July 31, 2013 / 10:38 AM / in 4 years

CORRECTED-UPDATE 3-Humana profit rises on growth in retail, employer units

(Corrects revenue figures in 14th paragraph to $10.3 billion vs
$9.7 billion, instead of $9.7 billion vs $9.2 billion; the error
also appeared in earlier updates)
    By Caroline Humer
    July 31 (Reuters) - Health insurer Humana Inc said
on Wednesday that its second-quarter profit rose 18 percent,
helped by low medical costs and growth in both its
direct-to-customer division and employer-based insurance unit.  
    Chief Executive Officer Bruce Broussard said while
government cutbacks to private Medicare plans for the elderly
planned for 2014 were 'onerous', he still anticipates growth in
sales of these plans directly to individuals.
    Humana will withdraw plan offerings in 2014 affecting 78,000
members, but will offer other Humana plans to most of those
people, he said during a conference call. 
    Insurers have coped with government cuts in funding for
private Medicare next year by cutting back on plans with extra
services and regions that are not profitable. 
    "It seems like they are not going to cut back drastically on
their membership. 2015 and beyond are where all the questions
lie," Morningstar analyst Vishnu Lekraj said. 
    Humana raised its earnings outlook for this year, in part to
reflect higher-than-expected second quarter earnings.
    The company reported net income of $420 million, or $2.63
per share, up from $356 million, or $2.16 per share, a year
    Excluding 12 cents a share in costs of exiting a Puerto Rico
Medicaid business for the poor, analysts were expecting earnings
of $2.47, according to Thomson Reuters I/B/E/S. 
    Humana is the fourth major insurer to report second-quarter
earnings that beat Wall Street estimates. UnitedHealth Group Inc
, WellPoint Inc and Aetna Inc have all
said their profits had benefited from reduced use of medical
services by customers.
    Humana said during the conference call that the rate of
hospital admissions of patients had been more favorable to it
than expected. Low admissions help insurer profits as they pay
out fewer claims.
    Like its competitors, Humana is planning to sell insurance
plans on the health exchanges being created under President
Barack Obama's healthcare reform law. Humana plans to sell these
plans in 14 states and said it is proceeding cautiously around
the online rollout of the plans that begins on Oct. 1.
    Humana CEO Bruce Broussard said the company has contingency
plans in place should there be technology issues. Humana has put
in bids in these 14 states where it already sells insurance that
"are pretty much in the middle and not too aggressive at the
lowest end," he said.
    Many states are due to submit their approved rates to the
government this week and have begun releasing premium rates that
individuals could expect to pay, revealing wide ranges in some
    Revenue rose to $10.3 billion from $9.7 billion, in line
with analysts' expectations of $10.3 billion.
    Private Medicare, known as Medicare Advantage, accounts for
about two-thirds of Humana's revenue. 
    The company raised its full-year earnings forecast to a
range of $8.65 to $8.75 per share to reflect the second-quarter
results. Analysts were expecting $8.68 per share.
    Humana said it had spent 83.4 percent of premiums it took in
on medical benefits, down from 83.5 percent a year earlier. It
had 12.37 million medical members at the end of the quarter, and
another 8.27 million people were in dental, vision and other
supplemental benefit plans.
    Humana shares gained $2.03, or 2.3 percent, to $91.29 in
morning trading.

 (Reporting by Caroline Humer; Editing by Lisa Von Ahn and
Sofina Mirza-Reid)
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