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Cover and table of contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2024


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 1-5975

HUMANA INC.


(Exact name of registrant as specified in its charter)


Delaware						61-0647538
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

500 West Main Street

Louisville, Kentucky 40202

(Address of principal executive offices, including zip code)

(502) 580-1000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class			Trading Symbol			Name of each exchange on which registered
Common stock, $0.16 2/3 par value			HUM			New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☒	Accelerated filer	☐

Non-accelerated filer	☐	Smaller reporting company	☐

Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date.


Class of Common Stock			Outstanding at June 30, 2024
$0.16 2/3 par value			120,401,661 shares

Table of Contents

Humana Inc.

FORM 10-Q

JUNE 30, 2024

INDEX


		Page
Part I: Financial Information
Item 1.	Financial Statements

	Condensed Consolidated Balance Sheets (Unaudited) at June 3 0 , 2024 and December 31, 2023	3

	Condensed Consolidated Statements of Income (Unaudited) for the three and six months ended June 30 , 2024 and 2023	4

	Condensed Consolidated Statements of Comprehensive Income (Unaudited) for the three and six months ended June 30 , 2024 and 2023	5

	Condensed Consolidated Statements of Stockholders' Equity (Unaudited) for the three and six months ended June 30 , 2024 and 2023	6

	Condensed Consolidated Statements of Cash Flows (Unaudited) for the six months ended June 30 , 2024 and 2023	8

	Notes to Condensed Consolidated Financial Statements (Unaudited)	10

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	35

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	50

Item 4.	Controls and Procedures	50

Part II: Other Information

Item 1.	Legal Proceedings	51

Item 1A.	Risk Factors	51

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	51

Item 3.	Defaults Upon Senior Securities	51

Item 4.	Mine Safety Disclosures	51

Item 5.	Other Information	52

Item 6.	Exhibits	53

	Signatures	54

	Certifications

Humana Inc.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)


	June 30, 2024		December 31, 2023
	(in millions, except share amounts)
ASSETS
Current assets:
Cash and cash equivalents	$	5,501	$	4,694
Investment securities	17,424		16,626
Receivables, net of allowances of $96 in 2024 and $88 in 2023	4,090		2,035
Other current assets	5,843		6,631

Total current assets	32,858		29,986
Property and equipment, net	2,821		3,030
Long-term investment securities	388		382
Equity method investments	736		740
Goodwill	9,567		9,550
Other long-term assets	3,723		3,377

Total assets	$	50,093	$	47,065
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Benefits payable	$	11,446	$	10,241
Trade accounts payable and accrued expenses	6,527		6,569
Book overdraft	355		353
Unearned revenues	313		266
Short-term debt	1,149		1,443

Total current liabilities	19,790		18,872
Long-term debt	11,746		10,213
Other long-term liabilities	1,829		1,662

Total liabilities	33,365		30,747

Commitments and Contingencies (Note 13)
Stockholders’ equity:
Preferred stock, $1 par; 10,000,000 shares authorized; none issued	—		—
Common stock, $0.16 2/3 par; 300,000,000 shares authorized; 198,718,810 shares issued at June 30, 2024 and 198,690,082 shares issued at December 31, 2023	33		33
Capital in excess of par value	3,420		3,346
Retained earnings	28,745		27,540
Accumulated other comprehensive loss	(1,122)		(999)
Treasury stock, at cost, 78,317,149 shares at June 30, 2024 and 76,465,862 shares at December 31, 2023	(14,405)		(13,658)
Total stockholders' equity	16,671		16,262
Noncontrolling interests	57		56
Total equity	16,728		16,318
Total liabilities and equity	$	50,093	$	47,065

See accompanying notes to condensed consolidated financial statements.

Humana Inc.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)


	Three months ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
	(in millions, except per share results)
Revenues:
Premiums	$	28,142	$	25,495	$	56,403	$	51,045
Services	1,100		978		2,162		1,977
Investment income	298		274		586		467
Total revenues	29,540		26,747		59,151		53,489
Operating expenses:
Benefits	25,039		22,009		50,163		43,867
Operating costs	3,148		3,111		6,190		6,090
Depreciation and amortization	212		191		421		377
Total operating expenses	28,399		25,311		56,774		50,334
Income from operations	1,141		1,436		2,377		3,155

Interest expense	168		120		327		233
Other expense, net	55		54		118		46
Income before income taxes and equity in net losses	918		1,262		1,932		2,876
Provision for income taxes	223		296		474		655
Equity in net losses	(17)		(10)		(41)		(27)
Net income	$	678	$	956	$	1,417	$	2,194
Net loss attributable to noncontrolling interests	1		3		3		4
Net income attributable to Humana	$	679	$	959	$	1,420	$	2,198
Basic earnings per common share	$	5.63	$	7.70	$	11.76	$	17.62
Diluted earnings per common share	$	5.62	$	7.66	$	11.74	$	17.54

See accompanying notes to condensed consolidated financial statements.

Humana Inc.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)


	Three months ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
	(in millions)
Net income attributable to Humana	$	679	$	959	$	1,420	$	2,198
Other comprehensive income (loss):
Change in gross unrealized investment (losses) gains	(47)		(137)		(161)		51
Effect of income taxes	10		31		38		(12)
Total change in unrealized investment (losses) gains, net of tax	(37)		(106)		(123)		39
Reclassification adjustment for net realized losses (gains)	1		(8)		—		53
Effect of income taxes	—		1		—		(14)
Total reclassification adjustment, net of tax	1		(7)		—		39
Other comprehensive (loss) income, net of tax	(36)		(113)		(123)		78


Comprehensive income attributable to Humana	$	643	$	846	$	1,297	$	2,276

See accompanying notes to condensed consolidated financial statements.

Humana Inc.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)


	Common Stock			Capital In Excess of Par Value		Retained Earnings		Accumulated Other Comprehensive Loss		Treasury Stock		Total Stockholders' Equity		Noncontrolling Interests		Total Equity
	Issued Shares	Amount
	(dollars in millions, share amounts in thousands)
Three months ended June 30, 2024
Balances, March 31, 2024	198,691	$	33	$	3,369	$	28,173	$	(1,086)	$	(14,359)	$	16,130	$	56	$	16,186
Net income						679						679		(1)		678
Distribution from noncontrolling interest holders, net														2		2


Other comprehensive loss								(36)				(36)				(36)
Common stock repurchases				—						(50)		(50)				(50)
Dividends and dividend equivalents				—		(107)						(107)				(107)
Stock-based compensation				55								55				55
Restricted stock unit vesting	28	—		(4)						4		—				—

Balances, June 30, 2024	198,719	$	33	$	3,420	$	28,745	$	(1,122)	$	(14,405)	$	16,671	$	57	$	16,728

Three months ended June 30, 2023
Balances, March 31, 2023	198,667	$	33	$	3,262	$	26,619	$	(1,113)	$	(12,224)	$	16,577	$	57	$	16,634
Net income						959						959		(3)		956
Distribution from noncontrolling interest holders, net														3		3


Other comprehensive loss								(113)				(113)				(113)
Common stock repurchases				—						(534)		(534)				(534)
Dividends and dividend equivalents				—		(110)						(110)				(110)
Stock-based compensation				51								51				51
Restricted stock unit vesting	23	—		(3)						3		—				—
Stock option exercises	—	—		3						1		4				4
Balances, June 30, 2023	198,690	$	33	$	3,313	$	27,468	$	(1,226)	$	(12,754)	$	16,834	$	57	$	16,891

See accompanying notes to condensed consolidated financial statements.

Humana Inc.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY—(Continued)

(Unaudited)



	Common Stock			Capital In Excess of Par Value		Retained Earnings		Accumulated Other Comprehensive Loss		Treasury Stock		Total Stockholders' Equity		Noncontrolling Interests		Total Equity
	Issued Shares	Amount
	(dollars in millions, share amounts in thousands)
Six months ended June 30, 2024
Balances, December 31, 2023	198,690	$	33	$	3,346	$	27,540	$	(999)	$	(13,658)	$	16,262	$	56	$	16,318
Net income						1,420						1,420		(3)		1,417
Distribution from noncontrolling interest holders, net												—		4		4


Other comprehensive loss								(123)				(123)				(123)
Common stock repurchases				—						(773)		(773)				(773)
Dividends and dividend equivalents				—		(215)						(215)				(215)
Stock-based compensation				100								100				100
Restricted stock unit vesting	29	—		(26)						26		—				—
Stock option exercises	—	—		—						—		—				—
Balances, June 30, 2024	198,719	$	33	$	3,420	$	28,745	$	(1,122)	$	(14,405)	$	16,671	$	57	$	16,728

Six months ended June 30, 2023
Balances, December 31, 2022	198,667	$	33	$	3,246	$	25,492	$	(1,304)	$	(12,156)	$	15,311	$	59	$	15,370
Net income						2,198						2,198		(4)		2,194
Distribution from noncontrolling interest holders, net												—		7		7

