Humana 2011 Annual Report Download - page 64
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Operating costs
• The Health and Well-Being Services segment operating cost ratio decreased 110 basis points from
2010 to 96.1% for 2011 reflecting scale efficiencies associated with growth in our pharmacy solutions
business together with the addition of our acquired Concentra operations which carry a lower operating
cost ratio than other lines of business in this segment.
Other Businesses
Pretax income for our Other Businesses of $84 million for 2011 compared to pretax losses of $2 million for 2010.
Pretax losses for 2010 include the impact of a net charge of $139 million associated with reserve strengthening for our
closed block of long-term care policies. Excluding this charge, the year-over-year decline primarily reflects a decrease
in pretax income associated with our contract with CMS to administer the LI-NET program.
Comparison of Results of Operations for 2010 and 2009
Certain financial data on a consolidated basis and for our segments was as follows for the years ended
December 31, 2010 and 2009:
Consolidated
Change
2010 2009 Dollars Percentage
(dollars in millions, except per common share results)
Revenues:
Premiums:
Retail ............................... $19,052 $18,349 $ 703 3.8%
Employer Group ...................... 9,080 7,466 1,614 21.6%
Other Businesses ..................... 4,580 4,112 468 11.4%
Total premiums ................... 32,712 29,927 2,785 9.3%
Services:
Retail ............................... 11 10 1 10.0%
Employer Group ...................... 395 370 25 6.8%
Health and Well-Being Services ......... 34 17 17 100.0%
Other Businesses ..................... 115 123 (8) (6.5)%
Total services .................... 555 520 35 6.7%
Investment income ........................ 329 296 33 11.1%
Total revenues ................... 33,596 30,743 2,853 9.3%
Operating expenses:
Benefits ................................. 27,117 24,784 2,333 9.4%
Operating costs ........................... 4,380 4,014 366 9.1%
Depreciation and amortization ............... 245 237 8 3.4%
Total operating expenses ........... 31,742 29,035 2,707 9.3%
Income from operations ........................ 1,854 1,708 146 8.5%
Interest expense .............................. 105 106 (1) (0.9)%
Income before income taxes ..................... 1,749 1,602 147 9.2%
Provision for income taxes ...................... 650 562 88 15.7%
Net income .................................. $ 1,099 $ 1,040 $ 59 5.7%
Diluted earnings per common share ............... $ 6.47 $ 6.15 $ 0.32 5.2%
Benefit ratio (a) ............................... 82.9% 82.8% 0.1%
Operating cost ratio (b) ......................... 13.2% 13.2% 0.0%
Effective tax rate .............................. 37.2% 35.1% 2.1%
(a) Represents total benefit expenses as a percentage of premiums revenue.
(b) Represents total operating costs as a percentage of total revenues less investment income.
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