Humana reported lower first-quarter profit as the company faced earnings headwinds from lower Medicare Advantage Star Ratings for 2026.
Shares were down 4% in premarket trading.
The health insurer reiterated its full-year adjusted-earnings guidance of at least $9 a share, but cut its nonadjusted earnings outlook to at least $8.36 a share, down from its previous forecast of at least $8.89 a share.
The company said it is incurring charges, including severance, asset impairments and external consulting expenses, related to its multiyear transformation program. The initiatives are intended to "re-align the company's cost structure, operating model, and technology footprint with evolving market conditions," Humana said.
Health insurers' profits have been dragged down by higher medical costs, driven by a range of factors, including more utilization of medical services and higher costs of pharmaceuticals. Older people in particular have been using medical services to a greater extent, which increases costs for Humana more so than for other insurers, given its reliance on Medicare Advantage plans.
Humana has said it expects earnings to decline in 2026 due to the lower Medicare Advantage Star Ratings it had received for the year. The quality ratings, on a scale of one to five stars, are tied to bonuses paid to insurers.
For the first quarter, the company posted net income of $9.83 a share, down from $10.30 a share the year prior.
Adjusted earnings were $10.31 a share. Analysts polled by FactSet had expected $10.20 a share.
Revenue rose to $39.65 billion from $32.11 billion the year before. Wall Street expected $39.37 billion.
Insurance-segment benefit ratio, which measures the proportion of premiums paid to cover medical costs, was 89.4%. Wall Street had expected 89.7%.
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