Humana 2000 Annual Report Download - page 4

Our turnaround is
creating a
strong
foundation for
growth.
To our stockholders:
At the end of 1999, we shared with
you our belief that Humana was
positioned to return to profitable
growth. We’re pleased that our
financial results for 2000 clearly
demonstrate that our nearly
completed turnaround has been
successful, and our new direction
is on track.
We are acutely aware that the
resources our stockholders have
invested with us must grow to
remain in our care. With our
senior executives and most of our
associates also being Humana
stockholders, we are pleased with
the 86 percent year-over-year
increase in our stock price as of
December 31, 2000 – pleased, but
not satisfied.
Borrowing a sports analogy, we see
ourselves in the eighth inning of
the first game of a double-header.
To provide maximum value to our
stockholders, it’s critical that we
not only remain focused on the
completion of our turnaround –
the first game – but also on our
return to growth. The revitalization
of Humana as a growth company
is the second game. To win it, we
are determined to become more
consumer-centric and innovative in
an industry known for neither. In
2000, we built the foundation for
sustained success in accomplishing
this objective.
Humana reported net income for
2000 of $90 million or $.54 per
diluted share, compared to a net
loss of $382 million or $2.28 loss
per diluted share in 1999. Our
results for 2000 did not include
any special charges or non-
recurring items.
Our 2000 medical expense ratio
of 84.5 percent improved by 30
basis points when compared to
1999’s adjusted ratio (excluding
one-time charges taken that year).
A renewed focus on commercial
pricing discipline, as well as benefit
and product design changes, drove
this improvement.
In addition to price and product
retooling, during 2000 we began
eliminating those markets and
products that are no longer core to
our company’s strategy. Those
divestitures, along with commercial
premium increases, resulted in
planned-for membership attrition
throughout the year. Combined
with investments in infrastructure
and technology, the membership
reduction contributed to an
administrative expense ratio of
15.3 percent for 2000 versus an
adjusted ratio of 14.6 percent
for 1999.
It is this smaller but stronger
membership base on which we will
build in 2001, not only through
growth in our core markets and
products, but through innovative
new products and streamlined
customer service made possible by
our technology investments.
In our industry, consumer focus
and true innovation represent
unoccupied space. Consumers
and employers are frustrated with
the complexity and restrictions of
traditional managed care and are
demanding new approaches. In
the pages that follow, we have
highlighted the imperatives we
are implementing to help meet
the needs and desires of employers
and their employees for fast,
Internet-enabled access to a broad
spectrum of consumer-centric
health benefits.
We have an exciting future
at Humana. With renewed
operational focus, commitment to
the consumer, innovative concepts,
and an expanded and talented
management team supported by
thousands of creative and
enthusiastic associates, we are
gaining momentum toward
becoming the most trusted name
in health solutions.
Sincerely,
David A. Jones
Chairman of the Board and
significant stockholder
Michael B. McCallister
President and
Chief Executive Officer and
significant stockholder
Michael B. McCallister
President and Chief Executive
Officer (left)
David A. Jones
Chairman of the Board (right)
g a i n i n g . . .