Humana Inc HUM (XNYS)

Morningstar Equity Analyst Report | Report as of 17 Nov 2020 11:44, UTC | Page 1 of 15
Humana Inc HUM (XNYS)

Morningstar Rating Last Price Fair Value Estimate Price/Fair Value Trailing Dividend Yield % Forward Dividend Yield % Market Cap (Bil) Industry Stewardship
QQQ 422.23 USD 395.00 USD 1.07 0.57 0.59 55.88 Healthcare Plans Exemplary
17 Nov 2020 17 Nov 2020 05 Aug 2020 17 Nov 2020 17 Nov 2020 17 Nov 2020
22:22, UTC 17:39, UTC
Morningstar Pillars Analyst Quantitative Important Disclosure:

Economic Moat Narrow Narrow The conduct of Morningstar’s analysts is governed by Code of Ethics/Code of Conduct Policy, Personal Security Trading Policy (or an equivalent of),
Valuation QQQ Fairly Valued and Investment Research Policy. For information regarding conflicts of interest, please visit http://global.morningstar.com/equitydisclosures
Uncertainty Medium High
Financial Health — Moderate Remaining Election Scenarios Unlikely to Significantly Change our View of
Source: Morningstar Equity Research
the Healthcare Industry
Quantitative Valuation
HUM Business Strategy and Outlook primarily on organic growth, it remains open to
dUSA
partnerships and acquisitions as well.
Julie Utterback, CFA, Sr. Eq. Analyst, 03 November 2020
Undervalued Fairly Valued Overvalued In the complex U.S. healthcare system, Humana pays
caregivers to provide services through an integrated and Analyst Note
Current 5-Yr Avg Sector Country
Price/Quant Fair Value 1.05 1.11 0.82 0.83
value-based approach while also making the insurance Julie Utterback, CFA, Sr. Eq. Analyst, 08 November 2020
Price/Earnings 13.7 24.1 26.5 20.1 experience easy to navigate for end users. Perhaps not As of Nov. 8, two major U.S. election scenarios remain
Forward P/E 19.8 — 11.3 13.9 surprisingly, given its founding as a nursing home in the possible for the federal government, but we think a split
Price/Cash Flow 9.7 19.2 18.4 13.1 1960s, the firm focuses on serving the elderly population government appears most likely, which would not change
Price/Free Cash Flow 11.5 58.2 27.3 19.5
Trailing Dividend Yield% 0.57 0.63 1.50 2.35
through its top-tier position in administering Medicare our view of the healthcare industry's moats or valuations.
Source: Morningstar Advantage plans. Given U.S. demographic trends and the
increasing penetration of Medicare Advantage plans in Currently, major news outlets have projected that the
Bulls Say the eligible population, Humana remains at the forefront Democrats will control the White House and the House of
OWith its prowess in Medicare Advantage plans, of one of the fastest-growing products in the U.S. health Representatives, but key elections in the Senate appear
Humana looks likely to benefit from strong insurance industry. up for grabs. Based on recent vote counts, Republicans
demographic trends and could even benefit from a will probably control 50 seats and the Democratic caucus
Democratic sweep scenario, assuming a potential Within Medicare Advantage, insurers like Humana are will probably control 48 seats, before Georgia holds run-off
public option includes Medicare Advantage plans. paid the same amount that the traditional Medicare elections in January for the two remaining Senate seats.
OHumana enjoys industry-leading customer program pays to provide benefits for its consumers; then Given the November votes and Georgia's history as a
satisfaction metrics that positively influence its the insurer aims to lower the costs associated with caring Republican-leaning state, we would be surprised if a
brand and reputation in the consumer-driven for users by making them healthier while also providing Republican does not win at least one of those seats, which
Medicare Advantage and Medicaid insurance them additional benefits and generating a profit. Given would keep the Senate's control in Republican hands. In
sectors. that dynamic, incentive alignment with care providers this most likely scenario, major healthcare policy reforms
OHumana's growth trajectory looks strong, with remains more important in this product than in other are unlikely through the legislative branch, which would
management aiming for 11%-15% EPS growth in the health insurance products, in our opinion, and Humana largely maintain the status quo from a moat and valuation
long run. sees this alignment as its key differentiator from other perspective in the healthcare industry.
health insurance players. For example, about two thirds
of its Medicare Advantage members have primary-care Such a split scenario would increase the importance of
Bears Say
physicians that operate in value-based arrangements, the Supreme Court case scheduled to be heard on Nov.
OHealthcare reform is likely to be a recurring topic
which encourage those caregivers to improve quality and 10, though. If the judicial branch fully strikes down the
throughout the 2020 election cycle, which could pose
costs. Humana owns some of these caregivers, including Affordable Care Act, millions of Americans would lose
a real fundamental threat.
primary-care practices and a minority interest in the health insurance through various ACA channels, including
OThe insurance and PBM industries are likely to
largest home healthcare provider in the United States, Medicaid expansion and the individual exchanges. This
remain large targets of regulators aiming to reduce
Kindred at Home. Also, Humana provides pharmacy scenario could have negative effects for pockets of the
the healthcare cost burden on society, even if they
benefit management functions, managing that key health healthcare industry, such as managed care companies
make it through the 2020 election largely unscathed.
input in an integrated fashion primarily for internal with significant Medicaid and individual exchange
OWith its relatively concentrated operations, any members. exposure like Centene and hospitals like HCA and Tenet.
missteps or significant regulatory changes in its If the ACA is struck down without an adequate
target markets could have an amplified effect on While especially powerful in the Medicare Advantage replacement in this scenario, we see downside risks of
Humana's bottom line relative to peers. market, this integrated approach benefits Humana in its 35% at Centene, 25% at Tenet, and 15% at HCA from our
other target markets too, including Medicaid, military, and fair value estimates. The earnings power of other
small-employer plans. With large opportunities in its managed care providers could be mildly affected, as well,
target markets, management aims to continue growing at but based on our analysis, we do not think they would be
a fast pace with a long-term annual earnings per share material to valuation.
growth goal of 11%-15%. While Humana appears focused
?
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Morningstar Equity Analyst Report |Page 2 of 15

