Humana reports 21 percent drop in 1Q profit

LOUISVILLE, Ky. — Humana Inc. said Monday that its first-quarter profit fell 21 percent as the health insurer paid out more in claims and bolstered spending in anticipation of growth in its lucrative Medicare Advantage membership.

The Louisville-based company nudged up its earnings expectations for the full year to a range of $7.55 to $7.75 per share, up from its prior forecast of $7.50 to $7.70 per share.

But the first-quarter results and the increased forecast were short of Wall Street expectations. Its shares fell more than 2 percent in premarket trading.

Humana cited favorable claims trends from prior periods in raising its forecast. In essence, Humana set aside more money in previous quarters than was needed to pay claims during a slowdown in the use of health care services by consumers who felt pinched during the recession. The prior favorable claims trend amounted to 3 cents per share in the first quarter, the company said.

Several insurers have said they expect health care use to return to more normal levels this year, which means they pay more claims.

The company said Monday that it paid out more in claims in its retail and employer group segments during the first quarter.

It reported double-digit gains in its Medicare Advantage membership. Humana ranks as one of the largest providers of Medicare Advantage plans, privately run programs offering comprehensive health coverage for seniors. Subsidized by the government, the plans offer basic Medicare coverage topped with extras like vision or dental coverage.

Humana said its individual Medicare Advantage membership grew to nearly 1.89 million as of March 31, up by 15 percent from the end of last year. Group Medicare Advantage membership was up 21 percent to 385,800 as of March 31.

Humana increased its investments in anticipation of the Medicare Advantage membership gains, and many of those costs were borne in the first quarter. For example, it hired more nurses to help care for members. Some nurses field health questions on the phone, and others visit the homes of some members with chronic conditions.

For the three months ended March 31, Humana reported net income of $248 million, or $1.49 per share, down from $315 million, or $1.86 per share, in the same period last year.

Revenue rose 11 percent to $10.2 billion.

Wall Street analysts had expected earnings per share of $1.52 on revenue of $10.14 billion.

Humana shares fell $2.22, or 2.5 percent, to $85.60 in premarket trading.

Humana’s pretax profit in its retail segment fell to $115 million in the first quarter from $217 million a year ago . Pretax income in its employer group segment was $121 million in the first quarter, compared to $139 million a year ago.