DOW JONES NEWSWIRES
Humana Inc.'s (HUM) first-quarter net income more than doubled,
thanks to a strong performance in its Medicare business, leading
the health insurer to raise its per-share earnings forecast.
The Louisville company reported higher revenue, lower costs and
greater enrollment in its Medicare plans, which were hurt last year
by surging prescription-drug costs. Humana's Medicare Advantage
business is important because the company is the second-largest
provider of such plans, behind UnitedHealth Group Inc. (UNH).
Humana shares - down nearly 27% year to date - rose 6.7% in
premarket trading to $29.20. The stock has been under pressure this
year because of the company's exposure to Medicare, which is facing
reduced government payments next year and possibly larger
government reform.
"[Medicare Advantage] results continue to track ahead of
expectations," Credit Suisse analyst Gregory Nersessian said,
noting that earnings from the commercial segment are under pressure
from lower than expected enrollment and higher costs.
UnitedHealth and WellPoint Inc. (WLP) last week reported big
declines in first-quarter enrollment on weakness in their
commercial operations, as increased job losses in the U.S. led
insurers to lose members. In the commercial space, Humana reported
a decline of 149,300 members during the quarter to 3.5 million, but
its Medicare Advantage offerings saw 17% year-to-year growth to 1.5
million.
"Upside was more than all from Medicare (better loss ratios,
higher revenues), while commercial fell short of expectations even
with an improved loss ratio on lower investment income," Citigroup
analyst Charles Boorady said.
Boorady said that contributing to the Medicare improvement was
tossing 180,000 heavy drug users that cost the company $1 a share
last year. The analyst thinks Coventry Health Care Inc. (CVH) may
have absorbed some of those users.
For the first quarter ended March 31, Humana reported net income
of $205.7 million, or $1.22 a share, up from $80.2 million, or 47
cents a share, a year earlier. Humana in March forecast earnings of
$1.10 to $1.20, above analysts' views at the time. Before today,
analysts had projected earnings of $1.18 a share, according to
Thomson Reuters.
Revenue increased 10% to $7.71 billion, above the Thomson
Reuters estimate of $7.65 billion.
Humana's consolidated benefits ratio, the percentage of premiums
used to pay medical bills, declined as expected, to 83.9% from
86.7%.
Because of the company's performance in its government
health-care plan business, Humana raised its 2009 per-share
earnings target to $6.10 to $6.20, above its previous estimate of
$5.90 to $6.10 and the average analyst estimate of $5.90. The
company projected revenue of $30 billion to $32 billion, in line
with analysts' mean estimate of $30.83 billion, according to
Thomson Reuters.
For the second quarter, the company expects earnings of $1.65 to
$1.70 a share; analysts were looking for $1.50.
-By Tess Stynes, Dow Jones Newswires; 201-938-2473;
tess.stynes@dowjones.com
(George Stahl contributed to this report.)