Acquisition												—		(5)		(5)
Other comprehensive income								78				78				78
Common stock repurchases				—						(628)		(628)				(628)
Dividends and dividend equivalents				—		(222)						(222)				(222)
Stock-based compensation				89								89				89
Restricted stock unit vesting	23	—		(27)						27		—				—
Stock option exercises	—	—		5						3		8				8
Balances, June 30, 2023	198,690	$	33	$	3,313	$	27,468	$	(1,226)	$	(12,754)	$	16,834	$	57	$	16,891

Humana Inc.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	For the six months ended June 30,
	2024		2023
	(in millions)
Cash flows from operating activities
Net income	$	1,417	$	2,194
Adjustments to reconcile net income to net cash provided by operating activities:

Loss on investment securities, net	—		45

Equity in net losses	41		27
Stock-based compensation	100		89
Depreciation	454		410
Amortization	31		34
Impairment of property and equipment	87		—


Changes in operating assets and liabilities, net of effect of businesses acquired and disposed:
Receivables	(2,055)		269
Other assets	592		(1,141)
Benefits payable	1,205		978
Other liabilities	(327)		(170)
Unearned revenues	47		7,092
Other	44		36
Net cash provided by operating activities	1,636		9,863
Cash flows from investing activities

Acquisitions, net of cash and cash equivalents acquired	(17)		(189)
Purchases of property and equipment, net	(291)		(487)
Purchases of investment securities	(2,962)		(2,737)
Proceeds from maturities of investment securities	1,355		577
Proceeds from sales of investment securities	499		811

Net cash used in investing activities	(1,416)		(2,025)
Cash flows from financing activities
Receipts from contract deposits, net	285		3,510
Proceeds from issuance of senior notes, net	2,232		1,215
Repayments of senior notes	(34)		(349)
(Repayments) issuance of commercial paper, net	(895)		238



Repayment of term loan	—		(500)
Debt issue costs	(7)		(4)
Change in book overdraft	2		159
Common stock repurchases	(766)		(623)
Dividends paid	(216)		(211)

Other	(14)		(120)
Net cash provided by financing activities	587		3,315
Increase in cash and cash equivalents	807		11,153
Cash and cash equivalents at beginning of period	4,694		5,061
Cash and cash equivalents at end of period	$	5,501	$	16,214

Humana Inc.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS—(Continued)

(Unaudited)


	For the six months ended June 30,
	2024		2023
	(in millions)
Supplemental cash flow disclosures:
Interest payments	$	250	$	175
Income tax payments, net	$	362	$	681
Details of businesses acquired in purchase transactions:
Fair value of assets acquired, net of cash and cash equivalents acquired	$	26	$	346
Less: Fair value of liabilities assumed	(9)		(162)
Less: Noncontrolling interests acquired	—		5

Cash paid for acquired businesses, net of cash and cash equivalents acquired	$	17	$	189

See accompanying notes to condensed consolidated financial statements.

Table of Contents

Humana Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. BASIS OF PRESENTATION AND SIGNIFICANT EVENTS

The accompanying unaudited condensed consolidated financial statements are presented in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the disclosures normally required by accounting principles generally accepted in the United States of America, or GAAP, or those normally made in an Annual Report on Form 10-K. The year-end condensed consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by GAAP. For further information, the reader of this Form 10-Q should refer to our Form 10-K for the year ended December 31, 2023, that was filed with the Securities and Exchange Commission, or the SEC, on February 15, 2024. We refer to this Form 10-K as the “2023 Form 10-K” in this document. References throughout this document to “we,” “us,” “our,” “Company,” and “Humana” mean Humana Inc. and its subsidiaries.

The preparation of our condensed consolidated financial statements in accordance with GAAP requires us to make estimates and assumptions that affect the amounts reported in the unaudited condensed consolidated financial statements and accompanying notes. The areas involving the most significant use of estimates are the estimation of benefits payable, the impact of risk adjustment provisions related to our Medicare contracts, the valuation and related impairment recognition of investment securities, and the valuation and related impairment recognition of long-lived assets, including goodwill and indefinite-lived intangible assets. These estimates are based on knowledge of current events and anticipated future events, and accordingly, actual results may ultimately differ materially from those estimates. For additional information regarding accounting policies considered in preparing our consolidated financial statements, refer to Note 2 to the audited Consolidated Financial Statements included in Part II, Item 8, "Financial Statements and Supplementary Data" in our 2023 Form 10-K.

The financial information has been prepared in accordance with our customary accounting practices and has not been audited. In our opinion, the information presented reflects all adjustments necessary for a fair statement of interim results. All such adjustments are of a normal and recurring nature.

Employer Group Commercial Medical Products Business Exit

In February 2023, we announced our planned exit from the Employer Group Commercial Medical Products business, which includes all fully insured, self-funded and Federal Employee Health Benefit medical plans, as well as associated wellness and rewards programs. No other Humana health plan offerings are materially affected. Following a strategic review, we determined the Employer Group Commercial Medical Products business was no longer positioned to sustainably meet the needs of commercial members over the long term or support our long-term strategic plans. The exit from this line of business will be phased over the 18 to 24 months following our February 2023 announcement.

Value Creation Initiative****s

Beginning in 2022, in order to create capacity to fund growth and investment in our Medicare Advantage business and further expansion of our healthcare services capabilities, we committed to drive additional value for the enterprise through cost saving, productivity initiatives, and value acceleration from previous investments. As a result of these initiatives, we recorded charges, primarily in asset impairments, of $68 million and $97 million for the three and six months ended June 30, 2024, respectively, within operating costs in the condensed consolidated statements of income. These charges were recorded at the corporate level and not allocated to the segments. We expect to incur additional charges through the end of 2024. We did not record any charges for the three and six months ended June 30, 2023.

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Humana Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

Revenue Recognition

Our revenues include premiums and services revenue. Services revenue includes administrative service fees that are recorded based upon established per member per month rates and the number of members for the month and are recognized as services are provided for the month. Additionally, services revenue includes net patient services revenue that are recorded based upon established billing rates, less allowances for contractual adjustments, and are recognized as services are provided. For additional information regarding our revenues, refer to Note 2 to the audited Consolidated Financial Statements included in Part II, Item 8, "Financial Statements and Supplementary Data" in our 2023 Form 10-K. For additional information regarding disaggregation of revenue by segment and type, refer to Note 14 to the unaudited Condensed Consolidated Financial Statements included in Part I, Item 1, "Financial Statements" of this Form 10-Q.

At June 30, 2024, accounts receivable related to services were $395 million. For the three and six months ended June 30, 2024, we had no material bad-debt expense and there were no material contract assets, contract liabilities or deferred contract costs recorded on the condensed consolidated balance sheet at June 30, 2024.

For the three and six months ended June 30, 2024, services revenue recognized from performance obligations related to prior periods, such as due to changes in transaction price, was not material. Further, services revenue expected to be recognized in any future year related to remaining performance obligations was not material.

2. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

Accounting Pronouncements Effective in Future Periods

In December 2023, the FASB issued Accounting Standards Update No. 2023-07, Segment Reporting — Improvements to Reportable Segment Disclosures. The new guidance requires incremental disclosures related to a public entity’s reportable segments but does not change the definition of a segment, the method for determining segments, or the criteria for aggregating operating segments into reportable segments. The new guidance requires a public entity to disclose its significant segment expense categories and amounts for each reportable segment. The new guidance will be effective for us beginning with our annual 2024 year-end financial statements. We are currently evaluating the impact on our segment information footnote disclosures.

In December 2023, the FASB issued Accounting Standards Update No. 2023-09 — Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The new guidance requires significant additional disclosures about income taxes, primarily focused on the disclosure of income taxes paid and the rate reconciliation table. The new guidance requires prospective application (with retrospective application permitted). The new guidance will be effective for us beginning with our annual 2025 year-end financial statements, with early adoption permitted. We are currently evaluating the impact on our income tax footnote disclosures.

There are no other recently issued accounting standards that apply to us or that are expected to have a material impact on our results of operations, financial condition, or cash flows.

3. ACQUISITIONS

During 2024 and 2023, respectively, we acquired various health and wellness related businesses which, individually or in the aggregate, have not had a material impact on our results of operations, financial condition, or cash flows. The results of operations and financial condition of these businesses acquired in 2024 and 2023, respectively, have been included in our condensed consolidated statements of income and condensed consolidated balance sheets from the respective acquisition dates. Acquisition-related costs recognized in 2024 and 2023, were not material to our results of operations. For asset acquisitions, the goodwill acquired is partially amortizable as deductible expenses for tax purposes. The pro forma financial information assuming the acquisitions had occurred as of the beginning of the calendar year prior to the year of acquisition, as well as the revenues and earnings generated during the quarter of acquisition, were not material for disclosure purposes.

