) fourth-quarter 2012 operating earnings per share (EPS) came in
at $1.19. The result substantially surpassed the Zacks Consensus
Estimate of $1.07 but the lagged the year-ago EPS by a penny. The
year-over-year decline in earnings was attributable to lower
pre-tax income in the company's Retail, and Health and Well-Being
Services segments, which were nearly offset by lower loss at
AETNA INC-NEW (AET): Free Stock Analysis
HEALTH NET INC (HNT): Free Stock Analysis
HUMANA INC NEW (HUM): Free Stock Analysis
UNITEDHEALTH GP (UNH): Free Stock Analysis
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Revenues for the reported quarter climbed 6.0% year over year to
$9.56 billion, but lagged the Zacks Consensus Estimate of $9.76
billion. Revenues from premium increased 4.0% year over year to
$8.98 billion, while services revenue surged 46.2% to $475
million in the reported quarter. Additionally, investment income
grew 9.7% to $102 million in the fourth quarter of 2012.
Operating profit in 2012 was $6.99 per share, which fell short of
the Zacks Consensus Estimate of $7.52 as well as the year-ago
income of $7.69.
Including a benefit of 48 cents from the favorable prior-period
medical claims reserve development, net income came in at $7.47
in 2012, lower than $8.46 earned in 2011.
Revenue improved 6.2% year over year to $39.13 billion but fell
marginally short of the Zacks Consensus Estimate of $39.18
Total medical membership increased 8.1% year over year to 12.09
million at the end of Dec 31, 2012, while the total specialty
membership at the end of the Dec 31, 2012 increased 10.5% to 8.08
Consolidated benefit ratio, which reflects the percentage of
benefit expenses in premium revenues, increased 190 basis points
(bps) year over year to 83.7%, mainly due to a hike in the
benefit ratio of the Retail segment.
The consolidated operating cost ratio, which reflects the
percentage of operating costs in total revenues less investment
income, inched down 20 bps year over year to 17.5%, primarily as
a result of improvement in operating metric at the Retail and
Employer Group Segments, offset by the impact of the accounting
for the new South Region TRICARE contract in the company's Other
Quarterly Results by Segment
: The segment's pre-tax income plummeted 21.5% year over year to
$256 million due to higher benefit ratio, partially offset by
lower operating cost ratio.
Reported premiums and services revenue increased 15% to $6.11
billion in the reported quarter. The upside primarily resulted
from a 19% year-over-year increase in individual Medicare
The benefit ratio was 82.6%, up 360 bps year over year. However,
operating cost ratio decreased 160 bps to 13.1% in the reported
: The segment incurred pre-tax loss of $25 million, narrower than
the loss of $51 million incurred in the year-ago quarter, largely
driven by better operating cost ratio.
Meanwhile, reported premiums and services revenue increased 14%
to $2.63 billion, primarily on the back of higher group Medicare
Advantage membership. The benefit ratio was 87.1%, up 70 bps year
over year, whereas reported operating cost ratio was 16.7%, down
Health and Well-Being Services
: Pre-tax income for the segment decreased 12% year over year to
$75 million, due to transaction costs associated with the
closings of the Metropolitan and MCCI Holdings buy.
Reported services revenue also increased to $3.26 billion, up 13%
year over year, primarily due to growth in the pharmacy solutions
business. However, operating cost ratio increased 50 bps to 96.8%
in the reported quarter.
Cash from operations was $1.92 billion in 2012 compared with cash
flow of $2.08 billion in the year-ago quarter, mainly due to
reduced net income. Humana exited the quarter with cash and cash
equivalents of $1.31 billion and long-term debt of $2.61 billion.
Share Repurchase Update
During 2012, Humana spent $460 million to buyback 6.25 million
shares at an average price of $73.66 per share. As of Feb 4,
2013, the company had shares outstanding worth $640 million under
its share repurchase program, which will expire on Jun 30, 2014.
Humana completed the acquisition of Metropolitan Health Networks
Inc., a Florida-based medical services organization, for $850
million. The deal was announced in Nov 2012. The acquisition is
expected to moderately improve Humana's earnings from this year.
The company affirmed the EPS guidance of $7.60-$7.80 for 2013 and
expects first-quarter earnings in the range of $1.75-$1.85.
Consolidated revenue for 2013 is expected in the range of
$41-$41.5 billion. Additionally, cash flow from operations is in
the range of $1.8-$2.0 billion for 2013. Moreover, capital
expenditure is anticipated in the range of $425-$459 million in
Results at Few Other HMOs
UnitedHealth Group Inc.
) reported fourth-quarter 2012 earnings of $1.20 per share, in
line with the Zacks Consensus Estimate but increased 2.6% on a
Health Net Inc
) fourth-quarter 2012 operating income, which comprises combined
net earnings from the Western Region Operations and Government
Contracts segments, came in at 36 cents per share, declining
substantially from the year-ago level of 72 cents per share.
. 's (
) fourth-quarter 2012 earnings of 94 cents fell short of the
Zacks Consensus Estimate of 96 cents by a couple of pennies.
Earnings also decreased 3% year over year.
Humana currently carries a Zacks Rank #4 (Sell).