Humana 2007 Annual Report Download - page 6

4Annual Report 2007
•In the Commercial Segment, we are
pleased with our improvement in 2007
and anticipate further progress in 2008. In
fact, improved operating results in 2007
more than made up for approximately
$50 million in venture capital gains that
this segment benefi ted from in 2006,
but which did not recur in 2007. Additionally,
our provider networks continue to expand
and improve, refl ecting the synergistic effect
of the growth in our Medicare business.
•In the fourth quarter of 2007, our
acquisitions of CompBenefi ts
Corporation and KMG America
Corporation accelerated Humana’s
transformation into a more integrated,
consumer-focused benefi t provider for
specialty as well as medical employee
benefi ts, including voluntary products.
•In addition to the improved performance
of Humana’s Commercial group business,
our individual line – HumanaOne –
recorded membership growth of 35
percent, further evidence of Humana’s
success at interacting with individual
consumers, as in our Medicare business.
•Finally we were recognized as a leader in
environmental protection by being
selected as one of only 99 U.S. companies on
the Dow-Jones Sustainability Index. Similarly,
we were named the leader in the health
benefi ts industry by Corporate Responsibility
Offi cer magazine for a variety of programs
designed to preserve the well-being of
our planet.
Favorable prospects for 2008
We believe the 2007 achievements just described
position us well for 2008, both in terms of the
existing environment and future trends. We’ll
now touch briefl y on what we consider the
primary strategic considerations in the external
environment for 2008:
– Medicare rates for 2009;
– The Medicare sales environment;
– The Commercial sales environment; and
– The political environment.
First, preliminary payment rates for 2009
Medicare have been released, with the fi nal
rates due out the fi rst Monday in April. While we
estimate the fi nal rates to increase in line with
medical cost trend of 4 to 6 percent, a number of
technical factors also come into play, which CMS
details as part of its fi nal rate release in April.
Regardless, as we’ve done over the past 20 years,
we will adjust benefi ts to ensure the Medicare
medical cost trend matches the net level of
premium increase.
Turning to Medicare sales, we’re pleased with
the results we’re seeing to date this year, with
January Medicare Advantage net enrollment up
100,000. The components of this increase include
higher retention levels than we had originally
expected – indicative of the loyalty of our senior
members. Gross individual sales are on track,
while group sales continue to prove challenging
as employers take a “wait and see” approach.
Our acquisitions of CompBenefi ts
Corporation and KMG America
Corporation accelerated Humana’s
transformation into a more
integrated, consumer-focused
benefi t provider for specialty as
well as medical employee benefi ts,
including voluntary products.
2005 2006 2007
Venture Capital (VC) gains
Pretax income excluding VC gains
Commercial Segment Pretax Income
($ in millions)
$200
$100
$0
$300