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Humana Says Profit Declined as Insurer Saw Medical Costs Rise

Humana Inc. (HUM), the second-biggest provider of U.S.-backed Medicare insurance, said first-quarter profit declined as premiums failed to keep up with rising medical costs. The company raised its full-year forecast.

Net income dropped 21 percent to $248 million, or $1.49 a share, from $315 million, or $1.86, a year earlier, the Louisville, Kentucky-based company said today in a statement. The per-share result missed by 2 cents the $1.51 average of 9 analyst estimates compiled by Bloomberg. Revenue rose to $10.2 billion, from $9.2 billion a year earlier.

The slowdown in medical procedures that had boosted health plan earnings for two years may be ending, Aetna Inc. (AET) executives said last week, after reporting profit that missed estimates. Humana Chief Executive Officer Michael McCallister has also predicted a rebound in medical costs, along with declining profit margins, said Chris Rigg, a Susquehanna Financial Group analyst.

The company anticipated “significant upticks in utilization across its commercial and Medicare businesses,” Rigg said in an April 15 note to clients.

The insurer said 2012 earnings will be $7.55 to $7.75 a share, after providing a full-year outlook of $7.50 to $7.70 in February. Analysts had estimated $8.09.

Humana declined 1.5 percent to $87.82 in New York trading on April 27. The shares gained 16 in the 12 months before today. UnitedHealth, based in Minnetonka, Minnesota, is the leading Medicare insurer.

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