(Reuters) - Humana Inc (HUM.N), which sells government-backed Medicare Advantage healthcare for older and disabled people, reported a higher-than-expected quarterly profit and saw a $550 million benefit in 2018 from the new U.S. corporate tax law.
Humana said it would invest half the tax windfall in employees and the business this year and return the other half to shareholders. It planned to raise its minimum wage to $15 per hour and move up to this year performance-based employee compensation previously planned for 2019.
Humana shares fell about 1 percent in early morning trading to $266.13 as analysts questioned the company during a conference call on the sustainability of the tax law’s benefit to earnings beyond this year.
Chief Financial Officer Brian Kane said investments in technology and care that improved services for members would help the company.
“They’re healthier, and that results in lower cost, and that
results in higher margins and higher growth,” Kane said.
Humana and two private equity firms agreed in December to buy home healthcare and long-term care operator Kindred Healthcare Inc KND.N for about $810 million, the latest expansion by an American health insurer into patient care.
Humana, which raised its quarterly dividend by 25 percent, forecast 2018 adjusted earnings of $13.50-$14.00 per share, ahead of analysts’ average estimate of $12.87 per share, according to Thomson Reuters I/B/E/S.
Memberships in retail Medicare Advantage plans - where individuals sign up directly with Humana - rose about one percent to 2.86 million, as of Dec. 31. Employer or other group-based Medicare Advantage membership climbed 24 percent to 441,400.
More than 20 million people receive government Medicare health insurance benefits through insurer-managed Medicare Advantage plans. A further 35 million are in the traditional Medicare fee for service program. Medicare Advantage is an important growth business for private insurers facing changes in their business as Republicans seek to repeal and replace Obamacare.
Net profit was $184 million, or $1.29 per share, in the fourth quarter ended Dec. 31, compared with a loss of $401 million, or $2.68 per share, a year earlier due to charges for exiting the individual insurance business.
Excluding items, the company earned $2.06 per share, above analysts’ average estimate of $2.00.
The company’s medical benefit ratio, the percentage of premiums spent on claims, improved to 83 percent from 89.2 percent a year ago.
Total revenue rose 2 percent to $13.19 billion.
Reporting by Caroline Humer in New York and Ankur Banerjee in Bengaluru; Editing by Martina D'Couto and Andrew Hay