Insurer Humana’s 3Q profit climbs 13 percent

October 31, 2011|Tom Murphy, AP Business Writer

Humana Inc.’s third-quarter net income jumped 13 percent after another strong quarter of Medicare Advantage enrollment growth. The health insurer’s shares hit a new 52-week high Monday after it also gave a better 2012 forecast than some analysts expected.

The Louisville, Ky., company said it expects 2012 earnings between $7.40 and $7.60 per share, which would lead to a drop from its projection for this year. But Humana typically starts with conservative earnings forecasts.

Many analysts expected an initial forecast from the company of $7 per share or less, Citi analyst Carl McDonald said in a research note. Health insurers have been helped the past several quarters by medical costs that have grown more slowly than expected. If that trend continues, the analyst said Humana earnings could top $9 next year.

Analysts expect, on average that the insurer will actually deliver earnings of $7.79 per share next year, according to FactSet.

The price of Humana shares hit $87.32 Monday, while broader trading indexes fell about 2 percent.

The managed-care sector is heading into 2012 buoyed by optimism. Cigna Corp. and WellPoint Inc. have both said they expect their earnings to grow next year. Aetna Chief Financial Officer Joe Zubretsky has said he’s “bullish’’ on his company’s prospects.

Health insurers entered 2011 uncertain about the impact of a new health care overhaul rule governing medical-loss ratios, which essentially measure the percentage of premiums insurers spend on care. The impact of that rule has turned out to be manageable and insurers face no such uncertainties heading into 2012

“Next year is sort of a quieter year in terms of regulatory issues, hopefully,’’ Susquehanna analyst Chris Rigg said.

For the third quarter, Humana earned $444.7 million, or $2.67 per share. That compares with earnings of $393.2 million, or $2.32 per share, in the same quarter last year. Revenue climbed 11 percent to $9.3 billion.

Adjusted income was $2.54 per share, which easily beat Wall Street expectations. Analysts surveyed by FactSet expected, on average, earnings of $2.03 per share on $9.26 billion in revenue.

Humana is the second-largest provider of Medicare Advantage plans, privately run versions of the government’s Medicare program. Subsidized by the government, the plans offer basic Medicare coverage topped with extras like vision or dental coverage or premiums lower than standard Medicare rates. Medicare accounts for 64 percent of Humana’s revenue.