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Humana Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

4. INVESTMENT SECURITIES

Investment securities classified as current and long-term were as follows at June 30, 2024 and December 31, 2023, respectively:


	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
	(in millions)
June 30, 2024
U.S. Treasury and other U.S. government corporations and agencies:
U.S. Treasury and agency obligations	$	3,080	$	1	$	(92)	$	2,989
Mortgage-backed securities	4,264		4		(509)		3,759
Tax-exempt municipal securities	770		—		(27)		743
Mortgage-backed securities:
Residential	451		—		(70)		381
Commercial	1,374		—		(112)		1,262
Asset-backed securities	1,531		2		(35)		1,498
Corporate debt securities	7,797		23		(640)		7,180
Total debt securities	$	19,267	$	30	$	(1,485)	$	17,812



December 31, 2023
U.S. Treasury and other U.S. government corporations and agencies:
U.S. Treasury and agency obligations	$	2,717	$	1	$	(51)	$	2,667
Mortgage-backed securities	3,946		1		(425)		3,522
Tax-exempt municipal securities	879		1		(22)		858
Mortgage-backed securities:
Residential	465		1		(66)		400
Commercial	1,471		—		(126)		1,345
Asset-backed securities	1,813		2		(44)		1,771
Corporate debt securities	7,011		28		(594)		6,445
Total debt securities	$	18,302	$	34	$	(1,328)	$	17,008

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Humana Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

We own certain corporate debt securities of Gentiva Hospice. The book value and fair value are $379 million and $396 million, respectively, at June 30, 2024. The book value and fair value were $379 million and $398 million, respectively, at December 31, 2023.

Gross unrealized losses and fair values aggregated by investment category and length of time of individual debt securities that have been in a continuous unrealized loss position for which no allowances for credit loss has been recorded were as follows at June 30, 2024 and December 31, 2023, respectively:


	Less than 12 months				12 months or more				Total
	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
	(in millions)
June 30, 2024
U.S. Treasury and other U.S. government corporations and agencies:
U.S. Treasury and agency obligations	$	1,592	$	(32)	$	1,135	$	(60)	$	2,727	$	(92)
Mortgage-backed securities	734		(14)		2,732		(495)		3,466		(509)
Tax-exempt municipal securities	208		(2)		503		(25)		711		(27)
Mortgage-backed securities:
Residential	21		(1)		353		(69)		374		(70)
Commercial	54		(1)		1,179		(111)		1,233		(112)
Asset-backed securities	398		(2)		735		(33)		1,133		(35)
Corporate debt securities	1,333		(14)		4,570		(626)		5,903		(640)
Total debt securities	$	4,340	$	(66)	$	11,207	$	(1,419)	$	15,547	$	(1,485)

December 31, 2023
U.S. Treasury and other U.S. government corporations and agencies:
U.S. Treasury and agency obligations	$	1,899	$	(12)	$	431	$	(39)	$	2,330	$	(51)
Mortgage-backed securities	958		(12)		2,269		(413)		3,227		(425)
Tax-exempt municipal securities	160		(1)		523		(21)		683		(22)
Mortgage-backed securities:
Residential	—		—		373		(66)		373		(66)
Commercial	18		—		1,303		(126)		1,321		(126)
Asset-backed securities	120		(1)		1,364		(43)		1,484		(44)
Corporate debt securities	466		(2)		4,783		(592)		5,249		(594)
Total debt securities	$	3,621	$	(28)	$	11,046	$	(1,300)	$	14,667	$	(1,328)

Approximately 97% of our debt securities were investment-grade quality, with a weighted average credit rating of AA- by Standard & Poor's Rating Service, or S&P, at June 30, 2024. Our remaining debt securities below investment-grade were primarily rated B+, the higher end of the below investment-grade rating scale. Tax-exempt municipal securities were diversified among general obligation bonds of states and local municipalities in the United States as well as special revenue bonds issued by municipalities to finance specific public works projects such as utilities, water and sewer, transportation, or education. Our general obligation bonds are diversified across the United States with no individual state exceeding approximately 1% of our total debt securities. Our investment policy limits investments in a single issuer and requires diversification among various asset types.

Our unrealized losses from all debt securities were generated from approximately 1,750 positions out of a total of approximately 2,170 positions at June 30, 2024. All issuers of debt securities we own that were trading at an

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unrealized loss at June 30, 2024 remain current on all contractual payments. After taking into account these and other factors previously described, we believe these unrealized losses primarily were caused by an increase in market interest rates in the current markets since the time these debt securities were purchased. At June 30, 2024, we did not intend to sell any debt securities with an unrealized loss position in accumulated other comprehensive income, and it is not likely that we will be required to sell these debt securities before recovery of their amortized cost basis. Additionally, we did not record any material credit allowances for debt securities that were in an unrealized loss position for the three and six months ended June 30, 2024 or 2023.

The detail of gains (losses) related to investment securities and included within investment income was as follows for the three and six months ended June 30, 2024 and 2023:


	Three months ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
	(in millions)				(in millions)
Gross gains on investment securities	$	—	$	15	$	2	$	15
Gross losses on investment securities	(1)		—		(2)		(61)
Gross gains on equity securities	—		—		—		1
Gross losses on equity securities	—		—		—		—
Net recognized (losses) gains on investment securities	$	(1)	$	15	$	—	$	(45)

The gains and losses related to equity securities for the three and six months ended June 30, 2024 and 2023 was as follows:


	Three months ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
	(in millions)				(in millions)
Net gains recognized on equity securities during the period	$	—	$	—	$	—	$	1
Less: Net gains recognized on equity securities sold during the period	—		—		—		1
Unrealized gains (losses) recognized on equity securities still held at the end of the period	$	—	$	—	$	—	$	—

The contractual maturities of debt securities available for sale at June 30, 2024, regardless of their balance sheet classification, are shown below. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.


	Amortized Cost		Fair Value
	(in millions)
Due within one year	$	1,390	$	1,381
Due after one year through five years	5,291		5,085
Due after five years through ten years	3,791		3,476
Due after ten years	1,175		970
Mortgage and asset-backed securities	7,620		6,900
Total debt securities	$	19,267	$	17,812

For additional information regarding our investment securities, refer to Note 2 to the audited Consolidated Financial Statements included in Part II, Item 8, "Financial Statements and Supplementary Data" in our 2023 Form 10-K.

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5. FAIR VALUE

Financial Assets

The following table summarizes our fair value measurements at June 30, 2024 and December 31, 2023, respectively, for financial assets measured at fair value on a recurring basis:


	Fair Value Measurements Using
	Fair Value		Quoted Prices in Active Markets (Level 1)		Other Observable Inputs (Level 2)		Unobservable Inputs (Level 3)
	(in millions)
June 30, 2024
Cash equivalents	$	5,402	$	5,402	$	—	$	—
Debt securities:
U.S. Treasury and other U.S. government corporations and agencies:
U.S. Treasury and agency obligations	2,989		—		2,989		—
Mortgage-backed securities	3,759		—		3,759		—
Tax-exempt municipal securities	743		—		743		—
Mortgage-backed securities:
Residential	381		—		379		2
Commercial	1,262		—		1,262		—
Asset-backed securities	1,498		—		1,454		44
Corporate debt securities	7,180		—		6,970		210
Total debt securities	$	17,812	$	—	$	17,556	$	256



December 31, 2023
Cash equivalents	$	4,582	$	4,582	$	—	$	—
Debt securities:
U.S. Treasury and other U.S. government corporations and agencies:
U.S. Treasury and agency obligations	2,667		—		2,667		—
Mortgage-backed securities	3,522		—		3,522		—
Tax-exempt municipal securities	858		—		858		—
Mortgage-backed securities:
Residential	400		—		396		4
Commercial	1,345		—		1,345		—
Asset-backed securities	1,771		—		1,733		38
Corporate debt securities	6,445		—		6,269		176
Total debt securities	$	17,008	$	—	$	16,790	$	218

Our Level 3 assets had a fair value of $256 million, or 1.1% of total invested assets, and $218 million, or 1.0% or total invested assets, at June 30, 2024 and December 31, 2023, respectively. During the six months ended June

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30, 2024 and 2023, the changes in the fair value of the assets measured using significant unobservable inputs (Level 3) were comprised of the following:


	Private Placements
	For the six months ended June 30, 2024		For the six months ended June 30, 2023
	(in millions)
Beginning balance at January 1	$	218	$	101
Total gains or losses:
Realized in earnings	—		—
Unrealized in other comprehensive income	(1)		—
Purchases	40		1
Maturities	—		(4)
Sales	—		—
Settlements	(1)		—
Transfer out	—		(4)
Balance at June 30	$	256	$	94

Interest Rate Swaps

We have entered into interest-rate swap agreements with major financial institutions to convert our interest-rate exposure on some of our senior notes payable from fixed rates to variable rates, based on Secured Overnight Financing Rate (SOFR), to align interest costs more closely with floating interest rates received on our cash equivalents and investment securities. These swap agreements were qualified and designated as a fair value hedge. Our interest rate swaps are recognized in other assets or other liabilities, as appropriate, in our condensed consolidated balance sheets at fair value as of the reporting date. Our interest rate swaps are highly effective at reflecting the fair value of our hedged fixed rate senior notes payable. We utilize market-based financing rates, forward yield curves and discount rates in determining fair value of these swaps at each reporting date, a Level 2 measure within the fair value hierarchy. The cumulative, aggregate adjustment to the carrying value of the senior notes was approximately $20 million at June 30, 2024. The swap liability, included within other long-term liabilities on our condensed consolidated balance sheet was approximately $20 million at June 30, 2024. The swap asset, included within other long-term assets on our condensed consolidated balance sheets, was approximately $68 million at December 31, 2023. We include the gain or loss on the swap agreements in interest expense on our condensed consolidated income statement, the same line item as the offsetting loss or gain on the related senior notes. The gain or loss due to hedge ineffectiveness was not material for the three and six months ended June 30, 2024. We did not enter into interest-rate swap agreements for the three and six months ended March 31, 2023. The following table summarizes the notional amounts at June 30, 2024 and December 31, 2023, respectively, for our senior notes under the swap agreements:


