Humana profit jumps 21 percent

LOUISVILLE — Humana reported a 21 percent upswing in second-quarter profit Monday as the health insurer's strong performance in its vast government segment, led by its growing Medicare Advantage business, was backed by a big improvement in its commercial sector.

Based on solid 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 with a prior range of $5.55 to $5.65.

"We continue to experience strong operating performance in both our business segments and believe we are positioned to ensure that momentum carries on in the long term," Humana president and CEO Michael B. McCallister told analysts.

Humana said its lucrative 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.

Its Medicare Advantage membership grew 17 percent, to 1.76 million as of June 30. That contributed to an 18 percent boost, to $4.89 billion, in Medicare Advantage premiums and administrative service fees.

The company earned $340.1 million, or $2 a share, up from $281.8 million, or $1.67 a share, a year ago. Revenue rose 9.5 percent, to $8.65 billion from $7.9 billion.

The company's second-quarter results reflect a higher-than-expected favorable development in medical claims reserves — stemming from prior years and this year's first quarter — that amounted to $117 million, or 44 cents a share.

"Much of this favorable development was due to a lower level of health care services utilization, which has continued through the second quarter," Humana chief financial officer Jim Bloem told analysts.

Meanwhile, Humana's commercial segment reported quarterly pretax earnings of $115.2 million, 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.

"We're pleased with the turnaround and overall improvement in our commercial business this year, especially after a very challenging 2009," Bloem said.

Like many other 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.