Humana Maintains FY16 Adj. EPS View As Q3 Results Top Estimates

(RTTNews) - Health insurer Humana Inc. (HUM), which is in deal to be acquired by peer Aetna Inc. (AET), on Friday trimmed its fiscal 2016 reported earnings per share guidance on certain costs, while reiterated adjusted earnings view. In its third quarter, the company recorded higher profit and revenues, above analysts' estimates.

The company now expects full-year earnings per share of approximately $8.68, compared to previous estimate of approximately $8.80. The revision was to include transaction and integration costs for third quarter, the company said. For the year, the company continues to expect adjusted earnings of approximately $9.50 per share.

On average, six analysts polled by Thomson Reuters expect earnings of $9.51 per share for the year. Analysts' estimates typically exclude special items.

Brian Kane, Chief Financial Officer for Humana, said, "We are pleased that our third-quarter results enable us to reaffirm our recently-raised EPS guidance for 2016, which includes two meaningful guidance increases during the course of the year. These increases are largely attributable to our better-than-expected performance in Medicare Advantage and Healthcare Services and we believe our performance positions us well for 2017."

For fiscal 2017, the company anticipates growth in consolidated pretax income, mainly on anticipated improvement in individual Medicare Advantage and Healthcare Services businesses. Lower expected losses in its Individual Commercial business would also impact results.

The company also expects net growth in individual Medicare Advantage membership to approximate that of previous year, despite competitor aggressiveness in external sales channels.

In its third quarter, consolidated pretax income of $902 million increased 39 percent from last year's $648 million. The results mainly reflected higher operating earnings in the Retail and Healthcare Services segments, partially offset by lower Group segment operating earnings.

Earnings per share were $2.98, higher than $2.09 a year ago.

Adjusted pre-tax income was $940 million, compared to $681 million last year. Adjusted earnings per share were $3.18, compared to $2.25 a year ago. Analysts expected earnings of $3.15 per share for the quarter.

Consolidated revenues, including investment income, were $13.69 billion, an increase of 2 percent from $13.36 billion last year. Analysts expected revenues of $13.41 billion for the quarter.

Total premiums and services revenues were $13.60 billion, up 3 percent from last year.

Consolidated benefit ratio of 81.5 percent decreased 240 basis points primarily due to lower year-over-year utilization for the Medicare Advantage business.

Regarding its pending acquisition by Aetna, the company noted that the U.S. Department of Justice on July 21, 2016 had filed a civil antitrust lawsuit seeking a permanent injunction that would prevent the closing of the transaction. The related trial is scheduled to commence on December 5, 2016.

Humana said it cannot predict when the DOJ litigation will be resolved. Both companies intend to vigorously defend the transaction in response to the lawsuit.

Humana shares closed Thursday's trading at $165.31, down 1.71 percent.