Humana Reports Second Quarter 2012 Financial Results

LOUISVILLE, Ky.--(BUSINESS WIRE)--

Humana Inc. (HUM) today reported diluted earnings per common share (EPS) for the quarter ended June 30, 2012 (2Q12) of $2.16, compared to $2.71 per share for the quarter ended June 30, 2011 (2Q11). For the six months ended June 30, 2012 (1H12) the company reported $3.65 in EPS compared to $4.57 for the six months ended June 30, 2011 (1H11).

Results for 2Q12 and 1H12 included $0.18 per share in expenses related to the previously-disclosed settlement of a litigation matter. Prior-year favorable medical claims reserve development for 2Q12 of $0.15 per share compared to $0.12 per share in 2Q11. Results for 1H12 and 1H11 included $0.18 per share and $0.44 per share, respectively, of prior-year favorable medical claims reserve development.

The company lowered EPS guidance for the year ending December 31, 2012 (FY12) to a range of $6.90 to $7.10 versus its previous estimate of $7.38 to $7.58. This reduction in FY12 EPS guidance primarily reflects higher-than-previously expected individual Medicare Advantage benefit ratios associated with new members and increased utilization for both new and existing members.

"Our companys strategy is sound, though we are disappointed by the need to lower our full-year earnings guidance," said Michael B. McCallister, Humanas Chairman of the Board and Chief Executive Officer. We believe the steps we are taking to address certain short-term operational challenges will put us back on the path for sustainable earnings growth moving forward."

Consolidated Highlights

Revenues 2Q12 consolidated revenues were $9.70 billion, an increase of $415 million, or 4 percent from $9.28 billion in 2Q11, with total premiums and services revenue of $9.60 billion up $407 million, or 4 percent compared to $9.19 billion in the prior years quarter. The increase in consolidated revenues was primarily due to related increases in the Retail and Employer Group segments driven by increases in average membership of the companys individual and group Medicare Advantage plans. These increases were partially offset by the companys new South Region TRICARE contract being accounted for as self-funded versus fully-insured for the previous contract. This new contract became effective on April 1, 2012.

1H12 consolidated revenues rose $1.44 billion, or 8 percent to $19.92 billion from $18.48 billion in 1H11 with total premiums and services revenue of $19.73 billion also up 8 percent, increasing $1.43 billion compared to $18.30 billion in the prior years period, driven primarily by the same factors as the second quarter year-over-year increase.

Benefit expenses The 2Q12 consolidated benefit ratio (benefit expenses as a percent of premiums) of 83.5 percent increased 140 basis points from 82.1 percent for the prior years quarter due primarily to higher year-over-year benefit ratios for the Retail and Employer Group segments. The consolidated benefit ratio for 1H12 of 84.5 percent increased by 150 basis points from the 1H11 consolidated benefit ratio of 83.0 percent primarily due to the same factors impacting the 2Q12 year-over-year comparison.

Operating costs The consolidated operating cost ratio (operating costs as a percent of total revenues less investment income) of 14.4 percent increased 140 basis points for 2Q12 compared to 13.0 percent in 2Q11. The increased year-over-year ratio primarily reflects the impact of the accounting for the companys new South Region TRICARE contract discussed above.

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Humana Reports Second Quarter 2012 Financial Results