Humana's Cautious Outlook Fails To Impress Investors

Humana Inc boosted its annual profit forecast on Wednesday, helped by lower-than-expected demand for non-urgent medical procedures, but the health insurer's shares fell as investors deemed the raise conservative.

Health insurers have seen medical costs fluctuate through the pandemic, with lower spending on elective medical procedures softening the blow from higher claims related to COVID-19 testing and treatment.

Analysts said the raise to the outlook by roughly 25 cents was cautious and could disappoint investors after second-quarter profit beat Wall Street estimates by $1 per share.

The company's shares were down 3.6% at $474.42 in late morning trading.

Humana said a lack of COVID-19 related costs was partly responsible for the forecast raise, but it still expects some expenses from COVID in the rest of the year.

"With respect to COVID, we've seen an uptick in cases in recent weeks, though hospitalization rates remain lower than we've seen in previous surges," Chief Financial Officer Susan Diamond said.

The Louisville, Kentucky-based company's better-than-expected second-quarter profit was helped in part by higher demand for its healthcare services and lower medical costs.

Low flu activity also helped keep in-patient volumes down in the quarter and help rein in medical costs, the company said.

Additionally, Chief Executive Officer Bruce Broussard said beginning next year, Humana will be realigned into two units - Insurance Services and CenterWell - in an effort to simplify the organization's structure.

The company raised its full-year adjusted earnings forecast to about $24.75 per share, compared with its prior projection of $24.50.

On an adjusted basis, the company earned $8.67 per share, beating the average estimate of $7.67, according to Refinitiv IBES data.