	June 30, 2024		December 31, 2023
	(in millions)
$750 million, 5.875% due March 1, 2033	$	650	$	650
$850 million, 5.950% due March 15, 2034	800		400
$500 million, 3.950% due August 15, 2049	450		450
$750 million, 5.500% due March 15, 2053	700		300
$1,000 million, 5.750% due April 15, 2054	400		—

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Financial Liabilities

Our debt is recorded at carrying value in our condensed consolidated balance sheets. The carrying value of our senior notes debt outstanding, net of unamortized debt issuance costs, was $12.9 billion at June 30, 2024 and $10.8 billion at December 31, 2023. The fair value of our senior notes debt was $12.4 billion at June 30, 2024 and $10.6 billion at December 31, 2023. The fair value of our senior notes debt is determined based on Level 2 inputs, including quoted market prices for the same or similar debt, or if no quoted market prices are available, on the current prices estimated to be available to us for debt with similar terms and remaining maturities. Carrying value approximates fair value for our commercial paper borrowings. We had no outstanding commercial paper borrowings at June 30, 2024. The commercial paper borrowings were $0.9 billion at December 31, 2023.

Put and Call Options Measured at Fair Value

Our put and call options associated with our equity method investments are measured at fair value each period using a Monte Carlo simulation.

The put and call options fair values associated with our Primary Care Organization strategic partnership with Welsh, Carson, Anderson & Stowe, or WCAS, which are exercisable at a fixed revenue exit multiple and provide a minimum return on WCAS' investment if exercised, are measured at fair value each reporting period using a Monte Carlo simulation. The put and call options fair values, derived from the Monte Carlo simulation, were $800 million and $23 million, respectively, at June 30, 2024. The put and call options fair values, derived from the Monte Carlo simulation, were $595 million and $18 million, respectively, at December 31, 2023. The put liability and call asset are included within other long-term liabilities and other long-term assets, respectively, within our condensed consolidated balance sheets.

The significant unobservable inputs utilized in these Level 3 fair value measurements (and selected values) include the enterprise value, annualized volatility and credit spread. Enterprise value was derived from a discounted cash flow model, which utilized significant unobservable inputs for long-term revenue, to measure underlying cash flows, weighted average cost of capital and long term growth rate. The table below presents the assumptions used for each reporting period.


	June 30, 2024		December 31, 2023
Annualized volatility	16.3% - 18.1%		16.1% - 17.8%
Credit spread	0.5% - 1.0%		0.9% - 1.1%
Revenue exit multiple	1.5x - 2.5x		1.5x - 2.5x
Weighted average cost of capital	11.0% - 13.0%		11.0% - 12.5%
Long term growth rate	3.0	%	3.0	%

The assumptions used for annualized volatility, credit spread and weighted average cost of capital reflect the lowest and highest values where they differ significantly across the series of put and call options due to their expected exercise dates.

Other Assets and Liabilities Measured at Fair Value

Certain assets and liabilities are measured at fair value on a non-recurring basis subject to fair value adjustment only in certain circumstances. As disclosed in Note 3, we acquired various health and wellness related businesses during 2024 and 2023. The net assets acquired and resulting goodwill and other intangible assets were recorded at fair value primarily using Level 3 inputs. The net tangible assets including receivables and accrued liabilities were recorded at their carrying value which approximated their fair value due to their short term nature. The fair value of goodwill and other intangible assets were internally estimated based primarily on the income approach. The income approach estimates fair value based on the present value of cash flow that the assets could be expected to generate in the future. We developed internal estimates for expected cash flows in the present value calculation using inputs and significant assumptions that include historical revenues and earnings, revenue growth rates, the amount and timing

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of future cash flows, discount rates, contributory asset charges and future tax rates, among others. The excess purchase price over the fair value of assets and liabilities acquired is recorded as goodwill.

Other than the assets and liabilities acquired during 2024 and 2023, there were no other material assets or liabilities measured at fair value on a recurring or nonrecurring basis during 2024 and 2023.

For additional information regarding our fair value measurements, refer to Note 2 to the audited Consolidated Financial Statements included in Part II, Item 8, "Financial Statements and Supplementary Data" in our 2023 Form 10-K.

6. MEDICARE PART D

We cover prescription drug benefits in accordance with Medicare Part D under multiple contracts with the Centers for Medicare and Medicaid Services, or CMS. The accompanying condensed consolidated balance sheets include the following amounts associated with Medicare Part D at June 30, 2024 and December 31, 2023. CMS subsidies/discounts in the table below include the reinsurance and low-income cost subsidies funded by CMS for which we assume no risk as well as brand name prescription drug discounts for Part D plan participants in the coverage gap funded by CMS and pharmaceutical manufacturers. For additional information regarding our prescription drug benefits coverage in accordance with Medicare Part D, refer to Note 2 to the audited Consolidated Financial Statements included in Part II, Item 8, "Financial Statements and Supplementary Data" in our 2023 Form 10-K.


	June 30, 2024						December 31, 2023
Risk Corridor Settlement			CMS Subsidies/ Discounts			Risk Corridor Settlement			CMS Subsidies/ Discounts
	(in millions)
Other current assets	$	94		$	657		$	224		$	514
Trade accounts payable and accrued expenses	(110)			(2,317)			(232)			(1,825)
Net current liability	(16)			(1,660)			(8)			(1,311)
Other long-term assets	401			—			17			—
Other long-term liabilities	(83)			—			(77)			—
Net long-term asset (liability)	318			—			(60)			—
Total net asset (liability)	$	302		$	(1,660)		$	(68)		$	(1,311)

7. GOODWILL AND OTHER INTANGIBLE ASSETS

Changes in the carrying amount of goodwill for our reportable segments for the six months ended June 30, 2024 were as follows:


	Insurance		CenterWell		Total
	(in millions)
Balance at January 1, 2024	$	2,663	$	6,887	$	9,550
Acquisitions	—		17		17


Balance at June 30, 2024	$	2,663	$	6,904	$	9,567

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The following table presents details of our other intangible assets included in other long-term assets in the accompanying condensed consolidated balance sheets at June 30, 2024 and December 31, 2023:


		June 30, 2024						December 31, 2023
	Weighted Average Life	Cost		Accumulated Amortization		Net		Cost		Accumulated Amortization		Net
		($ in millions)
Other intangible assets:
Certificates of need	Indefinite	$	1,092	$	—	$	1,092	$	1,092	$	—	$	1,092
Medicare licenses	Indefinite	288		—		288		288		—		288
Customer contracts/ relationships	9.4 years	956		739		217		956		718		238
Trade names and technology	6.7 years	139		114		25		139		109		30
Provider contracts	11.9 years	67		63		4		67		62		5
Noncompetes and other	8.4 years	85		48		37		84		44		40

Total other intangible assets	9.2 years	$	2,627	$	964	$	1,663	$	2,626	$	933	$	1,693

For the three months ended June 30, 2024 and 2023, amortization expense for other intangible assets was approximately $15 million and $16 million, respectively. For the six months ended June 30, 2024 and 2023, amortization expense for other intangible assets was approximately $31 million and $34 million, respectively. The following table presents our estimate of amortization expense remaining for 2024 and each of the next five succeeding years at June 30, 2024:


	(in millions)
For the years ending December 31,
2024	$	29
2025	58
2026	43
2027	33
2028	29
2029	27

For additional information regarding our goodwill and intangible assets, refer to Note 2 to the audited Consolidated Financial Statements included in Part II, Item 8, "Financial Statements and Supplementary Data" in our 2023 Form 10-K.

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8. BENEFITS PAYABLE

On a consolidated basis, which represents our Insurance segment net of eliminations, activity in benefits payable was as follows for the six months ended June 30, 2024 and 2023:


	For the six months ended June 30,
	2024		2023
	(in millions)
Balances, beginning of period	$	10,241	$	9,264
Acquisitions	—		62
Incurred related to:
Current year	50,832		44,621
Prior years	(669)		(754)
Total incurred	50,163		43,867
Paid related to:
Current year	(40,284)		(35,279)
Prior years	(8,674)		(7,610)
Total paid	(48,958)		(42,889)
Balances, end of period	$	11,446	$	10,304

The total estimate of benefits payable for claims incurred but not reported, or IBNR, is included within the net incurred claims amounts. At June 30, 2024, benefits payable included IBNR of approximately $7.1 billion, primarily associated with claims incurred in 2024.

Amounts incurred related to prior periods vary from previously estimated liabilities as the claims ultimately are settled. Negative amounts reported for incurred related to prior years result from claims being ultimately settled for amounts less than originally estimated (favorable development).

