Maybe Obamacare won't be so bad after all as health insurance provider Humana (HUM -0.14%) says it's expecting 2013 to be a very good year, certainly better than what it thought just three months ago, because after a strong first quarter, it's raising its full-year guidance.
Humana says that in the first-quarter earnings release it issued this morning, profits came in at $2.95 per share, almost double the $1.49 it recorded in the year-ago period and even well ahead of management's own expectations of $1.75 to $1.85 per share.
Of course, the results did include the beneficial effect of having settled contract claims with the Defense Department related to previously disclosed litigation, as well as a delay in the implementation of sequestration for the company's Medicare business. As management hadn't anticipated either outcome when it provided its guidance before, both items resulted in a beneficial effect of approximately $66 million on a pre-tax basis, or $0.26 per share.
While noting that there remain Medicare funding challenges ahead, which makes forecasting earnings growth for 2014 difficult, Humana President and CEO Bruce D. Broussard said: "Our better-than-expected earnings this quarter are a testament to the benefits of our focus on further developing our new member and chronic care clinical programs -- key elements of our integrated care delivery model. We expect this model will allow us to maintain and improve the economic value proposition we provide, which we believe will enable long-term earnings growth."
As a result, the health insurer now anticipates that earnings for the full year will be in the range of $8.40 to $8.60 per share, better than management's previous guidance of $7.60 to $7.80. This new outlook reflects the strong first-quarter results partially offset by higher-than-previously projected investment spending for Humana's integrated care delivery model and health-care exchanges during the latter half of 2013. So Obamacare will have an impact after all.
Concurrent with the earnings release, though, Humana's board of directors replaced its current share repurchase program of which there was still $557 million outstanding on it, with a new $1 billion buyback program.
