Humana Beats Estimates With 8% Rise in Income

From Times Wire Services

Managed-care giant Humana Inc. said Wednesday that its fourth-quarter net income rose 8%, slightly better than Wall Street’s expectations, as it raised premiums to keep up with rising costs.

Humana, which is in the midst of a turnaround phase following sluggish growth for several quarters, said operating profit grew to $27 million, or 16 cents a share, from $25 million, or 15 cents, in the year-ago quarter. Analysts on average were expecting 15 cents, according to First Call/Thomson Financial.

Revenue edged down to $2.56 billion from $2.57 billion as the company saw a 3.6% dip in commercial members.


The Louisville, Ky.-based company also said it expects 25% earnings growth this year, consistent with the average 67-cent estimate from analysts.

“They’re continuing to make progress in their turnaround,” said Edmund Kroll, an analyst at SG Cowen Securities Inc. “Cash flow, which is another metric we’ve been monitoring to gauge progress of improvement, was strong in the fourth quarter.”

Humana has raised premiums for employer health plans as much as 18%, more than other insurers, after falling behind rivals in controlling costs.

The company also is battling rising costs for Medicare customers and dropping unprofitable customers in its Medicaid and employer health plans.

The company’s medical expense ratio--the percentage of premium revenue spent by insurers on medical costs such as payments to doctors and hospitals--fell to 83.7% in the fourth quarter from 84.8% a year earlier.

Shares of Humana rose 33 cents to close at $12.58 on the New York Stock Exchange.

At a Glance

Other earnings, excluding one-time gains or charges unless noted:

* Allstate Corp. said fourth-quarter operating profit rose 12% to $589 million, or 80 cents a share, well beyond expectations of 72 cents. The insurer’s revenue rose 3% to $7.2 billion, boosted by investment income.


* BorgWarner Inc. said fourth-quarter earnings fell 26% to $26.8 million, or $1.02 a share, as the auto parts maker’s sales declined 12% to $596.3 million. The results beat the average analyst estimate of 97 cents, which was revised after the company warned of lower profit.

* Cendant Corp. said fourth-quarter profit fell less than analysts expected and said earnings will exceed expectations in the first quarter and the full year. Cendant, a franchiser of such brands as Ramada hotels and Avis car rental, said earnings declined 19% to 20 cents a share in the latest quarter, as lower interest rates helped its mortgage business. Revenue declined 12% to $968 million, reflecting the sale of businesses.

* Harrah’s Entertainment Inc. said fourth-quarter profit fell 39% to $23.5 million, or 20 cents a share, even as sales rose 14% to $855 million. The company said poor weather hurt business at its casinos in the East and Midwest and said winnings at its Rio casino in Las Vegas were lower than average. The results were a penny better than analyst forecasts.


Reuters and Bloomberg News were used in compiling this report.