Humana Q3 Profits Up 65%; Gains on Medicare

DOW JONES NEWSWIRES

Humana Inc.'s (HUM) third-quarter earnings rose 65% amid improved margins at its government segment and falling enrollment and prior-year investment losses.

The company also gave an initial 2010 forecast in which the health insurer projects "substantial" Medicare Advantage membership growth, resulting in revenue of $32 billion to $34 billion, well above analysts' average estimate of $29.63 billion, according to Thomson Reuters. But it sees earnings of $5.05 to $5.25 a share, lower than the average of $5.35.

Health insurers also are cutting or consolidating some Medicare Advantage offerings in response to tougher government requirements and in anticipation of reduced subsidies. As Congress works on a U.S. health-care overhaul, Medicare Advantage is among the thorny issues being tackled. Humana is one of the largest providers of the plans.

Health insurers have been opposing parts of the health-care revamp. However, in September, Humana came under scrutiny by the Centers for Medicare and Medicaid Services, which questioned its effort to enlist beneficiaries to fight proposed cuts to Medicare's private plans.

The managed-care company reported a profit of $301.5 million, or $1.78 a share, up from $183 million, or $1.09 a share, a year earlier. The prior year included 40 cents for investment losses. The company in August forecast earnings of $1.75 to $1.80.

Revenue increased 8% to $7.72 billion. Analysts polled by Thomson Reuters most recently forecast $7.82 billion.

President and Chief Executive Michael B. McCallister said the results reflected continuing solid performance in its government businesses, offsetting continuing challenged in Humana's commercial segment, which the company next year expects to cut costs at.

Medical membership fell 11% to 10.3 million as of Sept. 30 from a year earlier and was down 24,600 from the prior quarter. Medicare Advantage membership rose 11% from a year earlier, while commercial enrollment declined 4%.

Medical benefits ratio, or the amount of premiums used to pay patient medical costs, fell to 82.1% from 83.1% a year earlier and 83.3% in the prior quarter.

Shares of Humana, which affirmed its 2009 earnings outlook, closed Friday at $37.58 and didn't trade premarket. The stock is up roughly 30% in the past year.

(END) Dow Jones Newswires

11-02-09 0711ET