Humana Inc.

Overall execution & financial outlook improving (2026): - Management says Humana is “in a good place,” with strong execution and earnings/margin recovery moving from on-plan toward ahead of plan. - 2026 adjusted EPS outlook raised to at least $9.50 (from at least $9). - Cost trends described as in line to better than expected for both new and existing members; IBNR reserves increasing sequentially despite typical pharmacy mix shifts later in the year. - Pretax MA margin: targeting to double individual MA pretax margin this year excluding the Stars headwind.

Key “make-or-break” driver: Stars performance (BY’28) and margin bridge expectations - BY’28 Stars results are a major highlight: member-weighted Star rating of 4.17, described as approaching the highest Humana has ever achieved. - Operational quality wins cited (examples): +663k more care opportunities met, +534k annual preventive visits, +28k overdue mammograms leading to ~600 earlier breast cancer detections, +93k colorectal screenings leading to ~100 precancers/cancers, +73k overdue diabetes eye exams leading to ~17k new diabetes eye disease diagnoses. - Stars goal framework: Humana says it will manage business assuming roughly top-quartile performance (not top-decile), to keep cost/benefit structures sustainable. - 2028 expected “one-time tailwind”: Stars outperformance is expected to exceed targets, creating a tailwind in 2028. Humana will not invest all of it; expects some pass-through to shareholders (quantum TBD after more info). - BY’29 outlook: expects to achieve top-quartile performance (running ~5% ahead of last year’s quality improvement rate on key HEDIS metrics at end of Q3).

2027 expectations: no known new headwinds; margin improvement expected but not precisely guided - For 2027 AEP/membership, management states they don’t have any known headwinds other than carrying over the Stars headwind from this year. - Main tailwinds for 2027: ongoing transformation to reduce OpEx and medical costs, Medicaid/PCO “J-curve” progress, improved product price/positioning from 2026 bids, and fewer new members (lower marketing/onboarding year-1 costs). - Membership growth direction: still early—Humana currently anticipates 2027 membership up vs. 2026 (due to strong recapture/retention from planned exits and new sales ahead of plan), but retention data not yet known, so precision is limited. - Investor reality check: Celeste explicitly notes it’s too early to pinpoint 2027 margin landing, and it depends heavily on AEP membership size/composition and retention outcomes.