Humana Reports Third Quarter Financial Results, Provides 2010 Financial Guidance

• Reaffirms 2009 EPS guidance of approximately $6.15
• 2009 YTD cash flows from operations of over $1.1 billion
• Medicare operations continue to perform well
• TRICARE contract protest upheld by GAO
• Commercial results continue to be impacted by general economy

• Press Release
• Source: Humana Inc.
• On 6:00 am EST, Monday November 2, 2009

LOUISVILLE, Ky.--(BUSINESS WIRE)--Humana Inc. (NYSE: HUM - News) today reported diluted earnings per common share (EPS) for the quarter ended September 30, 2009 (3Q09) of $1.78, consistent with management’s guidance of $1.75 to $1.80. The company earned $1.09 per share for the quarter ended September 30, 2008 (3Q08) which reflected $0.40 per share in realized losses primarily associated with other-than-temporary impairments in investments and sales of distressed financial institution securities. The 3Q08 results also included high stand-alone Prescription Drug Plan (PDP) claim expenses.

For the nine months ended September 30, 2009 (YTD09) the company reported $4.67 in EPS compared to $2.79 in EPS for the nine months ended September 30, 2008 (YTD08). The YTD08 results reflected both high stand-alone PDP claim expenses and lower investment income primarily due to significant realized losses on investments.

“Our results this quarter reflect continued solid performance in our Government businesses, offsetting continuing challenges in our Commercial Segment,” said Michael B. McCallister, president and chief executive officer of Humana. “We continue to anticipate consolidated results in line with our previous expectations and thus are reaffirming our 2009 EPS guidance.”

The company anticipates EPS of approximately $6.15 for the year ending December 31, 2009 (FY09). Looking ahead to the year ending December 31, 2010 (FY10), the company projects EPS to be in the range of $5.05 to $5.25. The 2010 estimate includes military services EPS between breakeven and $0.10 per share (including the impact of asset write-downs and other charges) and excludes any potential impact from pending health legislation or regulatory reform.

"Looking to 2010, we're forecasting substantial net-new Medicare Advantage member growth, attributable to both large-group and individual customers," McCallister said. "In addition, as we've said in the past, we target an overall Medicare pretax operating margin of approximately 5 percent, which next year will include a significant increase in group membership, a traditionally lower margin business, a moderating margin for our stand-alone PDPs, and an individual Medicare margin that approximates the overall target. We also anticipate stabilizing our Commercial operating results with administrative cost reductions and continuation of pricing actions."

TRICARE Update

As previously disclosed, on July 22, 2009, Humana Military Healthcare Services (HMHS), a wholly owned subsidiary of the company, filed a protest with the Government Accountability Office (GAO) in connection with the award of the third generation TRICARE program contract for the South Region to another contractor. In its protest, Humana cited discrepancies between the award criteria and procedures prescribed in the request for proposals issued by the Department of Defense (DoD) and those that appear to have been used by the DoD in making its contractor selection. On October 28, 2009, the company learned that the GAO had upheld HMHS’ protest. Humana anticipates the GAO will publicly release a detailed version of its protest decision expeditiously to include the grounds for the decision and the nature of relief recommended by the GAO to the DoD. At this time, Humana is not able to determine what actions the DoD will take in response to recommendations by the GAO, nor can it determine whether or not the protest decision by the GAO will have any effect upon the ultimate disposition of the contract award, and therefore whether or not the protest decision is material.

Consolidated Highlights

Revenues – 3Q09 consolidated revenues rose 8 percent to $7.72 billion from $7.15 billion in 3Q08, with total premium and administrative services fees up 7 percent compared to the prior year’s quarter. The increase in premiums and administrative services fees primarily reflects an increase in both average Medicare Advantage membership and per-member premiums for these products.

Consolidated revenues for YTD09 rose 9 percent to $23.33 billion from $21.46 billion for YTD08 with total premiums and administrative services fees up 8 percent compared to the prior year’s period, also driven primarily by the increases in average Medicare Advantage enrollment and per-member premiums.

Benefit expenses – The 3Q09 consolidated benefit ratio (benefit expenses as a percent of premium revenues) of 82.1 percent decreased from 83.1 percent for the prior year’s quarter, as expected. This 100 basis point decrease was primarily driven by a decrease of 220 basis points in the Government Segment, partially offset by a 250 basis point increase in the Commercial Segment benefit ratio.

The consolidated benefit ratio for YTD09 of 83.1 percent was 180 basis points lower than the YTD08 consolidated benefit ratio of 84.9 percent, reflecting a 250 basis point decrease in the Government Segment’s benefit ratio year over year while the Commercial Segment’s benefit ratio was unchanged YTD09 compared to YTD08.

Selling, general, & administrative (SG&A) expenses – The 3Q09 consolidated SG&A expense ratio (SG&A expenses as a percent of premiums, administrative services fees and other revenue) of 13.7 percent remained unchanged from 3Q08. The YTD09 consolidated SG&A expense ratio of 13.5 percent increased 10 basis points from the YTD08 ratio of 13.4 percent.

Government Segment Results

Pretax results:

• Government segment pretax income of $474.5 million in 3Q09 compares to $271.7 million in 3Q08. This increase was primarily driven by lower PDP claim expenses, an 11 percent increase in average Medicare Advantage membership, the implementation of member premiums for most of the company’s Medicare Advantage products, and higher investment income.

Enrollment:

• Medicare Advantage membership grew to 1,514,800 at September 30, 2009, an increase of 146,800 members, or 11 percent, from September 30, 2008, and up 78,900, or 5 percent, versus December 31, 2008. As of September 30, 2009, approximately 62 percent of the company’s Medicare Advantage members were in network-based products versus 49 percent at September 30, 2008 and 51 percent at December 31, 2008.
• Membership in the company’s stand-alone PDPs totaled 1,960,400 at September 30, 2009 compared to 3,089,000 at September 30, 2008 and 3,066,600 at December 31, 2008. Both the year-over-year and year-to-date membership declines resulted primarily from attrition associated with low-income seniors opting to join competitor plans with lower or no member premiums as well as stand-alone PDP members choosing Medicare Advantage plans. For 2009, the company realigned its stand-alone PDP premium and benefit designs to correspond with its prescription drug claims experience.
• Military services membership at September 30, 2009 of 3,015,100 was up approximately 2 percent from 2,953,900 at September 30, 2008 and 2,964,700 at December 31, 2008.

Premiums and administrative services fees:

• Medicare Advantage premiums of $4.14 billion in 3Q09 increased 18 percent compared to $3.50 billion in 3Q08, primarily the combined result of an 11 percent increase in average Medicare Advantage membership and the introduction of member premiums for most of the company’s Medicare Advantage products.
• Medicare stand-alone PDP premiums of $578.1 million in 3Q09 decreased 26 percent compared to $782.9 million in 3Q08, reflecting a 36 percent decline in average membership year over year primarily due to members choosing competitor offerings given the premium and benefit design changes discussed above.
• Military services premiums and administrative services fees during 3Q09 increased $30.7 million, or 4 percent, to $818.8 million compared to $788.1 million in 3Q08.

