Humana Inc. recently unveiled its financial outcomes for the third quarter, revealing a complex picture of growth tempered by membership shifts. The company successfully outperformed earnings forecasts, fueled by an increase in premiums from both Medicare and state-level agreements. This premium growth, particularly within Medicare, was notably influenced by a direct subsidy from the Inflation Reduction Act. However, this positive revenue trend occurred alongside a reduction in total medical and individual Medicare Advantage memberships. Despite these fluctuating figures, Humana chose to uphold its adjusted earnings per share projections for the entire fiscal year, while also noting a rise in planned strategic investments. The announcement led to a dip in the company's stock value as the market processed these varied financial indicators.
In the third quarter, Humana achieved adjusted earnings of $3.24 per share, surpassing the analyst consensus of $2.82. The company's sales reached an impressive $32.65 billion, an increase from $29.39 billion in the prior year, exceeding the projected $32.01 billion. This revenue surge was primarily attributed to elevated premiums in its Medicare and state-based contracts. Specifically, the Medicare segment benefited from a higher direct subsidy, a consequence of the Inflation Reduction Act. Additionally, membership expansion in the company's state-based contracts and standalone prescription drug plan (PDP) businesses contributed to the overall sales growth.
Despite the strong financial performance in terms of earnings and sales, Humana observed a decline in its overall medical membership, which stood at 14.99 million at the end of the quarter, down from 16.36 million a year earlier. The individual Medicare Advantage segment also saw a reduction, dropping to 5.24 million members from 5.66 million in the previous year. The total Medicare member count decreased to 8.25 million from 8.52 million. The insurance segment's benefit ratio was reported at 91.1%, aligning with the company's prior expectations of being slightly above 91%.
Looking ahead, Humana reaffirmed its adjusted earnings guidance for 2025 at $17.00 per share, closely matching the consensus estimate of $17.07. The company also reiterated its insurance segment benefit ratio guidance, projecting it to be between 90.1% and 90.5%, reflecting robust operational performance. This guidance now incorporates an additional $150 million in incremental investments, building upon previous investment announcements. Revenue for 2025 is anticipated to be at least $128 billion, in line with analyst expectations. Humana also projected a smaller decline in individual Medicare Advantage members for fiscal year 2025, now expecting a loss of approximately 425,000 members, an improvement from the earlier forecast of up to 500,000, thanks to stronger retention and better-than-expected sales. The fourth-quarter insurance segment benefit ratio is predicted to be around 93.5%, with the full-year ratio expected to be at the upper end of the 90.1% to 90.5% range, including a 40-basis-point impact from the increased investments.
Following the release of its quarterly earnings report, Humana's stock experienced a noticeable downturn. The market's reaction underscored a careful assessment of the company's financial health, where the solid premium growth was weighed against the observed membership contractions. While the reaffirmed full-year guidance indicated stability, the increased investment plans and the challenges in member retention likely contributed to investor caution, leading to a temporary decline in the company's share value.