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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 March 31, 2024
OR

☐ | 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 March 31, 2024
$0.16 2/3 par value | 120,500,635 shares

Table of Contents
Humana Inc.
FORM 10-Q
MARCH 31, 2024
INDEX

|  | Page
Part I: Financial Information |
Item 1. | Financial Statements |
| Condensed Consolidated Balance Sheets (Unaudited) at March 31, 2024 and December 31, 2023 | 3
| Condensed Consolidated Statements of Income (Unaudited) for the three months ended March 31, 2024 and 2023 | 4
| Condensed Consolidated Statements of Comprehensive Income (Unaudited) for the three months ended March 31, 2024 and 2023 | 5
| Condensed Consolidated Statements of Stockholders' Equity (Unaudited) for the three months ended March 31, 2024 and 2023 | 6
| Condensed Consolidated Statements of Cash Flows (Unaudited) for the three months ended March 31, 2024 and 2023 | 7
| Notes to Condensed Consolidated Financial Statements (Unaudited) | 9
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 31
Item 3. | Quantitative and Qualitative Disclosures about Market Risk | 46
Item 4. | Controls and Procedures | 46
Part II: Other Information |
Item 1. | Legal Proceedings | 47
Item 1A. | Risk Factors | 47
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 47
Item 3. | Defaults Upon Senior Securities | 47
Item 4. | Mine Safety Disclosures | 47
Item 5. | Other Information | 48
Item 6. | Exhibits | 49
| Signatures | 50
| Certifications |

Humana Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)

| March 31, 2024 |  | December 31, 2023
| (in millions, except share amounts)
ASSETS |  |  |
Current assets: |  |  |
Cash and cash equivalents | $ | 5,910 |  |  | $ | 4,694 |
Investment securities | 16,697 |  |  | 16,626 |
Receivables, net of allowances of $85 in 2024 and $88 in 2023 | 3,925 |  |  | 2,035 |
Other current assets | 6,264 |  |  | 6,631 |
Total current assets | 32,796 |  |  | 29,986 |
Property and equipment, net | 2,979 |  |  | 3,030 |
Long-term investment securities | 380 |  |  | 382 |
Equity method investments | 730 |  |  | 740 |
Goodwill | 9,563 |  |  | 9,550 |
Other long-term assets | 3,643 |  |  | 3,377 |
Total assets | $ | 50,091 |  |  | $ | 47,065 |
LIABILITIES AND STOCKHOLDERS’ EQUITY |  |  |
Current liabilities: |  |  |
Benefits payable | $ | 11,729 |  |  | $ | 10,241 |
Trade accounts payable and accrued expenses | 6,504 |  |  | 6,569 |
Book overdraft | 333 |  |  | 353 |
Unearned revenues | 301 |  |  | 266 |
Short-term debt | 822 |  |  | 1,443 |
Total current liabilities | 19,689 |  |  | 18,872 |
Long-term debt | 12,390 |  |  | 10,213 |
Other long-term liabilities | 1,826 |  |  | 1,662 |
Total liabilities | 33,905 |  |  | 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; 198,690,593 shares issued at March 31, 2024 and 198,690,082 shares issued at December 31, 2023 | 33 |  |  | 33 |
Capital in excess of par value | 3,369 |  |  | 3,346 |
Retained earnings | 28,173 |  |  | 27,540 |
Accumulated other comprehensive loss | (1,086) |  |  | (999) |
Treasury stock, at cost, 78,189,958 shares at March 31, 2024 and 76,465,862 shares at December 31, 2023 | (14,359) |  |  | (13,658) |
Total stockholders' equity | 16,130 |  |  | 16,262 |
Noncontrolling interests | 56 |  |  | 56 |
Total equity | 16,186 |  |  | 16,318 |
Total liabilities and equity | $ | 50,091 |  |  | $ | 47,065 |

See accompanying notes to condensed consolidated financial statements.
3

Humana Inc.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)

|  |  | Three Months Ended March 31,
|  |  |  |  | 2024 |  | 2023
|  |  |  |  | (in millions, except per share results)
Revenues: |  |  |  |  |  |  |
Premiums |  |  |  |  | $ | 28,261 |  |  | $ | 25,550 |
Services |  |  |  |  | 1,062 |  |  | 999 |
Investment income |  |  |  |  | 288 |  |  | 193 |
Total revenues |  |  |  |  | 29,611 |  |  | 26,742 |
Operating expenses: |  |  |  |  |  |  |
Benefits |  |  |  |  | 25,124 |  |  | 21,858 |
Operating costs |  |  |  |  | 3,042 |  |  | 2,979 |
Depreciation and amortization |  |  |  |  | 209 |  |  | 186 |
Total operating expenses |  |  |  |  | 28,375 |  |  | 25,023 |
Income from operations |  |  |  |  | 1,236 |  |  | 1,719 |
Interest expense |  |  |  |  | 159 |  |  | 113 |
Other expense (income), net |  |  |  |  | 63 |  |  | (8) |
Income before income taxes and equity in net losses |  |  |  |  | 1,014 |  |  | 1,614 |
Provision for income taxes |  |  |  |  | 251 |  |  | 359 |
Equity in net losses |  |  |  |  | (24) |  |  | (17) |
Net income |  |  |  |  | $ | 739 |  |  | $ | 1,238 |
Net loss attributable to noncontrolling interests |  |  |  |  | 2 |  |  | 1 |
Net income attributable to Humana |  |  |  |  | $ | 741 |  |  | $ | 1,239 |
Basic earnings per common share |  |  |  |  | $ | 6.13 |  |  | $ | 9.91 |
Diluted earnings per common share |  |  |  |  | $ | 6.11 |  |  | $ | 9.87 |

See accompanying notes to condensed consolidated financial statements.
4

Humana Inc.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)

|  |  | Three Months Ended March 31,
|  |  |  |  | 2024 |  | 2023
|  |  |  |  | (in millions)
Net income attributable to Humana |  |  |  |  | $ | 741 |  |  | $ | 1,239 |
Other comprehensive income (loss): |  |  |  |  |  |  |
Change in gross unrealized investment (losses) gains |  |  |  |  | (114) |  |  | 188 |
Effect of income taxes |  |  |  |  | 28 |  |  | (43) |
Total change in unrealized investment (losses) gains, net of tax |  |  |  |  | (86) |  |  | 145 |
Reclassification adjustment for net realized (gains) losses |  |  |  |  | (1) |  |  | 61 |
Effect of income taxes |  |  |  |  | — |  |  | (15) |
Total reclassification adjustment, net of tax |  |  |  |  | (1) |  |  | 46 |
Other comprehensive (loss) income, net of tax |  |  |  |  | (87) |  |  | 191 |
Comprehensive income attributable to Humana |  |  |  |  | $ | 654 |  |  | $ | 1,430 |

See accompanying notes to condensed consolidated financial statements.
5

Humana Inc.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Unaudited)

| Common Stock |  | Capital In Excess of Par Value |  | Retained Earnings |  | Accumulated Other Comprehensive Income (Loss) |  | Treasury Stock |  | Total Stockholders' Equity |  | Noncontrolling Interests |  | Total Equity
| Issued Shares |  | Amount |  |  |  |  |  |  |
| (dollars in millions, share amounts in thousands)
Three months ended March 31, 2024
Balances, December 31, 2023 | 198,690 |  |  | $ | 33 |  |  | $ | 3,346 |  |  | $ | 27,540 |  |  | $ | (999) |  |  | $ | (13,658) |  |  | $ | 16,262 |  |  | $ | 56 |  |  | $ | 16,318 |
Net income |  |  |  |  |  |  | 741 |  |  |  |  |  |  | 741 |  |  | (2) |  |  | 739 |
Distribution from noncontrolling interest holders, net |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 2 |  |  | 2 |
Other comprehensive loss |  |  |  |  |  |  |  |  | (87) |  |  |  |  | (87) |  |  |  |  | (87) |
Common stock repurchases |  |  |  |  | — |  |  |  |  |  |  | (723) |  |  | (723) |  |  |  |  | (723) |
Dividends and dividend equivalents |  |  |  |  | — |  |  | (108) |  |  |  |  |  |  | (108) |  |  |  |  | (108) |
Stock-based compensation |  |  |  |  | 45 |  |  |  |  |  |  |  |  | 45 |  |  |  |  | 45 |
Restricted stock unit vesting | 1 |  |  | — |  |  | (22) |  |  |  |  |  |  | 22 |  |  | — |  |  |  |  | — |
Balances, March 31, 2024 | 198,691 |  |  | $ | 33 |  |  | $ | 3,369 |  |  | $ | 28,173 |  |  | $ | (1,086) |  |  | $ | (14,359) |  |  | $ | 16,130 |  |  | $ | 56 |  |  | $ | 16,186 |
Three months ended March 31, 2023
Balances, December 31, 2022 | 198,667 |  |  | $ | 33 |  |  | $ | 3,246 |  |  | $ | 25,492 |  |  | $ | (1,304) |  |  | $ | (12,156) |  |  | $ | 15,311 |  |  | $ | 59 |  |  | $ | 15,370 |
Net income |  |  |  |  |  |  | 1,239 |  |  |  |  |  |  | 1,239 |  |  | (1) |  |  | 1,238 |
Distribution from noncontrolling interest holders, net |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 4 |  |  | 4 |
Acquisition |  |  |  |  |  |  |  |  |  |  |  |  |  |  | (5) |  |  | (5) |
Other comprehensive income |  |  |  |  |  |  |  |  | 191 |  |  |  |  | 191 |  |  |  |  | 191 |
Common stock repurchases |  |  |  |  | — |  |  |  |  |  |  | (94) |  |  | (94) |  |  |  |  | (94) |
Dividends and dividend equivalents |  |  |  |  | — |  |  | (112) |  |  |  |  |  |  | (112) |  |  |  |  | (112) |
Stock-based compensation |  |  |  |  | 38 |  |  |  |  |  |  |  |  | 38 |  |  |  |  | 38 |
Restricted stock unit vesting | — |  |  | — |  |  | (24) |  |  |  |  |  |  | 24 |  |  | — |  |  |  |  | — |
Stock option exercises | — |  |  | — |  |  | 2 |  |  |  |  |  |  | 2 |  |  | 4 |  |  |  |  | 4 |
Balances, March 31, 2023 | 198,667 |  |  | $ | 33 |  |  | $ | 3,262 |  |  | $ | 26,619 |  |  | $ | (1,113) |  |  | $ | (12,224) |  |  | $ | 16,577 |  |  | $ | 57 |  |  | $ | 16,634 |

See accompanying notes to condensed consolidated financial statements.

