Humana, WellPoint Post Lower Profit In Q2

(RTTNews) - Health insurers Humana Inc. (HUM) and WellPoint, Inc. (WLP) reported Wednesday lower profit in their second quarter, despite significant revenue growth with improved premiums and medical memberships. Humana's earnings met analysts' view, while WellPoint's adjusted earnings topped estimates. For fiscal 2014, Humana backed earnings forecast, while WellPoint lifted its view.

Humana's net income for the second quarter fell 18.1 percent to $344 million from $420 million in the prior-year period. Earnings per share slipped 16.7 percent to $2.19, from $2.63 reported a year before.

On average, 22 analysts polled by Thomson Reuters expected the company to report earnings of $2.19 per share for the quarter. Analysts' estimates typically exclude special items. The company attributed the decline in profit mainly to investments in health care exchanges and state-based contracts and higher specialty drug costs associated with a new treatment of Hepatitis C, partially offset by membership growth.

The company's consolidated revenues climbed 18.4 percent to $12.22 billion. Wall Street expected revenues of $11.94 billion.

Total premiums and services revenue increased 18.6 percent driven mainly by 16.4 percent higher medical membership in the Retail segment and 15.1 percent higher group Medicare Advantage membership in the Employer Group division.

The consolidated benefit ratio, i.e., benefits expense as a percent of premiums, was 83.1 percent, down 30 basis points from lat year.

WellPoint's net income for the second quarter declined 8.6 percent to $731.1 million from $800.1 million last year. Earnings per share dropped 3 percent to $2.56 from prior year's $2.64, reflecting a 5.7 percent decline in share count.

Adjusted net income was $2.44 per share, compared to $2.60 per share in the prior year. Analysts expected earnings per share of $2.26 for the quarter.

Quarterly total revenues, however, increased 4.4 percent to $18.47 billion with strong contributions from both of its business segments. Total operating revenue grew 4.2 percent year-over-year to $18.23 billion. Eighteen analysts estimated $18.23 billion in revenues.

Premiums increased 3.5 percent to $17.07 billion. Medical enrollment totaled approximately 37.3 million members as of June 30, 2014, an increase of 4.5 percent from the prior year.

The benefit expense ratio was 82.7 percent, a decrease of 120 basis points from the prior year, largely driven by an improvement in the Commercial and Specialty Business.

Looking ahead for fiscal 2014, Humana continues to expect earnings per share to be in the range of $7.25 to $7.75, and sees revenues of $47 billion to $49 billion. Analysts project annual earnings per share of $7.84, on revenues of $48.03 billion.

For fiscal 2014, WellPoint now expects net income to exceed $8.81 per share, and adjusted net income to be greater than $8.60 per share, reflecting stronger enrollment and continued cost controls. Analysts project annual earnings of $8.58 per share. Annual operating revenue is likely to be more than $73.5 billion, while analysts estimate $73.45 billion for 2014.

The company previously projected reported earnings to be greater than $8.50 per share, and adjusted earnings per share to be greater than $8.40, with operating revenue greater than $73.5 billion.

WellPoint now expects medical enrollment to grow by 1.4 to 1.5 million members for the full year 2014.

WellPoint on Tuesday declared a third-quarter 2014 dividend to shareholders of $0.4375 per share. On an annualized basis, this equates to a dividend of $1.75 per share.

In pre-market activity, Humana shares are gaining $2.48 or 1.94 percent, and trading at $130.

On the NYSE, WellPoint shares lost 2.61 percent on Tuesday, and settled at $112.55.