By Sriparna Roy and Amina Niasse

(Reuters) -Humana beat Wall Street estimates for third-quarter profit on Wednesday as it added more members than expected in its government-backed Medicare Advantage insurance business for older adults, and saw strength in its primary care segment CenterWell.

The health insurer, a top provider of Medicare Advantage plans, said it expects "at least" $16 per share in adjusted profit for the full year, compared with its previous forecast of "approximately" $16 per share.

Shares of the Louisville, Kentucky-based company rose more than 4% in morning trade.

For 2025, Humana said it expects adjusted profit to be at least in line with final 2024 results. Analysts expect a 2025 profit of $19.77 per share, according to data compiled by LSEG.

"We want to be appropriately prudent and make sure that we're doing the right things to establish targets, hit those targets, build credibility over time," Jim Rechtin, CEO of Humana said in a conference call. "We are trying to establish the best way to navigate through the next 24 months."

Insurers providing Medicare Advantage plans have faced challenges recently due to rising healthcare expenses among older adults. These challenges were compounded by recent government payment rates, making it difficult for insurers to cover the higher medical costs without impacting profits.

Concerns about 2024 have been alleviated, but expectations for 2025 suggest a flat year with minimal growth, which is "a much lower bar than expected," said Baird analyst Michael Ha.

PERFORMANCE RATINGS

Humana shares, among the sector's most hard hit, have fallen nearly 44% so far this year, after the company withdrew its 2025 forecast previously, citing disappointing government Medicare reimbursement rates.

Humana launched a suit in October against the U.S. Department of Health and Human Services over the Medicare agency's calculation of its performance ratings.

A downgrade in the quality rating for a widely used Medicare insurance plan, which accounts for nearly half of its Medicare Advantage (MA) memberships, could potentially weigh on the insurer's revenue and bonus payments in 2026.

For 2027, the company expects to return its Medicare Advantage margins to at least 3%, but that target is at risk of erosion following drops in Humana's quality rating, Rechtin said.

For the full year, Humana anticipates individual net membership growth in its MA business of about 265,000, up from its previous estimate of about 225,000.