22:22, UTC 17:39, UTC
Close Competitors Currency (Mil) Market Cap TTM Sales Operating Margin TTM/PE plans with 18% of that program’s enrollees in 2019, behind
UnitedHealth Group Inc UNH USD 334,080 251,085 8.96 20.24 only UnitedHealth. While Humana’s national scale is
generally impressive in this program, that scale is even
CVS Health Corp CVS USD 87,880 266,041 5.42 11.10
more admirable considering it competes primarily in 18
Anthem Inc ANTM USD 82,033 117,450 0.00 17.01
states with a concentration in retiree-friendly Sunbelt
Cigna Corp CI USD 77,604 157,050 0.00 15.06
states, including Florida and Texas. Humana is typically
Economic Moat the number-one or -two Medicare Advantage insurer in
Julie Utterback, Sr. Eq. Analyst, 03 November 2020 the counties in which it offers plans, and Medicare
Humana earns a narrow moat rating from us, which Advantage enrollment share can rise closer to 30% and
reflects its top-tier position in the U.S. private health above in those core local markets. This local scale is
insurance market. Like many of its peers, Humana benefits important in developing a broader local membership base
from local scale-related advantages, although its focus as it creates efficiencies in that population and creates
on Medicare-related plans makes it somewhat unique in negotiating power over local service providers. For
the industry. Overall, with its ongoing competitive example, for small employers, Humana is typically able to
advantages in the U.S. health insurance industry, we price its plans significantly lower than the average
expect Humana to consistently produce excess returns of employer-based premium in the U.S., which we believe is
at least 2 times capital costs during the next 10 years even related to Humana’s local scale advantages.
if a public option that steals significant share from
employer-based plans is added to the existing U.S. Where local scale advantages are significant enough, we
healthcare system. think Humana’s insurance operations benefit from a
network effect. For example, in communities where
Our narrow moat rating for Humana is informed by an Humana already has substantial market share, it is able
analysis of potential changes to the U.S. healthcare to offer lower-priced products or more benefits per
system. During the next 10 years, we view scenarios member to existing and potential clients than its peers. If
where Humana provides medical and pharmaceutical that offering is compelling enough, more customers will
benefits through employers and government programs, be attracted to Humana’s insurance plans in those
such as Medicare Advantage and Medicaid managed-care communities, and local service providers, such as
plans, as much more likely than a "Medicare for All" hospitals and physician groups, will have more incentive
scenario where the private insurance industry no longer to work with Humana’s insurance networks to gain access
exists. In these more likely scenarios, we suspect there to its large membership rolls. As Humana’s local market
will be a place for private health insurers and related share rises, its negotiating leverage with healthcare
pharmacy benefit managers, like Humana, in the U.S. suppliers also rises, which can create a virtuous cycle
healthcare system for a relatively long time. Humana where Humana attracts even more clients and more
could even be a key beneficiary of a Medicare providers to its insurance network. In general, we think
Advantage-based public option if the primary result of network effects like these create barriers to entry for new
adding that option is the reduction of the uninsured competitors in local markets where Humana already
population rather than a significant shift away from enjoys significant scale advantages.
employer-based insurance.
We believe the network effect is so strong at Humana that
We continue to see two major moat sources--cost about two thirds of its Medicare Advantage beneficiaries
advantage and network effect--at top-tier insurance use primary-care physicians paid through value-based
companies like Humana. Humana’s cost advantages arrangements, or well above the national average of
relate primarily to scale in its local markets. While the around half of Medicare Advantage enrollees.
firm's medical membership rolls are smaller than some of Value-based arrangements are crucial to aligning
its more integrated peers, the development of a core incentives in Humana’s Medicare Advantage plans and
competency in Medicare-related products, particularly the general healthcare system, in our opinion. For
Medicare Advantage, combined with its geographic example, service providers that share risk completely with
concentration has been difficult to replicate. Humana Humana, representing about one third of its Medicare
enjoys the number-two position in Medicare Advantage Advantage enrollees, can boost their inflows per member
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served by 2.4 times compared with fee-for-service-only differentiated services play a stronger role for these plans,
providers. In these risk-sharing arrangements, quality of which are typically sold directly to consumers rather than
care can rise while cost of care falls, which is important through intermediaries, like employers. From a retention
for Humana and society as a whole, in our opinion. perspective, the company claims that once a customer is
Incentive payments from the government in Medicare are on one of its Medicare Advantage plans for two years,
related to star ratings (1 being the worst and 5 being the that person is usually a customer for life, and retention
best) on measures of outcomes, processes, patient rates for Humana’s plans average about seven years per
experience, and access. Humana recently announced that beneficiary, including involuntary terminations. Profitability
about 92% of its enrollees for the 2021 bonus year are in tends to rise with time during that retention period, so
4-star plans or above, which remains the highest maintaining those relationships is especially important to
percentage of the major five managed-care organizations Humana.
that we cover and compares with about 77% in 4-star
plans or above on average for the nation. That means While not moatworthy on a stand-alone basis, in our
providers that work with these Humana plans should be opinion, Humana's ownership of the fourth-largest
able to generate higher inflows from star-related bonuses pharmacy benefit manager and its growing presence in
with Humana plans going forward than the average plan, the provider space help support the strong outcomes and
which gives providers continued incentive to work with cost management needed to run successful health
Humana. insurance plans. Through both direct ownership and
partnerships, Humana remains at the forefront of
Within Medicare Advantage specifically, insurers like encouraging value-based offerings in order to boost health
Humana are paid roughly the same amount as the outcomes and better manage costs. Notably, management
traditional Medicare program pays to provide benefits for recently highlighted that just under one third of Humana's
its consumers on a risk-adjusted basis; then the insurer members are currently managed under full-risk
needs to lower the costs associated with caring for users arrangements with providers, which leads to significantly
by making them healthier in order to provide additional higher profits and better health outcomes than unaligned
benefits (dental, vision, pharmacy, and so on) while also relationships. Its proprietary provider relationships (which
generating a profit. Within this framework, insurers like include fully owned and other partnerships) enjoy even
Humana need specialized expertise in managing the higher profitability and better health outcomes than those
needs of seniors to improve their health outcomes and full-risk relationships.
ultimately lower costs. Humana has built up this expertise
over decades, which helps it create a better experience Fair Value & Profit Drivers
for end users from beginning to end. For example, Humana Julie Utterback, Sr. Eq. Analyst, 03 November 2020
devotes significant resources to helping seniors navigate We are keeping our fair value estimate for Humana at
the complex Medicare system to choose a plan that is $395 per share, which implies a 21 times multiple on 2020
right for them through both technology- and human-based expected earnings.
interfaces. Once on a Humana Medicare Advantage plan,
the company encourages preventative care, medication During the next five years, we assume Humana's revenue
adherence, and improvement of other determinants of grows about 9% compounded annually. In line with
care, such as food insecurity and transportation concerns, demographic trends, most of the company's membership
to control chronic conditions better and prevent a cascade growth will probably come from its fully insured business,
of more costly interventions. With its focus on making the particularly the fast-growing Medicare Advantage
complex healthcare system simpler and driving better business, which can have an amplified effect on revenue
health outcomes for end users, Humana generally leads growth. We expect mild operating margin contraction
the health insurance group in terms of customer during the next five years, as lower-margin government
satisfaction, which contributes to some intangible assets, plans and pharmacy benefit management business
in our opinion. Although we do not view intangible assets continue to largely outpace growth in Humana's other
as a primary moat source for Humana overall, they can be segments. However, we think Humana will repurchase
important in the more concentrated Medicare Advantage shares enough to boost adjusted EPS growth above
marketplace because factors like brand, reputation, and revenue growth. In total, we expect EPS to grow about
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11% compounded annually through 2024, or on the low

