Tags: Humana | CEO | Acquisitions | deal

Humana Makes Plans for 2013 With New CEO, Acquisitions

Monday, 05 November 2012 11:05 AM

U.S. health insurer Humana Inc. on Monday said it expects higher profits in 2013, has plans for a $500 million healthcare acquisition, and added President Bruce Broussard will take over as chief executive on Jan. 1.

Humana reported lower third-quarter profits but said it has stabilized costs in its Medicare Advantage program for older people. Last quarter, a surge in membership created a surprise increase in costs as payments for claims increased and the company missed its profit estimates.

This past quarter, its earnings beat expectations. The company said third-quarter net income was $426 million, or $2.62 per share, down from $445 million, or $2.67 per share a year ago. Revenue rose to $9.65 billion from $9.30 billion.

Wall Street had forecast third-quarter earnings of $2.05 per share according to Thomson Reuters I/B/E/S.

"Overall, we see (Humana's third quarter) as solid with a slight reduction in the company's retail (cost ratio) guidance for the year evidence that the first half of the year utilization increase has been contained," Leerink Swann analyst Jason Gurda said in a research note.

Humana, whose business largely focuses on Medicare healthcare for older people and Medicaid care for the poor, is positioning itself to benefit from healthcare reform. Under the Patient Protection and Affordable Care Act, more than 30 million people are expected to join the ranks of the insured, including in government healthcare programs for the elderly and poor.


Humana said it would buy Metropolitan Health Networks, a Florida-based healthcare organization that coordinates medical care for Medicare and Medicaid members. This is the largest of three acquisitions it announced on Monday, which together will add mildly to earnings in 2013.

It said it would pay $11.25 per share, or a bit less than $500 million based on 44.27 million shares outstanding. That is about a 4 percent premium compared with Friday's close of $10.85 per share.

It also said it is buying a minority stake in MCCI Holdings, a privately health medical services organization in Florida for an undisclosed amount.

In addition, Humana purchased Certify Data Systems, a technology company focusing on the electronic exchange of health records that serves hospital, physician and laboratory customers. The price was not disclosed.

Humana said it was moving forward with its previously stated plans to name Humana President Bruce Broussard to the CEO spot on Jan. 1. Broussard's move to CEO had been planned, but the timing was uncertain for him to replace Michael McCallister, the current chairman and CEO who is retiring. McCallister will be a non-executive chairman after the change.


Humana, whose profits fell in the second quarter because of the initial costs of a boost in Medicare Advantage members, said those issues have stabilized.

Its Medicare Advantage program had 1,911,800 members at the end of September, up 298,400 from a year earlier. That helped boost income from premiums even as its cost ratio was higher, the company said.

Humana also said prescription drug plan results and favorable medical claim reserves had helped earnings during the third quarter and were also behind a decision to raise its 2012 outlook, which it had cut in July. The new outlook is still below the numbers it had foreseen prior to that cut.

The company said it now expects 2012 earnings of $7.25 to $7.35 per share and 2013 earnings of $7.60 to $7.80 per share. It said revenue should be $39.0 billion to $39.5 billion for 2012, and $40.8 billion to $41.3 billion in 2013.

For 2012, Wall Street was expecting earnings of $7.14 per share and for 2013 it had forecast earnings of $7.87 per share, according to Thomson Reuters I/B/E/S.

© 2018 Thomson/Reuters. All rights reserved.

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U.S. health insurer Humana said it expects higher profits in 2013, has plans for a $500 million healthcare acquisition, and added President Bruce Broussard will take over as chief executive on Jan. 1.
Monday, 05 November 2012 11:05 AM
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