Humana Inc (NYSE:HUM) stock rose 0.14% (As on August 3, 11:14:13 AM UTC-4, Source: Google Finance) after the company’s second-quarter profit beat Wall Street estimates, as a lower-than-expected spike in non-urgent medical procedures helped keep a check on the health insurer’s costs, sending shares nearly 6% higher in morning trade. Humana reported a medical loss ratio, the percentage of premiums it spends on medical care, of 86.3% for the quarter, versus the average analysts’ estimate of 86.5%, according to Refinitiv data. The quarterly results benefited on the back of a solid individual Medicare Advantage business and expanding membership through state-based contracts. Improved per member individual Medicare Advantage premiums also contributed to the upside, which was partly offset by an elevated operating expense level.
HUM in the second quarter of FY 23 has reported the adjusted earnings per share of $8.94, beating the analysts’ estimates for the adjusted earnings per share of $8.82, according to Refinitiv data. The company had reported the adjusted revenue growth of 14.2 percent to $25.73 billion in the second quarter of FY 23, missing the analysts’ estimates the consensus mark by a whisker. Total premiums of Humana amounted to $25,495 million, which improved 14.5% year over year in the second quarter and outpaced the estimate of $24,545 million. Services revenue declined 27.5% year over year to $978 million and also missed our estimate of $987.7 million. Investment income of $274 million increased nearly six-fold year over year in the quarter under review. Humana reported a net income of $956 million in the second quarter, which climbed 37.2% year over year but lagged the estimate of $1,086 million.
The company had said in June that it expected the business’ second-quarter and full-year MLR to be near the top half of its full-year range of 86.3% to 87.3%. Humana affirmed its 2023 MLR forecast.
On the other hand, Humana, along with peer UnitedHealth, warned in June that medical expenses would jump in 2023 as more patients go ahead with elective procedures that had been delayed by the pandemic. Staffing shortages and health restrictions meant that many surgeries, particularly those on older adults at greater risk of contracting severe COVID-19, were previously put on hold. Analysts have also noted that aging in the so-called “baby boomer” generation — the cohort born from 1946 to 1964 – as well as elevated life expectancies are adding pressure on health insurers’ returns.