Humana beats estimates on Medicare Advantage demand, raises forecast

By Tamara Mathias and Ankur Banerjee

(Reuters) - Humana Inc topped Wall Street expectations for second-quarter profit on Wednesday as it sold more Medicare Advantage healthcare plans to the elderly and the disabled, prompting the U.S. health insurer to raise its full-year earnings forecast.

Humana has a significant presence in the Medicare Advantage market, a lucrative business for private insurers. Unlike its rivals, Humana is steering shy of large acquisitions and is instead focusing on partnerships and smaller deals while cementing its dominance in the Medicare Advantage business.

Individual membership in the insurer's Medicare Advantage plans rose 6.6 percent to about 3 million and group membership rose nearly 14 percent to 493,100 over the past year.

Humana said it now expects 2018 adjusted earnings of about $14.15 per share, compared to a previous forecast of $13.70 to $14.10 per share.

The company's adjusted consolidated benefit ratio, the percentage of premiums spent on claims, deteriorated to 84.3 percent in the quarter, missing consensus estimate of 83.9 percent according to brokerage Evercore ISI.

Over the past few quarters, insurers have kept a tight leash on medical costs and even a slight slip has weighed on stocks.

Shares of the Louisville, Kentucky-based company rose 1.9 percent to $320 in light trading before the bell.

"The stock reaction to the beat could be muted by the benefit ratio miss as we have seen with other insurers," Evercore ISI analyst Michael Newshel said in a note.

Earlier this month, the largest U.S. health insurer UnitedHealth Group reported quarterly medical costs slightly higher than expected, overshadowing a second quarter profit beat.

Humana said net income fell 70.3 percent to $193 million after the company recognized a pretax loss of $790 million on the sale of its KMG America Corp unit.

Excluding items, Humana earned $3.96 per share, beating analysts' average estimate of $3.77, according to Thomson Reuters I/B/E/S.

Revenue rose 5.4 percent to $14.26 billion, above the average estimate of $14.16 billion.

(Reporting by Ankur Banerjee and Tamara Mathias in Bengaluru; Editing by Saumyadeb Chakrabarty and Shounak Dasgupta)