and December 31, 2020
33 33
Capital in excess of par value 3,064 2,705
Retained earnings 23,191 20,517
Accumulated other comprehensive income 145 391
Treasury stock, at cost, 70,114,451 shares at September 30, 2021 and
    69,787,614 shares at December 31, 2020
(10,173) (9,918)
Noncontrolling interests 22 —
Total stockholders’ equity 16,282 13,728
Total liabilities and stockholders’ equity $ 45,320 $ 34,969


	June 30, 2022		December 31, 2021
	(in millions, except share amounts)
ASSETS
Current assets:
Cash and cash equivalents	$	5,153	$	3,394
Investment securities	13,037		13,192
Receivables, net of allowances of $72 in 2022 and $83 in 2021	3,369		1,814
Other current assets	5,393		6,493
Current assets held-for-sale	265		—
Total current assets	27,217		24,893
Property and equipment, net	3,121		3,073
Long-term investment securities	380		780
Equity method investments	174		141
Goodwill	8,911		11,092
Other long-term assets	3,690		4,379
Long-term assets held-for-sale	3,327		—
Total assets	$	46,820	$	44,358
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Benefits payable	$	9,650	$	8,289
Trade accounts payable and accrued expenses	5,787		4,509
Book overdraft	391		326
Unearned revenues	264		254
Short-term debt	1,541		1,953
Current liabilities held-for-sale	206		—
Total current liabilities	17,839		15,331
Long-term debt	11,290		10,541
Other long-term liabilities	1,907		2,383
Long-term liabilities held-for-sale	274		—
Total liabilities	31,310		28,255

Stockholders’ equity:
Preferred stock, $1 par; 10,000,000 shares authorized; none issued	—		—
Common stock, $0.16 2/3 par; 300,000,000 shares authorized; 198,666,598 shares issued at June 30, 2022 and 198,648,742 shares at December 31, 2021	33		33
Capital in excess of par value	3,153		3,082
Retained earnings	24,511		23,086
Accumulated other comprehensive (loss) income	(1,051)		42
Treasury stock, at cost, 72,112,900 shares at June 30, 2022 and 69,846,758 shares at December 31, 2021	(11,156)		(10,163)
Noncontrolling interests	20		23
Total stockholders’ equity	15,510		16,103
Total liabilities and stockholders’ equity	$	46,820	$	44,358

See accompanying notes to condensed consolidated financial statements.

Humana Inc.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)


		Three months ended September 30,				Nine months ended September 30,					Three months ended June 30,				Six months ended June 30,
		2021		2020		2021		2020			2022		2021		2022		2021
		(in millions, except per share results)									(in millions, except per share results)
Revenues:	Revenues:									Revenues:
Premiums	Premiums	$	19,885	$	18,904	$	59,987	$	55,822	Premiums	$	22,266	$	19,978	$	44,969	$	40,102
Services	Services	845		457		1,802		1,331		Services	1,349		491		2,613		957
Investment (loss) income		(33)		714		221		940
Investment income										Investment income	47		176		50		254
Total revenues	Total revenues	20,697		20,075		62,010		58,093		Total revenues	23,662		20,645		47,632		41,313
Operating expenses:	Operating expenses:									Operating expenses:
Benefits	Benefits	17,316		15,611		51,761		45,415		Benefits	19,099		17,149		38,724		34,445
Operating costs	Operating costs	2,603		2,513		6,726		6,984		Operating costs	3,173		2,116		6,059		4,123
Depreciation and amortization	Depreciation and amortization	150		128		436		362		Depreciation and amortization	175		144		345		286
Total operating expenses	Total operating expenses	20,069		18,252		58,923		52,761		Total operating expenses	22,447		19,409		45,128		38,854
Income from operations	Income from operations	628		1,823		3,087		5,332		Income from operations	1,215		1,236		2,504		2,459

Interest expense	Interest expense	88		75		235		211		Interest expense	101		79		191		147
Other (income) expense, net	Other (income) expense, net	(1,096)		(7)		(562)		63		Other (income) expense, net	(8)		419		(29)		534
Income before income taxes and equity in net earnings	Income before income taxes and equity in net earnings	1,636		1,755		3,414		5,058		Income before income taxes and equity in net earnings	1,122		738		2,342		1,778
Provision for income taxes	Provision for income taxes	120		450		536		1,485		Provision for income taxes	427		183		713		416
Equity in net earnings		15		35		69		68
Equity in net earnings (losses)										Equity in net earnings (losses)	2		33		(2)		54
Net income	Net income	$	1,531	$	1,340	$	2,947	$	3,641	Net income	$	697	$	588	$	1,627	$	1,416
Less: Net income attributable to noncontrolling interests	Less: Net income attributable to noncontrolling interests	—		—		—		—		Less: Net income attributable to noncontrolling interests	(1)		—		(1)		—
Net income attributable to Humana	Net income attributable to Humana	$	1,531	$	1,340	$	2,947	$	3,641	Net income attributable to Humana	$	696	$	588	$	1,626	$	1,416
Basic earnings per common share	Basic earnings per common share	$	11.91	$	10.12	$	22.90	$	27.53	Basic earnings per common share	$	5.50	$	4.57	$	12.83	$	11.00
Diluted earnings per common share	Diluted earnings per common share	$	11.84	$	10.05	$	22.77	$	27.37	Diluted earnings per common share	$	5.48	$	4.55	$	12.77	$	10.94

See accompanying notes to condensed consolidated financial statements.

Humana Inc.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)


		Three months ended September 30,				Nine months ended September 30,					Three months ended June 30,				Six months ended June 30,
		2021		2020		2021		2020			2022		2021		2022		2021
		(in millions)									(in millions)
Net income		$	1,531	$	1,340	$	2,947	$	3,641
Net income attributable to Humana										Net income attributable to Humana	$	696	$	588	$	1,626	$	1,416
Other comprehensive income:	Other comprehensive income:									Other comprehensive income:
Change in gross unrealized investment (losses) gains	Change in gross unrealized investment (losses) gains	(63)		66		(247)		332		Change in gross unrealized investment (losses) gains	(623)		136		(1,392)		(184)
Effect of income taxes	Effect of income taxes	14		(15)		56		(78)		Effect of income taxes	144		(31)		320		42
Total change in unrealized investment (losses) gains, net of tax	Total change in unrealized investment (losses) gains, net of tax	(49)		51		(191)		254		Total change in unrealized investment (losses) gains, net of tax	(479)		105		(1,072)		(142)
Reclassification adjustment for net realized gains	Reclassification adjustment for net realized gains	(16)		(1)		(80)		(48)		Reclassification adjustment for net realized gains	—		(9)		(27)		(64)
Effect of income taxes	Effect of income taxes	4		—		19		10		Effect of income taxes	—		2		6		15
Total reclassification adjustment, net of tax	Total reclassification adjustment, net of tax	(12)		(1)		(61)		(38)		Total reclassification adjustment, net of tax	—		(7)		(21)		(49)
Other comprehensive (loss) gain, net of tax		(61)		50		(252)		216
Comprehensive (loss) income attributable to equity method investments		(10)		3		6		(2)
Comprehensive income (loss) attributable to noncontrolling interests		—		—		—		—
Other comprehensive (loss) income, net of tax										Other comprehensive (loss) income, net of tax	(479)		98		(1,093)		(191)
Comprehensive income attributable to equity method investments										Comprehensive income attributable to equity method investments	—		10		—		16

Comprehensive income attributable to Humana	Comprehensive income attributable to Humana	$	1,460	$	1,393	$	2,701	$	3,855	Comprehensive income attributable to Humana	$	217	$	696	$	533	$	1,241

See accompanying notes to condensed consolidated financial statements.

Humana Inc.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)


		Common Stock			Capital In Excess of Par Value				Retained Earnings		Accumulated Other Comprehensive Income (loss)					Treasury Stock			Noncontrolling Interests				Total Stockholders’ Equity			Common Stock				Capital In Excess of Par Value				Retained Earnings				Accumulated Other Comprehensive Income (loss)				Treasury Stock				Noncontrolling Interests				Total Stockholders’ Equity
		Issued Shares	Amount												Issued Shares						Amount
		(dollars in millions, share amounts in thousands)																								(dollars in millions, share amounts in thousands)
Three months ended September 30, 2021
Balances, June 30, 2021		198,649	$	33			$	3,018					$	21,751				$	216			$	(10,175)			$	—	$	14,843
Three months ended June 30, 2022																									Three months ended June 30, 2022
Balances, March 31, 2022																									Balances, March 31, 2022	198,649		$	33			$	3,103			$	23,915			$	(572)			$	(11,160)			$	23			$	15,342
Net income	Net income								1,531										—				1,531		Net income									696												1				697
Acquisition																			22				22
Distribution to noncontrolling interest holders																									Distribution to noncontrolling interest holders																					(4)				(4)

Other comprehensive loss	Other comprehensive loss										(71)												(71)		Other comprehensive loss													(479)												(479)
Common stock repurchases	Common stock repurchases				—											(3)							(3)		Common stock repurchases					—												(4)								(4)
Dividends and dividend equivalents	Dividends and dividend equivalents								(91)														(91)		Dividends and dividend equivalents					—				(100)																(100)
Stock-based compensation	Stock-based compensation				48																		48		Stock-based compensation					50																				50
Restricted stock unit vesting	Restricted stock unit vesting	—	—		(3)											3							—		Restricted stock unit vesting	18		—		(4)												4								—
Stock option exercises	Stock option exercises	—	—		1											2							3		Stock option exercises	—		—		4												4								8
Balances, June 30, 2022																									Balances, June 30, 2022	198,667		$	33	$	3,153			$	24,511			$	(1,051)			$	(11,156)			$	20			$	15,510

Balances, September 30, 2021		198,649	$	33	$	3,064			$	23,191	$	145				$	(10,173)		$	22			$	16,282
Three months ended June 30, 2021																									Three months ended June 30, 2021
Balances, March 31, 2021																									Balances, March 31, 2021	198,649		$	33	$	2,712			$	21,252			$	108			$	(9,915)			$	—			$	14,190
Net income																									Net income									588												—				588
Distribution to noncontrolling interest holders																									Distribution to noncontrolling interest holders																					—				—

Three months ended September 30, 2020
Balances, June 30, 2020		198,630	$	33	$	2,898			$	19,616	$	317				$	(8,448)		$	—			$	14,416
Net income									1,340										—				1,340
Other comprehensive income	Other comprehensive income										53												53		Other comprehensive income													108												108
Common stock repurchases	Common stock repurchases	19			—											(5)							(5)		Common stock repurchases					263												(265)								(2)
Dividends and dividend equivalents	Dividends and dividend equivalents								(84)														(84)		Dividends and dividend equivalents					—				(89)																(89)
Stock-based compensation	Stock-based compensation				47																		47		Stock-based compensation					45																				45
Restricted stock unit vesting	Restricted stock unit vesting	—	—		(6)											6							—		Restricted stock unit vesting	—		—		(3)												3								—
Stock option exercises	Stock option exercises	—	—		1											—							1		Stock option exercises	—		—		1												2								3

Balances, September 30, 2020		198,649	$	33	$	2,940			$	20,872	$	370				$	(8,447)		$	—			$	15,768

Balances, June 30, 2021																									Balances, June 30, 2021	198,649		$	33	$	3,018			$	21,751			$	216			$	(10,175)			$	—			$	14,843

See accompanying notes to condensed consolidated financial statements.

~~Humana Inc.~~



	Common Stock			Capital In Excess of Par Value		Retained Earnings		Accumulated Other Comprehensive Income (loss)		Treasury Stock		Noncontrolling Interests		Total Stockholders’ Equity
	Issued Shares	Amount
	(dollars in millions, share amounts in thousands)
Six months ended June 30, 2022
Balances, December 31, 2021	198,649	$	33	$	3,082	$	23,086	$	42	$	(10,163)	$	23	$	16,103
Net income						1,626						1		1,627
Distribution to noncontrolling interest holders												(4)		(4)

Other comprehensive loss								(1,093)						(1,093)
Common stock repurchases				—						(1,028)				(1,028)
Dividends and dividend equivalents				—		(201)								(201)
Stock-based compensation				93										93
Restricted stock unit vesting	18	—		(28)						28				—
Stock option exercises	—	—		6						7				13
Balances, June 30, 2022	198,667	$	33	$	3,153	$	24,511	$	(1,051)	$	(11,156)	$	20	$	15,510

Six months ended June 30, 2021
Balances, December 31, 2020	198,649	$	33	$	2,705	$	20,517	$	391	$	(9,918)	$	—	$	13,728
Net income						1,416						—		1,416
Distribution to noncontrolling interest holders												—		—

Other comprehensive loss								(175)						(175)
Common stock repurchases				263						(296)				(33)
Dividends and dividend equivalents				—		(182)								(182)
Stock-based compensation				84										84
Restricted stock unit vesting	—	—		(36)						36				—
Stock option exercises	—	—		2						3				5
Balances, June 30, 2021	198,649	$	33	$	3,018	$	21,751	$	216	$	(10,175)	$	—	$	14,843

~~CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY~~

~~(Unaudited)~~

Common Stock Capital In
Excess of
Par Value Retained
Earnings Accumulated
Other
Comprehensive
Income Treasury
Stock Noncontrolling Interests Total
Stockholders’
Equity
Issued
Shares Amount
(dollars in millions, share amounts in thousands)
Nine months ended September 30, 2021
Balances, December 31, 2020 198,649 $ 33 $ 2,705 $ 20,517 $ 391 $ (9,918) $ — $ 13,728
Net income 2,947 — 2,947
Acquisition 22 22
Other comprehensive loss (246) (246)
Common stock repurchases 263 (299) (36)
Dividends and dividend
   equivalents (273) (273)
Stock-based compensation 132 132
Restricted stock unit vesting — — (40) 40 —
Stock option exercises — — 4 4 8
Balances, September 30, 2021 198,649 $ 33 $ 3,064 $ 23,191 $ 145 $ (10,173) $ 22 $ 16,282
Nine months ended September 30, 2020
Balances, December 31, 2019 198,630 $ 33 $ 2,820 $ 17,483 $ 156 $ (8,455) $ — $ 12,037
Net income 3,641 — 3,641
Impact of adopting ASC 326 -
   Current expected credit loss
   standard (CECL) (2) — (2)
Other comprehensive income 214 214
Common stock repurchases 19 — (30) (30)
Dividends and dividend
   equivalents (250) (250)
Stock-based compensation 129 129
Restricted stock unit vesting — — (21) 21 —
Stock option exercises — — 12 17 29
Balances, September 30, 2020 198,649 $ 33 $ 2,940 $ 20,872 $ 370 $ (8,447) $ — $ 15,768

~~See accompanying notes to condensed consolidated financial statements.~~

Humana Inc.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


		For the nine months ended September 30,					For the six months ended June 30,
		2021		2020			2022		2021
		(in millions)					(in millions)
Cash flows from operating activities	Cash flows from operating activities					Cash flows from operating activities
Net income	Net income	$	2,947	$	3,641	Net income	$	1,627	$	1,416
Adjustments to reconcile net income to net cash provided by operating activities:
Adjustments to reconcile net income to net cash provided by (used in) operating activities:						Adjustments to reconcile net income to net cash provided by (used in) operating activities:

Losses (gains) on investment securities, net	Losses (gains) on investment securities, net	18		(696)		Losses (gains) on investment securities, net	137		(86)
Gain on Kindred at Home equity method investment		(1,129)		—
Equity in net earnings		(69)		(68)

Equity in net losses (earnings)						Equity in net losses (earnings)	2		(54)
Stock-based compensation	Stock-based compensation	132		129		Stock-based compensation	93		84
Depreciation	Depreciation	468		390		Depreciation	369		308
Amortization	Amortization	51		66		Amortization	45		30
Benefit for deferred income taxes		—		(3)
Impairment on property and equipment						Impairment on property and equipment	140		—
Provision for deferred income taxes						Provision for deferred income taxes	167		—
Changes in operating assets and liabilities, net of effect of businesses acquired:	Changes in operating assets and liabilities, net of effect of businesses acquired:					Changes in operating assets and liabilities, net of effect of businesses acquired:
Receivables	Receivables	(294)		(82)		Receivables	(1,733)		(1,285)
Other assets	Other assets	(476)		(1,547)		Other assets	(655)		(879)
Benefits payable	Benefits payable	573		2,204		Benefits payable	1,361		300
Other liabilities	Other liabilities	207		1,257		Other liabilities	(333)		(301)
Unearned revenues	Unearned revenues	(84)		40		Unearned revenues	10		5
Other	Other	14		25		Other	31		(15)
Net cash provided by operating activities		2,358		5,356
Net cash provided by (used in) operating activities						Net cash provided by (used in) operating activities	1,261		(477)
Cash flows from investing activities	Cash flows from investing activities					Cash flows from investing activities

Acquisitions, net of cash and cash equivalents acquired	Acquisitions, net of cash and cash equivalents acquired	(3,959)		(709)		Acquisitions, net of cash and cash equivalents acquired	(167)		(325)
Purchases of property and equipment, net	Purchases of property and equipment, net	(945)		(668)		Purchases of property and equipment, net	(574)		(619)
Purchases of investment securities	Purchases of investment securities	(6,573)		(7,230)		Purchases of investment securities	(3,239)		(5,307)
Proceeds from maturities of investment securities	Proceeds from maturities of investment securities	2,103		3,500		Proceeds from maturities of investment securities	947		1,627
Proceeds from sales of investment securities	Proceeds from sales of investment securities	2,920		2,097		Proceeds from sales of investment securities	1,363		2,421
Net cash used in investing activities	Net cash used in investing activities	(6,454)		(3,010)		Net cash used in investing activities	(1,670)		(2,203)
Cash flows from financing activities	Cash flows from financing activities					Cash flows from financing activities
Receipts (withdrawals) from contract deposits, net		605		(274)
Receipts from contract deposits, net						Receipts from contract deposits, net	3,076		1,183
Proceeds from issuance of senior notes, net	Proceeds from issuance of senior notes, net	2,984		1,088		Proceeds from issuance of senior notes, net	744		—
Proceeds from issuance of commercial paper, net		193		21
Proceeds from term loan		500		1,000
Repayment of term loan		(150)		—
(Repayments) proceeds from issuance of commercial paper, net						(Repayments) proceeds from issuance of commercial paper, net	(418)		508

Debt issue costs	Debt issue costs	(29)		—		Debt issue costs	(2)		(21)
Change in book overdraft	Change in book overdraft	(80)		(11)		Change in book overdraft	65		(84)
Common stock repurchases	Common stock repurchases	(36)		(30)		Common stock repurchases	(1,028)		(33)
Dividends paid	Dividends paid	(263)		(239)		Dividends paid	(191)		(173)
Proceeds from stock option exercises and other, net		3		30
Other						Other	(11)		5
Net cash provided by financing activities	Net cash provided by financing activities	3,727		1,585		Net cash provided by financing activities	2,235		1,385
(Decrease) increase in cash and cash equivalents		(369)		3,931
Increase (decrease) in cash and cash equivalents						Increase (decrease) in cash and cash equivalents	1,826		(1,295)
Cash and cash equivalents at beginning of period	Cash and cash equivalents at beginning of period	4,673		4,054		Cash and cash equivalents at beginning of period	3,394		4,673
Cash and cash equivalents at end of period		$	4,304	$	7,985
Cash and cash equivalents at end of period (1)						Cash and cash equivalents at end of period (1)	$	5,220	$	3,378

(1) Includes $67 million of cash and cash equivalents classified as held-for-sale at June 30, 2022.

Humana Inc.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS—(Continued)

(Unaudited)


		For the nine months ended September 30,					For the six months ended June 30,
		2021		2020			2022		2021
		(in millions)					(in millions)
Supplemental cash flow disclosures:	Supplemental cash flow disclosures:					Supplemental cash flow disclosures:
Interest payments	Interest payments	$	183	$	159	Interest payments	$	171	$	132
Income tax payments, net	Income tax payments, net	$	219	$	778	Income tax payments, net	$	373	$	386
Details of businesses acquired in purchase transactions:	Details of businesses acquired in purchase transactions:					Details of businesses acquired in purchase transactions:
Fair value of assets acquired, net of cash acquired		$	9,572	$	816
Fair value of assets acquired, net of cash and cash equivalents acquired						Fair value of assets acquired, net of cash and cash equivalents acquired	$	190	$	602
Less: Fair value of liabilities assumed	Less: Fair value of liabilities assumed	(3,231)		(107)		Less: Fair value of liabilities assumed	(23)		(277)
Less: Noncontrolling interests acquired		(22)		—
Less: Remeasured existing Kindred at Home equity method investment		(2,360)		—
Cash paid for acquired businesses, net of cash acquired		$	3,959	$	709

Cash paid for acquired businesses, net of cash and cash equivalents acquired						Cash paid for acquired businesses, net of cash and cash equivalents acquired	$	167	$	325

See accompanying notes to condensed consolidated financial statements.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. BASIS OF PRESENTATION AND SIGNIFICANT EVENTS

The accompanying condensed consolidated financial statements are presented in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the disclosures normally required by accounting principles generally accepted in the United States of America, or GAAP, or those normally made in an Annual Report on Form 10-K. The year-end condensed consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by GAAP. For further information, the reader of this Form 10-Q should refer to our Form 10-K for the year ended December 31, ~~2020,~~2021, that was filed with the Securities and Exchange Commission, or the SEC, on February ~~18, 2021.~~17, 2022. We refer to the Form 10-K as the ~~“2020~~“2021 Form 10-K” in this document. References throughout this document to “we,” “us,” “our,” “Company,” and “Humana” mean Humana Inc. and its subsidiaries.

The preparation of our condensed consolidated financial statements in accordance with GAAP requires us to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. The areas involving the most significant use of estimates are the estimation of benefits payable, the impact of risk adjustment provisions related to our Medicare contracts, the valuation and related impairment recognition of investment securities, and the valuation and related impairment recognition of long-lived assets, including ~~goodwill.~~goodwill and indefinite-lived intangible assets. These estimates are based on knowledge of current events and anticipated future events, and accordingly, actual results may ultimately differ materially from those estimates. Refer to Note 2 to the consolidated financial statements included in our ~~2020~~2021 Form 10-K for information on accounting policies that we consider in preparing our consolidated financial statements. Since the filing of our 2020 Form 10-K we have acquired noncontrolling interest and indefinite-lived intangible assets as part of our acquisition of Kindred at Home, or KAH, during the third quarter of 2021. See Note 3 for further information. We have updated our accounting policies accordingly.

The financial information has been prepared in accordance with our customary accounting practices and has not been audited. In our opinion, the information presented reflects all adjustments necessary for a fair statement of interim results. All such adjustments are of a normal and recurring nature.

~~Indefinite-lived Assets~~Value Creation Initiatives

~~We are required~~During 2022, in order to ~~annually compare~~create capacity to fund growth and investment in our Medicare Advantage business and further expansion of our Healthcare Services capabilities in 2023, we committed to drive additional value for the ~~fair values~~enterprise through cost saving, productivity initiatives, and value acceleration from previous investments. As a result of ~~other indefinite-lived intangible assets~~these initiatives, during the second quarter of 2022, we recorded a charge of $203 million, primarily related to ~~their carrying amounts. If~~asset and software impairment and abandonment in the ~~carrying~~ amount of ~~an indefinite-lived intangible asset exceeds its fair value, an impairment loss is recognized. Fair values of indefinite-lived intangible assets~~$140 million. These charges are ~~determined based on the income approach.~~

~~Noncontrolling Interests~~

The consolidated financial statements include all assets, liabilities, revenues and expenses of less than 100% owned affiliates that we control. Accordingly, we record noncontrolling interests in the earnings and equity of such entities. We record adjustments to noncontrolling interests for the allocable portion of income or loss to which the noncontrolling interest holders are entitled based upon their portion of the subsidiaries they own. Distributions to holders of noncontrolling interests are adjusted to the respective noncontrolling interest holders’ balances. Noncontrolling interests, which relate to the minority ownership held by third party investors in certain of our Home Health Solutions business, are reported below net income under the heading “Net income attributable to noncontrolling interest”included within operating costs in the condensed consolidated statements of income for the three and ~~presented~~six months ended June 30, 2022, and were recorded at the corporate level and not allocated to the segments. Included in this charge is $21 million in future severance payments in connection with the optimization of our workforce to increase speed, agility, and the pace at which Humana must work as a ~~component of equity~~large, integrated healthcare organization. We expect this liability to be primarily paid within the next 12 months and classified it as a current liability, included in ~~the condensed consolidated balance sheets.~~trade accounts payable and accrued expenses.

COVID-19

The emergence and spread of the novel coronavirus, or COVID-19, beginning in the first quarter of 2020 has impacted our business. During periods of increased incidences of COVID-19, ~~non-essential care from~~ a reduction in non-COVID-19 hospital admissions for non-emergent and elective medical care have resulted in lower overall healthcare system ~~consumption decreased~~ utilization. ~~Likewise~~At the same time, COVID-19 treatment and testing ~~cost~~costs increased utilization. During the first half of 2022, we experienced lower overall utilization of the healthcare system than anticipated, as the reduction in COVID-19 utilization following the increased incidence associated with the Omicron variant outpaced the increase in non-COVID-19 utilization. The significant disruption in utilization during

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~~Humana Inc.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

~~(Unaudited)~~

2020 also impacted our ability to implement clinical initiatives to manage health care costs and chronic conditions of our members, and appropriately document their risk profiles, and, as such, is significantly ~~affecting~~affected our 2021 revenue under the risk adjustment payment model for Medicare Advantage plans. Finally, changes in utilization patterns and actions taken in 2021 as a result of the COVID-19 pandemic, including the suspension of certain financial recovery programs for a period of time and

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

shifting the timing of claim payments and provider capitation surplus payments, impacted our claim reserve development and operating cash flows for 2021.

Revenue Recognition

Our revenues include premium and service revenues. ~~Service~~Services revenues include administrative service fees that are recorded based upon established per member per month rates and the number of members for the month and are recognized as services are provided for the month. Additionally, service revenues include net patient service revenues that are recorded based upon established billing rates, less allowances for contractual adjustments, and are recognized as services are provided. For more information about our revenues, refer to Note 2 to the consolidated financial statements included in our ~~2020~~2021 Form 10-K for information on accounting policies that we consider in preparing our consolidated financial statements. See Note 14 for disaggregation of revenue by segment and type.

At ~~September~~June 30, ~~2021,~~2022, accounts receivable related to services were ~~$578 million.~~$490 million, including $178 million classified as held-for-sale at June 30, 2022. For the three and ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, we had no material bad-debt expense and there were no material contract assets, contract liabilities or deferred contract costs recorded on the condensed consolidated balance sheet at ~~September~~June 30, ~~2021.~~2022.

For the three and ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, services revenue recognized from performance obligations related to prior periods (for example, due to changes in transaction price), was not material. Further, services revenue expected to be recognized in any future year related to remaining performance obligations was not material.

2. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In September 2018, the FASB issued new guidance related to accounting for long-duration contracts of insurers which revises key elements of the measurement models and disclosure requirements for long-duration contracts issued by insurers, including the amortization of deferred contract acquisition costs and the measurement of liabilities for future policy benefits using current, rather than locked-in, assumptions. The new guidance, limited to our Medicare supplement product which represent less than 1% of consolidated premiums and services revenues, is effective for us beginning with annual and interim periods in 2023 ~~with earlier adoption permitted,~~ and, ~~are~~using a modified retrospective approach, is to be applied to contracts in force oron the basis of their existing carrying value amounts at the beginning ~~of the earliest period presented, with an option to apply retrospectively with a cumulative effect adjustment to the opening balances of retained earnings as~~ of the earliest period presented. We are currently evaluating the impact on our results of operations, financial position and cash flows.

There are no other recently issued accounting standards that apply to us or that are expected to have a material impact on our results of operations, financial condition, or cash flows.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

3. ACQUISITIONS AND DIVESTITURES

On April 21, 2022, we signed a definitive agreement with private investment firm Clayton, Dubilier & Rice, or CD&R, to divest a 60% interest in the Hospice and Personal Care divisions of Humana’s Kindred at Home subsidiary, or KAH Hospice, at an enterprise valuation of $3.4 billion. These divisions include patient-centered services for Hospice, Palliative, Community and Personal Care. Under the agreement, we will receive cash proceeds of approximately $2.8 billion, which includes a combination of debt repayments from KAH Hospice to Humana and equity proceeds from the 60% interest purchased by CD&R. The transaction is expected to close in the third quarter of 2022 and is subject to customary state and federal regulatory approvals.