Our reserving practice is to consistently recognize the actuarial best estimate of our ultimate liability for claims. Actuarial standards require the use of assumptions based on moderately adverse experience, which generally results in favorable reserve development, or reserves that are considered redundant. For additional information regarding our benefits payable and benefits expense recognition, refer to Note 2 to the audited Consolidated Financial Statements included in Part II, Item 8, "Financial Statements and Supplementary Data" in our 2023 Form 10-K.

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9. EARNINGS PER COMMON SHARE COMPUTATION

Detail supporting the computation of basic and diluted earnings per common share was as follows for the three and six months ended June 30, 2024 and 2023:


	Three months ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
	(dollars in millions, except per common share results; number of shares in thousands)
Net income available for common stockholders	$	679	$	959	$	1,420	$	2,198
Weighted average outstanding shares of common stock used to compute basic earnings per common share	120,445		124,574		120,712		124,790
Dilutive effect of:
Employee stock options	1		34		4		34
Restricted stock	219		501		251		512
Shares used to compute diluted earnings per common share	120,665		125,109		120,967		125,336
Basic earnings per common share	$	5.63	$	7.70	$	11.76	$	17.62
Diluted earnings per common share	$	5.62	$	7.66	$	11.74	$	17.54
Number of antidilutive stock options and restricted stock excluded from computation	751		78		958		308

For additional information regarding earnings per common share, refer to Note 2 to the audited Consolidated Financial Statements included in Part II, Item 8, "Financial Statements and Supplementary Data" in our 2023 Form 10-K.

10. STOCKHOLDERS’ EQUITY

Dividends

The following table provides details of dividend payments, excluding dividend equivalent rights for unvested stock awards, during 2024 under our Board approved quarterly cash dividend policy:


Record Date	Payment Date	Amount per Share		Total Amount
				(in millions)
2024 payments
12/29/2023	1/26/2024	$	0.8850	$	108
3/29/2024	4/26/2024	$	0.8850	$	107

In April 2024, the Board declared a cash dividend of $0.885 per share payable on July 26, 2024 to stockholders of record as of the close of business on June 28, 2024. Declaration and payment of future quarterly dividends are at the discretion of our Board and may be adjusted as business needs or market conditions change.

Stock Repurchases

Our Board of Directors may authorize the purchase of our common stock shares. Under the share repurchase authorization, shares may be purchased from time to time at prevailing prices in the open market, by block purchases, through plans designed to comply with Rule 10b5-1 under the Securities Exchange Act of 1934, as amended, or in privately-negotiated transactions, including pursuant to accelerated share repurchase agreements with investment banks, subject to certain regulatory restrictions on volume, pricing, and timing.

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Effective February 16, 2024, the Board of Directors replaced the February 2023 repurchase authorization (of which approximately $824 million remained unused) with a new share repurchase authorization for repurchases of up to $3 billion of our common shares exclusive of shares repurchased in connection with employee stock plans, expiring as of February 15, 2027, which we refer to as the 2024 repurchase authorization. During the six months ended June 30, 2024, we repurchased 1.9 million shares in open market transactions for $750 million at an average price of $384.65 under the February 2023 and 2024 share repurchase authorizations. During the six months ended June 30, 2023, we repurchased 1.2 million shares in open market transactions for $601 million at an average price of $488.12 under the February 2023 share repurchase authorization.

Our remaining repurchase authorization was $2.93 billion as of July 30, 2024.

In connection with employee stock plans, we acquired 0.04 million common shares for $16 million and 0.05 million common shares for $27 million during the six months ended June 30, 2024 and 2023, respectively.

For additional information regarding our stockholders' equity, refer to Note 16 to the audited Consolidated Financial Statements included in Part II, Item 8, "Financial Statements and Supplementary Data" in our 2023 Form 10-K.

11. INCOME TAXES

The effective income tax rate was 24.7% and 25.0% for the three and six months ended June 30, 2024, respectively, and 23.6% and 23.0% for the three and six months ended June 30, 2023, respectively. The year-over-year increase in the effective income tax rate is primarily due to a change in the mix of current year earnings between our Insurance segment and our CenterWell health services segment, as our CenterWell health services segment is subject to a higher effective tax rate than our Insurance segment. In addition, the prior year income tax rate was favorably impacted by the recognition of a non-taxable gain.

For additional information regarding income taxes, refer to Note 2 to the audited Consolidated Financial Statements included in Part II, Item 8, "Financial Statements and Supplementary Data" in our 2023 Form 10-K.

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12. DEBT

The carrying value of debt outstanding, net of unamortized debt issuance costs, was as follows at June 30, 2024 and December 31, 2023:


	June 30, 2024		December 31, 2023
	(in millions)
Short-term debt:
Commercial paper	$	—	$	871

Senior notes:
$600 million, 3.850% due October 1, 2024	568		572
$600 million, 4.500% due April 1, 2025	581		—
Total senior notes	1,149		572
Total short-term debt	$	1,149	$	1,443
Long-term debt:
Senior notes:
$600 million, 4.500% due April 1, 2025	$	—	$	598
$500 million, 5.700% due March 13, 2026	498		498
$750 million, 1.350% due February 3, 2027	689		688
$600 million, 3.950% due March 15, 2027	537		537
$500 million, 5.750% due March 1, 2028	489		495
$500 million, 5.750% due December 1, 2028	495		495
$750 million, 3.700% due March 23, 2029	585		590
$500 million, 3.125% due August 15, 2029	433		433
$500 million, 4.875% due April 1, 2030	496		496
$1,250 million, 5.375% due April 15, 2031	1,238		—
$750 million, 2.150% due February 3, 2032	744		743
$750 million, 5.875% due March 1, 2033	726		750
$850 million, 5.950% due March 15, 2034	816		840
$250 million, 8.150% due June 15, 2038	261		261
$400 million, 4.625% due December 1, 2042	397		396
$750 million, 4.950% due October 1, 2044	740		740
$400 million, 4.800% due March 15, 2047	396		396
$500 million, 3.950% due August 15, 2049	508		529
$750 million, 5.500% due March 15, 2053	712		728
$1,000 million, 5.750% due April 15, 2054	986		—
Total senior notes	11,746		10,213



Total long-term debt	$	11,746	$	10,213

Senior Notes

In March 2024, we issued $1.3 billion of 5.375% unsecured senior notes due April 15, 2031 and $1.0 billion of 5.750% unsecured senior notes due April 15, 2054. Our net proceeds, reduced for the underwriters' discounts and commissions paid, were $2.2 billion. We used the net proceeds for general corporate purposes, which include the repayment of existing indebtedness, including borrowings under our commercial paper program.

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For additional information regarding our Senior Notes, refer to Note 13 to the audited Consolidated Financial Statements included in Part II, Item 8, "Financial Statements and Supplementary Data" in our 2023 Form 10-K.

Revolving Credit Agreements

In June 2023, we entered into an amended and restated 5-year, $2.5 billion unsecured revolving credit agreement (replacing the 5-year, $2.5 billion unsecured revolving credit agreement entered in June 2021). In May 2024, we entered into an amendment to increase commitments $0.142 billion resulting in a $2.642 billion borrowing capacity.

In May 2024, we entered into a 364-day $2.1 billion unsecured revolving credit agreement (replacing the 364-day $1.5 billion unsecured revolving credit agreement entered in June 2023, which expired in accordance with its terms).

Under the credit agreements, at our option, we can borrow on either a competitive advance basis or a revolving credit basis. The revolving credit portion bears interest at Term SOFR or the base rate plus a spread. The competitive advance portion of any borrowings will bear interest at market rates prevailing at the time of borrowing on either a fixed rate or a floating rate based Term SOFR, at our option.

The SOFR spread, currently 114.0 basis points under the 5-year revolving credit agreement and 116.0 basis points under the 364-day revolving credit agreement, varies depending on our credit ratings ranging from 92.0 to 130.0 basis points under the 5-year revolving credit agreement and from 94.0 to 135.0 basis points under the 364-day revolving credit agreement. We also pay an annual facility fee regardless of utilization. This facility fee, currently 11.0 basis points, under the 5-year revolving credit agreement and 9.0 basis points under the 364-day revolving agreement, varies depending on our credit ratings ranging from 8.0 to 20.0 basis points under the 5-year revolving credit agreement and from 6.0 to 15.0 basis points under the 364-day revolving credit agreement.

Our credit agreements contain customary restrictive covenants and a financial covenant regarding maximum debt to capitalization of 60%, as well as customary events of default. We are in compliance with this financial covenant, with actual debt to capitalization of 43.6% as measured in accordance with the revolving credit agreements as of June 30, 2024.

At June 30, 2024, we had no borrowings and approximately $18 million of letters of credit outstanding under the revolving credit agreements. Accordingly, as of June 30, 2024, we had $2.624 billion of remaining borrowing capacity under the 5-year revolving credit agreement and $2.1 billion of remaining borrowing capacity under the 364-day revolving credit agreement (which excludes the uncommitted $750 million of incremental loan facilities), none of which would be restricted by our financial covenant compliance requirement.

