2020 Annual Report

2020 2019 2018 2017 2016

OPERATING RESULTS

Revenues $77,155 $64,888 $56,912 $53,767 $54,379

Net income $3,367 $2,707 $1,683 $2,448 $614

Diluted earnings per common share $25.31 $20.10 $12.16 $16.81 $4.07

FINANCIAL POSITION

Total assets $34,969 $29,074 $25,413 $27,178 $25,396

Total liabilities $21,241 $17,037 $15,252 $17,336 $14,711

Total stockholders’ equity $13,728 $12,037 $10,161 $9,842 $10,685

Cash flows from operations $5,639 $5,284 $2,173 $4,051 $1,936

MEMBERSHIP (IN THOUSANDS)

Medical 16,831.6 16,667.2 16,576.7 14,003.1 14,230.2

Specialty 5,310.3 5,425.9 6,072.3 6,986.0 6,961.2

(Dollars in millions, except per common share results)

Humana Inc.financial highlights

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KURT HILZINGERChairman of the Board

BRUCE BROUSSARDPresident and ChiefExecutive Officer

Leadership andresilience in anunprecedented year

Dear fellow stockholders,

Defined by a worldwide pandemic, 2020 wasan unprecedented and challenging year thatunderscored the importance of physical andmental health. Over the last year, we workedrelentlessly to ease the burden on all stakeholdersby being proactive and transparent, with a focuson addressing health and financial concerns formembers, providers, employer groups and ourunderserved communities, as well as supportingour associates.

We are grateful for theunwavering commitment of theclinicians and essential workerswho have continuously stoodon the frontlines in the fightagainst COVID-19.

We are also proud of the resiliency and responseof our associates—putting the holistic healthof our members, patients and providers at theforefront while continuing to advance our strategy.

At Humana, we are dedicated to deliveringhuman care—a healthcare experience that iseasier, more personalized and more caring for ourmembers. Our associates go above and beyond totake action to address the most important needsof our members while simultaneously creatingthe best possible experience so that they mayachieve their best health. Driven by this dedicationto human care, Humana continued to accelerateon all fronts in 2020 despite the pandemic,including our short-term operating and financialperformance, our ability to drive and invest inour long-term strategic objectives, and in ourcustomer-centricity efforts.

At Humana, weare dedicated todelivering humancare—a healthcareexperience thatis easier, morepersonalized andmore caring forour members.

“

”

Our pandemic responseCOVID-19 has highlighted the importance ofHumana’s clinically focused integrated modeldesigned to deliver holistic, personalized,empathetic care to its members. In partnershipwith policymakers and our industry peers, weproactively took deliberate and sustained actionsto remove financial barriers and ensure continuousaccess to care in response to the pandemic, easingsome of the burden on our nation’s most vulnerablepopulation at a time when they needed it most.

At Humana, we quickly announced we wouldcover COVID-19 testing and treatment costs andpivoted to telehealth alternatives for care dueto physical distancing requirements. In addition,we leveraged our integrated care delivery modelto stand up initiatives to support the return to careamid the pandemic, including:

Waiver of all cost sharing forin-network primary care,outpatient behavioral healthand telehealth visits for ourMedicare Advantage members

The distribution of in-homepreventive screening kits

Establishment of a clinicaloutreach team to proactivelyengage with the company’smost vulnerable members

A multisector advertisingcampaign designed to encouragemembers to stay connectedwith their providers

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In addition, we proactively addressed social determinant of health needsthat were exacerbated by the pandemic, including delivering over one millionmeals to members who were food insecure, sending care kits with masks to allHumana members and associates, and addressing loneliness.

Our pandemic response continues to evolve and weare actively engaged with the federal, state and localgovernments regarding our role in the vaccinationprocess. From the onset of the pandemic, our omni-channel approach to care helped us to ensure ourmembers continued to have access to quality care.We continue to meet members where they want toreceive care, whether that’s in a clinic setting, in thehome or via telehealth.

As a result of the pandemic, members areincreasingly seeking in-home care options, andwe expect the home to remain a preferred placeof care for many of our members even as thepandemic subsides.