Benefit Expenses:

• The Government Segment benefit ratio decreased 220 basis points to 81.9 percent in 3Q09 compared to 84.1 percent in the prior year’s quarter, primarily driven by a 340 basis point decline in the Medicare benefit ratio with decreases in both the Medicare Advantage and stand-alone PDP benefit ratios.

SG&A Expenses:

• The Government Segment’s SG&A expense ratio of 10.2% remained unchanged from 3Q08.

Commercial Segment Results

Pretax results:

• The Commercial Segment had a pretax loss of $5.2 million in 3Q09 compared to pretax income of $11.2 million in 3Q08 primarily driven by higher benefit expenses as a percent of premiums and lower average medical membership, partially offset by higher investment income.

Enrollment:

• Commercial Segment medical membership declined to 3,426,900 at September 30, 2009, a decrease of 127,100, or 4 percent, from 3,554,000 at September 30, 2008 and a decline of 193,900, or 5 percent, from 3,620,800 at December 31, 2008. The decline during 2009 primarily reflected the impact of the economic recession and increased unemployment across various of the company’s fully-insured group medical lines of business as well as the loss of two large ASO accounts totaling approximately 95,400 members on January 1, 2009.
• The company’s individual product line has continued to grow steadily, with membership of 358,800, up 13 percent at September 30, 2009 compared to 316,800 at September 30, 2008 and up 10 percent from 325,100 at December 31, 2008.
• Membership in Commercial Segment specialty products ^(a) of 7,262,900 at September 30, 2009 increased 8 percent from 6,727,400 at September 30, 2008 and 7 percent from 6,817,000 at December 31, 2008.

Premiums and administrative services fees:

• Premiums and administrative services fees for the Commercial Segment decreased 1 percent to $1.87 billion in 3Q09 compared to $1.88 billion in the prior year’s quarter, reflecting a 4 percent decline in average medical membership year over year.
• Commercial Segment medical premiums for fully-insured group accounts increased approximately 5 percent on a per-member basis during 3Q09 compared to 3Q08.

Benefit Expenses:

• In 3Q09, the Commercial Segment benefits ratio of 82.7 percent increased 250 basis points versus the 3Q08 benefit ratio of 80.2 percent, as an increase in per-member premiums was more than offset by higher utilization primarily associated with the general economy (aging of small group membership, higher utilization prior to termination, and increased COBRA participation) as well as the impact of the H1N1 virus.

SG&A Expenses:

• The Commercial Segment SG&A expense ratio of 24.0 percent for 3Q09 compares to 23.0 percent in 3Q08, primarily driven by increases in certain of the segment’s businesses that carry a higher administrative expense load such as mail-order pharmacy and individual medical products.

Balance Sheet

• At September 30, 2009, the company had cash, cash equivalents, and investment securities of $8.67 billion, up 17 percent from $7.41 billion in such assets at June 30, 2009.
• Debt-to-total capitalization at September 30, 2009 was 23.2 percent, down 180 basis points from 25.0 percent at June 30, 2009 due primarily to the favorable operating results during 3Q09.

Cash Flows from Operations

Cash flows provided by operations for 3Q09 of $940.1 million compared to cash flows provided by operations of $577.3 million in 3Q08 with the increase primarily due to higher net income as well as the positive impact of changes in working capital accounts.

Share Repurchase Program

In the third quarter of 2008, the company’s Board of Directors authorized the repurchase of up to $250 million of the company’s common shares exclusive of shares repurchased in connection with employee stock plans. Due to volatility in the financial markets, the company has not repurchased any shares under the third quarter 2008 authorization. The share repurchase program expires on December 31, 2009.

Footnote

(a) The Commercial Segment provides a full range of insured specialty products including dental, vision and other supplemental products. Members included in these products may not be unique to each product since members have the ability to enroll in multiple products. Other supplemental benefits include life, disability, and fixed benefit products including cancer and critical illness policies.

Conference Call & Virtual Slide Presentation

Humana will host a conference call, as well as a virtual slide presentation, at 9:00 a.m. eastern time today to discuss its financial results for the quarter and the company’s expectations for future earnings. A live virtual presentation (audio with slides) may be accessed via Humana’s Investor Relations page at www.humana.com. The company suggests web participants sign on at least 15 minutes in advance of the call. The company also suggests web participants visit the site well in advance of the call to run a system test and to download any free software needed to view the presentation.

All parties interested in the audio-only portion of the conference call are invited to dial 888-625-7430. No password is required. The company suggests participants dial in at least ten minutes in advance of the call. For those unable to participate in the live event, the virtual presentation archive may be accessed via the Historical Webcasts & Presentations section of the Investor Relations page at www.humana.com.

Cautionary Statement

This news release includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. When used in investor presentations, press releases, Securities and Exchange Commission (SEC) filings, and in oral statements made by or with the approval of one of our executive officers, the words or phrases like “expects,” “anticipates,” “believes,” “intends,” “likely will result,” “estimates,” “projects” or variations of such words and similar expressions are intended to identify such forward-looking statements. These forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties, and assumptions, including, among other things, information set forth in the “Risk Factors” section of our SEC filings, a summary of which includes but is not limited to the following:

• If Humana does not design and price its products properly and competitively, if the premiums Humana charges are insufficient to cover the cost of health care services delivered to its members, or if its estimates of benefits payable or future policy benefits payable based upon its estimates of future benefit claims are inadequate, Humana’s profitability could be materially adversely affected. Humana estimates the costs of its benefit expense payments, and designs and prices its products accordingly, using actuarial methods and assumptions based upon, among other relevant factors, claim payment patterns, medical cost inflation, and historical developments such as claim inventory levels and claim receipt patterns. These estimates, however, involve extensive judgment, and have considerable inherent variability that is extremely sensitive to payment patterns and changes in medical cost trends.
• If Humana fails to effectively implement its operational and strategic initiatives, including its Medicare initiatives, the company’s business could be materially adversely affected.
• If Humana fails to properly maintain the integrity of its data, to strategically implement new information systems, or to protect Humana’s proprietary rights to its systems, the company’s business could be materially adversely affected.
• Humana is involved in various legal actions, which, if resolved unfavorably to Humana, could result in substantial monetary damages. Increased litigation and negative publicity could increase the company’s cost of doing business.
• Humana's business activities are subject to substantial government regulation. New laws or regulations, or changes in existing laws or regulations or their enforcement, could increase the company's cost of doing business and could materially affect its business, profitability and financial condition. In addition, as a government contractor, the comapny is exposed to additional risks that could adversely affect its business or its willingness to participate in government health care programs.
• Any failure to manage administrative costs could hamper Humana’s profitability.
• Any failure by Humana to manage acquisitions and other significant transactions successfully could have a material adverse effect on its financial results, business and prospects.
• If Humana fails to develop and maintain satisfactory relationships with the providers of care to its members, the company’s business could be adversely affected.
• Humana’s mail order pharmacy business is highly competitive and subjects it to regulations in addition to those the company faces with its core health benefits businesses.
• Humana’s ability to obtain funds from its subsidiaries is restricted.
• Downgrades in Humana’s debt ratings, should they occur, may adversely affect its business, results of operations and financial condition.
• Changes in economic conditions could adversely affect Humana’s business and results of operations.
• The securities and credit markets may experience volatility and disruption, which could adversely affect the company’s business.
• Given the current economic climate, Humana’s stock and the stock of other companies in the insurance industry may be increasingly subject to stock price and trading volume volatility.

