tapebrief
HUM · Q3 2025

HUM · Q4 2025 Earnings

Bearish

Humana

Reported February 11, 2026

30-second summary

Humana closed FY2025 with adjusted EPS of $17.14 (narrowly above the ~$17.00 guide) on $129.7B revenue, while GAAP EPS came in at $9.84 — roughly $2.42 below the ~$12.26 guide, with Q4 carrying a $6.61/share GAAP loss driven by impairment charges, value-creation costs, put/call adjustments, and a loss on sale of business. The substantive news is FY2026: management introduced adjusted EPS guidance of "at least $9.00" — roughly a 47% decline from FY2025 — alongside ~25% individual MA membership growth and an explicit Star Ratings headwind framing. AEP delivered ~20pp of the targeted ~25% YoY growth, lifting January 2026 individual MA membership to ~6.28M (+1.03M from Dec 2025); the balance comes from continued mid-year additions and retention. This is a deliberate trade: take the Bonus Year 2026 Stars hit, accept slightly-below-breakeven MA underwriting on new members, and rebuild toward 2028 targets on scale and CenterWell accretion.

Headline numbers

EPS

Q4 FY2025

$-3.96

Revenue

Q4 FY2025

$32.52B

+11.3% YoY

Key financials

Q4 FY2025
MetricQ4 FY2025YoYQ3 FY2025QoQ
Revenue$32.52B+11.3%$32.65B-0.4%
EPS$-3.96—$3.24-222.2%

Guidance

FY2025 Adjusted EPS narrowly beat guidance at $17.14 vs. ~$17.00, but GAAP EPS sharply missed at -$6.61 due to large Q4 charge; FY2026 guidance introduces modest Adjusted EPS floor of $9.00 (down ~47% YoY) citing Star Ratings headwind, offset by 25% MA membership growth and CenterWell expansion.

Guidance is issued for the full year only, refreshed each quarter. Prior and new below are the same FY updated this quarter.

Actuals vs prior guidance

MetricPeriodPrior guideActualΔResult
GAAP EPSFY2025approximately $12.26-$6.61-$18.87 below guideBeat
Adjusted (non-GAAP) EPSFY2025approximately $17.00$17.14+$0.14 above guideMet

New guidance

MetricPeriodGuideYoY
RevenueFY2025$129.664 billion+10.1% YoY
GAAP EPSFY2026at least $8.89—
Adjusted (non-GAAP) EPSFY2026at least $9.00—
Individual Medicare Advantage Membership GrowthFY2026approximately 25 percent—

Segment KPIs

Q4 FY2025
SegmentQ4 FY2025YoY
Insurance Segment$31.343B+11.3%
CenterWell Segment$5.962B+16.2%
Individual Medicare Advantage$22.502B+4.7%
Medicare Stand-alone PDP$1.92B+163.7%

Other KPIs

Q4 FY2025
SegmentQ4 FY2025
Insurance Segment Benefit Ratio93.1%
Consolidated Benefit Ratio93.0%
Operating Cost Ratio13.7%
Individual Medicare Advantage Membership6,280,000 (Jan 2026)
Group Medicare Advantage Membership730,000 (Jan 2026)
CenterWell Senior Primary Care Patient Growth100,600 patients (+25%)
Days in Claims Payable31.9 days
Debt-to-Total Capitalization41.1%

Management tone

Q2 2025 cautious bounded confidence → Q3 2025 retention/LTV pivot with refusal to guide AEP → Q4 2025 explicit margin trough acknowledgment with 2028 reaffirmation.

Two quarters ago, management was protecting credibility on Stars and RAD-V by declining to engage; one quarter ago, they pivoted to retention and LTV framing while refusing to give a 2026 membership range; this quarter, they have fully owned the magnitude of the 2026 trough — slightly-below-breakeven MA underwriting, ~47% adjusted EPS decline — and reframed the conversation around 2028 earnings power. In response to Joshua Raskin, management said the scale from 2026 growth actually "shortens timeline to 2028 targets," explicitly positioning the worst guidance year as a setup rather than a setback.

The Stars discussion shifted from quiet-period defense (Q2) to active disclosure (Q4). Management anchored FY2026 guidance on a 75th percentile Stars assumption — explicitly not the 95th — to maintain flexibility, and disclosed that 2028 guidance "already reflects 75th percentile Stars performance." The operational evidence offered (reduced CTMs YoY, improved HRA completion, programs started in late Q1/early Q2 vs. historically Q4, better data targeting) is more specific than anything provided in the prior two quarters, suggesting management is now comfortable being held to operational metrics on Stars where they previously refused.

