Profits have lagged for Humana so far in 2014, but the health insurer is confident 2015 will spark a return to growth, executives said at an investor conference Thursday.
Humana expects shareholder profit will climb by 17% next year compared with this year, setting an earnings-per-share target of $8.50 to $9. The road to achieving that growth was a major theme at the conference, which Humana hosts every two years.
Humana executives view Medicare Advantage, the private Medicare option, as their biggest asset. The insurer expects to add more than a quarter of a million people to its Advantage rolls, which would put enrollment at around 2.7 million members. Humana's Medicare Part D prescription drug plans are expected to add another half-million people.
Medicare already represents about 75% of Humana's revenue and about 60% of its operating profit. The Advantage plan is becoming increasingly popular among the expanding baby boomer crowd, and analysts aren't surprised Humana is redoubling its efforts there.
“This Medicare Advantage space is viewed as an attractive growth subsector of managed care,” said David Windley, an equity managing director at Jefferies & Co. “And Medicare Advantage just so significantly overwhelms everything else in their portfolio.”
Wall Street expects Humana will end 2014 with around $49 billion in total revenue. Next year, Humana's revenue is expected to rise 10% to $54 billion, executives said. But Medicare Advantage alone won't drive that increase. Executives reiterated that Humana's individual market plans, called HumanaOne, are “positioned for growth and improved financial results” through competitive pricing. The system is offering Obamacare plans on 15 insurance exchanges for 2015 and expects to break even on individual plans next year, although some are skeptical that the company can do so with ACA plans after only two years.
“There's an awful lot of black-box calculation in figuring out how that will progress,” Windley said. “Their conviction was pretty strong.”
Some analysts predict Humana's 2015 year-end stock price will close around $150. So far this year, Humana's stock is up more than 36%, hovering around $140.70 per share.
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