Humana 4Q Profit Shrinks on Expenses

Hurt by increased costs, Humana (NYSE:HUM) reported on Monday a narrowed fourth-quarter profit, though its sales ticked higher as customers continued to sign up for Medicare Advantage plans.

The Louisville, Ky.-based company posted net income of $107.3 million, or 63 cents a share, compared with $250.7 million, or $1.48 a share, in the same quarter last year, just under average analyst estimates polled by Thomson Reuters of 81 cents.

The decline in earnings was due primarily to incremental fourth-quarter expenses, including reserves strengthening for the company’s closed block of long-term care business, as well as charges associated with Medicare Advantage enrollment periods and the launch of the Humana Wal-Mart-Preferred Rx Plan.

Revenue for the provider of various health and supplemental benefit plans, including Medicare and Medicaid, was $8.35 billion, up about 9% from $7.37 billion a share, just missing the Street’s view of $8.36 billion.

“Our fourth-quarter and full-year results showed operating strength in key areas of strategic focus,” said Humana CEO Michael B. McCallister. “Looking forward, better-than-expected sales at the end of 2010 increased our Medicare Advantage and PDP membership growth estimates for 2011 and, together with continued improvements in our operations, enable us to raise 2011 EPS guidance this morning.”

Sales were led by higher total premium and administrative service fees, fueled by a 17% increase in average membership for the company’s Medicare Advantage plans.

The company now anticipates 2011 earnings in the range of $5.70 to $5.90 a share, up from its earlier view of $5.45 to $5.65 a share.