Humana Profit Falls 46%, Hurt by Costs From Aetna Merger

Humana Inc. on Wednesday reported its profit tumbled 46% in the first quarter of the year, hurt by costs related to the Aetna Inc. merger and a rise in a key measure of the company's medical costs.

Still, results for the health insurer, which in July agreed to be acquired by rival Aetna, topped expectations.

Chief Financial Officer Brian Kane said the company is encouraged by early indicators in its Medicare and health-care services businesses "but remain cautious while our health-care exchange experience continues to develop."

The Louisville, Ky., company struck a $34.1 billion merger deal with rival Aetna Inc. in July amid a flurry of consolidation in the health-care space that was fueled by a desire to diversify and cut costs amid a landscape changed by the Affordable Care Act. The tie-up, if approved by regulators, will vault Aetna toward the top of the growing Medicare business.

In the most recent quarter, Humana's Medicare Advantage membership rose 4.5% to 2.8 million, while commercial membership dropped 21% to 875,700 because of termination by the Centers for Medicare and Medicaid Services for lack of eligibility documentation, lower membership in legacy plans and the loss of membership for nonpayment of premiums.

Humana's consolidated medical-loss ratio, or the share of premiums paid out for members' health expenses, was 84.8%, up from 83.1% in the year-ago quarter.

Over all, the insurer reported a first-quarter profit of $234 million, or $1.56 a share, down from $430 million, or $2.82 a share, a year earlier. The company said transaction and integration costs related to the Aetna merger dented earnings by 21 cents a share.

Excluding costs stemming from the Aetna merger, among other items, quarterly earnings fell to $1.86 a share from $2.58 a year earlier, above the company's estimate for $1.80 a share. Revenue edged down 0.2% to $13.8 billion, just above analysts' projection for $13.76 billion in revenue, according to Thomson Reuters.

Humana reaffirmed its 2016 guidance for adjusted earnings of $8.85 a share.

Shares in the company, inactive premarket, have risen 4.9% over the past three months.

Aetna last week reported enrollment in Affordable Care Act plans grew more than the company expected in the first quarter, but the insurer said it is still on track to roughly break even on the business this year, adding to the mixed signals from the industry about the direction of the health-law exchanges.

Humana's merger with Aetna is expected to close in the second half of 2016.

Write to Anne Steele at [e-mail]

(END) Dow Jones Newswires

May 04, 2016 08:55 ET (12:55 GMT)

Copyright (c) 2016 Dow Jones & Company, Inc.