end of management's long-term EPS growth guidance of Stewardship
11%-15%, and we assume some regulatory forces Julie Utterback, Sr. Eq. Analyst, 03 November 2020
constrain the growth trajectory a bit in the later years of We give Humana Exemplary marks for stewardship.
that forecast period. Humana's free cash flow more than
doubled in 2019, and we remain skeptical that cash flows After the proposed merger with Aetna was blocked by
will remain at such robust levels. We expect free cash regulators in 2017, we applaud Humana's ability to put its
flows to range between about $3 billion-$4 billion collective head down and successfully pursue its own
annually through 2024. stand-alone strategy. This strategic focus, which depends
primarily on organic growth, helps the company generate
We discount all of our assumptions at a weighted average returns on invested capital well in excess of its capital
cost of capital around 8.5%. costs and keeps its balance sheet leverage at easily
manageable levels, which we view positively for
Risk & Uncertainty stewardship. The company has said it plans to continue
Julie Utterback, Sr. Eq. Analyst, 03 November 2020 pursuing an integrated model of care to serve end users
We see medium uncertainty around Humana's future cash primarily in government-sponsored channels such as
flows in the intermediate term, as the positive growth Medicare Advantage and Medicaid. So we expect more
trajectory in the company's Medicare Advantage investments (de novo and acquisitions) primarily in its
stronghold is clouded by healthcare policy uncertainties. provider channels, including primary-care facility and
home healthcare investments such as the potential full
From a concentration perspective, nearly 90% of the firm's acquisition of Kindred at Home. These provider channels
nonmilitary medical membership (excluding stand-alone are particularly important in managing relatively high-cost
Medicare Part D drug plans) is tied to government funding. patient populations like those served by government-sponsored
While that exposes Humana to changes in federal and programs, and we view the combination of provider and
state budget priorities, this exposure is currently a positive insurer assets as powerful from a profitability and moat
factor, especially as the Medicare Advantage population perspective for companies like Humana.
continues to rise and represents one of the strongest
growth areas in the industry. Overall, we think the firm's ability to report consistently
strong results against the backdrop of a changing
However, healthcare policy risks may plague health healthcare policy landscape during the past decade has
insurers like Humana in both the near and long terms. The been impressive. Bruce Broussard has overseen
Medicare for All scenario debated in the Democratic substantial value creation since his elevation to CEO in
primaries called for the elimination of the private 2013. We also believe Humana's board has put together
insurance industry, which would have threatened most of a well-structured incentive scheme to align the
the company's operations. While we view this scenario's organization's interests with shareholders. Annual bonus
probability as virtually zero in this election cycle, that payments for top management and over half of the
policy risk may threaten the private insurance industry in workforce are influenced by adjusted earnings per share,
future election cycles. We see the risk of a public option the company's net promoter score, and other strategic
as still viable in this election cycle. Health insurers will measures, which we see as a strong alignment of
continue to play key roles in the healthcare system if a incentives throughout the organization. The firm's
public option is introduced, and they could even benefit long-term incentive program for top managers is a mix of
from the expansion of services provided, if the public options, restricted stock, and performance-based awards
option merely expands access to insurance rather than that measure against three-year cumulative return on
causes significant shifts in insurance sources. However, invested capital targets along with stock performance
if the public option creates a scenario where a significant benchmarked against peers. We think this combination
portion of the employer-based insurance population provides a balance among growth, profitability, and
switches to government-sponsored plans, Humana's reinvestment needs to help align management and
commercial business that caters largely to small employee decisions with the long-term goals of
businesses may suffer. shareholders.
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Julie Utterback, Sr. Eq. Analyst, 16 September 2020
Analyst Notes Archive Healthcare policy remains a key debate in the upcoming
election, but we have made no changes to our moat ratings
Raising Humana's Fair Value After It Beats Q2 or fair value estimates based on potential changes after
Expectations and Maintains EPS Guidance for 2020 this election. Positive for the healthcare industry, a
Julie Utterback, Sr. Eq. Analyst, 05 August 2020 "Medicare for All" scenario appears dead during this
Narrow-moat Humana delivered second-quarter operating election cycle. However, we still see a path to
results that significantly beat consensus from Capital IQ. more-affordable insurance options that could help the U.S.
Based on these strong trends and recently generated cash almost reach universal coverage if Democrats sweep the
flows, we are raising our fair value estimate to $395 per electable bodies of the federal government. Proposed
share, and we think shares are about fairly valued. changes by Joe Biden's campaign look likely to expand
Investors should know that despite these strong results, the existing safety nets within the U.S., and we think a
Humana only maintained its EPS guidance for 2020, public option has the most potential to alter the U.S.
despite the first-half results nearly reaching its full-year healthcare system. However, we suspect it would be much
expectations. more likely to influence the individual exchanges than the
employer-sponsored insurance that covers roughly half of
In the quarter, Humana beat expectations on the Americans. Based on our projected pricing of a public
bottom-line primarily on reduced medical utilization costs, option, we suspect that any shifts from employer-based
but it did not change its full-year guidance. Specifically, insurance would be limited to very small employers with
the company reported adjusted EPS of $12.56, or well a risk up to about 10% of the employer-based market.
above Capital IQ consensus of $10.12. Despite generating
nearly $18 per share of adjusted EPS in the first half of Overall, for key industry players, including the undervalued
2020, management still expects to generate only managed-care sector, we see a spectrum of opportunities
$18.25-$18.75 of adjusted EPS in 2020, or growth of and risks from proposed policy changes even in a
2%-5% over 2019. Management highlighted that it Democratic sweep scenario. Specifically in managed-care,
expects to be profitable in the third quarter (about 15% we see upside valuation scenarios in the mid- to high
of full year EPS guide), but it will likely generate a loss in single digits and downside scenarios that max out at
the fourth quarter. around 20% below our fair value estimates based on
potential policy changes in that election outcome. The
Several factors could create headwinds for Humana in the more diverse players—Cigna, CVS, and UnitedHealth—
second half of the year. First, medical utilization will likely would probably fare better in downside scenarios in which
return to more normalized levels than during the new government programs steal some share from existing
pandemic-related shutdowns in the second quarter. Also, insurance options, and the more concentrated insurers—
even if utilization does not return to more normal levels, Anthem, Centene, and Humana—face more downside
rebating mechanisms are in place when Humana does not risks in that scenario. Notably though, Anthem, Cigna,
meet minimum medical loss ratios. The company also Centene, and CVS recently traded well below fair value
