HUM 10-K & 10-Q changes, risk factors and insider trading

We are in a highly competitive industry. Some of our competitors are more established in the health care industry in terms of a larger market share and have greater financial resources than we do in some markets. In addition, other companies may enter our markets in the future, including emerging competitors in the Medicare programor Medicaid programs or competitors in the delivery of health care services. We believe that barriers to entry in our markets are not substantial, so the addition of new competitors can occur relatively easily, and customers enjoy significant flexibility in moving between competitors through the Medicare Annual Enrollment Period. While health plans compete on the basis of many factors, including service and the quality and depth of provider networks, we expect that price will continue to be a significant basis of competition. In addition to the challenge of controlling health care costs, we face intense competitive pressure to contain premium prices. Factors such as business consolidations, strategic alliances, legislative and regulatory reform, and marketing practices create pressure to contain premium price increases, despite being faced with increasing medical and administrative costs.

Our future performance depends in large part upon our ability to execute our strategy, including opportunities created by the expansion of our Medicare programs, our strategy with respect to state-based contracts, including those covering members dually eligible for the Medicare and Medicaid programs, the growth of our pharmacy,pharmacy solutions, primary care, and home solutions businesses, and the successful implementation of our integrated care delivery model.

The number of our Medicare Advantage plans rated 4-star or higher will significantly declinedeclined in 2025. We have filed a lawsuit seeking to set aside and vacate the 2025 Star Ratings of our Medicare Advantage plans, but there is no assurance that we will prevail in this lawsuit. If we are not successful, the decline in our Star Ratings will negatively impact our 2026 quality bonus payments from CMS and may also significantly adversely affect our revenues, operating results, and cash flows. In addition, there can be no assurances that we will be successful in maintaining or improving our Star Ratings in future years.

Based on 2025 Medicare Advantage Star Ratings released by CMS in October 2024, approximatelywe 25%have experienced a significant decline in the number of our Medicare Advantage members are currently enrolled in plans rated 4-star or higher for 2025, as compared to 94% based on our 2024 Star Ratings.2025. We have filed a lawsuit that, among other things, seeks to set aside and vacate the 2025 Star Ratings for our Medicare Advantage plans, but there is no assurance that we will prevail in the lawsuit. If we are not successful, the decline in our Star Ratings performance for 2025 will negatively impact our 2026 quality bonus payments from CMS and may also significantly adversely affect our revenues, operating results, and cash flows. Please see “Legal Proceedings and Certain Regulatory Matters” in Note 17 to the Consolidated Financial Statements included in Part II, Item 8, "Financial Statements and Supplementary Data" of this Form 10-K for a description of the lawsuit.

If we fail to properly maintain the integrity of our data, to strategically maintain existing or implement new information systems,systems (including systems powered by or incorporating AI/ML), or to protect our proprietary rights to our systems, our business may be materially adversely affected.

Our business depends significantly on effective information systems and the integrity and timeliness of the data we use to run our business. Our business strategy involves providing members and providers with easy to use products that leverage our information to meet their needs. Our ability to adequately price our products and services, provide effective and efficient service to our customers, develop new and innovative products and services (including enhanced technologies that improved connectivity across products and meet consumer expectations for engaging in their health care), automate and deploy new technologies to simplify administrative processes and clinical decision making, provide timely payments to care providers, drive administrative and operational efficiencies, and timely and accurately report our financial results depends significantly on the performance of, and integrity of the data, in our information systems. These systems require an ongoing commitment of significant resources to maintain, protect, and enhance existing systems and develop and integrate new systems, including systems powered by or incorporating artificial intelligence and machine learning (including generative AI) (AI/ML), to keep pace with continuing changes in information processing technology, evolving industry and regulatory standards, and changing customer preferences, and even with such resources there is no assurance that we will be able to do so. IfIn theaddition, informationchanges to laws, regulations and guidance regarding how we relymay upon to run our businesses was found to be inaccurate, unreliable, or biased, if we fail to improve service levels or maintain the integrity of our data, or if we fail to effectively maintain our information systems and develop and integrate new systems (including systems powered by or incorporatinguse AI/ML), could make it harder for us to conduct our business using AI/ML, require us to retrain our AI/ML, delete data produced by our AI/ML, or ifprevent or limit our use of AI/ML. Our use of AI/ML technologies werecould toalso result in inaccuracies,additional biasescompliance costs, regulatory investigations, actions, fines or errors, we could have operational disruptions, problems in determining medical cost estimatespenalties, and establishing appropriate pricing, customer and health care provider disputes, reputational challenges, regulatoryconsumer or other legal obstacles (including potential investigations and enforcement), difficulty preventing and detecting fraud, increases in operating expenses, difficulty driving administrative or operational efficiencies to enhance our operations and reduce costs, loss of existing customers, difficulty in attracting new customers, or other adverse consequences, each of which may result in a material adverse effect on our results of operations, financial position, and cash flows.lawsuits.