In making forward-looking statements, Humana is not undertaking to address or update them in future filings or communications regarding its business or results. In light of these risks, uncertainties, and assumptions, the forward-looking events discussed herein may or may not occur. There also may be other risks that we are unable to predict at this time. Any of these risks and uncertainties may cause actual results to differ materially from the results discussed in the forward-looking statements.

Humana advises investors to read the following documents as filed by the company with the SEC for further discussion both of the risks it faces and its historical performance:

• Form 10-K for the year ended December 31, 2008;
• Form 10-Q for the quarters ended March 31, 2009 and June 30, 2009;
• Form 8-Ks filed during 2009.

About Humana

Humana Inc., headquartered in Louisville, Kentucky, is one of the nation’s largest publicly traded health and supplemental benefits companies, with approximately 10.3 million medical members and approximately 7.3 million specialty-benefit members. Humana is a full-service benefits solutions company, offering a wide array of health and supplemental benefit plans for employer groups, government programs and individuals.

Over its 48-year history, Humana has consistently seized opportunities to meet changing customer needs. Today, the company is a leader in consumer engagement, providing guidance that leads to lower costs and a better health plan experience throughout its diversified customer portfolio.

More information regarding Humana is available to investors via the Investor Relations page of the company’s web site at www.humana.com, including copies of:

• Annual reports to stockholders;
• Securities and Exchange Commission filings;
• Most recent investor conference presentations;
• Quarterly earnings news releases;
• Replays of most recent earnings release conference calls;
• Calendar of events (including upcoming earnings conference call dates and times, as well as planned interaction with research analysts and institutional investors);
• Corporate Governance information.

Humana Inc. – Earnings Guidance Points as of November 2, 2009
(in accordance with			For the year ending December 31, 2009			For the year ending December 31, 2010			Comments
Generally Accepted
Accounting
Principles (GAAP))
Diluted earnings per			Full year 2009: approximately $6.15			Full year 2010: $5.05 to $5.25			EPS estimates for 2009 and 2010 exclude
common share (EPS)									impact of potential future share
									repurchases
									2010 estimate includes military services
									EPS between breakeven and $0.10 per
									share and excludes any potential impact
									from pending health insurance
									legislation or regulatory reform
Revenues			Consolidated revenues: approximately $31			Consolidated revenues: $32 billion to $34
			billion			billion
			Premiums and ASO fees:			Premiums and ASO fees:
			Medicare Advantage: $16.4 billion to			Medicare Advantage: $18 billion to $19
			$16.5 billion			billion
			Medicare stand-alone PDPs:			Medicare stand-alone PDPs:
			approximately $2.4 billion			$2.8 billion to $2.9 billion
			Military services: $3.5 billion to $3.6			Military services: $2.9 billion to $3.0			2010 Military Services assumes a 10/01/10
			billion;			billion;			transition date for TRICARE contract
			Commercial Segment: approximately			Commercial Segment: $7.4 billion to $7.6
			$7.5 billion			billion
			Consolidated investment income: $290			Consolidated investment income: $320
			million to $300 million			million to $335 million
			Consolidated other revenue: approximately			Consolidated other revenue: $265 million to
			$245 million			$275 million
Ending medical			Medicare Advantage: up approximately			Medicare Advantage: up 180,000 to 240,000			Includes fully-insured group and individual
membership			65,000 from prior year			from prior year			Medicare Advantage members and
									approximately 29,000 ASO group Medicare
									Advantage Members in 2010.
			Medicare stand-alone PDPs: down 1.15			Medicare stand-alone PDPs: up 150,000 to			2010 includes approximately 131,000 low-
			million from prior year			200,000 from prior year			income members associated with a CMS
									demonstration project.
			Military services: no material change			Military services: down approximately 3			Fully-insured and ASO combined; assumes
			from prior year			million from prior year			10/1/10 transition for TRICARE contract
			Medicaid: down approximately 72,000 from			Medicaid: no material change from prior year			2009 expected decline in Medicaid
			prior year						membership relates to a contract assumed
									in connection with the FY08 Cariten
									Healthcare acquisition that terminated
									effective December 31, 2008.
			Commercial: down approximately 200,000			Commercial: down 135,000 to 145,000 from			Fully-insured and ASO combined
			from prior year			prior year
Benefit ratios and			Government Segment benefit ratio in the			Government Segment benefit ratio in the			Medicare, Medicaid, and Military Services
benefit expense trend			range of 83.5% to 84.0%			range of 85% to 86%			combined
components
			Medicare benefit ratio in the range of			Medicare benefit ratio in the range of 84%			Medicare Advantage and Stand-Alone PDP
			82.0% to 83.0%			to 85%			combined
			Commercial Segment benefit ratio in the			Commercial Segment benefit ratio in the			Medical and Specialty combined
			range of 80% to 81%			range of 79% to 81%
			Commercial group fully insured secular			Commercial group fully insured secular			Commercial group fully insured secular trends
			benefit expense trend components:			benefit expense trend components:			of approximately 7% for 2009 and 8% for
			inpatient hospital utilization – relatively			inpatient hospital utilization – low single			2010 represent the underlying percentage
			flat; inpatient and outpatient hospital			digits; inpatient and outpatient hospital			change in total medical expenses which
			rates – mid to upper single digits;			rates – upper single digits; outpatient			excludes the impact of benefit changes and
			outpatient hospital utilization – mid			hospital utilization – mid single digits;			business, product, and demographic mix.
			single digits; physician – mid single			physician – mid single digits; pharmacy –
			digits; pharmacy – mid single digits			mid single digits
Selling, general &			13.5% to 14.0%			13% to 14%			SG&A expenses as a percent of premiums,
administrative									administrative services fees, and other
expense ratio									revenue
									2010 estimate includes approximately $100
									million in administrative cost reductions
Depreciation &			$240 million to $245 million			$260 million to $265 million
amortization
Interest expense			$105 million to $110 million			$105 million to $110 million
Government Segment			Medicare operating margin: approximately 6.5%			Medicare operating margin: approximately 5.0%			Medicare Advantage & stand-alone PDP combined
operating results
(Line-of-business-level			Military services: operating earnings of			Military services: operating earnings of			2010 military services earnings include the
results exclude the			approximately $110 million to $115 million			breakeven to $25 million			anticipated impact of the write-down of
impact of investment									goodwill and other charges related to the
income and interest									termination of the South Region contract
expense)									of $50 million to $75 million
Commercial Segment			Approximately $120 million			$125 million to $175 million			Segment-level results include the impact of
pretax earnings									investment income and interest expense
Cash flows from			$1.3 billion to $1.5 billion			$1.1 billion to $1.3 billion
operations
Capital expenditures			Approximately $175 million			Approximately $200 million
Effective tax rate			Approximately 35%			Approximately 36%
Shares used in			Approximately 169 million			Approximately 170 million			Excludes impact of potential future share
computing full-year									repurchases
EPS

Humana Inc.

