Higher spending drops Humana's Q1 profits by 21%

Humana's first quarter profits fell 21 percent compared to its first quarter last year, due to higher claims and spending on its growing Medicare Advantage business, according to The Wall Street Journal.

First quarter net income was $248 million, or $1.49 per share, down from $315, or $1.86 per share, a year earlier, according to Humana's statement released April 30.  

The numbers actually are higher than what Humana expected; the insurer had anticipated earnings per share in Q1 to be between $1.35 and $1.45. It raised its earnings per share guidance for the year up to $7.55 to $7.75 per share, from its prior forecast of $7.50 to $7.70 per share.

"Our compelling senior value proposition and favorable demographics have made Humana one of the fastest growing Medicare Advantage and PDP companies in the nation," Humana Chairman and CEO Michael B. McCallister said. "This growth trajectory has contributed solidly to our results for the first quarter and our continued confidence in our projected results for the full year."

Humana's Medicare Advantage membership in the first quarter of 2012 rose 16 percent; stand-alone PDP membership rose 12 percent.

However, the numbers were lower than what Wall Street expected; the insurer's shares fell more than 4 percent in premarket trading, according to the Associated Press. That may be because Humana's profits last quarter soared 86 percent, in large part due to the membership increase in its Medicare Advantage products.  

Humana is not the only big gun reporting losses in the first quarter of this year. Aetna's earnings dropped 13 percent because of higher claims and administrative costs, while WellPoint's were down almost 8 percent due to rising expenses and decreased enrollment. 

To learn more:
- here's Humana's statement
- read the AP article
- check out the WSJ article (registration required)

Related Articles:
Aetna's Q1 earnings dive 13% with higher claims costs
Humana's Q4 profits up 86% as Medicare Advantage enrollment rises
WellPoint profits drop 8 percent as enrollment falls, expenses rise