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Humana profit misses but shares rise on 2015 outlook


(Reuters) — U.S. health insurer Humana Inc. reported a lower than expected fourth-quarter profit as it spent more on new hepatitis C treatments and flu season expenses increased, but it said those and other costs are behind it and predicted a better 2015.

Humana shares, which were off slightly before a company conference call began, rose 1.9% to $151.39 in mid-morning New York Stock Exchange trading.

Humana, which has a large Medicare Advantage business, said that so far in 2015 enrollment in individual plans sold on the public exchanges is within expectations and in line with premium pricing, an improvement from 2014.

"I think they convinced everyone they are very comfortable about the pricing and health risk they are seeing on the public exchanges," Leerink Partners analyst Ana Gupte said on a conference call.

The company also said its 2015 financial outlook had not factored in a recently negotiated discount on pricey hepatitis C treatments from Gilead Inc. On Tuesday, Gilead said it had negotiated payer contracts with discounts of more than 40%, higher than some investors had been estimating. Hepatitis C costs as well as investments in new programs weighed on 2014 profits, Humana executives said during a conference call with investors.

In addition, costs related to the flu cut into profits in the fourth quarter but flu cases have since fallen from their peak and medical costs are more normal, its chief financial officer Brian Kane said.

The medical benefit ratio in the company's retail unit, its largest, increased to 83.3% in the fourth quarter from 82.7% a year earlier.

The ratio is the amount an insurer spends on medical claims compared with its income from premiums.

Humana's net income rose to $145 million, or 94 cents per share, in the quarter ended Dec. 31 compared with a loss of $30 million, or 19 cents per share, a year earlier, when it set aside funds for long-term care policies that it no longer sells.

Excluding items, the company earned $1.09 per share, below average analysts' estimate of $1.16 per share, according to Thomson Reuters I/B/E/S.

Revenue rose 21% to $12.33 billion, below the average estimate of $12.40 billion.

It expects 2015 earnings of $8.87 per share and revenue of $54.5 billion to $55 billion.

The company reiterated its forecast of a 13% rise in Medicare Advantage membership for 2015.

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