Health insurer Humana Inc. posted a higher-than-expected second-quarter profit, helped by growth in its Medicare plans for senior citizens, and it raised its full-year earnings forecast by about 11 percent.
The company said it would spend less than it previously expected on medical costs as a percent of revenue, helping boost its 2011 profit projection, which was tempered by planned investments in its Medicare business. Shares rose 5.5 percent in premarket trading.
"This was a strong quarter for Humana and seems to have allowed the company to spend more in (the second half) to help bolster its performance in 2012 as well," Wells Fargo analyst Peter Costa said in a research note.
Health insurers have generally topped expectations this quarter but not to the extent as in the first quarter, throwing some cold water on the strong run for the companies' share prices this year.
Humana's significant earnings beat could provide a lift for the companies' shares, which were hit on Friday after Coventry Health Care Inc failed to lift its forecast in line with Wall Street's target and Medicaid specialist Amerigroup Corp badly missed second-quarter expectations.
Health insurers have benefited from Americans postponing doctor visits and medical procedures in the weak economy, lowering the companies' claims. Investors have also shaken off their worst fears about last year's healthcare overhaul undermining the industry's business.
Humana's second-quarter net income rose to $460.3 million, or $2.71 a share, from $340.1 million, or $2 a share, a year ago.
Analysts on average expected $2.06 per share, according to Thomson Reuters I/B/E/S.
Total revenue rose 8 percent to $9.28 billion. Analysts looked for $9.35 billion.
Humana's enrollment in its Medicare Advantage plans rose 10 percent to 1.6 million at the end of June.
The company raised its full-year earnings outlook to a range of $7.50 to $7.60 per share, up from its prior view of $6.70 to $6.90. Analysts have been looking for $7.07.
For the third quarter, Humana expects earnings in a range of $1.95 to $2.05 per share. Analysts had looked for $1.96.
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