In the ordinary course of our business, we process, store and transmit large amounts of data, and rely on third-party service providers to do the same, including protected personal information subject to privacy, security or data breach notification laws, as well as proprietary or confidential information relating to our business or a third-party with which we do business. We have been, and will likely continue to be, regular targets of attempted cybersecurity attacks and other security threats and may be, and have been, subject to breaches of our information technology systems, including breaches of the information technology systems of third-party service providers. For example, in February 2024, Change Healthcare experienced a significant cybersecurity incident that disrupted its ability to provide services, impacting payers, providers and pharmacies nationwide, including us. Although the impact of such attacks has not been material to our operations or results of operations, financial position, or cash flow through December 31, 2024,2025, we can provide no assurance that we will be able to detect, prevent, or contain the effects of such cybersecurity attacks or other information security risks or threats, or that such an attack will not be material to our business, in the future. Further, because the techniques used to obtain unauthorized access, disable or degrade service, or sabotage systems change frequently and are increasing in sophistication, in part due to use of evolving AI/ML technologies (including generative AI), and because our businesses are changing as well, we may be unable to anticipate these techniques and threats, detect data security incidents or implement adequate preventive measures. A cybersecurity attack may penetrate our layered security controls and lead to the misappropriation of or compromise of protected personal information or proprietary or confidential information, create system disruptions, cause shutdowns, or deploy viruses, ransomware, and other malicious software programs that attack our systems or those of our third-party service providers. A cybersecurity attack that bypasses our information technology systems, or the security of our third-party service providers, could materially affect us due to the theft, destruction, loss, misappropriation or release of sensitive personal information, confidential information or proprietary information (including intellectual property,property), operational or business delays resulting from the disruption of our IT systems, extortion attempts, or negative publicity resulting in reputation or brand damage with our members, customers, providers, and other stakeholders.

The costs to detect, prevent, eliminate or address cybersecurity threats and vulnerabilities before or after an incident could be substantial. Our remediation efforts may not be successful and could result in interruptions, delays, or cessation of service, and loss of existing or potential members. In addition, breaches of our security measures or the security measures of third-party service providers, and the unauthorized dissemination of protected personal information or proprietary or confidential information about us or our customers or other third-parties,third parties, can expose our associates' or customers’ private information and result in the risk of financial or medical identity theft, or expose us or other third-partiesthird parties to a risk of loss or misuse of this information, result in significant regulatory fines or penalties, litigation and potential liability for us, damage our brand and reputation, or otherwise harm our business.

•At December 31, 2024,2025, under our contracts with CMS we provided health insurance coverage to approximately 924,8001.0 million individual Medicare Advantage members in Florida. These contracts accounted for approximately 14% of our total premiums and services revenue for the year ended December 31, 2024.2025. The loss of these and other CMS contracts (which are generally renewed annually) or significant changes in the Medicare Advantage and Prescription Drug Plan programs as a result of legislative or regulatory action, including changes to the Part D prescription drug benefit design (such as the changes to plan sponsor liability across the different Part D coverage phases that willbegan to apply beginning in plan year 2025) or reductions in premium payments to us or increases in member benefits or changes to 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.

•CMS uses a risk-adjustment model whichthat 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 (BBA) and the Benefits Improvement and Protection Act of 2000 (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 (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.

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 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 payment year (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 (the "Proposed RADV Rule") 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 20232026 preserved Humana’s position that CMS should apply an FFS Adjuster in any RADV audit that CMS intends to extrapolate. CMS confirmed its intent to apply the Final RADV Rule, including the first application of extrapolated audit results to determine audit settlements without the use of a FFS Adjuster, to CMS audits conducted for PY 2018 and subsequent years when it selected certain of Humana's MA contracts for PY 2018 RADV Audits.audits. Further, on May 21, 2025, CMS announced that it will conduct RADV audits for all eligible MA contracts for each payment year in all newly initiated audits and expedite the completion of RADV audits for PY 2018 through PY 2024 by early 2026. The Final RADV Rule, including the lack of a FFS Adjuster, and any related regulatory, industry or company reactions, the expansion of CMS's auditing efforts to include all eligible MA contracts, the acceleration of RADV audits for PY 2018 through PY 2024, other changes CMS may make to the RADV audit methodology for these years, and combination of these expanded auditing efforts with the application of the Final RADV Rule, could each 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. On September 25, 2025, the Court granted our motion for summary judgment and vacated the Final RADV Rule, finding that the Final RADV Rule was procedurally invalid under the APA because it was not a “logical outgrowth” of the Proposed RADV Rule. On November 21, 2025, the government notified the court of its appeal of that decision, which is now pending at the United States Court of Appeals for the Fifth Circuit and captioned Humana v Kennedy. There can be no assurances as to the final disposition of this lawsuit. 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.

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, market and sell our products, or otherwise operate our business, or restrictions on profitability, including reviews by regulatory bodies that may compare our Medicare Advantage business 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, further restrictions on service arrangements and fee payments between intercompany or vertically-integrated assets, 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) 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.

Laws in each of the states (and Puerto Rico) in which we operate our HMOs, PPOs and other health insurance-related services regulate our operations including: capital adequacy and other licensing requirements, policy language describing benefits, mandated benefits and processes, entry, withdrawal or re-entry into a state or market, rate increases, delivery systems, utilization review procedures, quality assurance, complaint systems, enrollment requirements, claim payments, marketing, and advertising. The HMO, PPO, and other health insurance-related products we offer are sold under licenses issued by the applicable insurance regulators.

Certain of our healthcare services businesses require a Certificate of Need, or CON, to operate in certain states. These states restrict the entry of new providers or services and the expansion of existing providers or services in their state through a CON process, which is periodically evaluated and updated as required by applicable state law. To the extent that we require a CON or other similar approvals to expand our operations, our expansion could be adversely affected by our inability to obtain the necessary approval. To the extent laws in these CON states change, including the elimination of the CON requirement, the intangible value associated with these CONs may be impaired.

Our pharmacy solutions business is highly competitive and subjects us to regulations and distribution and supply chain risks in addition to those we face with our core health benefits businesses.