Statistical Schedules

And

Supplementary Information

3Q09 Earnings Release

S-1

	Humana Inc.
	Statistical Schedules and Supplementary Information
	3Q09 Earnings Release
	Contents
	Page		Description
	S-3-4		Consolidated Statements of Income
	S-5		Consolidated Balance Sheets
	S-6-7		Consolidated Statements of Cash Flows
	S-8		Key Income Statement Ratios and Segment Operating Results
	S-9		Membership Detail
	S-10-11		Premiums and Administrative Services Fees Detail
	S-12		Percentage of Ending Membership under Capitation Arrangements
	S-13		Investments
	S-14-16		Benefits Payable
	S-17		Footnotes
S-2

Humana Inc.
Consolidated Statements of Income
In thousands, except per common share results
			Three Months Ended September 30,
										Dollar				Percentage
			2009			2008				Change				Change
Revenues:
	Premiums		$	7,444,122		$	6,991,569			$	452,553			6.5	%
	Administrative services fees			133,732			114,401				19,331			16.9	%
	Investment income (loss)			74,861			(16,773	)			91,634			546.3	%
	Other revenue			64,104			58,973				5,131			8.7	%
	Total revenues			7,716,819			7,148,170				568,649			8.0	%
Operating expenses:
	Benefits			6,111,351			5,810,613				300,738			5.2	%
	Selling, general and administrative			1,047,773			979,223				68,550			7.0	%
	Depreciation			52,897			46,371				6,526			14.1	%
	Other intangible amortization			9,191			9,755				(564	)		-5.8	%
	Total operating expenses			7,221,212			6,845,962				375,250			5.5	%
Income from operations				495,607			302,208				193,399			64.0	%
Interest expense				26,259			19,348				6,911			35.7	%
Income before income taxes				469,348			282,860				186,488			65.9	%
Provision for income taxes				167,829			99,852				67,977			68.1	%
Net income			$	301,519		$	183,008			$	118,511			64.8	%
Basic earnings per common share			$	1.80		$	1.10			$	0.70			63.6	%
Diluted earnings per common share			$	1.78		$	1.09			$	0.69			63.3	%
Shares used in computing basic earnings per common share				167,404			166,647
Shares used in computing diluted earnings per common share				169,246			168,578
S-3

Humana Inc.
Consolidated Statements of Income
In thousands, except per common share results
			Nine Months Ended September 30,
									Dollar			Percentage
			2009			2008			Change			Change
Revenues:
	Premiums		$	22,557,943		$	20,810,922		$	1,747,021		8.4	%
	Administrative services fees			368,308			339,344			28,964		8.5	%
	Investment income			219,745			154,007			65,738		42.7	%
	Other revenue			181,373			154,463			26,910		17.4	%
	Total revenues			23,327,369			21,458,736			1,868,633		8.7	%
Operating expenses:
	Benefits			18,748,206			17,667,129			1,081,077		6.1	%
	Selling, general and administrative			3,115,918			2,845,709			270,209		9.5	%
	Depreciation			152,250			133,469			18,781		14.1	%
	Other intangible amortization			28,330			27,073			1,257		4.6	%
	Total operating expenses			22,044,704			20,673,380			1,371,324		6.6	%
Income from operations				1,282,665			785,356			497,309		63.3	%
Interest expense				79,605			53,554			26,051		48.6	%
Income before income taxes				1,203,060			731,802			471,258		64.4	%
Provision for income taxes				414,044			258,728			155,316		60.0	%
Net income			$	789,016		$	473,074		$	315,942		66.8	%
Basic earnings per common share			$	4.72		$	2.83		$	1.89		66.8	%
Diluted earnings per common share			$	4.67		$	2.79		$	1.88		67.4	%
Shares used in computing basic earnings per common share				167,250			167,328
Shares used in computing diluted earnings per common share				168,858			169,392
S-4

Humana Inc.
Consolidated Balance Sheets
Dollars in thousands, except share amounts
			September 30,		June 30,		December 31,		Sequential Change
			2009		2009		2008		Dollar		Percent
Assets
Current assets:
	Cash and cash equivalents		$1,452,006		$1,585,109		$1,970,423
	Investment securities		5,899,385		4,583,423		4,203,538
	Receivables, net:
	Premiums		765,039		1,265,986		777,672
	Administrative services fees		11,489		10,928		12,010
	Securities lending invested collateral		176,692		270,120		402,399
	Other		936,217		1,056,798		1,030,000
	Total current assets		9,240,828		8,772,364		8,396,042		$468,464		5.3%
Property and equipment, net			679,010		691,414		711,492
Other assets:
	Long-term investment securities		1,319,319		1,240,197		1,011,904
	Goodwill		1,992,924		1,992,924		1,963,111
	Other		969,706		987,490		959,211
	Total other assets		4,281,949		4,220,611		3,934,226
Total assets			$14,201,787		$13,684,389		$13,041,760		$517,398		3.8%
Liabilities and Stockholders' Equity
Current liabilities:
	Benefits payable		$3,365,481		$3,411,197		$3,205,579
	Trade accounts payable and accrued expenses		1,532,810		1,351,689		1,077,027
	Book overdraft		199,384		153,853		224,542
	Securities lending payable		189,774		305,008		438,699
	Unearned revenues		219,789		244,855		238,098
	Total current liabilities		5,507,238		5,466,602		5,183,945		$40,636		0.7%
Long-term debt			1,680,424		1,682,654		1,937,032
Future policy benefits payable			1,171,904		1,154,317		1,164,758
Other long-term liabilities			294,018		322,538		298,835
	Total liabilities		8,653,584		8,626,111		8,584,570		$27,473		0.3%
Commitments and contingencies
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; 189,102,289 issued at September 30, 2009		31,517		31,478		31,309
	Capital in excess of par value		1,625,525		1,604,979		1,574,245
	Retained earnings		4,178,952		3,877,433		3,389,936
	Accumulated other comprehensive income (loss)		83,536		(86,556)		(175,243)
	Treasury stock, at cost, 19,269,815 shares at September 30, 2009		(371,327)		(369,056)		(363,057)
	Total stockholders' equity		5,548,203		5,058,278		4,457,190		$489,925		9.7%
Total liabilities and stockholders' equity			$14,201,787		$13,684,389		$13,041,760		$517,398		3.8%
Debt-to-total capitalization ratio			23.2%		25.0%		30.3%
S-5