For additional information regarding our Revolving Credit Agreements, refer to Note 13 to the audited Consolidated Financial Statements included in Part II, Item 8, "Financial Statements and Supplementary Data" in our 2023 Form 10-K.

Commercial Paper

Under our commercial paper program, we may issue short-term, unsecured commercial paper notes privately placed on a discount basis through certain broker dealers at any time. Amounts available under the program may be borrowed, repaid and re-borrowed from time to time. The net proceeds of issuances have been and are expected to be used for general corporate purposes. The maximum principal amount outstanding at any one time during the six

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months ended June 30, 2024 was $2.7 billion, with no outstanding amount at June 30, 2024 compared to $0.9 billion outstanding at December 31, 2023.

For additional information regarding our Commercial Paper refer to Note 13 to the audited Consolidated Financial Statements included in Part II, Item 8, "Financial Statements and Supplementary Data" in our 2023 Form 10-K.

Other Short-term Borrowings

We are a member, through one subsidiary, of the Federal Home Loan Bank of Cincinnati, or FHLB. As a member we have the ability to obtain short-term cash advances, subject to certain minimum collateral requirements. At June 30, 2024 we had no outstanding short-term FHLB borrowings.

13. COMMITMENTS, GUARANTEES AND CONTINGENCIES

Government Contracts

Our Medicare products, which accounted for approximately 86% of our total premiums and services revenue for the six months ended June 30, 2024, primarily consisted of products covered under the Medicare Advantage and Medicare Part D Prescription Drug Plan contracts with the federal government. These contracts are renewed generally for a calendar year term unless CMS notifies us of its decision not to renew by May 1 of the calendar year in which the contract would end, or we notify CMS of our decision not to renew by the first Monday in June of the calendar year in which the contract would end. All material contracts between Humana and CMS relating to our Medicare products have been renewed for 2024, and all of our product offerings filed with CMS for 2024 have been approved.

CMS uses a risk-adjustment model which adjusts premiums paid to Medicare Advantage, or MA, plans according to health status of covered members. The risk-adjustment model, which CMS implemented pursuant to the Balanced Budget Act of 1997, or BBA, and the Benefits Improvement and Protection Act of 2000, or BIPA, generally pays more where a plan's membership has higher expected costs. Under this model, rates paid to MA plans are based on actuarially determined bids, which include a process whereby our prospective payments are based on our estimated cost of providing standard Medicare-covered benefits to an enrollee with a "national average risk profile." That baseline payment amount is adjusted to account for certain demographic characteristics and health status of our enrolled members. Under the risk-adjustment methodology, all MA plans must collect from providers and submit the necessary diagnosis code information to CMS within prescribed deadlines. The CMS risk-adjustment model uses the diagnosis data, collected from providers, to calculate the health status-related risk-adjusted premium payment to MA plans, which CMS further adjusts for coding pattern differences between the health plans and the government fee-for-service, or FFS, program. We generally rely on providers, including certain providers in our network who are our employees, to code their claim submissions with appropriate diagnoses, which we send to CMS as the basis for our health status-adjusted payment received from CMS under the actuarial risk-adjustment model. We also rely on these providers to document appropriately all medical data, including the diagnosis data submitted with claims. In addition, we conduct medical record reviews as part of our data and payment accuracy compliance efforts, to more accurately reflect diagnosis conditions under the risk adjustment model.

CMS and the Office of the Inspector General of Health and Human Services, or HHS-OIG, perform audits of various companies’ risk adjustment diagnosis data submissions. We refer to these audits as Risk-Adjustment Data Validation Audits, or RADV audits. RADV audits review medical records in an attempt to validate provider medical record documentation and coding practices that influence the calculation of health status-related premium payments to MA plans.

In 2012, CMS released an MA contract-level RADV methodology that would extrapolate the results of each CMS RADV audit sample to the audited MA contract’s entire health status-related risk adjusted premium amount for the year under audit. In doing so, CMS recognized “that the documentation standard used in RADV audits to determine a contract’s payment error (medical records) is different from the documentation standard used to develop the Part C risk-adjustment model (FFS claims).” To correct for this difference, CMS stated that it would apply a “Fee-for-Service Adjuster (FFS Adjuster)” as “an offset to the preliminary recovery amount.” This adjuster would

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be “calculated by CMS based on a RADV-like review of records submitted to support FFS claims data.” CMS stated that this methodology would apply to audits beginning with PY 2011. Humana relied on CMS’s 2012 guidance in submitting MA bids to CMS. Humana also launched a “Self-Audits” program in 2013 that applied CMS’s 2012 RADV audit methodology and included an estimated FFS Adjuster. Humana completed Self-Audits for PYs 2011-2016 and reported results to CMS.

In October 2018, however, CMS issued a proposed rule announcing possible changes to the RADV audit methodology, including elimination of the FFS Adjuster. CMS proposed applying its revised methodology, including extrapolated recoveries without application of a FFS Adjuster, to RADV audits dating back to PY 2011. On January 30, 2023, CMS published a final rule related to the RADV audit methodology (Final RADV Rule). The Final RADV Rule confirmed CMS’s decision to eliminate the FFS Adjuster. The Final RADV Rule states CMS’s intention to extrapolate results from CMS and HHS-OIG RADV audits beginning with PY 2018, rather than PY 2011 as proposed. However, CMS’s Final RADV Rule does not adopt a specific sampling, extrapolation or audit methodology. CMS instead stated its general plan to rely on “any statistically valid method . . . that is determined to be well-suited to a particular audit.”

We believe that the Final RADV Rule fails to address adequately the statutory requirement of actuarial equivalence and violates the Administrative Procedure Act (“APA”). CMS failed to meet its legal obligations in the federal rulemaking process to give a reasoned justification for the rule or provide a meaningful opportunity for public comment. They also chose to apply the rule retroactively rather than prospectively, as required by law. Humana’s actuarially certified bids through PY 2023 preserved Humana’s position that CMS should apply an FFS Adjuster in any RADV audit that CMS intends to extrapolate. We expect CMS to apply the Final RADV Rule, including the first application of extrapolated audit results to determine audit settlements without a FFS Adjuster, to CMS and HHS-OIG RADV audits conducted for PY 2018 and subsequent years. The Final RADV Rule, including the lack of a FFS Adjuster, and any related regulatory, industry or company reactions, could have a material adverse effect on our results of operations, financial position, or cash flows.

In addition, as part of our internal compliance efforts, we routinely perform ordinary course reviews of our internal business processes related to, among other things, our risk coding and data submissions in connection with the risk adjustment model. These reviews may also result in the identification of errors and the submission of corrections to CMS that may, either individually or in the aggregate, be material. As such, the result of these reviews may have a material adverse effect on our results of operations, financial position, or cash flows.

On September 1, 2023, Humana Inc. and Humana Benefit Plan of Texas, Inc. filed suit against the United States Department of Health and Human Services, and Xavier Becerra in his official capacity as Secretary, in the United States District Court, Northern District of Texas, Fort Worth Division seeking a determination that the Final RADV Rule violates the APA and should be set aside. We remain committed to working alongside CMS to promote the integrity of the MA program as well as affordability and cost certainty for our members. It is critical that MA plans are paid accurately and that payment model principles, including the application of a FFS Adjuster, are in accordance with the requirements of the Social Security Act, which, if not implemented correctly could have a material adverse effect on our results of operations, financial position, or cash flows.

Our state-based Medicaid business, which accounted for approximately 7% of our total premiums and services revenue for the six months ended June 30, 2024 primarily consisted of serving members enrolled in Medicaid, and in certain circumstances members who qualify for both Medicaid and Medicare, under contracts with various states.

At June 30, 2024, our Military services business, which accounted for approximately 1% of our total premiums and services revenue for the six months ended June 30, 2024, primarily consisted of the TRICARE T2017 East Region contract. The T2017 East Region contract comprises 32 states and approximately 6 million TRICARE beneficiaries, under which delivery of health care services commenced on January 1, 2018. The T2017 East Region contract, which was originally set to expire on December 31, 2022, was subsequently extended by the U.S. Department of Defense, or DoD, and is currently scheduled to expire on December 31, 2024, unless further extended.

In December 2022, we were awarded the next generation of TRICARE Managed Care Support Contracts, or T-5, for the updated TRICARE East Region by the Defense Health Agency of the DoD.The T-5 East Region

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contract comprises 24 states, and Washington D.C., and covers approximately 4.6 million beneficiaries. The transition period for the T-5 contract began in January 2024 and will overlap the final year of the T2017 contract. The length of the contract is one transition year followed by eight annual option periods, which, if all options are exercised, would result in a total contract length of nine years.

The loss of any of the contracts above or significant changes in these programs as a result of legislative or regulatory action, including reductions in premium payments to us, regulatory restrictions on profitability, including reviews by regulatory bodies that may compare our Medicare Advantage profitability to our non-Medicare Advantage business profitability, or compare the profitability of various products within our Medicare Advantage business, and require that they remain within certain ranges of each other, or increases in member benefits or member eligibility criteria without corresponding increases in premium payments to us, may have a material adverse effect on our results of operations, financial position, and cash flows.

