Humana CEO: Disappointed In 1Q, But Recovery On Track Dow Jones Newswires
By Dinah Wisenberg Brin PHILADELPHIA -- Humana Inc. (HUM), which fell 2 cents shy of Wall Street's first quarter earnings consensus estimate, conceded Wednesday the results were disappointing but said the big managed-health-care company continues to make progress.
Company officials told analysts Humana plans to exit or raise some premiums in six costly small-group markets where there's no health-plan membership overlap, and will decide next month whether to leave five high-cost Medicare markets in 2001.
These troubled markets slowed the pace of Humana's overall margin improvement, although commercial and Medicare premiums and large-group margins improved as planned, the company said.
Humana also is talking to regulators in Texas and California in an effort to accelerate small-group premium increases to keep up with medical costs there, officials said in a conference call.
"We're disappointed that the results of the quarter did not meet our own expectations as well as yours. However, we're keeping a perspective," Humana President and Chief Executive Michael B. McCallister said.
"We may not like the speed of our recovery but we do like the compelling evidence that our recovery is on track," he said.
Officials said higher-than-expected costs in the six troublesome non-overlap small-group markets were the big surprise.
Before the market opened Wednesday, Humana reported operating earnings of 13 cents a share, compared with operating income of 20 cents a share in the year-ago quarter, excluding special items. (With those items, the company posted a 10 cent loss in the first quarter of 1999.
The first quarter consensus estimate of a First Call/Thomson Financial survey of 17 analysts was 15 cents a share.
Humana shares recently traded at 7 1/16, down 15/16, or 11.7%, on volume of 500,000 compared with average daily volume of 635,400.
On the positive side, officials said, large-group premium yields were in the 10% to 11% range, up about 4% from the fourth quarter. The rise reflects Humana's aggressive pricing strategy, the company said.
Medicare premium yields rose to 6.2% in the first quarter from 4.6% in the fourth because of a new member-premium component for many Medicare members and a shift in customer mix to markets with higher Health Care Finance Administration reimbursement rates, the company said.
Medicare expenses, however, were higher than in the year-ago quarter and the fourth quarter because of the five markets where costs were significantly higher.
Membership in the small-group division declined nearly 6%, or by 94,000 people, from the fourth quarter in reaction to significant rate increases.