LOUISVILLE — Humana's fourth-quarter earnings fell 57 percent as operations were weighed down by expenses partly associated with its Medicare offerings and an expansion into health care delivery.
The result was lower income from Humana's crucial government segment and a bigger pretax loss in its commercial business when compared with a year ago.
But the Louisville-based managed care company also raised its earnings forecast for 2011.
Humana chairman and CEO Michael B. McCallister said Monday that robust sales at the end of last year increased its growth estimates for its Medicare Advantage and stand-alone Medicare prescription drug membership.
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"The 2011 Medicare selling season in November and December surpassed our expectations," McCallister said in touting the just-ended enrollment period during a conference call with industry analysts.
Humana now expects earnings in a range of $5.70 to $5.90 a share in 2011, up from $5.45 to $5.65 a share previously.
For the fourth quarter, Humana said net income fell to $107.3 million, or 63 cents a share, for the three months ended Dec. 31, down from $250.7 million, or $1.48 a share, a year earlier. Revenue rose 9.4 percent, to $8.35 billion.
Humana posted fourth-quarter pretax income of $286.3 million in its vast government segment, compared with $452.3 million a year ago. The drop was due primarily to expenses of $40 million associated with the change in the Medicare Advantage enrollment period, $37 million for the launch of a Humana-Wal-Mart prescription drug plan and $26.2 million for a contribution to its charitable arm.
The government segment's full-year pretax income of $1.65 billion beat the prior year's performance of $1.5 billion.
Meanwhile, Humana's commercial segment had a pretax loss of $111.8 million in the quarter, compared with a pretax loss of $53.6 million a year ago. The company incurred incremental expenses of $139 million associated with building claims reserves for its now-closed long-term care insurance business.
For the full year, Humana reported net income of $1.1 billion, or $6.47 a share, compared with just more than $1 billion, or $6.15 a share, in the prior year. Revenue for the year totaled nearly $33.9 billion, up 9.4 percent.