Humana Inc. (NYSE: HUM) raised its full-year 2026 adjusted EPS guidance to at least $9.50, up from the prior floor of $9.00, after a third quarter that saw the Insurance segment's benefit ratio land at 93.7%. That beat management's forecast of "slightly above 94%." The signal: Medicare Advantage pricing and clinical cost management are finally offsetting the Star Ratings drag that has weighed on this stock for over a year.
Consolidated revenue surged 26% year over year to $41.2B, clearing the $40.9B consensus. The engine was a 23% jump in Individual Medicare Advantage membership, plus higher per-member premiums from increased MA benchmark funding and Part D subsidies under the Inflation Reduction Act. GAAP EPS hit $1.33, crushing the Street's expectation of a $1.00 loss. The headline adjusted figure was a loss of $0.70 per share, a swing from $3.24 of adjusted profit in Q3 2025. The culprit: a $2.94 per-share non-cash put/call valuation adjustment tied to the unwind of the WCAS joint ventures.
The Insurance benefit ratio is what matters operationally. Management had guided slightly above 94%; the actual 93.7% landed 30-40 basis points better. The improvement reflects MA pricing discipline and clinical cost management, partially offset by lower favorable prior-period development. That development came in at $67M versus $275M in Q3 2025, a $208M swing the company attributes to normal reserve run-off rather than deteriorating claims experience. The ratio improved anyway. That suggests the underlying pricing and cost trends have genuine traction.
The GAAP EPS guidance revision to at least $15.09 from at least $6.52 looks dramatic. It isn't. The $8.57 increase is dominated by the reversal of the $1.2B put liability associated with the WCAS joint ventures, flowing through the put/call valuation adjustment line. The adjusted EPS raise from $9.00 to $9.50 is the operative move. It signals management's confidence that operational momentum from the first three quarters persists through Q4. All other guidance metrics held steady: Insurance benefit ratio at 92.50%-93.00%, consolidated operating cost ratio at 9.75%-10.25%, and CenterWell segment income at $1.3B-$1.8B GAAP.
CenterWell keeps scaling. Senior Primary Care patients grew 30% year to date to 637,900; wholly-owned centers expanded 24% since year-end. The newly announced BlackRock joint venture, which replaces the WCAS partnerships, closed in Q4 and improves balance sheet flexibility at a reduced cost of capital. The segment's operating cost ratio rose to 95.9% from 93.9% a year ago, driven by patient and plan mix dynamics in one geography and higher specialty pharmacy volume. Management expects these pressures to ease as v28 risk model mitigation activities mature.
Year-to-date operating cash flow more than doubled to $5.4B from $2.6B, supported by favorable working capital and earnings. Debt-to-capitalization improved to 40.9% from 42.7% at June 30, reflecting commercial paper repayment and retained earnings. The balance sheet can fund the CenterWell expansion and the BlackRock joint venture without strain.
The forward view is restrained. The adjusted EPS guide of at least $9.50 still implies a steep year-over-year decline from the $17.14 reported in FY2025. The Star Ratings headwind for Bonus Year 2026 remains the dominant drag. But the Q3 beat and the $0.50 raise suggest management sees enough operational cushion to absorb that drag and still deliver a credible floor. Whether MA pricing and CenterWell's maturation can close that gap further is the question for 2026. For now, the trajectory is improving.