Humana Incurs Wider Y/Y Loss in Q4 on Decline in Membership

Humana Inc. HUM incurred a fourth-quarter 2024 adjusted net loss of $2.16 per share, narrower than the Zacks Consensus Estimate of a loss of $2.26 per share but wider than the prior-year quarter’s loss of 11 cents per share.See the Zacks Earnings Calendar to stay ahead of market-making news.Adjusted revenues of $29.2 billion advanced 13.5% year over year. The top line surpassed the consensus mark by 1.1%. The quarterly results were hurt by a decline in medical membership, which in turn, resulted from a year-over-year decline in members within Medicare stand-alone PDP and group commercial medical business. An elevated benefits expense level also inflicted adversities on the company’s performance. Nevertheless, the downside was partly offset by a well-performing CenterWell segment, attributed to strength in Pharmacy Solutions revenues.Humana Inc. Price, Consensus and EPS Surprise Humana Inc. price-consensus-eps-surprise-chart | Humana Inc. QuoteQ4 Operational UpdatePremiums of Humana rose 10.4% year over year to $27.8 billion, which beat the Zacks Consensus Estimate of $27.4 billion and our estimate of $27 billion. Services revenues of $1.2 billion improved 12.1% year over year and were higher than the consensus mark of $1.1 billion and our estimate of $1 billion. Investment income inched up 1% year over year to $297 million but fell short of the consensus estimate of $317.2 million and our estimate of $342.5 million.The benefits expense ratio was 91.5%, which deteriorated 80 basis points (bps) year over year due to the impact of higher Medicare Advantage and state-based contracts medical cost trends as well as reduced favorable prior period medical claims reserve development.   Total operating expenses of $29.8 billion escalated 11% year over year, higher than our estimate of $28.7 billion. The year-over-year increase was mainly due to elevated benefits expenses and operating costs. Yet, the operating cost ratio improved 20 bps year over year to 14.4%.HUM incurred an operating loss of $543 million, wider than the prior-year quarter’s loss of $348 million and our estimate of a loss of $313.2 million.Q4 Segmental UpdateInsuranceThe segment’s adjusted revenues of $28.2 billion advanced 13.5% year over year in the fourth quarter on the back of improved per-member Medicare premiums as well as an expanding customer base in the Medicare Advantage business and state-based contracts. The unit incurred an adjusted operating loss of $575 million, wider than the prior-year quarter’s loss of $361 million. Adjusted benefits expense ratio deteriorated 50 bps year over year to 91.9%. Adjusted operating cost ratio of 11% deteriorated 10 bps year over year. Total medical membership of the segment was 16.3 million as of Dec. 31, 2024, which slipped 3% year over year and came slightly lower than the Zacks Consensus Estimate as well as our estimate of 16.4 million.CenterWellThe segment recorded revenues of $5.1 billion, which grew 8.9% year over year and beat the Zacks Consensus Estimate of $4.89 billion and our estimate of $4.85 billion. The metric gained from expanding service lines to Humana’s members under value-based contracts, a growing specialty pharmacy business and improved revenues derived from the Primary Care business. However, adjusted operating income declined 13.5% year over year to $385 million. The operating cost ratio of 92.5% deteriorated 190 bps year over year.Humana’s Financial Update (As of Dec. 31, 2024)Humana exited the fourth quarter with cash and cash equivalents of $2.2 billion, which declined more than two-fold from the 2023-end level. Total assets of $46.5 billion dipped 1.2% from the figure at 2023-end. Long-term debt amounted to $11.1 billion, up 9.1% from the figure as of Dec. 31, 2023. Short-term debt was $577 million. Debt to capitalization was 41.9% at the fourth-quarter end, which deteriorated 10 bps from 2023-end. Total stockholders’ equity of $16.4 billion inched up 0.7% from the 2023-end level. HUM generated net cash from operations of $3 billion in 2024, which dropped 25.5% from the 2023 figure.HUM’s Capital Deployment UpdateHumana bought back shares worth $817 million in 2024. It also paid dividends of $431 million during the same time frame.2025 Outlook UnveiledAdjusted earnings per share (EPS) are forecasted to be at around $16.25, which indicates a 0.2% rise from the 2024 figure of $16.21. GAAP EPS is estimated to be roughly $15.88 in 2025, indicating a 59.1% surge from the 2024 figure of $9.98.Revenues are projected to lie within the band of $126-$128 billion, the mid-point of which implies a 