expects to provide significant support to its constituents. and below our policy bear scenarios, giving their shares
Those supports include eliminating copays for primary significant margins of safety heading into this election, in
care, increasing access to telehealth visits, covering direct our opinion.
testing and treatment costs for COVID-19, and investing
in its Medicare broker distribution channels to help those Supreme Court Shakeup Adds Another Layer of
stakeholders engage with clients outside the office. Much Complexity to Election Year for Healthcare Industry
of those costs will be recognized in the latter half of the Julie Utterback, Sr. Eq. Analyst, 20 September 2020
year, which could constrain the company's profits during With Justice Ruth Bader Ginsburg's death Sept. 18,
the rest of 2020. another layer of complexity has been added to this election
year for the healthcare industry. The Supreme Court is
Election Impact on U.S. Healthcare Looks Modest, scheduled to hear oral arguments on the Affordable Care
Supporting Industry Moats and Undervalued MCO Act on Nov. 10, a week after the U.S. election. Prior to
View Ginsburg's death, the court looked likely to uphold the ACA
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at least along the previous voting lines (5-4), but without Specifically, Humana reported adjusted EPS of $3.08, or
her vote, the path to upholding the law just got more slightly above consensus of $2.80. Although Humana has
complicated, creating the potential for the millions of generated roughly $21 per share of adjusted EPS so far in
Americans who gained access to insurance through the 2020, management only increased the bottom end of its
ACA to lose that coverage. For now, we are not changing guidance to $18.50 to $18.75 from $18.25-$18.75
our views on any moats or valuations in the industry, but previously.
investors should be aware of the various scenarios that
could influence the U.S. healthcare system over the next Management expects several headwinds to drive a loss
several weeks. in the fourth quarter. First, medical utilization looks likely
to continue normalizing versus the trough levels of the
Importantly, the Supreme Court has a couple of options second quarter. The company also expects to provide
related to hearing oral arguments on the ACA. First, the significant support to its constituents, including coverage
court could decide to hear the arguments with only eight of direct testing and treatment costs for COVID-19 and
justices. In the event of a 4-4 tie, the court could turn the investing in its Medicare broker distribution channels to
case back to the original district court to decide which help those stakeholders engage with clients outside the
parts of the law could be upheld without the individual office. Much of those costs will be recognized in the fourth
mandate that is in question. In that case, further appeals quarter, which could constrain the company's profits
of that court's decision-making process could be possible during the rest of 2020.
while the ACA remains the law of the land. To avoid such
uncertainty related to a potential tie vote, though, the Beyond 2020, Humana's business may be affected by
Supreme Court could wait to hear oral arguments until potential policy changes after the U.S. election. Valuations
another justice is named to the court, which would lead recently appeared bifurcated in the managed care sector
to a definitive vote. with Medicare Advantage leaders--Humana (22 times
2020 earnings as of Monday's close) and UnitedHealth (19
Despite previous precedent from Republican leadership times)--trading close to fair value. These two firms appear
in the Senate that delayed voting on an Obama nominee to be benefiting from the potential of Medicare Advantage
in 2016 because it was an election year, President Trump plans to participate in a public option, which is possible
and Senate leadership appear intent on voting on a new in a Democrat sweep election scenario.
justice before the end of the year. If that is the case, there
is a chance that a 5-4 vote upholding the ACA could turn U.S. Election Results Still Uncertain and All
to a 5-4 vote against the law, assuming the new justice Scenarios for Healthcare Policy Changes Still
votes in line with most of the other conservative jurists. Possible
Julie Utterback, Sr. Eq. Analyst, 04 November 2020
Humana Delivers Strong Q3 and Boosts Bottom End As of the morning of Nov. 4, control of the major U.S.
of Its 2020 Outlook; Maintaining Our FVE federal electable bodies still remains uncertain. For now,
Julie Utterback, Sr. Eq. Analyst, 03 November 2020 most news outlets project that the U.S. House of
Narrow-moat Humana delivered third-quarter operating Representatives will remain in the Democratic party's
results that beat consensus from Capital IQ, allowing control. However, control of the White House and Senate
management to increase the bottom end of its outlook still remain up in the air, as several states continue to
range for 2020. Our estimate remains at the high end of process votes and appear too close to call. We reiterate
that range, and we are keeping our fair value estimate our undervalued call on the managed care sector and see
intact. Notably, Humana expects a rare loss in the fourth significant margins of safety built into most of those
quarter, but we believe that relates more to the players' stocks even in our valuation downside policy
uniqueness of this year rather than a reduction in scenarios, which are possible only in a Democratic sweep
long-term prospects. scenario.
In the quarter, Humana beat expectations on the bottom However, investors should know that we would be unlikely
line primarily on strong demand for its Medicare-related to change our moat ratings or valuations even in a
products, despite normalizing medical utilization trends. Democratic sweep scenario until legislative plans are
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22:22, UTC 17:39, UTC
more certain. The U.S. still remains in increasing access Such a split scenario would increase the importance of
mode, and current initiatives to expand the insured the Supreme Court case scheduled to be heard on Nov.
population create a spectrum of risks and opportunities, 10, though. If the judicial branch fully strikes down the
with the public option representing the major wildcard. Affordable Care Act, millions of Americans would lose
Based on our pricing estimates for the public option, health insurance through various ACA channels, including
though, we see the potential for major changes on the Medicaid expansion and the individual exchanges. This
individual exchanges but only minor changes in the scenario could have negative effects for pockets of the
important employer-based market even at the low end of healthcare industry, such as managed care companies
our estimated pricing range. The role of private insurers with significant Medicaid and individual exchange
in the public option could also be a point of compromise exposure like Centene and hospitals like HCA and Tenet.
in the legislative process since plans from private insurers, If the ACA is struck down without an adequate
like Medicare Advantage, could play a role. replacement in this scenario, we see downside risks of
35% at Centene, 25% at Tenet, and 15% at HCA from our
Split control of the U.S. government's federal electable fair value estimates. The earnings power of other
bodies also remains possible, and policy changes that managed care providers could be mildly affected, as well,
meaningfully change our moat or valuations in the but based on our analysis, we do not think they would be
healthcare industry appear unlikely in this scenario. Split material to valuation.
control of the U.S. federal electable bodies would likely
result in a business as usual regulatory environment for
the healthcare industry. However, we think executive
orders could create mildly positive effects on the number
of insured Americans with a Democrat in the White House
and mildly negative effects with Republican control.
Remaining Election Scenarios Unlikely to

