(Reuters) -Humana raised its annual profit forecast after beating quarterly estimates on Wednesday, as the U.S. health insurer succeeded in keeping its medical costs in check, in contrast to several of its rivals who recently slashed their expectations.
The company said its strong quarterly performance was also driven by better-than-expected membership in individual Medicare Advantage plans and strength in its primary care segment CenterWell.
Its shares rose nearly 7% in premarket trading.
“Following several reductions to guidance, we think this increase will be received positively, as the company’s 2025 repricing actions appear to be having their intended effect,” said J.P.
Morgan analyst Lisa Gill.
Larger competitor UnitedHealth flagged underestimation of medical costs on Tuesday, and also provided a full-year profit forecast that fell short of analysts’ already diminished estimates.
Humana reported a quarterly medical cost ratio – the percentage of premiums spent on medical care – of 89.7%, up from 88.9% a year earlier, but in line with analysts’ estimates of 89.71%.
The industry has been battling with stubbornly high costs for the last two years due to increased use of healthcare services across government-backed plans.
Humana is the top provider of Medicare Advantage plans under which the U.S. government pays private insurers a set rate to manage healthcare for people aged 65 and older, and those with disabilities.
CEO Jim Rechtin said the company was confident in the growth outlook for Medicare Advantage and value-based care.
“We feel good about our solid performance in the first half of the year.”
The health insurer said it remained optimistic that its pricing of the Medicare Advantage plans for 2025 will drive margin improvement.
It also expects membership decline in the plans to be lower than previously anticipated.
Humana projected full-year profit to be about $17 per share, compared with its previous estimate of about $16.25.
Analysts on average were expecting a profit of $16.38 per share, as per LSEG data.
For the second quarter, the company earned a profit of $6.27 per share, topping estimates of $5.92.
(Reporting by Sriparna Roy and Sneha S K in Bengaluru; Editing by Sriraj Kalluvila)
