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Humana (NYSE:HUM) shares traded higher premarket Wednesday after the health insurer reported better-than-expected financials for Q1 2024 while reiterating its full-year outlook and benefit ratio, a key performance metric in managed care.
While the company’s topline expanded ~11% YoY to $29.6B during the quarter, its adjusted earnings per share fell ~23% YoY to $7.23, as its benefit ratio, which measures the proportion of premium spent on medical benefits, rose.
However, Humana (HUM) said its benefits ratio was in line with expectations in Q1, during which the company lowered its full-year outlook twice in January, citing higher-than-expected medical costs in its Medicare Advantage (MA) business.
HUM’s benefits ratio rose to ~89% in Q1 2024 from ~86% in the prior-year quarter, while the operating cost ratio dropped to ~10% from ~11% a year ago.
For the full year, the company reaffirmed its adjusted EPS target of ~$16.00 and benefit ratio of ~90% for its insurance segment but raised Medicare Advantage annual membership growth by 50,000 to 150,000.
However, the management pulled previously issued 2025 guidance of $6–$10 for adjusted EPS growth, citing, among other things, Medicare’s recent final MA rate notice, which, according to Humana (HUM), was insufficient to cover the current trends in medical costs.
“Our 2025 Adjusted EPS growth outlook will be impacted by several variables into which we will not have clear visibility until later this year. As a result, we believe it is prudent to provide more specific guidance for 2025 once we have greater clarity,” the company said.