Humana Reports Better than Expected Results for Third Quarter of 2024
Humana Inc. (NYSE: HUM) reported solid financial results for the third quarter of 2024, demonstrating robust performance across its segments. The company achieved a GAAP earnings per share (EPS) of $3.98 and an adjusted EPS of $4.16 for the quarter, reflecting a strong operational foundation.
Total revenues for the quarter reached $29.4 billion, a notable increase from $26.4 billion in the same period last year. This growth was primarily driven by higher per-member Medicare premiums and an expansion in Medicare Advantage and state-based contracts membership.
The Insurance segment, which includes Medicare and state-based contracts, recorded revenues of $28.37 billion, up from $25.51 billion in the previous year. The benefits expense ratio for this segment rose to 90.6% from 87.6%, reflecting the impact of elevated medical cost trends. Despite this, the segment’s income from operations was $274 million, with adjusted income reaching $329 million. The CenterWell segment also reported increased revenues of $5.04 billion, up from $4.66 billion, with income from operations at $382 million.
Operating cash flows for the quarter stood at $3.49 billion, a decline from the previous year’s $11.12 billion, primarily due to the timing of premium payments from the Centers for Medicare & Medicaid Services (CMS) and lower year-to-date earnings. The company maintained a strong balance sheet with $609 million in cash and short-term investments, and a debt-to-total capitalization ratio of 42.3%.
Humana Beats Expectations Comfortable in Third Quarter of 2024
Humana’s third-quarter performance exceeded market expectations, with the adjusted EPS of $4.16 surpassing the anticipated $3.38. This outperformance was largely attributed to the company’s effective management of Medicare premiums and membership growth in Medicare Advantage and state-based contracts. The company’s revenue of $29.4 billion also exceeded the forecasted $28.67 billion, showcasing its ability to capitalize on favorable market conditions.
The benefits expense ratio, however, increased to 89.9% from 86.6% in the previous year, indicating higher medical cost trends. Despite this, Humana’s operating cost ratio improved to 11.5% from 12.5%, reflecting scale efficiencies and administrative cost savings. These improvements were driven by the company’s value creation initiatives and the reduction of commission expenses for brokers, resulting from significant individual Medicare Advantage membership growth in 2023.
While the Insurance segment faced challenges with elevated medical costs, its revenue growth and improved operating efficiencies helped offset the impact. The CenterWell segment also contributed positively, with revenue growth driven by the expansion of value-based home care models and increased penetration in the specialty pharmacy business. Overall, Humana’s strategic initiatives and market positioning enabled it to surpass expectations for the quarter.
Humana Updates Full Year 2024 Guidance
Humana updated its full-year 2024 guidance, projecting a GAAP EPS of at least $12.89 and an adjusted EPS of at least $16.00. The company reaffirmed its insurance segment benefit ratio guidance of approximately 90% and maintained its operating cost ratio target of approximately 11.4%. Humana anticipates continued growth in its Medicare Advantage membership, raising its annual growth forecast to approximately 265,000 members.
The company remains optimistic about its strategic initiatives, particularly in the Medicare Advantage space, where it expects to leverage its scale efficiencies and value creation initiatives to drive further growth. Humana’s focus on enhancing its CenterWell segment, which includes pharmacy, primary care, and home solutions, is expected to contribute positively to its overall performance. The segment is projected to achieve a non-GAAP income from operations of approximately $1.4 billion.
Humana also highlighted its commitment to delivering shareholder value through share repurchases, with a remaining authorization of $2.93 billion as of October 29, 2024. The company plans to continue investing in its core businesses while maintaining a disciplined approach to capital allocation. With a strong balance sheet and strategic focus, Humana is well-positioned to achieve its financial targets for the year.
Disclaimer: The author does not hold or have a position in any securities discussed in the article.
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