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Humana's Messy Mix [TheStreet.com]

Summary: Health insurance provider Humana Inc., which options trader Phil Davis calls a "sector mover," reported a more-than-tripling of Q3 profit as revenues increased 48% to $5.65 billion, but the results were short of expectations. Shares tumbled 6.2% to close at $61.74 after the report. The company reported net income of $159.2 million ($0.95/share) versus $46.8 million ($0.28/share) a year earlier, but the Street had forecast $0.97 EPS. The company attributed its dramatic quarterly profit growth to the success of Medicare Advantage, its comprehensive health care plan, which offers services additional to prescription drug coverage. Medicare Advantage has almost doubled in enrollment to nearly 1 million since Sept. 30, 2005. The higher enrollment drove up administrative services fees to $86.3 million from $66.1 million in the quarter while investment income reached $62.5 million from $38.8 million. New revenue from stand-alone drug plans for Medicare beneficiaries also played a role. Higher enrollment plus expansion into new geographical areas sent premiums up to $2.37 billion for the quarter, an increase of 82% over last year's $1.3 billion.
Related links: Jim Cramer's Mad Money In-Depth Stock Picks, Oct. 4
Potentially impacted stocks and ETFs: Humana Inc. (HUM) • iShares Dow Jones US Healthcare Provider (IHF), iShares Morningstar Mid Core Index (JKG)

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Source: Medicare Enrollment Triples Humana's Q3 Profit