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Humana profit beats as medical costs ease on slow elective-care rebound

Published 11/02/2022, 07:01 AM
Updated 11/02/2022, 11:27 AM
© Reuters. FILE PHOTO: Signage for Humana Inc. is pictured at a health facility in Queens, New York City, U.S., November 30, 2021. REUTERS/Andrew Kelly

By Raghav Mahobe and Bhanvi Satija

(Reuters) -Humana Inc beat third-quarter profit estimates on Wednesday, as a sluggish recovery in elective procedures helped the health insurer keep medical costs in check.

Rivals such as UnitedHealth Group Inc (NYSE:UNH) and Elevance Health have also benefited from lower-than-expected medical costs, prompting them to raise their full-year forecasts.

Humana (NYSE:HUM) maintained its recently raised annual adjusted profit forecast of about $25 per share, which is just shy of analysts' expectations of $25.03, according to IBES data from Refinitiv.

Shares of the company rose 1% in early trade.

While raising the forecast in September, Humana cited a lack of COVID-19 "headwind materializing" and lower-than-expected medical cost trends in the company's Medicare Advantage and Medicaid businesses.

Humana expects the favorable medical cost trend to continue into 2023, Chief Financial Officer Susan Diamond said on a post-earnings conference call.

The company posted a quarterly ratio of medical expenses to premiums collected of 85.6%, compared with the average estimate of 85.69% in a Refinitiv poll of seven analysts. A lower ratio indicates a tight rein on the insurer's medical costs.

Humana's guidance to enroll 325,000 to 400,000 Medicare Advantage members next year marks a return to the industry's rate one year ahead of schedule, Stephens analyst Scott Fidel said in a note.

Chief Executive Officer Bruce Broussard said the insurer could probably do a "medium to smaller" deal at this time in the primary care business.

"We've looked at some of the larger transactions out there ... not really convinced that's the right direction for us," Broussard said.

© Reuters. FILE PHOTO: Signage for Humana Inc. is pictured at a health facility in Queens, New York City, U.S., November 30, 2021. REUTERS/Andrew Kelly

Recent media reports have suggested that Humana is among the top bidders to acquire primary care provider Cano Health Inc.

Humana said its adjusted profit for the third quarter was $6.88 per share, above estimates of $6.28, according to Refinitiv data.

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