Humana’s fourth-quarter pretax income fell despite higher revenue, as the share of dollars the Louisville-based insurer is spending on medical claims rose.
Nonetheless, the Louisville-based insurer said in a news release that its strong Medicare Advantage results helped generate fourth-quarter profit that exceeded management expectations.
The company said that its better-than-expected performance was driven primarily by persistently lower costs it incurred from patients that required hospitalization. Humana also reaffirmed its customer growth expectation for 2019 and raised its per-share cash dividend by 10 percent, to 55 cents.
In early trading Wednesday morning, Humana shares were down around 1.4 percent.
Fourth-quarter profit, however, rose primarily because of lower incomes taxes, and the company said its benefits-expense ratio, a key metric that indicates how much of its revenue goes toward paying claims, rose to 83.4 percent, up 0.4 percentage points.
Revenue in all three business units rose in the fourth quarter compared to a year earlier, but profit in each unit fell, with the Group and Specialty segment incurring a loss.
Fourth-quarter pretax income, at $436 million, was down 11 percent from a year earlier, on revenue of nearly $14.2 billion, up 7.4 percent.
Fourth-quarter net income, at $355 million, rose by $171 million, or nearly 93 percent, thanks primarily to lower income taxes, which fell by $223 million, or nearly 73 percent, to $83 million.
Earnings per share, at $2.58, doubled from the fourth quarter of 2017.
“We’re pleased with the consistency of and ongoing improvement in our performance, which can be attributed to our focus on optimizing our core operations,” CEO and President Bruce D. Broussard said in a news release.
For the year, Humana said it generated revenue of nearly $57 billion, up 5.9 percent, while pretax income, at about 2 billion, fell about 49 percent.
Full-year net income fell by 31.3 percent, to nearly $1.7 billion, although income tax expenses fell by nearly $1.2 billion, or about 75 percent.
The insurer said earnings per share for the year fell 28 percent, to $12.16 — though it said that adjusted earnings per share rose more than 24 percent.
The adjusted figure excludes the impact of a $786 million pretax charge related to the sale of subsidiary KMG, which lowered profit in 2018 by $2.41 per share. It also excludes the impact of items such as an 84-cents-per-share gain in 2017 from the $1 billion breakup fee that Humana received from Aetna after the companies’ merger failed.