Legal Proceedings and Certain Regulatory Matters

As previously disclosed, the Civil Division of the United States Department of Justice provided us with an information request in December 2014, concerning our Medicare Part C risk adjustment practices. The request relates to our oversight and submission of risk adjustment data generated by providers in our Medicare Advantage network, as well as to our business and compliance practices related to risk adjustment data generated by our providers and by us, including medical record reviews conducted as part of our data and payment accuracy compliance efforts, the use of health and well-being assessments, and our fraud detection efforts. We believe that this request for information is in connection with a wider review of Medicare Risk Adjustment generally that includes a number of Medicare Advantage plans, providers and vendors. We cooperated with the Department of Justice, and we have not heard from the Department of Justice on this matter since 2020.

As previously disclosed, on January 19, 2016, an individual filed a qui tam suit captioned United States of America ex rel. Steven Scott v. Humana Inc., currently pending in United States District Court, Western District of Kentucky, Louisville division. The complaint alleges certain civil violations by us in connection with the actuarial equivalence of the plan benefits under Humana’s Basic PDP plan, a prescription drug plan offered by us under Medicare Part D. The action seeks damages and penalties on behalf of the United States under the False Claims Act. The court ordered the qui tam action unsealed on September 13, 2017, so that the relator could proceed, following notice from the U.S. Government that it was not intervening at that time. On March 31, 2022, the Court denied the parties' Motions for Summary Judgement. We take seriously our obligations to comply with applicable CMS requirements and actuarial standards of practice, and continue to vigorously defend against these allegations. During 2023, we accrued certain anticipated expenses in connection with this matter.

On September 1, 2023, Humana Inc. and Humana Benefit Plan of Texas, Inc. filed suit against the United States Department of Health and Human Services, and Xavier Becerra in his official capacity as Secretary, in the United States District Court, Northern District of Texas, Fort Worth Division seeking a determination that the Final RADV Rule violates the APA and should be set aside. There is no assurance that we will prevail in the lawsuit. See “Government Contracts” in this footnote to the unaudited Consolidated Financial Statements of this Form 10-Q for additional information regarding this matter.

In June 2024, a putative stockholder class action was filed against Humana Inc. and certain of our current and former executive officers under the federal securities laws in the United States District Court for the District of Delaware. The case, captioned Iron Workers Local 401 Annuity Fund v. Humana, Inc., alleges that between July 2022 and January 2024, Humana made false or misleading statements in its periodic SEC filings and statements to the financial markets about our financial performance and the medical costs in our Medicare Advantage business. In July 2024, a parallel stockholder derivative action captioned Silva v. Broussard was filed in the United States District Court for the Western District of Kentucky alleging that the same claimed acts and omissions underlying the federal securities law case also constitute a breach of fiduciary duty by certain of our current and former directors and executive officers. We will vigorously defend against the allegations in both cases.

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Other Lawsuits and Regulatory Matters

Our current and past business practices are subject to review or other investigations by various state insurance and health care regulatory authorities and other state and federal regulatory authorities. These authorities regularly scrutinize the business practices of health insurance, health care delivery and benefits companies. These reviews focus on numerous facets of our business, including claims payment practices, statutory capital requirements, provider contracting, risk adjustment, competitive practices, commission payments, privacy issues, utilization management practices, pharmacy benefits, access to care, sales practices, and provision of care by our healthcare services businesses, among others. Some of these reviews have historically resulted in fines imposed on us and some have required changes to some of our practices. We continue to be subject to these reviews, which could result in additional fines or other sanctions being imposed on us or additional changes in some of our practices.

We also are involved in various other lawsuits that arise, for the most part, in the ordinary course of our business operations, certain of which may be styled as class-action lawsuits. Among other matters, this litigation may include employment matters, claims of medical malpractice, bad faith, nonacceptance or termination of providers, anticompetitive practices, improper rate setting, provider contract rate and payment disputes, including disputes over reimbursement rates required by statute, disputes arising from competitive procurement process, general contractual matters, intellectual property matters, and challenges to subrogation practices. Under state guaranty assessment laws, including those related to state cooperative failures in the industry, we may be assessed (up to prescribed limits) for certain obligations to the policyholders and claimants of insolvent insurance companies that write the same line or lines of business as we do.

As a government contractor, we may also be subject to false claims litigation, such as qui tam lawsuits brought by individuals who seek to sue on behalf of the government, alleging that the government contractor submitted false claims to the government or related overpayments from the government, including, among other allegations, those resulting from coding and review practices under the Medicare risk adjustment model. Qui tam litigation is filed under seal to allow the government an opportunity to investigate and to decide if it wishes to intervene and assume control of the litigation. If the government does not intervene, the individual may continue to prosecute the action on his or her own, on behalf of the government. We also are subject to other allegations of nonperformance of contractual obligations to providers, members, and others, including failure to properly pay claims, improper policy terminations, challenges to our implementation of the Medicare Part D prescription drug program and other litigation.

A limited number of the claims asserted against us are subject to insurance coverage. Personal injury claims, claims for extra contractual damages, care delivery malpractice, and claims arising from medical benefit denials are covered by insurance from our wholly owned captive insurance subsidiary and excess carriers, except to the extent that claimants seek punitive damages, which may not be covered by insurance in certain states in which insurance coverage for punitive damages is not permitted. In addition, insurance coverage for all or certain forms of liability has become increasingly costly and may become unavailable or prohibitively expensive in the future.

We record accruals for the contingencies discussed in the sections above to the extent that we conclude it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. No estimate of the possible loss or range of loss in excess of amounts accrued, if any, can be made at this time regarding the matters specifically described above because of the inherently unpredictable nature of legal proceedings, which also may be exacerbated by various factors, including: (i) the damages sought in the proceedings are unsubstantiated or indeterminate; (ii) discovery is not complete; (iii) the proceeding is in its early stages; (iv) the matters present legal uncertainties; (v) there are significant facts in dispute; (vi) there are a large number of parties (including where it is uncertain how liability, if any, will be shared among multiple defendants); or (vii) there is a wide range of potential outcomes.

The outcome of any current or future litigation or governmental or internal investigations, including the matters described above, cannot be accurately predicted, nor can we predict any resulting judgments, penalties, fines or other sanctions that may be imposed at the discretion of federal or state regulatory authorities or as a result of actions by third parties. Nevertheless, it is reasonably possible that any such outcome of litigation, judgments, penalties, fines

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or other sanctions could be substantial, and the outcome of these matters may have a material adverse effect on our results of operations, financial position, and cash flows, and may also affect our reputation.

14. SEGMENT INFORMATION

Our two reportable segments, Insurance and CenterWell, are based on a combination of the type of health plan customer and adjacent businesses centered on well-being solutions for our health plans and other customers, as described below. These segment groupings are consistent with information used by our Chief Executive Officer, the Chief Operating Decision Maker, to assess performance and allocate resources.

The Insurance segment consists of Medicare benefits, marketed to individuals or directly via group Medicare accounts, as well as our contract with CMS to administer the Limited Income Newly Eligible Transition, or LI-NET, prescription drug plan program and contracts with various states to provide Medicaid, dual eligible demonstration, and Long-Term Support Services benefits, which we refer to collectively as our state-based contracts. This segment also includes products consisting of employer group commercial fully-insured medical and specialty health insurance benefits marketed to individuals and employer groups, including dental, vision, and other supplemental health benefits, as well as administrative services only, or ASO. In addition, our Insurance segment includes our Military services business, primarily our T-2017 East Region contract, as well as the operations of our PBM business.

The CenterWell segment includes our pharmacy, primary care, and home solutions operations. The segment also includes our strategic partnerships with WCAS to develop and operate senior-focused, payor-agnostic, primary care centers, as well as our minority ownership interest in hospice operations. Services offered by this segment are designed to enhance the overall healthcare experience. These services may lead to lower utilization associated with improved member health and/or lower drug costs.

Our CenterWell intersegment revenues primarily relate to the operations of CenterWell Pharmacy (our mail- order pharmacy business), CenterWell Specialty Pharmacy, and retail pharmacies jointly located within CenterWell Senior Primary Care clinics.

In addition, our CenterWell intersegment revenues include revenues earned by certain owned providers derived from certain value-based arrangements with our health plans. Under these value-based arrangements, our owned providers enter into agreements with our health plans to stand ready to deliver, integrate, direct and control the administration and management of certain health care services for our members. In exchange, the owned provider receives a premium that is typically paid on a per-member per-month basis. These value-based arrangements represent a single performance obligation where revenues are recognized in the period in which we are obligated to provide integrated health care services to our members. Fee-for-service revenue is recognized at agreed upon rates, net of contractual allowances, as the performance obligation is completed on the date of service.

We present our condensed consolidated results of operations from the perspective of the health plans. As a result, the cost of providing benefits to our members, whether provided via a third party provider or internally through a stand-alone subsidiary, is classified as benefits expense and excludes the portion of the cost for which the health plans do not bear responsibility, including member co-share amounts and government subsidies of $4.8 billion and $5.0 billion for the three months ended June 30, 2024 and 2023, respectively. For the six months ended June 30, 2024 and 2023, these amounts were $8.5 billion and $9.0 billion respectively. In addition, depreciation and amortization expense associated with certain businesses delivering benefits to our members, primarily associated with our primary care and pharmacy operations, are included with benefits expense. The amount of this expense was $32 million and $34 million for the three months ended June 30, 2024 and 2023, respectively, and $64 million and $67 million for the six months ended June 30, 2024 and 2023, respectively.

