Humana posts sharp rise in 3rd-quarter profit

LOUISVILLE, Ky. -- Health insurer Humana Inc. said Monday its third-quarter profit nearly doubled from a year ago, as income from its government segment surged, aided by a one-time gain and improvements in its commercial business.

Net income grew to $302.4 million, or $1.78 per share, for the quarter ended Sept. 30, from $159.2 million, or 95 cents per share, a year ago.

Third-quarter earnings included a one-time 25-cent gain when Humana didn't have to spend about $68.9 million set aside previously for medical claims. Instead, it included the sum as earnings. The company also reported an unanticipated 5-cent gain from improved operations in its commercial and stand-alone Medicare prescription drug plans.

Revenue rose 12 percent to $6.32 billion, with total premium and administrative services fees up 11 percent on higher average Medicare membership.

Analysts surveyed by Thomson Financial expected profit of $1.49 per share on revenue of $6.21 billion.

Pretax earnings in Humana's government segment totaled $416.3 million in the third quarter, compared with $207 million in the year-ago period. The surge was due to rising Medicare membership and cost efficiencies from the higher enrollments, the company said.

"The quarter positioned us well to extend our industry-leading growth in both revenues and earnings through 2008 and beyond," said Michael B. McCallister, Humana's president and chief executive officer.

Louisville-based Humana said its Medicare Advantage membership grew 15 percent to 1.14 million at Sept. 30. Higher enrollment in the comprehensive health plans was due to an expansion of Medicare products and markets and increased sales and marketing. Medicare Advantage premiums rose 19 percent to $2.83 billion based on higher average membership.

Premiums from Humana's stand-alone Medicare prescription drug plans totaled $890.4 million, up 5 percent from a year ago.

Humana said that premiums and administrative service fees from its Tricare businesses increased $81 million to $731.8 million from a year ago. Tricare provides health insurance for military families and retirees.

Pretax earnings from Humana's commercial segment totaled $62.2 million, compared with $42.4 million in the year-ago period. The company said the rise was due to improved claims management and revenue growth.

Commercial segment medical membership was nearly 3.3 million as of Sept. 30, essentially unchanged from a year ago. Third-quarter premiums and administrative service fees from the commercial business increased 2 percent to $1.61 billion from a year ago.

Looking ahead, the company lifted its profit forecast for fiscal 2007 to a range of $4.75 to $4.80 per share, from $4.40 to $4.50 per share previously. Revenue is forecast to reach about $25 billion.

Analysts are expecting earnings of $4.52 per share on revenue of $24.99 billion.

Humana predicts 2008 earnings per share will range about $5.30 to $5.50 per share on revenue of about $28 billion to $30 billion. Wall Street has forecast profit of $5.17 per share on revenue of $27.17 billion.

The company predicts continued growth in its Medicare Advantage plans. Humana expects to add 200,000 to 250,000 such members by the end of 2008 compared with Dec. 31, 2007, and said premiums and fees from those plans should grow by $2 billion to $3 billion over 2007.

On the commercial side, Humana predicted premiums and fees of $7.2 billion to $7.7 billion for 2008, compared with a projected $6.5 billion for 2007.