As of June 30, 2022, we classified KAH Hospice as held-for-sale and aggregated KAH Hospice’s assets and liabilities separately on the balance sheet. With the fair value exceeding the carrying value of KAH Hospice’s net assets, the resulting gain will be recognized upon closing of the transaction. The ultimate gain to be recognized will reflect considerations for costs to sell, changes in the carrying value of net assets and the related tax effect. The carrying value of the assets and liabilities of KAH Hospice classified as held-for-sale approximates fair value. The amount of goodwill included in the carrying value is based on the relative fair value of the Home Solutions reporting unit included within the Healthcare Services segment.

During the three months ended June 30, 2022, Humana Inc., our parent company, recognized a deferred tax liability of approximately $167 million for the excess of the book basis over the tax basis of its KAH Hospice subsidiary because realization of the liability in the foreseeable future was apparent with the classification as held-for-sale at June 30, 2022. Upon closing of the transaction, the deferred tax liability will be adjusted to reflect any changes to the excess of the book basis over tax basis of the KAH Hospice subsidiary.

KAH Hospice revenues for the three and six months ended June 30, 2022 were $399 million and $781 million, respectively. KAH Hospice pretax earnings for the three and six months ended June 30, 2022 were $64 million and $126 million, respectively.

The assets and liabilities of KAH Hospice classified as held-for-sale are as follows:


	June 30, 2022
	(in millions)
Assets
Cash and cash equivalents	$	67
Receivables, net of allowances	178
Other current assets	20
Current assets held-for-sale	265
Property and equipment, net	41
Goodwill	2,331
Other assets	955
Long-term assets held-for-sale	3,327
Total assets held-for-sale	$	3,592
Liabilities
Trade accounts payable and accrued expenses	$	206
Current liabilities held-for-sale	206
Other liabilities	274
Long-term liabilities held-for-sale	274
Total liabilities held-for-sale	$	480

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

On August 17, 2021, we acquired the remaining 60% interest in Kindred at Home, or KAH, the nation’s largest home health and hospice provider, from TPG Capital, or TPG, and Welsh, Carson, Anderson & Stowe, or WCAS, two private equity funds, or the Sponsors, for an enterprise value of $8.2 billion, which includes our equity value of $2.4 billion associated with our 40% minority ownership interest. The remeasurement to fair value of our previously held 40% equity method investment with a carrying value of approximately $1.3 billion, resulted in a $1.1 billion gain recognized in "Other (income) expense, net". KAH has locations in 40 states, providing extensive geographic coverage with approximately 65% overlap with our individual Medicare Advantage membership. We paid the approximate $5.8 billion transaction price (net of our existing equity stake) through a combination of debt financing, the assumption of existing KAH indebtedness and parent company cash. ~~The preliminary fair values of KAH’s assets acquired and liabilities assumed at the date of the acquisition are summarized as follows:~~


	~~Kindred at Home~~
	~~($ in millions)~~
~~Cash and cash equivalents~~	$	~~278~~
~~Receivables~~	~~424~~
~~Other current assets~~	63
~~Property and equipment~~	74
~~Goodwill~~	~~5,778~~
~~Other intangible assets~~	~~2,325~~
~~Other long-term assets~~	~~172~~
~~Total assets acquired~~	$	~~9,114~~
~~Current liabilities~~	$	~~452~~
~~Long term debt~~	~~2,078~~
~~Other long-term liabilities~~	~~392~~
~~Total liabilities assumed~~	$	~~2,922~~
~~Non-controlling interests~~	22
~~Net assets acquired~~	$	~~6,170~~

The other intangible assets primarily consist of Certificate of Needs (CON) and Medicare licenses which have indefinite lives. Amortizing trade names included in other intangibles assets of approximately $18 million have an estimated weighted average useful life of 10 years. The goodwill, allocated to our Healthcare Services segment, primarily relates to the future economic benefit arising from the assets acquired and is consistent with our integrated care delivery strategy. Approximately $132 million of the goodwill is deductible for tax purposes. The purchase price allocation is preliminary, subject to completion of valuation analyses, including, for example, refining assumptions used to calculate the fair value of other intangible assets. The results of operations and financial condition of KAH have been included in our condensed consolidated statements of income and condensed consolidated balance sheets from the acquisition date. In connection with the acquisition, we recognized approximately $45 million of acquisition-related costs, primarily compensation costs as well as banker and other professional fees, in operating costs in our condensed consolidated statements of income. The comparative proforma financial information assuming the acquisition had occurred as of January 1, 2020 was not material to our results of operations.

During ~~2021~~2022 and ~~2020,~~2021, we acquired various health and wellness related businesses which, individually or in the aggregate, have not had a material impact on our results of operations, financial condition, or cash flows. The results of operations and financial condition of these businesses acquired in ~~2021~~2022 and ~~2020~~2021 have been included in our condensed consolidated statements of income and condensed consolidated balance sheets from the respective acquisition dates. Acquisition-related costs recognized in ~~2021~~2022 and ~~2020~~2021 were not material to our results of

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~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

~~(Unaudited)~~

operations. For asset acquisitions, the goodwill acquired is partially amortizable as deductible expenses for tax purposes. The pro forma financial information assuming the acquisitions had occurred as of the beginning of the calendar year prior to the year of acquisition, as well as the revenues and earnings generated during the year of acquisition, were not material for disclosure purposes.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

4. INVESTMENT SECURITIES

Investment securities classified as current and long-term were as follows at ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively:


		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value			Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
		(in millions)									(in millions)
September 30, 2021
June 30, 2022										June 30, 2022
U.S. Treasury and other U.S. government corporations and agencies:	U.S. Treasury and other U.S. government corporations and agencies:									U.S. Treasury and other U.S. government corporations and agencies:
U.S. Treasury and agency obligations	U.S. Treasury and agency obligations	$	656	$	1	$	(7)	$	650	U.S. Treasury and agency obligations	$	568	$	—	$	(43)	$	525
Mortgage-backed securities	Mortgage-backed securities	3,699		69		(46)		3,722		Mortgage-backed securities	3,332		—		(392)		2,940
Tax-exempt municipal securities	Tax-exempt municipal securities	853		35		(2)		886		Tax-exempt municipal securities	776		1		(34)		743
Mortgage-backed securities:	Mortgage-backed securities:									Mortgage-backed securities:
Residential	Residential	392		—		(3)		389		Residential	493		—		(54)		439
Commercial	Commercial	1,438		37		(7)		1,468		Commercial	1,582		—		(109)		1,473
Asset-backed securities	Asset-backed securities	1,394		7		(1)		1,400		Asset-backed securities	1,764		—		(50)		1,714
Corporate debt securities	Corporate debt securities	5,493		152		(47)		5,598		Corporate debt securities	6,181		2		(685)		5,498
Total debt securities	Total debt securities	$	13,925	$	301	$	(113)	14,113		Total debt securities	$	14,696	$	3	$	(1,367)	13,332
Common stock	Common stock							701		Common stock							85
Total investment securities	Total investment securities							$	14,814	Total investment securities							$	13,417

December 31, 2020
December 31, 2021										December 31, 2021
U.S. Treasury and other U.S. government corporations and agencies:	U.S. Treasury and other U.S. government corporations and agencies:									U.S. Treasury and other U.S. government corporations and agencies:
U.S. Treasury and agency obligations	U.S. Treasury and agency obligations	$	616	$	1	$	(1)	$	616	U.S. Treasury and agency obligations	$	611	$	1	$	(10)	$	602
Mortgage-backed securities	Mortgage-backed securities	3,115		140		(1)		3,254		Mortgage-backed securities	3,265		33		(69)		3,229
Tax-exempt municipal securities	Tax-exempt municipal securities	1,393		54		—		1,447		Tax-exempt municipal securities	810		33		(2)		841
Mortgage-backed securities:	Mortgage-backed securities:									Mortgage-backed securities:
Residential	Residential	17		—		—		17		Residential	373		—		(6)		367
Commercial	Commercial	1,260		59		(1)		1,318		Commercial	1,394		27		(11)		1,410
Asset-backed securities	Asset-backed securities	1,364		10		(2)		1,372		Asset-backed securities	1,346		6		(4)		1,348
Corporate debt securities	Corporate debt securities	4,672		256		(1)		4,927		Corporate debt securities	5,641		118		(59)		5,700
Total debt securities	Total debt securities	$	12,437	$	520	$	(6)	12,951		Total debt securities	$	13,440	$	218	$	(161)	13,497
Common stock	Common stock							815		Common stock							475
Total investment securities	Total investment securities							$	13,766	Total investment securities							$	13,972

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(Unaudited)

Gross unrealized losses and fair values aggregated by investment category and length of time of individual debt securities that have been in a continuous unrealized loss position for which no allowances for credit loss has been recorded were as follows at ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively:


		Less than 12 months				12 months or more				Total					Less than 12 months				12 months or more				Total
		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
		(in millions)													(in millions)
September 30, 2021
June 30, 2022														June 30, 2022
U.S. Treasury and other U.S. government corporations and agencies:	U.S. Treasury and other U.S. government corporations and agencies:													U.S. Treasury and other U.S. government corporations and agencies:
U.S. Treasury and agency obligations	U.S. Treasury and agency obligations	$	261	$	(4)	$	181	$	(3)	$	442	$	(7)	U.S. Treasury and agency obligations	$	91	$	(4)	$	431	$	(39)	$	522	$	(43)
Mortgage-backed securities	Mortgage-backed securities	2,555		(41)		231		(5)		2,786		(46)		Mortgage-backed securities	1,109		(129)		1,785		(263)		2,894		(392)
Tax-exempt municipal securities	Tax-exempt municipal securities	77		(1)		28		(1)		105		(2)		Tax-exempt municipal securities	38		(3)		594		(31)		632		(34)
Mortgage-backed securities:	Mortgage-backed securities:													Mortgage-backed securities:
Residential	Residential	348		(3)		—		—		348		(3)		Residential	250		(23)		189		(31)		439		(54)
Commercial	Commercial	340		(6)		98		(1)		438		(7)		Commercial	282		(11)		1,191		(98)		1,473		(109)
Asset-backed securities	Asset-backed securities	296		(1)		277		—		573		(1)		Asset-backed securities	517		(19)		1,171		(31)		1,688		(50)
Corporate debt securities	Corporate debt securities	1,589		(39)		223		(8)		1,812		(47)		Corporate debt securities	1,775		(183)		3,441		(502)		5,216		(685)
Total debt securities	Total debt securities	$	5,466	$	(95)	$	1,038	$	(18)	$	6,504	$	(113)	Total debt securities	$	4,062	$	(372)	$	8,802	$	(995)	$	12,864	$	(1,367)

December 31, 2020
December 31, 2021														December 31, 2021
U.S. Treasury and other U.S. government corporations and agencies:	U.S. Treasury and other U.S. government corporations and agencies:													U.S. Treasury and other U.S. government corporations and agencies:
U.S. Treasury and agency obligations	U.S. Treasury and agency obligations	$	225	$	(1)	$	—	$	—	$	225	$	(1)	U.S. Treasury and agency obligations	$	201	$	(3)	$	355	$	(7)	$	556	$	(10)
Mortgage-backed securities	Mortgage-backed securities	199		(1)		—		—		199		(1)		Mortgage-backed securities	2,082		(49)		556		(20)		2,638		(69)
Tax-exempt municipal securities	Tax-exempt municipal securities	16		—		19		—		35		—		Tax-exempt municipal securities	68		(1)		34		(1)		102		(2)
Mortgage-backed securities:	Mortgage-backed securities:													Mortgage-backed securities:
Residential	Residential	17		—		—		—		17		—		Residential	358		(6)		8		—		366		(6)
Commercial	Commercial	193		(1)		43		—		236		(1)		Commercial	295		(4)		400		(7)		695		(11)
Asset-backed securities	Asset-backed securities	65		—		498		(2)		563		(2)		Asset-backed securities	530		(3)		425		(1)		955		(4)
Corporate debt securities	Corporate debt securities	342		(1)		16		—		358		(1)		Corporate debt securities	1,456		(28)		769		(31)		2,225		(59)
Total debt securities	Total debt securities	$	1,057	$	(4)	$	576	$	(2)	$	1,633	$	(6)	Total debt securities	$	4,990	$	(94)	$	2,547	$	(67)	$	7,537	$	(161)

Approximately 96% of our debt securities were investment-grade quality, with a weighted average credit rating of AA- by Standard & Poor's Rating Service, or S&P, at ~~September~~June 30, ~~2021.~~2022. Most of the debt securities that were below investment-grade were rated BB, the higher end of the below investment-grade rating scale. Tax-exempt municipal securities were diversified among general obligation bonds of states and local municipalities in the United States as well as special revenue bonds issued by municipalities to finance specific public works projects such as utilities, water and sewer, transportation, or education. Our general obligation bonds are diversified across the United States

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~~United States~~ with no individual state exceeding 1% of our total debt securities. Our investment policy limits investments in a single issuer and requires diversification among various asset types.

Our unrealized losses from all debt securities were generated from approximately ~~540~~1,500 positions out of a total of approximately ~~1,740~~1,830 positions at ~~September~~June 30, ~~2021.~~2022. All issuers of debt securities we own that were trading at an unrealized loss at ~~September~~June 30, ~~2021~~2022 remain current on all contractual payments. After taking into account these and other factors previously described, we believe these unrealized losses primarily were caused by an increase in market interest rates in the current markets since the time these debt securities were purchased. At ~~September~~June 30, ~~2021,~~2022, we did not intend to sell any debt securities with an unrealized loss position in accumulated other comprehensive income, and it is not likely that we will be required to sell these debt securities before recovery of their amortized cost basis. Additionally, we did not record any material credit allowances for debt securities that were in an unrealized loss position for the three and ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020.~~2021.

The detail of (losses) gains ~~(losses)~~ related to investment securities and included within investment income was as follows for the three and ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020:~~2021:


		Three months ended September 30,				Nine months ended September 30,					Three months ended June 30,				Six months ended June 30,
		2021		2020		2021		2020			2022		2021		2022		2021
		(in millions)				(in millions)					(in millions)				(in millions)
Gross gains on investment securities	Gross gains on investment securities	$	71	$	2	$	180	$	71	Gross gains on investment securities	$	6	$	14	$	39	$	109
Gross losses on investment securities	Gross losses on investment securities	(1)		—		(1)		(18)		Gross losses on investment securities	(5)		—		(6)		—
Net (losses) gains on equity securities		(174)		643		(197)		643
Net (losses) gains on investment securities		$	(104)	$	645	$	(18)	$	696
Gross gains on equity securities										Gross gains on equity securities	—		62		—		64
Gross losses on equity securities										Gross losses on equity securities	(62)		—		(170)		(87)
Net recognized (losses) gains on investment securities										Net recognized (losses) gains on investment securities	$	(61)	$	76	$	(137)	$	86

~~Purchases of~~The gains and ~~proceeds from investment~~losses related to equity securities for the three and ~~nine~~six months ended ~~September~~June 30, 2022 and 2021 ~~and 2020 relate primarily to debt securities.~~was as follows:


	Three months ended June 30,				Six months ended June 30,
	2022		2021		2022		2021
	(in millions)				(in millions)
Net (losses) gains recognized on equity securities during the period	$	(62)	$	62	$	(170)	$	(23)
Less: Net losses recognized on equity securities sold during the period	(2)		—		(61)		—
Unrealized (losses) gains recognized on equity securities still held at the end of the period	$	(60)	$	62	$	(109)	$	(23)

The contractual maturities of debt securities available for sale at ~~September~~June 30, ~~2021,~~2022, regardless of their balance sheet classification, are shown below. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.


		Amortized Cost		Fair Value			Amortized Cost		Fair Value
		(in millions)					(in millions)
Due within one year	Due within one year	$	543	$	547	Due within one year	$	334	$	333
Due after one year through five years	Due after one year through five years	2,185		2,254		Due after one year through five years	2,814		2,680
Due after five years through ten years	Due after five years through ten years	2,919		2,966		Due after five years through ten years	3,126		2,712
Due after ten years	Due after ten years	1,355		1,367		Due after ten years	1,251		1,041
Mortgage and asset-backed securities	Mortgage and asset-backed securities	6,923		6,979		Mortgage and asset-backed securities	7,171		6,566
Total debt securities	Total debt securities	$	13,925	$	14,113	Total debt securities	$	14,696	$	13,332

1516

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

5. FAIR VALUE

Financial Assets

The following table summarizes our fair value measurements at ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively, for financial assets measured at fair value on a recurring basis:


		Fair Value Measurements Using									Fair Value Measurements Using
		Fair Value		Quoted Prices in Active Markets (Level 1)		Other Observable Inputs (Level 2)		Unobservable Inputs (Level 3)			Fair Value		Quoted Prices in Active Markets (Level 1)		Other Observable Inputs (Level 2)		Unobservable Inputs (Level 3)
		(in millions)									(in millions)
September 30, 2021
June 30, 2022										June 30, 2022
Cash equivalents	Cash equivalents	$	3,894	$	3,894	$	—	$	—	Cash equivalents	$	4,730	$	4,730	$	—	$	—
Debt securities:	Debt securities:									Debt securities:
U.S. Treasury and other U.S. government corporations and agencies:	U.S. Treasury and other U.S. government corporations and agencies:									U.S. Treasury and other U.S. government corporations and agencies:
U.S. Treasury and agency obligations	U.S. Treasury and agency obligations	650		—		650		—		U.S. Treasury and agency obligations	525		—		525		—
Mortgage-backed securities	Mortgage-backed securities	3,722		—		3,722		—		Mortgage-backed securities	2,940		—		2,940		—
Tax-exempt municipal securities	Tax-exempt municipal securities	886		—		886		—		Tax-exempt municipal securities	743		—		743		—
Mortgage-backed securities:	Mortgage-backed securities:									Mortgage-backed securities:
Residential	Residential	389		—		389		—		Residential	439		—		439		—
Commercial	Commercial	1,468		—		1,468		—		Commercial	1,473		—		1,473		—
Asset-backed securities	Asset-backed securities	1,400		—		1,400		—		Asset-backed securities	1,714		—		1,714		—
Corporate debt securities	Corporate debt securities	5,598		—		5,598		—		Corporate debt securities	5,498		—		5,396		102
Total debt securities	Total debt securities	14,113		—		14,113		—		Total debt securities	13,332		—		13,230		102
Common stock	Common stock	701		701		—		—		Common stock	85		85		—		—
Total invested assets	Total invested assets	$	18,708	$	4,595	$	14,113	$	—	Total invested assets	$	18,147	$	4,815	$	13,230	$	102

December 31, 2020
December 31, 2021										December 31, 2021
Cash equivalents	Cash equivalents	$	4,548	$	4,548	$	—	$	—	Cash equivalents	$	3,322	$	3,322	$	—	$	—
Debt securities:	Debt securities:									Debt securities:
U.S. Treasury and other U.S. government corporations and agencies:	U.S. Treasury and other U.S. government corporations and agencies:									U.S. Treasury and other U.S. government corporations and agencies:
U.S. Treasury and agency obligations	U.S. Treasury and agency obligations	616		—		616		—		U.S. Treasury and agency obligations	602		—		602		—
Mortgage-backed securities	Mortgage-backed securities	3,254		—		3,254		—		Mortgage-backed securities	3,229		—		3,229		—
Tax-exempt municipal securities	Tax-exempt municipal securities	1,447		—		1,447		—		Tax-exempt municipal securities	841		—		841		—
Mortgage-backed securities:	Mortgage-backed securities:									Mortgage-backed securities:
Residential	Residential	17		—		17		—		Residential	367		—		367		—
Commercial	Commercial	1,318		—		1,318		—		Commercial	1,410		—		1,410		—
Asset-backed securities	Asset-backed securities	1,372		—		1,372		—		Asset-backed securities	1,348		—		1,348		—
Corporate debt securities	Corporate debt securities	4,927		—		4,927		—		Corporate debt securities	5,700		—		5,632		68
Total debt securities	Total debt securities	12,951		—		12,951		—		Total debt securities	13,497		—		13,429		68
Common stock	Common stock	815		815		—		—		Common stock	475		475		—		—
Total invested assets	Total invested assets	$	18,314	$	5,363	$	12,951	$	—	Total invested assets	$	17,294	$	3,797	$	13,429	$	68

1617

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Humana Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

Our Level 3 assets had a fair value of $102 million at June 30, 2022 , or 0.6% of our total invested assets. During the year ended June 30, 2022, the changes in the fair value of the assets measured using significant unobservable inputs (Level 3) were comprised of the following:


	For the six months ended June 30,
	Private Placements
	(in millions)
Beginning balance at January 1	$	68
Total gains or losses:
Realized in earnings	—
Unrealized in other comprehensive income	(10)
Purchases	44
Sales	—
Settlements	—
Balance at June 30	$	102

Financial Liabilities

Our debt is recorded at carrying value in our consolidated balance sheets. The carrying value of our senior notes debt outstanding, net of unamortized debt issuance costs, was ~~$9.0~~$9.8 billion at ~~September~~June 30, ~~2021~~2022 and ~~$6.1~~$9.0 billion at December 31, ~~2020.~~2021. The fair value of our senior notes debt was ~~$10.1~~$9.4 billion at ~~September~~June 30, ~~2021~~2022 and ~~$7.4~~$10.0 billion at December 31, ~~2020.~~2021. The fair value of our senior notes debt is determined based on Level 2 inputs, including quoted market prices for the same or similar debt, or if no quoted market prices are available, on the current prices estimated to be available to us for debt with similar terms and remaining maturities. ~~Due to the short-term duration, carrying~~Carrying value approximates fair value for our term loans and commercial paper borrowings. The term ~~loans, including the assumption of Kindred at Home's term~~ loan and commercial paper borrowings were ~~$3.2~~$3.0 billion as of ~~September~~June 30, ~~2021~~2022 and ~~our commercial paper borrowings were $0.6~~$3.5 billion as of December 31, ~~2020.~~2021.

Put and Call Options Measured at Fair Value

Our put and call options associated with our equity method investments are measured at fair value each period using a Monte Carlo simulation.

Effective April 27, 2021, with the signing of the definitive agreement to acquire the remaining 60% interest of KAH, the respective put and call options were terminated. As such, the $63 million put and $440 million call fair values as of ~~the first quarter of~~March 31, 2021 were subsequently reduced to zero, resulting in $377 million in "Other (income) expense, net" in our ~~condensed~~ consolidated statements of income for the ~~nine months~~quarter and period ended ~~September~~June 30, 2021.

The put and call options ~~were~~fair values associated with our Primary Care Organization strategic partnership with WCAS, which are exercisable at a fixed revenue exit multiple and provide a minimum return on WCAS' investment if exercised, are measured at fair value ~~using a~~each reporting period. The put and call options fair values were $173 million and $13 million, respectively, at June 30, 2022. The put and call options fair values, derived from the Monte Carlo simulation, ~~which resulted in fair values of $45~~were $202 million and ~~$503~~$13 million, respectively, at December 31, ~~2020.~~ 2021.

The ~~put option was included within other long-term liabilities and the call option included within other long-term assets at December 31, 2020. The change~~significant unobservable inputs utilized in these Level 3 fair value measurements (and selected values) include the enterprise value, annualized volatility and credit spread. Enterprise value was derived from a discounted cash flow model, which utilized significant unobservable inputs for long-term revenue, to measure underlying cash flows, weighted average cost of capital and long term growth rate. The table below presents the ~~put and call options is reflected as "Other (income) expense, net" in our condensed consolidated statements~~assumptions used for each reporting period.

Table of ~~income.~~Contents

Humana Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)


	June 30, 2022		December 31, 2021
Annualized volatility	23.2% - 23.3%		22.4	%
Credit spread	1.5% - 1.6%		0.9	%
Revenue exit multiple	1.5x - 2.5x		1.5x - 2.5x
Weighted average cost of capital	13.0	%	12.5	%
Long term growth rate	3.0	%	3.0	%

Other Assets and Liabilities Measured at Fair Value

Certain assets and liabilities are measured at fair value on a non-recurring basis subject to fair value adjustment only in certain circumstances. As disclosed in Note 3, ~~“Acquisitions”~~“Acquisitions and Divestitures”, we completed our acquisition of KAH during the third quarter of 2021. The net assets acquired and resulting goodwill and other intangible assets were recorded at fair value primarily using Level 3 inputs. The net tangible assets including receivables and accrued liabilities were recorded at their carrying value which approximated their fair value due to their short term nature. The fair value of goodwill and other intangible assets were internally estimated based primarily on the income approach. The income approach estimates fair value based on the present value of cash flow that the assets could be expected to generate in the future. We developed internal estimates for expected cash flows in the present value calculation using inputs and significant assumptions that include historical revenues and earnings, revenue growth rates, the amount and timing of future cash flows, discount rates, contributory asset charges and future tax rates, among others. The excess purchase price over the fair value of assets and liabilities acquired is recorded as goodwill.

Other than the assets acquired and liabilities assumed in the KAH acquisition and other acquisitions in Note 3, there were no other material assets or liabilities measured at fair value on a recurring or nonrecurring basis during ~~2021.~~2022.

~~Table of Contents~~

~~Humana Inc.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

~~(Unaudited)~~

6. MEDICARE PART D

We cover prescription drug benefits in accordance with Medicare Part D under multiple contracts with the Centers for Medicare and Medicaid Services, or CMS, as described further in Note 2 to the consolidated financial statements included in our ~~2020~~2021 Form 10-K. The accompanying condensed consolidated balance sheets include the following amounts associated with Medicare Part D at ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020.~~2021. CMS subsidies/discounts in the table below include the reinsurance and low-income cost subsidies funded by CMS for which we assume no risk as well as brand name prescription drug discounts for Part D plan participants in the coverage gap funded by CMS and pharmaceutical manufacturers.