6

Humana Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

| For the three months ended March 31,
| 2024 |  | 2023
| (in millions)
Cash flows from operating activities |  |  |
Net income | $ | 739 |  |  | $ | 1,238 |
Adjustments to reconcile net income to net cash provided by operating activities: |  |  |
(Gain) loss on investment securities, net | (1) |  |  | 60 |
Equity in net losses | 24 |  |  | 17 |
Stock-based compensation | 45 |  |  | 38 |
Depreciation | 226 |  |  | 200 |
Amortization | 16 |  |  | 18 |
Impairment of property and equipment | 33 |  |  | — |
Changes in operating assets and liabilities, net of effect of businesses acquired and disposed: |  |  |
Receivables | (1,890) |  |  | (1,433) |
Other assets | 97 |  |  | (907) |
Benefits payable | 1,488 |  |  | 754 |
Other liabilities | (422) |  |  | (238) |
Unearned revenues | 35 |  |  | 6,934 |
Other | 33 |  |  | 6 |
Net cash provided by operating activities | 423 |  |  | 6,687 |
Cash flows from investing activities |  |  |
Acquisitions, net of cash and cash equivalents acquired | (14) |  |  | (73) |
Purchases of property and equipment, net | (177) |  |  | (223) |
Purchases of investment securities | (1,259) |  |  | (1,313) |
Proceeds from maturities of investment securities | 645 |  |  | 267 |
Proceeds from sales of investment securities | 391 |  |  | 50 |
Net cash used in investing activities | (414) |  |  | (1,292) |
Cash flows from financing activities |  |  |
Receipts from contract deposits, net | 499 |  |  | 2,997 |
Proceeds from issuance of senior notes, net | 2,232 |  |  | 1,215 |
Repayments of senior notes | — |  |  | (60) |
Repayments of commercial paper, net | (644) |  |  | (177) |
Repayment of term loan | — |  |  | (500) |
Debt issue costs | (5) |  |  | (4) |
Change in book overdraft | (20) |  |  | 108 |
Common stock repurchases | (717) |  |  | (94) |
Dividends paid | (109) |  |  | (100) |
Other | (29) |  |  | (106) |
Net cash provided by financing activities | 1,207 |  |  | 3,279 |
Increase in cash and cash equivalents | 1,216 |  |  | 8,674 |
Cash and cash equivalents at beginning of period | 4,694 |  |  | 5,061 |
Cash and cash equivalents at end of period | $ | 5,910 |  |  | $ | 13,735 |

7

Humana Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS—(Continued)
(Unaudited)

| For the three months ended March 31,
| 2024 |  | 2023
| (in millions)
Supplemental cash flow disclosures: |  |  |
Interest payments | $ | 158 |  |  | $ | 97 |
Income tax payments, net | $ | 1 |  |  | $ | 6 |
Details of businesses acquired in purchase transactions: |  |  |
Fair value of assets acquired, net of cash and cash equivalents acquired | $ | 22 |  |  | $ | 73 |
Less: Fair value of liabilities assumed | (8) |  |  | (5) |
Less: Noncontrolling interests acquired | — |  |  | 5 |
Cash paid for acquired businesses, net of cash and cash equivalents acquired | $ | 14 |  |  | $ | 73 |

See accompanying notes to condensed consolidated financial statements.
8

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 $29 million for the three months ended March 31, 2024 within operating costs in the 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 months ended March 31, 2023.
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
9

Table of Contents
Humana Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)
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 March 31, 2024, accounts receivable related to services were $390 million. For the three months ended March 31, 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 March 31, 2024.
For the three months ended March 31, 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 the first quarter of 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 the first quarter of 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 the first quarter of 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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Table of Contents
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 March 31, 2024 and December 31, 2023, respectively:

| Amortized Cost |  | Gross Unrealized Gains |  | Gross Unrealized Losses |  | Fair Value
| (in millions)
March 31, 2024 |  |  |  |  |  |  |
U.S. Treasury and other U.S. government corporations and agencies: |  |  |  |  |  |  |
U.S. Treasury and agency obligations | $ | 2,928 |  |  | $ | — |  |  | $ | (84) |  |  | $ | 2,844 |
Mortgage-backed securities | 3,925 |  |  | — |  |  | (486) |  |  | 3,439 |
Tax-exempt municipal securities | 850 |  |  | — |  |  | (24) |  |  | 826 |
Mortgage-backed securities: |  |  |  |  |  |  |
Residential | 462 |  |  | — |  |  | (68) |  |  | 394 |
Commercial | 1,420 |  |  | 1 |  |  | (113) |  |  | 1,308 |
Asset-backed securities | 1,552 |  |  | 2 |  |  | (37) |  |  | 1,517 |
Corporate debt securities | 7,348 |  |  | 24 |  |  | (623) |  |  | 6,749 |
Total debt securities | $ | 18,485 |  |  | $ | 27 |  |  | $ | (1,435) |  |  | 17,077 |
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 |

11

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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 $397 million, respectively, at March 31, 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 March 31, 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)
March 31, 2024 |  |  |  |  |  |  |  |  |  |  |
U.S. Treasury and other U.S. government corporations and agencies: |  |  |  |  |  |  |  |  |  |  |
U.S. Treasury and agency obligations | $ | 2,301 |  |  | $ | (43) |  |  | $ | 447 |  |  | $ | (41) |  |  | $ | 2,748 |  |  | $ | (84) |
Mortgage-backed securities | 862 |  |  | (15) |  |  | 2,513 |  |  | (471) |  |  | 3,375 |  |  | (486) |
Tax-exempt municipal securities | 261 |  |  | (1) |  |  | 508 |  |  | (23) |  |  | 769 |  |  | (24) |
Mortgage-backed securities: |  |  |  |  |  |  |  |  |  |  |
Residential | 9 |  |  | — |  |  | 365 |  |  | (68) |  |  | 374 |  |  | (68) |
Commercial | — |  |  | — |  |  | 1,242 |  |  | (113) |  |  | 1,242 |  |  | (113) |
Asset-backed securities | 447 |  |  | (2) |  |  | 787 |  |  | (35) |  |  | 1,234 |  |  | (37) |
Corporate debt securities | 824 |  |  | (7) |  |  | 4,702 |  |  | (616) |  |  | 5,526 |  |  | (623) |
Total debt securities | $ | 4,704 |  |  | $ | (68) |  |  | $ | 10,564 |  |  | $ | (1,367) |  |  | $ | 15,268 |  |  | $ | (1,435) |
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 March 31, 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 1,685 positions out of a total of approximately 2,100 positions at March 31, 2024. All issuers of debt securities we own that were trading at an
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unrealized loss at March 31, 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 March 31, 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 months ended March 31, 2024 or 2023.
The detail of gains (losses) related to investment securities and included within investment income was as follows for the three months ended March 31, 2024 and 2023:

|  |  | Three Months Ended March 31,
|  |  |  |  | 2024 |  | 2023
|  |  | (in millions)
Gross gains on investment securities |  |  |  |  | $ | 2 |  |  | $ | — |
Gross losses on investment securities |  |  |  |  | (1) |  |  | (61) |
Gross gains on equity securities |  |  |  |  | — |  |  | 1 |
Gross losses on equity securities |  |  |  |  | — |  |  | — |
Net recognized gains (losses) on investment securities |  |  |  |  | $ | 1 |  |  | $ | (60) |

The gains and losses related to equity securities for the three months ended March 31, 2024 and 2023 was as follows:

|  |  | Three Months Ended March 31,
|  |  |  |  | 2024 |  | 2023
|  |  | (in millions)
Net gains (losses) recognized on equity securities during the period |  |  |  |  | $ | — |  |  | $ | 1 |
Less: Net gains (losses) 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 March 31, 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 | $ | 1,235 |  |  | $ | 1,229 |
Due after one year through five years | 5,402 |  |  | 5,199 |
Due after five years through ten years | 3,259 |  |  | 2,954 |
Due after ten years | 1,230 |  |  | 1,037 |
Mortgage and asset-backed securities | 7,359 |  |  | 6,658 |
Total debt securities | $ | 18,485 |  |  | $ | 17,077 |

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 March 31, 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)
March 31, 2024 |  |  |  |  |  |  |
Cash equivalents | $ | 5,594 |  |  | $ | 5,594 |  |  | $ | — |  |  | $ | — |
Debt securities: |  |  |  |  |  |  |
U.S. Treasury and other U.S. government corporations and agencies: |  |  |  |  |  |  |
U.S. Treasury and agency obligations | 2,844 |  |  | — |  |  | 2,844 |  |  | — |
Mortgage-backed securities | 3,439 |  |  | — |  |  | 3,439 |  |  | — |
Tax-exempt municipal securities | 826 |  |  | — |  |  | 826 |  |  | — |
Mortgage-backed securities: |  |  |  |  |  |  |
Residential | 394 |  |  | — |  |  | 391 |  |  | 3 |
Commercial | 1,308 |  |  | — |  |  | 1,308 |  |  | — |
Asset-backed securities | 1,517 |  |  | — |  |  | 1,479 |  |  | 38 |
Corporate debt securities | 6,749 |  |  | — |  |  | 6,564 |  |  | 185 |
Total debt securities | 17,077 |  |  | — |  |  | 16,851 |  |  | 226 |
Total invested assets | $ | 22,671 |  |  | $ | 5,594 |  |  | $ | 16,851 |  |  | $ | 226 |
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 |
Total invested assets | $ | 21,590 |  |  | $ | 4,582 |  |  | $ | 16,790 |  |  | $ | 218 |

