Shares of Humana (HUM +1.19%) fell as much as 12.8% on Thursday after the health insurance company cut its 2023 guidance, citing rising Medicare Advantage costs amid "higher than anticipated inpatient utilization" in November and December.
NYSE: HUM
Key Data Points
Why Humana just cut its 2023 earnings guidance
In a surprise SEC filing this morning, Humana revealed that due to patients' higher inpatient utilization of Medicare Advantage late in the year, its fourth-quarter 2023 adjusted insurance segment benefit ratio -- or the percentage of payout on claims compared to its premiums -- should be around 91.4%, above the company's previous guidance for 89.5%. That would bring Humana's full-year adjusted insurance segment benefit ratio to 88%, above previous guidance for 87.5%.
On the bottom line, that should translate to generally accepted accounting principles (GAAP) earnings per share of $20, and adjusted (non-GAAP) earnings of $26.09 per share. By contrast, previous guidance provided in November called for GAAP earnings of "at least" $26.31 per share, and adjusted earnings of at least $28.25 per share.
What's next for Humana investors?
Though Humana was previously scheduled to release its final fourth-quarter results on Feb. 5, 2024, this afternoon it announced it would move up its quarterly call to next Thursday, Jan. 25, 2024 in order to give investors a "more timely update" on its performance and 2024 guidance.
Though Humana didn't provide specific 2024 guidance in its SEC filing today, it did note that it "believes the emerging trends are impacting the industry broadly" and expects those trends to be reflected in the 2025 Medicare Advantage pricing cycle.
Given Humana's incrementally lower earnings in the meantime, however, it's no surprise to see shares of this leading insurance stock falling in response.
