July 29 (Reuters) – Humana on Wednesday beat Wall Street estimates for second-quarter earnings as the health insurer’s spend on medical services was in line with expectations, but it left its annual adjusted profit forecast unchanged.
Shares of the company were down about 9% in premarket trading. Humana also lowered its net profit forecast to at least $6.52 per share from the previous estimate of at least $8.36.
Investors have been raising their expectations for insurers, after others including larger peer UnitedHealth raised their outlook and have done a better job at controlling costs.
Humana is one of the largest providers of Medicare Advantage plans serving people aged 65 and older as well as people with disabilities.
Once a key source of profit growth for insurers, these 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.
Humana reported a quarterly medical cost ratio, the percentage of premiums spent on medical care, of 91.2%, which the company said was in line with its expectations across both new and existing members. Analysts expected a ratio of 91.19%, according to data compiled by LSEG.
The company maintained its annual adjusted profit per share forecast of at least $9.
While major peers retreat from the Medicare Advantage market, Humana has been expanding enrollment of members.
The company said it saw a 23% rise in memberships in its individual Medicare Advantage plans in the quarter. It also reaffirmed its annual Medicare and Medicaid membership growth expectations.
Quarterly net revenue rose 26.2% to $40.87 billion, beating estimates of $40.61 billion.
On an adjusted basis, the company earned a profit of $7.61 per share, compared with analysts’ estimates of $7.22 per share.
(Reporting by Sriparna Roy and Sneha S K in Bengaluru; Editing by Devika Syamnath)