Our pharmacy solutions business also subjects us to extensive federal, state, and local regulation. The practice of pharmacy is generally regulated at the state level by state boards of pharmacy. Many of the states where we deliver pharmaceuticals, including controlled substances, have laws and regulations that require out-of-state mail-order pharmacies to register with that state’s board of pharmacy. Federal agencies further regulate our pharmacy operations, requiring registration with the U.S. Drug Enforcement Administration and individual state controlled substance authorities in order to dispense controlled substances. In addition, the FDA inspects facilities in connection with procedures to effect recalls of prescription drugs. The Federal Trade Commission also has requirements for mail-order sellers of goods. The U.S. Postal Service, or USPS, has statutory authority to restrict the transmission of drugs and medicines through the mail to a degree that may have an adverse effect on our mail-order operations. The USPS historically has exercised this statutory authority only with respect to controlled substances. If the USPS restricts our ability to deliver drugs through the mail, alternative means of delivery could be significantly more expensive. The U.S. Department of Transportation has regulatory authority to impose restrictions on drugs inserted in the stream of commerce. These regulations generally do not apply to the USPS and its operations. In addition, we are subject to CMS rules regarding the administration of our PDP plans and intercompany pricing between our PDP plans and our pharmacy business.

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 peopleMedicare withand Medicare,Medicaid Medicaid,participants, families, individuals, military service personnel, and communities at large.

InDuring February 2023,2025, we announcedfinalized our planned exit from the Employer Group Commercial Medical Products business, which includesincluded 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 arewere 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. We anticipate the exit of this line of business to be finalized in the first half of 2025.

In order to create capacity to fund growth and investment in our Medicare Advantage business and further expansion of our healthcare services capabilities beginning in 2022,businesses, we committed to drive additional value for the enterprise through cost saving,saving and productivity initiatives,initiatives. In addition, in response to sustained macroeconomic, regulatory and valuecompetitive accelerationpressures fromimpacting previousthe investments.industry, Aswe initiated a resultsubstantial ofmulti-year thesetransformation initiatives,program wedesigned recordedto chargesre-align ofour $281cost millionstructure, operating model and $436technology millionfootprint inwith 2024evolving andmarket 2023, respectively, primarily within operating costs in the consolidated statements of income.conditions.

Further,As a result of these initiatives, we recorded severance charges of $70$449 million, $281 million and $436 million in 20232025, 2024 and 2023, respectively, primarily within operating costs in ourthe consolidated statementstatements of incomeincome. asWe aexpect resultto incur additional charges over the course of our exit from the Employer Group Commercial Medical Products business.program.

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.benefits. In addition, our Insurance segment includes our Military services business, primarily our T-2017T-5 East Region contract, as well as the operations of our PBM business.

The CenterWell segment includes our pharmacy,pharmacy solutions, 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.

Transactions between reportable segments primarily consist of sales of products and services rendered by our CenterWell segment, primarily pharmacy,pharmacy solutions, primary care, and home solutions, 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.

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 stand-alone prescription drug plan, or PDP, 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. TheseEffective planJanuary designs1, generally2025, resultthe Medicare Part D coverage gap was eliminated as mandated by the Inflation Reduction Act of 2022, or IRA. The benefit design changes reduced out-of-pocket costs for beneficiaries, resulting in usgreater cost sharing and a greater portionleveling of the responsibility for totalnet prescription drug costs in the early stages and less in the latter stages. As a result, the PDP benefit ratio generally decreases asthroughout the year progresses.as compared to the historical seasonal decline prior to the IRA. 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. Beginning in 2025, changes to Part D under the Inflation Reduction Act are expected to increase risk-adjusted direct subsidies and cap members' out-of-pocket costs and as a result significantly impact seasonality and cost trends.

•Our strategy offersis to offer 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 December 31, 2024,2025, approximately 3,994,3003,586,100 members, or 71%,68%, of our individual Medicare Advantage members were in value-based relationships under our integrated care delivery model, as compared to 3,764,3003,994,300 members, or 70%,71%, at December 31, 2023.2024.

•Net income attributable to Humana was $1.2 billion, or $9.98$9.84 per diluted common share, and $2.5$1.2 billion, or $20.00$9.98 per diluted common share, in 20242025 and 2023,2024, respectively. This comparison was significantly impacted by put/call valuation adjustments associated with non-consolidating minority interest investments, charges associated with value creation initiatives, transactionimpairment charges, loss on sale of business and integrationsettlement costs, impairment charges and an accrual related toof certain anticipated litigation expenses. 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 20242025 and 20232024 periods:

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, further restrictions on service arrangements and fee payments between intercompany or vertically-integrated assets, increases in regulation of our prescription drug benefit businesses, reductions in reimbursement rates, 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.

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,pharmacy solutions, primary care, and home solutions, to our Insurance segment customers and are described in Note 18 to the audited Consolidated Financial Statements included in Part II, Item 8, "Financial Statements and Supplementary Data" of this Form 10-K.

Consolidated premiums revenue increased $10.8$10.7 billion, or 10.7%,9.6%, from $101.3 billion in the 2023 period to $112.1 billion in the 2024 period to $122.8 billion in the 2025 period primarily due to higher per member Medicare premiumspremiums, largely driven by an increased direct subsidy due to the IRA, and higher per member state-based contracts premiums, as well as Medicaremembership Advantagegrowth andin the state-based contracts membershipand growth.stand-alone PDP businesses. These factors were partially offset by the continuedmembership decline inwithin stand-alonethe PDPindividual membership,Medicare asAdvantage wellbusiness, as a decline in membership in our group commercial medical business as a resultinclusive of ourthe decision to exit thecertain business.unprofitable plans and counties in 2025.

Consolidated services revenue increased $0.4$1.4 billion, or 9.9%,31.6%, from $4.0 billion in the 2023 period to $4.4 billion in the 2024 period to $5.8 billion in the 2025 period primarily due to higher revenues associated with external growth in the primary care business,and pharmacy solutions businesses, partially offset by the impact of the v28 risk model revision.revision impacting the primary care business.

