Humana Profit Surges on Medicare Members

Health insurer Humana Inc. (HUM) Monday said quarterly profit surged 62 percent as it added new Medicare members and boosted commercial margins.

The Louisville, Ky.-based company said first-quarter net profit rose to $109.8 million or 67 cents per share, from $67.8 million, or 41 cents a share, a year earlier.

First-quarter income includes a 14-cents-per-share gain related to federal taxes.

Analysts on average had expectations of earnings of 48 cents per share, according to those polled by Reuters Estimates.

A move to higher-margin products where the health insurer takes less of the risk, and a 35 percent jump in Medicare membership, buoyed quarterly results.

Total medical membership stabilized at 7 million.

Humana (search) is among the private plans benefiting from a 2003 law seeking to boost private sector participation in the federal health insurance plan for the elderly and disabled, an aim of many Republicans in Washington.

The firm raised its earnings forecast for the full year to $2.23 to $2.25 per share, from its previous view of $2.20 per share, after beating its own first-quarter profit expectations by 4 to 6 cents per share. The company expects second-quarter earnings of 47 cents to 50 cents per share.

In recent weeks, several managed health-care companies have said medical cost increases are stabilizing in the single digits. Humana said per member medical costs are forecast to rise between 8 percent and 10 percent in 2005.

Both Medicare premiums and per-member medical costs are projected to rise by 11 percent to 13 percent for the year.

It also sees pretax earnings from commercial business increasing 10 percent to 15 percent this year. Humana also expects earnings from its government segment to increase, driven by Medicare improvements, but did not specify by how much.

Revenue for the quarter rose to $3.39 billion from $3.29 billion.