* Plans to offer health plans on 14 U.S. state exchanges
* Expects second-quarter profit of $2.40 to $2.50 per share
* Keeps conservative view of Medicare Advantage growth
* Shares rise 6 percent
By Caroline Humer
May 1 Humana Inc said its quarterly
profit more than doubled as customers used medical services less
than expected, so the company had to pay fewer claims. Humana
also raised its profit forecast for the year.
Shares in the health insurer rose 5 percent to $77.82,
leading increases for industry peers who have also beat Wall
Street expectations before a major overhaul of the healthcare
system under President Barack Obama.
Humana improved profitability in its businesses that
administer the government's Medicare health plans for the
elderly and gave a conservative view for how it will be affected
by cuts to Medicare in 2014, one analyst said.
"They seem to have a pretty balanced perspective on the
headwinds for 2014," said Ana Gupte, an analyst at Dowling &
Obama's healthcare overhaul takes full effect in 2014,
aiming to expand insurance coverage to millions more Americans
through new exchanges where individuals can buy health plans in
Earnings were also boosted by a legal decision in its favor
and an unexpected delay in government budget cuts to Medicare,
which Humana had factored in to take effect on Jan. 1, 2013.
They actually started on April 1.
Competitors, including UnitedHealth Group Inc,
WellPoint Inc and Aetna Inc have also reported
stronger-than-expected quarterly earnings due to Americans' low
use of medical services..
Humana raised its 2013 outlook to a range of $8.40 to $8.60
per share because of the stronger-than-expected first quarter
performance. It had previously forecast $7.60 to $7.80. Analysts
were expecting $7.99.
For the second quarter, the company said it expected
earnings of $2.40 to $2.50 per share, above the analysts'
estimate of $2.31."
Humana said that it plans to participate in 14 health
exchanges where it already has a strong network of contracts
with doctors and hospitals. It will invest $33 million in 2013
to prepare for these exchanges, which are due to start enrolling
new members on Oct. 1.
The exchanges are part of the Affordable Care Act, which has
also created new requirements for services insurance policies
must provide for free. Cuts in government reimbursements under
the law are also partly responsible for a 4 percent overall cut
in government funding for Medicare that Humana expects in 2014.
Humana's first-quarter net income nearly doubled to $473
million, or $2.95 per share, from $248 million, or $1.49 per
share, a year earlier.
The company said results were 26 cents a share higher than
expected because of favorable claims settlements and the delayed
cuts to Medicare reimbursement. Excluding those benefits,
earnings of $2.69 a share were far higher than the $1.81 that
analysts polled by Thomson Reuters I/B/E/S were expecting on
Revenue rose far less sharply than earnings, increasing 2.6
percent to $10.49 billion because of higher enrollments in
individual and Medicare health plans.
About two-thirds of Humana's revenue comes from Medicare
Advantage, a private Medicare plan for which the company is
reimbursed by the government. Humana said new reimbursement
rates, announced a month ago, were higher than first proposed,
but remained challenging, "making 2014 earnings growth uncertain
at this time."
UnitedHealth, WellPoint and Aetna, which all offer private
Medicare, have also said in the past two weeks that they believe
the Medicare Advantage pricing from the government will be
difficult in 2014.