Humana Posts Surprise Rise in Revenue
August 03 2016 - 8:00AM
Dow Jones News
Humana Inc. reported better-than-anticipated earnings and a
surprise rise in revenue in the most recent quarter as a key
measure of the company's medical costs fell.
Chief Financial Officer Brian Kane said the company was seeing
"consistently strong operational execution across our core
businesses, though challenges in our individual commercial business
remain."
In the latest quarter, Humana's Medicare Advantage membership
rose 4% to 2.8 million, while commercial membership dropped off 24%
to 792,000, mostly owing to the loss of membership associated with
first-half 2016 Affordable Care Act-compliant plan discontinuances,
loss of membership associated with nonpayment of premiums, or
termination by Centers for Medicare and Medicaid Services due to
lack of eligibility documentation and lower membership in legacy
plans.
Humana's consolidated medical-loss ratio, or the share of
premiums paid out for members' health expenses, fell to 84.3% from
85.2% in the year-ago quarter, which the company attributed to
lower medical-loss ratios in the retail and group segments.
In all for the June quarter, the insurer reported a profit of
$636 million, or $2.06 a share, down from $793 million, or $2.85 a
share, a year earlier. The company said transaction and integration
costs related to the pending merger with Aetna Inc. dented earnings
by 16 cents a share.
Excluding costs stemming from the merger with Aetna, among other
items, quarterly earnings rose to $2.30 a share from $1.77 a year
earlier, above the company's estimate for $2.28 a share. Revenue
rose 2% to $14.01 billion, topping analysts' projection for $13.59
billion in revenue, according to Thomson Reuters.
Humana reaffirmed its 2016 guidance for adjusted earnings of at
least $9.25 a share.
Shares, inactive premarket, have fallen 5% this year.
The Louisville, Ky., company struck a $34.1 billion merger deal
with rival Aetna in July of last year amid a flurry of
consolidation in the health-care space that was fueled by a desire
to diversify and cut costs amid a landscape changed by the
Affordable Care Act. The tie-up, if approved by regulators, will
vault Aetna toward the top of the growing Medicare business.
But late last month, the Justice Department filed a pair of
lawsuits in a Washington, D.C., federal court challenging Anthem
Inc.'s proposed acquisition of Cigna Corp. and Aetna's planned
combination with Humana, alleging the mergers would harm consumers,
employers and health-care providers with an unacceptable reduction
in competition.
On Tuesday, Aetna became the last of the five major national
health insurers to project a loss on Affordable Care Act plans for
2016, and the company said it would re-evaluate its participation
in the business and cancel a planned expansion. Despite the
exchange results, Aetna posted better-than-expected profit and
revenue growth in the second quarter and reaffirmed its 2016
operating earnings guidance.
Write to Anne Steele at Anne.Steele@wsj.com
(END) Dow Jones Newswires
August 03, 2016 08:45 ET (12:45 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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