Our Level 3 assets had a fair value of $226 million, or 1.0% of total invested assets, and $218 million, or 1.0% or total invested assets, at March 31, 2024 and December 31, 2023, respectively. During the three months ended
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March 31, 2024 and 2023, the changes in the fair value of the assets measured using significant unobservable inputs (Level 3) were comprised of the following:

| For the three months ended March 31, 2024 | For the three months ended March 31, 2023 |  |  |  |
| Private Placements |  |  |  |
| (in millions)
Beginning balance at January 1 | $ | 218 |  | $ | 101 |  |  |  |  |
Total gains or losses: |  |  |  |  |  |
Realized in earnings | — |  | — |  |  |  |  |
Unrealized in other comprehensive income | (2) |  | 1 |  |  |  |  |
Purchases | 11 |  | 1 |  |  |  |  |
Sales | — |  | — |  |  |  |  |
Settlements | (1) |  | — |  |  |  |  |
Transfer out | — |  | (4) |  |  |  |  |
Balance at March 31 | $ | 226 |  | $ | 99 |  |  |  |  |

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 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 $17 million at March 31, 2024. The swap asset, included within other long-term assets on our condensed consolidated balance sheets, were approximately $20 million and $68 million at March 31, 2024 and December 31, 2023, respectively. 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 months ended March 31, 2024. We did not enter into interest-rate swap agreements for the three months ended March 31, 2023. The following table summarizes the notional amounts at March 31, 2024 and December 31, 2023, respectively, for our senior notes under the swap agreements:

| March 31, 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 |  | — |

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 $13.0 billion at March 31, 2024 and $10.8 billion at December 31, 2023. The fair value of our senior notes debt was $12.6 billion at March 31, 2024 and $10.6 billion at December 31, 2023. The fair value of our senior notes debt is determined based on Level 2 inputs,
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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. The commercial paper borrowings were $0.3 billion and $0.9 billion at March 31, 2024 and December 31, 2023, respectively.
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 $731 million and $22 million, respectively, at March 31, 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.

| March 31, 2024 | December 31, 2023 |  |  |
Annualized volatility | 17.0% - 18.8% | 16.1% - 17.8% |  |  |
Credit spread | 1.0% - 1.3% | 0.9% - 1.1% |  |  |
Revenue exit multiple | 1.5x - 2.5x | 1.5x - 2.5x |  |  |
Weighted average cost of capital | 11.0% - 12.5% | 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 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.
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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 March 31, 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.

| March 31, 2024 |  | December 31, 2023
Risk Corridor Settlement |  | CMS Subsidies/ Discounts |  | Risk Corridor Settlement |  | CMS Subsidies/ Discounts
| (in millions)
Other current assets | $ | 100 |  |  | $ | 592 |  |  | $ | 224 |  |  | $ | 514 |
Trade accounts payable and accrued expenses | (108) |  |  | (2,472) |  |  | (232) |  |  | (1,825) |
Net current liability | (8) |  |  | (1,880) |  |  | (8) |  |  | (1,311) |
Other long-term assets | 293 |  |  | — |  |  | 17 |  |  | — |
Other long-term liabilities | (81) |  |  | — |  |  | (77) |  |  | — |
Net long-term asset (liability) | 212 |  |  | — |  |  | (60) |  |  | — |
Total net asset (liability) | $ | 204 |  |  | $ | (1,880) |  |  | $ | (68) |  |  | $ | (1,311) |

7. GOODWILL AND OTHER INTANGIBLE ASSETS
Changes in the carrying amount of goodwill for our reportable segments for the three months ended March 31, 2024 were as follows:

| Insurance |  | CenterWell |  |  |  |  |  | Total
| (in millions)
Balance at January 1, 2024 | $ | 2,663 |  |  | $ | 6,887 |  |  |  |  |  |  | $ | 9,550 |
Acquisitions | — |  |  | 13 |  |  |  |  |  |  | 13 |
Balance at March 31, 2024 | $ | 2,663 |  |  | $ | 6,900 |  |  |  |  |  |  | $ | 9,563 |

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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 March 31, 2024 and December 31, 2023:

|  |  | March 31, 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 |  |  | 728 |  |  | 228 |  |  | 956 |  |  | 718 |  |  | 238 |
Trade names and technology | 6.7 years |  | 139 |  |  | 111 |  |  | 28 |  |  | 139 |  |  | 109 |  |  | 30 |
Provider contracts | 11.9 years |  | 67 |  |  | 63 |  |  | 4 |  |  | 67 |  |  | 62 |  |  | 5 |
Noncompetes and other | 8.4 years |  | 85 |  |  | 46 |  |  | 39 |  |  | 84 |  |  | 44 |  |  | 40 |
Total other intangible assets | 9.2 years |  | $ | 2,627 |  |  | $ | 948 |  |  | $ | 1,679 |  |  | $ | 2,626 |  |  | $ | 933 |  |  | $ | 1,693 |

For the three months ended March 31, 2024 and 2023, amortization expense for other intangible assets was approximately $16 million and $18 million, respectively. The following table presents our estimate of amortization expense remaining for 2024 and each of the next five succeeding years at March 31, 2024:

| (in millions)
For the years ending December 31, |
2024 | $ | 44 |
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 three months ended March 31, 2024 and 2023:

|  | For the three months ended March 31,
|  | 2024 |  | 2023
|  | (in millions)
Balances, beginning of period |  | $ | 10,241 |  |  | $ | 9,264 |
Incurred related to: |  |  |  |
Current year |  | 25,659 |  |  | 22,380 |
Prior years |  | (535) |  |  | (522) |
Total incurred |  | 25,124 |  |  | 21,858 |
Paid related to: |  |  |  |
Current year |  | (16,061) |  |  | (14,203) |
Prior years |  | (7,575) |  |  | (6,901) |
Total paid |  | (23,636) |  |  | (21,104) |
Balances, end of period |  | $ | 11,729 |  |  | $ | 10,018 |

The total estimate of benefits payable for claims incurred but not reported, or IBNR, is included within the net incurred claims amounts. At March 31, 2024, benefits payable included IBNR of approximately $7.3 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 months ended March 31, 2024 and 2023:

|  |  | Three Months Ended March 31,
|  |  |  |  | 2024 |  | 2023
|  |  |  |  | (dollars in millions, except per common share results; number of shares in thousands)
Net income available for common stockholders |  |  |  |  | $ | 741 |  |  | $ | 1,239 |
Weighted average outstanding shares of common stock used to compute basic earnings per common share |  |  |  |  | 120,978 |  |  | 125,005 |
Dilutive effect of: |  |  |  |  |  |  |
Employee stock options |  |  |  |  | 6 |  |  | 34 |
Restricted stock |  |  |  |  | 284 |  |  | 525 |
Shares used to compute diluted earnings per common share |  |  |  |  | 121,268 |  |  | 125,564 |
Basic earnings per common share |  |  |  |  | $ | 6.13 |  |  | $ | 9.91 |
Diluted earnings per common share |  |  |  |  | $ | 6.11 |  |  | $ | 9.87 |
Number of antidilutive stock options and restricted stock excluded from computation |  |  |  |  | 1,165 |  |  | 538 |

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 |

In February 2024, the Board declared a cash dividend of $0.885 per share payable on April 26, 2024 to stockholders of record on March 29, 2024. 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
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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.
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 three months ended March 31, 2024, we repurchased 1.8 million shares in open market transactions for $702 million at an average price of $388.78 under the February 2023 and 2024 share repurchase authorizations. During the three months ended March 31, 2023, we repurchased 0.1 million shares in open market transactions for $67 million at an average price of $495.68 under the February 2023 share repurchase authorization.
Our remaining repurchase authorization was $2.96 billion as of April 23, 2024.
In connection with employee stock plans, we acquired 0.04 million common shares for $15 million and 0.05 million common shares for $27 million during the three months ended March 31, 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 25.3% and 22.5% for the three months ended March 31, 2024 and 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 the latter incurs a higher effective domestic tax rate than the former. 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 March 31, 2024 and December 31, 2023:

| March 31, 2024 |  | December 31, 2023
| (in millions)
Short-term debt: |  |  |
Commercial paper | $ | 250 |  |  | $ | 871 |
Senior notes: |  |  |
$600 million, 3.850% due October 1, 2024 | 572 |  |  | 572 |
Total senior notes | 572 |  |  | 572 |
Total short-term debt | $ | 822 |  |  | $ | 1,443 |
Long-term debt: |  |  |
Senior notes: |  |  |
$600 million, 4.500% due April 1, 2025 | $ | 599 |  |  | $ | 598 |
$500 million, 5.700% due March 13, 2026 | 498 |  |  | 498 |
$750 million, 1.350% due February 3, 2027 | 688 |  |  | 688 |
$600 million, 3.950% due March 15, 2027 | 537 |  |  | 537 |
$500 million, 5.750% due March 1, 2028 | 495 |  |  | 495 |
$500 million, 5.750% due December 1, 2028 | 495 |  |  | 495 |
$750 million, 3.700% due March 23, 2029 | 590 |  |  | 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 | 735 |  |  | 750 |
$850 million, 5.950% due March 15, 2034 | 826 |  |  | 840 |
$250 million, 8.150% due June 15, 2038 | 261 |  |  | 261 |
$400 million, 4.625% due December 1, 2042 | 396 |  |  | 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 | 514 |  |  | 529 |
$750 million, 5.500% due March 15, 2053 | 720 |  |  | 728 |
$1,000 million, 5.750% due April 15, 2054 | 989 |  |  | — |
Total senior notes | 12,390 |  |  | 10,213 |
Total long-term debt | $ | 12,390 |  |  | $ | 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.
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 SOFR, to align interest costs more closely with floating interest rates received on our cash equivalents and investment securities, as further described in Note 5. As a result, the carrying value of these senior notes has been adjusted to reflect changes in value
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caused by an increase or decrease in interest rates. The cumulative, aggregate adjustment to the carrying value of the senior notes was approximately $17 million at March 31, 2024.
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) and entered into a 364-day $1.5 billion unsecured revolving credit agreement (replacing the 364-day $1.5 billion unsecured revolving credit agreement entered in June 2022, 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 15.0 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 45.1% as measured in accordance with the revolving credit agreements as of March 31, 2024.
At March 31, 2024, we had no borrowings and approximately $18 million of letters of credit outstanding under the revolving credit agreements. Accordingly, as of March 31, 2024, we had $2.482 billion of remaining borrowing capacity under the 5-year revolving credit agreement and $1.5 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 three months ended March 31, 2024 was $2.7 billion, with $0.3 billion outstanding at March 31, 2024 compared to $0.9
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billion outstanding at December 31, 2023. The outstanding commercial paper at March 31, 2024 had a weighted average annual interest rate of 5.46%.
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 March 31, 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 three months ended March 31, 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 three months ended March 31, 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 March 31, 2024, our Military services business, which accounted for approximately 1% of our total premiums and services revenue for the three months ended March 31, 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 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.
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.
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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 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,
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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 $3.7 billion and $4.0 billion for the three months ended March 31, 2024 and 2023, 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 $33 million for the three months ended March 31, 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 services, to our Insurance segment customers. Intersegment 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.
Our segment results were as follows for the three months ended March 31, 2024 and 2023:
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| Insurance |  | CenterWell |  | Eliminations/ Corporate |  | Consolidated
Three months ended March 31, 2024 | (in millions)
External revenues |  |  |  |  |  |
Premiums: |  |  |  |  |  |  |
Individual Medicare Advantage | $ | 22,448 |  |  | $ | — |  |  | $ | — |  |  | $ | 22,448 |
Group Medicare Advantage | 1,989 |  |  | — |  |  | — |  |  | 1,989 |
Medicare stand-alone PDP | 821 |  |  | — |  |  | — |  |  | 821 |
Total Medicare | 25,258 |  |  | — |  |  | — |  |  | 25,258 |
Commercial fully-insured | 256 |  |  | — |  |  | — |  |  | 256 |
Specialty benefits | 239 |  |  | — |  |  | — |  |  | 239 |
Medicare Supplement | 197 |  |  | — |  |  | — |  |  | 197 |
State-based contracts and other | 2,311 |  |  | — |  |  | — |  |  | 2,311 |
Total premiums | 28,261 |  |  | — |  |  | — |  |  | 28,261 |
Services revenue: |  |  |  |  |  |  |
Home solutions | — |  |  | 335 |  |  | — |  |  | 335 |
Primary care | — |  |  | 241 |  |  | — |  |  | 241 |
Commercial ASO | 24 |  |  | — |  |  | — |  |  | 24 |
Military services and other | 251 |  |  | — |  |  | — |  |  | 251 |
Pharmacy solutions | — |  |  | 211 |  |  | — |  |  | 211 |
Total services revenue | 275 |  |  | 787 |  |  | — |  |  | 1,062 |
Total external revenues | 28,536 |  |  | 787 |  |  | — |  |  | 29,323 |
Intersegment revenues |  |  |  |  |  |  |
Services | 1 |  |  | 1,414 |  |  | (1,415) |  |  | — |
Products | — |  |  | 2,617 |  |  | (2,617) |  |  | — |
Total intersegment revenues | 1 |  |  | 4,031 |  |  | (4,032) |  |  | — |
Investment income | 162 |  |  | — |  |  | 126 |  |  | 288 |
Total revenues | 28,699 |  |  | 4,818 |  |  | (3,906) |  |  | 29,611 |
Operating expenses: |  |  |  |  |  |  |
Benefits | 25,251 |  |  | — |  |  | (127) |  |  | 25,124 |
Operating costs | 2,364 |  |  | 4,483 |  |  | (3,805) |  |  | 3,042 |
Depreciation and amortization | 186 |  |  | 53 |  |  | (30) |  |  | 209 |
Total operating expenses | 27,801 |  |  | 4,536 |  |  | (3,962) |  |  | 28,375 |
Income from operations | 898 |  |  | 282 |  |  | 56 |  |  | 1,236 |
Interest expense | — |  |  | 1 |  |  | 158 |  |  | 159 |
Other expense, net | — |  |  | — |  |  | 63 |  |  | 63 |
Income (loss) before income taxes and equity in net earnings | 898 |  |  | 281 |  |  | (165) |  |  | 1,014 |
Equity in net losses | (2) |  |  | (22) |  |  | — |  |  | (24) |
Segment earnings (loss) | $ | 896 |  |  | $ | 259 |  |  | $ | (165) |  |  | $ | 990 |
Net loss attributable to noncontrolling interests | 2 |  |  | — |  |  | — |  |  | 2 |
Segment earnings (loss) attributable to Humana | $ | 898 |  |  | $ | 259 |  |  | $ | (165) |  |  | $ | 992 |

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| Insurance |  | CenterWell |  | Eliminations/ Corporate |  | Consolidated
Three months ended March 31, 2023 | (in millions)
External revenues |  |  |  |  |  |
Premiums: |  |  |  |  |  |  |
Individual Medicare Advantage | $ | 19,809 |  |  | $ | — |  |  | $ | — |  |  | $ | 19,809 |
Group Medicare Advantage | 1,765 |  |  | — |  |  | — |  |  | 1,765 |
Medicare stand-alone PDP | 616 |  |  | — |  |  | — |  |  | 616 |
Total Medicare | 22,190 |  |  | — |  |  | — |  |  | 22,190 |
Commercial fully-insured | 1,018 |  |  | — |  |  | — |  |  | 1,018 |
Specialty benefits | 254 |  |  | — |  |  | — |  |  | 254 |
Medicare Supplement | 179 |  |  | — |  |  | — |  |  | 179 |
State-based contracts and other | 1,909 |  |  | — |  |  | — |  |  | 1,909 |
Total premiums | 25,550 |  |  | — |  |  | — |  |  | 25,550 |
Services revenue: |  |  |  |  |  |  |
Home solutions | — |  |  | 314 |  |  | — |  |  | 314 |
Primary care | — |  |  | 201 |  |  | — |  |  | 201 |
Commercial ASO | 71 |  |  | — |  |  | — |  |  | 71 |
Military services and other | 171 |  |  | — |  |  | — |  |  | 171 |
Pharmacy solutions | — |  |  | 242 |  |  | — |  |  | 242 |
Total services revenue | 242 |  |  | 757 |  |  | — |  |  | 999 |
Total external revenues | 25,792 |  |  | 757 |  |  | — |  |  | 26,549 |
Intersegment revenues |  |  |  |  |  |  |
Services | 14 |  |  | 1,133 |  |  | (1,147) |  |  | — |
Products | — |  |  | 2,615 |  |  | (2,615) |  |  | — |
Total intersegment revenues | 14 |  |  | 3,748 |  |  | (3,762) |  |  | — |
Investment income | 97 |  |  | — |  |  | 96 |  |  | 193 |
Total revenues | 25,903 |  |  | 4,505 |  |  | (3,666) |  |  | 26,742 |
Operating expenses: |  |  |  |  |  |  |
Benefits | 21,993 |  |  | — |  |  | (135) |  |  | 21,858 |
Operating costs | 2,418 |  |  | 4,126 |  |  | (3,565) |  |  | 2,979 |
Depreciation and amortization | 165 |  |  | 49 |  |  | (28) |  |  | 186 |
Total operating expenses | 24,576 |  |  | 4,175 |  |  | (3,728) |  |  | 25,023 |
Income from operations | 1,327 |  |  | 330 |  |  | 62 |  |  | 1,719 |
Interest expense | — |  |  | — |  |  | 113 |  |  | 113 |
Other income, net | — |  |  | — |  |  | (8) |  |  | (8) |
Income (loss) before income taxes and equity in net earnings | 1,327 |  |  | 330 |  |  | (43) |  |  | 1,614 |
Equity in net losses | (3) |  |  | (14) |  |  | — |  |  | (17) |
Segment earnings (loss) | $ | 1,324 |  |  | $ | 316 |  |  | $ | (43) |  |  | $ | 1,597 |
Net loss attributable to noncontrolling interests | 1 |  |  | — |  |  | — |  |  | 1 |
Segment earnings (loss) attributable to Humana | $ | 1,325 |  |  | $ | 316 |  |  | $ | (43) |  |  | $ | 1,598 |

