Humana Inc.

Good day and thank you for standing by. Welcome to Humana's first quarter earnings call. At this time, all participants are in the listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1 1 again. Please be advised that today's conference is being recorded. I'd now like to hand the conference over to Lisa Stoner, Vice President of Investor Relations. Please go ahead.

Thank you and good morning. I hope everyone had a chance to review our press release and prepared remarks, which are available on our website. We will begin this morning with brief remarks from Jim Recton, Humanities President and Chief Executive Officer, and Chief Financial Officer, Celeste Millay. Following these remarks, we will host a question-and-answer session where Jim and Celeste will be joined by George Renenden, Humana's President of Insurance Segment, and Dr. Sanjay Shetty, President of CenterWell. Before we begin our discussion, I need to advise call participants of our cautionary statement. Certain of the matters discussed in this conference call are forward-looking and involve a number of risks and uncertainties. Actual results could differ materially. Investors are advised to read the detailed risk factors discussed in our latest Form 10-K, our other filings with the Securities and Exchange Commission, and our fourth quarter 2025 earnings press release as they relate to forward-looking statements along with other risks discussed in our SEC filings. We undertake no obligation to publicly address or update any forward-looking statements in future filings or communications regarding our business or results. Today's press release Our historical financial news release and our filings with the SEC are also available on our investor relations site. Call participants should note that today's discussion includes financial measures that are not in accordance with generally accepted accounting principles or GAAP. Management's explanation for the use of these non-GAAP measures and reconciliation of GAAP to non-GAAP financial measures are included in today's press release. Any references to earnings per share or EPS made during this conference call refer to diluted earnings per common share. Finally, this call is being recorded for replay purposes. That replay will be available on the investor relations page of Humana's website, Humana.com, later today. With that, I will turn the call over to Jim.

Thank you, Lisa, and good morning, everyone. Thank you for joining us today. We have a few headlines. Let me start with we are pleased with our first quarter, and that is because we are where we expect it to be. And I'm just going to repeat that for emphasis. We are pleased with our first quarter because we are where we expect it to be. And right now, second headline, we are turning our attention to bids, and we are approaching bids with a focus on returning to a sustainable margin of at least 3% in 2028. and making progress against that in 2027 we know that we need to make some progress against that in 2027. those are the commitments we laid out in june of last year at investor day and we stand by those commitments the primary headline here is that we believe that we are on track to meet our commitments from investor day and we're doing the things to follow through on that so as usual i will frame my comments today around the four drivers of our business First is product and experience, which drive customer retention and growth. Second is clinical excellence, which delivers clinical outcomes and medical margin. Third, highly efficient operations. And fourth, capital allocation and growth in both CenterWell and Medicaid. So let's start with product and experience, where there are three things that I want you to take away. First of all, our member growth trajectory is on track. Now we will, And we have and we will continue to manage distribution and growth dynamically if things change, but our growth trajectory is on track. Second, I want to emphasize that membership, both new and returning, is performing as expected three months into the year. Now, as we turn our attention to bids for the 2027 plan year, I want to express appreciation for CMS's engagement on the improved rate notice. This helps promote more stability in the industry as a whole, and it has a positive impact on the health of our seniors. Nevertheless, medical cost trend continues to outpace program funding. And so our third takeaway, which is something we have noted previously, is that we will adjust benefits to remain on track to deliver our 2028 commitment of returning to a sustainable margin of at least 3%. And again, we expect to make the necessary progress towards that goal in 2027. We are very aware that we need to make some progress in 2027. So turning to clinical excellence, our outlook on BY28 STARS has not changed. We continue to be confident that we're on the right track to return to top quartile STARS results in BY28. Our performance on the STARS compensation metric as disclosed in our proxy is a good indicator of our progress. However, as you know, we don't know industry thresholds. And so while we feel good about our progress, we cannot guarantee an outcome in October. We will share more about our progress in the Q2 earnings call once the hybrid season is complete. For BY29 stars, we are seeing a strong early start. We have early engagement efforts. These are new efforts, early engagement efforts, which are translating into improved member activation and improved outcomes. To provide just one example, we're identifying certain chronic conditions among new members faster than we have in the past. What this allows us to do is to better target our gap closure efforts. And as a result, at the end of Q1, We are about 5% ahead of last year's gap closure pace on a per-member basis on certain key HEDIS metrics. Now, regarding highly efficient operations, we continue to make progress on our operating model changes. This includes centralizing certain teams, expanding outsourcing, and increased automation of processes. All of these things are increasing efficiencies. And then finally, on capital allocation, we recently completed the acquisition of Max Health. This is a Florida-based primary care organization that will expand Central Well's reach into new critical markets. We also saw Medicaid membership grow by approximately 50,000 lives, and this is largely driven by the January start of programs in Michigan, Illinois, and South Carolina. So in conclusion, We expect to double individual MA margin in 2026 adjusted for STARS. We expect to double individual MA margin. We continue to feel good about the way our member growth is setting us up for this year and subsequent years. We are making good progress on STARS. We will continue to be disciplined in pricing with a focus on unlocking the earnings power of the business by 2028. As a final note, before I turn it over to Celeste, I want to share an update on the insurance leadership transition that we announced in December. George Renadin, insurance segment president, will retire effective June 29th, 2026. Until then, he will focus primarily on the annual MA bid process, and he will continue to serve as a strategic advisor through at least the end of 2026. Aaron Martin, who is currently president of Medicare Advantage, We'll begin leading the day-to-day management of the insurance segment now. He will continue to report to George, and he will formally assume the role of insurance segment president when George retires. John Barger, a 30-year industry veteran with more than a decade in Medicare Advantage, will lead MA operations effective immediately and will formally assume the role of president of Medicare Advantage when Aaron transitions. I want to personally thank George for his nearly three decades of service to Humana and its instrumental impact on growing the Medicare Advantage business. And with that, I will turn it to Celeste for a few remarks before we get a Q&A.