The cost-savings cadence disclosure to AJ Rice is the other notable shift: management explicitly said cost-cutting is "only just beginning in 2026, with significant pickup expected in 2027 and 2028" — confirming that the $1.6–2B transformation savings are back-loaded, which mechanically forces the 2026 trough but supports the 2028 ramp.

Q&A highlights

Justin Lake · Wolf Research

How will the large cohort of ~2.5M new members progress on margins over a 3-5 year period when normalizing for STARS? What is the net benefit in 2027 from achieving top quartile STARS vs. the $3.5B headwind in 2026?

Management explained margin progression: marketing load cuts in half year 1-2, MLR improves throughout the period. For STARS, management anchored guidance on 75th percentile (not 95%) to maintain flexibility and index to industry changes. Acknowledged inability to quantify exact 2027 STARS benefit due to policy uncertainty, but 2028 targets already reflect 75th percentile assumption.

Marketing load typically cuts in half between year 1-2MLR improves progressively through years 2-5MRA improvement, medical management programs, and value-based partner paneling improve margins over time75th percentile STARS anchoring chosen for planning flexibility

Steven Baxter · Wells Fargo

How much earnings can be driven outside MA underwriting? How do new member margins compare to retained member margins given both are slightly below break-even on net basis?

CenterWell provides significant enterprise accretion: pharmacy tailwind from new member growth, increased PCO patients, and home health volume growth. New and continuing members have similar margins for different reasons: continuing members disproportionately impacted by STARS headwind (mostly <4 stars), while new members 70% on 4+ stars but offset by acquisition costs and higher MLR from lower MRA and potentially higher med costs.

CenterWell pharmacy significant tailwind from membership growthContinuing members mostly <4 star plans, heavily STARS-impacted70% of new members on 4+ star plans, 30% on <4 star plansNew member MLR higher due to lower pre-existing MRA and potentially unmanaged costs

AJ Rice · UBS

Of the $1.6-2B pre-tax earnings improvement from transformation initiatives (2025-2028), how much is realized in 2026 and what is the progressive trajectory through 2028?

Management stated cost-cutting efforts are only just beginning in 2026, with significant pickup expected in 2027 and 2028. Operating leverage from membership growth is close to 2028 expectations. Additional upside expected from: continued CenterWell clinic growth, Group MA margin improvement (500+ bps potential remaining), Medicaid and CenterWell PCO J-curve progression, and strategic pharmacy initiatives.

Operating leverage from volume close to 2028 expectations in 2026Cost-cutting efforts deliberately phased, significant pickup in 2027-2028500+ basis points remaining in Group MA margin improvement opportunityAdditional upside from CenterWell, Medicaid, and PCO clinics

Joshua Raskin · Nefron Research

Has management's view of the ultimate margin profile of the larger 2026 member book changed vs. Investor Day? Updated views on top quartile STARS attainment and 2027 rate notice impact?

Management reaffirmed confidence in 2028 targets despite near-term margin pressure. Emphasized scale advantage from 2026 growth reducing achievement timeline. Operating cost ratio improvement significant even after STARS headwind. On STARS, highlighted improved onboarding capabilities (reduced CTMs, improved HRAs, earlier program starts, better data targeting). Acknowledged STARS risk is relative and always present but feels well-positioned to mitigate. On rate notice, will adapt to final rates; advance notice came below medical cost trends but not unexpected.

Scale from 2026 growth shortens timeline to 2028 targetsOperating cost ratio improvement significant despite STARS headwindJanuary 2026 onboarding: reduced CTMs YoY, improved transactional NPS, increased HRA completionCTM and HRA both are STARS metrics where ahead of prior year

Kevin Fishbeck · Bank of America

How confident is management in capturing member performance issues before 2027 bid? When management says 'adjust to the rate,' does that mean margin trajectory or balance membership growth and margins? Is this different from competitors' recent 'prioritize margin' messaging?

Management stated April/May visibility on member performance is early enough to adjust 2027 bids if needed. Emphasized standing by Investor Day commitments: primary focus is margin trajectory and sustainable returns, not new member growth. Will retain members while pursuing margin targets, but growth is not the focus. First goal is reaching appropriate long-term margin profile.

