Health insurer Humana Inc. (HUM) Wednesday reported a significant increase in first-quarter profit and lifted its full-year earnings forecast, but said earnings growth in 2014 is uncertain at this time. Meanwhile, Coventry Health Care Inc. (CVH), which is being acquired by health insurer Aetna, Inc. (AET), reported lower profit and reduced revenues for the quarter.
Humana's earnings climbed to $473 million or $2.95 per share from $248 million or $1.49 per share in the previous year. On average, 19 analysts polled by Thomson Reuters expected earnings per share of $1.81 for the quarter. Analysts' estimates typically exclude one-time items.
The latest results included the beneficial effect of settlement of contract claims with the Department of Defense related to a litigation and a delay in the implementation of sequestration for the company's Medicare business.
The beneficial effect of these items on the results was $0.26 per common share, which was not anticipated in the company's guidance of $1.75 to $1.85 for the quarter.
Consolidated revenues rose 2.6 percent to $10.49 billion from $10.22 billion a year ago. Analysts estimated revenues of $10.25 billion.
Revenue from premiums rose 1 percent, while revenue from Services jumped 50 percent from last year.
In the Retail Segment, comprising Medicare and commercial fully-insured medical and specialty health insurance benefits, pretax income more than doubled to $350 million, primarily due to membership and premium growth and lower benefit and operating cost ratios.
The Employer Group segment reported pretax income of $205 million, up from last year's $129 million, reflecting improved benefit and operating cost ratios. This segment includes Medicare and commercial fully-insured medical and specialty health insurance benefit, as well as administrative services only products and health and productivity solutions businesses marketed to employer groups.
Total medical membership grew 4.6 percent in the quarter to 12,313.8 thousand.
For the second quarter, earnings per share are anticipated between $2.40 and $2.50. Analysts project earnings of $2.30 per share.
Looking ahead to fiscal 2013, the company now sees earnings per share of $8.40 - $8.60, compared to its prior range of $7.60 - $7.80. The boost reflects better-than-expected first quarter results partially offset by higher-than-earlier projected investment spending for the company's integrated care delivery model and health care exchanges in the latter half of 2013. Analysts project annual earnings of $7.98 per share.
Annual revenues are projected between $41.0 billion and $41.5 billion, while analysts estimate revenues of $41.13 billion.
Further, Humana's Chief Executive Bruce Brougham said, "On the immediate horizon, while the final 2014 Medicare rate notice remedied some aspects of the major reduction that was initially proposed, funding challenges continue, making 2014 earnings growth uncertain at this time.''
Meanwhile, Coventry Health Care said first-quarter net earnings decreased to $135.37 million or $1.00 per share from $170.72 million or $1.20 per share in the same quarter last year.
The prior-year results included a $0.58 per share positive impact from the Medicare Advantage Risk Adjustment Data Validation prior period reserve release. Analysts expected the company to report earnings of $0.82 per share for the quarter.
Total operating revenues declined to $3.52 billion from $3.69 billion in the prior year quarter. Analysts had a consensus revenue estimate of $3.71 billion for the quarter.
Total membership declined to 5.17 million from 5.26 million.
Allen Wise, CEO of Coventry, said, "These first quarter results position the company well to achieve its financial and operational goals in 2013 as we look towards combining our strengths with those of Aetna after satisfying all remaining regulatory requirements.''
Aetna said on Tuesday that its first-quarter profit declined from the prior year, as higher expenses offset a rise in revenues. The company raised its full year profit forecast.
HUM closed regular trade at $74.11 on Tuesday while CVH settled at $49.55.
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