Private Medicare plans provider Humana Inc. (HUM) posted higher profit for the fourth quarter, helped in part by lower prescription drug plans or PDP claim expenses. Further, the company issued earnings forecast for the first quarter, while it updated its financial outlook for fiscal 2010.
The Louisville, Kentucky-based company's fourth-quarter net income was $250.7 million, up 44% from the prior-year's net income of $174.1 million. On a per share basis, earnings grew 43.7% to $1.48 from $1.03 in the year-ago period.
On average, 18 analysts polled by Thomson Reuters expected the company to post earnings of $1.48 per share. Analysts' estimates typically exclude special items.
Quarterly revenues totaled $7.63 billion, an increase of 1.9%, compared to the previous year's revenues of $7.49 billion, but fell short of the $7.78 billion revenue consensus estimate of nine Street analysts.
Michael McCallister, president and chief executive officer of Humana said, "We completed a successful 2009 despite a challenging environment. Looking ahead, we see multiple revenue growth opportunities across our spectrum of products for 2010."
Total premiums rose 1.6% to $7.37 billion from $7.25 billion a year earlier, while Administrative services fees increased 13.6% to $127.8 million from $112.5 million reported last year. The increase in premiums and administrative services fees largely reflects an increase in both average Medicare Advantage membership and per-member premiums substantially offset by declines in average Commercial medical membership.
Investment income for the latest quarter amounted to $76.6 million, up 15.7% from $66.2 million in the same quarter of last year, and other revenues were up 8.9% to $59.8 million from $54.9 million a year ago.
During the most recent quarter, total operating expenses edged up 0.1% to $7.208 billion from $7.199 billion incurred in the comparable quarter of the previous year.
The latest quarter's consolidated benefit ratio was of 81.8%, a decline from 83.3% last year, reflecting a decline of 240 basis points in the Government Segment benefit ratio, partially offset by a 130 basis point increase in the Commercial Segment benefit ratio.
The company's Government segment reported pretax income of $452.3 million, compared to $267.3 million in the year-ago quarter, primarily driven by lower PDP claim expenses, a 6% growth in average Medicare Advantage membership, the implementation of member premiums for most of the company's Medicare Advantage products, and higher net investment income. Medicare Advantage membership grew 5% to 1.51 million at December 31, 2009 from 1.44 million at December 31, 2008.
The Commercial Segment incurred a pretax loss of $53.6 million, compared to a loss of $6.3 million a year earlier, primarily reflecting a higher benefit ratio and increased Selling, general, & administrative, or SG&A, expenses year over year, partially offset by higher net investment income.
For the full year 2009, the company reported net income of $1.04 billion or $6.15 per share, compared to $647.2 million or $3.83 per share in 2008. Analysts expected earnings of $6.15 per share for the full year.
Total revenues for fiscal 2009 advanced 7% to $30.9 billion from $28.9 billion reported in the previous year. Eight Wall Street analysts had a consensus revenue estimate of $31.09 billion for fiscal 2009.
Looking ahead, Humana expects first-quarter earnings in the range of $1.10 - $1.20 per share. Analysts are looking for earnings of $1.03 per share for the first quarter.
The company currently projects fiscal 2010 earnings between $5.15 and $5.35 per share, compared to the previously issued forecast of $5.05 - $5.25 per share. The company noted that the increase in 2010 earnings outlook primarily reflects the expected retention of the company's South Region TRICARE contract for an additional quarter during fiscal 2010.
Full-year 2010 revenues are now expected to be in the range of $33 billion - $34 billion, compared to prior outlook of $32 billion - $34 billion.
Wall Street analysts have a consensus earnings estimate of $5.40 per share on revenues of $33.08 billion for 2010.
Among Humana's rivals, UnitedHealth Group Inc. (UNH) posted an increase in fourth-quarter profit, totaling $944 million or $0.81 per share, compared to $726 million or $0.60 per share in the year-ago quarter, reflecting strong performance from its health services businesses, and public and senior health benefits programs. Total revenues for the quarter rose to $21.8 billion from the previous year's $20.5 billion.
Humana shares, which have been trading between $18.57 and $52.66 in the past 52 weeks, closed Friday's trading session at $48.62, down 17 cents or 0.35%.
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