Humana Inc.
Consolidated Statements of Cash Flows
Dollars in thousands
			Three Months Ended September 30,
											Dollar				Percentage
			2009				2008				Change				Change
Cash flows from operating activities
	Net income		$	301,519			$	183,008
	Adjustments to reconcile net income to net cash provided by operating activities:
	Depreciation and amortization			62,088				56,126
	Net realized capital (gains) losses			(4,184	)			92,285
	Stock-based compensation			15,796				14,670
	Provision (benefit) for deferred income taxes			12,072				(31,983	)
	Changes in operating assets and liabilities excluding the effects of acquisitions:
	Receivables			500,386				290,065
	Other assets			30,545				28,280
	Benefits payable			(45,716	)			(43,830	)
	Other liabilities			87,766				(19,893	)
	Unearned revenues			(25,066	)			3,359
	Other			4,905				5,188
Net cash provided by operating activities				940,111				577,275			$	362,836			62.9	%
Cash flows from investing activities
	Acquisitions, net of cash acquired			(69	)			3,746
	Purchases of property and equipment			(39,533	)			(67,500	)
	Purchases of investment securities			(2,451,044	)			(1,557,997	)
	Proceeds from maturities of investment securities			197,796				144,216
	Proceeds from sales of investment securities			1,152,495				1,462,238
	Change in securities lending collateral			115,234				264,795
Net cash (used in) provided by investing activities				(1,025,121	)			249,498				($1,274,619	)		-510.9	%
Cash flows from financing activities
	Receipts from CMS contract deposits			499,987				585,551
	Withdrawals from CMS contract deposits			(481,123	)			(728,707	)
	Debt issue costs			-				(1,182	)
	Change in book overdraft			45,531				(40,285	)
	Change in securities lending payable			(115,234	)			(264,795	)
	Common stock repurchases			(2,271	)			(11,106	)
	Excess tax benefit from stock-based compensation			1,473				450
	Proceeds from stock option exercises and other			3,544				1,559
Net cash used in financing activities				(48,093	)			(458,515	)		$	410,422			89.5	%
(Decrease)/increase in cash and cash equivalents				(133,103	)			368,258
Cash and cash equivalents at beginning of period				1,585,109				1,174,642
Cash and cash equivalents at end of period			$	1,452,006			$	1,542,900
S-6

Humana Inc.
Consolidated Statements of Cash Flows
Dollars in thousands
			Nine Months Ended September 30,
											Dollar				Percentage
			2009				2008				Change				Change
Cash flows from operating activities
	Net income		$	789,016			$	473,074
	Adjustments to reconcile net income to net cash provided by operating activities:
	Depreciation and amortization			180,580				160,542
	Net realized capital (gains) losses			(13,734	)			73,436
	Stock-based compensation			48,818				41,835
	Benefit for deferred income taxes			(22,753	)			(21,411	)
	Changes in operating assets and liabilities excluding the effects of acquisitions:
	Receivables			6,247				(93,320	)
	Other assets			11,718				(166,931	)
	Benefits payable			159,902				337,632
	Other liabilities			(10,681	)			(124,368	)
	Unearned revenues			(18,309	)			(9,098	)
	Other			16,687				14,346
Net cash provided by operating activities				1,147,491				685,737			$	461,754			67.3	%
Cash flows from investing activities
	Acquisitions, net of cash acquired			(12,436	)			(262,347	)
	Purchases of property and equipment			(122,135	)			(179,545	)
	Purchases of investment securities			(5,290,819	)			(5,082,141	)
	Proceeds from maturities of investment securities			802,331				418,563
	Proceeds from sales of investment securities			2,903,936				4,111,640
	Change in securities lending collateral			248,925				801,518
Net cash used in investing activities				(1,470,198	)			(192,312	)			($1,277,886	)		-664.5	%
Cash flows from financing activities
	Receipts from CMS contract deposits			1,534,629				1,774,381
	Withdrawals from CMS contract deposits			(1,204,536	)			(1,807,952	)
	Borrowings under credit agreement			-				425,000
	Repayments under credit agreement			(250,000	)			(1,225,000	)
	Proceeds from issuance of senior notes			-				749,247
	Debt issue costs			-				(6,662	)
	Change in book overdraft			(25,158	)			(11,546	)
	Change in securities lending payable			(248,925	)			(801,518	)
	Common stock repurchases			(8,270	)			(105,767	)
	Excess tax benefit from stock-based compensation			1,717				9,794
	Proceeds from stock option exercises and other			4,833				9,045
Net cash used in financing activities				(195,710	)			(990,978	)		$	795,268			80.3	%
Decrease in cash and cash equivalents				(518,417	)			(497,553	)
Cash and cash equivalents at beginning of period				1,970,423				2,040,453
Cash and cash equivalents at end of period			$	1,452,006			$	1,542,900
S-7

Humana Inc.
Key Income Statement Ratios and Segment Operating Results
Dollars in thousands
					Three Months Ended September 30,															Nine Months Ended September 30,
																	Percentage															Percentage
					2009				2008				Difference				Change			2009				2008				Difference				Change
Benefit ratio
	Government Segment					81.9	%			84.1	%			-2.2	%						84.3	%			86.8	%			-2.5	%
	Commercial Segment					82.7	%			80.2	%			2.5	%						79.4	%			79.4	%			0.0	%
	Consolidated					82.1	%			83.1	%			-1.0	%						83.1	%			84.9	%			-1.8	%
Selling, general, and administrative expense ratio (A)
	Government Segment					10.2	%			10.2	%			0.0	%						10.0	%			10.1	%			-0.1	%
	Commercial Segment					24.0	%			23.0	%			1.0	%						23.9	%			22.3	%			1.6	%
	Consolidated					13.7	%			13.7	%			0.0	%						13.5	%			13.4	%			0.1	%
Investment income (loss)
	Government Segment				$	44,936				($6,163	)		$	51,099			829.1	%		$	132,894			$	80,930			$	51,964			64.2	%
	Commercial Segment					29,925				(10,610	)			40,535			382.0	%			86,851				73,077				13,774			18.8	%
	Consolidated				$	74,861				($16,773	)		$	91,634			546.3	%		$	219,745			$	154,007			$	65,738			42.7	%
Interest expense
	Government Segment				$	17,447			$	6,969			$	10,478			150.4	%		$	50,160			$	18,084			$	32,076			177.4	%
	Commercial Segment					8,812				12,379				(3,567	)		-28.8	%			29,445				35,470				(6,025	)		-17.0	%
	Consolidated				$	26,259			$	19,348			$	6,911			35.7	%		$	79,605			$	53,554			$	26,051			48.6	%
Detail of pretax income (loss)
	Government Segment				$	474,501			$	271,701			$	202,800			74.6	%		$	1,045,277			$	517,913			$	527,364			101.8	%
	Commercial Segment					(5,153	)			11,159				(16,312	)		-146.2	%			157,783				213,889				(56,106	)		-26.2	%
	Consolidated				$	469,348			$	282,860			$	186,488			65.9	%		$	1,203,060			$	731,802			$	471,258			64.4	%
Detail of pretax margins
	Government Segment					8.2	%			5.2	%			3.0	%						6.0	%			3.3	%			2.7	%
	Commercial Segment					-0.3	%			0.6	%			-0.9	%						2.7	%			3.7	%			-1.0	%
	Consolidated					6.1	%			4.0	%			2.1	%						5.2	%			3.4	%			1.8	%
S-8

