Humana backs FY23 adjusted EPS view of ‘at least’ $28.25, consensus $28.34

In a regulatory filing, Humana disclosed that members of the company’s senior management team are scheduled to meet with investors and analysts at various meetings between June 16 and June 30 and that during these meetings the company intends to address its prospects and performance. The company will reaffirm its guidance of at least $27.88 in diluted earnings per common share, or at least $28.25 in adjusted earnings per common share, in each case for the year ending December 31, 2023. This guidance is consistent with the guidance issued in Humana’s press release dated April 26 and reaffirmed on June 1, the company stated. “The company will also reaffirm its full year Insurance segment benefit expense ratio guidance of 86.3 to 87.3 percent, although the company now expects to be at the top end of this full year range. This expectation is primarily driven by the emergence of higher than anticipated non-inpatient utilization trends, predominately in the categories of emergency room, outpatient surgeries, and dental services, as well as inpatient trends that have been stronger than anticipated in recent weeks, diverging from historical seasonality patterns. In addition, the company has continued to experience strong individual Medicare Advantage growth in recent months. Membership growth during the Open Enrollment Period included a higher-than-expected proportion of age-ins, which tend to run a higher benefit expense ratio than the average new member. As previously disclosed, on average, new members take approximately 3 years to achieve mature profitability levels. At this time, the company assumes it will continue to experience moderately higher-than-expected trends for the remainder of the year, which will be offset by a variety of factors, including higher-than-expected favorable prior year development, additional administrative expense reductions, higher than previously anticipated investment income and other business outperformance. With respect to the second quarter 2023 Insurance segment benefit expense ratio, the company now believes actual results will be biased towards the top half of its full year range of 86.3 percent to 87.3 percent. As a reminder, the company’s consolidated benefit expense ratio is expected to be approximately 40 to 50 basis points lower than the Insurance segment benefit expense ratio in each period due to intercompany eliminations. In addition, the company continues to expect the percentage of second quarter 2023 Adjusted EPS, as compared to the full year Adjusted EPS guidance, to be in the low thirties, consistent with the commentary provided on its first quarter 2023 earnings call on April 26, 2023. The company will also note, consistent with historical practice, it considered the initial emergence of these trends in connection with the 2024 Medicare Advantage bids submitted on June 5,” the filing added.