(Reuters) -Humana raised its annual profit forecast on Wednesday, as the U.S. health insurer bets on its efforts to rein in higher medical costs that have plagued the sector, sending its shares up nearly 5% in premarket trading.
The company is a top provider of Medicare Advantage plans under which the U.S. government pays private insurers a set rate to manage healthcare for people aged 65 and older, and those with disabilities.
The industry has been battling with persistently high costs for the last two years due to increased use of healthcare services across government-backed plans.
However, Humana said its medical costs were in line with its expectations.
“We feel good about our solid performance in the first half of the year,” CEO Jim Rechtin said in a statement.
It reported a quarterly medical cost ratio – the percentage of premiums spent on medical care- of 89.7%, up from 88.9% a year earlier, but in line with analysts’ estimates of 89.71%.
The company said its quarterly performance was partly driven by better-than-expected membership in its individual Medicare Advantage (MA) plans, as well as strength in its primary care segment CenterWell.
Humana expects membership decline in its MA plans to be lower than previously anticipated and said it remains confident that its insurance pricing will drive margin improvement.
The company on Wednesday projected full-year profit to be about $17 per share, compared with its previous estimate of about $16.25. Analysts on average were expecting a profit of $16.38 per share, as per data compiled by LSEG.
For the quarter, Humana earned a profit of $6.27 per share, compared to estimates of $5.92.
(Reporting by Sriparna Roy and Sneha S K in Bengaluru; Editing by Sriraj Kalluvila)
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