Consolidated benefits expense included $1.0 billion of favorable prior-period medical claims reserve development in the 2025 period and $701 million of favorable prior-period medical claims reserve development in the 2024 period and $872 million of favorable prior-period medical claims reserve development in the 2023 period. Prior-period medical claims reserve development decreased the consolidated benefit ratio by approximately 6080 basis points in the 20242025 period and decreased the consolidated benefit ratio by approximately 9060 basis points in the 20232024 period. Prior-period medical claims reserve development excludes the effects of provider risk-sharing arrangements, which are accounted for separately based on contractual settlement terms.

Depreciation and amortization increaseddecreased $60$141 million, or 7.7%,16.8%, from $779 million in the 2023 period to $839 million in the 2024 period to $698 million in the 2025 period primarily due to decreased capital expenditures.spending.

Interest expense increaseddecreased $167$29 million, or 33.9%,4.4%, from $493 million in the 2023 period to $660 million in the 2024 period to $631 million in the 2025 period primarily due to an increasedecrease in interest rates and higher average debt balances.

Our effective tax rate was 25.5%17.4% and 25.2%25.5% for the 20242025 period and 20232024 period, respectively. The year-over-year2025 increase in theperiod effective income tax rate isreflects primarilythe dueimpact toof a changetax inloss on sale of business, which exceeded the mixbook ofloss. currentThe yearrelated earningstax between our Insurance segment and our CenterWell health services segment, as our CenterWell health services segmentbenefit is subjectrealizable tovia acapital higherloss effective tax rate than our Insurance segment.carryback. For a complete reconciliation of the federal statutory rate to the effective tax rate, refer to Note 12 to the audited Consolidated Financial Statements included in Part II, Item 8, "Financial Statements and Supplementary Data" of this Form 10-K.

Insurance segment income from operations decreasedincreased $1.4$0.4 billion, or 51.4%,29.1%, from $2.6 billion in the 2023 period to $1.3 billion in the 2024 period to $1.7 billion in the 2025 period primarily due to the same factors impacting the Insurance segment's higher benefit ratio partially offset by the impact of the lowerand operating cost ratioratios as more fully described below.

Individual Medicare Advantage membership increaseddecreased 252,900412,500 members, or 4.7%,7.3%, from 5,408,900 members as of December 31, 2023 to 5,661,800 members as of December 31, 2024 primarilyto due5,249,300 members as of December 31, 2025 inclusive of the decision to membershipexit additionscertain associatedunprofitable withplans theand 2024counties Annualin Election Period, or AEP.2025. Individual Medicare Advantage membership includes 937,100760,500 D-SNP members as of December 31, 2024,2025, a net increasedecrease of 65,800176,600 D-SNP members, or 7.6%,18.8%, from 871,300937,100 members as of December 31, 2023.2024. For the full year 2025,2026, we anticipate net membership declinegrowth in our individual Medicare Advantage offerings of approximately 550,000 members.25%.

Group Medicare Advantage membership increased 36,10022,700 members, or 7.1%,4.2%, from 509,600 members as of December 31, 2023 to 545,700 members as of December 31, 2024 primarily due to growth568,400 members as of December 31, 2025 consistent with expectations as we maintain pricing discipline in smalla andcompetitive medium group accounts.market. For the full year 2025,2026, we anticipate net membership growth in our group Medicare Advantage offerings toof beapproximately relatively150,000 flat.members.

Medicare stand-alone PDP membership decreasedincreased 560,900174,400 members, or 19.7%,7.6%, from 2,849,100 members as of December 31, 2023 to 2,288,200 members as of December 31, 2024 primarily due to continued2,462,600 intensifiedmembers competitionas forof MedicareDecember stand-alone31, PDP2025 offerings.reflecting shifting competitive dynamics. For the full year 2025,2026, we anticipate net membership growth in our Medicare stand-alone PDP offerings of approximately 200,0001,000,000 members.

State-based contracts and other membership increased 231,100155,700 members, or 18.8%,10.7%, from 1,228,800 members as of December 31, 2023 to 1,459,900 members as of December 31, 2024 reflectingto 1,615,600 members as of December 31, 2025 primarily due to the impactVirginia contract implemented in 2025 and the allocation of membership additions associated with the implementation of new contracts partially offset withadditional membership lossin as a result of the public health of emergency unwind.Kentucky. For the full year 2025,2026, we anticipate net membership growth in our state-based contracts of approximatelyin 175,000a range of 25,000 to 250,000100,000 members.

Specialty membership decreasedincreased 306,300180,600 members, or 6.3%,4.0%, from 4,868,300 members as of December 31, 2023 to 4,562,000 members as of December 31, 2024 to 4,742,600 members as of December 31, 2025 primarily duereflecting togrowth non-renewalin ofgroup dental and vision plans as a result of exit from the Employer Group Commercial Medical Products business.products.

Insurance segment premiums revenue increased $10.8$10.7 billion, or 10.7%,9.6%, from $101.3 billion in the 2023 period to $112.1 billion in the 2024 period to $122.8 billion in the 2025 period primarily due to higher per member Medicare premiumspremiums, largely driven by an increased direct subsidy due to the IRA, and higher per member state-based contracts premiums, as well as Medicaremembership Advantagegrowth andin the state-based contracts membershipand growth.stand-alone PDP businesses. These factors were partially offset by the continuedmembership decline inwithin stand-alonethe PDPindividual membership,Medicare asAdvantage wellbusiness, as a decline in membership in our group commercial medical business as a resultinclusive of ourthe decision to exit thecertain business.unprofitable plans and counties in 2025.

Insurance segment services revenue decreasedincreased $34$0.1 million,billion, or 3.4%,5.3%, from $1.0 billion in the 2023 period to $966 million in the 2024 period to $1 billion in the 2025 period.