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Humana Inc.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The condensed consolidated financial statements of Humana Inc. in this document present the Company’s financial position, results of operations and cash flows, and should be read in conjunction with the following discussion and analysis. References to “we,” “us,” “our,” “Company,” and “Humana” mean Humana Inc. and its subsidiaries. This discussion includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. When used in filings with the Securities and Exchange Commission, or SEC, in our press releases, investor presentations, and in oral statements made by or with the approval of one of our executive officers, the words or phrases like “believes,” “expects,” “anticipates,” “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 Item 1A. – Risk Factors in our 2023 Form 10-K, as modified by any changes to those risk factors included in this document and in other reports we filed subsequent to February 15, 2024, in each case incorporated by reference herein. In making these statements, we are not undertaking to address or update such forward-looking statements in future filings or communications regarding our business or results. In light of these risks, uncertainties and assumptions, the forward–looking events discussed in this document might not occur. There may also 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.
Executive Overview
General
Humana Inc., headquartered in Louisville, Kentucky, is committed to putting health first – for our teammates, our customers, and our company. Through our Humana insurance services, and our CenterWell health care services, we make it easier for the millions of people we serve to achieve their best health – delivering the care and service they need, when they need it. These efforts are leading to a better quality of life for people with Medicare, Medicaid, families, individuals, military service personnel, and communities at large.
Our industry relies on two key statistics to measure performance. The benefit ratio, which is computed by taking
total benefits expense as a percentage of premiums revenue, represents a statistic used to measure underwriting profitability. The operating cost ratio, which is computed by taking total operating costs, excluding depreciation and amortization, as a percentage of total revenue less investment income, represents a statistic used to measure administrative spending efficiency.
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 $29 million for the three months ended March 31, 2024 within operating costs in the 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 months ended March 31, 2023.
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Business Segments
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.
The results of each segment are measured by income (loss) from operations. Transactions between reportable segments primarily consist of sales of products and services rendered by our CenterWell segment, primarily pharmacy, primary care, and home services, to our Insurance segment customers. Intersegment 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.
Seasonality
One of the product offerings of our Insurance segment is Medicare stand-alone prescription drug plans, or PDP, under the Medicare Part D program. Our quarterly Insurance segment earnings and operating cash flows are impacted by the Medicare Part D benefit design and changes in the composition of our membership. The Medicare Part D benefit design results in coverage that varies as a member’s cumulative out-of-pocket costs pass through successive stages of a member’s plan period, which begins annually on January 1 for renewals. These plan designs generally result in us sharing a greater portion of the responsibility for total prescription drug costs in the early stages and less in the latter stages. As a result, the PDP benefit ratio generally decreases as the year progresses. In addition, the number of low income senior members as well as year-over-year changes in the mix of membership in our stand-alone PDP products affects the quarterly benefit ratio pattern.
The Insurance segment also experiences seasonality in the commercial fully-insured product offering. The effect on the Insurance segment benefit ratio is opposite of the Medicare stand-alone PDP impact, with the benefit ratio increasing as fully-insured members progress through their annual deductible and maximum out-of-pocket expenses. The Employer Group Commercial Fully-Insured business decreased the Insurance segment benefit ratio by 10 basis points and decreased the Insurance segment benefit ratio by 30 basis points for the three months ended March 31, 2024 and 2023, respectively.
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The Insurance segment also experiences seasonality in the operating cost ratio as a result of costs incurred in the second half of the year associated with the Medicare marketing season. The Insurance segment may experience adverse impacts in the operating cost ratio as a result of our Employer Group Commercial Medical Products exit phased over the 18-24 months following our February 2023 announcement. The Employer Group Commercial Fully-Insured business increased the Insurance segment operating cost ratio by 10 basis points and increased the Insurance segment operating cost ratio by 40 basis points for the three months ended March 31, 2024 and 2023, respectively.
2024 Highlights
•Our strategy offers our members affordable health care combined with a positive consumer experience in growing markets. At the core of this strategy is our integrated care delivery model, which unites quality care, high member engagement, and sophisticated data analytics. Our approach to primary, physician-directed care for our members aims to provide quality care that is consistent, integrated, cost-effective, and member-focused, provided by both employed physicians and physicians with network contract arrangements. The model is designed to improve health outcomes and affordability for individuals and for the health system as a whole, while offering our members a simple, seamless healthcare experience. We believe this strategy is positioning us for long-term growth in both membership and earnings. We offer providers a continuum of opportunities to increase the integration of care and offer assistance to providers in transitioning from a fee-for-service to a value-based arrangement. These include performance bonuses, shared savings and shared risk relationships. At March 31, 2024, approximately 3,837,300 members, or 69%, of our individual Medicare Advantage members were in value-based relationships under our integrated care delivery model, as compared to 3,505,100 members, or 68%, at March 31, 2023.
•Net income attributable to Humana was $0.7 billion, or $6.11 per diluted common share, and $1.2 billion, or $9.87 per diluted common share, for the three months ended March 31, 2024 and 2023, respectively. These comparisons were significantly impacted by put/call valuation adjustments associated with non-consolidating minority interest investments, transaction and integration costs, and charges associated with value creation initiatives. The impact of these adjustments to our consolidated income before income taxes and equity in net earnings and diluted earnings per common share was as follows for the 2024 and 2023 quarter:
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|  |  | For the three months ended March 31,
|  |  |  |  | 2024 |  | 2023
|  |  |  |  | (in millions)
Consolidated income before income taxes and equity in net earnings: |  |  |  |  |  |  |
Put/call valuation adjustments associated with our non consolidating minority interest investments |  |  |  |  | $ | 131 |  |  | $ | 53 |
Transaction and integration costs |  |  |  |  | — |  |  | (51) |
Value creation initiatives |  |  |  |  | 29 |  |  | — |
Total |  |  |  |  | $ | 160 |  |  | $ | 2 |
|  |  | For the three months ended March 31,
|  |  |  |  | 2024 |  | 2023
Diluted earnings per common share: |  |  |  |  |  |  |
Put/call valuation adjustments associated with our non consolidating minority interest investments |  |  |  |  | $ | 1.08 |  |  | $ | 0.42 |
Transaction and integration costs |  |  |  |  | — |  |  | (0.41) |
Value creation initiatives |  |  |  |  | 0.24 |  |  | — |
Net tax impact of transactions |  |  |  |  | (0.31) |  |  | (0.11) |
Total |  |  |  |  | $ | 1.01 |  |  | $ | (0.10) |

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Regulatory Environment
We are and will continue to be regularly subject to new laws and regulations, changes to existing laws and regulations, and judicial determinations that impact the interpretation and applicability of those laws and regulations. The Health Care Reform Law, the Families First Act, the CARES Act, and the Inflation Reduction Act, and related regulations, are examples of laws which have enacted significant reforms to various aspects of the U.S. health insurance industry, including, among others, mandated coverage requirements, mandated benefits and guarantee issuance associated with insurance products, rebates to policyholders based on minimum benefit ratios, adjustments to Medicare Advantage premiums, the establishment of federally facilitated or state-based exchanges coupled with programs designed to spread risk among insurers, and the introduction of plan designs based on set actuarial values, and changes to the Part D prescription drug benefit design.
It is reasonably possible that these laws and regulations, as well as other current or future legislative, judicial or regulatory changes including restrictions on our ability to manage our provider network, manage and sell our products, or otherwise operate our business, or 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, increases in member benefits or changes to member eligibility criteria without corresponding increases in premium payments to us, increases in regulation of our prescription drug benefit businesses, or changes to the Part D prescription drug benefit design (and uncertainty arising from the implementation of these changes) in the aggregate may have a material adverse effect on our results of operations (including restricting revenue, enrollment and premium growth in certain products and market segments, restricting our ability to expand into new markets, increasing our medical and operating costs, further lowering our Medicare payment rates and increasing our expenses associated with assessments); our financial position (including our ability to maintain the value of our goodwill); and our cash flows.
In March 2024, the United States Securities and Exchange Commission issued its final regulation on climate-related disclosures. The regulation requires certain disclosures in registration statements and annual reports, including financial impact and climate-related impact metrics. On April 4, 2024, the SEC exercised its discretion to stay the Final Rules pending the completion of judicial review. The new regulation is effective for us beginning with the annual report for the year ended December 31, 2025. We are evaluating the final rule and its impact on our disclosures.
We intend for the discussion of our financial condition and results of operations that follows to assist in the understanding of our financial statements and related changes in certain key items in those financial statements from year to year, including the primary factors that accounted for those changes. Transactions between reportable segments primarily consist of sales of products and services rendered by our CenterWell segment, primarily pharmacy, primary care, and home services, to our Insurance segment customers and are described in Note 14 to the condensed consolidated financial statements included in this report.
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Comparison of Results of Operations for 2024 and 2023
The following discussion primarily details our results of operations for the three months ended March 31, 2024, or the 2024 quarter and the three months ended March 31, 2023, or the 2023 quarter.

|  |  |  |  |  |  |  |  |  |  |  | Change
|  |  | Three Months Ended March 31, |  |  |  | Three Months Ended March 31, 2024 vs 2023
|  |  |  |  | 2024 |  | 2023 |  |  |  |  |  | $ |  | %
|  |  |  |  | ($ in millions, except per common share results)
Revenues: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Insurance premiums |  |  |  |  | $ | 28,261 |  |  | $ | 25,550 |  |  |  |  |  |  | $ | 2,711 |  |  | 10.6 | %
Services: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Insurance |  |  |  |  | 275 |  |  | 242 |  |  |  |  |  |  | 33 |  |  | 13.6 | %
CenterWell |  |  |  |  | 787 |  |  | 757 |  |  |  |  |  |  | 30 |  |  | 4.0 | %
Total services revenue |  |  |  |  | 1,062 |  |  | 999 |  |  |  |  |  |  | 63 |  |  | 6.3 | %
Investment income |  |  |  |  | 288 |  |  | 193 |  |  |  |  |  |  | 95 |  |  | 49.2 | %
Total revenues |  |  |  |  | 29,611 |  |  | 26,742 |  |  |  |  |  |  | 2,869 |  |  | 10.7 | %
Operating expenses: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Benefits |  |  |  |  | 25,124 |  |  | 21,858 |  |  |  |  |  |  | 3,266 |  |  | 14.9 | %
Operating costs |  |  |  |  | 3,042 |  |  | 2,979 |  |  |  |  |  |  | 63 |  |  | 2.1 | %
Depreciation and amortization |  |  |  |  | 209 |  |  | 186 |  |  |  |  |  |  | 23 |  |  | 12.4 | %
Total operating expenses |  |  |  |  | 28,375 |  |  | 25,023 |  |  |  |  |  |  | 3,352 |  |  | 13.4 | %
Income from operations |  |  |  |  | 1,236 |  |  | 1,719 |  |  |  |  |  |  | (483) |  |  | (28.1) | %
Interest expense |  |  |  |  | 159 |  |  | 113 |  |  |  |  |  |  | 46 |  |  | 40.7 | %
Other expense (income), net |  |  |  |  | 63 |  |  | (8) |  |  |  |  |  |  | 71 |  |  | 887.5 | %
Income before income taxes and equity in net earnings |  |  |  |  | 1,014 |  |  | 1,614 |  |  |  |  |  |  | (600) |  |  | (37.2) | %
Provision for income taxes |  |  |  |  | 251 |  |  | 359 |  |  |  |  |  |  | (108) |  |  | (30.1) | %
Equity in net losses |  |  |  |  | (24) |  |  | (17) |  |  |  |  |  |  | 7 |  |  | 41.2 | %
Net income |  |  |  |  | $ | 739 |  |  | $ | 1,238 |  |  |  |  |  |  | $ | (499) |  |  | (40.3) | %
Diluted earnings per common share |  |  |  |  | $ | 6.11 |  |  | $ | 9.87 |  |  |  |  |  |  | $ | (3.76) |  |  | (38.1) | %
Benefit ratio (a) |  |  |  |  | 88.9 | % |  | 85.5 | % |  |  |  |  |  |  |  | 3.4 | %
Operating cost ratio (b) |  |  |  |  | 10.4 | % |  | 11.2 | % |  |  |  |  |  |  |  | (0.8) | %
Effective tax rate |  |  |  |  | 25.3 | % |  | 22.5 | % |  |  |  |  |  |  |  | 2.8 | %

