Humana Tops Q4 Earnings & Revenues, Issues ’18 View

Humana Inc.’s (HUM – Free Report) fourth-quarter 2017 operating earnings per share of $2.06 beat the Zacks Consensus Estimate by approximately 3%. The bottom line, however, declined 12% year over year.

Adjusted consolidated pretax income of $576 million declined 17% in the fourth quarter primarily due to lower earnings in the company’s Retail and Healthcare segments. This was partially offset by higher earnings in the Group and Specialty segment.

In the fourth quarter, the company reported revenues of $13.2 billion, up 2.4% on higher Retail segment revenues from the company’s Medicare Advantage business and Group and Specialty segment. Revenues also surpassed the Zacks Consensus Estimate by 1.2%.

Full-Year Update

The company reported adjusted earnings of $11.71 per share, up 7.2% year over year. Full-year earnings also surpassed Zacks Consensus Estimate of $11.63.

Revenues came in at $53.8 billion, down 1% year over year due to lower revenues from Individual Commercial segment, partially offset by Retail segment revenues.

Quarterly Operational Update

Humana’s adjusted consolidated benefit ratio of 83% deteriorated 200 basis points (bps) from the prior-year quarter.

Adjusted consolidated operating cost ratio of 13.9% improved 100 bps from the year-ago quarter.

Q4 Segment Results

Retail

Revenues from the Retail segment were $10.95 billion, up 3% year over year, primarily owing to higher revenues from the company’s Medicare Advantage business resulting from increased membership.

Benefit ratio of 84.2% deteriorated 130 bps year over year, primarily due to the impact of the temporary suspension of the health insurance industry fee in 2017.

The segment’s operating cost ratio of 11.8% improved 100 bps year over year because of the same reason.

Adjusted pretax income was $397 million, down 8% year over year.

Group and Specialty

Revenues from the Group and Specialty segment were $1.89 billion, up 3% from the prior-year quarter, primarily due to higher performance incentives earned under the previous TRICARE contract and increased group fully insured commercial medical premiums.