Humana Inc.’s (HUM – Free Report) third-quarter 2018 operating earnings per share of $4.58 beat the Zacks Consensus Estimate of $4.29 by 6.8%. The bottom line also improved 35.1% year over year. The upside can primarily be attributed to Medicare Advantage membership growth, lower impatient medical utilization, favorable prior period medical claims reserve development and significant operating efficiency of the company.
Humana Inc. Price, Consensus and EPS Surprise
Humana Inc. Price, Consensus and EPS Surprise | Humana Inc. Quote
Operational Update
Revenues of $14.2 billion were up nearly 7% on the back of the company’s Medicare Advantage business plus Group and Specialty segment. Moreover, the top line surpassed the Zacks Consensus Estimate of $13.9 billion.
Adjusted consolidated pre-tax income of $922 million improved 0.8%, primarily due to higher membership.
Benefit ratio was 82% in the quarter under review.
Operating cost ratio deteriorated 170 basis points to 13.5%.
Segment Results
Retail
Revenues from the Retail segment were $12.7 billion, up 9% year over year. This can primarily be attributed to higher revenues from the company’s individual and group Medicare Advantage business resulting from increased membership, and improved per-member premiums for a few segment’s products.
Benefit ratio of 83.2% declined 110 bps year over year, primarily due to reinstatement of the non-deductible health insurance industry fee.
The segment’s operating cost ratio of 11.2% deteriorated 140 bps year over year.
Group and Specialty
Revenues from the Group and Specialty segment were $1.89 billion, up 2% from the prior-year quarter, primarily backed by transition to the East Region TRICARE contract on Jan 1, 2018, increased stop-loss premiums related to the company’s level-funded ASO accounts, and high per member premiums across the commercial fully-insured business.
Benefit ratio increased 110 bps year over year to 80.7% driven by retroactive contractual rate adjustments, membership mix, negative impact of seasonality on fully-insured group commercial medical claims and lesser Prior Period Development.
