Humana lifts profit outlook as medical costs drop in govt plans

By Khushi Mandowara and Leroy Leo

(Reuters) -Humana Inc raised its annual adjusted profit forecast on Wednesday after lower medical costs in the firm's government-backed health insurance business helped it beat profit estimates for the first quarter.

The company's upbeat outlook contrasts the uncertainty around 2024 earnings for health insurers staring at the end of COVID-related insurance protection measures and potential declines in government payouts for some plans.

Investors have also been worried about health insurers including UnitedHealth and Elevance recording benign medical claims costs even as hospitals and medical device makers see a recovery in non-urgent procedures and routine checkups.

Some analysts stressed on increased investor scrutiny into whether certain one-time items were helping lower medical costs artificially. "Investors are struggling right now with the disconnect in the commentary and in the reports," Stephens analyst Scott Fidel told Reuters.

Shares of Humana were down 0.6% in choppy trade on Wednesday, while peers UnitedHealth, Elevance, Centene Corp and Cigna Group fell about 2% each.

Humana saw memberships in the Medicare Advantage segment - its main business of government-backed health insurance for the elderly or those with certain disabilities - grow to 5.66 million as of March-end from 5.13 million a quarter earlier.

Its adjusted benefit expense ratio, or the percentage of payout on claims compared with premiums received, fell to 85.9% in the quarter, lower than analysts' estimates of 86.47%, according Refinitiv data.

Humana CFO Susan Diamond said the insurer saw favorable cost trends in the quarter even as hospitals reported a recovery in procedures.

On an adjusted basis, Humana expects annual profit per share of at least $28.25, compared with its previous forecast of at least $28. For the first quarter, it reported adjusted profit of $9.38 per share, beating estimates of $9.27.

(Reporting by Khushi Mandowara and Leroy Leo in Bengaluru; Editing by Devika Syamnath)