		September 30, 2021				December 31, 2020					June 30, 2022				December 31, 2021
		Risk Corridor Settlement		CMS Subsidies/ Discounts		Risk Corridor Settlement		CMS Subsidies/ Discounts			Risk Corridor Settlement		CMS Subsidies/ Discounts		Risk Corridor Settlement		CMS Subsidies/ Discounts
		(in millions)									(in millions)
Other current assets	Other current assets	$	170	$	1,681	$	216	$	1,420	Other current assets	$	148	$	703	$	363	$	1,894
Trade accounts payable and accrued expenses	Trade accounts payable and accrued expenses	(14)		(1,139)		(39)		(253)		Trade accounts payable and accrued expenses	(93)		(2,355)		(68)		(466)
Net current asset		156		542		177		1,167
Net current asset (liability)										Net current asset (liability)	55		(1,652)		295		1,428
Other long-term assets	Other long-term assets	244		—		8		—		Other long-term assets	361		—		5		—
Other long-term liabilities	Other long-term liabilities	(257)		—		(90)		—		Other long-term liabilities	(212)		—		(194)		—
Net long-term liability		(13)		—		(82)		—
Total net asset		$	143	$	542	$	95	$	1,167
Net long-term asset (liability)										Net long-term asset (liability)	149		—		(189)		—
Total net asset (liability)										Total net asset (liability)	$	204	$	(1,652)	$	106	$	1,428

~~7. GOODWILL AND OTHER INTANGIBLE ASSETS~~

~~Changes in the carrying amount of goodwill for our reportable segments for the nine months ended September 30, 2021 were as follows:~~

Retail Group and Specialty Healthcare
Services Total
(in millions)
Balance at January 1, 2021 $ 1,535 $ 261 $ 2,651 $ 4,447
Acquisitions 205 — 6,154 6,359
Balance at September 30, 2021 $ 1,740 $ 261 $ 8,805 $ 10,806

Table of Contents

Humana Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

7. GOODWILL AND OTHER INTANGIBLE ASSETS

Changes in the carrying amount of goodwill for our reportable segments for the six months ended June 30, 2022 were as follows:


	Retail		Group and Specialty		Healthcare Services		Total
	(in millions)
Balance at January 1, 2022	$	1,933	$	261	$	8,898	$	11,092
Acquisitions	10		—		140		150
Held-for-sale	—		—		(2,331)		(2,331)

Balance at June 30, 2022	$	1,943	$	261	$	6,707	$	8,911

The following table presents details of our other intangible assets included in other long-term assets in the accompanying condensed consolidated balance sheets at ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020.~~2021:


			September 30, 2021						December 31, 2020								June 30, 2022						December 31, 2021
		Weighted Average Life	Cost		Accumulated Amortization		Net		Cost		Accumulated Amortization		Net			Weighted Average Life	Cost		Accumulated Amortization		Net		Cost		Accumulated Amortization		Net
			($ in millions)														($ in millions)
Other intangible assets:	Other intangible assets:														Other intangible assets:
Certificates of need	Certificates of need	Indefinite	$	1,786	$	—	$	1,786	$	—	$	—	$	—	Certificates of need	Indefinite	$	1,765	$	—	$	1,765	$	1,771	$	—	$	1,771
Medicare licenses	Medicare licenses	Indefinite	522		—		522		—		—		—		Medicare licenses	Indefinite	514		—		514		522		—		522
Customer contracts/ relationships	Customer contracts/ relationships	9.4 years	876		608		268		849		572		277		Customer contracts/ relationships	9.4 years	912		647		265		883		620		263
Trade names and technology	Trade names and technology	7.1 years	156		94		62		122		89		33		Trade names and technology	7.0 years	159		102		57		160		97		63
Provider contracts	Provider contracts	11.7 years	70		55		15		69		50		19		Provider contracts	11.6 years	72		60		12		72		57		15
Noncompetes and other	Noncompetes and other	7.0 years	34		29		5		29		29		—		Noncompetes and other	6.7 years	39		30		9		35		30		5
Held-for-sale															Held-for-sale		(867)		(1)		(866)		—		—		—
Total other intangible assets	Total other intangible assets	9.1 years	$	3,444	$	786	$	2,658	$	1,069	$	740	$	329	Total other intangible assets	9.2 years	$	2,594	$	838	$	1,756	$	3,443	$	804	$	2,639

For the three months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, amortization expense for other intangible assets was approximately ~~$17~~$18 million and ~~$23~~$15 million, respectively. For the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, amortization expense for other intangible assets was approximately ~~$47~~$36 million and ~~$66~~$30 million, respectively. The following table presents our estimate of amortization expense remaining for ~~2021~~2022 and each of the five next succeeding ~~years:~~years, excluding amortization expense on intangibles held-for-sale at June 30, 2022:


		(in millions)			(in millions)
For the years ending December 31,	For the years ending December 31,			For the years ending December 31,
2021		$	18
2022	2022	66		2022	$	34
2023	2023	50		2023	55
2024	2024	43		2024	47
2025	2025	42		2025	45
2026	2026	29		2026	32
2027				2027	24

1920

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Humana Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

8. BENEFITS PAYABLE

On a consolidated basis, activity in benefits payable was as follows for the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020:~~2021:


		For the nine months ended September 30,					For the six months ended June 30,
			2021		2020				2022		2021
		(in millions)					(in millions)
Balances, beginning of period	Balances, beginning of period		$	8,143	$	6,004		Balances, beginning of period	$	8,289	$	8,143

Less: Reinsurance recoverables			—		(68)
Balances, beginning of period, net			8,143		5,936

Acquisitions	Acquisitions		42		—			Acquisitions	—		42
Incurred related to:	Incurred related to:							Incurred related to:
Current year	Current year		52,529		45,693			Current year	39,121		35,164
Prior years	Prior years		(768)		(278)			Prior years	(397)		(719)
Total incurred	Total incurred		51,761		45,415			Total incurred	38,724		34,445
Paid related to:	Paid related to:							Paid related to:
Current year	Current year		(44,370)		(37,810)			Current year	(30,356)		(27,556)
Prior years	Prior years		(6,818)		(5,334)			Prior years	(7,007)		(6,589)
Total paid	Total paid		(51,188)		(43,144)			Total paid	(37,363)		(34,145)

Reinsurance recoverable			—		1

Balances, end of period	Balances, end of period		$	8,758	$	8,208		Balances, end of period	$	9,650	$	8,485

Amounts incurred related to prior periods vary from previously estimated liabilities as the claims ultimately are settled. Negative amounts reported for incurred related to prior years result from claims being ultimately settled for amounts less than originally estimated (favorable development).

Our reserving practice is to consistently recognize the actuarial best estimate of our ultimate liability for claims. Actuarial standards require the use of assumptions based on moderately adverse experience, which generally results in favorable reserve development, or reserves that are considered redundant.

The higher prior year favorable development for the nine months ended September 30, 2021 was primarily attributable to the reversal of actions taken in 2020, including the suspension of certain financial recovery programs for a period of time. The suspension during 2020 was intended to provide financial and administrative relief for providers facing unprecedented strain as a result of the COVID-19 pandemic.

Incurred and Paid Claims Development

The following discussion provides information about incurred and paid claims development for our Retail and Group and Specialty segments as of ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, net of reinsurance, and the total estimate of benefits payable for claims incurred but not reported, or IBNR, included within the net incurred claims amounts.

Table of Contents

Humana Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

Retail Segment

Activity in benefits payable for our Retail segment was as follows for the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020:~~2021:


		For the nine months ended September 30,					For the six months ended June 30,
			2021		2020				2022		2021
		(in millions)					(in millions)
Balances, beginning of period	Balances, beginning of period		$	7,428	$	5,363		Balances, beginning of period	$	7,675	$	7,428

Less: Reinsurance recoverables			—		(68)
Balances, beginning of period, net			7,428		5,295

Acquisitions	Acquisitions		42		—			Acquisitions	—		42
Incurred related to:	Incurred related to:							Incurred related to:
Current year	Current year		49,247		42,186			Current year	37,299		32,986
Prior years	Prior years		(673)		(235)			Prior years	(367)		(619)
Total incurred	Total incurred		48,574		41,951			Total incurred	36,932		32,367
Paid related to:	Paid related to:							Paid related to:
Current year	Current year		(41,721)		(34,946)			Current year	(29,061)		(25,953)
Prior years	Prior years		(6,216)		(4,759)			Prior years	(6,459)		(5,990)
Total paid	Total paid		(47,937)		(39,705)			Total paid	(35,520)		(31,943)

Reinsurance recoverable			—		1

Balances, end of period	Balances, end of period		$	8,107	$	7,542		Balances, end of period	$	9,087	$	7,894

At ~~September~~June 30, ~~2021,~~2022, benefits payable for our Retail segment included IBNR of approximately ~~$5.4~~$5.5 billion, primarily associated with claims incurred in ~~2021.~~2022.

Group and Specialty Segment

Activity in benefits payable for our Group and Specialty segment was as follows for the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020:~~2021:


		For the nine months ended September 30,					For the six months ended June 30,
			2021		2020				2022		2021
		(in millions)					(in millions)
Balances, beginning of period	Balances, beginning of period		$	715	$	641		Balances, beginning of period	$	614	$	715

Incurred related to:	Incurred related to:							Incurred related to:
Current year	Current year		3,769		3,929			Current year	2,121		2,492
Prior years	Prior years		(95)		(43)			Prior years	(30)		(100)
Total incurred	Total incurred		3,674		3,886			Total incurred	2,091		2,392
Paid related to:	Paid related to:							Paid related to:
Current year	Current year		(3,136)		(3,286)			Current year	(1,594)		(1,917)
Prior years	Prior years		(602)		(575)			Prior years	(548)		(599)
Total paid	Total paid		(3,738)		(3,861)			Total paid	(2,142)		(2,516)

Balances, end of period	Balances, end of period		$	651	$	666		Balances, end of period	$	563	$	591

At ~~September~~June 30, ~~2021,~~2022, benefits payable for our Group and Specialty segment included IBNR of approximately ~~$564~~$488 million, primarily associated with claims incurred in ~~2021.~~2022.

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9. EARNINGS PER COMMON SHARE COMPUTATION

Detail supporting the computation of basic and diluted earnings per common share was as follows for the three and ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020:~~2021:


		Three months ended September 30,				Nine months ended September 30,					Three months ended June 30,				Six months ended June 30,
		2021		2020		2021		2020			2022		2021		2022		2021
		(dollars in millions, except per common share results; number of shares in thousands)									(dollars in millions, except per common share results; number of shares in thousands)
Net income available for common stockholders	Net income available for common stockholders	$	1,531	$	1,340	$	2,947	$	3,641	Net income available for common stockholders	$	697	$	588	$	1,627	$	1,416
Weighted average outstanding shares of common stock used to compute basic earnings per common share	Weighted average outstanding shares of common stock used to compute basic earnings per common share	128,518		132,318		128,714		132,234		Weighted average outstanding shares of common stock used to compute basic earnings per common share	126,523		128,692		126,730		128,811
Dilutive effect of:	Dilutive effect of:									Dilutive effect of:
Employee stock options	Employee stock options	68		105		65		95		Employee stock options	47		74		44		63
Restricted stock	Restricted stock	669		773		619		681		Restricted stock	514		621		505		595
Shares used to compute diluted earnings per common share	Shares used to compute diluted earnings per common share	129,255		133,196		129,398		133,010		Shares used to compute diluted earnings per common share	127,084		129,387		127,279		129,469
Basic earnings per common share	Basic earnings per common share	$	11.91	$	10.12	$	22.90	$	27.53	Basic earnings per common share	$	5.50	$	4.57	$	12.83	$	11.00
Diluted earnings per common share	Diluted earnings per common share	$	11.84	$	10.05	$	22.77	$	27.37	Diluted earnings per common share	$	5.48	$	4.55	$	12.77	$	10.94
Number of antidilutive stock options and restricted stock excluded from computation	Number of antidilutive stock options and restricted stock excluded from computation	136		143		256		311		Number of antidilutive stock options and restricted stock excluded from computation	98		103		362		317

10. STOCKHOLDERS’ EQUITY

Dividends

The following table provides details of dividend payments, excluding dividend equivalent rights for unvested stock awards, in ~~2020~~2021 and ~~2021~~2022 under our Board approved quarterly cash dividend policy:


Record Date	Record Date	Payment Date	Amount per Share		Total Amount		Record Date	Payment Date	Amount per Share		Total Amount
					(in millions)						(in millions)
2020 payments
12/31/2019		1/31/2020	$	0.550	$	73
3/31/2020		4/24/2020	0.625		83
6/30/2020		7/31/2020	0.625		83
9/30/2020		10/30/2020	0.625		83
2021 payments	2021 payments						2021 payments
12/31/2020	12/31/2020	1/29/2021	$	0.625	$	81	12/31/2020	1/29/2021	$	0.6250	$	81
3/31/2021	3/31/2021	4/30/2021	0.700		90		3/31/2021	4/30/2021	0.7000		90
6/30/2021	6/30/2021	7/30/2021	0.700		90		6/30/2021	7/30/2021	0.7000		90
9/30/2021	9/30/2021	10/29/2021	0.700		90		9/30/2021	10/29/2021	0.7000		90
2022 payments							2022 payments
12/31/2021							12/31/2021	1/28/2022	$	0.7000	$	90
3/31/2022							3/31/2022	4/29/2022	0.7875		100

In ~~October 2021,~~April 2022, the Board declared a cash dividend of ~~$0.70~~$0.7875 per share payable on ~~January 28,~~July 29, 2022 to stockholders of record on ~~December 31, 2021.~~June 30, 2022. Declaration and payment of future quarterly dividends is at the discretion of our Board and may be adjusted as business needs or market conditions change.

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Stock Repurchases

Our Board of Directors may authorize the purchase of our common stock shares. Under the share repurchase authorization, shares may be purchased from time to time at prevailing prices in the open market, by block purchases, through plans designed to comply with Rule 10b5-1 under the Securities Exchange Act of 1934, as amended, or in privately-negotiated transactions, including pursuant to accelerated share repurchase agreements with investment banks, subject to certain regulatory restrictions on volume, pricing, and timing.

On July 30, 2019, the Board of Directors replaced a previous share repurchase authorization of up to $3 billion (of which approximately $1.03 billion remained unused) with a new authorization for repurchases of up to $3 billion of our common shares exclusive of shares repurchased in connection with employee stock plans, expiring on June 30, 2022.

On July 31, 2019, we entered into an accelerated stock repurchase agreement, the July 2019 ASR, with Citibank, N.A., or Citi, to repurchase $1 billion of our common stock. On August 2, 2019, we made a payment of $1 billion to Citi and received an initial delivery of 2.7 million shares of our common stock. We recorded the payment to Citi as a reduction to stockholders’ equity, consisting of an $800 million increase in treasury stock, which reflects the value of the initial 2.7 million shares received upon initial settlement, and a $200 million decrease in capital in excess of par value, which reflects the value of stock held back by Citi pending final settlement of the July 2019 ASR. Upon final settlement of the July 2019 ASR on December 26, 2019, we received an additional 0.7 million shares as determined by the average daily volume weighted-averages share price of our common stock during the term of the agreement, less a discount, of $296.19, bringing the total shares received under the July 2019 ASR to 3.4 million. In addition, upon settlement we reclassified the $200 million value of stock initially held back by Citi from capital in excess of par value to treasury stock.

On December 22, 2020, we entered into separate accelerated stock repurchase agreements, ("the December 2020 ASR Agreements"), with Citibank, N.A., or Citi, and JPMorgan Chase Bank, or JPM, to repurchase $1.75 billion of our common stock as part of the $3 billion repurchase program authorized by the Board of Directors on July 30, 2019. On December 23, 2020, in accordance with the December 2020 ASR Agreements, we made a payment of $1.75 billion ($875 million to Citi and $875 million to JPM) and received an initial delivery of 3.8 million shares of our common stock (1.9 million shares each from Citi and JPM). We recorded the payments to Citi and JPM as a reduction to stockholders’ equity, consisting of an $1.5 billion increase in treasury stock, which reflects the value of the initial 3.8 million shares received upon initial settlement, and a $262.5 million decrease in capital in excess of par value, which reflects the value of stock held back by Citi and JPM pending final settlement of the December 2020 ASR Agreements. Upon final settlement of the December 2020 ASR agreements with Citi and JPM on May 4, 2021 and May 5, 2021, respectively, we received an additional 0.3 million shares and 0.3 million shares, respectively, as determined by the average daily volume weighted-averages share price of our common stock during the term of the agreement, less a discount, of $400.07 and $401.49, respectively, bringing the total shares received under the December 2020 ASR agreements to 4.4 million. In addition, upon settlement we reclassified the $262.5 million value of stock initially held back by Citi and JPM from capital in excess of par value to treasury stock.

On February 18, 2021, the Board of Directors replaced the previous share repurchase authorization of up to $3 billion (of which approximately $250 million remained unused) with a new authorization for repurchases of up to $3 billion of our common shares exclusive of shares repurchased in connection with employee stock plans, expiring as of February 18, 2024.

On January 11, 2022, we entered into separate accelerated stock repurchase agreements, the January 2022 ASR Agreements, with Mizuho Markets Americas LLC, or Mizuho, and Wells Fargo Bank, or Wells Fargo, to repurchase $1 billion of our common stock as part of the $3 billion repurchase program authorized by the Board of Directors on February 18, 2021. On January 12, 2022, in accordance with the January 2022 ASR Agreements, we made a payment of $1 billion ($500 million to Mizuho and $500 million to Wells Fargo) and received an initial delivery of 2.2 million shares of our common stock (1.08 million shares each from Mizuho and Wells Fargo). In January 2022, we recorded the payments to Mizuho and Wells Fargo as a reduction to stockholders’ equity, consisting of an $850 million increase in treasury stock, which reflects the value of the initial 2.2 million shares received upon initial settlement, and a $150 million decrease in capital in excess of par value, which reflects the value of stock held back by Mizuho and Wells Fargo pending final settlement of the January 2022 ASR Agreements. Upon final settlement of the January 2022 ASR Agreements with Mizuho and Wells Fargo on March 29, 2022 and March 30, 2022, respectively, we received an additional 0.1 million shares and 0.1 million shares, respectively, as determined by the average daily volume weighted-averages share price of our common stock during the term of the agreement, less a discount, of $410.96 and $411.66, respectively, bringing the total shares received under the January 2022 ASR Agreements to 2.4 million. In addition, upon settlement we reclassified the $150 million value of stock initially held back by Mizuho and Wells Fargo from capital in excess of par value to treasury stock. Our remaining repurchase authorization was $3$2 billion as of ~~November 2, 2021.~~July 26, 2022.

In connection with employee stock plans, we acquired 0.06 million common shares for $28 million and 0.09 million common shares for ~~$36 million and 0.08 million common shares for $30~~$33 million during the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, respectively.

~~Noncontrolling interests~~

11. INCOME TAXES

The effective income tax rate was 38.1% and 30.5% for the three and six months ended June 30, 2022, respectively, and 23.7% and 22.7% for the three and six months ended June 30, 2021, respectively. The increase is primarily due to the impact of the $167 million deferred tax liability recognized by Humana Inc., our parent company, for the excess of the book basis over the tax basis of its KAH Hospice subsidiary because realization of the liability in the foreseeable future was apparent with the classification as held-for-sale at June 30, 2022, as further discussed in Note 3.

Noncontrolling interests of $22 million as of September 30, 2021 relate to the minority ownership held by third party investors in certain of our Home Solutions businesses as a result of our Kindred at Home acquisition.

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(Unaudited)

~~11. INCOME TAXES~~

The effective income tax rate was 7.2% and 15.4% for the three and nine months ended September 30, 2021, respectively, compared to 25.2% and 29.0% for the three and nine months ended September 30, 2020, respectively, primarily due to the non-taxable gain we recognized on our previously held Kindred at Home equity method investment from our acquisition of the remaining ownership interest in the business in August 2021 and the termination of the non-deductible health insurance industry fee in 2021.

12. DEBT

The carrying value of debt outstanding, net of unamortized debt issuance costs, was as follows at ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020:~~2021:


		September 30, 2021		December 31, 2020			June 30, 2022		December 31, 2021
		(in millions)					(in millions)
Short-term debt:	Short-term debt:					Short-term debt:
Commercial paper	Commercial paper	$	795	$	600	Commercial paper	$	541	$	955

Senior notes:						Senior notes:
$600 million, 3.150% due December 1, 2022						$600 million, 3.150% due December 1, 2022	600		599
$400 million, 2.900% due December 15, 2022						$400 million, 2.900% due December 15, 2022	400		399
Total senior notes						Total senior notes	1,000		998
Total short-term debt	Total short-term debt	$	795	$	600	Total short-term debt	$	1,541	$	1,953

Long-term debt:	Long-term debt:					Long-term debt:
Senior notes:	Senior notes:					Senior notes:
$600 million, 3.15% due December 1, 2022		$	599	$	598
$400 million, 2.90% due December 15, 2022		399		398
$1.5 billion, 0.650% due August 3, 2023	$1.5 billion, 0.650% due August 3, 2023	1,491		—		$1.5 billion, 0.650% due August 3, 2023	$	1,495	$	1,492
$600 million, 3.85% due October 1, 2024		598		598
$600 million, 4.50% due April 1, 2025		596		595
$600 million, 3.850% due October 1, 2024						$600 million, 3.850% due October 1, 2024	598		598
$600 million, 4.500% due April 1, 2025						$600 million, 4.500% due April 1, 2025	597		596
$750 million, 1.350% due February 3, 2027	$750 million, 1.350% due February 3, 2027	742		—		$750 million, 1.350% due February 3, 2027	744		742
$600 million, 3.95% due March 15, 2027		596		596
$600 million, 3.950% due March 15, 2027						$600 million, 3.950% due March 15, 2027	597		596
$750 million, 3.700% due March 23, 2029						$750 million, 3.700% due March 23, 2029	741		—
$500 million, 3.125% due August 15, 2029	$500 million, 3.125% due August 15, 2029	496		495		$500 million, 3.125% due August 15, 2029	496		496
$500 million, 4.875% due April 1, 2030	$500 million, 4.875% due April 1, 2030	495		494		$500 million, 4.875% due April 1, 2030	495		495
$750 million, 2.150% due February 3, 2032	$750 million, 2.150% due February 3, 2032	741		—		$750 million, 2.150% due February 3, 2032	742		741
$250 million, 8.15% due June 15, 2038		262		262
$250 million, 8.150% due June 15, 2038						$250 million, 8.150% due June 15, 2038	261		261
$400 million, 4.625% due December 1, 2042	$400 million, 4.625% due December 1, 2042	396		396		$400 million, 4.625% due December 1, 2042	396		396
$750 million, 4.95% due October 1, 2044		740		739
$400 million, 4.80% due March 15, 2047		395		396
$500 million, 3.95% due August 15, 2049		492		493
$750 million, 4.950% due October 1, 2044						$750 million, 4.950% due October 1, 2044	740		740
$400 million, 4.800% due March 15, 2047						$400 million, 4.800% due March 15, 2047	395		395
$500 million, 3.950% due August 15, 2049						$500 million, 3.950% due August 15, 2049	493		493
Total senior notes						Total senior notes	8,790		8,041
Term loans:	Term loans:					Term loans:
Gentiva term loan, due July 2, 2025		1,928		—
Term loan, due October 29, 2023						Term loan, due October 29, 2023	2,000		2,000
Delayed draw term loan, due May 28, 2024	Delayed draw term loan, due May 28, 2024	500		—		Delayed draw term loan, due May 28, 2024	500		500
Total term loans						Total term loans	2,500		2,500
Total long-term debt	Total long-term debt	$	11,466	$	6,060	Total long-term debt	$	11,290	$	10,541

Senior Notes

Our senior notes, which are unsecured, may be redeemed at our option at any time at 100% of the principal amount plus accrued interest and a specified make-whole amount. The 8.15% senior notes are subject to an interest rate adjustment if the debt ratings assigned to the notes are downgraded (or subsequently upgraded). In addition, our senior notes contain a change of control provision that may require us to purchase the notes under certain circumstances.

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(Unaudited)

~~senior notes contain a change of control provision that may require us to purchase the notes under certain circumstances.~~

In ~~August 2021,~~March 2022, we issued ~~$1.5 billion~~$750 million of ~~0.650%~~3.700% unsecured senior notes due ~~August 3, 2023, $750 million of 1.350% unsecured senior notes due February 3, 2027 and $750 million of 2.150% unsecured senior notes due February 3, 2032.~~March 23, 2029. Our net proceeds, reduced for the underwriters' ~~discount~~discounts and ~~commission and offering expenses~~commissions paid, ~~as of September 30, 2021~~ were ~~$2.984 billion.~~$744 million. We used the net proceeds ~~together with cash on hand and~~for general corporate purposes, which included the repayment of existing indebtedness, including borrowings under our $500 million delayed draw term loan, to fund the approximately $5.8 billion purchase price of the acquisition of Kindred at Home, which included the assumption of approximately $2.1 billion of Kindred at Home’s indebtedness and is net of our existing 40% equity interest, and to pay related fees and expenses.commercial paper program.

Delayed Draw Term Loan Credit Agreement

In May 2021, we entered into a $500 million unsecured delayed draw term loan credit agreement. Under the term loan credit agreement, loans bear interest at either LIBOR plus a spread or the base rate plus a spread. The loans under the term loan credit agreement mature on the third anniversary of the funding date. The LIBOR spread, currently 125 basis points, varies depending on our credit ratings ranging from 100.0 to 162.5 basis points. The term loan credit agreement provides for the transition from LIBOR and does not require amendment in connection with such transition.

In August 2021, we borrowed $500 million under the delayed draw term loan agreement, which was used, in combination with other debt financing, to fund the approximate $5.8 billion transaction price of Kindred at Home. The $500 million term loan will mature on May 28, 2024. The term loan credit agreement contains customary restrictive covenants and a financial covenant regarding maximum debt to capitalization of 60%, as well as customary events of default. We are in compliance with this financial covenant, with actual debt to capitalization of ~~43%~~45.3% as measured in accordance with the term loan credit agreement as of ~~September~~June 30, ~~2021.~~2022.

We have other customary ~~arms-length~~ relationships, including financial advisory and banking, with some parties to the term loan agreement.

~~Gentiva Credit Agreement~~

Gentiva Health Services, Inc., or Gentiva, an entity within the Kindred at Home organizational structure, and certain of Gentiva’s subsidiaries are a party to a First Lien Credit Agreement, which we refer to as the Gentiva Credit Agreement. The Gentiva Credit Agreement consists of (i) a term loan facility maturing on July 2, 2025, which we refer to as the Gentiva Term Loan, and (ii) a $350 million revolving credit facility maturing on July 2, 2023, which we refer to as the Gentiva Revolver. As of the closing of the acquisition of Kindred at Home on August 17, 2021, we assumed approximately $2.1 billion of borrowings under the Gentiva Term Loan, and subsequent to the acquisition, we repaid $150 million of borrowings under the Gentiva Term Loan. No borrowings were outstanding under the Gentiva Revolver and the Gentiva Revolver was subsequently terminated on September 30, 2021.

Borrowings under the Gentiva Term Loan bear interest at a rate per annum of 175 basis points over the base rate or 275 basis points over the Eurodollar rate. The Gentiva Term Loan requires certain mandatory prepayments of a percentage of excess cash flow (as defined in the Gentiva Credit Agreement) or following certain events, including certain asset sales and casualty events, and requires quarterly amortization payments of 0.25% of the original principal amount of the term loan. The Gentiva Term Loan is not subject to any financial maintenance covenants.

The Gentiva Credit Agreement imposes certain restrictions including, but not limited to, those that restrict (with certain exceptions) Gentiva’s and its guarantor subsidiaries’ ability to incur additional indebtedness or liens, make certain investments or restricted payments (including dividends), engage in new lines of business, sell assets and engage in certain affiliate transactions. The Gentiva Credit Agreement also contains certain customary representations and warranties, covenants, events of default and acceleration provisions upon the occurrence of an

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~~(Unaudited)~~

~~event of default (including a change of control). All amounts outstanding under the Gentiva Term Loan were repaid on October 29, 2021, and the Gentiva Credit Agreement was terminated.~~

October 2021 Term Loan Agreement

On October 29, 2021, we entered into a $2.0 billion term loan credit agreement, which we refer to as the October 2021 Term Loan Agreement, with certain lending banks and other financial institutions. Proceeds of the October 2021 Term Loan Agreement were applied to finance the repayment in full of the outstanding ~~debt under the Gentiva Credit Agreement and for other general corporate purposes.~~KAH debt.

Loans under the October 2021 Term Loan Agreement bear interest at adjusted Term SOFR, as defined in the October 2021 Term Loan Agreement, or the base rate plus a spread. The applicable margin, currently 112.5 basis points, varies depending on our credit ratings ranging from 87.5 to 137.5 basis points. The loans under the October 2021 Term Loan Agreement will mature on ~~the second anniversary of the closing date,~~ October 29, 2023. The October 2021 Term Loan Agreement contains customary covenants, including a maximum debt to capitalization financial condition covenant regarding maximum debt to capitalization of 60%, as well as customary events of default. ~~The terms~~We are in compliance with this financial covenant, with actual debt to capitalization of 45.3% as measured in accordance with the ~~October 2021 Term Loan Agreement also include customary representations and warranties.~~term loan credit agreement as of June 30, 2022. We have other relationships, including financial advisory and banking, with some parties to the October 2021 Term Loan Agreement. The foregoing description of the October 2021 Term Loan Agreement does not purport to be complete. For an understanding of the terms and provisions of the October 2021 Term Loan Agreement, reference should be made to the copy of that agreement attached as Exhibit 10.4 to this Form 10-Q and incorporated by reference herein.

At the time of the repayment in full of the ~~Gentiva Credit Agreement,~~KAH debt, there was $1.9 billion of outstanding debt thereunder and no prepayment penalty was due.

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(Unaudited)

Revolving Credit Agreements

In June 2021, we entered into ~~two separate revolving credit agreements: (i)~~ a 5-year, $2.5 billion unsecured revolving credit ~~agreement and (ii) a 364-day $1.5 billion unsecured revolving credit~~ agreement. Under the 5-year revolving credit ~~agreements,~~agreement, at our option, we can borrow on either a competitive advance basis or a revolving credit basis. The revolving credit portion bears interest at either LIBOR plus a spread or the base rate plus a spread. The competitive advance portion of any borrowings will bear interest at market rates prevailing at the time of borrowing on either a fixed rate or a floating rate based on LIBOR, at our option. The revolving credit ~~agreements provide~~agreement provides for the transition from LIBOR and dodoes not require amendment in connection with such transition.

