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Health benefits company Humana (NYSE: HUM) upgraded its outlook for 2011 earnings on Monday based on better-than-expected drug plan sales in the fourth quarter.

For the fourth quarter, the Louisville, Kentucky-based company posted a 9% year-over-year increase in revenues to $8.35 billion, as total premium and admin fees grew due to a 17% rise in average membership for the company's Medicare Advantage plans.

Chairman and CEO Michael B. McCallister said:

Looking forward, better-than-expected sales at the end of 2010 increased our Medicare Advantage and PDP [prescription drug plan] membership growth estimates for 2011 and, together with continued improvements in our operations, enable us to raise 2011 EPS guidance this morning.

Indeed, the company said it now anticipates earnings per share in the range of $5.70 to $5.90, compared to the previous estimate of $5.45 to $5.65.

Medicare Advantage membership was roughly 1.76 million at December 31, 2010, an increase from 1.50 million a year earlier. January 2011 Medicare Advantage membership approximated 1.89 million, reflecting better-than-expected sales during the recently completed 2011 enrollment period, Humana said.

Prescription drug plan membership, on the other hand, fell year-over-year during the fourth quarter, but is expected to grow on sales of the newly launched Humana-Walmart plan, a low, uniform-member premium benefit.

The commercial segment medical membership declined to 3.12 million at year-end, a decrease of 9% from the year-ago quarter.

Fourth quarter earnings tumbled to $107.3 million, or $0.63 per diluted share, down from $250.7 million, or $1.48 per share, in the prior year period. The company said this was a result of $1.02 per share in incremental fourth quarter expenses, including costs from strengthening reserves for Humana's long-term care business, increased spending associated with a change in Medicare enrollment period, and costs related to the launch of the Humana-Walmart (NYSE:WMT) plan.

For the full year, however, Humana reported improved earnings of $6.47 per diluted share, compared to $6.15 in 2009, resulting in 58% higher cash flows from operations at $2.24 billion. Revenues for 2010 grew by 9% to $33.87 billion. At year-end, the company had cash and equivalents of $10.05 billion.

Humana has approximately 10.2 million medical members, 7.1 million specialty members, and operates more than 300 medical centers and 240 worksite medical facilities.

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Source: Humana Raises Earnings Outlook for 2011 on Higher Sales