April 29, 2020 / 10:59 AM / a month ago

Health insurer Humana sees higher first-half profit as COVID-19 delays spending

(Reuters) - U.S. health insurer Humana Inc (HUM.N) said a big share of its full-year profit could come in the first half as it benefits from paying fewer claims due to delays in non-essential surgeries in the wake of the coronavirus pandemic.

Shares of the company rose 5% to $381.49 in afternoon trading on Wednesday as Humana joined rivals to keep its full-year adjusted profit forecast unchanged.

“A disproportionate amount of our full-year 2020 earnings will now occur in the first half, heavily weighted to the second quarter,” Chief Financial Officer Brian Kane said in a conference call with analysts.

The gains due to COVID-19, however, could be short-lived depending on how quickly the outbreak subsides and healthcare activity begins to resume, according to a Reuters analysis.

Humana said the benefits from healthcare spending declines would be offset by the costs it would incur due to the outbreak, including the increase in pharmacy costs after it allowed early prescription refills for members.

The insurer expects deferred procedures to resume in the coming weeks or months, prompting it to keep its full-year adjusted profit range unchanged at between $18.25 to $18.75 per share.

In the first quarter, the company’s profit beat was helped by a rise in enrollments in its Medicare Advantage business, which caters to people older than 65 or those with disabilities.

Sales at its retail unit, which includes Medicare plans, rose 19.6% to $16.76 billion.

Humana has been banking on a steady growth in Medicare enrollment and said it expects to add 300,000 to 350,000 members to its plans for individuals in 2020, a step up from its prior range of 270,000 to 330,000 members.

The insurer delivered the strongest earnings among its peers so far, driven by a better-than-expected control over costs, Barclays analyst Steve Valiquette said in a client note.

The company’s consolidated benefit ratio, the percentage of premiums spent on claims, improved to 85.1% in the quarter from 86.2% last year, beating consensus estimates of 85.79%.

Excluding items, it earned $5.40 per share, beating the analysts’ average estimate of $4.68 per share, according to Refinitiv data.

Total revenue rose 17.6% to $18.94 billion, above estimates of $18.47 billion.

Reporting by Saumya Sibi Joseph and Trisha Roy in Bengaluru; Editing by Supriya Kurane and Arun Koyyur

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