The Insurance segment benefits expense included $1.0 billion of favorable prior-period medical claims reserve development in the 2025 period and $701 million of favorable prior-period medical claims reserve development in the 2024 period and $872 million of favorable prior-period medical claims reserve development in the 2023 period. Prior-period medical claims reserve development decreased the Insurance segment benefit ratio by approximately 6080 basis points in the 20242025 period and decreased the Insurance segment benefit ratio by approximately 9060 basis points in the 20232024 period. Prior-period medical claims reserve development excludes the effects of provider risk-sharing arrangements, which are accounted for separately based on contractual settlement terms.

The Insurance segment operating cost ratio decreased 10010 basis points from 10.2% in the 2023 period to 9.2% in the 2024 period to 9.1% in the 2025 period primarily due to scale efficiencies associated with growth in individual Medicare Advantage membership, administrative cost efficiencies resulting from ourthe value creation initiatives,initiatives aand lesseroperating impactleverage ofassociated commissionwith expenseincreased forrevenues brokers in the 2024 period compared to the 2023 period as a result of significant individual Medicare Advantage membership growth in 2023, as well asfrom the impact of the accrued charge related to certain anticipated litigation expenses included in the 2023 period.IRA. These factors were partially offset by significantlythe reducedoperating compensationleverage accrualsimpact inassociated with the 2023loss period.of individual Medicare Advantage membership.

CenterWell income from operations decreasedwas $0.1relatively billion,unchanged or 5.3%, from $1.4 billion in the 2023 period toat $1.3 billion in the 2024 periodand primarily2025 dueperiods, toreflecting the same factors impacting the CenterWell segment's higherrevenue and operating cost ratio as more fully described below.

CenterWell services revenue increased $0.4$1.4 billion, or 14.2%,39.0%, from $3.0 billion in the 2023 period to $3.5 billion in the 2024 period to $4.8 billion in the 2025 period primarily due to higher revenues associated with growth in the primary care business,and pharmacy solutions businesses, partially offset by the impact of the v28 risk model revision.revision impacting the primary care business.

The CenterWell segment operating cost ratio increased 10090 basis points from 91.2% in the 2023 period to 92.2% in the 2024 period primarilyto due93.1% toin the unfavorable2025 impactperiod primarily resulting from the continued phase-in of the v28 risk model revision towithin the primary care businessbusiness, andas well as the impactuptick of significantlyvolume reducedwithin compensationCenterWell accrualsSpecialty inPharmacy that carries a higher operating cost ratio than the 2023traditional period,pharmacy business. These factors were partially offset by continued maturation of the v28 mitigation activities within the primary are business and administrative cost efficiencies resulting from ourthe value creation initiatives and positive prior-period medical claims reserve development within the Primary Care Organization.initiatives.

Cash and cash equivalents decreasedincreased to $4.2 billion at December 31, 2025 from $2.2 billion at December 31, 2024 from $4.7 billion at December 31, 2023.2024. The change in cash and cash equivalents for the years ended December 31, 2024,2025, 20232024 and 20222023 is summarized as follows:

Cash flows provided by operations of $0.9 billion in the 2025 period decreased $2.0 billion from cash flows provided by operations of $3.0 billion in the 20242024. periodThe decreaseddecrease $1.0in billionour fromoperating cash flows providedprimarily byreflected operationstiming ofimpacts, $4.0including billionthe year-over-year increase in the 2023 period primarilyreceivables due to lowerthe earningsIRA inand the 2024 period compared to the 2023 period, partially offset by the favorableunfavorable impact of working capital changes.items.

The detail of total net receivables (exclusive of Part D IRA impacts) was as follows at December 31, 2024,2025, 20232024 and 20222023:

The changes in Medicare receivables for boththe 2025 period reflects higher per member Medicare premiums, partially offset by lower individual Medicare Advantage membership. The change in Medicare receivables for the 2024 period and the 2023 period reflectreflects individual Medicare Advantage membership growthgrowth. andIn addition, both periods further reflect the typical pattern caused by the timing of accruals and related collections associated with the CMS risk-adjustment model. TheSignificant increasecollections occur with the mid-year and final settlements with CMS in State-based contracts receivables for the 2024second and 2023third periods is primarily related to expansion to various states.quarter.

Value Creation Initiatives and Impairment Charges

As a result of these initiatives, we recorded charges of $98$56 million and $24$154 million for the three and six months ended MarchJune 31,30, 20262026, respectively, and $29 million and $53 million for the three and six months ended June 30, 2025, respectively, within operating costs in the consolidated statements of income. The charges primarily relate to severance and associate exit costs, asset impairments, and external consulting spend,expenses severanceincurred andto other employee related charges in connection with workforce optimization, and asset impairments forexecute the three months ended March 31, 2026 and 2025.program. We expect to incur additional charges over the course of the program.

•Our strategy is to offer 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 MarchJune 31,30, 2026, approximately 4,088,8004,118,700 members, or 64%, of our individual Medicare Advantage members were in value-based relationships under our integrated care delivery model, as compared to 3,501,7003,542,300 members, or 67%,68%, at MarchJune 31,30, 2025.

•Net income attributable to Humana was $1.19$694 billion,million, or $9.83$5.73 per diluted common share, and $1.24$545 billion,million, or $10.30$4.51 per diluted common share, for the three months ended MarchJune 31,30, 2026 and 2025, respectively. Net income attributable to Humana was $1.9 billion, or $15.55 per diluted common share, and $1.8 billion, or $14.81 per diluted common share, for the six months ended June 30, 2026 and 2025, respectively. These comparisons were impacted by put/call valuation adjustments associated with non-consolidating minority interest investmentsinvestments, impairment charges and charges associated with value creation initiatives. The impact of these adjustments to our consolidated income before income taxes and equity in net losses and diluted earnings per common share was as follows for the 2026 and 2025 quarter and period:

The following discussion primarily deals with our results of operations for the three months ended MarchJune 31,30, 2026, or the 2026 quarter andquarter, the three months ended MarchJune 31,30, 2025, or the 2025 quarter.quarter, the six months ended June 30, 2026, or the 2026 period, and the six months ended June 30, 2025, or the 2025 period.

