Humana Inc. (NYSE:HUM)

The analysis of the financial data reveals significant changes and trends in the intangible assets over the five-year period.

Goodwill

There is a marked increase in goodwill from 2019 to 2021, with a peak at 11,092 million USD in 2021, more than doubling compared to 2019. However, it decreases in 2022 to 9,142 million USD and stabilizes slightly with a marginal increase to 9,550 million USD in 2023.

Certificates of need

Data for certificates of need is available only from 2021 onward, showing a decline from 1,771 million USD in 2021 to 1,132 million USD in 2022 and a further slight decrease to 1,092 million USD in 2023.

Medicare licenses

Medicare licenses also start appearing from 2021, with a value of 522 million USD. This value nearly halves by 2022 to 286 million USD and remains almost flat into 2023 at 288 million USD, indicating a reduction in these assets.

Customer contracts/relationships

There is steady growth in customer contracts and relationships from 646 million USD in 2019 to 956 million USD in 2023, with consistent annual increases, reflecting strengthening intangible assets in this category.

Trade names and technology

Trade names and technology values increase from 84 million USD in 2019 to 160 million USD in 2021, followed by a slight decline to 142 million USD in 2022 and a minor decrease to 139 million USD in 2023, showing relative stability after initial growth.

Provider contracts

Provider contracts remain relatively stable over the period, fluctuating slightly around the low 70s (69 to 73 million USD) until 2022, then decreasing to 67 million USD in 2023.

Noncompetes and other

This category shows a notable increase from 29 million USD in 2019 and 2020 to 35 million USD in 2021, then sharply rises to 86 million USD in 2022, followed by a small decrease to 84 million USD in 2023, indicating growing investments or acquisitions in this intangible asset.

Other intangible assets, cost

There is an outstanding increase in other intangible assets, cost, from 829 million USD in 2019 to a peak of 3,443 million USD in 2021. This is followed by a reduction to 2,648 million USD in 2022 and a slight decrease to 2,626 million USD in 2023, suggesting a dilution or amortization impact post-peak investment.

Accumulated amortization

Accumulated amortization increases steadily from -652 million USD in 2019 to -933 million USD in 2023, reflecting ongoing amortization of intangible assets, with no significant fluctuations.

Other intangible assets, net

The net value of other intangible assets grows from 177 million USD in 2019 to 2,639 million USD in 2021, then declines sharply to 1,765 million USD in 2022 and further to 1,693 million USD in 2023. This trend suggests that amortization and possible impairments have reduced the net carrying value despite prior sharp increases.

Goodwill and other intangible assets (total)

The combined total of goodwill and other intangible assets follows the pattern seen in goodwill: a substantial increase from 2019 to 2021, reaching 13,731 million USD, then decreasing in subsequent years to 10,907 million USD in 2022 and slightly rising to 11,243 million USD in 2023.

Overall, the data indicates significant expansions in goodwill and other intangible assets peak around 2021, followed by contractions or stabilization afterwards. This pattern suggests major acquisitions or intangible asset capitalization up to 2021, with subsequent amortization effects and modest adjustments. Certain specific intangible assets, such as certificates of need and Medicare licenses, appeared in reported data starting 2021 and generally declined thereafter. Customer contracts and noncompetes showed steady or sharp increases, respectively, reflecting strategic asset growth in these areas.

The financial data reveals notable developments in both the total assets and stockholders’ equity from 2019 through 2023, with marked differences between reported and goodwill-adjusted figures.

Total Assets

Reported total assets demonstrate a consistent upward trajectory from 29,074 million US dollars in 2019 to 47,065 million in 2023, indicating considerable growth over the five-year period. There was a substantial increase between 2020 and 2021, rising by nearly 9,389 million, followed by a slight decline in 2022 before resuming growth in 2023.

The adjusted total assets, which exclude goodwill, also grew steadily from 25,146 million in 2019 to 37,515 million in 2023. The increase, however, is less pronounced than the reported figures, reflecting the impact goodwill has on total asset valuation. Growth in adjusted assets slowed significantly after 2021, showing modest increases in the last two years.

Stockholders’ Equity

Reported stockholders’ equity rose consistently from 12,037 million in 2019 to 16,262 million in 2023. Despite a minor dip in 2022, the overall trend is positive, suggesting the company maintained and increased its net worth over the period.

