Humana Rises as Insurer Sees Medical Costs Stabilizing

Humana Inc. shares jumped Wednesday after the insurer said an uptick in medical costs it warned about in June was stabilizing.

(Bloomberg) — Humana Inc. shares jumped Wednesday after the insurer said an uptick in medical costs it warned about in June was stabilizing.

Adjusted profit for the second quarter was $8.94 a share, the Medicare-focused insurer reported Wednesday, exceeding analysts’ expectations. Humana affirmed its adjusted earnings outlook for the year and boosted its forecast for membership growth in Medicare Advantage plans. The shares rose 5.5% at 9:57 a.m. in New York. They had lost 11% this year through Tuesday’s close.

The report helps defuse concerns Humana and rival UnitedHealth Group Inc. raised in June when they disclosed that care expenses, especially for outpatient surgeries, were rising faster than expected. The warning sparked a selloff as investors feared that insurers hadn’t adequately priced for a rebound in care needed by patients who deferred procedures during the pandemic.

UnitedHealth’s results in July dispelled some of that worry and lifted shares across the sector. Humana said there’s a “stabilizing Medicare Advantage utilization environment based on most recent claims activity” in its earnings release, without elaborating.

“Medical costs came in much better than feared,” Leerink Partners analysts led by Whit Mayo said in a research note.

Data on medical use is “incrementally positive” compared to when Humana alerted investors to higher costs, Chief Financial Officer Susan Diamond said on a call with analysts.

Humana affirmed its full-year guidance for adjusted earnings of at least $28.25 per share. Medical expenses as a percent of premium revenue would fall within its previously given range of 86.3% to 87.3%, the company said.

The company affirmed its adjusted earnings target for 2025 of $37 per share and said it’s targeting growth within its historical range of 11% to 15% for 2024.

Membership growth in 2023 has been better than expected, Chief Executive Officer Bruce Broussard said on the call. The company expects to grow Medicare Advantage members by 825,000 in 2023, an 18% growth rate.

Humana also reported a $90 million charge related to “certain anticipated litigation expenses” that was stripped out of its adjusted results.

(Updates with opening share price in second paragraph and analyst and executive comments starting in fifth paragraph. A previous version of this story was corrected to specify the profit figure is per share.)

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