Significantly Change our View of the Healthcare
Industry
Julie Utterback, Sr. Eq. Analyst, 08 November 2020
As of Nov. 8, two major U.S. election scenarios remain
possible for the federal government, but we think a split
government appears most likely, which would not change
our view of the healthcare industry's moats or valuations.
Currently, major news outlets have projected that the

Democrats will control the White House and the House
of Representatives, but key elections in the Senate appear
up for grabs. Based on recent vote counts, Republicans
will probably control 50 seats and the Democratic caucus
will probably control 48 seats, before Georgia holds
run-off elections in January for the two remaining Senate
seats. Given the November votes and Georgia's history as
a Republican-leaning state, we would be surprised if a
Republican does not win at least one of those seats, which
would keep the Senate's control in Republican hands. In
this most likely scenario, major healthcare policy reforms
are unlikely through the legislative branch, which would
largely maintain the status quo from a moat and valuation
perspective in the healthcare industry.
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Quantitative Equity Report | Release: 17 Nov 2020, 17:44, GMT-06:00 | Reporting Currency: USD | Trading Currency: USD | Exchange:XNYS Page
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Humana Inc HUM QQQQ 17 Nov 2020 02:00 UTC

Last Close Fair ValueQ Market Cap Sector Industry Country of Domicile
17 Nov 2020 17 Nov 2020 02:00 UTC 17 Nov 2020
422.23 403.82 56,713.6 Mil d Healthcare Healthcare Plans USA United States
There is no one analyst in which a Quantitative Fair Value Estimate and Quantitative
Star Rating are attributed to; however, Mr. Lee Davidson, Head of Quantitative
Price vs. Quantitative Fair Value
Research for Morningstar, Inc., is responsible for overseeing the methodology that 2016 2017 2018 2019 2020 2021 Quantitative Fair Value Estimate
supports the quantitative fair value. As an employee of Morningstar, Inc., Mr. Total Return
Davidson is guided by Morningstar, Inc.’s Code of Ethics and Personal Securities
Trading Policy in carrying out his responsibilities. For information regarding Conflicts Sales/Share
580
of Interests, visit http://global.morningstar.com/equitydisclosures Forecast Range
Forcasted Price
464 Dividend
Company Profile
Split
Humana is one of the largest private health insurers in the Momentum: Neutral
348
U.S. with a focus on administering Medicare Advantage plans. Standard Deviation: 27.83
The firm has built a niche specializing in government- Liquidity: High
232
sponsored programs, with nearly all its medical membership
stemming from individual and group Medicare Advantage, 208.25 52-Wk 474.70
Medicaid, and the military's Tricare program. The firm is also 116
a leader in stand-alone prescription drug plans for seniors 150.00 5-Yr 474.70
enrolled in traditional fee-for-service Medicare. Humana
14.8 22.5 16.3 28.7 15.7 Total Return %
offers employer-based plans primarily for small businesses
2.3 1.0 21.3 -2.5 0.7 +/– Market (Morningstar US Index)
Quantitative Scores Scores 0.57 0.64 0.70 0.60 0.57 Trailing Dividend Yield %
All Rel Sector Rel Country 0.57 0.64 0.70 0.60 0.58 Forward Dividend Yield %
Quantitative Moat Narrow 99 98 97 27.5 19.4 26.2 19.5 13.7 Price/Earnings
Valuation Fairly Valued 8 10 12 0.6 0.7 0.7 0.8 0.8 Price/Revenue
Quantitative Uncertainty High 98 98 96 Morningstar RatingQ
Financial Health Moderate 80 54 80 QQQQQ
QQQQ
QQQ
HUM QQ
Q
d
USA
2015 2016 2017 2018 2019 TTM Financials (Fiscal Year in Mil)
Undervalued Fairly Valued Overvalued 54,289 54,379 53,767 56,912 64,888 74,388 Revenue
Source: Morningstar Equity Research 11.9 0.2 -1.1 5.8 14.0 14.6 % Change
— — — — — — Operating Income
— — — — — — % Change
Valuation Sector Country
Current 5-Yr Avg Median Median 1,276 614 2,448 1,683 2,707 4,153 Net Income
Price/Quant Fair Value 1.05 1.11 0.82 0.83 868 1,936 4,051 2,173 5,284 5,868 Operating Cash Flow
Price/Earnings 13.7 24.1 26.5 20.1 -523 -527 -526 -612 -736 -898 Capital Spending
Forward P/E 19.8 — 11.3 13.9 345 1,409 3,525 1,561 4,548 4,970 Free Cash Flow
Price/Cash Flow 9.7 19.2 18.4 13.1 0.6 2.6 6.6 2.7 7.0 6.7 % Sales
Price/Free Cash Flow 11.5 58.2 27.3 19.5 8.44 4.07 16.81 12.16 20.10 31.23 EPS
Trailing Dividend Yield % 0.57 0.63 1.50 2.35 14.7 -51.8 313.0 -27.7 65.3 55.4 % Change
Price/Book 3.6 3.1 3.4 2.4 1.14 29.92 24.92 -7.10 27.67 42.29 Free Cash Flow/Share
Price/Sales 0.8 0.6 4.2 2.4 1.15 0.87 1.89 2.00 2.20 2.43 Dividends/Share
69.82 75.58 81.43 78.14 87.82 108.93 Book Value/Share
Profitability Sector Country 148,288 149,305 137,679 135,567 132,105 132,341 Shares Outstanding (K)
Current 5-Yr Avg Median Median
Profitability
Return on Equity % 30.4 16.7 12.4 12.9
12.8 5.8 23.9 16.8 24.4 30.4 Return on Equity %
Return on Assets % 12.3 6.7 6.2 5.2
5.3 2.5 9.3 6.4 9.9 12.3 Return on Assets %
Revenue/Employee (Mil) 1.6 1.2 0.3 0.3
2.4 1.1 4.6 3.0 4.2 5.6 Net Margin %
2.25 2.17 2.05 2.16 2.38 2.20 Asset Turnover
Financial Health Sector Country
Current 5-Yr Avg Median Median 2.4 2.4 2.8 2.5 2.4 2.4 Financial Leverage
Distance to Default 0.6 0.8 0.6 0.5 — — — — — — Gross Margin %
Solvency Score — — 494.6 552.4 — — — — — — Operating Margin %
Assets/Equity 2.4 2.5 1.4 1.7 3,821 3,792 4,770 4,375 4,967 6,059 Long-Term Debt
Long-Term Debt/Equity 0.4 0.4 0.1 0.4 10,346 10,685 9,842 10,161 12,037 15,768 Total Equity
38.7 37.6 34.8 34.3 35.2 36.4 Fixed Asset Turns
Growth Per Share Quarterly Revenue & EPS Revenue Growth Year On Year %
1-Year 3-Year 5-Year 10-Year Revenue (Mil) Mar Jun Sep Dec Total
23.6
Revenue % 14.0 6.1 6.0 7.7 2020 18,935.0 19,083.0 20,075.0 — —
Operating Income % — — — — 2019 16,107.0 16,245.0 16,241.0 16,295.0 64,888.0 17.6 17.5
Earnings % 65.3 70.3 22.3 12.6 2018 14,279.0 14,259.0 14,206.0 14,168.0 56,912.0 14.3 15.0
13.9
2017 13,762.0 13,534.0 13,282.0 13,189.0 53,767.0 12.8
Dividends % 10.0 36.2 14.7 —
Book Value % 21.6 8.4 7.2 10.4 Earnings Per Share () 7.0 7.4
Stock Total Return % 26.6 22.5 20.5 22.3 2020 3.56 13.75 10.05 — —
2019 4.16 6.94 5.14 3.84 20.10
2018 3.53 1.39 4.65 2.58 12.16
2018 2019 2020
2017 7.49 4.46 3.44 1.29 16.81
© Morningstar 2020. All Rights Reserved. Unless otherwise provided in a separate agreement, you may use this report only in the country in which its original distributor is based. The information, data, analyses and ®
opinions presented herein do not constitute investment advice; are provided solely for informational purposes and therefore is not an offer to buy or sell a security; are not warranted to be correct, complete or accurate; and
are subject to change without notice. Except as otherwise required by law, Morningstar shall not be responsible for any trading decisions, damages or other losses resulting from, or related to, the information, data, ß
analyses or opinions or their use. The information herein may not be reproduced, in any manner without the prior written consent of Morningstar. Please see important disclosures at the end of this report.
Research Methodology for Valuing Companies

