Humana (HUM) revealed a 7% decline in fourth-quarter profit on Monday but topped Wall Street's expectations as expenses shrunk and premiums grew.

The company also warned that the current fiscal year will produce higher medical costs amid this winter's unusually harsh flu season.

The Louisville, Ky.-based health insurer reported net income of $192 million, or $1.19 a share, in its most recent period, compared with a year-earlier profit of $199 million, or $1.20.

The results topped average analyst estimates of $1.06 in a Thomson Reuters poll.

Humana displayed improved cost management during the quarter, with its consolidated operating cost ratio narrowing slightly to 17.5%.

“The progress we made building our clinical capabilities in 2012 positions us strongly for success in 2014 and beyond,” said Humana CEO Bruce Broussard.

Revenue for the three months ended Dec. 31 climbed 6% to $9.56 billion from a year ago, led by a rise in total premiums and services revenue and a 287,300-person increase in Medicare membership.

The performance, however, fell short of the Street's view of $9.73 billion.

Humana reaffirmed its fiscal 2013 guidance in the range of $7.60 to $7.80, noting that modest accretion from the recently-closed Metropolitan Health Networks acquisition is expected to modestly offset higher-than-expected flu-related medical costs.

Analysts on average are calling for slightly stronger full-year EPS of $7.89.

Follow Jennifer Booton on Twitter at @Jbooton