Second-Quarter Earnings Down 3.2 Percent For Humana

Main Category: Pharma Industry / Biotech Industry
Article Date: 06 Aug 2008 - 6:00 PDT

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Humana on Monday announced that second-quarter earnings decreased by 3.2% to $209.9 million, or $1.24 per share, from $216.8 million, or $1.28 per share, a year earlier, in part because of a decline in premiums from stand-alone Medicare prescription drug plans, the Wall Street Journal reports (Hoyt, Wall Street Journal, 8/4). In addition, Humana reported that second-quarter revenue increased by 14% to $7.35 billion from $6.4 billion a year earlier. Second-quarter premium revenues from stand-alone Medicare prescription drug plans deceased by 14% from a year earlier to $905.1 million, and membership in those plans at the end of the quarter totaled 3.1 million, compared with 3.44 million a year earlier, Humana said.

According to Humana, second-quarter premium revenues from Medicare Advantage plans increased by 25% from a year earlier to $3.49 billion, and membership in those plans at the end of the quarter totaled 211,300, a 19% increase from a year earlier. Humana also said that membership in commercial health plans increased to 3.56 million at the end of the second quarter, a 9% increase from a year earlier. Humana reported second-quarter pretax earnings of $249.4 million for the government segment, compared with $288.8 million a year earlier. Second-quarter pretax earnings for the commercial segment increased by 49% to $75.6 million from $50.8 million a year earlier, according to Humana (Schreiner, AP/Kansas City Star, 8/4).

Humana reported a second-quarter medical-loss ratio, the percentage of premium revenue used to cover the cost of medical bills for members, of 85%, compared with 83.4% a year earlier (Wall Street Journal, 8/4). Humana also increased full-year earnings estimates to between $4.30 and $4.40 per share, compared with previous estimates of between $4.10 and $4.35 per share (AP/Kansas City Star, 8/4).

Medicare Business
According to the Wall Street Journal, some analysts "have said Humana is in a better position than its competitors, since it has lower exposure to the commercial-risk market and generates most of its profits from its Medicare division." In June, Humana CEO Mike McCallister said that Medicare business has helped the company double in size over the past few years. "However, Humana's large Medicare business makes it more susceptible to politics, as evidenced last month with the passage of legislation that will cause insurers to take cutbacks to the Medicare plans they sell to consumers via Medicare Advantage," according to the Journal (Hoyt, Wall Street Journal, 8/5).

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