Humana 2Q Profit Rises 34% On Medicare Business

   DOW JONES NEWSWIRES 
 

Humana Inc.'s (HUM) second-quarter earnings rose 34% as revenue rose despite falling enrollment on strong gains at its Medicare Advantage business, where profit surged 62%.

Health insurers profits remain under pressure from rising medical costs and falling enrollments, while companies expect payments from their government plans to fall. The industry has been trying to discourage Washington from establishing competing plans as the health-care debate continues.

Humana was among three companies poised to lose Tricare federal contracts to provide health coverage to U.S. military personnel in 11 southern states. Loss of the multibillion-dollar contracts next year is likely to result in substantial drops in revenue and profits as membership is likely to drop by 3 million. Humana does a substantial amount of business within government programs and has one of the industry's biggest Medicare efforts, making it more vulnerable to next year's lower government payments.

The company reported a profit of $281.8 million, or $1.67 a share, up from $209.9 million, or $1.24 a share, a year earlier. The company in April projected $1.65 to $1.70, above analysts' estimates at the time.

Revenue increased 7.5% to $7.9 billion. Analysts polled by Thomson Reuters most recently were looking for $7.77 billion.

Humana's benefits ratio - the percentage of premium revenue used to pay medical bills - declined to 83.3% from 85% a year earlier. The company's total medical membership fell 10% to 10.3 million, but was flat from the prior quarter.

At its smaller commercial business, pretax profit slumped 53%, in part on lower investment income.

For the third quarter, the company expects earnings of $1.75 to $1.80, while analysts were looking for $1.78. The company affirmed its 2009 earnings outlooks.

Shares closed at $32.85 on Friday and didn't trade premarket. The stock has lost about a quarter of its value in the past year, though it has advanced nearly 80% from a March low.

-By Tess Stynes, Dow Jones Newswires; 212-416-2481; [e-mail]