Humana Inc.'s pretax income fell 11% in its latest quarter as the health insurer trimmed its workforce and earnings from its health-care-services business dropped.
Humana reported a third-quarter pretax profit of $799 million, or $3.44 a share, compared with $902 million, or $2.98 a share, a year ago.
The Louisville, Ky., company said head-count reductions and decreased earnings from integrated-care services hurt its results, while earnings increased in many of its core insurance segments. Humana said its mail-order pharmacy services were less popular than expected during the quarter, especially among members in the prescription plan it is offering with Wal-Mart Stores Inc.
The company said this week it will cut 1,300 jobs and leave the long-term-care business, bolstering analyst speculation that the insurance company is readying itself for a merger less than a year after a tie-up with Aetna fell apart.
Humana plans to offload the long-term-care business, KMG America Corp., to Continental General Insurance Co. Humana expects to record a net loss of $400 million on the sale. It will provide $353 million to help fund the transaction, which it expects to be more than offset by a tax benefit from the sale of $500 million.
Together, the company expects layoffs and the early retirement program to reduce head count by 2,700 people, or 5.7% of its workforce.
Chief Executive Bruce Broussard said in prepared remarks Wednesday that cutting costs has allowed the company to invest in its products and streamline its operating processes. The company's number of four-star Medicare plans increased for 2018 and Mr. Broussard said management feels good about Humana's Medicare pricing a few weeks into the enrollment period for 2018.
Last week, Humana sued the federal government for about $611 million, alleging the U.S. Department of Health and Human Services misled insurers it brought into Affordable Care Act exchanges. Humana said in the lawsuit filed with the U.S. Court of Federal Claims that the government owes it risk corridor payments, or reimbursements to cover losses over certain thresholds, for the years 2014 through 2016. The administration didn't immediately respond to a request for comment.
Overall, Humana posted a third-quarter profit of $499 million, or $3.44 a share, compared with $450 million, or $2.98 a share, a year ago.
Excluding one-time items, Humana earned $3.39 a share, up from $3.20 a share in the year-earlier period. Analysts had expected adjusted earnings per share of $3.27.
Humana shares, up 26% this year, were down 2.5% in early trading Wednesday.
The company also decreased its full-year outlook as a result of charges stemming from workforce reductions. It now expects earnings per share of $17.62 this year, down from an earlier forecast of $17.83. It raised its forecast for adjusted earnings per share to $11.60 from $11.50.
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(END) Dow Jones Newswires
November 08, 2017 10:25 ET (15:25 GMT)