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Humana issues 1Q warning
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April 8, 1999: 10:35 a.m. ET
HMO expects profit to come in at least 10 cents lower than estimates
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NEW YORK (CNNfn) - Health-care provider Humana Inc. warned Wall Street Thursday that its first-quarter profit will be far short of expectations, immediately sending its share price plummeting.
The managed-care company said operating profit for the quarter will be 20 cents to 24 cents per share. That compares with a consensus estimate of 34 cents predicted by First Call.
Shares of Humana (HUM) were trading at 10-15/16 Thursday morning, down 5-1/4.
The HMO said it will record $90 million in additional medical claims expenses during the first quarter, including $50 million more in premium costs in its recently renegotiated contract with Columbia/HCA Healthcare Corp. (COL).
Humana said the rest of the $90 million in expenses includes $35 million related to strengthening its medical claim reserves and $5 million for a payment to Columbia to resolve outstanding contract issues.
"Although its immediate financial impact is adverse, the contract represents a new cost factor which we can address in our upcoming premium pricing actions," Gregory H. Wolf, Humana's president and CEO, said. He added that "notwithstanding the hard decisions we made this quarter, our business is fundamentally sound."
For the fourth quarter, Humana earned $57 million, or 34 cents a share, up from $48 million, or 29 cents, a year earlier.
The Louisville, Ky.-based company is one of the largest HMOs in the country, with 6.2 million members. The company expects to report first-quarter earnings May 13. 
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Humana
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