7.8% increase from the 2024 figure of $117.8 billion. The Insurance segment’s revenues are estimated to be within $121-$123 billion. Revenues of the CenterWell segment are expected in the band of $20.5-$21.5 billion.Management anticipates Individual Medicare Advantage membership to witness a decline of around 550,000 in 2025, down roughly 10% from the 2024-end figure of 5.7 million. Group Medicare Advantage membership is expected to stay relatively flat from the 2024-end figure of 0.5 million.Membership from the Medicare stand-alone PDP is estimated to increase around 200,000 this year. State-based contracts are now expected to witness membership growth within 175,000-250,000. The benefit ratio of the Insurance unit is expected to lie between 90.1% and 90.5%. The consolidated GAAP operating cost ratio is anticipated within the band of 11.3-11.7%. GAAP cash flow from operations is estimated to be between $2.4 billion and $2.9 billion for 2025. Meanwhile, capital expenditures are projected to be roughly $650 million.The effective tax rate is expected at around 25% while weighted average share count is anticipated at around 121.5 million.HUM’s Zacks RankHumana currently has a Zacks Rank #4 (Sell). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.Other Medical Sector ReleasesOf the Medical sector players that have reported fourth-quarter 2024 results so far, the bottom-line results of UnitedHealth Group Incorporated UNH, Centene Corporation CNC and The Ensign Group, Inc. ENSG beat the respective Zacks Consensus Estimate.UnitedHealth Group reported fourth-quarter 2024 adjusted EPS of $6.81, which surpassed the Zacks Consensus Estimate of $6.71. The bottom line advanced 10.6% year over year. Revenues rose 6.8% year over year to $100.8 billion. However, the top line missed the consensus mark by 1.4%. UnitedHealth’s medical care ratio (MCR) was 85.5% in 2024, which deteriorated from 83.2% in 2023. UnitedHealth’s operating earnings grew 1.1% year over year to $7.8 billion in the fourth quarter. However, the net margin deteriorated 30 bps year over year to 5.5%. Revenues of the health benefits business of UnitedHealth, UnitedHealthcare, advanced 4.7% year over year to $74.1 billion. Earnings from operations amounted to $3 billion, down from $3.1 billion a year ago. Revenues in the Optum business line were $65.1 billion, which rose 9.4% year over year. The UnitedHealthcare business catered to 50.68 million people as of Dec. 31, 2024, which fell 3.9% year over year. Centene’s fourth-quarter 2024 adjusted EPS of 80 cents outpaced the Zacks Consensus Estimate by 63.3%. Moreover, the bottom line rose 77.8% year over year. Revenues were $40.8 billion, which increased 3.4% year over year. The top line surpassed the consensus mark by 4.8%. Revenues from Medicaid dipped 1% year over year to $20.8 billion while Medicare revenues grew 4% year over year to $5.5 billion. Additionally, commercial revenues of $8.7 billion climbed 18% year over year.Centene's premiums amounted to $35.5 billion, rising 3.8% year over year. Service revenues decreased 29.7% year over year to $777 million. As of Dec. 31, 2024, total membership was 28.6 million, which grew 4.1% year over year. Centene’s HBR deteriorated 10 basis points year over year to 89.6%. Adjusted net earnings of $404 million rose 68.3% year over year.  Adjusted SG&A expense ratio of 8.9% improved 80 basis points year over year. Ensign Group reported fourth-quarter 2024 adjusted EPS of $1.49, which outpaced the Zacks Consensus Estimate by 1.4%. The bottom line improved 16.4% year over year. Operating revenues advanced 15.5% year over year to $1.1 billion. The top line beat the consensus mark by 0.8%. Ensign Group’s adjusted net income of $87.6 million rose 18.9% year over year. Same-facilities occupancy improved 230 bps while transitioning-facilities occupancy expanded 470 bps year over year.The Skilled Services segment recorded revenues of $1.08 billion in the fourth quarter, which advanced 15.1% year over year. Segment income rose 20.7% year over year to $141 million. Skilled nursing facilities and campus operations of the segment totaled 286 and 30, respectively, at the fourth-quarter end. Rental revenues in the Standard Bearer unit improved 14.8% year over year to $25.1 million. Segmental income was $7.4 million, which dipped 1.4% year over year.  Funds from operations increased 7.3% year over year to $15.3 million.Only $1 to See All Zacks' Buys and SellsWe're not kidding.Several years ago, we shocked our members by offering them 30-day access to all our picks for the total sum of only $1. 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