In June 2022, we entered into a 364-day $1.5 billion unsecured revolving credit agreement (replacing the 364-day $1.5 billion unsecured revolving credit agreement entered into in June 2021, which expired in accordance with its terms). Under the 364-day revolving credit agreement, at our option, we can borrow on either a competitive advance basis or a revolving credit basis. The revolving credit portion bears interest at Term SOFR or the base rate plus a spread. The competitive advance portion of any borrowings will bear interest at market rates prevailing at the time of borrowing on either a fixed rate or a floating rate based Term SOFR, at our option.

The LIBOR spread, currently 110.0 basis points under the 5-year revolving credit agreements and the SOFR spread, currently 115.0 basis points under the 364-day revolving credit agreement, varies depending on our credit ratings ranging from 91.0 to 140.0 basis points under the 5-year revolving credit agreement and from ~~93.0~~94.0 to ~~145.0~~135.0 basis points under the 364-day revolving credit agreement. We also pay an annual facility fee regardless of utilization. This facility fee, currently 15.0 basis points, under the 5-year revolving credit agreement and 10.0 basis points under the 364-day revolving agreement, varies depending on our credit ratings ranging from 9.0 to 22.5 basis points under the 5-year revolving credit agreement and from ~~7.0~~6.0 to ~~17.5~~15.0 basis points under the 364-day revolving credit agreement.

The terms of the revolving credit agreements include standard provisions related to conditions of borrowing which could limit our ability to borrow additional funds. In addition, the credit agreements contain customary restrictive covenants and a financial covenant regarding maximum debt to capitalization of 60%, as well as customary events of default. We are in compliance with this financial covenant, with actual debt to capitalization of ~~43%~~45.3% as measured in accordance with the revolving credit agreements as of ~~September~~June 30, ~~2021.~~2022. Upon our agreement with one or more financial institutions, we may expand the aggregate commitments under the revolving credit agreements by up to $750 million in the aggregate, to a maximum of $4.75 billion, across the 5-year and 364-day revolving credit agreements.

At ~~September~~June 30, ~~2021,~~2022, we had no borrowings and ~~less than $1~~approximately $73 million of letters of credit outstanding under the revolving credit ~~agreements.~~agreements, including those of KAH. Accordingly, as of ~~September~~June 30, ~~2021,~~2022, we had ~~$2.5~~$2.4 billion of remaining borrowing

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~~(Unaudited)~~

capacity under the 5-year revolving credit agreement and $1.5 billion of remaining borrowing capacity under the 364-day revolving credit agreement (which excludes the uncommitted $750 million of incremental loan facilities), none of which would be restricted by our financial covenant compliance requirement.

We have other customary ~~arms-length~~ relationships, including financial advisory and banking, with some parties to the revolving credit agreements.

Commercial Paper

Under our commercial paper program we may issue short-term, unsecured commercial paper notes privately placed on a discount basis through certain broker dealers at any ~~time~~time. On February 10, 2022, we increased the size of our commercial paper program to permit the issuance of commercial paper notes in an aggregate principal amount not to exceed $4 billion compared to the prior amount not to exceed $2 billion. Amounts available under the program may be borrowed, repaid and re-borrowed from time to time. The net proceeds of issuances have been and are expected to be used for general corporate purposes. The maximum principal amount outstanding at any one time during the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 was ~~$1.1~~$1.5 billion, with ~~$795~~$541 million outstanding at ~~September~~June 30, ~~2021~~ 2022

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(Unaudited)

compared to ~~$600~~$955 million outstanding at December 31, ~~2020.~~2021. The outstanding commercial paper at ~~September~~June 30, ~~2021~~2022 had a weighted average annual interest rate of ~~0.29%~~1.70%.

Other Short-term Borrowings

We are a member, through one subsidiary, of the Federal Home Loan Bank of Cincinnati, or FHLB. As a member we have the ability to obtain short-term cash advances, subject to certain minimum collateral requirements. At ~~September~~June 30, ~~2021~~2022 we had no outstanding short-term FHLB borrowings.

13. COMMITMENTS, GUARANTEES AND CONTINGENCIES

Government Contracts

Our Medicare products, which accounted for approximately ~~83%~~81% of our total premiums and services revenue for the ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, primarily consisted of products covered under the Medicare Advantage and Medicare Part D Prescription Drug Plan contracts with the federal government. These contracts are renewed generally for a calendar year term unless CMS notifies us of its decision not to renew by May 1 of the calendar year in which the contract would end, or we notify CMS of our decision not to renew by the first Monday in June of the calendar year in which the contract would end. All material contracts between Humana and CMS relating to our Medicare products have been renewed for ~~2022 and all of our~~2023. Our product offerings ~~have been approved.~~under those contracts are subject to approval by CMS in the third quarter of 2022.

CMS uses a risk-adjustment model which adjusts premiums paid to Medicare Advantage, or MA, plans according to health status of covered members. The risk-adjustment model, which CMS implemented pursuant to the Balanced Budget Act of 1997, ~~(BBA)~~or BBA, and the Benefits Improvement and Protection Act of 2000, ~~(BIPA),~~or BIPA, generally pays more where a plan's membership has higher expected costs. Under this model, rates paid to MA plans are based on actuarially determined bids, which include a process whereby our prospective payments are based on our estimated cost of providing standard Medicare-covered benefits to an enrollee with a "national average risk profile." That baseline payment amount is adjusted to reflect the health status of our enrolled membership. Under the risk-adjustment methodology, all MA plans must collect from providers and submit the necessary diagnosis code information to CMS within prescribed deadlines. The CMS risk-adjustment model uses the diagnosis data to calculate the risk-adjusted premium payment to MA plans, which CMS adjusts for coding pattern differences between the health plans and the government fee-for-service program. We generally rely on providers, including certain providers in our network who are our employees, to code their claim submissions with appropriate diagnoses, which we send to CMS as the basis for our payment received from CMS under the actuarial risk-adjustment model. We also rely on these providers to document appropriately all medical data, including the diagnosis data submitted with claims. In addition, we conduct medical record reviews as part of our data and payment accuracy compliance efforts, to more accurately reflect diagnosis conditions under the risk adjustment model. These compliance efforts include the internal contract level audits described in more detail below, as well as ordinary course reviews of our internal business processes.

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CMS is phasing-in the process of calculating risk scores using diagnoses data from the Risk Adjustment Processing System, or RAPS, to diagnoses data from the Encounter Data System, or EDS. The RAPS process requires MA plans to apply a filter logic based on CMS guidelines and only submit diagnoses that satisfy those guidelines. For submissions through EDS, CMS requires MA plans to submit all the encounter data and CMS will apply the risk adjustment filtering logic to determine the risk scores. For 2020, 50% of the risk score was calculated from claims data submitted through EDS. CMS increased that percentage to 75% for 2021 and will complete the phased-in transition from RAPS to EDS by using only EDS data to calculate risk scores in 2022. The phase-in from RAPS to EDS could result in different risk scores from each dataset as a result of plan processing issues, CMS processing issues, or filtering logic differences between RAPS and EDS, and could have a material adverse effect on our results of operations, financial position, or cash flows.

CMS and the Office of the Inspector General of Health and Human Services, or HHS-OIG, are continuing to perform audits of various companies’ selected MA contracts related to this risk adjustment diagnosis data. We refer to these audits as Risk-Adjustment Data Validation Audits, or RADV audits. RADV audits review medical records in an attempt to validate provider medical record documentation and coding practices which influence the calculation of premium payments to MA plans.

In 2012, CMS released a “Notice of Final Payment Error Calculation Methodology for Part C Medicare Advantage Risk Adjustment Data Validation (RADV) Contract-Level Audits.” The payment error calculation methodology provided that, in calculating the economic impact of audit results for an MA contract, if any, the results of the RADV audit sample would be extrapolated to the entire MA contract after a comparison of the audit results to a similar audit of the government’s traditional fee-for-service Medicare program, or Medicare FFS. We refer to the process of accounting for errors in FFS claims as the "FFS ~~Adjuster."~~Adjuster". This comparison of RADV audit results to the FFS error rate is necessary to determine the economic impact, if any, of RADV audit results because

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the government used the Medicare FFS program data set, including any attendant errors that are present in that data set, to estimate the costs of various health status conditions and to set the resulting adjustments to MA plans’ payment rates in order to establish actuarial equivalence in payment rates as required under the Medicare statute. CMS already makes other adjustments to payment rates based on a comparison of coding pattern differences between MA plans and Medicare FFS data (such as for frequency of coding for certain diagnoses in MA plan data versus the Medicare FFS program dataset).

The final RADV extrapolation methodology, including the first application of extrapolated audit results to determine audit settlements, is expected to be applied to CMS RADV contract level audits conducted for contract year 2011 and subsequent years. CMS is currently conducting RADV contract level audits for certain of our Medicare Advantage plans.

Estimated audit settlements are recorded as a reduction of premiums revenue in our consolidated statements of income, based upon available information. We perform internal contract level audits based on the RADV audit methodology prescribed by CMS. Included in these internal contract level audits is an audit of our Private Fee-For Service business which we used to represent a proxy of the FFS Adjuster which has not yet been finalized. We based our accrual of estimated audit settlements for each contract year on the results of these internal contract level audits and update our estimates as each audit is completed. Estimates derived from these results were not material to our results of operations, financial position, or cash flows. We report the results of these internal contract level audits to CMS, including identified overpayments, if any.

On October 26, 2018, CMS issued a proposed rule and accompanying materials, ~~(which~~which we refer to as the “Proposed Rule”), related to, among other things, the RADV audit methodology described above. If implemented, the Proposed Rule would use extrapolation in RADV audits applicable to payment year 2011 contract-level audits and all subsequent audits, without the application of a FFS Adjuster to audit findings. We believe that the Proposed Rule fails to address adequately the statutory requirement of actuarial equivalence, and have provided substantive comments to CMS on the Proposed Rule as part of the notice-and-comment rulemaking process. Whether, and to what extent, CMS finalizes the Proposed Rule, and any related regulatory, industry or company reactions, could have a material adverse effect on our results of operations, financial position, or cash flows.

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In addition, as part of our internal compliance efforts, we routinely perform ordinary course reviews of our internal business processes related to, among other things, our risk coding and data submissions in connection with the risk adjustment model. These reviews may also result in the identification of errors and the submission of corrections to CMS, that may, either individually or in the aggregate, be material. As such, the result of these reviews may have a material adverse effect on our results of operations, financial position, or cash flows.

We will continue to work with CMS to ensure that MA plans are paid accurately and that payment model principles are in accordance with the requirements of the Social Security Act, which, if not implemented correctly could have a material adverse effect on our results of operations, financial position, or cash flows.

Our state-based Medicaid business, which accounted for approximately 6% of our total premiums and services revenue for the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 primarily consisted of serving members enrolled in Medicaid, and in certain circumstances members who qualify for both Medicaid and Medicare, under contracts with various states.

At ~~September~~June 30, ~~2021,~~2022, our military services business, which accounted for approximately 1% of our total premiums and services revenue for the ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, primarily consisted of the TRICARE T2017 East Region contract. The T2017 East Region contract comprising 32 states and approximately 6 million TRICARE beneficiaries, under which delivery of health care services commenced on January 1, 2018. The T2017 East Region contract is a 5-year contract set to expire on December 31, 2022 and is subject to renewals on January 1 of each year during its term at the government's option.

The loss of any of the contracts above or significant changes in these programs as a result of legislative or regulatory action, including reductions in premium payments to us, regulatory restrictions on profitability, including reviews by regulatory bodies that may compare our Medicare Advantage profitability to our non-Medicare

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Advantage business profitability, or compare the profitability of various products within our Medicare Advantage business, and require that they remain within certain ranges of each other, or increases in member benefits or member eligibility criteria without corresponding increases in premium payments to us, may have a material adverse effect on our results of operations, financial position, and cash flows.

Legal Proceedings and Certain Regulatory Matters

As previously disclosed, the Civil Division of the United States Department of Justice provided us with an information request in December 2014, concerning our Medicare Part C risk adjustment practices. The request relates to our oversight and submission of risk adjustment data generated by providers in our Medicare Advantage network, as well as to our business and compliance practices related to risk adjustment data generated by our providers and by us, including medical record reviews conducted as part of our data and payment accuracy compliance efforts, the use of health and well-being assessments, and our fraud detection efforts. We believe that this request for information is in connection with a wider review of Medicare Risk Adjustment generally that includes a number of Medicare Advantage plans, providers and vendors. We continue to cooperate with the Department of Justice. These matters are expected to result in additional qui tam litigation.

As previously disclosed, on January 19, 2016, an individual filed a qui tam suit captioned United States of America ex rel. Steven Scott v. Humana, Inc., in United States District Court, Central District of California, Western Division. The complaint alleges certain civil violations by us in connection with the actuarial equivalence of the plan benefits under Humana’s Basic PDP plan, a prescription drug plan offered by us under Medicare Part D. The action seeks damages and penalties on behalf of the United States under the False Claims Act. The court ordered the qui tam action unsealed on September 13, 2017, so that the relator could proceed, following notice from the U.S. Government that it was not intervening at that time. On January 29, 2018, the suit was transferred to the United States District Court, Western District of Kentucky, Louisville Division. We have substantially completed discovery with the relator who has pursued the matter on behalf of the united States following unsealing. On March 31, 2022, the Court denied the parties' Motions for Summary Judgement. We take seriously our obligations to comply with applicable CMS requirements and actuarial standards of practice, and continue to vigorously defend against these allegations since the transfer to the Western District of Kentucky. We have substantially completed discovery with the relator who has pursued the matter on behalf of the United States following its unsealing, and expect the Court to consider our motion for summary judgment.

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allegations.

Other Lawsuits and Regulatory Matters

Our current and past business practices are subject to review or other investigations by various state insurance and health care regulatory authorities and other state and federal regulatory authorities. These authorities regularly scrutinize the business practices of health insurance, health care delivery and benefits companies. These reviews focus on numerous facets of our business, including claims payment practices, statutory capital requirements, provider contracting, risk adjustment, competitive practices, commission payments, privacy issues, utilization management practices, pharmacy benefits, access to care, and sales practices, among others. Some of these reviews have historically resulted in fines imposed on us and some have required changes to some of our practices. We continue to be subject to these reviews, which could result in additional fines or other sanctions being imposed on us or additional changes in some of our practices.

We also are involved in various other lawsuits that arise, for the most part, in the ordinary course of our business operations, certain of which may be styled as class-action lawsuits. Among other matters, this litigation may include employment matters, claims of medical malpractice, bad faith, nonacceptance or termination of providers, anticompetitive practices, improper rate setting, provider contract rate and payment disputes, including disputes over reimbursement rates required by statute, disputes arising from competitive procurement process, general contractual matters, intellectual property matters, and challenges to subrogation practices. Under state guaranty assessment laws, including those related to state cooperative failures in the industry, we may be assessed (up to prescribed limits) for certain obligations to the policyholders and claimants of insolvent insurance companies that write the same line or lines of business as we do.

As a government contractor, we may also be subject to false claims litigation, such as qui tam lawsuits brought by individuals who seek to sue on behalf of the government, alleging that the government contractor submitted false

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claims to the government or related overpayments from the government, including, among other allegations, those resulting from coding and review practices under the Medicare risk adjustment model. Qui tam litigation is filed under seal to allow the government an opportunity to investigate and to decide if it wishes to intervene and assume control of the litigation. If the government does not intervene, the individual may continue to prosecute the action on his or her own, on behalf of the government. We also are subject to other allegations of nonperformance of contractual obligations to providers, members, and others, including failure to properly pay claims, improper policy terminations, challenges to our implementation of the Medicare Part D prescription drug program and other litigation.

A limited number of the claims asserted against us are subject to insurance coverage. Personal injury claims, claims for extra contractual damages, care delivery malpractice, and claims arising from medical benefit denials are covered by insurance from our wholly owned captive insurance subsidiary and excess carriers, except to the extent that claimants seek punitive damages, which may not be covered by insurance in certain states in which insurance coverage for punitive damages is not permitted. In addition, insurance coverage for all or certain forms of liability has become increasingly costly and may become unavailable or prohibitively expensive in the future.

We record accruals for the contingencies discussed in the sections above to the extent that we conclude it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. No estimate of the possible loss or range of loss in excess of amounts accrued, if any, can be made at this time regarding the matters specifically described above because of the inherently unpredictable nature of legal proceedings, which also may be exacerbated by various factors, including: (i) the damages sought in the proceedings are unsubstantiated or indeterminate; (ii) discovery is not complete; (iii) the proceeding is in its early stages; (iv) the matters present legal uncertainties; (v) there are significant facts in dispute; (vi) there are a large number of parties (including where it is uncertain how liability, if any, will be shared among multiple defendants); or (vii) there is a wide range of potential outcomes.

The outcome of any current or future litigation or governmental or internal investigations, including the matters described above, cannot be accurately predicted, nor can we predict any resulting judgments, penalties, fines or other sanctions that may be imposed at the discretion of federal or state regulatory authorities or as a result of actions by third parties. Nevertheless, it is reasonably possible that any such outcome of litigation, judgments, penalties, fines

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or other sanctions could be substantial, and the outcome of these matters may have a material adverse effect on our results of operations, financial position, and cash flows, and may also affect our reputation.

14. SEGMENT INFORMATION

We manage our business with 3 reportable segments: Retail, Group and Specialty, and Healthcare Services. The reportable segments are based on a combination of the type of health plan customer and adjacent businesses centered on well-being solutions for our health plans and other customers, as described below. These segment groupings are consistent with information used by our Chief Executive Officer, the Chief Operating Decision Maker, to assess performance and allocate resources.

The Retail segment consists of Medicare benefits, marketed to individuals or directly via group Medicare accounts. In addition, the Retail segment also includes our contract with CMS to administer the Limited Income Newly Eligible Transition, or LI-NET, prescription drug plan program and contracts with various states to provide Medicaid, including Temporary Assistance for Needy Families, or TANF, dual eligible demonstration, and Long-Term Support Services benefits, which we refer to collectively as our state-based contracts. The Group and Specialty segment consists of employer group commercial fully-insured medical and specialty health insurance benefits marketed to individuals and employer groups, including dental, vision, and other supplemental health benefits, as well as administrative services only, or ASO products. In addition, our Group and Specialty segment includes our military services business, primarily our TRICARE T2017 East Region contract. The Healthcare Services segment includes ~~services offered to our health plan members as well as to third parties, including~~ pharmacy, ~~solutions,~~ provider, ~~services,~~ and home ~~solutions~~ services, ~~such as home health and~~along with other services and capabilities to promote wellness and advance population ~~health, including our non-consolidating minority investment in~~health. The operations of the recently acquired full ownership of Kindred at Home, as well as the company's strategic ~~partnership~~partnerships with WCAS to develop and operate senior-focused, payor-agnostic, primary care ~~centers. Our home solutions business now includes Kindred at Home.~~centers are also included in the Healthcare Services segment.

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Our Healthcare Services intersegment revenues primarily relate to managing prescription drug coverage for members of our other segments through Humana Pharmacy Solutions®, or HPS, and includes the operations of Humana Pharmacy, Inc., our mail order pharmacy business. These revenues consist of the prescription price (ingredient cost plus dispensing fee), including the portion to be settled with the member (co-share) or with the government (subsidies), plus any associated administrative fees. Services revenues related to the distribution of prescriptions by third party retail pharmacies in our networks are recognized when the claim is processed and product revenues from dispensing prescriptions from our mail order pharmacies are recorded when the prescription or product is shipped. Our pharmacy operations, which are responsible for designing pharmacy benefits, including defining member co-share responsibilities, determining formulary listings, contracting with retail pharmacies, confirming member eligibility, reviewing drug utilization, and processing claims, act as a principal in the arrangement on behalf of members in our other segments. As principal, our Healthcare Services segment reports revenues on a gross basis, including co-share amounts from members collected by third party retail pharmacies at the point of service.

In addition, our Healthcare Services intersegment revenues include revenues earned by certain owned providers derived from risk-based and non-risk-based managed care agreements with our health plans. Under risk based agreements, the provider receives a monthly capitated fee that varies depending on the demographics and health status of the member, for each member assigned to these owned providers by our health plans. The owned provider assumes the economic risk of funding the assigned members’ healthcare services. Under non risk-based agreements, our health plans retain the economic risk of funding the assigned members' healthcare services. Our Healthcare Services segment reports provider services revenues associated with risk-based agreements on a gross basis, whereby capitation fee revenue is recognized in the period in which the assigned members are entitled to receive healthcare services. Provider services revenues associated with non-risk-based agreements are presented net of associated healthcare costs.

We present our condensed consolidated results of operations from the perspective of the health plans. As a result, the cost of providing benefits to our members, whether provided via a third party provider or internally through a stand-alone subsidiary, is classified as benefits expense and excludes the portion of the cost for which the health plans do not bear responsibility, including member co-share amounts and government subsidies of ~~$5.0~~$4.8 billion and $4.4 billion for the three months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, respectively. For the ~~nine~~

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six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020~~2021 these amounts were ~~$12.9~~$8.8 billion and ~~$11.9~~$8.0 billion, respectively. In addition, depreciation and amortization expense associated with certain businesses in our Healthcare Services segment delivering benefits to our members, primarily associated with our provider services and pharmacy operations, are included with benefits expense. The amount of this expense was ~~$28~~$29 million and ~~$33~~$26 million for the three months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, respectively. For the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, the amount of this expense was ~~$80~~$59 million and ~~$94~~$52 million, respectively.

Other than those described previously, the accounting policies of each segment are the same and are described in Note 2 to the consolidated financial statements included in our ~~2020~~2021 Form 10-K. Transactions between reportable segments primarily consist of sales of services rendered by our Healthcare Services segment, primarily pharmacy, provider, and home solutions services, to our Retail and Group and Specialty segment customers. Intersegment sales and expenses are recorded at fair value and eliminated in consolidation. Members served by our segments often use the same provider networks, enabling us in some instances to obtain more favorable contract terms with providers. Our segments also share indirect costs and assets. As a result, the profitability of each segment is interdependent. We allocate most operating expenses to our segments. Assets and certain corporate income and expenses are not allocated to the segments, including the portion of investment income not supporting segment operations, interest expense on corporate debt, and certain other corporate expenses. These items are managed at a corporate level. These corporate amounts are reported separately from our reportable segments and are included with intersegment eliminations in the tables presenting segment results below.

Our segment results were as follows for the three and six months ended June 30, 2022 and 2021:

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~~Our segment results were as follows for the three and nine months ended September 30, 2021 and 2020:~~


		Retail		Group and Specialty		Healthcare Services		Eliminations/ Corporate		Consolidated			Retail		Group and Specialty		Healthcare Services		Eliminations/ Corporate		Consolidated
Three months ended September 30, 2021		(in millions)
Three months ended June 30, 2022												Three months ended June 30, 2022	(in millions)
External revenues	External revenues											External revenues
Premiums:	Premiums:											Premiums:
Individual Medicare Advantage	Individual Medicare Advantage	$	14,642	$	—	$	—	$	—	$	14,642	Individual Medicare Advantage	$	16,692	$	—	$	—	$	—	$	16,692
Group Medicare Advantage	Group Medicare Advantage	1,737		—		—		—		1,737		Group Medicare Advantage	1,857		—		—		—		1,857
Medicare stand-alone PDP	Medicare stand-alone PDP	541		—		—		—		541		Medicare stand-alone PDP	606		—		—		—		606
Total Medicare	Total Medicare	16,920		—		—		—		16,920		Total Medicare	19,155		—		—		—		19,155
Fully-insured	Fully-insured	185		1,052		—		—		1,237		Fully-insured	185		943		—		—		1,128
Specialty	Specialty	—		432		—		—		432		Specialty	—		427		—		—		427
Medicaid and other	Medicaid and other	1,296		—		—		—		1,296		Medicaid and other	1,556		—		—		—		1,556
Total premiums	Total premiums	18,401		1,484		—		—		19,885		Total premiums	20,896		1,370		—		—		22,266
Services revenue:	Services revenue:											Services revenue:

Home solutions	Home solutions	—		—		374		—		374		Home solutions	—		—		752		—		752
Provider	Provider	—		—		110		—		110		Provider	—		—		137		—		137
ASO and other	ASO and other	—		198		—		—		198		ASO and other	8		196		—		—		204
Pharmacy	Pharmacy	—		—		163		—		163		Pharmacy	—		—		256		—		256
Total services revenue	Total services revenue	—		198		647		—		845		Total services revenue	8		196		1,145		—		1,349
Total external revenues	Total external revenues	18,401		1,682		647		—		20,730		Total external revenues	20,904		1,566		1,145		—		23,615
Intersegment revenues	Intersegment revenues											Intersegment revenues
Services	Services	1		10		5,087		(5,098)		—		Services	—		14		5,327		(5,341)		—
Products	Products	—		—		2,303		(2,303)		—		Products	—		—		2,489		(2,489)		—
Total intersegment revenues	Total intersegment revenues	1		10		7,390		(7,401)		—		Total intersegment revenues	—		14		7,816		(7,830)		—
Investment income (loss)		38		3		1		(75)		(33)
Investment income												Investment income	42		4		1		—		47
Total revenues	Total revenues	18,440		1,695		8,038		(7,476)		20,697		Total revenues	20,946		1,584		8,962		(7,830)		23,662
Operating expenses:	Operating expenses:											Operating expenses:
Benefits	Benefits	16,207		1,282		—		(173)		17,316		Benefits	18,182		1,045		—		(128)		19,099
Operating costs	Operating costs	1,669		421		7,634		(7,121)		2,603		Operating costs	1,712		415		8,469		(7,423)		3,173

Depreciation and amortization	Depreciation and amortization	108		20		46		(24)		150		Depreciation and amortization	131		23		50		(29)		175
Total operating expenses	Total operating expenses	17,984		1,723		7,680		(7,318)		20,069		Total operating expenses	20,025		1,483		8,519		(7,580)		22,447
Income (loss) from operations	Income (loss) from operations	456		(28)		358		(158)		628		Income (loss) from operations	921		101		443		(250)		1,215

Interest expense	Interest expense	—		—		—		88		88		Interest expense	—		—		—		101		101
Other income, net	Other income, net	—		—		—		(1,096)		(1,096)		Other income, net	—		—		—		(8)		(8)
Income (loss) before income taxes and equity in net earnings	Income (loss) before income taxes and equity in net earnings	456		(28)		358		850		1,636		Income (loss) before income taxes and equity in net earnings	921		101		443		(343)		1,122
Equity in net earnings		—		—		15		—		15
Equity in net earnings (losses)												Equity in net earnings (losses)	8		—		(6)		—		2
Segment earnings (loss)	Segment earnings (loss)	$	456	$	(28)	$	373	$	850	$	1,651	Segment earnings (loss)	$	929	$	101	$	437	$	(343)	$	1,124
Less: noncontrolling interests	Less: noncontrolling interests	—		—		—		—		—		Less: noncontrolling interests	—		—		(1)		—		(1)
Segment earnings (loss) attributable to Humana	Segment earnings (loss) attributable to Humana	$	456	$	(28)	$	373	$	850	$	1,651	Segment earnings (loss) attributable to Humana	$	929	$	101	$	436	$	(343)	$	1,123

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		Retail		Group and Specialty		Healthcare Services		Eliminations/ Corporate		Consolidated			Retail		Group and Specialty		Healthcare Services		Eliminations/ Corporate		Consolidated
Three months ended September 30, 2020		(in millions)
Three months ended June 30, 2021												Three months ended June 30, 2021	(in millions)
External revenues	External revenues											External revenues
Premiums:	Premiums:											Premiums:
Individual Medicare Advantage	Individual Medicare Advantage	$	12,949	$	—	$	—	$	—	$	12,949	Individual Medicare Advantage	$	14,585	$	—	$	—	$	—	$	14,585
Group Medicare Advantage	Group Medicare Advantage	1,880		—		—		—		1,880		Group Medicare Advantage	1,775		—		—		—		1,775
Medicare stand-alone PDP	Medicare stand-alone PDP	622		—		—		—		622		Medicare stand-alone PDP	662		—		—		—		662
Total Medicare	Total Medicare	15,451		—		—		—		15,451		Total Medicare	17,022		—		—		—		17,022
Fully-insured	Fully-insured	177		1,169		—		602		1,948		Fully-insured	182		1,078		—		—		1,260
Specialty	Specialty	—		424		—		—		424		Specialty	—		432		—		—		432
Medicaid and other	Medicaid and other	1,081		—		—		—		1,081		Medicaid and other	1,264		—		—		—		1,264
Total premiums	Total premiums	16,709		1,593		—		602		18,904		Total premiums	18,468		1,510		—		—		19,978
Services revenue:	Services revenue:											Services revenue:

