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Humana reports lower adjusted pretax income in Q4'17, hikes dividend

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Humana reports lower adjusted pretax income in Q4'17, hikes dividend

Humana Inc. reported fourth-quarter 2017 GAAP consolidated pretax income of $490 million, compared to a loss of $486 million in the 2016 fourth quarter. GAAP EPS was $1.29, compared to a per-share loss of $2.68 in the year-ago quarter.

The year-over-year comparison was favorably impacted by the reserve strengthening recorded in the fourth quarter of 2016 for the company's non-strategic closed block of long-term care insurance business and the improvement in earnings associated with the individual commercial segment in the most recent quarter, as well as an increase in earnings year over year for its group and specialty segment. These items were partially offset by the decline in earnings for the healthcare services and retail segments. GAAP EPS was impacted by a charge of 94 cents per share due to the tax law.

Adjusted consolidated pretax income was $576 million, down from $694 million in the year-ago quarter, primarily due to lower earnings in the retail and healthcare services segments, partially offset by higher earnings in the group and specialty segment. Adjusted EPS for the quarter was $2.06, compared to $2.34 in the prior-year quarter.

The S&P Capital IQ consensus normalized EPS estimate for the quarter was $2.00.

Consolidated revenues for the quarter rose year over year to $13.19 billion from $12.88 billion. Total premiums revenues increased year over year to $12.82 billion from $12.56 billion.

Humana's consolidated benefit ratio decreased to 83.0% from 89.2% in the fourth quarter of 2016.

The company's board declared a cash dividend of 50 cents per share, up from the previous payout of 40 cents per share. The dividend is payable April 27 to stockholders of record as of March 30.

Regarding the Centers for Medicare and Medicaid Services' proposed 1.84% rate increase for payments to insurers for offering private Medicare plans for the 2019 plan year, Humana said it expects a change to its benchmark funding relatively in line with the CMS' estimate, excluding the impact attributable to the employer group waiver plan payment policy.

For the 2017 full year, Humana reported GAAP consolidated pretax income of $4.02 billion, compared to $1.55 billion in 2016. GAAP EPS was $16.81, compared to $4.07. Adjusted consolidated pretax income was $3.19 billion, up from $3.11 billion in 2016. Adjusted EPS was $11.71, compared to $10.92.

The S&P Capital IQ consensus normalized EPS estimate for 2017 was $11.63.

Adjusted results for the 2016 fourth quarter and full year have been recast to exclude certain items, the company noted.

For 2018, Humana said it expects GAAP EPS of $13.16 to $13.66 and non-GAAP EPS of $13.50 to $14.00. This guidance includes a net benefit from the tax reform law of approximately $2.00.

The S&P Capital IQ consensus normalized EPS estimate for 2018 is $12.45.

Total revenues should be in the $55.8 billion to $56.4 billion range.