(Reuters) -Health insurer Humana reported third-quarter profit that beat Wall Street estimates on Wednesday, helped by higher premiums and medical costs which were in line with the company’s expectations.
It is one of the largest providers of Medicare Advantage plans for people 65 and older and those with disabilities, and gets most of its revenue from those plans.
The industry has been battling stubbornly high costs for the last two years due to the increased use of healthcare services across government-backed plans.
Humana has been making efforts to contain costs by repricing plans and adjusting benefits to help boost profits.
Its quarterly medical cost ratio – the percentage of premiums spent on medical care – came in at 91.1%, in line with Humana’s expectations. Analysts, however, had expected a ratio of 90.90%, according to data compiled by LSEG.
The company reaffirmed its 2025 adjusted profit and cost forecasts, but trimmed its annual net profit forecast to $12.26 per share from $13.77 per share, and warned medical costs would likely hit the upper end of its 90.1% to 90.5% range.
Humana’s shares fell 4% in premarket trading.
The company did not provide membership or profit forecasts for 2026 and at least two analysts said the lack of clarity on next year’s performance could be weighing on sentiment, with investors likely expecting weakness next year due to lower expected MA bonus payments.
SMALLER MEMBERSHIP DECLINE
Humana expects a decline of about 425,000 members in its individual Medicare Advantage plans in 2025, smaller than a loss of up to 500,000 members expected previously. This was driven by stronger member retention and better-than-expected sales.
“We view membership growth as positive supported by our 2026 MA pricing and the plan and benefit repositioning we drove in the prior two years,” the company said in prepared remarks ahead of a call with analysts, adding it expects most of its new members to be on higher-rated plans.
Lower quality ratings for its Medicare Advantage plans, however, remain a concern for 2026 as they could cost Humana millions of dollars in bonus payments from the government.
The company posted adjusted quarterly profit of $3.24 per share, surpassing an estimate of $2.82 per share.
(Reporting by Sriparna Roy and Sneha S K in Bengaluru; Editing by Pooja Desai)