Home solutions	Home solutions	—		—		26		—		26		Home solutions	—		—		25		—		25
Provider	Provider	—		—		81		—		81		Provider	—		—		97		—		97
ASO and other	ASO and other	4		189		—		—		193		ASO and other	12		194		—		—		206
Pharmacy	Pharmacy	—		—		157		—		157		Pharmacy	—		—		163		—		163
Total services revenue	Total services revenue	4		189		264		—		457		Total services revenue	12		194		285		—		491
Total external revenues	Total external revenues	16,713		1,782		264		602		19,361		Total external revenues	18,480		1,704		285		—		20,469
Intersegment revenues	Intersegment revenues											Intersegment revenues
Services	Services	—		9		4,852		(4,861)		—		Services	—		10		4,977		(4,987)		—
Products	Products	—		—		2,013		(2,013)		—		Products	—		—		2,261		(2,261)		—
Total intersegment revenues	Total intersegment revenues	—		9		6,865		(6,874)		—		Total intersegment revenues	—		10		7,238		(7,248)		—
Investment income	Investment income	28		3		2		681		714		Investment income	65		4		1		106		176
Total revenues	Total revenues	16,741		1,794		7,131		(5,591)		20,075		Total revenues	18,545		1,718		7,524		(7,142)		20,645
Operating expenses:	Operating expenses:											Operating expenses:
Benefits	Benefits	14,224		1,481		—		(94)		15,611		Benefits	16,068		1,247		—		(166)		17,149
Operating costs	Operating costs	1,877		452		6,871		(6,687)		2,513		Operating costs	1,533		409		7,205		(7,031)		2,116

Depreciation and amortization	Depreciation and amortization	87		21		46		(26)		128		Depreciation and amortization	108		22		41		(27)		144
Total operating expenses	Total operating expenses	16,188		1,954		6,917		(6,807)		18,252		Total operating expenses	17,709		1,678		7,246		(7,224)		19,409
Income (loss) from operations		553		(160)		214		1,216		1,823
Income from operations												Income from operations	836		40		278		82		1,236

Interest expense	Interest expense	—		—		—		75		75		Interest expense	—		—		—		79		79
Other income, net		—		—		—		(7)		(7)
Other expense, net												Other expense, net	—		—		—		419		419
Income (loss) before income taxes and equity in net earnings	Income (loss) before income taxes and equity in net earnings	553		(160)		214		1,148		1,755		Income (loss) before income taxes and equity in net earnings	836		40		278		(416)		738
Equity in net earnings	Equity in net earnings	—		—		35		—		35		Equity in net earnings	—		—		33		—		33
Segment earnings (loss)	Segment earnings (loss)	$	553	$	(160)	$	249	$	1,148	$	1,790	Segment earnings (loss)	$	836	$	40	$	311	$	(416)	$	771
Less: noncontrolling interests		—		—		—		—		—
Segment earnings (loss) attributable to Humana		$	553	$	(160)	$	249	$	1,148	$	1,790

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Humana Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)


		Retail		Group and Specialty		Healthcare Services		Eliminations/ Corporate		Consolidated			Retail		Group and Specialty		Healthcare Services		Eliminations/ Corporate		Consolidated
Nine months ended September 30, 2021		(in millions)
Six months ended June 30, 2022												Six months ended June 30, 2022	(in millions)
External revenues	External revenues											External revenues
Premiums:	Premiums:											Premiums:
Individual Medicare Advantage	Individual Medicare Advantage	$	44,042	$	—	$	—	$	—	$	44,042	Individual Medicare Advantage	$	33,744	$	—	$	—	$	—	$	33,744
Group Medicare Advantage	Group Medicare Advantage	5,267		—		—		—		5,267		Group Medicare Advantage	3,732		—		—		—		3,732
Medicare stand-alone PDP	Medicare stand-alone PDP	1,867		—		—		—		1,867		Medicare stand-alone PDP	1,245		—		—		—		1,245
Total Medicare	Total Medicare	51,176		—		—		—		51,176		Total Medicare	38,721		—		—		—		38,721
Fully-insured	Fully-insured	545		3,229		—		—		3,774		Fully-insured	367		1,915		—		—		2,282
Specialty	Specialty	—		1,298		—		—		1,298		Specialty	—		856		—		—		856
Medicaid and other	Medicaid and other	3,739		—		—		—		3,739		Medicaid and other	3,110		—		—		—		3,110
Total premiums	Total premiums	55,460		4,527		—		—		59,987		Total premiums	42,198		2,771		—		—		44,969
Services revenue:	Services revenue:											Services revenue:

Home solutions	Home solutions	—		—		423		—		423		Home solutions	—		—		1,478		—		1,478
Provider		—		—		298		—		298
Provider services												Provider services	—		—		250		—		250
ASO and other	ASO and other	17		582		—		—		599		ASO and other	14		391		—		—		405
Pharmacy		—		—		482		—		482
Pharmacy solutions												Pharmacy solutions	—		—		480		—		480
Total services revenue	Total services revenue	17		582		1,203		—		1,802		Total services revenue	14		391		2,208		—		2,613
Total external revenues	Total external revenues	55,477		5,109		1,203		—		61,789		Total external revenues	42,212		3,162		2,208		—		47,582
Intersegment revenues	Intersegment revenues											Intersegment revenues
Services	Services	1		30		14,838		(14,869)		—		Services	—		28		10,504		(10,532)		—
Products	Products	—		—		6,716		(6,716)		—		Products	—		—		4,935		(4,935)		—
Total intersegment revenues	Total intersegment revenues	1		30		21,554		(21,585)		—		Total intersegment revenues	—		28		15,439		(15,467)		—
Investment income	Investment income	155		11		3		52		221		Investment income	85		7		3		(45)		50
Total revenues	Total revenues	55,633		5,150		22,760		(21,533)		62,010		Total revenues	42,297		3,197		17,650		(15,512)		47,632
Operating expenses:	Operating expenses:											Operating expenses:
Benefits	Benefits	48,574		3,674		—		(487)		51,761		Benefits	36,932		2,091		—		(299)		38,724
Operating costs	Operating costs	4,653		1,227		21,749		(20,903)		6,726		Operating costs	3,406		828		16,654		(14,829)		6,059

Depreciation and amortization	Depreciation and amortization	320		63		127		(74)		436		Depreciation and amortization	254		45		103		(57)		345
Total operating expenses	Total operating expenses	53,547		4,964		21,876		(21,464)		58,923		Total operating expenses	40,592		2,964		16,757		(15,185)		45,128
Income (loss) from operations	Income (loss) from operations	2,086		186		884		(69)		3,087		Income (loss) from operations	1,705		233		893		(327)		2,504

Interest expense	Interest expense	—		—		—		235		235		Interest expense	—		—		—		191		191
Other income, net	Other income, net	—		—		—		(562)		(562)		Other income, net	—		—		—		(29)		(29)
Income before income taxes and equity in net earnings		2,086		186		884		258		3,414
Equity in net earnings		—		—		69		—		69
Segment earnings		$	2,086	$	186	$	953	$	258	$	3,483
Income (loss) before income taxes and equity in net earnings												Income (loss) before income taxes and equity in net earnings	1,705		233		893		(489)		2,342
Equity in net earnings (losses)												Equity in net earnings (losses)	8		—		(10)		—		(2)
Segment earnings (loss)												Segment earnings (loss)	$	1,713	$	233	$	883	$	(489)	$	2,340
Less: noncontrolling interests	Less: noncontrolling interests	—		—		—		—		—		Less: noncontrolling interests	—		—		(1)		—		(1)
Segment earnings attributable to Humana		$	2,086	$	186	$	953	$	258	$	3,483
Segment earnings (loss) attributable to Humana												Segment earnings (loss) attributable to Humana	$	1,713	$	233	$	882	$	(489)	$	2,339

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Humana Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)


		Retail		Group and Specialty		Healthcare Services		Eliminations/ Corporate		Consolidated			Retail		Group and Specialty		Healthcare Services		Eliminations/ Corporate		Consolidated
Nine months ended September 30, 2020		(in millions)
Six months ended June 30, 2021												Six months ended June 30, 2021	(in millions)
External Revenues	External Revenues											External Revenues
Premiums:	Premiums:											Premiums:
Individual Medicare Advantage	Individual Medicare Advantage	$	38,748	$	—	$	—	$	—	$	38,748	Individual Medicare Advantage	$	29,400	$	—	$	—	$	—	$	29,400
Group Medicare Advantage	Group Medicare Advantage	5,867		—		—		—		5,867		Group Medicare Advantage	3,530		—		—		—		3,530
Medicare stand-alone PDP	Medicare stand-alone PDP	2,108		—		—		—		2,108		Medicare stand-alone PDP	1,326		—		—		—		1,326
Total Medicare	Total Medicare	46,723		—		—		—		46,723		Total Medicare	34,256		—		—		—		34,256
Fully-insured	Fully-insured	509		3,606		—		602		4,717		Fully-insured	360		2,177		—		—		2,537
Specialty	Specialty	—		1,278		—		—		1,278		Specialty	—		866		—		—		866
Medicaid and other	Medicaid and other	3,104		—		—		—		3,104		Medicaid and other	2,443		—		—		—		2,443
Total premiums	Total premiums	50,336		4,884		—		602		55,822		Total premiums	37,059		3,043		—		—		40,102
Services revenue:	Services revenue:											Services revenue:

Home solutions	Home solutions	—		—		80		—		80		Home solutions	—		—		49		—		49
Provider		—		—		236		—		236
Provider services												Provider services	—		—		188		—		188
ASO and other	ASO and other	14		576		—		—		590		ASO and other	17		384		—		—		401
Pharmacy		—		—		425		—		425
Pharmacy solutions												Pharmacy solutions	—		—		319		—		319
Total services revenue	Total services revenue	14		576		741		—		1,331		Total services revenue	17		384		556		—		957
Total external revenues	Total external revenues	50,350		5,460		741		602		57,153		Total external revenues	37,076		3,427		556		—		41,059
Intersegment revenues	Intersegment revenues											Intersegment revenues
Services	Services	—		22		14,514		(14,536)		—		Services	—		20		9,751		(9,771)		—
Products	Products	—		—		5,900		(5,900)		—		Products	—		—		4,413		(4,413)		—
Total intersegment revenues	Total intersegment revenues	—		22		20,414		(20,436)		—		Total intersegment revenues	—		20		14,164		(14,184)		—
Investment income	Investment income	114		12		2		812		940		Investment income	117		8		2		127		254
Total revenues	Total revenues	50,464		5,494		21,157		(19,022)		58,093		Total revenues	37,193		3,455		14,722		(14,057)		41,313
Operating expenses:	Operating expenses:											Operating expenses:
Benefits	Benefits	41,939		3,886		—		(410)		45,415		Benefits	32,367		2,392		—		(314)		34,445
Operating costs	Operating costs	5,047		1,316		20,274		(19,653)		6,984		Operating costs	2,984		806		14,115		(13,782)		4,123

Depreciation and amortization	Depreciation and amortization	251		60		135		(84)		362		Depreciation and amortization	212		43		81		(50)		286
Total operating expenses	Total operating expenses	47,237		5,262		20,409		(20,147)		52,761		Total operating expenses	35,563		3,241		14,196		(14,146)		38,854
Income from operations	Income from operations	3,227		232		748		1,125		5,332		Income from operations	1,630		214		526		89		2,459

Interest expense	Interest expense	—		—		—		211		211		Interest expense	—		—		—		147		147
Other expense, net	Other expense, net	—		—		—		63		63		Other expense, net	—		—		—		534		534
Income before income taxes and equity in net earnings		3,227		232		748		851		5,058
Income (loss) before income taxes and equity in net earnings												Income (loss) before income taxes and equity in net earnings	1,630		214		526		(592)		1,778
Equity in net earnings	Equity in net earnings	—		—		68		—		68		Equity in net earnings	—		—		54		—		54
Segment earnings		$	3,227	$	232	$	816	$	851	$	5,126
Less: noncontrolling interests		—		—		—		—		—
Segment earnings attributable to Humana		$	3,227	$	232	$	816	$	851	$	5,126
Segment earnings (loss)												Segment earnings (loss)	$	1,630	$	214	$	580	$	(592)	$	1,832

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Humana Inc.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The condensed consolidated financial statements of Humana Inc. in this document present the Company’s financial position, results of operations and cash flows, and should be read in conjunction with the following discussion and analysis. References to “we,” “us,” “our,” “Company,” and “Humana” mean Humana Inc. and its subsidiaries. This discussion includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. When used in filings with the Securities and Exchange Commission, or SEC, in our press releases, investor presentations, and in oral statements made by or with the approval of one of our executive officers, the words or phrases like “believes,” “expects,” “anticipates,” “intends,” “likely will result,” “estimates,” “projects” or variations of such words and similar expressions are intended to identify such forward–looking statements. These forward–looking statements are not guarantees of future performance and are subject to risks, uncertainties and assumptions, including, among other things, information set forth in Item 1A. – Risk Factors in our ~~2020~~2021 Form 10-K, as modified by any changes to those risk factors included in this document and in other reports we filed subsequent to February ~~18, 2021,~~17, 2022, in each case incorporated by reference herein. In making these statements, we are not undertaking to address or update such forward-looking statements in future filings or communications regarding our business or results. In light of these risks, uncertainties and assumptions, the forward–looking events discussed in this document might not occur. There may also be other risks that we are unable to predict at this time. Any of these risks and uncertainties may cause actual results to differ materially from the results discussed in the forward–looking statements.

Executive Overview

General

Humana Inc., headquartered in Louisville, Kentucky, is a leading health and well-being company committed to helping our millions of medical and specialty members achieve their best health. Our successful history in care delivery and health plan administration is helping us create a new kind of integrated care with the power to improve health and well being and lower costs. Our efforts are leading to a better quality of life for people with Medicare, families, individuals, military service personnel, and communities at large. To accomplish that, we support physicians and other health care professionals as they work to deliver the right care in the right place for their patients, our members. Our range of clinical capabilities, resources and tools, such as in home care, behavioral health, pharmacy services, data analytics and wellness solutions, combine to produce a simplified experience that makes health care easier to navigate and more effective.

Our industry relies on two key statistics to measure performance. The benefit ratio, which is computed by taking

total benefits expense as a percentage of premiums revenue, represents a statistic used to measure underwriting profitability. The operating cost ratio, which is computed by taking total operating costs, excluding depreciation and amortization, as a percentage of total revenue less investment income, represents a statistic used to measure administrative spending efficiency.

Kindred at Home Acquisition

Sale of Hospice and Personal Care Divisions

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The transaction is expected to close in the third quarter of 2022 and is subject to customary state and federal regulatory approvals.

Value Creation Initiatives

During 2022, in order to create capacity to fund growth and investment in our Medicare Advantage business and further expansion of our Healthcare Services capabilities in 2023, we committed to drive additional value for the enterprise through cost saving, productivity initiatives, and value acceleration from previous investments. As a result of these initiatives, during the second quarter of 2022, we recorded a charge of $203 million, primarily related to asset and software impairment and abandonment in the amount of $140 million. These charges are included within operating costs in the condensed consolidated statements of income for the three and six months ended June 30, 2022, and were recorded at the corporate level and not allocated to the segments. Included in this charge is $21 million in future severance payments in connection with the optimization of our workforce to increase speed, agility, and the pace at which Humana must work as a large, integrated healthcare organization. We expect this liability to be primarily paid within the next 12 months and classified it as a current liability, included in trade accounts payable and accrued expenses. We anticipate additional charges in the remainder of the year across these same categories as additional cost saving, productivity initiatives, and value acceleration opportunities are identified.

COVID-19

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non-COVID-19 hospital admissions for non-emergent and elective medical care have resulted in lower overall healthcare system ~~consumption decreased~~ utilization. ~~Likewise~~At the same time, COVID-19 treatment and testing ~~cost~~costs increased utilization. During the first half of 2022, we experienced lower overall utilization of the healthcare system than anticipated, as the reduction in COVID-19 utilization following the increased incidence associated with the Omicron variant outpaced the increase in non-COVID-19 utilization. The significant disruption in utilization during 2020 also impacted our ability to implement clinical initiatives to manage health care costs and chronic conditions of our members, and appropriately document their risk profiles, and, as such, is significantly ~~affecting~~affected our 2021 revenue under the risk adjustment payment model for Medicare Advantage plans. Finally, changes in utilization patterns and actions taken in 2021 as a result of the COVID-19 pandemic, including the suspension of certain financial recovery programs for a period of time and shifting the timing of claim payments and provider capitation surplus payments, impacted our claim reserve development and operating cash flows for 2021.

Business Segments

We manage our business with three reportable segments: Retail, Group and Specialty, and Healthcare Services. The reportable segments are based on a combination of the type of health plan customer and adjacent businesses centered on well-being solutions for our health plans and other customers, as described below. These segment groupings are consistent with information used by our Chief Executive Officer, the Chief Operating Decision Maker, to assess performance and allocate resources.

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the company's strategic ~~partnership~~partnerships with WCAS to develop and operate senior-focused, payor-agnostic, primary care ~~centers. Our home solutions business now includes Kindred at Home.~~centers are also included in the Healthcare Services segment.

The results of each segment are measured by segment earnings, and for our Healthcare Services Segment, also include equity in net earnings from our equity method investees. Transactions between reportable segments primarily consist of sales of services rendered by our Healthcare Services segment, primarily pharmacy, provider, and home solutions services, to our Retail and Group and Specialty segment customers. Intersegment sales and expenses are recorded at fair value and eliminated in consolidation. Members served by our segments often use the same provider networks, enabling us in some instances to obtain more favorable contract terms with providers. Our segments also share indirect costs and assets. As a result, the profitability of each segment is interdependent. We allocate most operating expenses to our segments. Assets and certain corporate income and expenses are not allocated to the segments, including the portion of investment income not supporting segment operations, interest expense on corporate debt, and certain other corporate expenses. These items are managed at a corporate level. These corporate amounts are reported separately from our reportable segments and are included with intersegment eliminations.

Seasonality

COVID-19 disrupted the pattern of our quarterly earnings and operating cash flows largely due to the temporary deferral of non-essential care which resulted in reductions in non-COVID-19 hospital admissions and lower overall healthcare system utilization during higher levels of COVID-19 hospital admissions. Likewise, during periods of increased incidences of COVID-19, COVID-19 treatment and testing costs increase. Similar impacts and seasonal disruptions from either higher or lower utilization are expected to persist as we respond to and recover from the COVID-19 global health crisis.

One of the product offerings of our Retail segment is Medicare stand-alone prescription drug plans, or PDPs, under the Medicare Part D program. Our quarterly Retail segment earnings and operating cash flows are impacted by the Medicare Part D benefit design and changes in the composition of our membership. The Medicare Part D benefit design results in coverage that varies as a member’s cumulative out-of-pocket costs pass through successive

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stages of a member’s plan period, which begins annually on January 1 for renewals. These plan designs generally result in us sharing a greater portion of the responsibility for total prescription drug costs in the early stages and less in the latter stages. As a result, the PDP benefit ratio generally decreases as the year progresses. In addition, the number of low income senior members as well as year-over-year changes in the mix of membership in our standalone PDP products affects the quarterly benefit ratio pattern.

In addition, the Retail segment also experiences seasonality in the operating cost ratio as a result of costs incurred in the second half of the year associated with the Medicare marketing season.

Our Group and Specialty segment also experiences seasonality in the benefit ratio pattern. However, the effect is opposite of Medicare stand-alone PDP in the Retail segment, with the Group and Specialty segment’s benefit ratio increasing as fully-insured members progress through their annual deductible and maximum out-of-pocket expenses.

~~2021~~2022 Highlights

•Our strategy offers our members affordable health care combined with a positive consumer experience in growing markets. At the core of this strategy is our integrated care delivery model, which unites quality care, high member engagement, and sophisticated data analytics. Our approach to primary, physician-directed care for our members aims to provide quality care that is consistent, integrated, cost-effective, and member-focused, provided by both employed physicians and physicians with network contract arrangements. The model is designed to improve health outcomes and affordability for individuals and for the health system as a whole, while offering our members a simple, seamless healthcare experience. We believe this strategy is positioning us for long-term growth in both membership and earnings. We offer providers a continuum of opportunities to increase the integration of care and offer assistance to providers in transitioning from a fee-for-service to a value-based arrangement. These include performance bonuses, shared savings and shared risk relationships. At ~~September~~June 30, ~~2021,~~2022, approximately ~~2,979,800~~3,095,300 members, or 68%,

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of our individual Medicare Advantage members were in value-based relationships under our integrated care delivery model, as compared to ~~2,605,900~~2,914,300 members, or ~~66%~~67%, at ~~September~~June 30, 2020. Medicare Advantage and dual demonstration program membership enrolled in a Humana care management program was 963,500 at September 30, 2021, an increase of 5.0% from 917,200 at September 30, 2020. These members may not be unique to each program since members have the ability to enroll in multiple programs. The increase is primarily driven by growth in Special Needs Plans, or SNP, membership, partially offset by improved predictive modeling leading to a reduction in members being managed by legacy care management programs.2021.

•Net income was ~~$1.5 billion,~~$697 million, or ~~$11.84~~$5.48 per diluted common share, and ~~$1.3 billion,~~$588 million, or ~~$10.05,~~$4.55, for the three months ended ~~September~~June 30, ~~2021,~~2022, and ~~2020,~~2021, respectively. Net income was ~~$2.9~~$1.6 billion, or ~~$22.77~~$12.77 per diluted common share, and ~~$3.6~~$1.4 billion, or ~~$27.37~~$10.94 per diluted common share, for the ~~nine~~six months ended ~~September~~June 30, 2022, and 2021, ~~and 2020,~~ respectively. ~~These comparisons were~~This comparison was significantly impacted by charges associated with productivity initiatives related to previously disclosed $1 billion value creation plan, tax provision related to the ~~gain on our equity method investment in~~pending sale of Kindred at ~~Home upon completion of our acquisition of the business,~~Home's Hospice and Personal Care divisions, put/call valuation adjustments associated with certain equity method investments, transaction and integration costs, as well as the change in the fair value of publicly-traded equity securities, transaction and integration costs associated with the Kindred at Home acquisition, and the receipt of unpaid risk corridor payments in the third quarter of 2020 that were previously written off. The put/call valuation adjustments included the impact of the termination of the put/call agreement related to Kindred at Home as a result of the transaction announced on April 27, 2021.securities. The impact of these adjustments to our consolidated income before income taxes and equity in net earnings and diluted earnings per common share was as follows for the 2022and 2021 quarter and ~~period.~~period:

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For the three months ended September 30, For the nine months ended September 30,
2021 2020 2021 2020
Consolidated income before income taxes and equity in net earnings:
Gain on Kindred at Home equity method investment $ 1,129 $ — $ 1,129 $ —
Change in the fair value of publicly-traded equity securities (174) 643 (197) $ 643
Receipt of commercial risk corridor receivables previously written off, net — 578 — 578
Put/call valuation adjustments (33) 7 (567) (63)
Transaction and integration costs associated with Kindred at Home acquisition (71) — (93) —
Total $ 851 $ 1,228 $ 272 $ 1,158
For the three months ended September 30, For the nine months ended September 30,
2021 2020 2021 2020
Diluted earnings per common share:
Gain on Kindred at Home equity method investment $ 8.74 $ — $ 8.73 $ —
Change in the fair value of publicly-traded equity securities (1.04) 3.72 (1.18) 3.73
Receipt of commercial risk corridor receivables previously written off, net — 3.35 — 3.35
Put/call valuation adjustments (0.20) 0.03 (3.38) (0.37)
Transaction and integration costs associated with Kindred at Home acquisition (0.39) — (0.52) —
Total $ 7.11 $ 7.10 $ 3.65 $ 6.71


	For the three months ended June 30,				For the six months ended June 30,
	2022		2021		2022		2021
Consolidated income before income taxes and equity in net earnings:


Charges associated with productivity initiatives related to the previously disclosed $1 billion value creation plan	$	203	$	—	$	203	$	—
Put/call valuation adjustments associated with company's non consolidating minority interest investments	(8)		419		(29)		534
Transaction and integration costs	36		22		53		22
Change in the fair value of publicly-traded equity securities	62		(63)		170		22
Total	$	293	$	378	$	397	$	578

	For the three months ended June 30,				For the six months ended June 30,
	2022		2021		2022		2021
Diluted earnings per common share:


Charges associated with productivity initiatives related to the previously disclosed $1 billion value creation plan	$	1.23	$	—	$	1.23	$	—
Tax provision related to the pending sale of Kindred at Home's Hospice and Personal Care divisions	1.31		—		1.31		—
Put/call valuation adjustments associated with company's non consolidating minority interest investments	(0.05)		2.49		(0.18)		3.18
Transaction and integration costs	0.22		0.13		0.32		0.13
Change in the fair value of publicly-traded equity securities	0.37		(0.37)		1.03		0.13
Total	$	3.08	$	2.25	$	3.71	$	3.44

◦Excluding these adjustments, our improved comparisons of our results of operations were ~~materially~~primarily impacted by the significant, temporary deferral of care in 2020 resulting from stay-at-home orders, physical distancing measures, and other restrictions implemented to reduce the spread of COVID-19, as well as the impact of COVID-19 testing and treatment costs, which on a net basis significantly and favorably impacted the 2020 results, in particular to the second quarter of 2020, when compared to the 2021 period results. In addition, the third quarter of 2021 reflects the impact of lower COVID-19 related administrative costs in 2021 compared to 2020. Administrative costs in 2020 included costs associated with personal protective equipment, member response effort, the build-out of infrastructure necessary to support employees working remotely and charitable contribution cost to support the communities served by us.

~~In addition, our results of operations for 2021 were favorably impacted by individual Medicare Advantage and state-based contract membership growth and improved operating performance in~~ our Healthcare Services segment, including the consolidation of Kindred at Home operations upon completion of the acquisition of the remaining 60% interest in Kindred at Home in August 2021. Further, 2021 was also favorably impacted by the lower tax rate resulting from the termination of the non-deductible health insurance industry fee in 2021, as well as a lower number of shares used to compute dilutive earnings per common share, primarily reflecting share repurchases.operations.

Table of Contents

Health Care Reform

The Health Care Reform Law enacted significant reforms to various aspects of the U.S. health insurance industry. Certain significant provisions of the Health Care Reform Law include, among others, mandated coverage requirements, mandated benefits and guarantee issuance associated with commercial medical insurance, rebates to policyholders based on minimum benefit ratios, adjustments to Medicare Advantage premiums, the establishment of federally facilitated or state-based exchanges coupled with programs designed to spread risk among insurers, and the introduction of plan designs based on set actuarial values. In addition, the Health Care Reform Law established insurance industry assessments, including an annual health insurance industry fee. The annual health insurance industry fee, which was not deductible for income tax purposes and significantly increased our effective tax rate, was in effect for 2020, but was permanently repealed beginning in calendar year 2021.

It is reasonably possible that the Health Care Reform Law and related regulations, as well as other current or future legislative, judicial or regulatory changes such as the Families First Coronavirus Response Act, ~~(the "Families~~or the Families First ~~Act"),~~Act, the Coronavirus Aid, Relief, and Economic Security Act, ~~(the "CARES Act")~~or the CARES Act, and other legislative or regulatory action taken in response to COVID-19 including restrictions on our ability to manage our provider network or otherwise operate our business, or restrictions on profitability, including reviews by regulatory bodies that may compare our Medicare Advantage profitability to our non-Medicare Advantage business profitability, or compare the profitability of various products within our Medicare Advantage business, and require that they remain within certain ranges of each other, increases in member benefits or changes to member eligibility criteria without corresponding increases in premium payments to us, or increases in regulation of our prescription drug benefit businesses, in the aggregate may have a material adverse effect on our results of operations (including restricting revenue, enrollment and premium growth in certain products and market segments, restricting our ability to expand into new markets, increasing our medical and operating costs, further lowering our Medicare payment rates and increasing our expenses associated with assessments); our financial position (including our ability to maintain the value of our goodwill); and our cash flows.