Humana Inc.
Membership Detail
In thousands
			Ending		Average 3Q09		Ending		Year-over-year Change						Ending		Sequential Change
			September 30, 2009				September 30, 2008		Amount			Percent			June 30, 2009		Amount			Percent
Medical Membership:
Government Segment:
	Medicare Advantage - HMO		591.0		589.7		502.3		88.7			17.7	%		586.1		4.9			0.8	%
	Medicare Advantage - PPO		348.0		345.3		171.0		177.0			103.5	%		338.9		9.1			2.7	%
	Medicare Advantage - PFFS		575.8		575.6		694.7		(118.9	)		-17.1	%		574.8		1.0			0.2	%
	Total Medicare Advantage		1,514.8		1,510.6		1,368.0		146.8			10.7	%		1,499.8		15.0			1.0	%
	Medicare - PDP - Standard		751.8		757.8		1,495.7		(743.9	)		-49.7	%		771.5		(19.7	)		-2.6	%
	Medicare - PDP - Enhanced		1,087.3		1,089.9		1,433.8		(346.5	)		-24.2	%		1,095.6		(8.3	)		-0.8	%
	Medicare - PDP - Complete		121.3		122.5		159.5		(38.2	)		-23.9	%		124.9		(3.6	)		-2.9	%
	Total Medicare stand-alone PDPs		1,960.4		1,970.2		3,089.0		(1,128.6	)		-36.5	%		1,992.0		(31.6	)		-1.6	%
	Total Medicare		3,475.2		3,480.8		4,457.0		(981.8	)		-22.0	%		3,491.8		(16.6	)		-0.5	%
	Military services insured		1,754.3		1,753.6		1,734.4		19.9			1.1	%		1,753.4		0.9			0.1	%
	Military services ASO		1,260.8		1,256.2		1,219.5		41.3			3.4	%		1,254.9		5.9			0.5	%
	Total military services		3,015.1		3,009.8		2,953.9		61.2			2.1	%		3,008.3		6.8			0.2	%
	Medicaid insured		399.8		397.5		385.1		14.7			3.8	%		393.6		6.2			1.6	%
	Medicaid ASO		-		-		177.3		(177.3	)		-100.0	%		-		0.0			0.0	%
	Total Medicaid		399.8		397.5		562.4		(162.6	)		-28.9	%		393.6		6.2			1.6	%
	Total Government Segment		6,890.1		6,888.1		7,973.3		(1,083.2	)		-13.6	%		6,893.7		(3.6	)		-0.1	%
Commercial Segment:
	Fully-insured medical:
	Group		1,474.1		1,477.5		1,596.0		(121.9	)		-7.6	%		1,499.6		(25.5	)		-1.7	%
	Individual		358.8		355.0		316.8		42.0			13.3	%		347.2		11.6			3.3	%
	Medicare supplement		27.8		26.9		18.4		9.4			51.1	%		24.9		2.9			11.6	%
	Total fully-insured medical		1,860.7		1,859.4		1,931.2		(70.5	)		-3.7	%		1,871.7		(11.0	)		-0.6	%
	ASO		1,566.2		1,567.3		1,622.8		(56.6	)		-3.5	%		1,576.2		(10.0	)		-0.6	%
	Total Commercial Segment		3,426.9		3,426.7		3,554.0		(127.1	)		-3.6	%		3,447.9		(21.0	)		-0.6	%
Total medical membership			10,317.0		10,314.8		11,527.3		(1,210.3	)		-10.5	%		10,341.6		(24.6	)		-0.2	%
Specialty Membership
	Dental - fully-insured		2,631.7		2,508.1		2,578.6		53.1			2.1	%		2,446.7		185.0			7.6	%
	Dental - ASO		1,197.4		1,053.2		1,062.7		134.7			12.7	%		980.3		217.1			22.1	%
	Total dental		3,829.1		3,561.3		3,641.3		187.8			5.2	%		3,427.0		402.1			11.7	%
	Vision		2,427.3		2,415.2		2,188.9		238.4			10.9	%		2,376.1		51.2			2.2	%
	Other supplemental benefits (B)		1,006.5		1,002.2		897.2		109.3			12.2	%		987.3		19.2			1.9	%
Total specialty membership			7,262.9		6,978.7		6,727.4		535.5			8.0	%		6,790.4		472.5			7.0	%
S-9

Humana Inc.
Premiums and Administrative Services Fees Detail
Dollars in thousands, except per member per month
																Per Member per Month (C)
			Three Months Ended September 30,													Three Months Ended September 30,
									Dollar				Percentage
			2009			2008			Change				Change			2009			2008
Premium revenues
Government Segment:
	Medicare Advantage		$	4,135,198		$	3,497,568		$	637,630			18.2	%		$	912		$	858
	Medicare stand-alone PDPs			578,142			782,855			(204,713	)		-26.1	%		$	98		$	84
	Total Medicare			4,713,340			4,280,423			432,917			10.1	%
	Military services insured (D)			796,126			771,560			24,566			3.2	%		$	151		$	148
	Medicaid insured			162,896			152,069			10,827			7.1	%		$	137		$	131
	Total Government Segment premiums			5,672,362			5,204,052			468,310			9.0	%
Commercial Segment:
	Fully-insured medical (group and individual)			1,540,442			1,559,120			(18,678	)		-1.2	%		$	276		$	269
	Specialty			231,318			228,397			2,921			1.3	%		$	12		$	12
	Total Commercial Segment premiums			1,771,760			1,787,517			(15,757	)		-0.9	%
Total premium revenues			$	7,444,122		$	6,991,569		$	452,553			6.5	%
Administrative services fees
	Military services ASO (D)		$	22,690		$	16,581		$	6,109			36.8	%		$	6		$	5
	Other government ASO			15,257			4,588			10,669			232.5	%
	Commercial Segment			95,785			93,232			2,553			2.7	%		$	12		$	12
Total administrative services fees			$	133,732		$	114,401		$	19,331			16.9	%
S-10

Humana Inc.
Premiums and Administrative Services Fees Detail
Dollars in thousands, except per member per month
																Per Member per Month (C)
			Nine Months Ended September 30,													Nine Months Ended September 30,
									Dollar				Percentage
			2009			2008			Change				Change			2009			2008
Premium revenues
Government Segment:
	Medicare Advantage		$	12,340,786		$	10,157,109		$	2,183,677			21.5	%		$	922		$	860
	Medicare stand-alone PDPs			1,812,638			2,562,925			(750,287	)		-29.3	%		$	99		$	91
	Total Medicare			14,153,424			12,720,034			1,433,390			11.3	%
	Military services insured (D)			2,591,605			2,389,195			202,410			8.5	%		$	165		$	153
	Medicaid insured			480,085			437,725			42,360			9.7	%		$	136		$	126
	Total Government Segment premiums			17,225,114			15,546,954			1,678,160			10.8	%
Commercial Segment:
	Fully-insured medical (group and individual)			4,643,204			4,566,632			76,572			1.7	%		$	274		$	267
	Specialty			689,625			697,336			(7,711	)		-1.1	%		$	12		$	13
	Total Commercial Segment premiums			5,332,829			5,263,968			68,861			1.3	%
Total premium revenues			$	22,557,943		$	20,810,922		$	1,747,021			8.4	%
Administrative services fees
	Military services ASO (D)		$	63,140		$	51,582		$	11,558			22.4	%		$	6		$	5
	Other government ASO			18,295			11,749			6,546			55.7	%
	Commercial Segment			286,873			276,013			10,860			3.9	%		$	12		$	11
Total administrative services fees			$	368,308		$	339,344		$	28,964			8.5	%
S-11

