Health insurer Humana Inc. reported a 21 percent upswing in second-quarter profit Monday as another strong performance in its lucrative government segment, led by its growing Medicare Advantage business, was backed by a big improvement in its commercial sector.
Based on surging first-half results, the Louisville-based company raised its net income-per-share expectations for the full year to a range of $5.65 to $5.75, compared to a prior range of $5.55 to $5.65.
Analysts expect $5.71 per share, on average.
Michael B. McCallister, Humana's president and chief executive, said the second-quarter performance reflected strength in both the government and commercial segments.
Humana said its Medicare Advantage business posted double-digit enrollment growth in the quarter. Medicare Advantage plans are government-sponsored, privately run programs for seniors that offer comprehensive health coverage.
Meanwhile, the company's second-quarter consolidated benefit ratio — the percentage of premiums paid to cover medical claims — also improved from a year ago.
The company earned $340.1 million, or $2 per share, up from $281.8 million, or $1.67 per share, a year ago. Revenue rose 9.5 percent to $8.65 billion from $7.9 billion.
Analysts polled by Thomson Reuters expected $1.67 per share in net income on $8.61 billion in revenue.
Humana posted pretax adjusted income of $451.2 million in its vast government segment, up from $404.7 million a year ago. The company attributed the higher results to the rise in Medicare Advantage membership and lower administrative costs.
Its Medicare Advantage membership grew to 1.76 million as of June 30, up 17 percent from a year ago. That contributed to an 18 percent boost to $4.89 billion in Medicare Advantage premiums and administrative service fees.
Membership in Humana's stand-alone Medicare prescription drug plans fell 10 percent to 1.79 million people as of June 30. The company said the enrollment decline reflected its "competitive positionining" as it realigned the program's premium and benefit designs to correspond with past pharmacy claims. But premium revenue rose 10 percent to $700.2 million and the company increased premiums per member per month by about 18 percent.
Pretax earnings in the government segment reached $696.9 million in the first half of the year, up $126.1 million from the year-ago period.
Meanwhile, Humana's commercial segment reported pretax earnings of $115.2 million in the quarter, up sharply from $35.3 million a year ago. The company pinned the big upswing on pricing discipline, or setting premiums based on the underlying medical costs, as well as fewer medical claims and a continued focus on reducing administrative costs.
Like many other health insurers, Humana's commercial business has struggled amid declines in employer-sponsored insurance enrollment blamed on the sluggish economy.
Commercial segment medical membership stood at 3.28 million as of June 30, down 162,800 from a year ago. Premiums and administrative services fees for the segment fell by 2 percent to $1.84 billion in the quarter.
Military services membership totaled just over 3 million as of June 30, up about 1 percent from a year ago, but revenue fell slightly to $907.9 million.`
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