We intend for the discussion of our financial condition and results of operations that follows to assist in the understanding of our financial statements and related changes in certain key items in those financial statements from year to year, including the primary factors that accounted for those changes. Transactions between reportable segments primarily consist of sales of services rendered by our Healthcare Services segment, primarily pharmacy, provider, and home solutions services, to our Retail and Group and Specialty segment customers and are described in Note 14 to the condensed consolidated financial statements included in this report.

Comparison of Results of Operations for ~~2021~~2022 and ~~2020~~2021

The following discussion primarily deals with our results of operations for the three months ended ~~September~~June 30, 2022, or the 2022 quarter, the three months ended June 30, 2021, or the 2021 quarter, the six months ended June 30, 2022, or the 2022 period, and the ~~three~~six months ended ~~September 30, 2020, or the 2020 quarter, the nine months ended September~~June 30, 2021, or the 2021 ~~period, and the nine months ended September 30, 2020, or the 2020~~ period.

Table of Contents

Consolidated


		For the three months ended September 30,						Change					For the three months ended June 30,						Change
		2021			2020			Dollars		Percentage			2022			2021			Dollars		Percentage
		(dollars in millions, except per common share results)											(dollars in millions, except per common share results)
Revenues:	Revenues:											Revenues:
Premiums:	Premiums:											Premiums:
Retail	Retail	$	18,401		$	16,709		$	1,692	10.1	%	Retail	$	20,896		$	18,468		$	2,428	13.1	%
Group and Specialty	Group and Specialty	1,484			1,593			(109)		(6.8)	%	Group and Specialty	1,370			1,510			(140)		(9.3)	%
Corporate		—			602			(602)		(100.0)	%

Total premiums	Total premiums	19,885			18,904			981		5.2	%	Total premiums	22,266			19,978			2,288		11.5	%
Services:	Services:											Services:
Retail	Retail	—			4			(4)		(100.0)	%	Retail	8			12			(4)		(33.3)	%
Group and Specialty	Group and Specialty	198			189			9		4.8	%	Group and Specialty	196			194			2		1.0	%
Healthcare Services	Healthcare Services	647			264			383		145.1	%	Healthcare Services	1,145			285			860		301.8	%
Total services	Total services	845			457			388		84.9	%	Total services	1,349			491			858		174.7	%
Investment (loss) income		(33)			714			(747)		(104.6)	%
Investment income												Investment income	47			176			(129)		(73.3)	%
Total revenues	Total revenues	20,697			20,075			622		3.1	%	Total revenues	23,662			20,645			3,017		14.6	%
Operating expenses:	Operating expenses:											Operating expenses:
Benefits	Benefits	17,316			15,611			1,705		10.9	%	Benefits	19,099			17,149			1,950		11.4	%
Operating costs	Operating costs	2,603			2,513			90		3.6	%	Operating costs	3,173			2,116			1,057		50.0	%
Depreciation and amortization	Depreciation and amortization	150			128			22		17.2	%	Depreciation and amortization	175			144			31		21.5	%
Total operating expenses	Total operating expenses	20,069			18,252			1,817		10.0	%	Total operating expenses	22,447			19,409			3,038		15.7	%
Income from operations	Income from operations	628			1,823			(1,195)		(65.6)	%	Income from operations	1,215			1,236			(21)		(1.7)	%
Interest expense	Interest expense	88			75			13		17.3	%	Interest expense	101			79			22		27.8	%
Other income, net		(1,096)			(7)			1,089		15,557.1	%
Other (income) expense, net												Other (income) expense, net	(8)			419			427		101.9	%
Income before income taxes and equity in net earnings	Income before income taxes and equity in net earnings	1,636			1,755			(119)		(6.8)	%	Income before income taxes and equity in net earnings	1,122			738			384		52.0	%
Provision for income taxes	Provision for income taxes	120			450			(330)		(73.3)	%	Provision for income taxes	427			183			244		133.3	%
Equity in net earnings	Equity in net earnings	15			35			(20)		(57.1)	%	Equity in net earnings	2			33			(31)		(93.9)	%
Net income	Net income	$	1,531		$	1,340		$	191	14.3	%	Net income	$	697		$	588		$	109	18.5	%
Diluted earnings per common share	Diluted earnings per common share	$	11.84		$	10.05		$	1.79	17.8	%	Diluted earnings per common share	$	5.48		$	4.55		$	0.93	20.4	%
Benefit ratio (a)	Benefit ratio (a)	87.1		%	82.6		%			4.5	%	Benefit ratio (a)	85.8		%	85.8		%			—	%
Operating cost ratio (b)	Operating cost ratio (b)	12.6		%	13.0		%			(0.4)	%	Operating cost ratio (b)	13.4		%	10.3		%			3.1	%
Effective tax rate	Effective tax rate	7.2		%	25.2		%			(18.0)	%	Effective tax rate	38.1		%	23.7		%			14.4	%

Table of Contents


		For the nine months ended September 30,						Change					For the six months ended June 30,						Change
		2021			2020			Dollars		Percentage			2022			2021			Dollars		Percentage
		(dollars in millions, except per common share results)											(dollars in millions, except per common share results)
Revenues:	Revenues:											Revenues:
Premiums:	Premiums:											Premiums:
Retail	Retail	$	55,460		$	50,336		$	5,124	10.2	%	Retail	$	42,198		$	37,059		$	5,139	13.9	%
Group and Specialty	Group and Specialty	4,527			4,884			(357)		(7.3)	%	Group and Specialty	2,771			3,043			(272)		(8.9)	%
Corporate		—			602			(602)		(100.0)	%

Total premiums	Total premiums	59,987			55,822			4,165		7.5	%	Total premiums	44,969			40,102			4,867		12.1	%
Services:	Services:											Services:
Retail	Retail	17			14			3		21.4	%	Retail	14			17			(3)		(17.6)	%
Group and Specialty	Group and Specialty	582			576			6		1.0	%	Group and Specialty	391			384			7		1.8	%
Healthcare Services	Healthcare Services	1,203			741			462		62.3	%	Healthcare Services	2,208			556			1,652		297.1	%
Total services	Total services	1,802			1,331			471		35.4	%	Total services	2,613			957			1,656		173.0	%
Investment income	Investment income	221			940			(719)		(76.5)	%	Investment income	50			254			(204)		(80.3)	%
Total revenues	Total revenues	62,010			58,093			3,917		6.7	%	Total revenues	47,632			41,313			6,319		15.3	%
Operating expenses:	Operating expenses:											Operating expenses:
Benefits	Benefits	51,761			45,415			6,346		14.0	%	Benefits	38,724			34,445			4,279		12.4	%
Operating costs	Operating costs	6,726			6,984			(258)		(3.7)	%	Operating costs	6,059			4,123			1,936		47.0	%
Depreciation and amortization	Depreciation and amortization	436			362			74		20.4	%	Depreciation and amortization	345			286			59		20.6	%
Total operating expenses	Total operating expenses	58,923			52,761			6,162		11.7	%	Total operating expenses	45,128			38,854			6,274		16.1	%
Income from operations	Income from operations	3,087			5,332			(2,245)		(42.1)	%	Income from operations	2,504			2,459			45		1.8	%
Interest expense	Interest expense	235			211			24		11.4	%	Interest expense	191			147			44		29.9	%
Other (income) expense, net	Other (income) expense, net	(562)			63			625		992.1	%	Other (income) expense, net	(29)			534			563		105.4	%
Income before income taxes and equity in net earnings	Income before income taxes and equity in net earnings	3,414			5,058			(1,644)		(32.5)	%	Income before income taxes and equity in net earnings	2,342			1,778			564		31.7	%
Provision for income taxes	Provision for income taxes	536			1,485			(949)		(63.9)	%	Provision for income taxes	713			416			297		71.4	%
Equity in net earnings		69			68			1		1.5	%
Equity in net (losses) earnings												Equity in net (losses) earnings	(2)			54			(56)		(103.7)	%
Net income	Net income	$	2,947		$	3,641		$	(694)	(19.1)	%	Net income	$	1,627		$	1,416		$	211	14.9	%
Diluted earnings per common share	Diluted earnings per common share	$	22.77		$	27.37		$	(4.60)	(16.8)	%	Diluted earnings per common share	$	12.77		$	10.94		$	1.83	16.7	%
Benefit ratio (a)	Benefit ratio (a)	86.3		%	81.4		%			4.9	%	Benefit ratio (a)	86.1		%	85.9		%			0.2	%
Operating cost ratio (b)	Operating cost ratio (b)	10.9		%	12.2		%			(1.3)	%	Operating cost ratio (b)	12.7		%	10.0		%			2.7	%
Effective tax rate	Effective tax rate	15.4		%	29.0		%			(13.6)	%	Effective tax rate	30.5		%	22.7		%			7.8	%

(a)Represents benefits expense as a percentage of premiums revenue.

(b)Represents operating costs as a percentage of total revenues less investment income.

Premiums Revenue

Consolidated premiums increased $2.3 billion, or 11.5%, from $20.0 billion in the 2021 quarter to $22.3 billion in the 2022 quarter and increased $4.9 billion, or 12.1%, from $40.1 billion in the 2021 period to $45.0 billion in the 2022 period primarily due to individual Medicare Advantage and state-based contracts membership growth and

higher per member individual Medicare Advantage premiums,

partially offset by declining year-over-year membership associated with the group commercial medical products and a reduction in sequestration relief in the 2022 quarter compared to the 2021 quarter.

Table of Contents

~~Premiums~~Services Revenue

Consolidated premiums increased $1.0 billion, or 5.2%, from $18.9 billion in the 2020 quarter to $19.9 billion in the 2021 quarter and increased $4.2 billion, or 7.5%, from $55.8 billion in the 2020 period to $60.0 billion in the 2021 period. These increases were primarily due to individual Medicare Advantage and state-based contracts membership growth, as well as higher per member individual Medicare Advantage premiums as a result of the improving CMS benchmark rate for 2021, net of Medicare Risk Adjustment, or MRA, headwinds resulting from COVID-19 related utilization disruption in 2020. These increases were partially offset by declining stand-alone PDP, group commercial medical, and group Medicare Advantage membership. The comparison was further impacted by 2020 quarter impact of the receipt of commercial risk corridor receivables that were previously written off.

~~Services~~ ~~Revenue~~

~~Consolidated~~ services revenue increased ~~$388~~$858 million, or ~~84.9%~~174.7%, from ~~$457 million in the 2020 quarter to $845~~$491 million in the 2021 quarter ~~and increased $471 million, or 35.4%, from~~to $1.3 billion in the ~~2020 period to $1.8~~2022 quarter and increased $1.7 billion, or 173.0%, from $1.0 billion in the 2021 ~~period. These increases were~~ period to $2.6 billion in the 2022 period primarily due to ~~higher home solutions revenues associated with our~~the impact of Kindred at Home ~~acquisition.~~revenues from external customers.

Investment Income

Investment income decreased ~~$747~~$129 million, or ~~104.6%~~73.3%, from ~~$714 million in the 2020 quarter to a $33 million loss in the 2021 quarter~~. ~~Investment income decreased $719 million, or 76.5%, from $940 million in the 2020 period to $221~~$176 million in the 2021 ~~period. The decline~~quarter to $47 million in ~~both~~ the 2022 quarter and decreased $204 million, or 80.3%, from $254 million in the 2021 period p~~rimarily reflects~~ ~~a significant~~to $50 million in the 2022 period primarily due to the decrease in the fair value of our ~~common stock~~publicly traded equity securities investments.

Benefit Expense

Consolidated benefits expense increased ~~$1.7~~$2.0 billion, or ~~10.9%~~11.4%, from ~~$15.6 billion in the 2020 quarter to $17.3~~$17.1 billion in the 2021 quarter ~~and increased $6.3 billion, or 14.0%, from $45.4~~to $19.1 billion in the ~~2020 period to $51.8~~2022 quarter and increased $4.3 billion, or 12.4%, from $34.4 billion in the 2021 period to $38.7 billion in the 2022 period. The consolidated benefit ratio ~~increased 450 basis points from 82.6% for the 2020 quarter to 87.1%~~was unchanged at 85.8% for the 2021 quarter and 2022 quarter and increased ~~490~~20 basis points from ~~81.4% for the 2020 period to 86.3%~~85.9% for the 2021 ~~period. These increases reflect~~period to 86.1% for the ~~2020 quarter impact of~~2022 periodprimarily due to the receipt of commercial risk corridor receivables that were previously written off, the termination in 2021 of the non-deductible health insurance industry fee which, along with a portion of the related tax benefit, was contemplated in the pricinglower favorable prior-period medical claims reserve development, offset by higher per member individual Medicare Advantage premiums and benefit design of our products, COVID-19 impacts, including the impact of the deferral of non-essential care, net of COVID-19 treatment and testing costs and our pandemic relief efforts in 2020, as well as 2021 MRA headwinds resulting from this COVID-19 related utilization disruption in 2020, and the impact in 2021 a~~ssociated~~lower admissions per thousand, or APT, associated with the ~~competitive nature of the group~~individual Medicare Advantage business ~~particularly in large group accounts that were recently procured, as well as~~ in the current year. Further, the 2022 quarter and period ratios reflect a shift in line of business mix with continued growth in certain government programs, which carry a higher benefits expense ratio, combined with a decline in Medicare stand-alone PDP ~~business.~~ and Group and Specialty membership, which have a lower benefits expense ratio.

~~These factors were partially offset by higher~~

Consolidated benefits expense included $37 million of favorable prior-period medical claims reserve development in ~~2021.~~

~~The higher~~the 2022 quarter and $164 million of favorable prior-period medical claims development in the 2021 quarter. Consolidated benefits expense included $397 million of favorable prior-period medical claims reserve development ~~was primarily attributable to~~in the ~~reversal~~2022 period and $719 million of ~~actions taken~~favorable prior-period medical claims reserve development in ~~2020, including~~ the suspension of certain financial recovery programs for a period of time. The suspension during 2020 was intended to provide financial and administrative relief for provider facing unprecedented strain as a result of the COVID-19 pandemic. The favorable prior-period2021 period. Prior-period medical claims reserve development decreased the consolidated benefit ratio by approximately 20 basis points in the 2022 quarter and decreased the consolidated benefit ratio by approximately 80 basis points in the 2021 ~~quarter whereas the favorable prior-period~~quarter. Prior-period medical claims reserve development decreased the consolidated benefit ratio by approximately 2090 basis points in the ~~2020 quarter. The favorable prior-period medical claims reserve development~~2022 period and decreased the consolidated benefit ratio by approximately ~~130~~180 basis points in the 2021 ~~period versus approximately 50 basis points in the 2020~~ period.

~~Table of Contents~~

Operating Costs

Our segments incur both direct and shared indirect operating costs. We allocate the indirect costs shared by the segments primarily as a function of revenues. As a result, the profitability of each segment is interdependent.

Consolidated operating costs increased ~~$90 million,~~$1.1 billion, or ~~3.6%~~50.0%, from ~~$2.5 billion in the 2020 quarter to $2.6~~$2.1 billion in the 2021 quarter ~~and decreased $258 million, or 3.7%, from $7.0~~to $3.2 billion in the ~~2020 period to $6.7~~2022 quarter and increased $1.9 billion, or 47.0%, from $4.1 billion in the 2021 period to $6.1 billion in the 2022 period. The consolidated operating cost ratio ~~decreased 40~~increased 310 basis points from ~~13.0% for the 2020 quarter to 12.6%~~10.3% for the 2021 quarter to 13.4% for the 2022 quarter and ~~decreased 130~~increased 270 basis points from ~~12.2% for the 2020 period to 10.9%~~10.0% for the 2021 ~~period. These ratio decreases were~~ period to 12.7% for the 2022 periodprimarily due to the ~~termination~~impact of the non-deductible health insurance industry fee in 2021, lower COVID-19 related administrative costs in 2021 compared to 2020. Administrative costs in 2020 included costs associated with personal protective equipment, member response efforts, and the build-out of infrastructure necessary to support employees working remotely. These decreases were further impacted by scale efficiencies associated with growth in our Medicare Advantage membership and operating cost efficiencies in 2021 from previously implemented productivity initiatives. These factors were partially offset by the impactconsolidation of Kindred at Home operations, ~~as the business has~~which have a significantly higher operating cost ratio than our historical consolidated operating cost ~~ratio, continued strategic investments made to position us for long-term success, transaction and integration costs associated with the~~ratio. Kindred at Home ~~transaction,~~operations added approximately 220 basis points and ~~the 2020 quarter receipt of the commercial risk corridor receivables that were previously written off. The period decrease was further impacted by a $200 million contribution~~210 basis points, respectively, to the ~~Humana Foundation~~2022 quarter and period consolidated operating costs ratios. Further, the year-over-year increases reflect the $203 million in charges related to productivity initiatives in the ~~first half~~2022 quarter primary related to asset and software impairment and abandonment, partially offset by scale efficiencies associated with growth in individual Medicare Advantage membership.

Table of 2020 to support communities served by the company, particularly those with social and health disparities. The non-deductible health insurance industry fee impacted the operating cost ratio by 150 basis points in the 2020 quarter and period.Contents

Depreciation and Amortization

Depreciation and amortization increased ~~$22~~$31 million, or ~~17.2%~~21.5%, from ~~$128 million in the 2020 quarter to $150~~$144 million in the 2021 quarter ~~and increased $74 million, or 20.4%, from $362~~to $175 million in the ~~2020 period to $436~~2022 quarter and increased $59 million, or 20.6%, from $286 million in the 2021 period to $345 million in the 2022 period primarily due to capital expenditures.

Interest Expense

Interest expense increased ~~$13~~$22 million, or ~~17.3%~~27.8%, from ~~$75 million in the 2020 quarter to $88~~$79 million in the 2021 quarter ~~and increased $24 million, or 11.4%, from $211~~to $101 million in the ~~2020 period to $235~~2022 quarter and increased $44 million, or 29.9%, from $147 million in the 2021 period to $191 million in the 2022 period from borrowings to ~~fund~~finance the ~~KAH~~Kindred at Home acquisition.

Income Taxes

The effective income tax rate was ~~7.2%~~38.1% and ~~25.2%~~23.7% for the three months ended ~~September~~June 30, ~~2021,~~2022, and ~~2020,~~2021, respectively, and ~~was 15.4%~~30.5% and ~~29.0%~~22.7% for the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, respectively. The ~~decreases were~~increase is primarily due to the ~~non-taxable gain we recognized on our previously held Kindred at Home equity method investment~~tax impact resulting from ~~our acquisition~~the excess of the ~~remaining ownership interest~~book basis over the tax basis of KAH Hospice in connection with the ~~business in August 2021 and the termination of the non-deductible health insurance industry fee in 2021.~~held-for-sale classification at June 30, 2022.

Retail Segment


	June 30,		Change
	2022	2021	Members	Percentage
Membership:
Medical membership:
Individual Medicare Advantage	4,555,100	4,341,600	213,500	4.9	%
Group Medicare Advantage	562,500	557,300	5,200	0.9	%
Medicare stand-alone PDP	3,580,700	3,653,100	(72,400)	(2.0)	%
Total Retail Medicare	8,698,300	8,552,000	146,300	1.7	%

State-based Medicaid and other	1,053,000	877,300	175,700	20.0	%
Medicare Supplement	317,400	330,400	(13,000)	(3.9)	%
Total Retail medical members	10,068,700	9,759,700	309,000	3.2	%

Table of Contents

~~Retail Segment~~



	For the three months ended June 30,						Change
	2022			2021			Dollars		Percentage
	(in millions)
Premiums and Services Revenue:
Premiums:
Individual Medicare Advantage	$	16,692		$	14,585		$	2,107	14.4	%
Group Medicare Advantage	1,857			1,775			82		4.6	%
Medicare stand-alone PDP	606			662			(56)		(8.5)	%
Total Retail Medicare	19,155			17,022			2,133		12.5	%
State-based Medicaid and other	1,556			1,264			292		23.1	%
Medicare Supplement	185			182			3		1.6	%
Total premiums	20,896			18,468			2,428		13.1	%
Services	8			12			(4)		(33.3)	%
Total premiums and services revenue	20,904			18,480			$	2,424	13.1	%
Segment earnings	$	929		$	836		$	93	11.1	%
Benefit ratio	87.0		%	87.0		%			—	%
Operating cost ratio	8.2		%	8.3		%			(0.1)	%

September 30, Change
2021 2020 Members Percentage
Membership:
Medical membership:
Individual Medicare Advantage 4,397,300 3,935,100 462,200 11.7 %
Group Medicare Advantage 559,800 612,000 (52,200) (8.5) %
Medicare stand-alone PDP 3,638,400 3,892,200 (253,800) (6.5) %
Total Retail Medicare 8,595,500 8,439,300 156,200 1.9 %
State-based Medicaid and other 909,100 730,100 179,000 24.5 %
Medicare Supplement 332,000 331,300 700 0.2 %
Total Retail medical members 9,836,600 9,500,700 335,900 3.5 %


		For the three months ended September 30,						Change					For the six months ended June 30,						Change
		2021			2020			Dollars		Percentage			2022			2021			Dollars		Percentage
		(in millions)											(in millions)
Premiums and Services Revenue:	Premiums and Services Revenue:											Premiums and Services Revenue:
Premiums:	Premiums:											Premiums:
Individual Medicare Advantage	Individual Medicare Advantage	$	14,642		$	12,949		$	1,693	13.1	%	Individual Medicare Advantage	$	33,744		$	29,400		$	4,344	14.8	%
Group Medicare Advantage	Group Medicare Advantage	1,737			1,880			(143)		(7.6)	%	Group Medicare Advantage	3,732			3,530			202		5.7	%
Medicare stand-alone PDP	Medicare stand-alone PDP	541			622			(81)		(13.0)	%	Medicare stand-alone PDP	1,245			1,326			(81)		(6.1)	%
Total Retail Medicare	Total Retail Medicare	16,920			15,451			1,469		9.5	%	Total Retail Medicare	38,721			34,256			4,465		13.0	%
State-based Medicaid and other	State-based Medicaid and other	1,296			1,081			215		19.9	%	State-based Medicaid and other	3,110			2,443			667		27.3	%
Medicare Supplement	Medicare Supplement	185			177			8		4.5	%	Medicare Supplement	367			360			7		1.9	%
Total premiums	Total premiums	18,401			16,709			1,692		10.1	%	Total premiums	42,198			37,059			5,139		13.9	%
Services	Services	—			4			(4)		(100.0)	%	Services	14			17			(3)		(17.6)	%
Total premiums and services revenue	Total premiums and services revenue	18,401			16,713			$	1,688	10.1	%	Total premiums and services revenue	$	42,212		$	37,076		$	5,136	13.9	%
Segment earnings	Segment earnings	$	456		$	553		$	(97)	(17.5)	%	Segment earnings	$	1,713		$	1,630		$	83	5.1	%
Benefit ratio	Benefit ratio	88.1		%	85.1		%			3.0	%	Benefit ratio	87.5		%	87.3		%			0.2	%
Operating cost ratio	Operating cost ratio	9.1		%	11.2		%			(2.1)	%	Operating cost ratio	8.1		%	8.0		%			0.1	%

Segment Earnings

•Retail segment earnings increased $93 million, or 11.1%, from $836 million in the 2021 quarter to $929 million in the 2022 quarter and increased $83 million, or 5.1%, from $1.6 billion in the 2021 period to $1.7 billion in the 2022 period primarily due to the same factors impacting the segment's benefit and operating cost ratios as more fully described below.

Table of Contents

For the nine months ended
September 30, Change
2021 2020 Dollars Percentage
(in millions)
Premiums and Services Revenue:
Premiums:
Individual Medicare Advantage $ 44,042 $ 38,748 $ 5,294 13.7 %
Group Medicare Advantage 5,267 5,867 (600) (10.2) %
Medicare stand-alone PDP 1,867 2,108 (241) (11.4) %
Total Retail Medicare 51,176 46,723 4,453 9.5 %
State-based Medicaid and other 3,739 3,104 635 20.5 %
Medicare Supplement 545 509 36 7.1 %
Total premiums 55,460 50,336 5,124 10.2 %
Services 17 14 3 21.4 %
Total premiums and services revenue $ 55,477 $ 50,350 $ 5,127 10.2 %
Segment earnings $ 2,086 $ 3,227 $ (1,141) (35.4) %
Benefit ratio 87.6 % 83.3 % 4.3 %
Operating cost ratio 8.4 % 10.0 % (1.6) %

~~Segment Earnings~~

•Retail segment earnings decreased $97 million, or 17.5%, from $553 million in the 2020 quarter to $456 million in the 2021 quarter and decreased $1.1 billion, or 35.4%, from $3.2 billion in the 2020 period to $2.1 billion in the 2021 period. These decreases primarily resulted from the same factors that led to the segment's higher benefit ratio, partially offset by the segment's lower operating cost ratio as more fully described below.

Enrollment

•Individual Medicare Advantage membership increased ~~462,200~~213,500 members, or ~~11.7%~~4.9%, from ~~September~~June 30, ~~2020~~2021 to ~~September~~June 30, ~~2021,~~2022 primarily due to membership additions associated with the ~~previous~~most recent Annual Election Period, or ~~AEP, and Open Election Period, or OEP, for Medicare beneficiaries.~~AEP. The ~~membership~~year-over-year growth was further impacted by continued enrollment resulting from special elections ~~age-ins,~~in the second half of 2021 and Dual Eligible Special Need Plans, or D-SNP, ~~members. The OEP sales period, which ran from January 1 to March 31, 2021 added approximately 36,000 members compared to the 2020 OEP that added approximately~~ ~~30,000 members.~~membership growth. Individual Medicare Advantage membership includes ~~561,300~~661,200 D-SNP members as of ~~September~~June 30, ~~2021,~~2022, a net increase of ~~170,200,~~128,300, or ~~43.5%~~24.1%, from ~~391,100~~532,900 as of ~~September~~June 30, ~~2020.~~2021.

•Group Medicare Advantage membership ~~decreased 52,200,~~increased 5,200 members, or ~~8.5%~~0.9%, from ~~September 30, 2020 to September~~June 30, 2021 ~~primarily due~~ to ~~the net loss of certain~~June 30, 2022 reflecting smaller account sales and organic growth in concurrent accounts with no large accounts ~~in January 2021, partially offset by continued growth in small group accounts.~~won or lost for the period.

•Medicare stand-alone PDP membership decreased ~~253,800~~72,400 members, or ~~6.5%~~2.0%, from ~~September~~June 30, ~~2020~~2021 to ~~September~~June 30, ~~2021,~~2022 primarily due to ~~anticipated declines as a result of the Walmart Value plan no longer being the low cost leader in 2021.~~continued intensified competition for Medicare stand-alone PDP offerings.

•State-based Medicaid membership increased ~~179,000~~175,700 members, or ~~24.5%~~20.0%, from ~~September 30, 2020 to September~~June 30, 2021 ~~primarily~~to June 30, 2022 reflecting ~~additional enrollment as a result of~~ the suspension of state eligibility redetermination efforts due to the currently enacted ~~Public Health Emergency, as well as the recently completed acquisition in Wisconsin.~~public health emergency, or PHE.

~~Table of Contents~~

Premiums Revenue

•Retail segment premiums increased ~~$1.7~~$2.4 billion, or ~~10.1%~~13.1%, from ~~$16.7~~$18.5 billion in the ~~2020~~2021 quarter to ~~$18.4~~$20.9 billion in the ~~2021~~2022 quarter and increased $5.1 billion, or ~~10.2%~~13.9%, from ~~$50.3 billion in the 2020 period to $55.5~~$37.1 billion in the 2021 ~~period. These increases were~~period to $42.2 billion in the 2022 period primarily due to ~~higher premiums as a result of~~ individual Medicare Advantage and state-based contracts membership growth and higher per member individual Medicare Advantage premiums ~~as a result of the improving CMS benchmark rate for 2021, net of MRA headwinds resulting from COVID-19 related utilization disruption in 2020. These favorable items were~~ partially offset by ~~the decline in membership in our stand-alone PDP and group Medicare Advantage offerings. The 2021 period was further impacted by the Medicare~~a reduction of sequestration relief in the ~~first~~2022 quarter ofcompared to the 2021 ~~that was not enacted until the second quarter of 2020.~~quarter.

