Humana reports sharply higher third-quarter earnings

Monday, November 1st 2004, 10:50 am
By: News On 6

LOUISVILLE, Ky. (AP) _ Humana Inc. reported sharply higher third-quarter earnings Monday on the strength of broad gains in the company's commercial and government business. The health benefit company also increased its outlook for 2004.

The Louisville-based company posted net income of $84.3 million, or 52 cents per share, for the quarter ending Sept. 30, up from earnings of $62.1 million, or 38 cents a share, in the comparable year-ago period.

The results easily beat the 44-cent-per-share projection by analysts surveyed by Thomson First Call.

In trading Monday morning, Humana shares were up up $1.21, or 6.3 percent, at $20.36 on the New York Stock Exchange _ near the middle of their 52-week trading range of $15.20 to $24.02.

Revenues for the quarter totaled $3.18 billion, slightly ahead of the $3.11 billion in the year-ago period, the company said.

Humana also raised its earnings projection for the year to between $1.66 and $1.69 per share, up from its previous estimate of $1.63 to $1.67 a share. Wall Street analysts have projected $1.65 a share.

The company said it expects the earnings upswing to continue next year with predicted earnings of $1.90 to $1.95 a share, compared to the $1.86 per share projection by Wall Street analysts.

Michael B. McCallister, Humana's president and chief executive officer, said the gains were based partly on a solid performance by the company's Medicare business and a more profitable commercial segment.

McCallister said the third-quarter results showed that the company's diversification strategy is ``playing out very well.''

McCallister said the company's ``broad portfolio'' of business has ``created numerous earnings opportunities while mitigating risks associated with any one particular line of business.''

Pretax earnings from Humana's commercial business totaled $38.7 million in the third quarter, up 49 percent from a year ago. Humana attributed the gains to increases in self-funded and individual-product members plus the lapse of some underperforming at-risk accounts.

Revenues from premiums and administrative service fees charged to commercial members rose 7 percent to $1.8 billion in the third quarter.

Commercial medical membership climbed by 9 percent to a total of 3.3 million as of Sept. 30, mainly through the acquisition of Ochsner Health Plan last spring, the company said.

Humana came up short in bidding to retain an 89,000-member commercial public account for 2005 that the company said was not profitable this year. The company said it still expects a slight increase in commercial membership next year.

Third-quarter pretax income from Humana's government segment _ which covers Medicare, Medicaid and military-related members _ totaled $88.8 million for the quarter, up 32 percent from a year ago.

Membership in the company's MedicareAdvantage plan was up by 46,700 members for the year to 371,300, and premiums increased by 12 to 14 percent for the third quarter, making the plan more profitable.

The company reported a temporary drop in its TRICARE business, which provides health insurance for the military. Membership was at 1.8 million as of Sept. 30, down by 990,000 members from a year ago. However, the company bolstered its TRICARE membership by about one million members effective Monday in Texas, Oklahoma, Arkansas and Louisiana.

For the nine-month period, Humana reported net income of nearly $232.9 million, or $1.43 cents per share, up from $162.6 million, or $1.01 a share, for the same period a year ago. Revenues for the most recent nine months reached nearly $9.89 billion, up from $9.07 billion a year earlier.

Humana has about 7 million medical members, mainly in 15 states and Puerto Rico.