Humana reports strong first quarter after failed Aetna tie-up

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Humana reaffirmed on Tuesday that it raised its 2017 earnings-per-share guidance to at least $11.10, which it had preannounced during the insurer’s investor day last week. (Getty/Pashalgnatov)

Following a failed merger with Aetna and a decision to lessen its individual market footprint, Humana seems to be starting the year off on the right foot financially.

On Tuesday, the major insurer reported a GAAP consolidated pretax income of $1.69 billion for the first quarter of 2017, up from $500 million in the first quarter of 2016. That was mainly due to the $947 million it collected from the breakup fee associated with Aetna’s failed bid to acquire Humana, the insurer said, plus higher year-over-year earnings for its retail segment.

Humana also reaffirmed that it raised its 2017 earnings-per-share guidance to at least $11.10, which it had preannounced during the insurer’s investor day last week.

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“We believe in the strength of our company going forward and its ability to deliver double digit growth for shareholders over the long term,” Humana CEO Bruce Broussard said on Wednesday’s earnings call.

Humana is determined to focus on what it does best—“helping seniors with chronic conditions”—as well as initiatives such as integrating more deeply with providers to push toward a more holistic care model for its members, he said.

Humana had discontinued all of its off-exchange individual market insurance products in 2017 and considerably reduced its on-exchange offerings. The insurer expects to lose $45 million on its individual products this year, CFO Brian Kane said during the call, though he added that losses were considerably higher last year before Humana reduced its footprint.

For 2018, the insurer has already announced that it won’t operate in the individual market at all.

Looking ahead, Humana’s continued focus on its core business, Medicare Advantage, might continue to make it an attractive candidate for acquisition. Indeed, now that Anthem has lost its initial appeal of a judge’s ruling against its merger with Cigna, the latter might be in a good position to acquire Humana if it is allowed to exit its merger agreement with Anthem.

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