Our actions in response to the pandemic, togetherwith our government partners, further underscorethe strength of the Medicare Advantage programas an enduring public-private partnership that putsseniors and their holistic health at the forefront.Medicare Advantage organizations were some of thefirst to proactively identify and implement policy andbenefit changes at the beginning of the pandemic.

With strong bipartisan support,we worked closely withgovernment partners on bothsides of the aisle to createsolutions for addressinghealthcare system challengesof cost and outcomes.

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Financial andoperational highlightsThe strength of our underlying business iscompelling, and Humana delivered strongfundamental operating results in our coreinsurance businesses in 2020 while continuing toinvest for the long-term and addressing the needsof the populations we serve. We drove a 670basis point increase in our Net Promoter ScoreSM,or NPS®, highlighting our broad focus on theconsumer experience across all platforms.

For 2021, we announced that92% of our Medicare Advantagemembers are in plans rated4-Star or higher, leading thepublicly traded MedicareAdvantage companies.

Also for 2021, Humana’s Medicare Advantageplans are all recommended by USAA—acompany known for its customer satisfaction andcommitment to the financial security of currentand former members of the U.S. military.

We ended 2020 withapproximately 4.6 millionMedicare Advantage members,reflecting year-over-yeargrowth of 11%, fuelingconsolidated revenuegrowth of 19%.

Importantly, and as in prior years, our robustgrowth was balanced across multiple MedicareAdvantage plan types as a result of the strengthof our clinical programs, provider partnerships,distribution channels, and our broad offeringsthat allow for deeper personalization to meetthe members’ needs.

Approximately 67% of ourindividual Medicare Advantagemembers are cared for by physiciansin value-based arrangements.

Value-based care emphasizes qualityand efficiency over quantity andmakes it a more viable approach toimproving outcomes and loweringcosts as witnessed by 211,000 fewerdays as hospital inpatients1 and 8.6%fewer visits to the emergency room1

when comparing Humana’s MedicareAdvantage members to those in anon-value-based care setting.

Value-based care arrangementsled Humana’s Medicare Advantagemembers to save an estimated$90.6 million1 in plan-coveredmedical costs in 2019 compared towhat would have been incurred hadthese members received care fromphysicians in Medicare Advantagenon-value-based agreements.

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Seniors continue to increasingly choose MedicareAdvantage plans over fee-for-service Medicareplans, with approximately

of eligibleseniors choosingMedicare Advantageplans today240%

The Medicare Advantage program puts primary care in the driver seat, with proven results in reducing costswhile improving health outcomes. A 2017 publication sponsored by CMS included 9.9 million beneficiariesfrom three states and found that:

and 4 of 6patient-experiencemeasures3

Medicare AdvantageOUTPERFORMEDfee-for-serviceMedicare on

clinical qualitymeasuresassessed3

16 of16

40%

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80% With the expansion of additional flexibilities forsupplemental benefits, Medicare Advantageorganizations have been highly innovative—fromefforts to lessen social isolation to meal delivery torespite care to simple home improvements to keepseniors safer at home.

At Humana, we continue to focus on how we canexpand our presence with underserved populationsin an effort to drive improved clinical outcomes andreduce health disparities.

In Medicare Advantage, weexperienced industry-leadinggrowth in Dual Special NeedsPlans (DSNP) in 2020, increasingDSNP membership approximately41% year over year.

Medicare Advantage saves seniors$1,598 a year4 on average relativeto those in fee-for-service Medicare.

Out-of-pocketcosts for inpatientservices run7 times higherin fee-for-serviceMedicare thanMedicare Advantage4

Medicare Advantage: More benefits, more savings

Vision

Hearing

Wellness

Dental

7x

Fee-for-service MedicareMedicare Advantage

Medicare Advantageenrollees with accessto one $0 premium plan

Medicare Advantageenrollees without accessto a $0 premium plan

Data from CMS and the KaiserFamily Foundation indicatesthat in 2020 approximately

of all MedicareAdvantage plansoffered at least oneof the following:

with more than half of all MedicareAdvantage plans offering all four4

94%

6%94% of MedicareAdvantageenrollees hadaccess to atleast one $0premium plan4

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Despite facing pressures in 2020 becauseof the ongoing pandemic, our Group andSpecialty segment continues to executeon its growth strategy and we remainexcited about the prospects for our majormedical, specialty and military businesses.

