(Reuters) -Humana Inc raised its annual adjusted profit forecast on Wednesday after lower medical costs in the firm’s government-backed health insurance business helped it beat profit estimates in the first quarter.
The company’s rosy outlook contrasts uncertainty around 2024 earnings for health insurers staring at the end of COVID-related insurance protection measures and potentially lower government payouts for some plans. That has led to increased investor scrutiny into whether one-time items are leading to lower medical costs, which pushed down shares of rivals UnitedHealth and Elevance earlier this month despite both beating profit estimates.
Humana also saw memberships grow in the Medicare Advantage segment, its rapidly growing main business which consists of government-backed plans offered by private companies to people aged over 65 years or those with certain disabilities.
The firm had 5.66 million Medicare Advantage members as of March end, compared with 5.13 million a quarter earlier.
In February, the company raised its annual forecast for membership additions in the segment to 775,000, expecting to benefit from redirecting resources out of its employer-backed insurance business that is in the process of shutting down.
The impact of its exit from the commercial business was not included in adjusted figures for the quarter, Humana said.
Its adjusted benefit expense ratio – or the percentage of payout on claims compared with premiums received – fell to 85.9% in the quarter, lower than analysts’ estimate of 86.47%, according Refinitiv data.
On an adjusted basis, the company now expects annual profit per share of at least $28.25, compared with its previous forecast of at least $28. Analysts estimated 2023 profit of $28.12 per share.
Humana’s adjusted profit came in at $9.38 per share, beating estimates of $9.27.
(Reporting by Khushi Mandowara and Leroy Leo in Bengaluru; Editing by Devika Syamnath)