Humana 2001 Annual Report Download - page 4

p r ofitability or no longer fit the
c o m p a n y’s strategic focus.
Medical membership increased
f r om 5 . 3 million in 2 0 0 0 to 6 . 4
million in 2 0 0 1 . The increase was
primarily driven by the acquisition
of 1 . 2 million T R I C A R E m e m b e r s
on May 3 1. (T R I C A R E is the U . S .
De p a r tment of De f e n s e’s health
benefits program for military
dependents and re t i r ees.) Hu m a n a
has been the T R I C A R E
contractor for Regions
3and 4since 1 9 9 6 ;
the 1 . 2 m i l l i o n
additional
T R I C A R E
members, fro m
Regions 2and 5,
b r ought total
Humana T R I C A R E
membership to
2 . 7 million members,
making us the leading
national contractor for this
p r ofitable pro g r a m .
Reflecting continued discipline in
c o m m e r cial pricing, as well as
benefit and product design changes,
Hu m a n a’s medical expense ratio
(our medical expenses as a perc e n t
of premium re v enues) improved by
1 2 0 basis points in 2 0 0 1 . For the
ye a r, the ratio was 8 3 . 3 p e rc e n t ,
c o m p a r ed to 8 4 . 5 p e r cent in 2 0 0 0 .
On the other hand, our selling,
general and administrative expense
ratio (those expenses as a percent of
To our stockholders:
As anticipated, 2 0 0 1 saw the
successful completion of Hu m a n a’s
financial turnaround and the launch
of our grow t h - t h ro u g h - i n n ov a t i o n
s t r a t e g y, featuring a suite of
c o n s u m e r - d i r ected, technology-
enabled health benefits pro d u c t s
and services. To address the rising
f rustration of consumers and
physicians, Humana pioneered a
n e w direction in health benefits
in 2 0 0 1 , helping employers
c o n t r ol costs thro u g h
expanded employee
benefit options,
d r a m a t i c a l l y
i m p ro v i n g
s e rvice to our
members and
the doctors
who care for
them and
i n t ro d u c i n g
Emphesys – a
g ro u n d - b r eaking, digital
health plan.
In 2 0 0 1, we also saw a 3 0 p e rc e n t
i n c r ease in earnings. Humana
re p o r ted net income of $ 1 1 7 . 2
million or $ . 7 0 per diluted share,
c o m p a red to $ 9 0 . 1 million or $ . 5 4
per diluted share in 2 0 0 0. Re ve n u e s
fell slightly to $ 1 0 . 2 billion in
2 0 0 1 f rom $ 1 0 . 6 billion in 2 0 0 0 ,
reflecting the completion of a two-
year process of divesting those
p r oducts and markets that either
lacked the prospect for long-term
Diluted earnings
per share
p r emium re v enues plus administra-
t i v e services fees) rose, from 1 4 . 5
p e rcent in 2 0 0 0 to 1 5 . 3 p e r cent in
2 0 0 1 . As profitable administrative
s e rvices only ( A S O ) m e m b e r s h i p
g rew last ye a r – p a rticularly with
the acquisition of T R I C A R E
Regions 2and 5and the inaugura-
tion of the T R I C A R E for Life
expanded benefits program for
older military re t i re e s – the
resultant shift in business mix
accounted for a portion of the
i n c r ease. Planned, robust spending
on our industry-leading technology
i n f r a s t ru c t u r e also contributed to
the rise; ultimately those inve s t-
ments are expected to substantially
l ower the cost of serving our
members. E B I T D A ( E a r n i n g s
Be f o re In t e r est, Ta xes, De p r eciation
and Amortization), a measure
often used to evaluate the cash
basis earnings of the company, also
i m p r oved 2 8 p e r cent during the
year to $ 3 6 9 . 9 million, versus
$ 2 8 9 . 2 million in 2 0 0 0 .
Se rving our members more quickly,
seamlessly and effectively was an
a r ea of dramatic improvement for
Diluted
e a r nings
per share
2
points of use. At the same time, we will relentlessly strive to execute “the basics” flawlessly.