Qualitative Equity Research Overview intangible assets, switching costs, network effect, cost Our model is divided into three distinct stages:
At the heart of our valuation system is a detailed projection advantage, and efficient scale.
of a company's future cash flows, resulting from our Stage I: Explicit Forecast
analysts' research. Analysts create custom industry and Companies with a narrow moat are those we believe In this stage, which can last five to 10 years, analysts
company assumptions to feed income statement, balance are more likely than not to achieve normalized excess make full financial statement forecasts, including items
sheet, and capital investment assumptions into our globally returns for at least the next 10 years. Wide-moat such as revenue, profit margins, tax rates, changes in
standardized, proprietary discounted cash flow, or DCF, companies are those in which we have very high working-capital accounts, and capital spending. Based
modeling templates. We use scenario analysis, in-depth confidence that excess returns will remain for 10 years, on these projections, we calculate earnings before
competitive advantage analysis, and a variety of other with excess returns more likely than not to remain for at interest, after taxes, or EBI, and the net new
analytical tools to augment this process. We believe this least 20 years. The longer a firm generates economic investment, or NNI, to derive our annual free cash flow
bottom-up, long-term, fundamentally based approach profits, the higher its intrinsic value. We believe low- forecast.
allows our analysts to focus on long-term business drivers, quality no-moat companies will see their normalized
which have the greatest valuation impact, rather than short- returns gravitate toward the firm's cost of capital more Stage II: Fade
term market noise. quickly than companies with moats. The second stage of our model is the period it will take
the company's return on new invested capital—the
Morningstar's equity research group (“we," "our") believes To assess the direction of the underlying competitive return on capital of the next dollar invested ("RONIC")—
that a company's intrinsic worth results from the future advantages, analysts perform ongoing assessments of to decline (or rise) to its cost of capital. During the Stage
cash flows it can generate. The Morningstar Rating for the moat trend. A firm's moat trend is positive in cases II period, we use a formula to approximate cash flows in
stocks identifies stocks trading at an uncertainty-adjusted where we think its sources of competitive advantage lieu of explicitly modeling the income statement,
discount or premium to their intrinsic worth—or fair value are growing stronger; stable where we don't anticipate balance sheet, and cash flow statement as we do in
estimate, in Morningstar terminology. Five-star stocks sell changes to competitive advantages over the next Stage I. The length of the second stage depends on the
for the biggest risk-adjusted discount to their fair values several years; or negative when we see signs of strength of the company's economic moat. We forecast
whereas 1-star stocks trade at premiums to their intrinsic deterioration. this period to last anywhere from one year (for
worth. companies with no economic moat) to 10–15 years or
All the moat and moat trend ratings undergo periodic more (for wide-moat companies). During this period,
Four key components drive the Morningstar rating: (1) our review and any changes must be approved by the cash flows are forecast using four assumptions: an
assessment of the firm's economic moat, (2) our estimate of Morningstar Economic Moat Committee, comprised of average growth rate for EBI over the period, a
the stock's fair value, (3) our uncertainty around that fair senior members of Morningstar's equity research normalized investment rate, average return on new
value estimate and (4) the current market price. This department. invested capital, or RONIC, and the number of years
process ultimately culminates in our single-point star rating. until perpetuity, when excess returns cease. The
2. Estimated Fair Value investment rate and return on new invested capital
1. Economic Moat Combining our analysts' financial forecasts with the decline until the perpetuity stage is reached. In the case
The concept of an economic moat plays a vital role not firm's economic moat helps us assess how long returns of firms that do not earn their cost of capital, we
only in our qualitative assessment of a firm's long-term on invested capital are likely to exceed the firm's cost of assume marginal ROICs rise to the firm's cost of capital
investment potential, but also in the actual calculation capital. Returns of firms with a wide economic moat (usually attributable to less reinvestment), and we may
of our fair value estimates. An economic moat is a rating are assumed to fade to the perpetuity period over truncate the second stage.
structural feature that allows a firm to sustain excess a longer period of time than the returns of narrow-moat
profits over a long period of time. We define excess firms, and both will fade slower than no-moat firms, Stage III: Perpetuity
economic profits as returns on invested capital (or ROIC) increasing our estimate of their intrinsic value. Once a company's marginal ROIC hits its cost of capital,
over and above our estimate of a firm's cost of capital, we calculate a continuing value, using a standard
or weighted average cost of capital (or WACC). Without perpetuity formula. At perpetuity, we assume that any
a moat, profits are more susceptible to competition. We growth or decline or investment in the business neither
have identified five sources of economic moats: creates nor destroys value and that any new investment
provides a return in line with estimated WACC.
Morningstar Research Methodology for Valuing Companies Because a dollar earned today is worth more than a
dollar earned tomorrow, we discount our projections of
cash flows in stages I, II, and III to arrive at a total
present value of expected future cash flows. Because we
are modeling free cash flow to the firm—representing cash
available to provide a return to all capital providers—we
discount future cash flows using the WACC, which is a
weighted average of the costs of equity, debt, and preferred
stock (and any other funding sources), using expected
future proportionate long-term market-value weights.
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3. Uncertainty Around That Fair Value Estimate Morningstar Equity Research Star Rating Methodology
Morningstar's Uncertainty Rating captures a range of likely
potential intrinsic values for a company and uses it to
assign the margin of safety required before investing, which
in turn explicitly drives our stock star rating system. The
Uncertainty Rating represents the analysts' ability to bound
the estimated value of the shares in a company around the
fair value estimate, based on the characteristics of the
business underlying the stock, including operating and
financial leverage, sales sensitivity to the overall
economy, product concentration, pricing power, and
other company-specific factors.
Analysts consider at least two scenarios in addition to

their base case: a bull case and a bear case.
Assumptions are chosen such that the analyst believes
there is a 25% probability that the company will perform
better than the bull case, and a 25% probability that the
company will perform worse than the bear case. The
distance between the bull and bear cases is an
important indicator of the uncertainty underlying the
fair value estimate.
Our recommended margin of safety widens as our

