Humana Inc., which has agreed to sell itself to Aetna Inc., on
Wednesday reported a better-than-expected 25% jump in profit in its
second quarter, though revenue disappointed as the health insurer
faces challenges in its Medicare Advantage business.
Shares slipped 0.3% in premarket trading.
Humana said it took actions to improve profitability in its
individual commercial and state-based contracts businesses in the
quarter. Meanwhile, the company said it sees its Medicare Advantage
business stabilizing.
Results for Medicare Advantage were hurt by lower-than-expected
claim recovery levels and fewer reductions in inpatient admissions
than it had anticipated.
Earlier this month, Humana cut its adjusted earnings outlook for
the full year and issued downbeat guidance for the latest quarter
amid higher-than-expected Medicare Advantage admissions.
"While certain operational challenges impacted our
second-quarter results, we are encouraged by recent progress," said
finance chief Brian Kane in a news release Wednesday.
Medicare Advantage membership grew 14.8% to 2.71 million, while
individual commercial membership fell 7.5% to 1.04 million.
Overall, Humana posted earnings of $431 million, or $2.85 a
share, compared with a profit of $344 million, or $2.19 a share, a
year earlier.
Excluding a gain from the sale of its Concentra Inc. business,
per-share earnings were $1.67. Humana had forecast earnings of
$1.60 to $1.65 a share.
Total revenue, which includes investment income, grew 12.4% to
$13.73 billion.
Analysts polled by Thomson Reuters had forecast $13.81 billion
in revenue
Revenue from premiums and services grew 12.3% to $13.62 billion,
reflecting higher totals in the retail and group segments.
The company backed its full-year guidance for $7.75 in adjusted
earnings.
For the third quarter, Humana forecast per-share earnings of
$2.15 a share, while analysts polled by Thomson Reuters had
forecast per-share earnings of $2.18 a share.
Humana in early July agreed to sell itself to Aetna Inc., part
of a rapid-fire reconfiguration of the U.S. health-insurance
industry's top ranks. Last week, Anthem Inc. agreed to buy Cigna
Corp. for $48 billion, combining the second- and fifth-largest
health insurers by revenue.
The consolidation momentum in the health-insurance industry is
being fed by a desire to diversify and cut costs, amid a landscape
changed by the Affordable Care Act. Insurers are eager to reduce
expenses and build scale that will help them face off against
health-care providers that are bulking up. The providers themselves
are growing partly with an eye toward new forms of payment
encouraged by the health law.
The deal to buy Humana would boost Hartford, Conn.-based Aetna's
Medicare business and give it scale to thrive as the industry
consolidates.
Write to Chelsey Dulaney at Chelsey.Dulaney@wsj.com
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