Humana Inc. shares have been on the rise recently amid an earnings season that has generally boded well for managed care insurers, according to S&P.
The major managed care insurer, which presented its first-quarter earnings on April 26, experienced over a 6% jump in stock value since April 25 as of noon today. This was the most significant stock price increase among managed care insurers during that period, apart from Alignment Healthcare Inc., which rose over 28% during that same period.
In a research note, J.P. Morgan analyst Lisa Gill described Humana’s first-quarter results as “solid” and buoyed by above-trend Medicare Advantage growth.
Humana CEO Bruce Broussard said during an earnings call that approximately 50% of Humana’s new Medicare Advantage sales reflect members switching from competitor plans.
According to Gill, this indicates that Humana’s plans are resonating with the marketplace.
“On the flip side, increased switching has also raised some concerns on competition,” Gill said.
Centene looks ahead
In contrast, Centene Corp., which released its quarterly earnings the day prior to Humana, saw its shares rise a modest 0.65% from April 24, the day before its first-quarter earnings report was released, by noon Friday.
In recent months, much attention has been paid to Medicaid redeterminations, a lengthy process by which states determine who is qualified for coverage under the joint federal and state program aimed at children and people with disabilities or limited incomes.
After years of COVID-19-related delays, redetermination resumed in April but appears unlikely to really impact Centene until 2024, according to comments made by CEO Sarah M. London during a recent earnings call.
Among the problems posed by redetermination are acuity risk factors, which measure how sick covered individuals are. Acuity risk factors were not part of actuarial rate assessments during the last period of redetermination in 2019.
“We fully expect that states will ultimately provide sufficient rate adjustments to reflect any changes in acuity of the Medicaid population, but we are building a provision in our 2024 target in case there is a gap in timing in some of our states,” London said.
Medicaid redetermination is expected to have less of an impact on Centene in 2023, partially due to states delaying redetermination timelines, according to J.P. Morgan analyst Calvin Sternick.
Better performance in Medicaid and the redetermination timing shift led management to adjust 2023 guidance to reflect better Medicaid performance versus prior expectations for a similar amount of margin degradation, Sternick said.
“However, based on the timing shift and more recent estimates around expected member disenrollment, [Centene] now anticipates a temporary mismatch between rate updates and population acuity, which will result in a larger-than-expected headwind in 2024,” Sternick said.
Stephens analyst Scott Fidel responded similarly and in a research note following Centene’s earnings call said the insurer’s latest assumptions represent a “relatively conservative view on Medicaid redeterminations vs. peers for 2023-2024.”
Trupanion, MetLife disappoint
Earnings season has not been kind to all insurers and on Friday pet insurer Trupanion Inc.’s stock price tumbled 21.14% from May 4, the day prior to its earnings release, trading at $28.35 a share by noon Friday.
According to its earnings report, Trupanion’s first-quarter net loss widened to $24.8 million from a net loss of $8.9 million in the first quarter of 2022. The net loss in the first quarter of 2023 included $8.6 million of nonrecurring expenses.
MetLife Inc.’s stock value also decreased during the same week it released its quarterly earnings report. On Thursday, the insurer posted net income of $14 million in the first quarter, down significantly from $1.57 billion in the year-ago period, according to its earnings release. According to CEO Michel Khalaf, the loss was largely due to major investment losses in Japan.
MetLife’s stock was trading at $55.19 a share by noon Friday, down 6% from May 3, the day prior to the insurer’s earnings call.
By 2 p.m. Friday, the S&P 500 had fallen 0.91% from the week prior to 4,131.39, while the S&P 500 U.S. Insurance index lost 1.33%, falling to 575.12.
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