(Reuters) - Health insurer Humana Inc reported a higher-than-expected quarterly profit on Wednesday, due to strength in its Medicare Advantage business and it forecast 2018 earnings that came in above analysts’ estimates.
The company said it expects to benefit by about $4 per share in 2018 from the recent changes to U.S. tax laws and to invest about $2 per share in its technology and integrated care delivery model.
Humana and two private equity firms agreed in December to buy home healthcare and long-term care operator Kindred Healthcare Inc for about $810 million, the latest expansion by an American health insurer into patient care.
“We continue to make strong progress in advancing our integrated care strategy, especially in deepening our clinical capabilities through long-term platform investments in the home and primary care,” said Humana’s Chief Executive Bruce Broussard.
Humana’s results come a week after Amazon.com Inc, JPMorgan Chase & Co and Berkshire Hathaway Inc said they would create a company to cut healthcare costs for employees.
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.
Individual Medicare Advantage memberships rose about a percent to 2.86 million, as of Dec. 31, while Group Medicare Advantage membership climbed 24 percent to 441,400.
The program accounts for about one-third of Medicare members in the United States, making it an important growth business for private insurers that are 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.
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 Ankur Banerjee in Bengaluru; Editing by Martina D'Couto