uncertainty of the estimated value of the equity
increases. The more uncertain we are about the
estimated value of the equity, the greater the discount
we require relative to our estimate of the value of the
firm before we would recommend the purchase of the Morningstar Star Rating for Stocks The Morningstar Star Ratings for stocks are defined below:
shares. In addition, the uncertainty rating provides Once we determine the fair value estimate of a stock, we
guidance in portfolio construction based on risk compare it with the stock's current market price on a daily QQQQQ We believe appreciation beyond a fair risk-
tolerance. basis, and the star rating is automatically re-calculated at adjusted return is highly likely over a multiyear time frame.
the market close on every day the market on which the The current market price represents an excessively
Our uncertainty ratings for our qualitative analysis are stock is listed is open. pessimistic outlook, limiting downside risk and maximizing
low, medium, high, very high, and extreme. Please note, there is no predefined distribution of stars. upside potential.
That is, the percentage of stocks that earn 5 stars can
× Low–margin of safety for 5-star rating is a 20% discount fluctuate daily, so the star ratings, in the aggregate, can QQQQ We believe appreciation beyond a fair risk-
and for 1-star rating is 25% premium. serve as a gauge of the broader market's valuation. When adjusted return is likely.
× Medium–margin of safety for 5-star rating is a 30% there are many 5-star stocks, the stock market as a whole is
discount and for 1-star rating is 35% premium. more undervalued, in our opinion, than when very few QQQ Indicates our belief that investors are likely to
× High–margin of safety for 5-star rating is a 40% discount companies garner our highest rating. receive a fair risk-adjusted return (approximately cost of
and for 1-star rating is 55% premium. equity).
× Very High–margin of safety for 5-star rating is a 50% We expect that if our base-case assumptions are true the
discount and for 1-star rating is 75% premium. market price will converge on our fair value estimate over QQ We believe investors are likely to receive a less than
× Extreme–margin of safety for 5-star rating is a 75% time, generally within three years (although it is impossible fair risk-adjusted return.
discount and for 1-star rating is 300% premium. to predict the exact time frame in which market prices may
adjust). Q Indicates a high probability of undesirable risk-adjusted
4. Market Price returns from the current market price over a multiyear time
The market prices used in this analysis and noted in the Our star ratings are guideposts to a broad audience and frame, based on our analysis. The market is pricing in an
report come from exchange on which the stock is listed, individuals must consider their own specific investment excessively optimistic outlook, limiting upside potential and
which we believe is a reliable source. goals, risk tolerance, tax situation, time horizon, income leaving the investor exposed to Capital loss.
needs, and complete investment portfolio, among other
For more details about our methodology, please go to factors.
https://shareholders.morningstar.com.
?

Other Definitions quantitative report and the quantitative ratings, there is no Value Estimate, current market price, and the Quantitative
one analyst in which a given report is attributed to; Uncertainty Rating. The rating is expressed as 1-Star, 2-Star,
Last Price: Price of the stock as of the close of the market however, Mr. Lee Davidson, Head of Quantitative Research 3-Star, 4-Star, and 5-Star.
of the last trading day before date of the report. for Morningstar, Inc., is responsible for overseeing the
methodology that supports the quantitative equity ratings Q: the stock is overvalued with a reasonable margin of
Stewardship Rating: Represents our assessment of used in this report. As an employee of Morningstar, Inc., safety.
management's stewardship of shareholder capital, with Mr. Davidson is guided by Morningstar, Inc.'s Code of Ethics Log (Quant FVE/Price)<–1*Quantitative Uncertainty
particular emphasis on capital allocation decisions. Analysts and Personal Securities Trading Policy in carrying out his
consider companies' investment strategy and valuation, responsibilities. QQ: the stock is somewhat overvalued.
financial leverage, dividend and share buyback policies, Log (Quant FVE/Price) between (–1*Quantitative
execution, compensation, related party transactions, and Quantitative Equity Ratings Uncertainty, –0.5*Quantitative Uncertainty)
accounting practices. Corporate governance practices are Morningstar's quantitative equity ratings consist of:
only considered if they've had a demonstrated impact on (i) Quantitative Fair Value Estimate QQQ: the stock is approximately fairly valued.
shareholder value. Analysts assign one of three ratings: (ii) Quantitative Star Rating Log (Quant FVE/Price) between (–0.5*Quantitative
"Exemplary," "Standard," and "Poor." Analysts judge (iii) Quantitative Uncertainty Uncertainty, 0.5*Quantitative Uncertainty)
stewardship from an equity holder's perspective. Ratings (iv) Quantitative Economic Moat
are determined on an absolute basis. Most companies will (v) Quantitative Financial Health QQQQ: the stock is somewhat undervalued.
receive a Standard rating, and this is the default rating in (collectively the "Quantitative Ratings"). Log (Quant FVE/Price) between (0.5*Quantitative
the absence of evidence that managers have made Uncertainty, 1*Quantitative Uncertainty)
exceptionally strong or poor capital allocation decisions. The Quantitative Ratings are calculated daily and derived
from the analyst-driven ratings of a company's peers as QQQQQ: the stock is undervalued with a reasonable
Quantitative Valuation: Using the below terms, intended to determined by statistical algorithms. Morningstar, Inc. margin of safety. Log (Quant FVE/Price) >1*Quantitative
denote the relationship between the security's Last Price ("“Morningstar," "we," "our") calculates Quantitative Uncertainty
and Morningstar's quantitative fair value estimate for that Ratings for companies whether it already provides analyst
security. ratings and qualitative coverage. In some cases, the Quantitative Uncertainty: Intended to represent
Quantitative Ratings may differ from the analyst ratings Morningstar's level of uncertainty about the accuracy of the
× Undervalued: Last Price is below Morningstar's because a company's analyst-driven ratings can quantitative fair value estimate. Generally, the lower the
quantitative fair value estimate. significantly differ from other companies in its peer group. quantitative Uncertainty, the narrower the potential range
× Fairly Valued: Last Price is in line with Morningstar's of outcomes for that particular company. The rating is
quantitative fair value estimate. Quantitative Fair Value Estimate: Intended to represent expressed as Low, Medium, High, Very High, and Extreme.
× Overvalued: Last Price is above Morningstar's Morningstar's estimate of the per share dollar amount that
quantitative fair value estimate. a company's equity is worth today. Morningstar calculates × Low: the interquartile range for possible fair values is less
the quantitative fair value estimate using a statistical model than 10%.
Risk Warning derived from the fair value estimate Morningstar's equity × Medium: the interquartile range for possible fair values is
Please note that investments in securities are subject to analysts assign to companies. Please go to less than 15% but greater than 10%.
market and other risks and there is no assurance or https://shareholders.morningstar.com for information about × High: the interquartile range for possible fair values is
guarantee that the intended investment objectives will be fair value estimates Morningstar's equity analysts assign to less than 35% but greater than 15%.
achieved. Past performance of a security may or may not be companies. × Very High: the interquartile range for possible fair values
sustained in future and is no indication of future is less than 80% but greater than 35%.
performance. A security investment return and an investor's Quantitative Economic Moat: Intended to describe the × Extreme: the interquartile range for possible fair values is
principal value will fluctuate so that, when redeemed, an strength of a firm's competitive position. It is calculated greater than 80%.
investor's shares may be worth more or less than their using an algorithm designed to predict the Economic Moat
original cost. A security's current investment performance rating a Morningstar analyst would assign to the stock. The Quantitative Financial Health: Intended to reflect the
may be lower or higher than the investment performance rating is expressed as Narrow, Wide, or None. probability that a firm will face financial distress in the near
noted within the report. Morningstar's Uncertainty Rating future. The calculation uses a predictive model designed to
serves as a useful data point with respect to sensitivity × Narrow: assigned when the probability of a stock anticipate when a company may default on its financial
analysis of the assumptions used in our determining a fair receiving a "Wide Moat" rating by an analyst is greater obligations. The rating is expressed as Weak, Moderate,
value price. than 70% but less than 99%. and Strong.
× Wide: assigned when the probability of a stock receiving
Quantitative Equity Reports Overview a "Wide Moat" rating by an analyst is greater than 99%. × Weak: assigned when Quantitative Financial Health <0.2
The quantitative report on equities consists of data, × None: assigned when the probability of an analyst × Moderate: assigned when Quantitative Financial Health
statistics and quantitative equity ratings on equity receiving a "Wide Moat" rating by an analyst is less than is between 0.2 and 0.7
securities. Morningstar, Inc.'s quantitative equity ratings are 70%. × Strong: assigned when Quantitative Financial Health >0.7
forward looking and are generated by a statistical model
that is based on Morningstar Inc.'s analyst-driven equity Quantitative Star Rating: Intended to be the summary
ratings and quantitative statistics. Given the nature of the rating based on the combination of our Quantitative Fair
?

