November 7, 2018 / 11:43 AM / a year ago

Medicare Advantage drives Humana earnings beat; shares hit new high

(Reuters) - U.S. health insurer Humana Inc (HUM.N) on Wednesday reported a third-quarter profit that handily beat Wall Street estimates and raised its full-year earnings forecast as it expects more customers to buy its Medicare Advantage health plans.

FILE PHOTO: A patient is comforted by her husband at St. Joseph's Hospital in Tucson, Arizona, U.S. September 13, 2017. REUTERS/Caitlin O'Hara

Humana shares rose more than 5 percent, hitting an all-time high of $349.36 in morning trading, amid a wider boost to the health insurance sector following results from Tuesday’s U.S congressional elections.

Chief Financial Officer Brian Kane forecast membership growth of 250,000 to 300,000 people next year for Humana’s individual Medicare Advantage health plans for people older than 65 or those with disabilities. Two brokerages said their estimates were at the upper end of that guidance range.

“We feel very good about the and obviously we’re working hard to drive growth above that range,” Kane said on a call with analysts.

The number of people who signed up for individual health plans sold by Humana’s Medicare Advantage business rose 6.8 percent to 3 million over the 12 months since Sept. 30, 2017.

“We are pleased with the initial positive response to our individual Medicare Advantage offerings for 2019,” Kane said.

He said tax cuts helped the company invest in benefits for members and offer competitive Medicare Advantage products, which are expected to drive significant membership growth and an increase in adjusted earnings per share next year in excess of Humana’s long-term growth target of 11 percent to 15 percent.

The solid quarter, a 2019 selling season that is proceeding well, strong ratings on the health plans it offers, as well as results of the 2019 midterm elections sets Humana up well for outperformance into next year, Leerink analyst Ana Gupte said.

Humana raised its 2018 adjusted earnings forecast by 25 cents to $14.40 per share, above the Refinitiv IBES estimate of $14.18.

The company’s adjusted consolidated benefit ratio, the percentage of premiums spent on claims, improved to 82 percent in the quarter from 82.4 percent last year, ahead of consensus estimates of 82.8 percent, according to brokerage Jefferies.

Excluding items, the company earned $4.58 per share, beating analysts’ average estimate by 32 cents.

Humana said net income rose 29 percent to $644 million, or $4.65 per share, in the quarter.

Total revenue rose nearly 7 percent to $14.21 billion.

Reporting by Tamara Mathias and Manas Mishra in Bengaluru; Editing by Shailesh Kuber and Bill Berkrot

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