Humana 1Q Profit Lifted Amid Stronger Demand for Services

Humana (NYSE:HUM) said on Monday that its profit climbed 22% in the first-quarter, led by growth in its services segments and lower medical costs.

The Louisville-based health insurer posted net income of $315.2 million, or $1.86 a share, compared with $258.7 million, or $1.52 a share, in the same quarter last year, matching average analyst estimates polled by Thomson Reuters.

Revenue for the three-months ended March 31 was $9.19 billion, up 9.7% from $8.38 billion a year ago, led by a 151% improvement in its services segment. The results narrowly beat the Street’s view of $9.14 billion.

“Our favorable first-quarter results reflect operational discipline in our core businesses and a growing focus on a broader array of businesses designed to help people achieve lifelong well-being,” Humana CEO Michael McCallister said in a statement. “Humana’s financial strength allows us to begin a more aggressive capital deployment program while still fully supporting the continued execution of our corporate strategy overall.”

Cushioning the results were lower medical costs, a trend seen across the industry, as consumers used fewer healthcare services in 2010. The costs, though, are expected to return to normal levels this year.

The company last week raised its fiscal earnings view to a range of $6.70 to $6.90 a share, ahead of its earlier forecast of $5.95 to $6.15. Analysts are expecting earnings of $7.03 a share.

The increase marks its second this year, following a successful appeal of a decision by the U.S. Defense Department’s Tricare health system network that re-awarded Humana a multi-billion-dollar contract that had been given to rival UnitedHealth Group (NYSE:UNH) in 2009.

Sales for the quarter were helped by a 10% increase in total premiums and services revenue, a reflection of improved performance of its retail and health and well-being services segments led by an 11% increase in average membership in its Medicare Advantage plans, partially offset by a drop in its employer group revenues.

Humana saw higher across-the-board memberships, led by its individual stand-alone prescription drug plans, HumanaOne medical and individual specialty products.