Supporting our core insurance business, as wellas third parties, is our healthcare services business,a key component of our clinical model. In 2020,our Healthcare Services business delivered 17%growth in Adjusted EBITDA year over year withour Pharmacy, Provider and Home businessesall performing well.5

In 2020, we began servingMedicaid members inKentucky, and just recentlyannounced the acquisitionof Independent Care HealthPlan (iCare) in Wisconsin,along with our entry intothe South Carolina Medicaidprogram and a ManagedMedicaid contract awardin Oklahoma.

Our Medicaid strategy is predicated on the core strengths of our Medicare chassis including our clinical programs,provider relationships focused on value-based care, and commitment to investments in the communities we serve.We are able to offer states an individualized approach to care that considers the physical and mental well-being ofbeneficiaries, as well as the critical social determinants that impact the population.

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PharmacyProcessed 478 million scripts and drovemail-order penetration of approximately 37%in Medicare Advantage.

ProviderEnded the year with 156 wholly owned primarycare centers after opening 15 new centers in 2020,including expanding to Louisiana and Nevada. Inaddition, our Conviva primary care clinics deliveredsignificant clinical and financial improvement as theturnaround in that business continued, including a5% reduction in hospital admissions per thousand.

HomeMade important investments in our strategy to offerprimary care and post-acute services in the homethrough minority investments in Heal, a pioneerof in-home primary care, and DispatchHealth, aprovider of emergent in-home medical care.

In addition, Kindred at Home successfully managedthe transition to the new CMS payment modelwhile also implementing a new operating systemin 2020, setting it up to drive further operatingmodel advancement in 2021. In over 50,000home episodes, we demonstrated that integratingnew proactive clinical models within the nurse’sworkflow significantly reduces downstreamemergency room visits and hospital admissions.The success of these clinical test and learnsprovides us with confidence that scaling theseprograms will provide meaningful quality and costimprovements in 2021 and beyond.

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Accordingly, we continue to invest in, and build on,our healthcare services capabilities. While we arebuilding these services to serve our members, weare doing so in an agnostic manner, providing usthe opportunity in the future to coordinate careoutside of the typical insurance revenue model.

Importantly, we recognize healthcare inequityin our country is a primary concern. Humanasees this as a significant opportunity andacknowledges its critical role in tackling theissue, as Medicare Advantage plans are uniquelypositioned to address the needs of underservedpopulations. Data shows that Medicare Advantageis continuing to grow as the preferred option forthose who are low-income and for racial andethnic minorities.

Of the nearly 26 millionMedicare Advantagebeneficiaries,2 there is growingdiversity in enrollment withmore than 28% of beneficiariesbeing racial and ethnicminorities, as compared to 21%in fee-for-service Medicare.4

Humana is committed to leverage our businessplatforms to support local communities in theirefforts to minimize social and health disparities.

Looking to 2021and the futureAs we look to 2021 and beyond, weare encouraged by how the collectivehealthcare system responded to thecrisis, and how actions taken to combatthe pandemic strengthened andaccelerated critical tenets of the system.

Supported by CMS, as previously described,health plans and providers proactively addressedsocial determinant of health needs that wereexacerbated by the pandemic and quickly pivotedto telephonic and in-home care, advancing in amatter of months what may have taken yearsabsent the pandemic. These advancementsare directly aligned to our long-term strategicobjectives and omni-channel approach to care.However, significant opportunity remains.

As the population ages, healthcare costs continueto rise and the health of our country’s populationis not improving. As such, we expect continuedgrowth in value-based care arrangements as wellas an increased need for broad care coordinationservices across the healthcare system.

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This includes enhancing access to care bycontinuing to expand and build primary carecenters in underserved markets, offeringsupplemental benefits including, amongothers, over-the-counter medication coverage,transportation, dental and vision, as well as takinga leadership role in enhancing innovative solutionsaimed at addressing social determinants of healthfor both Medicare and Medicaid members.