Humana Inc.
Percentage of Ending Membership under Capitation Arrangements
		Government Segment															Commercial Segment
September 30, 2009		Medicare Advantage			Medicare stand-alone PDPs			Military Services			Medicaid			Total Govt. Segment			Fully-insured			ASO			Total Comm. Segment			Total Medical Membership
Capitated HMO hospital system based (E)		1.9	%		-			-			-			0.4	%		1.2	%		-			0.7	%		0.5	%
Capitated HMO physician group based (E)		3.2	%		-			-			29.3	%		2.4	%		1.5	%		-			0.8	%		1.9	%
Risk-sharing (F)		18.8	%		-			-			69.9	%		8.2	%		1.0	%		-			0.6	%		5.7	%
All other membership		76.1	%		100.0	%		100.0	%		0.8	%		89.0	%		96.3	%		100.0	%		97.9	%		91.9	%
Total medical membership		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%
September 30, 2008
Capitated HMO hospital system based (E)		1.9	%		-			-			-			0.3	%		1.3	%		-			0.7	%		0.4	%
Capitated HMO physician group based (E)		3.5	%		-			-			26.3	%		2.5	%		1.4	%		-			0.8	%		1.9	%
Risk-sharing (F)		20.0	%		-			-			41.6	%		6.4	%		1.3	%		-			0.7	%		4.7	%
All other membership		74.6	%		100.0	%		100.0	%		32.1	%		90.8	%		96.0	%		100.0	%		97.8	%		93.0	%
Total medical membership		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%
S-12

Humana Inc.						Fair value
Investments
Dollars in thousands
						9/30/2009										6/30/2009										12/31/2008
Investment Portfolio:
	Cash & cash equivalents					$				1,452,006						$				1,585,109						$				1,970,423
	Investment securities					$				5,899,385										4,583,423										4,203,538
	Long-term investment securities					$				1,319,319										1,240,197										1,011,904
		Total investment portfolio				$				8,670,710						$				7,408,729						$				7,185,865
	Duration (G)									3.55										3.37										3.39
	Average Credit Rating					AA+										AA+										AA+
Securities Lending Invested Collateral Portfolio:
	Cash & cash equivalents					$				40,975						$				61,374						$				46,693
	Certificates of deposit / bank notes					$				52,275										71,413										167,973
	Corporate floating rate					$				24,978										48,964										55,341
	Asset-backed securities					$				58,464										88,369										132,392
						$				176,692						$				270,120						$				402,399
	Average Credit Rating					AA+										AA+										AA+
Investment Portfolio Detail:
Cash and cash equivalents						$				1,452,006						$				1,585,109						$				1,970,423
U.S. Government and agency obligations
	U.S. Treasury and agency obligations					$				1,253,636						$				593,174						$				599,898
	U.S. Government residential mortgage-backed									1,420,491										1,094,271										1,283,482
	U.S. Government commercial mortgage-backed					$				27,554										25,093										14,223
		Total U.S. Government and agency obligations				$				2,701,681										1,712,538										1,897,603
Tax-exempt municipal securities
	Pre-refunded									416,694										481,440										694,797
	Insured									575,417										570,596										452,427
	Other									1,001,409										731,076										468,585
	Auction rate securities									71,792										72,718										73,653
		Total tax-exempt municipal securities								2,065,312										1,855,830										1,689,462
Residential mortgage-backed
	Prime residential mortgages									132,043										301,836										339,665
	Alt-A residential mortgages									3,895										3,977										5,939
	Sub-prime residential mortgages									1,564										1,562										1,704
		Total residential mortgage-backed				$				137,502										307,375										347,308
Commercial mortgage-backed										275,963										259,373										260,299
Asset-backed securities										155,234										152,469										144,370
Corporate securities
	Financial services									686,256										495,981										356,816
	Other									1,170,002										1,014,128										484,581
		Total corporate securities								1,856,258										1,510,109										841,397
Redeemable preferred stocks										21,643										21,124										19,702
Non-redeemable preferred stocks										706										685										11,228
Common stocks										4,405										4,117										4,073
			Total investment portfolio			$				8,670,710						$				7,408,729						$				7,185,865
S-13

Humana Inc.
Detail of Benefits Payable Balance and Year-to-Date Changes
Dollars in thousands
			September 30, 2009				June 30, 2009				December 31, 2008
Detail of benefits payable
	IBNR and other benefits payable (H)		$	2,436,947			$	2,448,633			$	2,216,909
	Unprocessed claim inventories (I)			317,100				258,000				247,200
	Processed claim inventories (J)			112,790				199,978				190,445
	Payable to pharmacy benefit administrator (K)			187,771				161,200				244,228
	Benefits payable, excluding military services			3,054,608				3,067,811				2,898,782
	Military services IBNR (L)			313,796				300,583				248,492
	Other military services benefits payable (M)			(2,923	)			42,803				58,305
	Military services benefits payable			310,873				343,386				306,797
Total Benefits Payable			$	3,365,481			$	3,411,197			$	3,205,579
			Nine Months Ended				Nine Months Ended				Year Ended
			September 30, 2009				September 30, 2008				December 31, 2008
Year-to-date changes in benefits payable, excluding military services (N)
	Balances at January 1		$	2,898,782			$	2,355,461			$	2,355,461
	Acquisitions			-				34,122				96,021
	Incurred related to:
	Current year			16,639,799				15,769,075				21,092,135
	Prior years (O)			(221,887	)			(230,461	)			(268,027	)
	Total incurred			16,417,912				15,538,614				20,824,108
	Paid related to:
	Current year			(14,707,443	)			(13,692,050	)			(18,832,301	)
	Prior years			(1,554,643	)			(1,523,293	)			(1,544,507	)
	Total paid			(16,262,086	)			(15,215,343	)			(20,376,808	)
	Balances at end of period		$	3,054,608			$	2,712,854			$	2,898,782
			Nine Months Ended				Nine Months Ended				Year Ended
			September 30, 2009				September 30, 2008				December 31, 2008
Summary of Consolidated Benefit Expense:
	Total benefit expense incurred, per above		$	16,417,912			$	15,538,614			$	20,824,108
	Military services benefit expense			2,279,918				2,098,059				2,819,787
	Future policy benefit expense (P)			50,376				30,456				64,338
	Consolidated Benefit Expense		$	18,748,206			$	17,667,129			$	23,708,233
S-14

Humana Inc.
Benefits Payable Statistics (Q)
Receipt Cycle Time (R)
			2009			2008		Change			Percentage Change
	1st Quarter Average			14.8		15.1		(0.3	)		-2.0	%
	2nd Quarter Average			14.0		15.0		(1.0	)		-6.7	%
	3rd Quarter Average			13.7		15.2		(1.5	)		-9.9	%
	4th Quarter Average			-		14.6		N/A			N/A
	Full Year Average			14.1		15.0		(0.9	)		-6.0	%
Unprocessed Claims Inventories
	Date		Estimated Valuation (000's)			Claim Item Counts		Number of Days on Hand
	9/30/2007		$	224,000		819,100		6.1
	12/31/2007		$	213,400		683,500		5.0
	3/31/2008		$	212,000		673,000		4.4
	6/30/2008		$	228,700		742,800		4.6
	9/30/2008		$	293,600		946,500		6.0
	12/31/2008		$	247,200		745,500		4.3
	3/31/2009		$	258,800		740,600		4.2
	6/30/2009		$	258,000		709,900		4.0
	9/30/2009		$	317,100		856,500		4.9
S-15

