(Reuters) – Humana Inc raised its annual adjusted profit forecast on Wednesday after lower medical costs in the firm’s government-backed health insurance business helped it beat profit estimates for the first quarter.

The company’s upbeat outlook contrasts uncertainty around 2024 earnings for health insurers staring at the end of COVID-related insurance protection measures and potential declines in government payouts for some plans.     That has driven increased investor scrutiny into whether one-time items are helping lower medical costs artificially, hurting shares of rivals UnitedHealth (NYSE:UNH) and Elevance earlier this month despite both beating profit estimates.

Shares of Humana (NYSE:HUM) rose 2% to $512.09 in premarket trading on Wednesday.

Humana also saw memberships in the Medicare Advantage business grow to 5.66 million as of March-end from 5.13 million a quarter earlier. Medicare Advantage is its main business of government-backed health insurance for the elderly or those with certain disabilities.

In February, the company raised its annual forecast for membership additions in the segment to 775,000, expecting to benefit from redirecting resources out of its employer-backed insurance business that is in the process of shutting down.

The impact of its exit from the commercial business was not included in adjusted figures for the quarter, Humana said.

Its adjusted benefit expense ratio – or the percentage of payout on claims compared with premiums received – fell to 85.9% in the quarter, lower than analysts’ estimate of 86.47%, according Refinitiv data.

The better-than-expected ratio reflected a favorable trend in claims for inpatient hospital services for the individual Medicare Advantage plans, which J.P. Morgan analyst Lisa Gill said should be seen as a positive given concerns that medical costs could increase this year.

On an adjusted basis, Humana expects annual profit per share of at least $28.25, compared with its previous forecast of at least $28.

Its adjusted profit came in at $9.38 per share, beating estimates of $9.27.