(b)Represents operating costs, excluding depreciation and amortization, as a percentage of total revenues less net investment income.

Consolidated premiums revenue increased $7.2$8.1 billion, or 23.6%,26.4%, from $30.5$30.7 billion in the 2025 quarter to $37.7$38.8 billion in the 2026 quarter and increased $15.3 billion, or 25.0%, from $61.2 billion in the 2025 period to $76.5 billion in the 2026 period primarily reflecting membership growth across the Medicare businesses in 2026, higher per member Medicare Advantage (MA) and stand-alone PDP premiums largely driven by an increase in MA benchmark funding from the Centers for Medicare and Medicaid Services (CMS) and the increased Part D direct subsidy as a result of the Inflation Reduction Act (IRA). These factors were partially offset by the previously disclosed Bonus Year (BY) 2026 Star Ratings headwind.

Consolidated services revenue increased $0.3$0.4 billion, or 25.7%,27.1%, from $1.3$1.4 billion in the 2025 quarter to $1.7$1.8 billion in the 2026 quarter and increased $0.7 billion, or 26.4%, from $2.7 billion in the 2025 period to $3.5 billion in the 2026 period primarily reflecting the increased payor-agnostic client base across the CenterWell platform partially offset by the final year of the phase-in of the v28 risk model revision.

Net Investment Income

InvestmentNet investment income wasdecreased relatively$19 unchangedmillion, or 7.0%, from $264$272 million in the 2025 quarter to $262$253 million in the 2026 quarter.quarter and decreased $21 million, or 3.9%, from $536 million in the 2025 period to $515 million in the 2026 period.

Consolidated benefits expense increased $7.2$7.8 billion, or 27.0%,28.3%, from $26.5$27.6 billion in the 2025 quarter to $33.7$35.4 billion in the 2026 quarter.quarter and increased $15.0 billion, or 27.7%, from $54.1 billion in the 2025 period to $69.1 billion in the 2026 period. The consolidated benefit ratio increased 240140 basis points from 87.0%89.7% for the 2025 quarter to 89.4%91.1% for the 2026 quarter and increased 180 basis points from 88.4% for the 2025 period to 90.2% for the 2026 period primarily reflecting the BY 2026 Star Ratings revenue headwind, the effect of the individual MA membership growth during the most recent Annual Election Period (AEP) and Open Enrollment Period (OEP) as the new members, on average, run at a higher benefit ratio as compared to retained members (excluding the impact of the BY 2026 Star Ratings headwind) and the anticipated lower favorable prior-period medical claims reserve development in the 2026 quarter compared to the 2025 quarter.2026. These factors were partially offset by the 2026 individual MA pricing, inclusive of the MA funding environment (excluding the BY 2026 Star Ratings headwind) combined with our ongoing clinical excellence efforts, more than offsetting the assumption of claims trend (with largely stable benefits year over yearyear-over-year), and the benefit of our group MA recontracting efforts for the 2026 plan year.

Consolidated benefits expense included $389$53 million of favorable prior-period medical claims reserve development in the 2026 quarter and $477$161 million of favorable prior-period medical claims development in the 2025 quarter. Consolidated benefits expense included $442 million of favorable prior-period medical claims reserve development in the 2026 period and $638 million of favorable prior-period medical claims reserve development in the 2025 period. This development does not directly correspond to our operating results as a portion is attributable to provider risk-sharing arrangements, which are accounted for separately based on contractual terms.

Consolidated operating costs increased $0.6$0.4 billion, or 19.1%,12.2%, from $3.4$3.5 billion in the 2025 quarter to $4.0 billion in the 2026 quarter.quarter and increased $1.1 billion, or 15.5%, from $6.9 billion in the 2025 period to $8.0 billion in the 2026 period. The consolidated operating cost ratio decreased 40120 basis points from 10.6%11.0% for the 2025 quarter to 10.2%9.8% for the 2026 quarter and decreased 80 basis points from 10.8% for the 2025 period to 10.0% for the 2026 period primarily reflecting operating leverage associated with increased revenues from membership growth across the Medicare businesses in 2026 combined with an improved MA benchmark funding rate and increased Part D direct subsidy resulting from the IRA, as well as the progress on our previously discussed tactical cost cutting and transformation initiatives combined with the beneficial impact of our prior value creation initiatives that have driven administrative cost efficiencies. These factors were partially offset by the impact of the previously disclosed BY 2026 Star Ratings headwindheadwind, higher charges associated with our value creation initiatives and a higher CenterWell operating cost ratio.ratio during the 2026 period.

Depreciation and amortization decreased $20$19 million, or 10.9%,10.7%, from $183$178 million in the 2025 quarter to $163$159 million in the 2026 quarter and decreased $39 million, or 10.8%, from $361 million in the 2025 period to $322 million in the 2026 period primarily due to decreased capital spending.

Interest expense increased $33$40 million, or 20.6%,25.5%, from $160$157 million in the 2025 quarter to $193$197 million in the 2026 quarter and increased $73 million, or 23.0%, from $317 million in the 2025 period to $390 million in the 2026 period primarily due to financing costscosts, including liquidity and capital management measures for 2026, and higher average debt balances.

