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Humana Reports First Quarter Financial Results
Business Wire, April 28, 2008
* 1Q08 diluted earnings per common share of $0.47
* Revenues and net income up 12 percent over prior year's quarter
* Medicare Advantage net membership gains effective through April 2008 of 153,000
* PDP benefit expense for 1Q08 and full year 2008 estimates in line with March 12, 2008 guidance
* Commercial Segment benefit expense ratio improves 260 basis points versus prior year
* Improvement in claims cycle time impacts days in claims payable and operating cash flow
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LOUISVILLE, Ky. -- Humana Inc. (NYSE: HUM) today reported financial results for the quarter ended March 31, 2008 (1Q08) including diluted earnings per common share (EPS) of $0.47, ahead of management's previous guidance for EPS of $0.44 to $0.46, primarily due to a lower-than-anticipated effective tax rate. The company earned $0.42 per share for the quarter ended March 31, 2007 (1Q07).
The company also announced that it had raised its EPS projection for the year ending December 31, 2008 to a range of $4.10 to $4.35 to reflect a lower diluted share count and effective tax rate for the full year.
"Our Medicare Advantage and Commercial progress was particularly strong in the first quarter," said Michael B. McCallister, the company's president and chief executive officer. "Our first quarter earnings, and our success in achieving targeted Medicare Advantage membership gains year to date, give us confidence that we'll continue to see solid improvement in all non-Prescription Drug Plan (PDP) lines of business through 2008 and beyond. We expect to return our stand-alone PDPs to profitability in 2009."
Revenues - 1Q08 consolidated revenues rose 12 percent to $6.96 billion from $6.20 billion in 1Q07, with total premium and administrative services fees also up 12 percent compared to the prior year's quarter. This year-over-year increase was primarily driven by higher average Medicare Advantage membership in 1Q08 versus 1Q07.
Benefit expenses - The 1Q08 consolidated benefits ratio (benefit expenses as a percent of premium revenues) of 86.7 percent was 10 basis points lower than the 1Q07 benefit ratio of 86.8 percent, the combined result of a 70 basis point increase in the Government Segment benefits ratio and a 260 basis point decline in the Commercial Segment benefits ratio.
Selling, general, & administrative (SG&A) expenses - The 1Q08 consolidated SG&A expense ratio (SG&A expenses as a percent of premiums, administrative services fees and other revenue) increased 40 basis points to 13.8 percent for 1Q08 from 13.4 percent in 1Q07. The year-over-year increase was primarily the result of the acquisition of two specialty products companies in the fourth quarter of 2007.
Government Segment Results
Pretax results:
* As expected, the Government Segment experienced a pretax loss of $3.2 million in 1Q08 compared to pretax income of $17.9 millionin 1Q07. The year-over-year decline in operating performance primarily reflected approximately $100 million in incremental expense for 1Q08 associated with the company's stand-alone PDPs, as described in the company's news release on March 12, 2008. Also as expected, that incremental expense was substantially offset by improved operating performance in the company's Medicare Advantage and military services businesses.
Enrollment:
* Medicare Advantage membership grew to 1,267,700 at March 31, 2008, an increase of 154,300, or 14 percent, from March 31, 2007 and up 124,700, or 11 percent versus December 31, 2007. Approximately 45 percent of the net Medicare Advantage membership increase year over year was in the company's Medicare Advantage PPO products.
* Membership in the company's stand-alone PDPs totaled 3,150,200 at March 31, 2008 compared to 3,473,700 at March 31, 2007 and 3,442,000 at December 31, 2007.
* April 2008 membership in the company's Medicare Advantage plans approximated 1,296,000.
* April 2008 Medicare stand-alone PDP membership approximated 3,130,000.
Premiums and administrative services fees:
* Medicare Advantage premiums of $3.17 billion in 1Q08 increased 15 percent compared to $2.74 billion in 1Q07, primarily the result of a 14 percent increase in average membership.
* Medicare stand-alone PDP premiums of $875.0 million in 1Q08 decreased 3 percent compared to $906.4 million in 1Q07, primarily the result of a 10 percent decline in average membership versus that for 1Q07.
* Military services premiums and administrative services fees during 1Q08 increased $89.7 million to $831.2 million compared to $741.5 million in 1Q07.
Benefit Expenses:
* The Government Segment benefits ratio increased 70 basis points to 90.0 percent in 1Q08 compared to 89.3 percent in the prior year's quarter. Improved operating performance year over year in the company's Medicare Advantage and military services businesses was more than offset by the combined effect of significantly higher stand-alone PDP claims, the extra day for leap year, and a minimal impact from the 1Q08 flu season.
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