Humana beats quarterly profit estimates on Medicare strength

London: Humana beat first-quarter profit expectations on Wednesday, helped by strength in its government-backed insurance business for older adults and boost from valuation adjustments in some strategic partnerships.

Shares of the company rose 3.3 per cent in premarket trading after the health insurer also raised its 2024 individual Medicare Advantage growth target by 50,000 members.

The company, however, saw a jump in its medical benefit ratio - percentage of premiums spent on medical care - to 88.9 per cent for the quarter from 85.5 per cent last year. The growth was also higher than analysts' expectation of 88.45 per cent, according to LSEG data.

The company said it has taken a more conservative approach towards reserves for medical claims following disruptions caused by a recent hack at UnitedHealth tech unit Change Healthcare.

Chief Financial Officer Susan Marie Diamond said last month about 15 per cent to 20 per cent of Humana's medical claims were dependent on the UnitedHealth unit.

The company also said it no longer believes adjusted earnings per share growth of $6 to $10 was possible in 2025 after the final government notice on Medicare reimbursement rates.

Humana, which primarily provides government-backed insurance plans including Medicare Advantage, has been facing multiple challenges.

It has already warned of a potential hit to profits this year and the next from increased demand for medical procedures especially among older adults who had delayed surgery during the pandemic.

Humana generated revenue of $29.61 billion in the first quarter, above estimates of $28.47 billion.

On an adjusted basis, Humana reported a profit of $7.23 per share, higher than the average analyst estimate of $6.12 per share.

The company also recorded a $1.08 per share adjustment in valuation for certain strategic partnerships, which boosted its adjusted profit.

(Reporting by Mariam Sunny and Leroy Leo in Bengaluru; Editing by Shinjini Ganguli)