(a)Represents benefits expense as a percentage of premiums revenue.
(b)Represents operating costs as a percentage of total revenues less investment income.
Premiums Revenue
Consolidated premiums revenue increased $2.7 billion, or 10.6%, from $25.6 billion in the 2023 quarter to $28.3 billion in the 2024 quarter primarily due to higher per member Medicare premiums and individual and group Medicare Advantage membership growth. These factors were partially offset by the continued decline in the our group commercial medical and stand-alone PDP membership, as well as a decline in state-based contracts membership as a result of the end of the suspension of state eligibility redetermination efforts previously enacted as part of the Public Health Emergency.
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Services Revenue
Consolidated services revenue increased $0.1 billion, or 6.3%, from $1.0 billion in the 2023 quarter to $1.1 billion in the 2024 quarter.
Investment Income
Investment income increased $95 million, or 49.2%, from $193 million in the 2023 quarter to $288 million in the 2024 quarter primarily due to increase in interest income on our debt securities.
Benefit Expense
Consolidated benefits expense increased $3.3 billion, or 14.9%, from $21.9 billion in the 2023 quarter to $25.1 billion in the 2024 quarter. The consolidated benefit ratio increased 340 basis points from 85.5% for the 2023 quarter to 88.9% for the 2024 quarter primarily due to higher Medicare Advantage medical cost trends in the 2024 quarter compared to the 2023 quarter partially offset by the impact of pricing and benefit design of our 2024 Medicare Advantage products, which included a reduction in benefits in response to the net impact of the final rate notice and the initial emergence of increased medical cost trends. Further, the year-over-year comparison continues to reflect a shift in line of business mix, with growth in Medicare Advantage and state-based contracts and other membership, which can carry a higher benefit ratio.
Consolidated benefits expense included $535 million of favorable prior-period medical claims reserve development in the 2024 quarter and $522 million of favorable prior-period medical claims development in the 2023 quarter. Prior-period medical claims reserve development decreased the consolidated benefit ratio by approximately 190 basis points in the 2024 quarter and decreased the consolidated benefit ratio by approximately 200 basis points in the 2023 quarter.
Operating Costs
Our segments incur both direct and shared indirect operating costs. We allocate the indirect costs shared by the segments primarily as a function of revenues. As a result, the profitability of each segment is interdependent.
Consolidated operating costs increased $0.06 billion, or 2.1%, from $2.98 billion in the 2023 quarter to $3.04 billion in the 2024 quarter. The consolidated operating cost ratio decreased 80 basis points from 11.2% for the 2023 quarter to 10.4% for the 2024 quarter primarily due to scale efficiencies associated with growth in our individual Medicare Advantage membership, administrative cost efficiencies resulting from our value creation initiatives, and lower commission expense for brokers in the 2024 quarter compared to the 2023 quarter as a result of significant individual Medicare Advantage membership growth in 2023. These factors were partially offset by the impact from charges related to value creation initiatives in the 2024 quarter.
Depreciation and Amortization
Depreciation and amortization increased $23 million, or 12.4%, from $186 million in the 2023 quarter to $209 million in the 2024 quarter primarily due to capital expenditures.
Interest Expense
Interest expense increased $46 million, or 40.7%, from $113 million in the 2023 quarter to $159 million in the 2024 quarter primarily due to increase in interest rates and higher average debt balances.
Income Taxes
The effective income tax rate was 25.3% and 22.5% for the three months ended March 31, 2024, and 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 the latter incurs a higher effective domestic tax rate than the former. In addition, the prior year income tax rate was favorably impacted by the recognition of a non-taxable gain.
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Insurance Segment

| March 31, |  | Change
| 2024 |  | 2023 |  | Members |  | %
Membership: |  |  |  |  |  |  |
Individual Medicare Advantage | 5,548,900 |  |  | 5,153,000 |  |  | 395,900 |  |  | 7.7 | %
Group Medicare Advantage | 551,500 |  |  | 511,200 |  |  | 40,300 |  |  | 7.9 | %
Medicare stand-alone PDP | 2,347,000 |  |  | 2,956,300 |  |  | (609,300) |  |  | (20.6) | %
Total Medicare | 8,447,400 |  |  | 8,620,500 |  |  | (173,100) |  |  | (2.0) | %
Medicare Supplement | 323,200 |  |  | 294,000 |  |  | 29,200 |  |  | 9.9 | %
Commercial fully-insured | 109,700 |  |  | 522,600 |  |  | (412,900) |  |  | (79.0) | %
State-based contracts and other | 1,261,400 |  |  | 1,371,500 |  |  | (110,100) |  |  | (8.0) | %
Military services | 5,955,300 |  |  | 5,930,700 |  |  | 24,600 |  |  | 0.4 | %
Commercial ASO | 77,700 |  |  | 414,800 |  |  | (337,100) |  |  | (81.3) | %
Total Medical Membership | 16,174,700 |  |  | 17,154,100 |  |  | (979,400) |  |  | (5.7) | %
Total Specialty Membership (a) | 4,653,200 |  |  | 5,114,700 |  |  | (461,500) |  |  | (9.0) | %

(a) We provide a full range of insured specialty products including dental, vision, and life insurance benefits marketed to individuals and groups. Members included in these products may not be unique to each product since members have the ability to enroll in a medical product and one or more specialty products.

|  |  |  |  |  |  |  |  |  |  |  |  | Change
|  |  | Three Months Ended March 31, |  |  |  | Three Months Ended March 31, 2024 vs 2023
|  |  |  |  | 2024 |  | 2023 |  |  |  |  |  | $ |  | %
|  |  |  |  | ($ in millions)
Premiums and Services Revenue: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Premiums: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Individual Medicare Advantage |  |  |  |  | $ | 22,448 |  |  | $ | 19,809 |  |  |  |  |  |  | $ | 2,639 |  |  | 13.3 | %
Group Medicare Advantage |  |  |  |  | 1,989 |  |  | 1,765 |  |  |  |  |  |  | 224 |  |  | 12.7 | %
Medicare stand-alone PDP |  |  |  |  | 821 |  |  | 616 |  |  |  |  |  |  | 205 |  |  | 33.3 | %
Total Medicare |  |  |  |  | 25,258 |  |  | 22,190 |  |  |  |  |  |  | 3,068 |  |  | 13.8 | %
Commercial fully-insured |  |  |  |  | 256 |  |  | 1,018 |  |  |  |  |  |  | (762) |  |  | (74.9) | %
Specialty benefits |  |  |  |  | 239 |  |  | 254 |  |  |  |  |  |  | (15) |  |  | (5.9) | %
Medicare Supplement |  |  |  |  | 197 |  |  | 179 |  |  |  |  |  |  | 18 |  |  | 10.1 | %
State-based contracts and other |  |  |  |  | 2,311 |  |  | 1,909 |  |  |  |  |  |  | 402 |  |  | 21.1 | %
Total premiums revenue |  |  |  |  | 28,261 |  |  | 25,550 |  |  |  |  |  |  | 2,711 |  |  | 10.6 | %
Commercial ASO |  |  |  |  | 24 |  |  | 71 |  |  |  |  |  |  | (47) |  |  | (66.2) | %
Military services and other |  |  |  |  | 251 |  |  | 171 |  |  |  |  |  |  | 80 |  |  | 46.8 | %
Services revenue |  |  |  |  | 275 |  |  | 242 |  |  |  |  |  |  | 33 |  |  | 13.6 | %
Total premiums and services revenue |  |  |  |  | $ | 28,536 |  |  | $ | 25,792 |  |  |  |  |  |  | $ | 2,744 |  |  | 10.6 | %
Income from operations |  |  |  |  | $ | 898 |  |  | $ | 1,327 |  |  |  |  |  |  | $ | (429) |  |  | (32.3) | %
Benefit ratio |  |  |  |  | 89.3 | % |  | 86.1 | % |  |  |  |  |  |  |  | 3.2 | %
Operating cost ratio |  |  |  |  | 8.3 | % |  | 9.4 | % |  |  |  |  |  |  |  | (1.1) | %

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Income from operations
Insurance segment income from operations decreased $0.4 billion, or 32.3%, from $1.3 billion in the 2023 quarter to $0.9 billion in the 2024 quarter primarily due to the same factors impacting the segment's higher benefit ratio partially offset by the lower operating cost ratio as more fully described below.
Enrollment
Individual Medicare Advantage membership increased 395,900 members, or 7.7%, from March 31, 2023 to March 31, 2024 primarily due to membership additions associated with the most recent Annual Election Period, or AEP. Individual Medicare Advantage membership includes 922,200 D-SNP members as of March 31, 2024, a net increase of 140,100 D-SNP members, or 18%, from 782,100 D-SNP members as of March 31, 2023.
Group Medicare Advantage membership increased 40,300 members, or 7.9%, from March 31, 2023 to March 31, 2024 primarily due to growth in small and medium group accounts.
Medicare stand-alone PDP membership decreased 609,300 members, or 20.6%, from March 31, 2023 to March 31, 2024 primarily due to continued intensified competition for Medicare stand-alone PDP offerings.
State-based contracts and other membership decreased 110,100 members, or 8.0%, from March 31, 2023 to March 31, 2024 primarily due to the end of the suspension of state eligibility redetermination efforts previously enacted as part of the Public Health Emergency.
Commercial fully-insured medical membership decreased 412,900 members, or 79.0%, from March 31, 2023 to March 31, 2024 and commercial ASO medical membership decreased 337,100 members, or 81.3%, from March 31, 2023 to March 31, 2024. These decreases reflect our planned exit of 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. The exit from this line of business will be phased over the 18 to 24 months following our February 2023 announcement.
Specialty membership decreased 461,500 members, or 9.0%, from March 31, 2023 to March 31, 2024 primarily due to non-renewal of dental and vision plans as a result of exit from the Employer Group Commercial Medical Products business partially offset by growth in dental and vision plans as a result of Medicare Advantage enrollment.
Premiums Revenue
Insurance segment premiums revenue increased $2.7 billion, or 10.6%, from $25.6 billion in the 2023 quarter to $28.3 billion in the 2024 quarter primarily due to higher per member Medicare premiums and individual and group Medicare Advantage membership growth. These factors were partially offset by the continued decline in the our group commercial medical and stand-alone PDP membership, as well as a decline in state-based contracts membership as a result of the end of the suspension of state eligibility redetermination efforts previously enacted as part of the Public Health Emergency.
Services Revenue
Insurance segment services revenue increased $33 million, or 13.6%, from $242 million in the 2023 quarter to $275 million in the 2024 quarter.
Benefits Expense
The Insurance segment benefit ratio increased 320 basis points from 86.1% for the 2023 quarter to 89.3% for the 2024 quarter primarily due to higher Medicare Advantage medical cost trends in the 2024 quarter compared to the 2023 quarter partially offset by the impact of pricing and benefit design of our 2024 Medicare Advantage products, which included a reduction in benefits in response to the net impact of the final rate notice and the initial emergence of increased medical cost trends. Further, the year-over-year comparison continues to reflect a shift in
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line of business mix, with growth in Medicare Advantage and state-based contracts and other membership, which can carry a higher benefit ratio.
The Insurance segment benefits expense included $535 million of favorable prior-period medical claims reserve development in the 2024 quarter and $522 million of favorable prior-period medical claims reserve development in the 2023 quarter. Prior-period medical claims reserve development decreased the Insurance segment benefit ratio by approximately 190 basis points in the 2024 quarter and decreased the Insurance segment benefit ratio by approximately 200 basis points in the 2023 quarter.
Operating Costs
The Insurance segment operating cost ratio decreased 110 basis points from 9.4% for the 2023 quarter to 8.3% for the 2024 quarter primarily due to scale efficiencies associated with growth in our individual Medicare Advantage membership, administrative cost efficiencies resulting from our value creation initiatives, and lower commission expense for brokers in the 2024 quarter compared to the 2023 quarter as a result of significant individual Medicare Advantage membership growth in 2023.
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CenterWell Segment