Humana Inc.
Benefits Payable Statistics (Continued) (Q)
Days in Claims Payable (S)
	Quarter Ended		Days in Claims Payable (DCP)		Change Last 4 Quarters			Percentage Change			DCP Excluding Capitation			Change Last 4 Quarters			Percentage Change
	9/30/2007		61.8		4.3			7.5	%		70.2			5.9			9.2	%
	12/31/2007		60.2		3.9			6.9	%		68.3			4.3			6.7	%
	3/31/2008		56.9		(2.4	)		-4.0	%		63.3			(2.7	)		-4.1	%
	6/30/2008		57.2		(2.8	)		-4.7	%		63.3			(5.2	)		-7.6	%
	9/30/2008		58.1		(3.7	)		-6.0	%		65.1			(5.1	)		-7.3	%
	12/31/2008		59.4		(0.8	)		-1.3	%		66.5			(1.8	)		-2.6	%
	3/31/2009		54.6		(2.3	)		-4.0	%		60.9			(2.4	)		-3.8	%
	6/30/2009		56.1		(1.1	)		-1.9	%		61.5			(1.8	)		-2.8	%
	9/30/2009		56.2		(1.9	)		-3.3	%		62.7			(2.4	)		-3.7	%
Year-to-Date Change in Days in Claims Payable (T)
								2009			2008
DCP - beginning of period								59.4			60.2
	Components of change in DCP:
	Internal versus outsourced claims processing cycle times							-			(3.2	)
	Change in unprocessed claims inventories							0.6			1.5
	Change in processed claims inventories							(1.5	)		(0.3	)
	Change in pharmacy payment cutoff							(1.3	)		(0.2	)
	Impact of Cariten acquisition in 4Q08							(0.9	)		-
	All other							(0.1	)		0.1
DCP - end of period								56.2			58.1
S-16

Humana Inc.
Footnotes to Statistical Schedules and Supplementary Information
3Q09 Earnings Release
(A)		The selling, general and administrative (SG&A) expense ratio is defined as SG&A expenses as a percent of premiums, administrative services fees and other revenue.
(B)		Other supplemental benefits include life, disability, and fixed benefit products including cancer and critical illness policies.
(C)		Computed based on average membership for the period (i.e., monthly ending membership during the period divided by the number of months in the period).
(D)		Military services revenues are generally not contracted on a per-member basis.
(E)		In a limited number of circumstances, the company contracts with hospitals and physicians to accept financial risk for a defined set of HMO membership. In transferring this risk, the company prepays these providers a monthly fixed-fee per member to coordinate substantially all of the medical care for their capitated HMO membership, including some health benefit administrative functions and claims processing. For these capitated HMO arrangements, the company generally agrees to reimbursement rates that target a benefit expense ratio. Providers participating in hospital-based capitated HMO arrangements generally receive a monthly payment for all of the services within their system for their HMO membership. Providers participating in physician-based capitated HMO arrangements generally have subcontracted specialist physicians and are responsible for reimbursing such physicians and hospitals for services rendered to their HMO membership.
(F)		In some circumstances, the company contracts with physicians under risk-sharing arrangements whereby physicians have assumed some level of risk for all or a portion of the benefit expenses of their HMO membership. Although these arrangements do include capitation payments for services rendered, the company processes substantially all of the claims under these arrangements.
(G)		Duration is the time-weighted average of the present value of the bond portfolio cash flow.
(H)		IBNR represents an estimate of benefit expenses payable for claims incurred but not reported (IBNR) at the balance sheet date. The level of IBNR is primarily impacted by membership levels, benefit claim trends and the receipt cycle time, which represents the length of time between when a claim is initially incurred and when the claim form is received (i.e. a shorter time span results in lower reserves for claims IBNR). Other benefits payable includes amounts payable to providers under capitation arrangements.
(I)		Unprocessed claim inventories represent the estimated valuation of claims received but not yet fully processed.
(J)		Processed claim inventories represent the estimated valuation of processed claims that are in the post-claim-adjudication process, which consists of administrative functions such as audit and check batching and handling.
(K)		The balance due to the company's pharmacy benefit administrator fluctuates as a result of the number of business days in the last payment cycle of the month. Payment cycles are every 10 days (10th & 20th of month) and the last day of the month.
(L)		Military services IBNR primarily fluctuates due to benefit expense inflation and changes in the utilization of benefits. Amount includes unprocessed inventories as an independent third party administrator processes all military services benefit claims on the company's behalf.
(M)		Other military benefits payable may include liabilities to subcontractors and/or risk share payables to the Department of Defense. The level of these balances may fluctuate from period to period due to the timing of payment (cutoff) and whether or not the balances are payables or receivables (receivables from the Department of Defense are classified as receivables in the company's balance sheet).
(N)		The table excludes activity associated with military services benefits payable, because the federal government bears a substantial portion of the risk associated with financing the cost of health benefits. More specifically, the risk-sharing provisions of the military services contracts with the federal government and with subcontractors effectively limit profits and losses when actual claim experience varies from the targeted claim amount negotiated annually. As a result of these contract provisions, the impact of changes in estimates for prior year military services benefits payable are substantially offset by the associated changes in estimates of revenue from health care services reimbursements. As such, any impact on the company's results of operations is reduced substantially, whether positive or negative.
(O)		Amounts incurred related to prior years 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). There were no changes in the approach used to determine the company's estimate of claim reserves during the quarter.
(P)		Future policy benefit expense has a related liability classified as a long-term liability on the balance sheet.
(Q)		Benefits reserves statistics represents fully-insured medical claims data and excludes military services claims data and specialty benefits.
(R)		The receipt cycle time measures the average length of time between when a claim was initially incurred and when the claim form was received. Receipt cycle time data for the company's largest claim processing platforms represent approximately 95% of the company's fully-insured claims volume. Pharmacy and specialty claims, including dental, vision and other supplemental benefits, are excluded from this measurement.
(S)		A common metric for monitoring benefits payable levels relative to the benefit expense is days in claims payable, or DCP, which represents the benefits payable at the end of the period divided by average benefit expenses per day in the quarterly period. Since the company has some providers under capitation payment arrangements (which do not require a benefits payable IBNR reserve), the company has also summarized this metric excluding capitation expense. In addition, this calculation excludes the impact of the company's military services and stand-alone PDP business.
(T)		DCP fluctuates due to a number of issues, the more significant of which are detailed in this rollforward. Growth in certain product lines can also impact DCP for the quarter since a provision for claims would not have been recorded for members that had not yet enrolled earlier in the quarter, yet those members would have a provision and corresponding reserve recorded upon enrollment later in the quarter. This analysis excludes the impact of military services and Medicare stand-alone PDPs upon DCP.
S-17

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