Humana's Profit Grows as Medicare Membership Rises

Humana Inc., which in July agreed to be acquired by rival Aetna Inc., on Friday said Medicare membership growth lifted third-quarter profit.

Strength in health care services, driven by Medicare, offset a soft commercial segment. Chief Financial Officer Brian Kane said the insurer expects "marked improvement" in the Medicare and individual commercial businesses next year, but added that Humana remains cautious about 2016 earnings growth expectations due to challenges in those segments.

The Louisville, Ky. company struck its $34.1 billion merger deal amid a flurry of consolidation in the health care space, 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.

Aetna last week lifted its full-year guidance after reporting third-quarter operating earnings that topped expectations, as Medicare Advantage membership increased 9.8% and Medicaid membership rose 6%.

For Humana, Medicare Advantage membership increased 13.9% and Medicaid membership jumped 24% while commercial membership declined 11.2%. The company said its commercial business continues to be challenged primarily due to volatility related to the start of the health care exchange program created under the Affordable Care Act.

In all, the insurer reported a profit of $314 million, or $2.09 a share, up from $290 million, or $1.85 a share, a year earlier. Excluding costs stemming from the Aetna merger, among other items, earnings rose to $2.16 a share. Revenue increased 9.2% to $13.4 billion.

Analysts projected adjusted profit of $2.13 a share on $13.64 billion, according to Thomson Reuters.

Shares in the company, up 25% this year, were inactive premarket.

Humana backed its outlook for the year, still anticipating $7.75 in adjusted earnings per share.

Write to Lisa Beilfuss at lisa.beilfuss@wsj.com

Subscribe to WSJ: http://online.wsj.com?mod=djnwires