The effective income tax rate was 25.0%25.6% and 24.6%24.7% for the three months ended MarchJune 31,30, 2026, and 2025, respectively, and 25.2% and 24.6% for the six months ended June 30, 2026 and 2025, respectively. The year-over-year2026 increasequarter inand theperiod effective income tax rate increase is primarily duerelated to increased state tax expense.taxes.

Insurance segment income from operations decreasedincreased $139$54 million, or 8.8%,7.0%, from $1.6$766 billionmillion in the 2025 quarter to $1.4$820 million in the 2026 quarter and decreased $0.09 billion, or 3.6%, from $2.34 billion in the 2025 period to $2.25 billion in the 2026 quarterperiod primarily due to the same factors impacting the Insurance segment's benefit and operating cost ratios as more fully described below.

Individual Medicare Advantage membership increased 1,177,5001,224,400 members, or 22.6%,23.4%, from MarchJune 31,30, 2025 to MarchJune 31,30, 2026 reflecting net membership gains during the most recent AEP and OEP. Individual Medicare Advantage membership includes 945,100959,900 D-SNP members as of MarchJune 31,30, 2026, a net increase of 146,000173,900 D-SNP members, or 18.3%,22.1%, from 799,100786,000 D-SNP members as of MarchJune 31,30, 2025.

Group Medicare Advantage membership increased 156,600157,200 members, or 27.3%,27.6%, from MarchJune 31,30, 2025 to MarchJune 31,30, 2026 reflecting net membership additions from the 2026 selling season.

Medicare stand-alone PDP membership increased 1,427,5001,519,300 members, or 58.7%,62.6%, from MarchJune 31,30, 2025 to MarchJune 31,30, 2026 reflecting net membership additions from group MA recontracting efforts and the 2026 selling season.

State-based contracts and other membership decreasedincreased 46,80020,300 members, or 2.9%,1.3%, from MarchJune 31,30, 2025 to MarchJune 31,30, 2026 primarily reflecting shifts in other membership offset by net membership additions in state-based contracts.contracts offset by shifts in other membership.

Specialty membership increased 223,900198,700 members, or 5%,4%, from MarchJune 31,30, 2025 to MarchJune 31,30, 2026 primarily reflecting growth in group dental and vision products.

Insurance segment premiums revenue increased $7.2$8.1 billion, or 23.6%,26.4%, from $30.5$30.7 billion in the 2025 quarter to $37.7$38.8 billion in the 2026 quarter and increased $15.3 billion, or 25.0%, from $61.2 billion in the 2025 period to $76.5 billion in the 2026 period primarily reflecting membership growth across the Medicare businesses in 2026, higher per member MA and stand-alone PDP premiums largely driven by an increase in MA benchmark funding from CMS and the increased Part D direct subsidy as a result of the IRA. These factors were partially offset by the BY 2026 Star Ratings headwind.

Insurance segment services revenue decreased $5$7 million, or 2.0%,3.4%, from $252$206 million in the 2025 quarter to $247$199 million in the 2026 quarter.quarter and decreased $12 million, or 2.6%, from $458 million in the 2025 period to $446 million in the 2026 period.

The Insurance segment benefit ratio increased 200130 basis points from 87.4%89.9% for the 2025 quarter to 89.4%91.2% for the 2026 quarter and increased 160 basis points from 88.7% for the 2025 period to 90.3% for the 2026 period primarily reflecting the BY 2026 Star Ratings revenue headwind, the effect of the individual MA membership growth during the most recent AEP and OEP as the new members, on average, run at a higher benefit ratio as compared to retained members (excluding the impact of the BY 2026 Star Ratings headwind) and the anticipated lower favorable prior-period medical claims reserve development in the 2026 quarter compared to the 2025 quarter.2026. These factors were partially offset by the 2026 individual MA pricing, inclusive of the MA funding environment (excluding the BY 2026 Star Ratings headwind) combined with our ongoing clinical excellence efforts, more than offsetting the assumption of claims trend (with largely stable benefits year over yearyear-over-year), and the benefit of our group Medicare Advantage recontracting efforts for the 2026 plan year.

The Insurance segment operating cost ratio decreased 90120 basis points from 8.2%8.3% for the 2025 quarter to 7.3%7.1% for the 2026 quarter and decreased 110 basis points from 8.3% for the 2025 period to 7.2% for the 2026 period primarily reflecting operating leverage associated with increased revenues from membership growth across the Medicare businesses in 2026 combined with an improved MA benchmark funding rate and increased Part D direct subsidy resulting from the IRA, as well as the progress on our previously discussed tactical cost cutting and transformation initiatives combined with the beneficial impact of prior value creation initiatives that have driven administrative cost efficiencies. These factors were partially offset by the impact of the previously disclosed BY 2026 Star Ratings headwind.

CenterWell income from operations decreasedincreased $103$122 million, or 26.3%,35.5%, from $392$344 million in the 2025 quarter to $289$466 million in the 2026 quarter and increased $19 million, or 2.6%, from $736 million in the 2025 period to $755 million in the 2026 period primarily due to the same factors impacting the CenterWell segment's revenue and operating cost ratio as more fully described below.

CenterWell external services revenue increased $0.3$0.4 billion, or 32.0%,32.4%, from $1.1$1.2 billion in the 2025 quarter to $1.4$1.6 billion in the 2026 quarter and increased $0.7 billion, or 32.2%, from $2.3 billion in the 2025 period to $3.0 billion in the 2026 period primarily reflecting the continued expansion of our payor-agnostic client base, primarily associated with the primary care business as a result of recent acquisitions, partially offset by the final year of the phase-in of the v28 risk model revision.

