Humana beats Q2 estimates with $694M profit as Medicare costs stabilize

Humana Inc. reported second-quarter net income of $694 million as medical costs for its Medicare Advantage members fell in line with company expectations, beating Wall Street estimates.

"The first half of the year went well, and we're right where we said we'd be at Investor Day last year," Jim Rechtin, president and chief executive officer at Humana, said.

The Louisville, Kentucky-based insurer posted adjusted earnings of $7.61 per share, topping the $6.22 average estimate of analysts surveyed by Zacks Investment Research. Revenue jumped to $40.87 billion from $32.4 billion a year earlier, also exceeding the $40.65 billion consensus. The company's benefit ratio — the percentage of premium revenue spent on medical costs — came in at 91.2 percent, compared with 89.7 percent in the year-ago quarter and in line with management's guidance of "slightly above 91 percent."

Humana added more than 1 million Medicare Advantage enrollees during the period, bringing total membership to 7.1 million, a 25 percent increase from 5.8 million a year earlier. The growth came as rivals including UnitedHealth Group's UnitedHealthcare and CVS Health's Aetna pulled plans from counties they deemed unprofitable. Wall Street had been concerned about whether Humana could manage costs while expanding rapidly, but the company said medical and pharmacy cost trends were in line with its expectations of "high single digit" growth, with slight favorability in inpatient care concentrated among members in value-based provider arrangements.

The results provide a positive signal for Humana's ability to manage medical expenses while growing market share in the competitive Medicare Advantage market. The company expects full-year earnings of $9 per share. Investors will watch upcoming quarterly reports for continued evidence that cost trends remain under control as the company integrates its expanded membership base.

This article is for informational purposes only and does not constitute investment advice.