Humana surprises market with solid quarterly figures and optimistic forecast

Humana presents strong quarterly figures and increases its revenues by an impressive 14.7% compared to the previous year, reaching $29.3 billion. This surpasses market expectations of $28.67 billion. This success is largely attributed to the increased Medicare Advantage membership and higher Medicare premiums per member. At the end of the third quarter, Humana had a total of 16.358 million medical members, a decline from 16.963 million the previous year. Nonetheless, Medicare Advantage membership increased to 5.659 million from 5.374 million. Interestingly, the benefit ratio rose to 89.9% compared to 86.6% the previous year, slightly exceeding expectations, thanks to strong performance in the CenterWell Primary Care sector. Within the insurance division, the ratio stood at 90.6% compared to 87.6% the prior year. Unexpectedly high risk ratings of members ensured that the costs for the Medicare Advantage business remained within expectations, while Medicaid costs were higher. For 2024, Humana raises its growth expectations for individual Medicare Advantage membership from 225,000 to 265,000. The insurance giant forecasts a GAAP earnings per share of at least $12.89 for 2024, up from prior expectations of around $12.81, while the consensus is at $13.36. The company also aims for a Medicare Advantage profit margin of at least 3%, though it acknowledges that achieving this target might be more challenging by 2027 due to the impact of the 2025 MA Star ratings. For the fiscal year 2024, Humana reaffirms its forecast for the insurance division's benefit ratio of approximately 90%, with an expected ratio of 91.5% to 92% in the fourth quarter. For 2025, Humana assumes that the adjusted earnings per share will remain at least at the 2024 level, should the member development meet expectations.