CenterWell intersegment revenues increased $0.7$0.9 billion, or 16.4%,19.9%, from $4.0$4.3 billion in the 2025 quarter to $4.7$5.2 billion in the 2026 quarter and increased $1.5 billion, or 18.3%, from $8.4 billion in the 2025 period to $9.9 billion in the 2026 period primarily due to higher revenues associated with growth in each of the CenterWell business lines resulting from increased Medicare membership in 2026.

Cash and cash equivalents increased to approximately $5.0$6.9 billion at MarchJune 31,30, 2026 from $4.2 billion at December 31, 2025. The change in cash and cash equivalents for the threesix months ended MarchJune 31,30, 2026 and 2025 is summarized as follows:

Cash flows provided by operations of $1.3$3.2 billion in the 2026 quarterperiod increased $0.9$1.6 billion from cash flows provided by operations of $0.3$1.6 billion in the 2025 quarter.period. The increase in our operating cash flows was the result of favorable working capital activity, primarily associated with an increase in the IBNR balance,balance modestlyand offsetthe byfavorable timing impact of a decline$1.05 billion Medicaid state-directed payment that settled shortly after June 30, 2026, combined with a modest increase in net earnings in the 2026 quarter.earnings.

The detail of total net receivables at MarchJune 31,30, 2026 and December 31, 2025 and reconciliation to cash flow for the threesix months ended MarchJune 31,30, 2026 and 2025 was as follows:

The change in Medicare receivables for the 2026 quarterperiod and 2025 quarterperiod reflects 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.

During the 2026 quarter,period, we acquired MaxHealth for cash consideration of approximately $908 million, net of cash acquired. NoWe acquired and disposed other businesses were acquired that individually or in the aggregate haddid not have a material impact on our results of operations, financial conditions or cash flows during the 2026 and 2025 quarters.periods.

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 $121$253 million in the 2026 quarterperiod and $95$209 million in the 2025 quarter.period.

Net purchases of investment securities were $1.5$1.7 billion in the 2026 quarterperiod and net proceeds of investment securities were $409$871 million in the 2025 quarter.period.

Receipts from CMS associated with Medicare Part D claim subsidies for which we do not assume risk were higher than claim payments by $548 million and $75$479 million in the 2026 period and claim payments were higher than receipts from CMS associated with Medicare Part D claim subsidies for which we do not assume risk by $482 million in the 2025 quarters, respectively.period.

Under our administrative services only TRICARE contracts, reimbursements from the federal government exceeded health care costs payments for which we do not assume risk by $125$68 million in the 2026 quarterperiod and health care costs payments for which we do not assume risk exceeded reimbursements from the federal government by $110$97 million in the 2025 quarter.period.

InUnder 2024, we entered into aour securities lending program whereprogram, we loan certain investment securities for short periods of time in exchange for collateral. InNet 2024,proceeds wefrom alsothe enteredsecurities intolending anprogram were $64 million and $48 million in the 2026 period and 2025 period, respectively. Under the uncommitted receivables purchase facility under which certain pharmaceutical rebate receivables may be sold on a non-recourse basis to a financial institution. In the 2026 quarterperiod net repayments from the securities lending program were $55 million. Therethere were no net repayments or proceeds from the uncommitted receivables purchase facility in the 2026 quarter.facility. In the 2025 quarter, net proceeds from the securities lending program were $175 million andperiod net repayments from the uncommitted receivables purchase facility were $68$123 million.

Net proceeds from the issuance of commercial paper were $693$1.3 millionbillion in the 2026 quarterperiod and maximum principal amount outstanding at any one time during the 2026 quarterperiod was $2.0$2.6 billion. Net repayments from the issuance of commercial paper were $4$5 million in the 2025 quarter.period.

We repurchased common shares for $103 million and $100 million in the 2026 period and 2025 period, respectively, under share repurchase plans authorized by the Board of Directors. We also acquired common shares in connection with employee stock plans for $107$5 million and $9 million in the 2026 quarterperiod and 2025 quarter,period, respectively.

We paid dividends to stockholders of $107$214 million and $108$214 million during the 2026 quarterperiod and 2025 quarter,period, respectively.

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 MarchJune 31,30, 2026 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 company were $111$1.6 millionbillion at MarchJune 31,30, 2026 compared to $1.5 billion at December 31, 2025. This decreaseincrease primarily reflects capitalthe contributionstiming toof certainan subsidiaries,approximately cash$1.05 dividendsbillion toMedicaid shareholders,state-directed capitalpayment expenditures,that andsettled commonshortly stockafter repurchases,June partially30, offset by2026, net proceeds from the issuance of junior subordinated notes and commercial paper.paper, partially offset by cash paid for acquisitions, capital contributions to certain subsidiaries, repayments of senior notes, cash dividends to shareholders, capital expenditures, and common stock repurchases. Our use of operating cash derived from our non-insurance subsidiaries, such as our CenterWell segment, is generally not restricted by departments of insurance (or comparable state regulators).

During 2025 and 2026, we entered into agreements with unrelated insurers that do not qualify for reinsurance accounting under GAAP, and are accounted for using deposit accounting. These contracts minimize the risk of catastrophic loss, reducing capital and surplus requirements. Total deposit assets and liabilities related to these reinsurance agreements that do not qualify for reinsurance accounting under GAAP are not material at MarchJune 31,30, 2026.

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 DecemberMarch 31, 2025,2026, our state regulated subsidiaries had aggregate statutory capital and surplus of approximately $14.1$15.5 billion, which exceeded aggregate minimum regulatory requirements of $7.5$8.2 billion. The amount of ordinary dividends that may be paid to our parent company inwas approximately $0.6 billion during the six months ended June 30, 2026 iscompared approximatelyto $1.1$0.3 billion induring the aggregate.six Actualmonths dividendsended paidJune to our parent company were approximately $1.1 billion in30, 2025. 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.