Other Definitions
Last Close: Price of the stock as of the close of the market

of the last trading day before date of the report.
Quantitative Valuation: Using the below terms, intended to

denote the relationship between the security's Last Price
and Morningstar's quantitative fair value estimate for that
security.
× Undervalued: Last Price is below Morningstar's

quantitative fair value estimate.
× Fairly Valued: Last Price is in line with Morningstar's
× Overvalued: Last Price is above Morningstar's
This Report has not been made available to the issuer of the
security prior to publication.
Risk Warning
Please note that investments in securities are subject to
market and other risks and there is no assurance or
guarantee that the intended investment objectives will be
achieved. Past performance of a security may or may not be
sustained in future and is no indication of future
performance. A security investment return and an investor's
principal value will fluctuate so that, when redeemed, an
investor's shares may be worth more or less than their
original cost. A security's current investment performance
may be lower or higher than the investment performance
noted within the report.
The quantitative equity ratings are not statements of fact.

Morningstar does not guarantee the completeness or
accuracy of the assumptions or models used in determining
the quantitative equity ratings. In addition, there is the risk
that the price target will not be met due to such things as
unforeseen changes in demand for the company's products,
changes in management, technology, economic
development, interest rate development, operating and/or
material costs, competitive pressure, supervisory law,
exchange rate, and tax rate. For investments in foreign
markets there are further risks, generally based on
exchange rate changes or changes in political and social
conditions.
A change in the fundamental factors underlying the

quantitative equity ratings can mean that the valuation is
subsequently no longer accurate.
For more information about Morningstar's quantitative

methodology, please visit
http://global.morningstar.com/equitydisclosures.
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22:22, UTC 17:39, UTC
General Disclosure
The analysis within this report is prepared by the person
(s) noted in their capacity as an analyst for Morningstar’s
equity research group. The equity research group
consists of various Morningstar, Inc. subsidiaries
(“Equity Research Group)”. In the United States, that
subsidiary is Morningstar Research Services LLC, which
is registered with and governed by the U.S. Securities
and Exchange Commission.
The opinions expressed within the report are given in

good faith, are as of the date of the report and are
subject to change without notice. Neither the analyst
nor Equity Research Group commits themselves in
advance to whether and in which intervals updates to
the report are expected to be made. The written analysis
and Morningstar Star Rating for stocks are statements the Report and are subject to change. While financial situation or particular needs of any specific
of opinions; they are not statements of fact. Morningstar has obtained data, statistics and recipient. This publication is intended to provide
information from sources it believes to be reliable, information to assist institutional investors in making
The Equity Research Group believes its analysts make Morningstar does not perform an audit or seeks their own investment decisions, not to provide
a reasonable effort to carefully research information independent verification of any of the data, statistics, investment advice to any specific investor. Therefore,
contained in the analysis. The information on which the and information it receives. investments discussed and recommendations made
analysis is based has been obtained from sources herein may not be suitable for all investors: recipients
believed to be reliable such as, for example, the The quantitative equity ratings are not a market call, must exercise their own independent judgment as to
company’s financial statements filed with a regulator, and do not replace the User or User’s clients from the suitability of such investments and recommendations
company website, Bloomberg and any other the conducting their own due-diligence on the security. The in the light of their own investment objectives,
relevant press sources. Only the information obtained quantitative equity rating is not a suitability experience, taxation status and financial position.
from such sources is made available to the issuer who assessment; such assessments take into account may
is the subject of the analysis, which is necessary to factors including a person’s investment objective, The information, data, analyses and opinions presented
properly reconcile with the facts. Should this sharing of personal and financial situation, and risk tolerance all herein are not warranted to be accurate, correct,
information result in considerable changes, a statement of which are factors the quantitative equity rating complete or timely. Unless otherwise provided in a
of that fact will be noted within the report. While the statistical model does not and did not consider. separate agreement, neither Morningstar, Inc. or the
Equity Research Group has obtained data, statistics and Equity Research Group represents that the report
information from sources it believes to be reliable, Prices noted with the Report are the closing prices on contents meet all of the presentation and/or disclosure
neither the Equity Research Group nor Morningstar, Inc. the last stock-market trading day before the publication standards applicable in the jurisdiction the recipient is
performs an audit or seeks independent verification of date stated, unless another point in time is explicitly located.
any of the data, statistics, and information it receives. stated.
Except as otherwise required by law or provided for in
General Quantitative Disclosure General Disclosure (applicable to both Quantitative a separate agreement, the analyst, Morningstar, Inc.
The Quantitative Equity Report (“Report”) is derived and Qualitative Research) and the Equity Research Group and their officers,
from data, statistics and information within Unless otherwise provided in a separate agreement, directors and employees shall not be responsible or
Morningstar, Inc.’s database as of the date of the Report recipients accessing this report may only use it in the liable for any trading decisions, damages or other
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professionals and/or sophisticated investors (“Users”) report is Morningstar Research Services LLC, a U.S.A. Research Group encourages recipients of this report to
and should not be the sole piece of information used by domiciled financial institution. read all relevant issue documents (e.g., prospectus)
such Users or their clients in making an investment pertaining to the security concerned, including without
decision. The quantitative equity ratings noted the This report is for informational purposes only and has limitation, information relevant to its investment
Report are provided in good faith, are as of the date of no regard to the specific investment objectives, objectives, risks, and costs before making an
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22:22, UTC 17:39, UTC
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Morningstar Equity Analyst Report | Report as of 17 Nov 2020 11:44, UTC | Page 1 of 15