Nov 6 (Reuters) - Humana raised its full-year profit forecast on Friday after reporting lower-than-expected medical costs in the third quarter.
The company, one of the largest providers of Medicare Advantage plans for older adults and people with disabilities, is bucking an industrywide pullback by expanding enrollment in these plans amid a broader retreat by rivals.
Its quarterly medical cost ratio, the percentage of premiums spent on medical care, was 93.7% in its insurance segment, below analysts'
expectation of 94.39%, according to data compiled by LSEG.
It said medical and pharmacy cost trends were in line with or better than expectations across both new and existing members.
The higher forecast signaled strong confidence in cost trends that was not reflected in investor consensus, Cantor Fitzgerald analyst Sarah James said.
Humana's individual Medicare Advantage membership increase of 23% year to date through the third quarter tracks its expectation of about 25% membership growth through 2026, the company said.
According to Morningstar analyst Julie Utterback, investors may be disappointed by the modest increase in the forecast, which implies a substantial fourth-quarter loss.
The Centers for Medicare and Medicaid Services in October released its star ratings for 2027 Medicare Advantage plans, in which Humana outshone larger rivals, analysts said.
The ratings, on a scale of one to five stars, are linked to bonuses paid to insurers.
Humana said its expanded membership base and return to top-rated star plans position it to unlock the business's earnings potential by 2028. The company sees annual adjusted profit of at least $9.50 per share, compared with at least $9 per share estimated previously. Analysts on average expected 2026 profit of $9.15 per share.
On an adjusted basis, it reported a quarterly loss of 70 cents per share, compared with analysts' estimate of a $1 per share loss.
The company's CenterWell care-delivery unit, which provides senior-focused primary care and other services, reported a quarterly operating cost ratio of 95.9%, higher than the previous year. The increase was mainly due to higher primary care costs, largely "concentrated to a group of specific patients in a single geography."
(Reporting by Christy Santhosh and Sneha S K in Bengaluru; Editing by Pooja Desai)