|  |  |  |  |  |  |  |  |  |  |  |  | Change
|  |  | Three Months Ended March 31, |  |  |  | Three Months Ended March 31, 2024 vs 2023
|  |  |  |  | 2024 |  | 2023 |  |  |  |  |  | $ |  | %
|  |  |  |  | ($ in millions)
Revenues: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Services: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Home solutions |  |  |  |  | $ | 335 |  |  | $ | 314 |  |  |  |  |  |  | $ | 21 |  |  | 6.7 | %
Pharmacy solutions |  |  |  |  | 211 |  |  | 242 |  |  |  |  |  |  | (31) |  |  | (12.8) | %
Primary care |  |  |  |  | 241 |  |  | 201 |  |  |  |  |  |  | 40 |  |  | 19.9 | %
Total services revenue |  |  |  |  | 787 |  |  | 757 |  |  |  |  |  |  | 30 |  |  | 4.0 | %
Intersegment revenues: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Home solutions |  |  |  |  | 485 |  |  | 314 |  |  |  |  |  |  | 171 |  |  | 54.5 | %
Pharmacy solutions |  |  |  |  | 2,617 |  |  | 2,615 |  |  |  |  |  |  | 2 |  |  | 0.1 | %
Primary care |  |  |  |  | 929 |  |  | 819 |  |  |  |  |  |  | 110 |  |  | 13.4 | %
Total intersegment revenues |  |  |  |  | 4,031 |  |  | 3,748 |  |  |  |  |  |  | 283 |  |  | 7.6 | %
Total services and intersegment revenues |  |  |  |  | $ | 4,818 |  |  | $ | 4,505 |  |  |  |  |  |  | $ | 313 |  |  | 6.9 | %
Income from operations |  |  |  |  | $ | 282 |  |  | $ | 330 |  |  |  |  |  |  | $ | (48) |  |  | (14.5) | %
Operating cost ratio |  |  |  |  | 93.0 | % |  | 91.6 | % |  |  |  |  |  |  |  | 1.4 | %

Income from operations
CenterWell income from operations decreased $48 million, or 14.5%, from $330 million in the 2023 quarter to $282 million in the 2024 quarter primarily due to the same factors impacting the segment's higher operating cost ratio as more fully described below.
Services Revenue
CenterWell services revenue increased $30 million, or 4.0%, from $757 million in the 2023 quarter to $787 million in the 2024 quarter primarily due to higher revenues associated with growth in the primary care and home solutions businesses partially offset by a decline in revenues associated with the pharmacy solutions business and the impact of the v28 risk model revision.
Intersegment Revenues
CenterWell intersegment revenues increased $0.3 billion, or 7.6%, from $3.7 billion in the 2023 quarter to $4.0 billion in the 2024 quarter primarily due to greater intersegment revenues associated with the home solutions business in the 2024 quarter as compared to the 2023 quarter as a result of the expansion of the value-based care home model and higher intersegment revenues associated with growth in the primary care business, partially offset by the impact of the v28 risk model revision.
Operating Costs
The CenterWell segment operating cost ratio increased 140 basis points from 91.6% for the 2023 quarter to 93.0% for the 2024 quarter primarily due to the unfavorable impact of the v28 risk model revision to the primary care business.
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Liquidity
Historically, our primary sources of cash have included receipts of premiums, services revenue, and investment and other income, as well as proceeds from the sale or maturity of our investment securities, and borrowings. Our primary uses of cash historically have included disbursements for claims payments, operating costs, interest on borrowings, taxes, purchases of investment securities, acquisitions, capital expenditures, repayments on borrowings, dividends, and share repurchases. As premiums generally are collected in advance of claim payments by a period of up to several months, our business normally should produce positive cash flows during periods of increasing premiums and enrollment. Conversely, cash flows would be negatively impacted during periods of decreasing premiums and enrollment. From period to period, our cash flows may also be affected by the timing of working capital items including premiums receivable, benefits payable, and other receivables and payables. Our cash flows are impacted by the timing of payments to and receipts from CMS associated with Medicare Part D subsidies for which we do not assume risk. The use of cash flows may be limited by regulatory requirements of state departments of insurance (or comparable state regulators) which require, among other items, that our regulated subsidiaries maintain minimum levels of capital and seek approval before paying dividends from the subsidiaries to the parent. Our use of cash flows derived from our non-insurance subsidiaries, such as in our CenterWell segment, is generally not restricted by state departments of insurance (or comparable state regulators).
For additional information regarding our liquidity risk, refer to Part I, Item 1A, "Risk Factors" in our 2023 Form 10-K and Part II, Item 1A, "Risk Factors" of this Form 10-Q.
Cash and cash equivalents increased to approximately $5.9 billion at March 31, 2024 from $4.7 billion at December 31, 2023. The change in cash and cash equivalents for the three months ended March 31, 2024 and 2023 is summarized as follows:

| Three Months Ended
| 2024 |  | 2023
| (in millions)
Net cash provided by operating activities | $ | 423 |  |  | $ | 6,687 |
Net cash used in investing activities | (414) |  |  | (1,292) |
Net cash provided by financing activities | 1,207 |  |  | 3,279 |
Increase in cash and cash equivalents | $ | 1,216 |  |  | $ | 8,674 |

Cash Flow from Operating Activities
Cash flows provided by operations of $423 million in the 2024 quarter decreased $6.3 billion from cash flows provided by operations of $6.7 billion in the 2023 quarter. Our operating cash flows for the 2023 quarter were significantly impacted by the early receipt of the Medicare premium remittance of $6.6 billion in March 2023 because the payment date for April 2023 fell on a weekend. Generally, when the first day of a month falls on a weekend or holiday, with the exception of January 1 (New Year's Day), we receive this payment at the end of the previous month. This also resulted in an increase to unearned revenues in our condensed consolidated balance sheet at March 31, 2023.
The most significant drivers of changes in our working capital are typically the timing of payments of benefits expense and receipts for premiums. Benefits expense includes claim payments, capitation payments, pharmacy costs net of rebates, allocations of certain centralized expenses and various other costs incurred to provide health insurance coverage to members, as well as estimates of future payments to hospitals and others for medical care and other supplemental benefits provided on or prior to the balance sheet date. 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 2022 Form 10-K.
The detail of total net receivables at March 31, 2024 and December 31, 2023 and reconciliation to cash flow for the three months ended March 31, 2024 and 2023 was as follows:
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| March 31, 2024 |  | December 31, 2023 |  | 2024 Quarter Change |  | 2023 Quarter Change
| (in millions)
Medicare | $ | 3,288 |  |  | $ | 1,426 |  |  | $ | 1,862 |  |  | $ | 1,398 |
Commercial and other | 553 |  |  | 549 |  |  | 4 |  |  | 66 |
Military services | 169 |  |  | 148 |  |  | 21 |  |  | (32) |
Allowances | (85) |  |  | (88) |  |  | 3 |  |  | 1 |
Total net receivables | $ | 3,925 |  |  | $ | 2,035 |  |  | $ | 1,890 |  |  | $ | 1,433 |

