- Humana (NYSE:HUM +5.7%) jumps on more that double normal volume as investors respond to its increase in 2016 and Q2 guidance. The company says its upward revisions were prompted by better-than-expected performances in its Medicare Advantage and Healthcare Services businesses, although tempered a bit from continuing challenges in its individual commercial medical business.
- The company new expects EPS for the year to be at least $8.56 versus its previous mark of $8.32 (+2.9%). On a Non-GAAP basis, EPS should be at least $9.25, up 4.5% from the previous target of $8.85.
- Its expectation for Q2 EPS is now at least $2.03 compared to the previous mark of $2.06. On a Non-GAAP basis, the EPS target is now ~$2.28 versus the previous forecast of at least $2.15.
- Pretax earnings of the Medicare Advantage unit should be ~$185M or $0.76/share due to operating initiatives that resulted in favorable medical claims development and lower utilization.
- Pretax earnings in Healthcare Services should be ~$62M or $0.29/share due to higher-than-projected earnings in the pharmacy business.
- Humana established a premium deficiency reserve (PDR) related to its Individual business in Q4 of last year. Based on a recent evaluation of claims data, it has increased its PDR for this year by ~$208M pretax ($0.86/share). Net anticipated pretax expenses through Q2 will be ~$52M ($0.22/share). The two items together comprise the $1.08/share line item downward adjustment in its overall earnings guidance update (FY16 financial guidance table).
- The company also reports that its has filed proposals for significant rate increases and service area changes with various Departments of Insurance regarding individual insurance for consumers. It intends to almost completely exit Affordable Care Act (ACA)-compliant off-exchange markets by next year. Its revised geographic presence will be pared down to 156 counties across 11 states from 1,351 counties across 19 states. Its premiums from ACA-compliant offerings will be $750M - 1B this year, far short of the projected $3.4B.