Humana 2003 Annual Report Download - page 3

To our Stockholders:
In 2003 Humana continued to advance its strategy
of disrupting the industry, transforming the company
and accelerating our growth. In the process, each of our
business segments – serving our diversified customer
base of national accounts, middle-market, small group,
individual, dental, senior products and military – was
profitable, and revenue and membership reached
record levels.
This breakthrough success reaffirms our view that
the marketplace is looking for a company that parts
ways with the industry and offers a sustainable solution
to the problem of skyrocketing health benefit costs that
reduce business investment and limit employee buying
power. Humana saw this scenario unfolding several
years ago, and in response we designed a total solution
that represents the next step after managed care.
This design required replacing old notions with
new ideas.
First, we rejected the conventional wisdom that,
given the health care system’s complexity, employees
Michael B. McCallister, Director, President and Chief Executive Officer (left)
David A. Jones, Chairman of the Board (right)
are destined to remain disengaged from the kind of informed decision-making that they exercise in other aspects
of their economic lives. Second, we determined that even innovative products that stand alone aren’t sufficient.
We surround our plan designs with a process that includes coordinated electronic tools, high-touch member
outreach and consumer education programs throughout the plan year. Finally, we recognized that our role has
changed from a commodity claims-payer to a value-added benefits coordinator, offering expert guidance to our
customers and members – on everything from pretax finance options to predictive modeling – while preserving
their ability to make choices that are right for themselves and their families.
These efforts produced our success in 2003 and established a platform for sustained momentum in 2004.
In the course of the past year, we extended the ongoing improvement in our Commercial business segment,
with substantial increases in membership and profitability. In the government sector, the Medicare
Modernization Act, signed into law in early December, opened new opportunities for us. We were one of the first
Medicare health plan contractors 20 years ago and we have a wealth of successful experience meeting the needs
of our nation’s seniors. Financially, 2003 saw appreciable margin expansion and an increase in both operating
cash flows and balance sheet liquidity.
For the year, our earnings per share of $1.41 increased 66 percent over the $0.85 recorded in 2002.
2003 Milestones
Among Humana’s many accomplishments in 2003 were these highlights:
ŠWe successfully positioned our Commercial segment as a meaningful contributor to our consolidated
results, accounting for 35 percent of our pretax income in 2003, a record for this segment.
ŠSales of our unique, consumer-choice Smart product family continued to accelerate. Medical cost trend
for the early adopting customers is averaging in the mid-single digits.