By Sriparna Roy and Sneha S K
July 29 (Reuters) – Humana stuck to its annual adjusted profit forecast on Wednesday for a second consecutive quarter, disappointing Wall Street and pushing the health insurer’s shares down 5% in morning trading.
Investor expectations for health insurers have risen after peers such as UnitedHealth reported strong trends in Medicare Advantage plans, improved cost management and raised their forecasts, leaving Humana’s modest earnings beat and unchanged annual outlook short of expectations, analysts said.
The company maintained its annual adjusted profit per share forecast of at least $9, but lowered its net profit forecast to at least $6.52 per share from the previous estimate of at least $8.36.
Humana is one of the largest providers of Medicare Advantage (MA) plans serving people aged 65 and older as well as people with disabilities.
“Given the significant run in the stock over the last few months combined with strong peer MA results, we think results likely fell short of elevated investor expectations,” said Barclays analyst Andrew Mok.
Humana stock gained about 60% in the last three months, per LSEG data.
STAR RATINGS
Humana said it is making good progress on Star ratings, which are given by the Medicare agency on a scale of one to five stars and are linked to bonuses paid to insurers.
While major peers retreat from the Medicare Advantage market, Humana has been expanding enrollment of members.
“Our member growth is expected to further fuel our ability to unlock the earnings potential of the business,” said CEO Jim Rechtin.
Humana said it saw a 23% rise in memberships in its individual Medicare Advantage plans in the quarter.
Once a key source of profit growth for insurers, privately managed Medicare Advantage plans have come under pressure from rising medical costs for three years as well as tighter reimbursement rates, leading some insurers to scale back or exit underperforming markets.
Quarterly medical cost ratio, the percentage of premiums spent on medical care, stood at 91.2%, which was in line with Humana’s expectations across both new and existing members. Analysts expected a ratio of 91.19%, according to data compiled by LSEG.
It earned quarterly adjusted profit per share of $7.61, surpassing estimates of $7.22.
(Reporting by Sriparna Roy and Sneha S K in Bengaluru, Amina Niasse in New York; Editing by Devika Syamnath)
Comments