Health insurer HealthSpring, Inc. (HS), Monday, reported a sharp increase in net income for the fourth quarter that also surpassed analysts' estimate, driven by an over 25% growth in Medicare premium revenue. The Franklin, Tennessee-based company also provided an outlook for the full year 2010, which is better than market view.
Net income for the fourth quarter grew 37% to $38.78 million from $28.31 million last year. Per-share earnings grew 33.3% to $0.68 from $0.51 in the prior-year quarter.
On average, 11 analysts polled by Thomson Reuters expected the company to earn $0.62 per share for the quarter. Analysts' estimates typically exclude special items.
Net revenue for the quarter was $677.61 million compared with $540.84 million in the prior-year quarter, as Medicare premium revenue grew 25.4% to $663.66 million from $529.24 million last year. Eight analysts had a consensus revenue estimate of $661.03 million for the second quarter.
Medicare Advantage premiums, including the prescription drug component of HealthSpring's Medicare Advantage plans, or MA-PD, increased 24.2% to $586.5 million, attributable to increases in both membership and per member per month, or PMPM, premium rates.
Stand-alone PDP premium revenue grew 35.6% to $76.5 million, reflecting a 10.8% increase in membership and an increase in PDP premiums PMPM in the quarter.
For the full year 2009, net income was $133.60 million or $2.41 per share, compared with $118.95 million or $2.12 per share in the last year. Net revenue for the full year totaled $2.67 billion, up 21.8% from $2.19 billion in the previous year. Analysts expected the company to earn $2.35 per share on revenues of $2.65 billion for the full year.
Medicare Advantage premiums were $2.3 billion for the full year, reflecting an increase of 22.5% over the prior year, while Stand-alone PDP premium revenue for the full year grew 22.6% to $325.4 million compared with last year
Herb Fritch, Chief Executive Officer, said "Outperformance in most of our health plans and in our stand-alone prescription drug plan, coupled with continuing SG&A operating leverage, allowed us to close the year on a high note."
Looking ahead, for the full year 2010, the company expects earnings per share in a range of $2.25 to $2.50. Eleven analysts expect the company to earn $2.21 per share for the year.
The company anticipates 2010 full year total revenue to be between $2.85 billion and $2.95 billion, which is better than nine analysts current view of $2.84 billion.
"Moving to 2010, our Medicare Advantage membership has increased. In addition, our stand-alone PDP saw significant auto-assigned membership growth in January. Although our outlook does anticipate a modest increase in our MA MLR, we believe that 2010 will be another good year for HealthSpring," Fritch added.
HS shares closed Friday's regular trading at $17.14 on the NYSE.
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