IBJNews

Insurer Humana's quarterly profit climbs 13 percent

Back to TopCommentsE-mailPrintBookmark and Share

Humana Inc.'s third-quarter earnings jumped 13 percent after another strong quarter of Medicare Advantage enrollment growth, and the health insurer also raised its 2011 earnings forecast, following a lead set the past couple of weeks by other big insurers, including competitor WellPoint Inc.

The Louisville-based company said individual Medicare Advantage membership climbed 10 percent, to 1.6 million people, compared with last year's quarter, mainly because of a successful enrollment season last fall. The insurer's Medicare prescription drug coverage enrollment also jumped 47 percent, to 2.5 million people, helped by a low-cost drug plan it offers with retail giant Wal-Mart Stores Inc.

Humana is the second-largest provider of Medicare Advantage plans, which are privately run versions of the government's Medicare program. Subsidized by the government, the plans offer basic Medicare coverage topped with extras like vision or dental coverage or premiums lower than standard Medicare rates. Medicare accounts for 64 percent of Humana's revenue.

Individual Medicare Advantage membership, which excludes group plans offered through employers, also climbed 10 percent in the second quarter, helping the insurer post a 35-percent jump in profit for that quarter.

Humana earned $444.7 million, or $2.67 per share, in the three months that ended Sept. 30. That compares with earnings of $393.2 million, or $2.32 per share, in the same quarter last year.

Revenue climbed 11 percent, to $9.3 billion.

Adjusted income was $2.54 per share, which easily beat Wall Street expectations. Analysts surveyed by FactSet expected, on average, earnings of $2.03 per share on $9.26 billion in revenue.

Revenue from the company's health and well-being services segment climbed 29 percent, to $2.83 billion, helped by Humana's acquisition of health care company Concentra Inc., which provides occupational medicine, urgent care, physical therapy and wellness services.

Balancing gains like that was an 11-percent increase in total operating expenses. Benefits, the insurer's largest expense, climbed 7.6 percent, to $7.15 billion, but care use continued to rise at lower-than-expected rates, which has helped Humana and other insurers in recent quarters.

While Medicare Advantage enrollment grew, the company's commercial membership tumbled 9 percent, to about 2.5 million people. Humana attributed that mainly to disciplined pricing, which means the insurer aimed to avoid dropping prices too low to boost enrollment.

Humana became the latest big health insurer to raise its 2011 forecast this month, following WellPoint, UnitedHealth Group Inc., Humana Inc. and Cigna Corp. It now expects 2011 earnings of $8.35 to $8.40 per share. That's up from previous guidance of $7.50 to $7.60 per share. Analysts expect $7.69 per share.

The insurer's third-quarter performance and new 2011 forecast confirm "what was pretty much already known: 2011 has been an extremely strong year," Goldman Sachs analyst Matthew Borsch said in a research note. Goldman Sachs has done investment and non-investment banking services for Humana.

The company also said it expects 2012 earnings of between $7.40 and $7.60 per share, which would represent a drop compared to this year. Humana's initial guidance last year for 2011 also represented an earnings decline because the insurer sets Medicare Advantage projections conservatively.

Leerink Swann analyst Jason Gurda said in another note the insurer's guidance has been well-below what it actually reports in recent years, "so we wouldn't read very much into the below consensus guidance range."

Analysts expect earnings of $7.79 per share for 2012.

ADVERTISEMENT

  • Penny for the guy?
    Glad they can make a bigger profit now since the amount of my health insurance deductions just surged over 5% of last year's amount. Between taxes, the rising costs of gas and food, and escalating health care costs I am losing the struggle just to make ends meet.

Post a comment to this story

COMMENTS POLICY
We reserve the right to remove any post that we feel is obscene, profane, vulgar, racist, sexually explicit, abusive, or hateful.
 
You are legally responsible for what you post and your anonymity is not guaranteed.
 
Posts that insult, defame, threaten, harass or abuse other readers or people mentioned in IBJ editorial content are also subject to removal. Please respect the privacy of individuals and refrain from posting personal information.
 
No solicitations, spamming or advertisements are allowed. Readers may post links to other informational websites that are relevant to the topic at hand, but please do not link to objectionable material.
 
We may remove messages that are unrelated to the topic, encourage illegal activity, use all capital letters or are unreadable.
 

Messages that are flagged by readers as objectionable will be reviewed and may or may not be removed. Please do not flag a post simply because you disagree with it.

Sponsored by
ADVERTISEMENT

facebook - twitter on Facebook & Twitter

Follow on TwitterFollow IBJ on Facebook:
Follow on TwitterFollow IBJ's Tweets on these topics:
 
Subscribe to IBJ
  1. By Mr. Lee's own admission, he basically ran pro-bono ads on the billboard. Paying advertisers didn't want ads on a controversial, ugly billboard that turned off customers. At least one of Mr. Lee's free advertisers dropped out early because they found that Mr. Lee's advertising was having negative impact. So Mr. Lee is disingenous to say the city now owes him for lost revenue. Mr. Lee quickly realized his monstrosity had a dim future and is trying to get the city to bail him out. And that's why the billboard came down so quickly.

  2. Merchants Square is back. The small strip center to the south of 116th is 100% leased, McAlister’s is doing well in the outlot building. The former O’Charleys is leased but is going through permitting with the State and the town of Carmel. Mac Grill is closing all of their Indy locations (not just Merchants) and this will allow for a new restaurant concept to backfill both of their locations. As for the north side of 116th a new dinner movie theater and brewery is under construction to fill most of the vacancy left by Hobby Lobby and Old Navy.

  3. Yes it does have an ethics commission which enforce the law which prohibits 12 specific items. google it

  4. Thanks for reading and replying. If you want to see the differentiation for research, speaking and consulting, check out the spreadsheet I linked to at the bottom of the post; it is broken out exactly that way. I can only include so much detail in a blog post before it becomes something other than a blog post.

  5. 1. There is no allegation of corruption, Marty, to imply otherwise if false. 2. Is the "State Rule" a law? I suspect not. 3. Is Mr. Woodruff obligated via an employment agreement (contractual obligation) to not work with the engineering firm? 4. In many states a right to earn a living will trump non-competes and other contractual obligations, does Mr. Woodruff's personal right to earn a living trump any contractual obligations that might or might not be out there. 5. Lawyers in state government routinely go work for law firms they were formally working with in their regulatory actions. You can see a steady stream to firms like B&D from state government. It would be interesting for IBJ to do a review of current lawyers and find out how their past decisions affected the law firms clients. Since there is a buffer between regulated company and the regulator working for a law firm technically is not in violation of ethics but you have to wonder if decisions were made in favor of certain firms and quid pro quo jobs resulted. Start with the DOI in this review. Very interesting.

ADVERTISEMENT