Humana's Earnings Fall as Insurer Cuts Jobs--2nd Update
November 08 2017 - 10:40AM
Dow Jones News
By Cara Lombardo
Humana Inc.'s pretax income fell 11% in its latest quarter as
the health insurer trimmed its workforce and earnings from its
health-care-services business dropped.
Humana reported a third-quarter pretax profit of $799 million,
or $3.44 a share, compared with $902 million, or $2.98 a share, a
year ago.
The Louisville, Ky., company said head-count reductions and
decreased earnings from integrated-care services hurt its results,
while earnings increased in many of its core insurance segments.
Humana said its mail-order pharmacy services were less popular than
expected during the quarter, especially among members in the
prescription plan it is offering with Wal-Mart Stores Inc.
The company said this week it will cut 1,300 jobs and leave the
long-term-care business, bolstering analyst speculation that the
insurance company is readying itself for a merger less than a year
after a tie-up with Aetna fell apart.
Humana plans to offload the long-term-care business, KMG America
Corp., to Continental General Insurance Co. Humana expects to
record a net loss of $400 million on the sale. It will provide $353
million to help fund the transaction, which it expects to be more
than offset by a tax benefit from the sale of $500 million.
By the end of the week, Humana plans to notify about 1,300
employees that their jobs will be cut early in 2018, a spokesman
said. That is in addition to more than 1,150 employees who have
already opted to leave the company as part of an early retirement
program introduced in September.
Together, the company expects layoffs and the early retirement
program to reduce head count by 2,700 people, or 5.7% of its
workforce.
Chief Executive Bruce Broussard said in prepared remarks
Wednesday that cutting costs has allowed the company to invest in
its products and streamline its operating processes. The company's
number of four-star Medicare plans increased for 2018 and Mr.
Broussard said management feels good about Humana's Medicare
pricing a few weeks into the enrollment period for 2018.
Last week, Humana sued the federal government for about $611
million, alleging the U.S. Department of Health and Human Services
misled insurers it brought into Affordable Care Act exchanges.
Humana said in the lawsuit filed with the U.S. Court of Federal
Claims that the government owes it risk corridor payments, or
reimbursements to cover losses over certain thresholds, for the
years 2014 through 2016. The administration didn't immediately
respond to a request for comment.
Overall, Humana posted a third-quarter profit of $499 million,
or $3.44 a share, compared with $450 million, or $2.98 a share, a
year ago.
Excluding one-time items, Humana earned $3.39 a share, up from
$3.20 a share in the year-earlier period. Analysts had expected
adjusted earnings per share of $3.27.
Humana shares, up 26% this year, were down 2.5% in early trading
Wednesday.
The company also decreased its full-year outlook as a result of
charges stemming from workforce reductions. It now expects earnings
per share of $17.62 this year, down from an earlier forecast of
$17.83. It raised its forecast for adjusted earnings per share to
$11.60 from $11.50.
Write to Cara Lombardo at cara.lombardo@wsj.com
(END) Dow Jones Newswires
November 08, 2017 10:25 ET (15:25 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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