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Humana Forecasts 2012 Earnings Lower Than Analyst Estimates

Updated on

Feb. 6 (Bloomberg) -- Humana Inc., the second-largest Medicare provider, raised its 2012 earnings forecast less than analysts estimated as more Americans were expected to seek medical care in a recovering economy.

Humana said 2012 profit may be $7.50 to $7.70 a share, compared with the analysts’ average estimate of $8.05. Fourth-quarter earnings excluding one-time items were $1.12, the Louisville, Kentucky-based insurer said in a statement today. The result missed by 9 cents the average of 17 analyst estimates compiled by Bloomberg.

About 40,000 more Medicare Advantage members may be added in 2012 than expected, Humana said. The jump may help offset an anticipated gain in demand for medical services. UnitedHealth Group Inc. and WellPoint Inc., the largest health insurers, also have predicted costs would rise, expecting Americans to return to typical levels of medical spending.

Humana’s “guidance probably allows for higher medical costs,” said Dave Shove, an analyst with Bank of Montreal in New York, in a telephone interview. “I expect that these numbers are not as robust as many had hoped.”

Humana fell 5.4 percent to $85.25 at 4:15 p.m. New York time. The shares have gained 41 percent in the last 12 months.

Looking to Expand

The previous 2012 profit forecast had been $7.40 to $7.60, Humana said. Fourth-quarter net income surged 85 percent to $199 million, or $1.20 a share, from $107 million, or 57 cents, the company said.

Humana is looking to expand in the U.S. government program for the elderly and disabled as the health-care law puts pressure on how much insurers can be reimbursed for care, Chief Executive Officer Michael McCallister said last month. Increasing the size of Humana’s Medicare business, which generated 64 percent of 2010 revenue, would help with costs, McCallister said.

Humana owns more than 300 clinics in 40 states after acquiring Concentra Inc. in 2010 for $790 million. Under McCallister, the company also has bought small insurance plans to increase Humana’s reach in Medicare. UnitedHealth serves the most Medicare members.

McCallister, Humana’s CEO since 2000, is planning to retire in 2013. He will be replaced by Bruce Broussard, who is Humana’s president and was previously CEO of McKesson Specialty Health, a $9 billion subsidiary of McKesson Corp. formed in the merger of McKesson Specialty and U.S. Oncology in December 2010.

Related News and Information: Humana financial analysis: HUM US <Equity> FA <GO> Health Insurer stock index: S5MANH <Index> MRR1 <GO> Health-care stock index: S5HLTH <Index> MRR <GO> Bloomberg Industries analysis: {BI HMOI <GO>}

To contact the reporter on this story: Sarah Frier in New York at sfrier1@bloomberg.net

To contact the editor responsible for this story: Reg Gale at rgale5@bloomberg.net

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