HUM Misses Q2 Earnings on Higher Benefit Costs, Ups '25 EPS View

Core Insights - Humana Inc. reported second-quarter 2025 adjusted earnings of $6.27 per share, missing the Zacks Consensus Estimate by 0.8%, and a year-over-year decrease of 9.9% [1] - Adjusted revenues reached $32.4 billion, reflecting a 10.2% year-over-year increase, surpassing the consensus mark by 1.9% [1] Financial Performance - The quarterly results were negatively impacted by elevated expense levels and a decline in individual Medicare Advantage membership, although this was partially offset by strong performance in the CenterWell unit [2] - Premiums improved by 9.1% year over year to $30.7 billion, exceeding the Zacks Consensus Estimate of $30.2 billion [3] - Services revenues climbed 27.3% year over year to $1.4 billion, beating the consensus mark of $1.31 billion [3] - Total operating expenses increased by 10.2% year over year to $31.3 billion, higher than the estimate of $29.9 billion, driven by higher benefits and operating costs [5] Segment Performance - The Insurance segment recorded adjusted revenues of $31.1 billion, up 9.6% year over year, due to improved per-member Medicare premiums and an expanding customer base [6] - CenterWell revenues advanced 11.9% year over year to $5.5 billion, benefiting from higher revenues in pharmacy and primary care businesses [8] Membership and Ratios - Total medical membership in the Insurance segment was 14.8 million, down 9% year over year, falling short of the Zacks Consensus Estimate of 15.4 million [7] - The benefit ratio deteriorated by 70 basis points year over year to 89.7%, influenced by state-based contracts and a decline in individual Medicare Advantage membership [4] Cash Flow and Capital Deployment - Humana ended the second quarter with cash and cash equivalents of $4 billion, an increase of 81.9% from the end of 2024 [11] - The company generated net cash from operations of $1.6 billion in the first half of 2025, a decrease of 2.1% from the prior year [12] - Share buybacks amounted to $109 million in the first half of 2025, with dividends paid totaling $214 million [13] 2025 Outlook - Adjusted EPS is now forecasted at around $17.00, up from the previous estimate of $16.25, indicating a 4.9% rise from 2024 [14] - Revenues are estimated to be at least $128 billion, reflecting an 8.7% increase from 2024 [15] - Individual Medicare Advantage membership is expected to decline by up to 500,000 in 2025 [16]