Humana 1Q profit more than doubles

[April 27, 2009]  LOUISVILLE, Ky. (AP) -- Health insurer Humana Inc. said Monday its first-quarter profit more than doubled as its government business surged from higher membership in its Medicare Advantage plans and lower claims expenses from its stand-alone Medicare prescription drug plans.

The company also raised its full-year earnings outlook to between $6.10 and $6.20 per share, up from $5.90 to $6.10 per share.

Humana's employer-sponsored plans also showed some resilience. Commercial segment medical membership of 3.47 million as of March 31 was essentially unchanged from a year ago and down 149,300 from the end of 2008. Other major insurers have seen commercial membership fall as their corporate customers have cut jobs.

Louisville-based Humana said it earned $205.7 million, or $1.22 per share, compared with profit of $80.2 million, or 47 cents per share, a year ago. Revenue rose 11 percent to $7.71 billion. Wall Street analysts polled by Thomson Reuters forecast profit of $1.18 per share on $7.65 billion in revenue.

Humana posted a dramatic turnaround in pretax income from its vast government segment, increasing to $166.1 million in the just-ended quarter compared with a loss of $3.2 million a year ago.

The surge was driven mainly by lower claims expenses in its Medicare prescription drug plans, a big increase in average Medicare Advantage membership and the start of member premiums for most of its Medicare Advantage plans, the company said.

Humana said its Medicare Advantage membership grew to nearly 1.47 million members as of March 31, up 16 percent from a year ago, and up 2 percent from the end of 2008. The year-over-year increase included 94,900 members added through acquisitions completed during 2008.

Medicare Advantage premiums of $4.06 billion in the first quarter were up 28 percent from a year ago. Medicare Advantage plans are government-sponsored, privately run programs for seniors that offer comprehensive health coverage

"The first quarter's results are a clear indication that 2009 will be a year of solid performance," said Michael B. McCallister, Humana's president and chief executive.

Membership in Humana's stand-alone Medicare prescription drug plans totaled nearly 2.08 million as of March 31, down from 3.15 million members a year ago. Humana said the decline came from its "competitive positioning" as it realigned premium and benefit structures to correspond with pharmacy claims experience.

The stand-alone Medicare prescription drug plans generated premiums of $595.7 million in the quarter, down 32 percent from a year ago, reflecting a sharp decline in average membership.

A year ago, higher-than-expected claims in the stand-alone Medicare prescription plans caused a drag on Humana's earnings. Humana said the problems were limited to 2008 and were fixed before submitting bids for 2009 plans.

Military services membership totaled nearly 3 million as of March 31, up about 2 percent from a year ago.

Meanwhile, Humana's commercial segment posted pretax earnings of $127.7 million, up slightly from a year ago despite a $12 million decline in net investment income from the year-ago period.

[Associated Press; By BRUCE SCHREINER]

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