Adjusted stockholders’ equity, net of goodwill, presents a more volatile pattern. It increased from 8,109 million in 2019 to 9,281 million in 2020 but then sharply dropped to 4,988 million in 2021. Following this, there was a gradual recovery, reaching 6,712 million by 2023. This volatility indicates significant fluctuations in the valuation or impairment of goodwill affecting the equity base.

Overall, the disparity between reported and adjusted figures underscores the considerable role goodwill plays in the company’s asset and equity values. The consistent growth in reported figures points to expanding asset and equity bases, whereas the adjusted data suggests more conservative growth once goodwill is removed, alongside periods of goodwill write-downs or impairments affecting adjusted equity notably in 2021.

Total Asset Turnover

The reported total asset turnover shows a declining trend from 2.21 in 2019 to 1.87 in 2021, followed by a recovery to 2.24 in 2023. In contrast, the adjusted total asset turnover remains relatively stable around 2.5 in 2019-2021, then increases steadily to 2.81 by 2023, indicating improved efficiency when goodwill is excluded.

Financial Leverage

Reported financial leverage increases gradually over the period, from 2.42 in 2019 to 2.89 in 2023. Adjusted financial leverage shows more volatility, rising significantly to 6.67 in 2021 before decreasing to around 5.59 in 2023. This suggests greater reliance on debt or liabilities after adjusting for goodwill, with peak leverage in 2021.

Return on Equity (ROE)

The reported ROE decreases consistently from a high of 24.53% in 2020 down to 15.31% in 2023. By contrast, adjusted ROE shows a strong upward surge to 58.8% in 2021 followed by a decline to 37.08% in 2023, though it remains well above reported figures. This indicates that excluding goodwill significantly enhances perceived equity profitability, despite recent declines.

Return on Assets (ROA)

Reported ROA declines steadily through the period, falling from 9.63% in 2020 to 5.29% in 2023. The adjusted ROA similarly decreases but stays consistently above reported figures, declining from 11.03% in 2020 to 6.63% in 2023. This reflects diminished asset profitability over time but a more favorable performance when goodwill is excluded.

The financial data reveals noteworthy trends in the total assets and asset turnover ratios over the five-year period ending December 31, 2023.

Total Assets

Reported total assets have demonstrated a consistent upward trajectory, rising from US$29,074 million in 2019 to US$47,065 million in 2023. This represents an overall increase of approximately 62%. The year 2022 experienced a slight contraction from 2021 levels, but the figure rebounded strongly in 2023.

Adjusted total assets, which presumably exclude goodwill, also showed consistent growth but at lower absolute levels compared to reported totals. These assets increased from US$25,146 million in 2019 to US$37,515 million in 2023. Growth slowed somewhat in 2021 and 2022 but resumed in 2023.

Total Asset Turnover

Reported total asset turnover ratios declined from 2.21 in 2019 to a trough of 1.87 in 2021, indicating less efficient use of assets during that period. However, efficiency recovered in subsequent years, reaching 2.24 in 2023, the highest ratio in the observed timeframe.

Adjusted total asset turnover ratios were higher than reported ratios for all years, starting at 2.56 in 2019 and maintaining relative stability through 2021. Thereafter, efficiency improved considerably, with ratios climbing from 2.49 in 2021 to 2.81 in 2023, suggesting enhanced utilization of non-goodwill asset bases.

In summary, the company has experienced sustained asset growth, both reported and goodwill-adjusted, with occasional slowdowns. Asset efficiency, after a mid-period decline, has improved noticeably by 2023, especially when adjusting for goodwill. This pattern suggests a strengthening operational capability in converting assets into revenue or output over time, particularly with regard to tangible and other adjusted assets.

Over the observed period, total assets demonstrated consistent growth on both a reported and goodwill adjusted basis. Reported total assets increased from approximately 29.1 billion USD at the end of 2019 to around 47.1 billion USD by the end of 2023, reflecting a substantial expansion. Adjusted total assets, which exclude goodwill effects, also showed an upward trajectory, rising from roughly 25.1 billion USD in 2019 to 37.5 billion USD in 2023, although the growth rate was more moderate compared to reported figures.

Stockholders’ equity displayed a generally positive trend in reported terms, climbing from about 12.0 billion USD at the end of 2019 to 16.3 billion USD by 2023. The adjusted equity numbers presented a less consistent pattern, starting at 8.1 billion USD in 2019 and peaking near 9.3 billion USD in 2020 before dropping significantly to 5.0 billion USD in 2021. Thereafter, adjusted equity began recovering, reaching approximately 6.7 billion USD in 2023. This volatility in adjusted equity values suggests potential impacts from impairments or changes related to goodwill adjustments during this timeframe.