The changes in Medicare receivables for both the 2024 quarter and the 2023 period reflect individual Medicare Advantage membership growth and the typical pattern caused by the timing of accruals and related collections associated with the CMS risk-adjustment model. Significant collections occur with the mid-year and final settlements with CMS in the second and third quarter.
Cash Flow from Investing Activities
During the 2024 quarter and 2023 quarter, we acquired various businesses for approximately $14 million and $73 million, net of cash and cash equivalents received, respectively.
Our ongoing capital expenditures primarily relate to our information technology initiatives, support of services in our primary care operations including medical and administrative facility improvements necessary for activities such as the provision of care to members, claims processing, billing and collections, wellness solutions, care coordination, regulatory compliance and customer service. Total net capital expenditures, excluding acquisitions, were $177 million in the 2024 quarter and $223 million in the 2023 quarter.
Net purchases of investment securities were $223 million and $996 million in the 2024 quarter and 2023 quarter, respectively.
Cash Flow from Financing Activities
Receipts from CMS associated with Medicare Part D claim subsidies for which we do not assume risk were higher than claim payments by $569 million and $3.03 billion in the 2024 and 2023 quarters, respectively.
Under our administrative services only TRICARE contracts, health care costs payments for which we do not assume risk exceeded reimbursements from the federal government by $70 million and $29 million in the 2024 and 2023 quarters, respectively.
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.
In March 2023, we issued $500 million of 5.700% unsecured senior notes due March 13, 2026 and $750 million of 5.500% unsecured senior notes due March 15, 2053. Our net proceeds, reduced for the underwriters' discounts and commissions paid, were $1.2 billion. We used the net proceeds to repay outstanding amounts under our $500 million Delayed Draw Term Loan. The remaining net proceeds will be used for general corporate purposes, which include the repayment of existing indebtedness, including borrowings under our commercial paper program.
In March 2023, we entered into a Rule 10b5-1 Repurchase Plan, or the Plan, to repurchase a portion of our $1.5 billion aggregate principal amount of 0.650% senior notes maturing in August 2023 and our $600 million aggregate principal amount of 3.850% senior notes maturing in October 2024 during the Plan period beginning on March 13, 2023 and ending on June 15, 2023. At March 31, 2023, we repurchased $61 million, for cash totaling approximately $60 million.
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Net repayments from the issuance of commercial paper were $644 million in the 2024 quarter and net repayments from the issuance of commercial paper were $177 million in the 2023 quarter. The maximum principal amount outstanding at any one time during the 2024 period was $2.7 billion.
We repurchased common shares for $702 million and $67 million in the 2024 quarter and 2023 quarter, respectively, under share repurchase plans authorized by the Board of Directors. We also acquired common shares in connection with employee stock plans for $15 million and $27 million in the 2024 quarter and 2023 quarter, respectively.
We paid dividends to stockholders of $109 million and $100 million during the 2024 quarter and 2023 quarter, respectively.
Future Sources and Uses of Liquidity
Dividends
For additional information regarding our dividends to stockholders, refer to Note 10 to the unaudited Consolidated Financial Statements included in Part I, Item 1, "Financial Statements" of this Form 10-Q.
Stock Repurchases
For additional information regarding stock repurchases, refer to Note 10 to the unaudited Consolidated Financial Statements included in Part I, Item 1, "Financial Statements" of this Form 10-Q.
Debt
For additional information regarding debt, including our senior notes, term loans, revolving credit agreements, commercial paper program and other short-term borrowings, refer to Note 12 to the unaudited Consolidated Financial Statements included in Part I, Item 1, "Financial Statements" of this Form 10-Q.
Acquisitions
For additional information regarding acquisitions, refer to Note 3 to the unaudited Consolidated Financial Statements included in Part I, Item 1, "Financial Statements" of this Form 10-Q.
Liquidity Requirements
We believe our cash balances, investment securities, operating cash flows, and funds available under our credit agreement and our commercial paper program or from other public or private financing sources, taken together, provide adequate resources to fund ongoing operating and regulatory requirements, acquisitions, future expansion opportunities, and capital expenditures for at least the next twelve months, as well as to refinance or repay debt, and repurchase shares.
Adverse changes in our credit rating may increase the rate of interest we pay and may impact the amount of credit available to us in the future. Our investment-grade credit rating at March 31, 2024 was BBB according to Standard & Poor’s Rating Services, or S&P, and Baa2 according to Moody’s Investors Services, Inc., or Moody’s. A downgrade by S&P to BB+ or by Moody’s to Ba1 triggers an interest rate increase of 25 basis points with respect to $250 million of our senior notes. Successive one notch downgrades increase the interest rate an additional 25 basis points, or annual interest expense by $1 million, up to a maximum 100 basis points, or annual interest expense by $3 million.
In addition, we operate as a holding company in a highly regulated industry. Humana Inc., our parent company, is dependent upon dividends and administrative expense reimbursements from our subsidiaries, most of which are subject to regulatory restrictions. We continue to maintain significant levels of aggregate excess statutory capital and surplus in our state-regulated operating subsidiaries. Cash, cash equivalents, and short-term investments at the parent
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company were $509 million at March 31, 2024, remaining relatively unchanged compared to $510 million at December 31, 2023.
Regulatory Requirements
Certain of our subsidiaries operate in states that regulate the payment of dividends, loans, or other cash transfers to Humana Inc., our parent company, and require minimum levels of equity as well as limit investments to approved securities. The amount of dividends that may be paid to Humana Inc. by these subsidiaries, without prior approval by state regulatory authorities, or ordinary dividends, is limited based on the entity’s level of statutory income and statutory capital and surplus. If the dividend, together with other dividends paid within the preceding twelve months, exceeds a specified statutory limit or is paid from sources other than earned surplus, it is generally considered an extraordinary dividend requiring prior regulatory approval. In most states, prior notification is provided before paying a dividend even if approval is not required.
Although minimum required levels of equity are largely based on premium volume, product mix, and the quality of assets held, minimum requirements vary significantly at the state level. Based on the most recently filed statutory financial statements as of December 31, 2023, our state regulated subsidiaries had aggregate statutory capital and surplus of approximately $12.2 billion, which exceeded aggregate minimum regulatory requirements of $9.8 billion. The amount of ordinary dividends that may be paid to our parent company in 2024 is approximately $1.1 billion in the aggregate. Actual dividends paid to our parent company were approximately $1.8 billion in 2023. The amount, timing and mix of ordinary and extraordinary dividend payments will vary due to state regulatory requirements, the level of excess statutory capital and surplus and expected future surplus requirements related to, for example, premium volume and product mix.
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Item 3. Quantitative and Qualitative Disclosures about Market Risk
Our earnings and financial position are exposed to financial market risk, including those resulting from changes in interest rates.4
Interest rate risk also represents a market risk factor affecting our consolidated financial position due to our significant investment portfolio, consisting primarily of fixed maturity securities of investment-grade quality with a weighted average S&P credit rating of AA- at March 31, 2024. Our net unrealized position increased $114 million from a net unrealized loss position of $1.3 billion at December 31, 2023 to a net unrealized loss position of $1.4 billion at March 31, 2024. At March 31, 2024, we had gross unrealized losses of $1.4 billion on our investment portfolio primarily due to an increase in market interest rates since the time the securities were purchased. There w ere no material credit allowances d uring the three months ended March 31, 2024. While we believe that these securities in an unrealized loss will recover in value over time and we currently do not have the intent to sell such securities, given the current market conditions and the significant judgments involved, there is a continuing risk that future declines in fair value may occur and material realized losses from sales or credit allowances may be recorded in future periods.
Duration is the time-weighted average of the present value of the bond portfolio’s cash flow. Duration is indicative of the relationship between changes in fair value and changes in interest rates, providing a general indication of the sensitivity of the fair values of our fixed maturity securities to changes in interest rates. However, actual fair values may differ significantly from estimates based on duration. The average duration of our investment portfolio, including cash and cash equivalents, was approximately 3 years as of March 31, 2024 and December 31, 2023. Based on the duration, including cash equivalents, a 1% increase in interest rates would generally decrease the fair value of our securities by approximately $688 million at March 31, 2024.
Item 4. Controls and Procedures
Under the supervision and with the participation of our Chief Executive Officer, or CEO, our Chief Financial Officer, or CFO, and our Principal Accounting Officer, we carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures for the quarter ended March 31, 2024.
Based on our evaluation, our CEO, CFO, and our Principal Accounting Officer concluded that our disclosure controls and procedures are effective to provide reasonable assurance that information the Company is required to disclose in its reports under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, including, without limitation, ensuring that such information is accumulated and communicated to the Company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
There have been no changes in the Company’s internal control over financial reporting during the quarter ended March 31, 2024 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
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Part II. Other Information
Item 1. Legal Proceedings
For additional information regarding legal proceedings pending against us and certain other pending or threatened litigation, investigations or other matters, refer to “Legal Proceedings and Certain Regulatory Matters” in Note 13 to the unaudited Consolidated Financial Statements included in Part I, Item 1, "Financial Statements" of this Form 10-Q.
Item 1A. Risk Factors
There have been no changes to the risk factors included in our 2023 Form 10-K.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
(a)None.
(b)N/A
(c)The following table provides information about our purchases of equity securities that are registered by us pursuant to Section 12 of the Securities Exchange Act of 1934, as amended, during the three months ended March 31, 2024:

Period | Total Number of Shares Purchased (1)(2) |  | Average Price Paid per Share |  | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1)(2) |  | Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (1) (2)
January 2024 | 1,572,566 |  |  | $ | 392.11 |  |  | 1,572,566 |  |  | $ | 883,530,302 |
February 2024 | 181,648 |  |  | 371.58 |  |  | 181,648 |  |  | 2,992,126,583 |
March 2024 | 50,431 |  |  | 346.94 |  |  | 50,431 |  |  | 2,974,630,293 |
Total | 1,804,645 |  |  | $ | 388.78 |  |  | 1,804,645 |  |  |

(1)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. Our remaining repurchase authorization was $2.96 billion as of April 23, 2024.
(2)Excludes 0.04 million shares repurchased in connection with employee stock plans.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
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Item 5. Other Information
a.None.
b.None.
c.During the three months ended March 31, 2024, no director or officer of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.
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Item 6: Exhibits

3(i) | Restated Certificate of Incorporation of Humana Inc. filed with the Secretary of State of Delaware on November 9, 1989, as restated to incorporate the amendment of January 9, 1992, and the correction of March 23, 1992 (incorporated herein by reference to Exhibit 4(i) to Humana Inc.’s Post-Effective Amendment No. 1 to the Registration Statement on Form S-8 (Reg. No. 33-49305) filed February 2, 1994).
3(ii) | Humana Inc. Amended and Restated By-laws, effective as of December 8, 2022 (incorporated herein by reference to Exhibit 3(b) to Humana Inc.’s Current Report on Form 8-K filed on December 8, 2022).
10.1 | Twenty-Eighth Supplemental Indenture, dated March 13, 2024, between the Company and The Bank of New York Mellon Trust Company, N.A., as trustee (incorporated herein by reference to Exhibit 4.2 to Humana Inc.’s Current Report on Form 8-K filed on March 13, 2024).
10.2 | Twenty-Ninth Supplemental Indenture, dated March 13, 2024, between the Company and The Bank of New York Mellon Trust Company, N.A., as trustee (incorporated herein by reference to Exhibit 4.4 to Humana Inc.’s Current Report on Form 8-K filed on March 13, 2024).
31.1 | Principal Executive Officer certification pursuant to Section 302 of Sarbanes–Oxley Act of 2002.
31.2 | Principal Financial Officer certification pursuant to Section 302 of Sarbanes–Oxley Act of 2002.
32 | Principal Executive Officer and Principal Financial Officer certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101 | The following materials from Humana Inc.'s Quarterly Report on Form 10-Q formatted in iXBRL (Inline Extensible Business Reporting Language): (i) the Condensed Consolidated Balance Sheets at March 31, 2024 and December 31, 2023; (ii) the Condensed Consolidated Statements of Income for the three months ended March 31, 2024 and 2023; (iii) the Condensed Consolidated Statements of Comprehensive Income for the three months ended March 31, 2024 and 2023; (iv) the Consolidated Statements of Stockholders' Equity for the three months ended March 31, 2024 and 2023; (v) the Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2024 and 2023; and (vi) Notes to Condensed Consolidated Financial Statements. The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
104 | Cover Page Interactive Data File formatted in Inline XBRL and contained in Exhibit 101.

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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

|  | HUMANA INC.
|  | (Registrant)
Date: | April 24, 2024 | By: | /s/ JOHN-PAUL W. FELTER
|  |  | John-Paul W. Felter
|  |  | Senior Vice President, Chief Accounting Officer and Controller (Principal Accounting Officer)

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