Benefits Expense

•The Retail segment benefit ratio ~~increased 300 basis points from 85.1% for the 2020 quarter to 88.1%~~is unchanged at 87.0% for the 2021 quarter and 2022 quarter and increased ~~430~~20 basis points from ~~83.3% for the 2020 period to 87.6%~~87.3% for the 2021 ~~period. These increases were~~period to 87.5% for the 2022 period primarily due to the termination in 2021 of the non-deductible health insurance industry fee which, along with a portion of the related tax benefit, which was contemplated in the pricing and benefit design of our products, COVID-19 impacts, including the impact of the deferral of non-essential care, net of COVID-19 treatment and testing costs and our pandemic relief efforts in 2020, as well as 2021 MRA headwinds resulting from this COVD-19 related utilization disruption in 2020, as well as the impact in 2021 associated with the competitive nature of the group Medicare Advantage business, particularly in large group accounts that were recently procured, ~~as well as in the stand-alone PDP business.~~ ~~These factors were partially offset by higher~~lower favorable prior-period medical claims reserve ~~development.~~development, partially offset by the impact of higher per member individual Medicare Advantage premiums and lower APT associated with the individual Medicare Advantage business. Further, the 2022 quarter and period ratios reflect a shift in line of business mix within the segment, with growth in individual Medicare Advantage and state-based contracts and other membership, which carry a higher benefits expense ratio, combined with a decline in Medicare stand-alone PDP, which has a lower benefits expense ratio.

•The Retail segment's benefits expense ~~for the 2021 quarter includes $54~~included $39 million inof favorable prior-period medical claims reserve development ~~versus $30~~in the 2022 quarter and $156 million inof favorable prior-period medical claims development in the ~~2020~~2021 quarter. ~~For the 2021 period, the~~The Retail segment’s benefit expense ~~includes the beneficial effect~~included $367 million of ~~$673 million in~~ favorable prior-period medical claims reserve development ~~versus $235 million~~ in the ~~2020~~2022 period and $619 million of favorable prior-period medical claims reserve development in the 2021 period. Prior-period medical claims reserve development decreased the Retail segment's benefit ratio by approximately 3020 basis points in the ~~2021~~2022 quarter and decreased the Retail segment's benefit ratio by approximately 2080 basis points in the ~~2020~~2021 quarter. ~~Favorable prior-period~~Prior-period medical claims reserve development decreased the Retail segment benefit ratio by approximately ~~120~~90 basis points in the ~~2021~~2022 period ~~versus~~and decreased the Retail segment benefit ratio by approximately 50170 basis points in the ~~2020~~2021 period.

Operating Costs

•The Retail segment operating cost ratio decreased ~~210~~10 basis points from ~~11.2% for the 2020 quarter to 9.1%~~8.3% for the 2021 quarter ~~and decreased 160 basis points from 10.0%~~to 8.2% for the ~~2020 period to 8.4% for the 2021 period. These decreases were~~ 2022 quarter primarily due to ~~the termination of the non-deductible health insurance industry fee in 2021, lower COVID-19 related administrative costs in the 2021 quarter, as previously discussed,~~ scale efficiencies associated with growth in ~~our~~the individual Medicare Advantage membership, ~~and operating cost efficiencies in the 2021 quarter driven by previously implemented productivity initiatives. These improvements were~~ partially offset by ~~continued~~ strategic investments ~~made~~ to position usthe segment for long-term ~~success.~~success. The ~~non-deductible health insurance industry fee impacted the~~Retail segment operating cost ratio ~~by 160~~increased 10 basis points infrom 8.0% for the ~~2020 quarter and period.~~2021 period to

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8.1% for the 2022 period primarily due to strategic investments to position the segment for long-term success, as well as the impact of higher marketing spend in the 2022 period to support individual Medicare Advantage growth. These factors were partially offset by scale efficiencies associated with growth in the individual Medicare Advantage membership.

Group and Specialty Segment


		September 30,		Change				June 30,		Change
		2021	2020	Members	Percentage			2022	2021	Members	Percentage
Membership:	Membership:						Membership:
Medical membership:	Medical membership:						Medical membership:
Fully-insured commercial group	Fully-insured commercial group	690,000	799,500	(109,500)	(13.7)	%	Fully-insured commercial group	595,400	706,100	(110,700)	(15.7)	%
ASO	ASO	496,500	502,100	(5,600)	(1.1)	%	ASO	448,100	497,800	(49,700)	(10.0)	%
Military services	Military services	6,051,700	6,016,400	35,300	0.6	%	Military services	6,017,800	6,038,500	(20,700)	(0.3)	%
Total group medical members	Total group medical members	7,238,200	7,318,000	(79,800)	(1.1)	%	Total group medical members	7,061,300	7,242,400	(181,100)	(2.5)	%
Specialty membership (a)	Specialty membership (a)	5,313,100	5,325,600	(12,500)	(0.2)	%	Specialty membership (a)	5,156,400	5,327,500	(171,100)	(3.2)	%

(a)Specialty products include dental, vision, and other supplemental health. Members included in these products may not be unique to each product since members have the ability to enroll in multiple products.

For the three months ended September 30, Change
2021 2020 Dollars Percentage
(in millions)
Premiums and Services Revenue:
Premiums:
Fully-insured commercial group $ 1,052 $ 1,169 $ (117) (10.0) %
Group specialty 432 424 8 1.9 %
Total premiums 1,484 1,593 (109) (6.8) %
Services 198 189 9 4.8 %
Total premiums and services revenue $ 1,682 $ 1,782 $ (100) (5.6) %
Segment loss $ (28) $ (160) $ 132 82.5 %
Benefit ratio 86.4 % 93.0 % (6.6) %
Operating cost ratio 24.9 % 25.2 % (0.3) %


		For the nine months ended September 30,						Change					For the three months ended June 30,						Change
		2021			2020			Dollars		Percentage			2022			2021			Dollars		Percentage
		(in millions)											(in millions)
Premiums and Services Revenue:	Premiums and Services Revenue:											Premiums and Services Revenue:
Premiums:	Premiums:											Premiums:
Fully-insured commercial group	Fully-insured commercial group	$	3,229		$	3,606		$	(377)	(10.5)	%	Fully-insured commercial group	$	943		$	1,078		$	(135)	(12.5)	%
Group specialty	Group specialty	1,298			1,278			20		1.6	%	Group specialty	427			432			(5)		(1.2)	%
Total premiums	Total premiums	4,527			4,884			(357)		(7.3)	%	Total premiums	1,370			1,510			(140)		(9.3)	%
Services	Services	582			576			6		1.0	%	Services	196			194			2		1.0	%
Total premiums and services revenue	Total premiums and services revenue	$	5,109		$	5,460		$	(351)	(6.4)	%	Total premiums and services revenue	$	1,566		$	1,704		$	(138)	(8.1)	%
Segment earnings	Segment earnings	$	186		$	232		$	(46)	(19.8)	%	Segment earnings	$	101		$	40		$	61	152.5	%
Benefit ratio	Benefit ratio	81.2		%	79.6		%			1.6	%	Benefit ratio	76.3		%	82.6		%			(6.3)	%
Operating cost ratio	Operating cost ratio	23.9		%	24.0		%			(0.1)	%	Operating cost ratio	26.3		%	23.9		%			2.4	%

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	For the six months ended June 30,						Change
	2022			2021			Dollars		Percentage
	(in millions)
Premiums and Services Revenue:
Premiums:
Fully-insured commercial group	$	1,915		$	2,177		$	(262)	(12.0)	%
Group specialty	856			866			(10)		(1.2)	%
Total premiums	2,771			3,043			(272)		(8.9)	%
Services	391			384			7		1.8	%
Total premiums and services revenue	$	3,162		$	3,427		$	(265)	(7.7)	%
Segment earnings	$	233		$	214		$	19	8.9	%
Benefit ratio	75.5		%	78.6		%			(3.1)	%
Operating cost ratio	26.0		%	23.4		%			2.6	%

Segment Earnings

•Group and Specialty segment ~~losses decreased $132~~earnings increased $61 million, or ~~82.5%~~152.5%, from a $160 million loss in the 2020 quarter to a $28 million loss in the 2021 quarter. The quarter over quarter improvement reflects the segments lower benefit and operating ratios as more fully described below. Segment earnings decreased $46 million, or 19.8%, from $232 million in the 2020 period to $186$40 million in the 2021 ~~period. The~~quarter to $101 million in the 2022 quarter and increased $19 million, or 8.9%, from $214 million in the 2021 period ~~over~~to $233 million in the 2022 period ~~decline reflects~~primarily due to the same factors that ~~resulted in a higher~~led to the segment's lower benefit ratio partially offset by ~~a decreased~~the same factors that led to the segment's higher operating ~~cost~~ ratio as more fully described below.

Enrollment

•Fully-insured commercial group medical membership decreased ~~109,500~~110,700 members, or ~~13.7%~~15.7%, from ~~September 30, 2020 to September~~June 30, 2021 to June 30, 2022 reflecting ~~lower small group quoting activity~~the impact of pricing discipline to address COVID-19 and sales attributable to depressed economic activity from the COVID-19 pandemic, partially offset by higher retention of existing customers, particularly in larger groups. The portion of group fully-insured commercial medical membership in small group accounts was approximately 51% at September 30, 2021 and 56% at September 30, 2020.improve profitability.

•Group ASO commercial medical membership decreased ~~5,600~~49,700 members, or ~~1.1%~~10.0%, from ~~September~~June 30, ~~2020~~2021 to ~~September~~June 30, ~~2021. Small group membership comprised 44% of group ASO medical membership at~~ ~~September 30, 2021~~ ~~and 45% at~~ ~~September 30, 2020. The membership change reflects~~2022 reflecting continued intensified competition for small group accounts, partially offset by strong retention among large group accounts.

•Military services membership ~~increased 35,300~~decreased 20,700 members, or ~~0.6%~~0.3%, from ~~September~~June 30, ~~2020~~2021 to ~~September~~June 30, ~~2021.~~2022. Membership includes military service members, retirees, and their families to whom we are providing healthcare services under the current TRICARE East Region contract.

•Specialty membership decreased ~~12,500~~171,100 members, or ~~0.2%~~3.2%, from ~~September 30, 2020 to September~~June 30, 2021 to June 30, 2022 primarily due ~~primarily~~ to the loss of dental and vision groups cross-sold with medical, as reflected in the loss of group fully-insured commercial medical membership ~~described~~ above. ~~The decrease also~~In addition, current membership reflects the economic impact of ~~the economic downturn driven by~~ the COVID-19 pandemic.

Premiums Revenue

•Group and Specialty segment premiums decreased ~~$109~~$140 million, or ~~6.8%~~9.3%, from ~~$1.6 billion in the 2020 quarter to~~ $1.5 billion in the 2021 quarter ~~and decreased $357 million, or 7.3%, from $4.9~~to $1.4 billion in the ~~2020 period to $4.5~~2022 quarter and decreased $272 million, or 8.9%, from $3.0 billion in the 2021 ~~period. These decreases were~~period to $2.8 billion in the 2022 period primarily due to the decline in our fully-insured ~~group~~commercial medical and ASO commercial membership, partially offset by higher per member premiums across the fully-insured commercial business.

Table of Contents

Services Revenue

•Group and Specialty segment services revenue increased $9$2 million, or ~~4.8%~~1.0%, from ~~$189 million in the 2020 quarter to $198~~$194 million in the 2021 quarter ~~and increased $6 million, or 1.0%, from $576~~to $196 million in the ~~2020 period to $582~~2022 quarter and increased $7 million, or 1.8%, from $384 million in the 2021 period to $391 million in the 2022 period.

Benefits Expense

•The Group and Specialty segment benefit ratio decreased ~~660~~630 basis points from ~~93.0% in the 2020 quarter to 86.4%~~82.6% in the 2021 ~~quarter. The decrease reflects~~quarter to 76.3% in the ~~negative impact on~~2022 quarter and decreased 310 basis points from 78.6% in the ~~2020 quarter~~2021 period to 75.5% in the 2022 period primarily due to the impact of the specialty product's lower benefit ratio, as the segment results now reflect a ~~result~~higher mix of ~~ongoing pandemic relief efforts, primarily surrounding initiatives to ease administrative and financial stress for providers and employers, including premium rate relief for select employer groups and~~ the ~~payment of monthly stipends to support dental providers. Comparisons were favorably impacted by the deliberate~~specialty business, pricing and benefit design efforts ~~for 2021~~ to address COVID-19 and increase profitability, ~~and position~~as well as a less severe COVID-19 impact within the fully-insured commercial business ~~for~~

~~Table of Contents~~

~~long-term success and~~due to the ~~impact of lower specialty utilization, primarily related~~enrolled population's vaccination rate in 2022 compared to ~~dental services.~~2021. These ~~favorable comparisons~~factors were partially offset by the termination in 2021 of the non-deductible health insurance industry fee in which, along with a portion of the related tax benefit, was contemplated in the pricing and benefit design of our products, and the impact of unfavorablelower prior-period medical claims reserve ~~development in the 2021 quarter.~~

The Group and Specialty segment benefit ratio increased 160 basis points from 79.6% in the 2020 period to 81.2% in the 2021 period primarily due to the termination in 2021 of the non-deductible HIF which, along with a portion of the related tax benefit, was contemplated in the pricing and benefit design of our products and the significant impact of the deferral of non-essential care, primarily in the second quarter of 2020, net of COVID-19 treatment and testing cost and our pandemic relief efforts in the 2020 period. These unfavorable factors were partially offset by the impact of higher favorable prior period development in the 2021 period and the deliberate pricing and benefit design efforts for 2021 to increase profitability and position the commercial business for long-term success.development.

•The Group and Specialty segment's benefits expense included $5$2 million inof unfavorable prior-period medical claims reserve development in the ~~2021~~2022 quarter ~~versus $13~~and $8 million inof favorable prior-period medical claims reserve development in the ~~2020~~2021 quarter. ~~This~~The Group and Specialty segment's benefits expense included $30 million of favorable prior-period medical claims reserve development in the 2022 period and $100 million of favorable prior-period medical claims reserve development in the 2021 period. Prior-period medical claims reserve development increased the Group and Specialty segment benefit ratio by approximately 3010 basis points in the ~~2021~~2022 quarter ~~but~~and decreased the Group Specialty segment benefit ratio by approximately 8050 basis points in the ~~2020~~2021 quarter. ~~The Group and Specialty segment's benefits expense included the effect of a favorable prior-period~~Prior-period medical claims reserve development ~~of $95 million in the 2021 period versus $43 million in the 2020 period. The favorable prior period medical claims reserve development for the 2021 period~~ decreased the Group and Specialty segment benefit ratio by approximately ~~210 basis points and 90~~110 basis points in the ~~2020~~2022 period and decreased the Group and Specialty segment benefit ratio by approximately 330 basis points in the 2021 period.

Operating Costs

•The Group and Specialty segment operating cost ratio ~~decreased 30~~increased 240 basis points from ~~25.2% for the 2020 quarter to 24.9%~~23.9% for the 2021 quarter to 26.3% for the 2022 quarter and ~~decreased 10~~increased 260 basis points from ~~24.0% in the 2020 period to 23.9%~~23.4% in the 2021 ~~period. These decreases~~ period to 26.0% in the 2022 periodprimarily ~~reflect~~due to the ~~termination~~impact of membership declining at a greater rate than the ~~non-deductible health insurance industry fee~~decline in ~~2021, lower COVID-19 related~~absolute administrative ~~costs in 2021,~~expenses, as ~~previously discussed,~~well as a greater proportion of membership associated with our ASO commercial and operating cost efficiencies driven by previously implemented productivity initiatives. These were partially offset by continued strategic investments made to position us for long-term success. The non-deductible health insurance industry fee impacted themilitary services businesses, each of which have a higher operating cost ratio ~~by 130 basis points~~than the fully-insured commercial product. The increase further reflects investments in the ~~2020 quarter~~Military services business across demonstration programs, partners service contracts and ~~period.~~in preparation for the next generation of the United States Department of Defenses's TRICARE contracts, as well as investments in the specialty business to promote growth.

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Healthcare Services Segment


		For the three months ended September 30,						Change					For the three months ended June 30,						Change
		2021			2020			Dollars		Percentage			2022			2021			Dollars		Percentage
		(in millions)											(in millions)
Revenues:	Revenues:											Revenues:
Services:	Services:											Services:

Home solutions	Home solutions	$	374		$	26		348		1338.5	%	Home solutions	$	752		$	25		$	727	2908.0	%
Pharmacy solutions	Pharmacy solutions	$	163		$	157		$	6	3.8	%	Pharmacy solutions	256			163			93		57.1	%
Provider services	Provider services	110			81			29		35.8	%	Provider services	137			97			40		41.2	%
Total services revenues	Total services revenues	647			264			383		145.1	%	Total services revenues	1,145			285			860		301.8	%
Intersegment revenues:	Intersegment revenues:											Intersegment revenues:

Home solutions	Home solutions	191			134			57		42.5	%	Home solutions	214			138			76		55.1	%
Pharmacy solutions	Pharmacy solutions	6,569			6,158			411		6.7	%	Pharmacy solutions	6,825			6,458			367		5.7	%
Provider services	Provider services	630			573			57		9.9	%	Provider services	777			642			135		21.0	%
Total intersegment revenues	Total intersegment revenues	7,390			6,865			525		7.6	%	Total intersegment revenues	7,816			7,238			578		8.0	%
Total services and intersegment revenues	Total services and intersegment revenues	$	8,037		$	7,129		$	908	12.7	%	Total services and intersegment revenues	$	8,961		$	7,523		$	1,438	19.1	%
Segment earnings	Segment earnings	$	373		$	249		$	124	49.8	%	Segment earnings	$	437		$	311		$	126	40.5	%
Operating cost ratio	Operating cost ratio	95.0		%	96.4		%			(1.4)	%	Operating cost ratio	94.5		%	95.8		%			(1.3)	%


		For the nine months ended September 30,						Change					For the six months ended June 30,						Change
		2021			2020			Dollars		Percentage			2021			2021			Dollars		Percentage
		(in millions)											(in millions)
Revenues:	Revenues:											Revenues:
Services:	Services:											Services:

Home solutions	Home solutions	423			80			343		428.8	%	Home solutions	1,478			49			1,429		2916.3	%
Pharmacy solutions	Pharmacy solutions	482			425			57		13.4	%	Pharmacy solutions	480			319			161		50.5	%
Provider services	Provider services	298			236			62		26.3	%	Provider services	250			188			62		33.0	%
Total services revenues	Total services revenues	1,203			741			462		62.3	%	Total services revenues	2,208			556			1,652		297.1	%
Intersegment revenues:	Intersegment revenues:											Intersegment revenues:

Home solutions	Home solutions	452			415			37		8.9	%	Home solutions	416			261			155		59.4	%
Pharmacy solutions	Pharmacy solutions	19,244			18,275			969		5.3	%	Pharmacy solutions	13,498			12,675			823		6.5	%
Provider services	Provider services	1,858			1,724			134		7.8	%	Provider services	1,525			1,228			297		24.2	%
Total intersegment revenues	Total intersegment revenues	21,554			20,414			1,140		5.6	%	Total intersegment revenues	15,439			14,164			1,275		9.0	%
Total services and intersegment revenues	Total services and intersegment revenues	$	22,757		$	21,155		$	1,602	7.6	%	Total services and intersegment revenues	$	17,647		$	14,720		$	2,927	19.9	%
Segment earnings	Segment earnings	$	953		$	816		$	137	16.8	%	Segment earnings	$	883		$	580		$	303	52.2	%
Operating cost ratio	Operating cost ratio	95.6		%	95.8		%			(0.2)	%	Operating cost ratio	94.4		%	95.9		%			(1.5)	%

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Segment Earnings

•Healthcare Services segment earnings increased ~~$124~~$126 million, or ~~49.8%~~40.5%, from ~~$249 million in the 2020 quarter to $373~~$311 million in the 2021 quarter ~~and increased $137 million, or 16.8%, from $816~~to $437 million in the ~~2020 period to $953~~2022 quarter and increased $303 million, or 52.2%, from $580 million in the 2021 period to $883 million in the 2022 periodprimarily due to ~~higher earnings from our~~consolidation of Kindred at Home ~~acquisition~~earnings, individual Medicare Advantage and state-based contracts membership growth leading to higher pharmacy earnings as well as the same factors that ~~drove~~led to the ~~segment declining~~segment's lower operating cost ~~ratio as more fully described below.~~ratio.

Script Volume

•Humana Pharmacy Solutions script volumes on an adjusted 30-day equivalent basis increased to approximately ~~130~~133 million in the 2022 quarter, up 3.3%, versus scripts of approximately 129 million in the 2021 quarter and increased to approximately 264 million in the 2022 period, up ~~8.6%~~3.8%, versus scripts of approximately ~~119~~255 million in the ~~2020 quarter. For the~~ 2021 period ~~script volumes increased to approximately 384 million, up 8.0%, versus scripts of approximately 356 million in the 2020 period. These increases were~~ primarily due to ~~higher~~ individual Medicare Advantage ~~and state-based contracts~~ membership growth, partially offset by the decline in stand-alone PDP, fully-insured commercial and ~~group Medicare Advantage~~ASO membership.

Services Revenues

•Services revenues increased ~~$383~~$860 million, or ~~145.1%~~301.8%, from ~~$264 million in the 2020 quarter to $647~~$285 million in the 2021 quarter to $1.1 billion in the 2022 quarter and increased ~~$462 million,~~$1.7 billion, or ~~62.3%~~297.1%, from ~~$741~~$556 million in the ~~2020~~2021 period to ~~$1.2~~$2.2 billion in the ~~2021 period. These increases w~~2022 period~~ere~~ primarily due to ~~higher revenues associated with our~~the impact of Kindred at Home ~~acquisition. The 2021 period further reflects additional pharmacy~~ revenues ~~associated with the acquisition of Enclara which was closed during the first quarter of 2020.~~from external customers.

Intersegment Revenues

•Intersegment revenues increased ~~$525~~$578 million, or ~~7.6%~~8.0%, from ~~$6.9 billion in the 2020 quarter to $7.4~~$7.2 billion in the 2021 quarter ~~and increased $1.1 billion, or 5.6%, from $20.4~~to $7.8 billion in the ~~2020 period to $21.6~~2022 quarter and increased $1.3 billion, or 9.0%, from $14.2 billion in the 2021 ~~period. These increases were~~period to $15.4 billion in the 2022 period primarily due to individual Medicare Advantage and state-based contracts membership growth leading to higher pharmacy revenues, the impact of greater mail-order pharmacy penetration, as well as higher revenues ~~associated~~associated with growth in our provider business. ~~These increases were partially offset by the loss of intersegment revenues associated with the decline in stand-alone PDP and group Medicare Advantage membership as previously discussed.~~

Operating Costs

•The Healthcare Services segment operating cost ratio decreased ~~140 basis points from 96.4% for the 2020 quarter to 95.0% for the 2021 quarter and decreased 20~~130 basis points from 95.8% for the ~~2020 period~~2021 quarter to ~~95.6%~~94.5% for the 2022 quarter and decreased 150 basis points from 95.9% for the 2021 ~~period. These decreases~~period to 94.4% for the 2022 period primarily ~~result from the the impact~~due to consolidation of Kindred at Home operations which have a lower operating cost ratio than other businesses within the segment, combined with a favorable impact to the ~~impact on the third quarter 2020~~ ratio ~~associated with COVID-19 administrative~~ related ~~costs, including expenses associated with additional safety measures taken for~~to our pharmacy provider, and home solutions teams who continued to provide services to members throughout the crisis, as well as operational improvements in our provider services business, largely related to Conviva, along with operating cost efficiencies driven by previously implemented productivity initiatives. These factors contributing to a decrease in the operating cost ratio were partially offset by increased administrative cost in the pharmacy operations as a result of incremental spend to accelerate growth within the business, additional shipping costs incurred in pharmacy operations to ensure members’ timely receipt of prescriptions, and increased utilization levels in our provider business in the 2021 quarter compared to levels in the 2020 quarter amid the COVID-19 pandemic.operations.

Liquidity

Historically, our primary sources of cash have included receipts of premiums, services revenue, and investment and other income, as well as proceeds from the sale or maturity of our investment securities, and borrowings. Our

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primary uses of cash historically have included disbursements for claims payments, operating costs, interest on borrowings, taxes, purchases of investment securities, acquisitions, capital expenditures, repayments on borrowings, dividends, and share repurchases. Because premiums generally are collected in advance of claim payments by a period of up to several months, our business normally should produce positive cash flows during periods of increasing premiums and enrollment. Conversely, cash flows would be negatively impacted during periods of decreasing premiums and enrollment. From period to period, our cash flows may also be affected by the timing of working capital items including premiums receivable, benefits payable, and other receivables and payables. Our cash flows are impacted by the timing of payments to and receipts from CMS associated with Medicare Part D subsidies for which we do not assume risk. The use of cash flows may be limited by regulatory requirements of state departments of insurance (or comparable state regulators) which require, among other items, that our regulated subsidiaries maintain minimum levels of capital and seek approval before paying dividends from the subsidiaries to

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the parent. Our use of cash flows derived from our non-insurance subsidiaries, such as in our Healthcare Services segment, is generally not restricted by state departments of insurance (or comparable state regulators).

For additional information on our liquidity risk, please refer to the section entitled “Risk Factors” in our ~~2020~~2021 Form 10-K and Item 1A of Part II of this document.

Cash and cash equivalents ~~decreased~~increased to approximately ~~$4.3~~$5.2 billion at ~~September~~June 30, ~~2021~~2022 from ~~$4.7~~$3.4 billion at December 31, ~~2020.~~2021. The change in cash and cash equivalents for the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020~~2021 is summarized as follows:


		Nine Months Ended					Six Months Ended
		2021		2020			2022		2021
		(in millions)					(in millions)
Net cash provided by operating activities		$	2,358	$	5,356
Net cash provided by (used in) operating activities						Net cash provided by (used in) operating activities	$	1,261	$	(477)
Net cash used in investing activities	Net cash used in investing activities	(6,454)		(3,010)		Net cash used in investing activities	(1,670)		(2,203)
Net cash provided by financing activities	Net cash provided by financing activities	3,727		1,585		Net cash provided by financing activities	2,235		1,385
(Decrease) increase in cash and cash equivalents		$	(369)	$	3,931
Increase (decrease) in cash and cash equivalents						Increase (decrease) in cash and cash equivalents	$	1,826	$	(1,295)

Cash Flow from Operating Activities

Cash flows provided by operations of ~~$2.4~~$1.3 billion in the ~~2021~~2022 period ~~decreased $3.0~~ increased $1.7 billion from cash flows ~~provided by~~used in operations of ~~$5.4 billion~~$477 million in the ~~2020~~2021 period primarily due to ~~the negative impact of working capital items and lower~~higher earnings in the 2022 period combined with the 2021 period ~~compared to~~impact associated with the ~~2020 period. Our 2021 period operating cash flows were significantly impacted by changes to working capital levels, primarily as a result~~pay down of ~~prior year disruptions caused by COVID-19. These impacts include paying down~~ claims inventory and capitation for provider surplus amounts earned in 2020 ~~as well as~~and additional provider support. ~~These factors were partially offset by the favorable impact of the termination of the non-deductible HIF in 2021.~~

The most significant drivers of changes in our working capital are typically the timing of payments of benefits expense and receipts for premiums. We illustrate these changes with the following summaries of benefits payable and receivables.

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The detail of benefits payable was as follows at ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020:~~2021:


		September 30, 2021		December 31, 2020		2021 Period Change		2020 Period Change			June 30, 2022		December 31, 2021		2022 Period Change		2021 Period Change
		(in millions)									(in millions)
IBNR (1)	IBNR (1)	$	5,973	$	5,290	$	683	$	999	IBNR (1)	$	5,953	$	5,695	$	258	$	129
Reported claims in process (2)	Reported claims in process (2)	1,201		816		385		539		Reported claims in process (2)	1,471		907		564		428

Other benefits payable (3)	Other benefits payable (3)	1,584		2,037		(453)		666		Other benefits payable (3)	2,226		1,687		539		(215)
Total benefits payable	Total benefits payable	$	8,758	$	8,143	$	615	$	2,204	Total benefits payable	$	9,650	$	8,289	$	1,361	$	342
Payables from acquisition	Payables from acquisition					(42)		—		Payables from acquisition					—		(42)
Change in benefits payable per cash flow statement resulting in cash from operations	Change in benefits payable per cash flow statement resulting in cash from operations					$	573	$	2,204	Change in benefits payable per cash flow statement resulting in cash from operations					$	1,361	$	300

(1)IBNR represents an estimate of benefits payable for claims incurred but not reported, ~~(IBNR)~~or IBNR, at the balance sheet date and includes unprocessed claim inventories. The level of IBNR is primarily impacted by membership levels, medical claim trends and the receipt cycle time, which represents the length of time between when a claim is initially incurred and when the claim form is received and processed (i.e. a shorter time span results in a lower IBNR).

