NEW YORK: Health insurer Humana has reported a drop in fourth-quarter income and said it was experiencing the worst flu season in a decade that would cost $75 million for added healthcare services such as hospitalisations.
Its profits beat analyst expectations, however, and it gave a better-than-expected first quarter outlook. Shares rose $3.12, or 4.1 per cent, to $78.47 in early trading. The company said net income had fallen to $192 million, or $1.19 a share, from $199 million, or $1.20 per share, a year earlier.
Analysts on average had expected earnings of $1.06 per share, according to Thomson Reuters. Fourth-quarter revenue rose 6 per cent to $9.56 billion from $9.06 billion, missing the analysts’ average estimate of $9.73 billion.
Humana said it expected first-quarter earnings of $1.75 to $1.85 per share, compared with analysts’ expectations of $1.53.
“It looks like they are starting the year stronger than expected,” Leerink Swann analyst Jason Gurda said, noting the above consensus outlook for the first quarter despite the company’s anticipated high 2013 flu costs. That was likely helping shares, he said.
Part of the fourth-quarter earnings beat was due to a decline in the company’s tax rate from the year-earlier quarter. The company also said an increase for members in some plans enabled it to be more cost efficient.
Costs associated with the flu peaked in the middle of January, Chief Financial Officer Jim Bloem said during a conference call. Humana said it spent about $25 million, or 10 cents per share, during the fourth quarter and it expects to spend another $50 million, or 20 cents per share. Insurers’ finances can be hurt by the flu because of an increase in claims related to visits to doctors and hospitals.