Medicare Advantage growth, tax reform boost Humana earnings

Humana building
Humana earned $16.81 per share in 2017, up from $4.07 a year earlier. (Humana)

Buoyed by the performance of its individual Medicare Advantage business line and tax reform, Humana reported better-than-expected earnings in the fourth quarter and raised its 2018 outlook.

The company said Wednesday that it earned $1.29 per share in the quarter, compared to a $2.68 loss in the fourth quarter of 2016. Its adjusted earnings per share of $2.06 in the fourth quarter also beat analysts’ consensus estimate of $2 per share.

For 2017 overall, Humana earned $16.81 per share, up from $4.07 a year earlier. Looking ahead, the insurer said it will raise its adjusted earnings outlook from $11.71 in 2017 to $13.50 to $14 per share in 2018.

The lower corporate tax rate will benefit Humana’s earnings per share by approximately $4 in 2018. The company said it will use half of that to invest in its employees, further health-related initiatives in the communities it serves, and accelerate investments in technology and its integrated care model. The rest of the benefit will be returned to the company’s shareholders.

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Humana said its Medicare Advantage membership totaled 2.86 million by the end of 2017, a 1% year-over-year increase. It said membership growth last year was muted due to the uncertainty associated with the proposed Aetna transaction during last year’s annual election period.

But Humana’s individual MA membership rose to 3 million as of January, which CEO Bruce Broussard attributed to better retention and strong sales during the 2018 annual election period. Many of its new members came from competing plans, and the insurer saw market share gain in most states where it operates, Broussard noted during a call with analysts.

Humana, though, has its eye on being more than just a Medicare Advantage powerhouse; it also wants to continue growing its healthcare services segment. One avenue it’s taken recently is the acquisition of part of home-care giant Kindred Healthcare. Broussard also highlighted the insurer’s move to consolidate its provider brands in South Florida and Texas into a physician-led, payer-agnostic platform called Conviva.

“We continue to make strong progress in advancing our integrated care delivery strategy, especially in deepening our clinical capabilities through long-term platform investments in the home and primary care,” he said during Wednesday’s call.