Commercial Segment medical membership declined to 3,410,800 at December 31, 2009, a decrease of 210,000, or 6 percent, from 3,620,800 at December 31, 2008 and relatively unchanged from 3,426,900 at September 30, 2009. The year-over-year decline primarily reflected the impact of the economic recession and increased unemployment across various of the company ™s fully-insured group medical lines of business, a competitive environment including the loss of two large ASO accounts totaling approximately 95,400 members on January 1, 2009. The company ™s individual medical product line has continued to grow steadily, with membership of 367,400, up 13 percent at December 31, 2009 compared to 325,100 at December 31, 2008 and up 2 percent from 358,800 at September 30, 2009. January 2010 Commercial Segment medical membership declined approximately 88,000 from that at the end of 2009, with approximately 42 percent of the decline related to self-insured products. Membership in Commercial Segment specialty products of 7,200,100 at December 31, 2009 increased 7 percent from 6,713,200 at December 31, 2008 and was slightly higher than 7,163,700 at September 30, 2009.

Premiums and administrative services fees:

Premiums and administrative services fees for the Commercial Segment decreased 2 percent to $1.88 billion in 4Q09 compared to $1.92 billion in the prior year ™s quarter, reflecting a 5 percent decline in average medical membership year over year. Commercial Segment medical premiums for fully-insured group accounts increased approximately 5 percent on a per-member basis during 4Q09 compared to 4Q08.

Benefit Expenses:

In 4Q09, as expected, the Commercial Segment benefits ratio of 84.4 percent increased 130 basis points versus the 4Q08 benefit ratio of 83.1 percent, as an increase in per-member premiums was more than offset by higher utilization primarily associated with the general economy (the average age of smaller group membership, higher utilization prior to termination, and increased COBRA participation) as well as the impact of the H1N1 virus.

SG&A Expenses:

The Commercial Segment SG&A expense ratio of 24.9 percent for 4Q09 compares to 23.0 percent in 4Q08, primarily driven by increases in certain of the segment ™s businesses that carry a higher administrative expense load such as mail-order pharmacy, individual medical products, and specialty benefit products.

Balance Sheet

At December 31, 2009, the company had cash, cash equivalents, and investment securities of $9.11 billion, up 5 percent from $8.67 billion at September 30, 2009 and up 27 percent from $7.19 billion at December 31, 2008. Parent company cash and investments of $665.6 million at December 31, 2009 declined $27.8 million from $693.4 million at September 30, 2009, primarily reflecting subsidiary capital contributions during 4Q09. Cash and investments at the parent increased $415.1 million year over year compared to $250.5 million held at the parent at December 31, 2008 as dividends from subsidiaries more than offset debt repayments and subsidiary capital contributions. Debt-to-total capitalization at December 31, 2009 was 22.5 percent, down 70 basis points from 23.2 percent at September 30, 2009, and was down 780 basis points compared to 30.3 percent at December 31, 2008.

Cash Flows from Operations

Cash flows provided by operations for 4Q09 of $274.1 million compared to cash flows provided by operations of $296.6 million in 4Q08 as higher net income was more than offset by uses of cash associated with changes in working capital accounts during 4Q09 compared to 4Q08. FY09 cash flows from operations improved to $1.42 billion versus $982.3 million for FY08 primarily due to higher net income year over year and the positive impact of changes in working capital accounts during FY09 versus those during FY08.

The company also evaluates operating cash flows on a non-GAAP basis.

Share Repurchase Program

In December 2009, the company ™s Board of Directors renewed its authorization for the use of up to $250 million for the repurchase of Humana common shares. The previous share repurchase authorization was set to expire on December 31, 2009. The renewed authorization is effective until December 31, 2011.

SOURCE Humana Inc.