Humana Inc. (HUM)

Humana insures the elderly through Medicare Advantage — almost its entire business depends on one government programme.

The government pays the insurer a fixed sum per enrolled pensioner, and the insurer arranges care. Profit arises when actual costs fall below that sum. The key metric is the share of premiums spent on claims: a couple of points of increase removes the profit entirely.

That is precisely what happened: after the pandemic the elderly sought deferred care more often, costs outran rates, and the industry moved into loss on some plans. A second factor is the plan quality rating, which determines a payment bonus; a downgrade costs the company hundreds of millions. Enrolment growth and margin now pull in opposite directions: signing more members raises costs before it raises payment. Humana pays a dividend.