Financial leverage ratios reveal diverging paths depending on the measurement basis. Reported financial leverage showed a steady increase from 2.42 in 2019 to 2.89 in 2023. This gradual rise indicates enhanced use of financial obligations relative to equity under reported figures. In contrast, adjusted financial leverage ratios started at 3.10 in 2019, increased moderately to 3.29 in 2020, and then surged dramatically to 6.67 in 2021 before declining to 5.59 in 2023. The sharp increase in 2021 followed by partial reduction suggests a significant change in capital structure or adjustments affecting equity values, impacting the leverage ratio when goodwill is excluded.

Overall, the patterns indicate meaningful growth in asset base and equity under reported data, coupled with a deliberate increase in financial leverage. The adjusted figures, however, denote more pronounced fluctuations, especially in equity and leverage, reflecting the material effect of goodwill-related adjustments on the company’s financial structure during the analyzed years.

The financial data reveals distinct trends in both reported and goodwill-adjusted metrics over the five-year period ending in 2023.

Stockholders' Equity

Reported stockholders' equity exhibited a general upward trend from US$12,037 million in 2019 to US$16,262 million in 2023, despite a slight decline in 2022. This indicates a growth in the company's net asset base as reported under conventional accounting measures.

In contrast, adjusted stockholders' equity, which accounts for goodwill adjustments, showed more volatility. It increased from US$8,109 million in 2019 to US$9,281 million in 2020, then sharply dropped to US$4,988 million in 2021. Subsequently, it partially recovered to US$6,169 million in 2022 and further to US$6,712 million in 2023. This pattern suggests significant fluctuations in intangible asset valuation affecting equity.

Return on Equity (ROE)

The reported ROE decreased from 22.49% in 2019 to 15.31% in 2023, indicating a decline in profitability relative to reported equity over the period. A peak of 24.53% was noted in 2020, followed by a steady downward trajectory.

Adjusted ROE, reflecting goodwill adjustments, was consistently higher than reported ROE but exhibited greater variability. It peaked at 58.8% in 2021, significantly exceeding other years, then decreased to 37.08% by 2023. Despite the decline, the adjusted ROE remained substantially above reported figures, implying that the company's core operations may be more profitable when excluding goodwill effects.

Overall, the data indicates that goodwill adjustments have a notable impact on equity and profitability ratios, leading to more pronounced fluctuations in adjusted metrics. The decline in reported ROE over the years suggests reduced efficiency in using equity to generate profit on a reported basis, whereas the elevated and variable adjusted ROE highlights the influence of intangible assets on perceived performance.

Asset Trends

The reported total assets demonstrated a consistent upward trajectory from 2019 to 2023, increasing from 29,074 million US dollars in 2019 to 47,065 million US dollars in 2023. Notably, there was a substantial rise between 2020 and 2021, with assets growing by approximately 26.9%. However, a slight decrease was observed in 2022 before assets rebounded in 2023.

Adjusted total assets, which exclude goodwill, exhibited a similar growth pattern but at a more moderate pace. They increased steadily from 25,146 million US dollars in 2019 to 37,515 million US dollars in 2023. The growth was more gradual and consistent without any decline within the period.

Return on Assets (ROA) Analysis

Reported ROA peaked in 2020 at 9.63%, rising slightly from 9.31% in 2019. However, from 2021 onwards, there was a noticeable decline in reported ROA, falling to 5.29% by 2023. This trend signals diminishing profitability relative to total assets over the three-year span.

Adjusted ROA, calculated excluding goodwill, followed a parallel downward trajectory but consistently showed higher percentages than reported ROA. Starting from 10.77% in 2019, adjusted ROA peaked at 11.03% in 2020 and then declined to 6.63% in 2023. The higher adjusted ROA suggests that goodwill has a dilutive effect on the reported return measure.

Overall Observations

The data demonstrates growth in the asset base both reported and adjusted, albeit with fluctuations in reported assets in 2022. Profitability, as measured by ROA, improved initially up to 2020 but declined thereafter, indicating potential margin compression or increased asset base without proportional income growth. The adjusted metrics consistently outperform the reported ones, implying that goodwill negatively impacts the return on assets calculations.