MW Humana's exit of some 'unprofitable' Medicare plans helps fuel a big profit beat

By Tomi Kilgore

Stock surges as quarterly earnings climb past expectations and full-year outlook was affirmed, and Medicare Advantage membership losses were in line with views

Shares of Humana Inc. were headed higher in early Wednesday trading, after the health insurer reported first-quarter earnings that rose well above expectations, as costs declined and the exit from certain "unprofitable" Medicare Advantage plans progressed.

While the company also affirmed its full-year profit outlook, which can be viewed as a positive in the current uncertain economic environment, quarterly revenue came up a bit shy, and the earnings outlook for the current quarter was below Wall Street projections.

The stock $(HUM)$ rose 5.1% in premarket trading, putting it on track to snap a three-day losing streak.

Humana said that, through the first quarter, individual Medicare Advantage membership declined by about 446,000, which the company said was in line with its expectations.

The losses were driven by its decision to exit certain "unprofitable plans and counties," which affected about 560,000 members. The company said that 40% of the members who left the plan joined other Humana Medicare Advantage plans. For 2025, a membership decline of about 550,000 is still expected.

For the membership plans that remain, Humana said it plans to spend a "few hundred million dollars" to improve member and patient outcomes, as it looks to improve the government's "Stars" ratings of its plans.

Read: Humana's stock rocked after a Medicare Advantage plan's rating is set to drop.

Meanwhile, group Medicare Advantage membership increased by about 27,000 in the first quarter, which was what Humana had been anticipating.

With help from the exit from unprofitable plans, Humana reported first-quarter net income that jumped 66.8% from a year ago to $1.69 billion. Adjusted earnings per share, which excludes nonrecurring items, rose to $11.58 from $7.23, well above the average analyst estimate compiled by FactSet of $10.07.

See related: UnitedHealth, Humana and other health-insurance stocks are surging after this 'big win.'

For 2025, the company said it still expects adjusted EPS to be about $16.25, which is up from $16.21 a year ago. But for the second quarter, the company expects earnings to be about 35% of expected full-year earnings, which implies EPS of about $5.69. The FactSet consensus for second-quarter EPS is currently $6.37.

Also on the downbeat side, first-quarter revenue grew 8.4% to $32.11 billion, but was just below the FactSet consensus of $32.20 billion, as insurance segment revenue growth of 7.8% to $30.94 billion missed expectations of an 11.2% rise.

On a bright note, the insurance segment benefit ratio, which is a measure of how much is paid out on claims - lower is better - fell to 87.4% from 89.3%, and was below the FactSet consensus of 87.5%.

The company said the improvement was driven by favorable timing of certain administrative expenses and investments, and outperformance by its healthcare-services business CenterWell.

Humana's stock has gained 2.2% in 2025, while the Health Care Select Sector SPDR ETF XLV has tacked on 1.2% and the S&P 500 index SPX has lost 5.5%.

-Tomi Kilgore

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April 30, 2025 08:55 ET (12:55 GMT)

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