April/May member performance visibility allows 2027 bid adjustmentsNo different visibility timing than prior yearsStanding by Investor Day margin commitmentsPrimary focus: get to right long-term sustainable margin profile

Answers to last quarter's watch list

Q4 Insurance benefit ratio mechanics — Q4 Insurance BR printed 93.1%, landing inside the 92.5–93.7% zone needed to hit the FY 90.1–90.5% range. The seasonal step-up worked as designed.
Resolved positively
Consolidated GAAP operating cost ratio in Q4 — Q4 GAAP operating cost ratio was 13.7%, materially worse than Q3's 12.6% and well outside the raised FY 11.6–12.1% range. Q4 charges (impairments, value-creation costs, loss on sale of business) blew out the cost ratio.
Resolved negatively
AEP and 2026 MA membership disclosure on the Q4 call — management broke the silence with full disclosure: individual MA membership of 6.28M as of Jan 2026 and a FY2026 growth guide of approximately 25%, driven by new sales and improved retention. This is a sharp inflection from the FY2025 ~425k decline. Status: Resolved positively (on volume); margin implications resolved negatively.
STARS bonus year 28 trajectory — management anchored FY2026 guidance on 75th percentile Stars (not 95th) and said 2028 guidance already reflects 75th percentile performance. Operational metrics (CTMs, HRAs, program timing) cited as ahead of prior year. No quantitative BY28 update; hybrid season completion in Q2 2026 remains the disclosure milestone.
Continue monitoring
Days in claims payable trajectory — DCP fell another 1.3 days QoQ to 31.9 days, and is down 5.9 days YoY from 37.8 at Dec 31, 2024. Management attributes the compression to IRA-driven mix shift toward pharmacy claims (which process faster than medical) and lower provider-capitation accrual requirements.
Continue monitoring
Whether the GAAP/non-GAAP EPS gap widens further — gap widened modestly: non-GAAP adjusted EPS landed at $17.14 (slightly above $17.00 guide), FY GAAP at $9.84 (vs. ~$12.26 prior guide, a $2.42 miss). The full-year gap widened from $6.23/share in FY2024 to $7.30/share in FY2025, driven by the Q4 charge stack.
Resolved negatively

What to watch into next quarter

The composition of the FY2025 Q4 GAAP charge stack — Q4 carried a $6.61/share GAAP loss reflecting impairments, value-creation costs, put/call adjustments, and a loss on sale of business. Watch the 10-K disclosure and Q1 commentary for the recurring vs. discrete characterization, particularly the impairment charges tied to indefinite-lived intangibles in state markets and the joint-venture impairment.

Q1 2026 Insurance benefit ratio against the FY2026 build — with ~1M+ new MA members on the book at lower MRA and potentially unmanaged costs, watch whether Q1 benefit ratio prints above the FY2025 Q1 baseline or whether the new-cohort cost pressure shows up immediately.

2027 advance rate notice response and bid adjustment signaling — management said they will "adjust to wherever the final rate notice lands." Watch whether they signal margin-prioritizing bid changes by the Q1 print, including potential 2027 county exits or benefit redesigns.

CenterWell senior primary care patient adds in Q1 — organic FY2025 growth (~68,600) landed at the top of the 50–70k guide range, with The Villages adding ~32,000. Watch whether organic patient growth rate sustains and what Q1 CenterWell margin disclosure looks like as the cohort scales.

Quantification of the Star Ratings headwind components — management sized the net 2026 Stars headwind at ~$3.5B (individual + group MA, net of contract diversification and provider offsets). Watch for Q1 disclosure of the gross headwind, the mitigation magnitude, and updated mix of members on 4+ star contracts.

Days in claims payable bottom — DCP has now fallen 5.9 days YoY to 31.9. Watch whether Q1 sees a rebuild or further compression, and whether IBNR remains stable as the larger member book ages.

Sources

  1. Humana Q4 2025 detailed press release (8-K Ex. 99.2): https://www.sec.gov/Archives/edgar/data/49071/000004907126000005/hum-2025q4xex99x2detailedx.htm
  2. Humana Q4 2025 earnings call prepared remarks and Q&A (analyst exchanges with Wolfe, Wells Fargo, Mizuho, RBC, Nephron, Goldman Sachs, UBS, Guggenheim, TD)

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