Shares of Humana (HUM) have plunged 16% after the American health insurer reported a surprise loss for the fourth quarter of 2023 and issued weak guidance for the coming year.
For Q4 2023, Humana announced a loss of $0.11 U.S. per share on revenue of $25.60 billion U.S. Analysts had expected a profit of $0.89 U.S. a share on revenue of $25.50 billion U.S.
The shock loss was blamed on an increase in Medicare Advantage medical costs, as well as higher inpatient utilization rates.
In terms of forward guidance, the company said it sees earnings of $16 U.S. a share for all of 2024, which is significantly below the $29 U.S. a share that had been expected on Wall Street.
Humana has invested heavily in the government-funded Medicare Advantage program that offers health benefits to aging senior citizens.
This makes Humana’s earnings sensitive to higher utilization rates among seniors because Medicare Advantage makes up the bulk of its business today.
An increase in utilization rates for healthcare services eats into Humana’s profits.
Prior to today (Jan. 25), Humana’s stock had declined 20% over the last 12 months and was trading at $402.40 U.S. per share.
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