(2)Reported claims in process represents the estimated valuation of processed claims that are in the post claim adjudication process, which consists of administrative functions such as audit and check batching and handling, as well as amounts owed to our pharmacy benefit administrator which fluctuate due to bi-weekly payments and the month-end cutoff.

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(3)Other benefits payable primarily include amounts owed to providers under capitated and risk sharing arrangements.

The increase in benefits payable in ~~2021~~the 2022 period was primarily due to ~~higher IBNR and~~ an increase in reported claims in process, ~~partially offset by a reduction in~~higher capitation ~~accruals. IBNR increased primarily as a result of individual Medicare Advantage membership growth partially offset by paying down claim inventories.~~accruals and higher IBNR. Higher reported claims in process was a function of ~~timing~~month-end cut off. IBNR increased primarily as a result of month-end cutoff. The 2020 period was significantly impacted by higher capitation accruals as significantly lower utilization caused by COVID-19 resulted in higher surplus accruals to providers. These higher surplus accrual to providers were paid down during 2021.increased individual Medicare Advantage and state-based contracts membership.

The detail of total net receivables was as follows at ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020:~~2021:


		September 30, 2021		December 31, 2020		2021 Period Change		2020 Period Change			June 30, 2022		December 31, 2021		2022 Period Change		2021 Period Change
		(in millions)									(in millions)
Medicare	Medicare	$	1,182	$	928	$	254	$	28	Medicare	$	2,954	$	1,214	$	1,740	$	1,225
Commercial and other	Commercial and other	612		122		490		47		Commercial and other	378		579		(201)		78
Military services	Military services	167		160		7		13		Military services	109		104		5		3
Allowance for doubtful accounts	Allowance for doubtful accounts	(82)		(72)		(10)		(9)		Allowance for doubtful accounts	(72)		(83)		11		(6)
Total net receivables	Total net receivables	$	1,879	$	1,138	$	741	$	79	Total net receivables	$	3,369	$	1,814	$	1,555	$	1,300
Reconciliation to cash flow statement:	Reconciliation to cash flow statement:									Reconciliation to cash flow statement:
Receivables from acquisition	Receivables from acquisition					(447)		3		Receivables from acquisition					—		(15)
Receivables held-for-sale										Receivables held-for-sale					178
Change in receivables per cash flow statement resulting in cash from operations	Change in receivables per cash flow statement resulting in cash from operations					$	294	$	82	Change in receivables per cash flow statement resulting in cash from operations					$	1,733	$	1,285

The changes in Medicare receivables for both the ~~2021~~2022 period and the ~~2020~~2021 period reflect individual Medicare Advantage membership growth and the typical pattern caused by the timing of accruals and related collections

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associated with the CMS risk-adjustment model. Significant collections occur with the mid-year and final settlements with CMS in the second and third quarter. We received the ~~2021 $1.3 billion~~2022 mid-year settlement of approximately $2.0 billion in July ~~2021. The increase in Commercial and other receivables and the allowance for doubtful accounts primarily relates to the Kindred at Home acquisition.~~2022.

Cash Flow from Investing Activities

During the 2022 period and 2021 period, we acquired ~~Kindred at Home and other various health and wellness related~~immaterial businesses ~~for cash consideration~~ of approximately ~~$4.0 billion, net of cash received.~~

~~During 2020, we acquired privately held Enclara Healthcare for cash consideration of approximately $709~~$167 million and $325 million, net of cash ~~received.~~

and cash equivalents received, respectively.

Our ongoing capital expenditures primarily relate to our information technology initiatives, support of services in our provider services operations including medical and administrative facility improvements necessary for activities such as the provision of care to members, claims processing, billing and collections, wellness solutions, care coordination, regulatory compliance and customer service. Total capital expenditures, excluding acquisitions, were ~~$945~~$574 million in the ~~2021~~2022 period and ~~$668~~$619 million in the ~~2020~~2021 period.

Net purchases of investment securities were ~~$1.6~~$929 million in the 2022 period and net purchases of investment securities were $1.3 billion in ~~both~~ the 2021 ~~and 2020 periods.~~period.

Cash Flow from Financing Activities

Receipts from CMS associated with Medicare Part D claim subsidies for which we do not assume risk were higher than claim payments by ~~$625 million~~$3.1 billion and $1.2 billion in the 2022 and 2021 ~~period and claim payments were higher than receipts from CMS associated with Medicare Part D claim subsidies for which we do not assume risk by $283 million in the 2020 period.~~periods, respectively.

Under our administrative services only TRICARE contracts, health care costs payments for which we do not assume risk exceeded reimbursements from the federal government by ~~$20~~$4 million and $2 million in the 2022 and 2021 ~~period and reimbursements from the federal government exceeded health care costs payments for which we do not assume risk by $9 million in the 2020 period.~~periods, respectively.

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Net ~~proceeds~~repayments from the issuance of commercial paper were ~~$193~~$418 million in the ~~2021~~2022 period and ~~$21~~net proceeds from the issuance of commercial paper were $508 million in the ~~2020~~2021 period. The maximum principal amount outstanding at any one time during the ~~2021~~2022 period was ~~$1.1~~$1.5 billion.

In ~~August 2021,~~March 2022, we issued ~~$1,500~~$750 million of ~~0.650%~~3.700% unsecured senior notes due ~~August 3, 2023, $750 million of 1.350% unsecured senior notes due February 3, 2027 and $750 million of 2.150% unsecured senior notes due February 3, 2032.~~March 23, 2029. Our net proceeds, reduced for the underwriters' ~~discount~~discounts and ~~commission~~commissions paid, were $744 million.

On January 11, 2022, we entered into the January 2022 ASR Agreements with Mizuho and ~~offering expenses paid as of September 30, 2021 were $2.984 billion.~~

~~In March 2020, we issued $600 million of 4.500% senior notes due~~ April 1, 2025 and $500 million of 4.875% senior notes due April 1, 2030. Our net proceeds, reduced for the underwriters' discount and commission and offering expenses paid as of September 30, 2020 were $1,088 million.

~~In August 2021, we borrowed $500 million under the delayed draw term loan agreement. In March 2020, we drew~~Wells Fargo to repurchase $1 billion onof our ~~existing term loan commitment, which was repaid in November 2020.~~

Ascommon stock as part of the ~~closing~~$3 billion repurchase program authorized by the Board of ~~the acquisition~~Directors on February 18, 2021. On January 12, 2022, we made a payment of ~~Kindred at Home on August 17, 2021, we assumed approximately $2.1~~$1 billion and received an initial delivery of ~~borrowings under the Gentiva Term Loan, and subsequent to the acquisition, we repaid $150~~2.2 million shares of ~~borrowings under the Gentiva Term Loan.~~our common stock.

We acquired common shares in connection with employee stock plans for an aggregate cost of ~~$36~~$28 million in the 2022 period and $33 million in the 2021 ~~period and $30 million in the 2020~~ period.

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We paid dividends to stockholders of ~~$263~~$191 million during the ~~2021~~2022 period and ~~$239~~$173 million during the ~~2020~~2021 period.

The remainder of the cash used in or provided by financing activities in ~~2021~~2022 and ~~2020~~2021 primarily resulted from ~~debt issuance costs, proceeds from stock option exercises and~~ the change in book overdraft.

Future Sources and Uses of Liquidity

Dividends

For a detailed discussion of dividends to stockholders, please refer to Note 10 to the condensed consolidated financial statements.

Stock Repurchases

For a detailed discussion of stock repurchases, please refer to Note 10 to the condensed consolidated financial statements.

Debt

For a detailed discussion of our debt, including our senior notes, term loans, credit agreements, commercial paper program, and other short-term borrowings, please refer to Note 12 to the condensed consolidated financial statements.

Divestiture

In the third quarter of 2022, we expect to divest a 60% interest in KAH Hospice pursuant to the definitive agreement we signed with CD&R on April 21, 2022. Under the agreement, we will receive cash proceeds of approximately $2.8 billion, which includes a combination of debt repayments from KAH Hospice to Humana and equity proceeds from the 60% interest purchased by CD&R. The transaction is subject to customary state and federal regulatory approvals. For a detailed discussion of this transaction, please refer to Note 3 to the condensed consolidated financial statements.

Liquidity Requirements

We believe our cash balances, investment securities, operating cash flows, and funds available under our credit agreement and our commercial paper program or from other public or private financing sources, taken together, provide adequate resources to fund ongoing operating and regulatory requirements, acquisitions, future expansion opportunities, and capital expenditures for at least the next twelve months, as well as to refinance or repay debt, and repurchase shares.

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Adverse changes in our credit rating may increase the rate of interest we pay and may impact the amount of credit available to us in the future. Our investment-grade credit rating at ~~September~~June 30, ~~2021~~2022 was BBB+ according to Standard & Poor’s Rating Services, or S&P, and Baa3 according to Moody’s Investors Services, Inc., or Moody’s. A downgrade by S&P to BB+ or by Moody’s to Ba1 triggers an interest rate increase of 25 basis points with respect to $250 million of our senior notes. Successive one notch downgrades increase the interest rate an additional 25 basis points, or annual interest expense by less than $1 million, up to a maximum 100 basis points, or annual interest expense by $3 million.

In addition, we operate as a holding company in a highly regulated industry. Humana Inc., our parent company, is dependent upon dividends and administrative expense reimbursements from our subsidiaries, most of which are subject to regulatory restrictions. We continue to maintain significant levels of aggregate excess statutory capital and surplus in our state-regulated operating subsidiaries. Cash, cash equivalents, and short-term investments at the parent company were ~~$1.2 billion~~$800 million at ~~September~~June 30, ~~2021~~2022 compared to ~~$772 million~~$1.3 billion at December 31, ~~2020.~~2021. This ~~increase~~decrease primarily was due to common stock repurchases, capital expenditures, repayment of borrowings under the commercial paper program, cash dividends to shareholders, capital contributions to certain subsidiaries and acquisitions, partially offset by net proceeds from the senior notes, ~~and term loans, dividends received~~proceeds from ~~regulated subsidiaries,~~the sale of investment securities and earnings in non-regulated Healthcare Services ~~subsidiaries, and the issuance of commercial paper, partially offset by acquisitions, capital expenditures, cash dividends to shareholders, and capital contributions to certain~~ subsidiaries. Our use of operating cash derived from our non-insurance subsidiaries, such as our Healthcare Services segment, is generally not restricted by departments of insurance (or comparable state regulators).

Regulatory Requirements

Certain of our subsidiaries operate in states that regulate the payment of dividends, loans, or other cash transfers to Humana Inc., our parent company, and require minimum levels of equity as well as limit investments to approved securities. The amount of dividends that may be paid to Humana Inc. by these subsidiaries, without prior approval

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by state regulatory authorities, or ordinary dividends, is limited based on the entity’s level of statutory income and statutory capital and surplus. If the dividend, together with other dividends paid within the preceding twelve months, exceeds a specified statutory limit or is paid from sources other than earned surplus, it is generally considered an extraordinary dividend requiring prior regulatory approval. In most states, prior notification is provided before paying a dividend even if approval is not required.

Although minimum required levels of equity are largely based on premium volume, product mix, and the quality of assets held, minimum requirements vary significantly at the state level. Based on the most recently filed statutory financial statements as of ~~June 30, 2021,~~March 31, 2022, our state regulated subsidiaries had aggregate statutory capital and surplus of approximately ~~$9.6~~$10.3 billion, which exceeded aggregate minimum regulatory requirements of ~~$7.2~~$7.9 billion. The amount of ordinary dividends paid to our parent company was approximately $1.3 billion during the nine months ended September 30, 2021 compared to $360 million during the nine months ended September 30, 2020. The amount, timing and mix of ordinary and extraordinary dividend payments will vary due to state regulatory requirements, the level of excess statutory capital and surplus and expected future surplus requirements related to, for example, premium volume and product mix.

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Item 3. Quantitative and Qualitative Disclosures about Market Risk

Our earnings and financial position are exposed to financial market risk, including those resulting from changes in interest rates.

Interest rate risk also represents a market risk factor affecting our consolidated financial position due to our significant investment portfolio, consisting primarily of fixed maturity securities of investment-grade quality with a weighted average S&P credit rating of AA- at ~~September~~June 30, ~~2021.~~2022. Our net unrealized position decreased ~~$326~~$1,421 million from a net unrealized gain position of ~~$514~~$57 million at December 31, ~~2020~~2021 to a net unrealized ~~gain~~loss position of ~~$188~~$1,364 million at ~~September~~June 30, ~~2021.~~2022. At ~~September~~June 30, ~~2021,~~2022, we had gross unrealized losses of ~~$113~~$1,367 million on our investment portfolio primarily due to an increase in market interest rates since the time the securities were purchased. There were no material credit allowances during the ~~nine~~six months ended ~~September~~June 30, ~~2021.~~2022. While we believe that these securities in an unrealized loss will recover in value over time and we currently do not have the intent to sell such securities, given the current market conditions and the significant judgments involved, there is a continuing risk that future declines in fair value may occur and material realized losses from sales or credit allowances may be recorded in future periods.

Duration is the time-weighted average of the present value of the bond portfolio’s cash flow. Duration is indicative of the relationship between changes in fair value and changes in interest rates, providing a general indication of the sensitivity of the fair values of our fixed maturity securities to changes in interest rates. However, actual fair values may differ significantly from estimates based on duration. The average duration of our investment portfolio, including cash and cash equivalents, was approximately ~~3.5~~3.3 years as of ~~September~~June 30, ~~2021~~2022 and approximately ~~3.0~~3.6 years as of December 31, ~~2020.~~2021. The ~~increase~~decrease in the average duration is reflective of various portfolio management activities and the decreased holdings of cash and cash equivalents. Based on the duration, including cash equivalents, a 1% increase in interest rates would generally decrease the fair value of our securities by approximately ~~$632~~$604 million at ~~September~~June 30, ~~2021.~~2022.

Item 4. Controls and Procedures

Under the supervision and with the participation of our Chief Executive Officer, or CEO, our Chief Financial Officer, or CFO, and our Principal Accounting Officer, we carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures for the quarter ended ~~September~~June 30, ~~2021.~~2022.

Based on our evaluation, which excluded the impact of the acquisition of Kindred at Home, or KAH, discussed below, our CEO, CFO, and our Principal Accounting Officer concluded that our disclosure controls and procedures are effective to provide reasonable assurance that information the Company is required to disclose in its reports under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, including, without limitation, ensuring that such information is accumulated and communicated to the Company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

On August 17, 2021, we acquired the remaining 60% interest in KAH. At September 30, 2021, KAH's assets represented approximately 20% of consolidated assets. For the three and nine months ended September 30, 2021, KAH's revenues represented approximately 2% and 1% of consolidated revenues, respectively, and income before income taxes represented approximately 2% and 1% of consolidated income before income taxes, respectively. We currently exclude, and are in the process of working to incorporate, KAH in our evaluation of internal controls over financial reporting and related disclosure controls and procedures. Total KAH assets and revenues excluded from our evaluation represent 1% and 3%, respectively, of the related consolidated financial statement amounts as of and for the period ended June 30, 2022.

Other than the KAH acquisition mentioned above, there have been no changes in the Company’s internal control over financial reporting during the quarter ended ~~September~~June 30, ~~2021~~2022 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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Part II. Other Information

Item 1. Legal Proceedings

For a description of the legal proceedings pending against us and certain other pending or threatened litigation, investigations, or other matters, see “Legal Proceedings and Certain Regulatory Matters” in Note 13 to the condensed consolidated financial statements of this Form 10-Q.

Item 1A. Risk Factors

There have been no changes to the risk factors included in our ~~2020~~2021 Form 10-K.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

(a)None.

(b)N/A

(c)The following table provides information about our purchases of equity securities that are registered by us pursuant to Section 12 of the Securities Exchange Act of 1934, as amended, during the three months ended ~~September~~June 30, ~~2021:~~2022:


Period	Total Number of Shares Purchased (1)(2)	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1)(2)	Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (1)
~~July 2021~~April 2022	—	$	—	—	$	—2,000,000,000
~~August 2021~~May 2022	—	—		—	—2,000,000,000
~~September 2021~~June 2022	—	—		—	—2,000,000,000
Total	—	$	—	—

(1)On December 22, 2020, we entered into separate accelerated stock repurchase agreements, ("the December 2020 ASR Agreements"), with Citibank, N.A., or Citi, and JPMorgan Chase Bank, or JPM, to repurchase $1.75 billion of our common stock as part of the $3 billion repurchase program authorized by the Board of Directors on July 30, 2019. On December 23, 2020, in accordance with the December 2020 ASR Agreements, we made a payment of $1.75 billion ($875 million to Citi and $875 million to JPM) and received an initial delivery of 3.8 million shares of our common stock (1.9 million shares each from Citi and JPM). We recorded the payments to Citi and JPM as a reduction to stockholders’ equity, consisting of an $1.5 billion increase in treasury stock, which reflects the value of the initial 3.8 million shares received upon initial settlement, and a $262.5 million decrease in capital in excess of par value, which reflects the value of stock held back by Citi and JPM pending final settlement of the December 2020 ASR Agreements. Upon final settlement of the December 2020 ASR agreements with Citi and JPM on May 4, 2021 and May 5, 2021, respectively, we received an additional 0.3 million shares and 0.3 million shares, respectively, as determined by the average daily volume weighted-averages share price of our common stock during the term of the agreement, less a discount, of $400.07 and 401.49, respectively, bringing the total shares received under the December 2020 ASR agreements to 4.4 million. In addition, upon settlement we reclassified the $262.5 million value of stock initially held back by Citi and JPM from capital in excess of par value to treasury stock. On February 18, 2021, the Board of Directors replaced the previous share repurchase authorization of up to $3 billion (of which approximately $250 million remained unused) with a new authorization for repurchases of up to $3 billion of our common shares exclusive of shares repurchased in connection with employee stock plans, expiring as of February 18, 2024. ~~Our remaining~~On January 11, 2022, we entered into separate accelerated stock repurchase ~~authorization was~~ $3agreements, the January 2022 ASR Agreements, with Mizuho Markets Americas LLC, or Mizuho, and Wells Fargo Bank, or Wells Fargo, to repurchase $1 billion of our common stock as part of ~~September~~the $3 billion repurchase program authorized by the Board of Directors on February 18, 2021. On January 12, 2022, in accordance with the January 2022 ASR Agreements, we made a payment of $1 billion ($500 million to Mizuho and $500 million to Wells Fargo) and received an initial delivery of 2.2 million shares of our common stock (1.08 million shares each from Mizuho and Wells Fargo). In January 2022, we recorded the payments to Mizuho and Wells Fargo as a reduction to stockholders’ equity, consisting of an $850 million increase in treasury stock, which reflects the value of the initial 2.2 million shares received upon initial settlement, and a $150 million decrease in capital in excess of par value, which reflects the value of stock held back by Mizuho and Wells Fargo pending final settlement of the January 2022 ASR Agreements. Upon final settlement of the January 2022 ASR Agreements with Mizuho and Wells Fargo on March 29, 2022 and March 30, ~~2021~~.2022, respectively, we received an additional 0.1 million shares and 0.1 million shares, respectively, as determined by the average daily volume weighted-averages share price of our common stock during the term of the agreement, less a discount, of $410.96 and $411.66, respectively, bringing the total shares received under the January 2022 ASR Agreements to 2.4 million. In addition, upon settlement we reclassified

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the $150 million value of stock initially held back by Mizuho and Wells Fargo from capital in excess of par value to treasury stock. Our remaining repurchase authorization was $2 billion as of July 26, 2022.

(2)Excludes ~~90,000~~64,812 shares repurchased in connection with employee stock plans.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

On October 29, 2021, we entered into a $2.0 billion term loan credit agreement with the several banks and other financial institutions from time to time parties thereto, JPMorgan Chase Bank, N.A. as Agent, Bank of America, N.A., as Syndication Agent, PNC Capital Markets, LLC, U.S. Bank, National Association, Wells Fargo Securities, LLC, Citibank, N.A., and Truist Bank, as Documentation Agents, and JPMorgan Chase Bank, N.A., BofA Securities, Inc. and JPMorgan Chase Bank, N.A., BofA Securities, Inc., PNC Capital Markets LLC, U.S. Bank, National Association, Wells Fargo Securities, LLC, Citibank, N.A., and Truist Securities, Inc., as Joint Lead Arrangers and Joint Bookrunners (the “October 2021 Term Loan Agreement”). Proceeds of the October 2021 Term Loan Agreement were applied to finance the repayment in full of the outstanding debt under the Gentiva Credit Agreement and for other general corporate purposes.

Loans under the October 2021 Term Loan Agreement bear interest at adjusted Term SOFR, as defined in the October 2021 Term Loan Agreement, or the base rate plus a spread. The loans under the October 2021 Term Loan Agreement will mature on the second anniversary of the closing date, October 29, 2023. The October 2021 Term Loan Agreement contains customary covenants, including a maximum debt to capitalization financial condition covenant, as well as customary events of default. The terms of the October 2021 Term Loan Agreement also include customary representations and warranties. We have other relationships, including financial advisory and banking, with some parties to the October 2021 Term Loan Agreement. The foregoing description of the October 2021 Term Loan Agreement does not purport to be complete. For an understanding of the terms and provisions of the October 2021 Term Loan Agreement, reference should be made to the copy of that agreement attached as Exhibit 10.4 to this Form 10-Q and incorporated by reference herein.

~~At the time of the repayment in full of the Gentiva Credit Agreement, there was $1.9 billion of outstanding debt thereunder and no prepayment penalty was due.~~None.

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Item 6: Exhibits


3(i)			Restated Certificate of Incorporation of Humana Inc. filed with the Secretary of State of Delaware on November 9, 1989, as restated to incorporate the amendment of January 9, 1992, and the correction of March 23, 1992 (incorporated herein by reference to Exhibit 4(i) to Humana Inc.’s Post-Effective Amendment No. 1 to the Registration Statement on Form S-8 (Reg. No. 33-49305) filed February 2, 1994).
3(ii)			By-Laws of Humana Inc., as amended on December 14, 2017 (incorporated herein by reference to Exhibit 3(b) to Humana Inc.’s Current Report on Form 8-K, filed December 14, 2017).
10.1			~~Eighteenth Supplemental Indenture,~~ 364-Day $1.5 Billion Revolving Credit Agreement, dated ~~August~~as of June 3, ~~2021, between the Company~~2022, among Humana Inc., and ~~The~~JPMorgan Chase Bank, N.A. as Agent and as CAF Loan Agent, Bank of ~~New York Mellon Trust Company,~~America, N.A. as Syndication Agent, Citibank, N.A., Goldman Sachs Bank USA, PNC Capital Markets LLC, U.S. Bank National Association and Wells Fargo Securities, LLC, as ~~trustee (incorporated~~Documentation Agents, and JPMorgan Chase Bank, N.A., BofA Securities, Inc., Goldman Sachs Bank USA, Citibank, N.A., PNC Capital Markets LLC, U.S. Bank National Association and Wells Fargo Securities, LLC, as Joint-Lead Arrangers and Joint Bookrunners (incorporated herein by reference to Exhibit ~~4.2~~10.1 to Humana Inc.’s Current Report on Form 8-K filed on ~~August~~June 3, ~~2021)~~2022).
10.2			~~Nineteenth Supplemental Indenture, dated August 3, 2021,~~Transition & Separation Agreement between ~~the Company~~Timothy Alan Wheatley and ~~The Bank of New York Mellon Trust Company, N.A., as trustee (incorporated herein by reference to Exhibit 4.4 to~~ Humana ~~Inc.’s Current Report on Form 8-K filed on August 3, 2021).~~
~~10.3~~			Twentieth Supplemental Indenture, dated August 3, 2021, between the Company and The Bank of New York Mellon Trust Company, N.A., as trustee (incorporated herein by reference to Exhibit 4.6 to Humana Inc.’s Current Report on Form 8-K filed on August 3, 2021).
~~10.4~~			$2.0 Billion Term Loan Credit Agreement, dated as of October 29, 2021, among Humana Inc., and JPMorgan Chase Bank, N.A. as Agent, Bank of America, N.A., as Syndication Agent, PNC Capital Markets, LLC, U.S. Bank, National Association, Wells Fargo Securities, LLC, Citibank, N.A., and Truist Bank, as Documentation Agents, and JPMorgan Chase Bank, N.A., BofA Securities, Inc. and ~~JPMorgan Chase Bank, N.A., BofA Securities, Inc., PNC Capital Markets LLC, U.S. Bank, National Association, Wells Fargo Securities, LLC, Citibank, N.A.,~~its affiliates and ~~Truist Securities, Inc., as Joint Lead Arrangers and Joint Bookrunners.~~subsidiaries, dated July 25, 2022.
31.1			Principal Executive Officer certification pursuant to Section 302 of Sarbanes–Oxley Act of 2002.
31.2			Principal Financial Officer certification pursuant to Section 302 of Sarbanes–Oxley Act of 2002.
32			Principal Executive Officer and Principal Financial Officer certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101			The following materials from Humana Inc.'s Quarterly Report on Form 10-Q formatted in iXBRL (Inline Extensible Business Reporting Language): (i) the Condensed Consolidated Balance Sheets at ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020;~~2021; (ii) the Condensed Consolidated Statements of Income for the three and ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020;~~2021; (iii) the Condensed Consolidated Statements of Comprehensive Income for the three and ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020;~~2021; (iv) the Consolidated Statements of Equity for the three and ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020;~~2021; (v) the Condensed Consolidated Statements of Cash Flows for the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020;~~2021; and (vi) Notes to Condensed Consolidated Financial Statements. The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
104			Cover Page Interactive Data File formatted in Inline XBRL and contained in Exhibit 101.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


			HUMANA INC.
			(Registrant)

Date:	~~November 3, 2021~~July 27, 2022	By:	/s/ ~~CYNTHIA H. ZIPPERLE~~MICHAEL A. KOEBERLEIN
			~~Cynthia H. Zipperle~~Michael A. Koeberlein
			Senior Vice President, Chief Accounting Officer and Controller (Principal Accounting Officer)

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	September 30, 2021		December 31, 2020
	(in millions, except share amounts)
ASSETS
Current assets:
Cash and cash equivalents	$	4,304	$	4,673
Investment securities	13,719		12,554
Receivables, less allowance for doubtful accounts of $82 in 2021 and $72 in 2020	1,879		1,138
Other current assets	5,913		5,276
Total current assets	25,815		23,641
Property and equipment, net	2,898		2,371
Long-term investment securities	1,095		1,212
Equity method investments	143		1,170
Goodwill	10,806		4,447
Other long-term assets	4,563		2,128
Total assets	$	45,320	$	34,969
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Benefits payable	$	8,758	$	8,143
Trade accounts payable and accrued expenses	4,957		4,013
Book overdraft	240		320
Unearned revenues	277		318
Short-term debt	795		600
Total current liabilities	15,027		13,394
Long-term debt	11,466		6,060
Other long-term liabilities	2,545		1,787
Total liabilities	29,038		21,241

Stockholders’ equity:
Preferred stock, $1 par; 10,000,000 shares authorized; none issued	—		—
Common stock, $0.16 2/3 par; 300,000,000 shares authorized; 198,648,742 shares issued at September 30, 2021 and December 31, 2020	33		33
Capital in excess of par value	3,064		2,705
Retained earnings	23,191		20,517
Accumulated other comprehensive income	145		391
Treasury stock, at cost, 70,114,451 shares at September 30, 2021 and 69,787,614 shares at December 31, 2020	(10,173)		(9,918)
Noncontrolling interests	22		—
Total stockholders’ equity	16,282		13,728
Total liabilities and stockholders’ equity	$	45,320	$	34,969