Healthcare insurer, Humana Inc. (NYSE: HUM) on Monday reported a drop in fiscal third-quarter earnings as insurance claims increased sharply during the period; however, the company upwardly revised its outlook on fiscal 2012 earnings even as it agreed to acquire Metropolitan Health Networks in deal valued at $850 million.
For the fiscal third quarter which ended on September 30, the company reported net profit of $426 million or $2.62 a share, compared to net earnings of $ 445 million or $2.67 a share, in the year earlier quarter. However, the actual earnings beat company’s own initial estimates of $2.00 to $ 2.10 per share. Analysts polled by Thomson Reuters had forecasted earnings of $2.05 a share.
The company said growth in earnings, to some extent, could be attributed to the fact that certain costs were shifted in the fourth quarter.
Meanwhile, thanks to higher premiums collected, revenue leaped 3.8% to $9.65 million from $9.3 million, in the corresponding period of last year. Nevertheless, revenue missed Street’s forecast of $9.86 million.
Bruce Broussard, who has been designated as the next Chief Executive following Michael McCallister’s retirement from the company in January, said in a statement, “Our third-quarter results demonstrate that the issues which surfaced in the second quarter have stabilized,”
The insurer also announced that it has agreed to acquire Metropolitan Health Networks for $11.25 a share. The deal is expected to bolster Humana’s Medicare Advantage and Medicaid programs.
By the end of September, Humana’s Medicare Advantage program included over 1.9 million members–an increase of nearly 298,400 members from the year earlier quarter.
Human also raised its outlook on fiscal 2012 earnings. The company is now expecting earnings to fall within the range of $7.25 to $7.35 a share, up from its initial estimations of $6.90 to $7.10 a share. Potential improvements in earnings are attributed to stronger medical claims reserves and better stand –alone prescription drug plan results. Analysts’ consensual estimate on fiscal 2012 earnings is for $7.14 a share.
For fiscal 2013, the insurer is expecting earnings to come within the range of $ 7.60 to $ 7.80 a share, which is lower than Street’s expectations of $7.87 a share.
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