Humana Profit Falls 46%, Hurt by Costs From Aetna Merger
04 May 2016 - 11:01PM
Dow Jones News
By Anne Steele
Humana Inc. on Wednesday reported its profit tumbled 46% in the
first quarter of the year, hurt by costs related to the Aetna Inc.
merger and a rise in a key measure of the company's medical
costs.
Still, results for the health insurer, which in July agreed to
be acquired by rival Aetna, topped expectations.
Chief Financial Officer Brian Kane said the company is
encouraged by early indicators in its Medicare and health-care
services businesses "but remain cautious while our health-care
exchange experience continues to develop."
The Louisville, Ky., company struck a $34.1 billion merger deal
with rival Aetna Inc. in July amid a flurry of consolidation in the
health-care space that was fueled by a desire to diversify and cut
costs amid a landscape changed by the Affordable Care Act. The
tie-up, if approved by regulators, will vault Aetna toward the top
of the growing Medicare business.
In the most recent quarter, Humana's Medicare Advantage
membership rose 4.5% to 2.8 million, while commercial membership
dropped 21% to 875,700 because of termination by the Centers for
Medicare and Medicaid Services for lack of eligibility
documentation, lower membership in legacy plans and the loss of
membership for nonpayment of premiums.
Humana's consolidated medical-loss ratio, or the share of
premiums paid out for members' health expenses, was 84.8%, up from
83.1% in the year-ago quarter.
Over all, the insurer reported a first-quarter profit of $234
million, or $1.56 a share, down from $430 million, or $2.82 a
share, a year earlier. The company said transaction and integration
costs related to the Aetna merger dented earnings by 21 cents a
share.
Excluding costs stemming from the Aetna merger, among other
items, quarterly earnings fell to $1.86 a share from $2.58 a year
earlier, above the company's estimate for $1.80 a share. Revenue
edged down 0.2% to $13.8 billion, just above analysts' projection
for $13.76 billion in revenue, according to Thomson Reuters.
Humana reaffirmed its 2016 guidance for adjusted earnings of
$8.85 a share.
Shares in the company, inactive premarket, have risen 4.9% over
the past three months.
Aetna last week reported enrollment in Affordable Care Act plans
grew more than the company expected in the first quarter, but the
insurer said it is still on track to roughly break even on the
business this year, adding to the mixed signals from the industry
about the direction of the health-law exchanges.
Humana's merger with Aetna is expected to close in the second
half of 2016.
Write to Anne Steele at Anne.Steele@wsj.com
(END) Dow Jones Newswires
May 04, 2016 08:46 ET (12:46 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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