May 3, 2017 / 10:47 AM / in 3 months

Humana profit beats on Medicare Advantage unit strength

3 Min Read

(Reuters) - U.S. health insurer Humana Inc (HUM.N) reported higher-than-expected quarterly profit on Wednesday due to strength in Medicare Advantage, a program in which it manages government health benefits for the elderly and people with disabilities.

Medicare Advantage plans account for about a third of the more than 55 million people covered by Medicare and is the fastest growing government health program. It is an alternative to standard fee-for-service Medicare accounts and makes up the majority of Humana's revenue.

Private insurers like Humana are turning to Medicare Advantage for growth as they exit the Obamacare individual insurance market for people under age 65. That market is expected to contract as U.S. President Donald Trump and Republican lawmakers seek to repeal and replace the Affordable Care Act.

Humana, which said it has 155,000 members in Obamacare exchanges plans this year, already disclosed it will exit that business in 2018 because of losses. It has 65,000 members in Tennessee, a state that has had difficulty attracting insurers.

Humana Chief Financial Officer Brian Kane said that the cost of medical services for exchange members was within expectations of a forecast $45 million loss in that business in 2017. Kane said medical expenses are seasonal and that he expects them to rise later this year.

The company raised its full-year profit forecast last week on the back of strong performance in its retail business.

The company's net income rose to $1.12 billion, or $7.49 per share, in the first quarter ended March 31, from $254 million, or $1.68 per share, a year earlier.

The results included a net gain of $947 million associated with its terminated merger agreement with Aetna Inc (AET.N).

Aetna and Humana walked away from the deal in February after a federal judge backed the U.S. Justice Department's decision to block it on antitrust grounds.

Excluding items, the company earned $2.75 per share, beating analysts' average estimate of $2.50, according to Thomson Reuters I/B/E/S.

Total revenue fell to $13.76 billion from $13.80 billion, due to lower Obamacare individual commercial premiums.

Adjusted revenue rose 4 percent to $13.48 billion, just shy of estimates of $13.62 billion.

Humana shares fell 0.5 percent, or $1.05, to $224.47.

Reporting by Ankur Banerjee in Bengaluru and Caroline Humer in New York; Editing by Shounak Dasgupta and Meredith Mazzilli

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