November 8, 2017 / 12:00 PM / a year ago

UPDATE 4-Humana outlines 2018 growth challenges, shares fall

(Adds analyst about outlook)

By Caroline Humer

NEW YORK, Nov 8 (Reuters) - Health insurer Humana Inc on Wednesday said its 2018 profit growth would be "a bit below" 11 percent as the specialist in Medicare healthcare for the elderly and disabled faces off against challenges such as the reinstatement of a 3 percent industry-wide health insurance tax.

Humana shares fell 6 percent to $240.55 after the company's executives discussed the preliminary 2018 outlook during a conference call about its third-quarter profit, which was above Wall Street expectations.

The Louisville, Kentucky, company on Wednesday also said it cut its workforce by about 2,700 employees or 5.7 percent as it began voluntary early retirement and workforce reduction programs in the third quarter.

Humana Chief Financial Officer Brian Kane said that the reinstatement next year of the Obamacare health insurance tax, as well as the costs of exiting the individual market, could hurt earnings by 30 cents per share. The company also flagged a membership drop in its Medicare prescription drug plan of a few hundred thousand people.

Like rivals such as Aetna Inc, Humana scaled back individual government-subsidized health plans created by Obamacare, after losing money on the plans. Humana said it is now profitable there.

The 2018 earnings growth forecast is based off of an estimated $11 per share in 2017 that is on similar financial terms, Kane said when he forecast it to be "a bit below" the long-term growth rate of 11 to 16 percent.

Leerink analyst Ana Gupte said the outlook was driving down shares because it forecast lower earnings for 2018 than analyst estimates, forcing Wall Street to trim expectations.

Before the Wednesday morning earnings report, Wall Street analysts expected 2018 earnings of $12.29 per share. After the call, that figure slipped to $12.16 per share, according to Thomson Reuters data.

Humana raised its forecast for 2017 adjusted earnings to about $11.60 per share from $11.50. It said individual Medicare Advantage membership reached 2.85 million by the end of September, up 1 percent from a year ago.

Humana's consolidated benefit ratio - the percentage of premiums spent on claims - rose slightly to 82.1 percent from 81.5 percent a year ago.

Humana's net profit rose 11 percent to $499 million or $3.44 per share in the quarter ended Sept. 30. Excluding one-time items, the company earned $3.39 per share, topping analysts' average estimate of $3.27, according to Thomson Reuters I/B/E/S.

Revenue fell 3 percent to $13.28 billion. (Additional reporting by Ankur Banerjee in Bengaluru; Editing by Sai Sachin Ravikumar and Phil Berlowitz)

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