Humana Profit Falls by One-Fifth

Humana Inc posted a 21 percent decline in quarterly profit on Monday, missing Wall Street's target, as higher medical benefit costs weighed on the health insurer's results. Its shares fell 3.5 percent in premarket trading.

April 30, 2012

* Q1 EPS $1.49 vs $1.53 Street view

* Slightly raises full-year forecast

* Comes after Aetna, Coventry disappointing quarters

* Shares fall 3.5 percent premarket

(Adds shares, analyst comments)

April 30 - Humana Inc posted a 21 percent decline in quarterly profit on Monday, missing Wall Street's target, as higher medical benefit costs weighed on the health insurer's results. Its shares fell 3.5 percent in premarket trading.

The first-quarter report from Humana, one of the largest providers of Medicare plans for the elderly, comes after rival insurers Aetna Inc and Coventry Health Care Inc posted lower-than-expected profits last week.

Health insurers' profits benefited last year from Americans' low use of medical services in the weak economy, which kept their claim costs low. But some companies have registered fewer such gains in the first quarter of this year as they brace for an increase in medical claim costs.

Humana's net income fell to $248 million, or $1.49 per share, compared with $315 million, or $1.86 per share, a year earlier.

Analysts were expecting $1.53 per share. Humana said the earnings did top its expectations of $1.35 to $1.45.

In 2011, many health insurers recognized significant gains from money they set aside to cover medical claims, due to actual claims submitted turning out to be lower than the companies had forecast.

Humana only saw moderate gains from recognizing such reserves in the quarter -- 3 cents per share -- while some analysts were expecting more significant benefits, just as they had been with Aetna. A year ago, Humana reported 31 cents per share in additional profit by recognizing claim reserves.

"While Q1 was ahead of guidance it was below consensus and shows the same trend displayed at some of the other health insurers this quarter," Wells Fargo analyst Peter Costa said in a research note.

Humana's revenue rose 11.2 percent to $10.22 billion, about $100 million ahead of estimates.

The company spent 85.4 percent of premium revenue on medical benefits, up from 83.8 percent a year before.

Its profit fell 47 percent in Humana's retail segment, which includes its Medicare plans, primarily because of the higher medical benefit costs.

Humana pointed to the extra day of claims because of the Leap Year, requirements due to the new U.S. healthcare overhaul law and the increased membership in its plans for the increase in health benefit costs.

Membership in Humana's Medicare Advantage plans rose 18 percent to 1.88 million.

Humana raised its 2012 earnings forecast to a range of $7.55 to $7.75 per share, an increase of 5 cents on both ends. Analysts had been looking for $7.99.

Humana shares fell 3.5 percent to $84.76 in premarket trading. Through Friday, its shares were up 0.2 percent this year, underperforming a nearly 9 percent rise for the Morgan Stanley Healthcare Payor index of health insurers. (Reporting by Lewis Krauskopf; Editing by Gerald E. McCormick and Maureen Bavdek)