Integrating our MedicareAdvantage and Medicaid businessmodels with our communityefforts enables us to be moreholistic in our approach toimprove health, both at anindividual level and withincommunities overall.

During 2020, we donated $200 million tothe Humana Foundation, an endowment thatwill allow continued meaningful investmentin the communities we serve, includinginitiatives designed to identify and addresshealthcare disparities.

With 2021, comes changes in government and anew administration. As we have done with everynew administration, we will work diligently to buildrelationships with, and earn the trust of, thesenew leaders. We believe the Medicare Advantageprogram has strong bipartisan support as anenduring public-private partnership that putsseniors and their holistic health at the forefront.

We remain committed topublic-private partnerships thatare solution-oriented and driveresults that will meaningfullybenefit the healthcare systemin the coming years.

We will work tirelessly to support programs andinitiatives that promote value, choice and stabilityfor our members.

Humana will continue towork collaboratively withthe broader healthcare

community and governmentpartners to advance healthequity so healthcare canwork better for everyone,regardless of background,age or economic status.

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ConclusionIn closing, our continued successand ability to respond proactivelyto the pandemic would notbe possible without the trustand dedication of our manystakeholders and as such, we’dlike to express our thanks andappreciation to each of them.

Kurt J. HilzingerChairman of the BoardHumana Inc.

Bruce D. BroussardPresident, Chief ExecutiveOfficer and Board MemberHumana Inc.

Our associatesFor being agile and resilient throughout an unprecedentedyear while never wavering in their commitment to ourmembers, employer groups and providers.

Our membersFor entrusting us to guide them through the pandemic,putting their health and well-being in our hands.

Our clinician partnersFor their proactive approach to care, including quicklypivoting to telehealth, working tirelessly on the frontlines toensure our members’—their patients’—holistic health needsare met despite the pandemic.

Our governmental partnersFor uniting with us throughout the pandemic to ensure ourmembers have access to quality, affordable care, includingaddressing social determinant of health needs.

Our stockholdersFor supporting our actions to remove financial barriers andenhance access to care for our members in response to thepandemic by believing in our mission and allowing us tocontinue to invest in our organization.

We expect healthcare to change substantially in the nextfive to ten years and are excited to help drive this continuedevolution. With our dedication to human care, we areconfident that Humana will play a leadership role in shapingthe future of healthcare.

Sincerely,

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2020A 2019 B

GENERALLY ACCEPTED ACCOUNTING PRINCIPLES(GAAP) RESULTS $25.31 $20.10

Amortization associated with identifiable intangibles 0.51 0.40

Put/call valuation adjustments associated with company’snon-consolidating minority interest investments 0.60 (2.89)

Change in fair market value of publicly traded equity securities (4.32) -

Receipt of commercial risk corridor receivables previously written off, net (3.35) -

Charges associated with workforce optimization - 0.26

ADJUSTED (NON-GAAP) $18.75 $17.87

Diluted earnings per common share (EPS)

The company has included financial measures that are not in accordance with GAAP. Management believes that these measures,when presented in conjunction with the comparable GAAP measures, are useful to both management and its investors in analyzingthe company’s ongoing business and operating performance. Consequently, management uses these non-GAAP (Adjusted) financialmeasures as indicators of the company’s business performance, as well as for operational planning and decision-making purposes.Non-GAAP (Adjusted) financial measures should be considered in addition to, but not as a substitute for, or superior to, financial measuresprepared in accordance with GAAP. All financial measures herein are in accordance with GAAP unless otherwise indicated.A2020 Adjusted results exclude the following:

*Amortization expense for identifiable intangibles of approximately $88 million pretax income, or $0.51 per diluted common share.*Put/call valuation adjustments of approximately $103 million, or $0.60 per diluted common share, associated with Humana’snon-consolidating minority interest investments.

*Change in fair market value of publicly traded equity securities of $745 million, or $4.32 per diluted common share. Humana adjustsfor the market gains and losses of its publicly traded equity investments (primarily Oak Street Health, Inc.) each period because whileinvestments are strategic decisions for the company, management’s measure of performance is primarily focused on operationalresults rather than fair value of such investments. Also, management does not forecast changes in fair value of its equity investments.Accordingly, the company believes it is useful to adjust GAAP EPS for the market gains and losses of publicly traded equity securities.

