April 29 (Reuters) – Humana on Wednesday beat quarterly earnings estimates due to tighter control over medical costs, but kept its annual adjusted profit forecast unchanged unlike rivals who raised theirs, sending its shares more than 6% lower premarket.
The health insurer, one of the largest providers of plans for people aged 65 years and older as well as those with disabilities, has been expanding enrollment of members while major rivals retreat from the Medicare Advantage market, a segment saddled by unrelenting cost pressures for nearly three years.
The insurer anticipates 2026 individual Medicare Advantage membership to grow about 25% from a year earlier, boosted by new sales and improved retention.
Its first-quarter insurance segment benefit ratio – or the percentage of premiums spent on medical care – of 89.4% was slightly favorable to the company’s outlook of “just under 90%”. The ratio is a key metric tracked by investors to gauge costs.
“While it remains early, available information to date suggests that medical and pharmacy cost trends are slightly better than our expectations, across both new and existing membership,” the company said.
It expects annual adjusted profit to be at least $9, but lowered its reported profit forecast to at least $8.36 from the previous estimate of at least $8.89.
The forecast anticipates a year-over-year decline as a result of the Star Ratings given by the Medicare agency. The ratings, on a scale of one to five stars, are linked to bonuses paid to insurers, with anything less than three stars seen as poor quality that could lead to lower payments.
The insurer also said it continues to see a persistent gap between final rates for payments to private insurers offering Medicare Advantage plans and amount paid for healthcare by the company.
The company said it expects new members to boost profits this year, while cost-containment efforts, including plan repricing, should keep it on track to unlock the business’s full earnings potential by 2028
On an adjusted basis, the company earned a profit of $10.31 per share, higher than analysts’ estimates of $10.19 per share, per data compiled by LSEG.
(Reporting by Sneha S K and Sriparna Roy in Bengaluru; Editing by Devika Syamnath)
