Humana feasts on Aetna breakup fee, Medicare Advantage in 1Q

Humana's first-quarter earnings topped $1 billion thanks largely to a breakup fee from its failed combination with rival health insurer Aetna and growth in its core Medicare Advantage business.

The insurer said Wednesday that it booked a net gain of about $947 million before taxes after Aetna ended its roughly $34-billion bid to acquire Humana.

The insurers called off their deal in February after a federal judge rejected it, citing concerns over its impact on prices and benefits. Federal regulators had sued last summer to stop that combination and a separate deal, Blue Cross-Blue Shield insurer Anthem's bid to acquire Cigna.

Louisville, Kentucky-based Humana Inc. sells individual and group health insurance and coverage to military members and their families. It is one of the nation's biggest providers of Medicare Advantage plans, privately run versions of the federal government's Medicare program for people who are over 65 or disabled.

Humana CEO Bruce Broussard said in a statement from the insurer that first-quarter results "strongly reinforce Humana's strength as an independent company."

Revenue from the insurer's retail segment climbed 5 percent to $11.43 billion, helped by Medicare Advantage enrollment growth as well price hikes.

Humana's individual, commercial coverage tumbled 69 percent to 201,000 from the end of last year, as the company cut the number of counties in which it offers coverage through the Affordable Care Act's insurance exchanges. The insurer also stopped selling the coverage off the exchanges.

Humana said earlier this year that it will leave the public insurance exchanges entirely next year. The company has said it had taken several actions to improve that business, but it was still seeing signs of unbalanced risk in that customer population. Health insurers have struggled to attract enough healthy people to their risk pools to balance the claims they incur from people with expensive medical conditions.

Humana initially announced last week that it would report earnings adjusted for non-recurring gains of $2.75 per share on $13.76 billion in revenue for the first quarter. That topped Wall Street expectations.

Analysts expected, on average, earnings of $2.55 per share on $13.61 billion in revenue, according to Zacks Investment Research.

The company also raised its 2017 guidance last week and reaffirmed that forecast on Wednesday. It expects full-year adjusted earnings of at least $11.10 per share.

Analysts forecast earnings of $11.03 per share, according to FactSet.

Shares of Humana climbed $1.78 to $227.38 in pre-market trading Wednesday, after the company detailed its quarterly performance. That tops the all-time high price of $226.85 that the stock reached on Tuesday.

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Elements of this story were generated by Automated Insights using data from Zacks Investment Research. Access a Zacks stock report on HUM at https://www.zacks.com/ap/HUM

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Keywords: Humana, Earnings Report