Humana Blames Medicare Advantage As Stock Falls After Larger Than Expected Quarterly Loss, Grim Outlook

Humana Inc HUM shares nosedived after the company released dismal fourth quarter 2023 earnings.

The company reported a Q4 adjusted EPS loss of $(0.11), a turnaround from EPS income of $1.97 a year ago, missing the consensus of $(0.05).

The fourth quarter results reflect an additional increase in Medicare Advantage medical cost trends, driven by higher than anticipated inpatient utilization, primarily for November and December, and a further increase in non-inpatient trends.

The insurer reported adjusted revenue of $25.73 billion, compared to $21.30 billion a year ago and the consensus of $25.55 billion.

Sales increased on individual Medicare Advantage and state-based contracts membership growth and higher per member individual Medicare Advantage premiums.

Humana’s individual Medicare Advantage enrollment was 5.41 million at the end of the third quarter, up 18.5%. Total Medical Membership decreased by 1.3% to 16.86 million.

The Benefits expense ratio for the fourth quarter increased to 90.7% from 87.3%.

“We believe the elevated (Medicare) medical costs are an industry dynamic, not specific to Humana, and that they may persist for an extended period or, in some cases, permanently reset the baseline,” Reuters noted, citing Humana.

Shares of other health insurers, such as CVS Health Corp CVS, Cigna Inc CI, Centene Corp CNC, and UnitedHealth Group Incorporated UNH, were also trading lower in the premarket trading.

Guidance: Humana announced its initial fiscal year 2024 EPS outlook of ‘approximately $14.87’ on a GAAP basis, ‘and approximately $16.00’ on an adjusted basis (versus consensus of $28.91). 

The company assumes higher Medicare advantage medical costs experienced in the fourth quarter to persist throughout 2024.

The company affirmed 2024 individual Medicare Advantage annual membership growth of approximately 100,000 or 1.8%.

In its prepared remarks, Humana said it no longer believes the previously communicated $37 adjusted EPS target for 2025 is achievable.

Price Action: HUM shares are down 16% at $338.01 during the premarket session on the last check Thursday.

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