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Humana boosts guidance, will exit at least 8 exchange markets in '17

HumanaInc. is set to leave at least eight state individual markets in2017 after struggling to turn a profit on the Affordable Care Act-createdhealth exchanges.

The health insurer said July 21 that it is cutting itsexchange presence to no more than 11 states next year, down from the 19 that itparticipated in this year. That means it will sell individual plans in just 156counties in 2017, a sharp reduction from its current 1,351 counties.

Humana also plans to pull all of its ACA-compliantoff-exchange products from the market as well, and seek rate increases acrossseveral of the states where it remains.

The decision comes after the company's individual market plansperformed poorly over the past year, forcing Humana to establish a premiumdeficiency reserve connected to some of its 2016 policies. The insurer is nowincreasing that reserve in the second quarter by $208 million, or 86 cents pershare.

Humana also warned that it anticipated $52 million, or 22cents per share, of net pretax expenses through the second quarter tied tochanges to its accruals for prior-period claims development and the exchanges'premium stabilization programs. Together, those account for Humana'santicipated $1.08 per share in full-year 2016 losses in its individual marketbusiness.

The exchange exits should contribute to a drop inACA-compliant product premiums to between $750 million and $1 billion in 2017,the company said, from the roughly $3.4 billion projected for 2016.

Humana is the latest insurer to pull out of multipleexchange markets over profitability concerns. previouslysaid it would remain in no more than three exchanges in 2017, down from 34 in 2016.

Despite the difficulties with its individual policies,Humana predicted better-than-expected earnings for 2016 due largely to itsMedicare Advantage and healthcare services segments. The insurer anticipates atleast $8.56 per share of earnings for the full year, up from its originalguidance of $8.32 per share.

Excluding transaction and integration costs and theamortization expense of identifiable intangibles, Humana's adjusted earningsshould be at least $9.25 per share, up from the $8.85 per share previouslypredicted.

The S&P Capital IQ consensus normalized EPS estimate for2016 is $8.87.

The company also updated its second-quarter outlook, cuttingits GAAP earnings guidance to about $2.03 per share, from at least $2.06 pershare, to incorporate a new estimate for transaction and integration costs.

Excluding transaction and integration costs and theamortization expense of identifiable intangibles, Humana expects second-quarteradjusted earnings of about $2.28 per share, compared with previous guidance ofat least $2.15 per share.

The S&P Capital IQ consensus normalized EPS estimate forthe second quarter is $2.19.