*Net adjustment of $578 million, or $3.35 per diluted common share, related to the receipt of unpaid risk corridor payments associatedwith losses incurred by the company under the Affordable Care Act (ACA) business from 2014 to 2016 (previously written off).

B2019 Adjusted results exclude the following:*Amortization expense for identifiable intangibles of approximately $70 million pretax income, or $0.40 per diluted common share.*Put/call valuation adjustments of approximately $506 million, or $2.89 per diluted common share, associated with Humana’snon-consolidating minority interest investments.

*Expense associated with involuntary workforce reduction of approximately $47 million pretax, or $0.26 per diluted common share.

1Humana’s Value-based Care Report – Physician Progress and Patient Outcomeswww.humana.com/provider/news/publications/humana-your-practice/value-based-care-report

2Based on data from CMS.gov as of January 20213https://www.ncbi.nlm.nih.gov/pmc/articles/PMC5682140/4https://www.bettermedicarealliance.org/wp-content/uploads/2020/07/State-of-MA-Report-Final.pdf5The Healthcare Services segment Adjusted EBITDA includes GAAP segment earnings with adjustments to add back depreciation andamortization expense, interest expense, and income taxes. The Adjusted EBITDA includes results from all lines of business within thesegment. The Adjusted EBITDA also includes the impact of Humana’s 40% minority interest in Kindred at Home and the strategicpartnership with Welsh, Carson, Anderson & Stowe (WCAS) to develop and operate senior-focused, payer-agnostic, primary care centers.

HEALTHCARE SERVICES SEGMENT RESULTS (IN MILLIONS) 2020 2019

GAAP segment earnings $944 $789

Depreciation and amortization expense $203 $179

Interest and taxes $85 $88

ADJUSTED EBITDA $1,232 $1,056

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KURT J. HILZINGERChairman of the BoardHumana Inc.PartnerCourt Square CapitalPartners, LP

FRANK J.BISIGNANOChief Executive Officerand DirectorFiserv, Inc.

BRUCE D.BROUSSARDPresident and ChiefExecutive OfficerHumana Inc.

RAQUEL C.BONO, M.D.PrincipalRCB Consulting

FRANK A. D’AMELIOChief Financial Officer andExecutive Vice President,Global SupplyPfizer Inc.

WAYNE A.I .FREDERICK, M.D. ,F .A.C.S.PresidentHoward University

KAREN W. KATZFormer President andChief Executive OfficerNeiman Marcus GroupLTD LLC

MARCY S.KLEVORNFormer ChiefTransformation OfficerFord Motor Company

DAVID A.JONES, JR.ChairmanChrysalis Ventures, LLC

JOHN W. GARRATTExecutive VicePresident and ChiefFinancial OfficerDollar GeneralCorporation

WILLIAM J.MCDONALDManaging PartnerWild IrishmanAdvisory, LLC

JORGE S.MESQUITAFormer Executive VicePresident, WorldwideChairman, ConsumerJohnson & Johnson

JAMES J. O’BRIENFormer Chairman ofthe Board and ChiefExecutive OfficerAshland, Inc.

MARISSA T.PETERSONPresident and ChiefExecutive OfficerMission PeakExecutive Consulting

Humana Boardof Directors

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Corporate HeadquartersThe Humana Building | 500 West Main Street | Louisville, KY 40202 | 502.580.1000 | Humana.com

More Information About Humana Inc.Copies of the Company’s filings with the U.S. Securities and Exchange Commission may be obtained with-out charge via the Investor Relations page of the Company’s internet site at Humana.com or by writing:

Amy K. SmithVice President – Investor RelationsPost Office Box 1438Louisville, Kentucky 40202

Transfer Agent and RegistrarAmerican Stock Transfer & Trust Company, LLCShareholder Services – ATTN: Operations Center6201 15th AvenueBrooklyn, New York 11219800.937.5449Shareholder Services Direct Dial: 718.921.8124Email: help@astfinancial.com www.astfinancial.com

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