Other than those described previously, the accounting policies of each segment are the same. For additional information regarding our accounting policies refer to Note 2 to the audited Consolidated Financial Statements included in Part II, Item 8, "Financial Statements and Supplementary Data" in our 2023 Form 10-K. Transactions between reportable segments primarily consist of sales of products and services rendered by our CenterWell segment, primarily pharmacy, primary care, and home solutions, to our Insurance segment customers. Intersegment

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sales and expenses are recorded primarily at fair value and eliminated in consolidation. Members served by our segments often use the same provider networks, enabling us in some instances to obtain more favorable contract terms with providers. Our segments also share indirect costs and assets. As a result, the profitability of each segment is interdependent. We allocate most operating expenses to our segments. Assets and certain corporate income and expenses are not allocated to the segments, including the portion of investment income not supporting segment operations, interest expense on corporate debt, and certain other corporate expenses. These items are managed at a corporate level. These corporate amounts are reported separately from our reportable segments and are included with intersegment eliminations in the tables presenting segment results below.

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Our segment results were as follows for the three and six months ended June 30, 2024 and 2023:



	Insurance		CenterWell		Eliminations/ Corporate		Consolidated
Three months ended June 30, 2024	(in millions)
External revenues
Premiums:
Individual Medicare Advantage	$	22,215	$	—	$	—	$	22,215
Group Medicare Advantage	1,938		—		—		1,938
Medicare stand-alone PDP	867		—		—		867
Total Medicare	25,020		—		—		25,020
Commercial fully-insured	152		—		—		152
Specialty benefits	240		—		—		240
Medicare Supplement	206		—		—		206
State-based contracts and other	2,524		—		—		2,524
Total premiums	28,142		—		—		28,142
Services revenue:


Home solutions	—		335		—		335
Primary care	—		322		—		322
Commercial ASO	8		—		—		8
Military services and other	206		—		—		206
Pharmacy solutions	—		229		—		229
Total services revenue	214		886		—		1,100
Total external revenues	28,356		886		—		29,242
Intersegment revenues
Services	1		1,416		(1,417)		—
Products	—		2,645		(2,645)		—
Total intersegment revenues	1		4,061		(4,062)		—
Investment income	168		—		130		298
Total revenues	28,525		4,947		(3,932)		29,540
Operating expenses:
Benefits	25,182		—		(143)		25,039
Operating costs	2,395		4,553		(3,800)		3,148

Depreciation and amortization	185		56		(29)		212
Total operating expenses	27,762		4,609		(3,972)		28,399
Income from operations	763		338		40		1,141

Interest expense	—		1		167		168
Other expense, net	—		—		55		55
Income (loss) before income taxes and equity in net earnings	763		337		(182)		918
Equity in net income (losses)	1		(18)		—		(17)
Segment earnings (loss)	$	764	$	319	$	(182)	$	901
Net loss attributable to noncontrolling interests	1		—		—		1
Segment earnings (loss) attributable to Humana	$	765	$	319	$	(182)	$	902

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	Insurance		CenterWell		Eliminations/ Corporate		Consolidated
Three months ended June 30, 2023	(in millions)
External revenues
Premiums:
Individual Medicare Advantage	$	19,749	$	—	$	—	$	19,749
Group Medicare Advantage	1,732		—		—		1,732
Medicare stand-alone PDP	568		—		—		568
Total Medicare	22,049		—		—		22,049
Commercial fully-insured	950		—		—		950
Specialty benefits	252		—		—		252
Medicare Supplement	182		—		—		182
State-based contracts and other	2,062		—		—		2,062
Total premiums	25,495		—		—		25,495
Services revenue:


Home solutions	—		341		—		341
Primary care	—		190		—		190
Commercial ASO	64		—		—		64
Military services and other	167		—		—		167
Pharmacy solutions	—		216		—		216
Total services revenue	231		747		—		978
Total external revenues	25,726		747		—		26,473
Intersegment revenues
Services	15		1,144		(1,159)		—
Products	—		2,639		(2,639)		—
Total intersegment revenues	15		3,783		(3,798)		—
Investment income	134		—		140		274
Total revenues	25,875		4,530		(3,658)		26,747
Operating expenses:
Benefits	22,127		—		(118)		22,009
Operating costs	2,545		4,193		(3,627)		3,111

Depreciation and amortization	172		50		(31)		191
Total operating expenses	24,844		4,243		(3,776)		25,311
Income from operations	1,031		287		118		1,436

Interest expense	—		1		119		120
Other expense, net	—		—		54		54
Income (loss) before income taxes and equity in net earnings	1,031		286		(55)		1,262
Equity in net earnings (losses)	1		(11)		—		(10)
Segment earnings (loss)	$	1,032	$	275	$	(55)	$	1,252
Net loss attributable to noncontrolling interests	3		—		—		3
Segment earnings (loss) attributable to Humana	$	1,035	$	275	$	(55)	$	1,255

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	Insurance		CenterWell		Eliminations/ Corporate		Consolidated
Six months ended June 30, 2024	(in millions)
External revenues
Premiums:
Individual Medicare Advantage	$	44,663	$	—	$	—	$	44,663
Group Medicare Advantage	3,927		—		—		3,927
Medicare stand-alone PDP	1,688		—		—		1,688
Total Medicare	50,278		—		—		50,278
Commercial fully-insured	408		—		—		408
Specialty benefits	479		—		—		479
Medicare Supplement	403		—		—		403
State-based contracts and other	4,835		—		—		4,835
Total premiums	56,403		—		—		56,403
Services revenue:


Home solutions	—		670		—		670
Primary care	—		563		—		563
Commercial ASO	32		—		—		32
Military services and other	457		—		—		457
Pharmacy solutions	—		440		—		440
Total services revenue	489		1,673		—		2,162
Total external revenues	56,892		1,673		—		58,565
Intersegment revenues
Services	2		2,830		(2,832)		—
Products	—		5,262		(5,262)		—
Total intersegment revenues	2		8,092		(8,094)		—
Investment income	330		—		256		586
Total revenues	57,224		9,765		(7,838)		59,151
Operating expenses:
Benefits	50,433		—		(270)		50,163
Operating costs	4,759		9,036		(7,605)		6,190

Depreciation and amortization	371		109		(59)		421
Total operating expenses	55,563		9,145		(7,934)		56,774
Income from operations	1,661		620		96		2,377

Interest expense	—		2		325		327
Other expense, net	—		—		118		118
Income (loss) before income taxes and equity in net losses	1,661		618		(347)		1,932
Equity in net losses	(1)		(40)		—		(41)
Segment earnings (loss)	$	1,660	$	578	$	(347)	$	1,891
Net loss attributable to noncontrolling interests	3		—		—		3
Segment earnings (loss) attributable to Humana	$	1,663	$	578	$	(347)	$	1,894

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	Insurance		CenterWell		Eliminations/ Corporate		Consolidated
Six Months Ended June 30, 2023	(in millions)
External Revenues
Premiums:
Individual Medicare Advantage	$	39,558	$	—	$	—	$	39,558
Group Medicare Advantage	3,497		—		—		3,497
Medicare stand-alone PDP	1,184		—		—		1,184
Total Medicare	44,239		—		—		44,239
Commercial fully-insured	1,968		—		—		1,968
Specialty benefits	506		—		—		506
Medicare Supplement	361		—		—		361
State-based contracts and other	3,971		—		—		3,971
Total premiums	51,045		—		—		51,045
Services revenue:
Home solutions	—		655		—		655
Primary care	—		391		—		391
Commercial ASO	135		—		—		135
Military services and other	338		—		—		338
Pharmacy solutions	—		458		—		458
Total services revenue	473		1,504		—		1,977
Total external revenues	51,518		1,504		—		53,022
Intersegment revenues
Services	29		2,277		(2,306)		—
Products	—		5,254		(5,254)		—
Total intersegment revenues	29		7,531		(7,560)		—
Investment income	231		—		236		467
Total revenues	51,778		9,035		(7,324)		53,489
Operating expenses:
Benefits	44,120		—		(253)		43,867
Operating costs	4,963		8,319		(7,192)		6,090
Depreciation and amortization	337		99		(59)		377
Total operating expenses	49,420		8,418		(7,504)		50,334
Income from operations	2,358		617		180		3,155

Interest expense	—		1		232		233
Other expense, net	—		—		46		46
Income (loss) before income taxes and equity in net losses	2,358		616		(98)		2,876
Equity in net losses	(2)		(25)		—		(27)
Segment earnings (loss)	$	2,356	$	591	$	(98)	$	2,849
Net loss attributable to noncontrolling interests	4		—		—		4
Segment earnings (loss) attributable to Humana	$	2,360	$	591	$	(98)	$	2,853

Table of Contents

Humana Inc.

Next: Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF