Humana, the Louisville, Ky.-based managed-care company, said last week that it expects to take a $400 million to $500 million charge in the fourth quarter related to the sale of its devalued workers' compensation business.
The struggling HMO, in an effort to streamline business and reduce debt, has agreed to sell its PCA Property & Casualty Insurance unit to FolksAmerica Holding Co., New York, for $125 million in cash. Its up to $500 million write-off in the quarter ended Dec. 31, 1999, will stem from devalued goodwill and a $65 million pretax loss on the sale.
"The write-off is an admission by Humana that they overpaid for a number of recent acquisitions," said Todd Richter, healthcare services analyst for Banc of America Securities. "It's an inevitable part of their housecleaning and a small step in the right direction."
Humana bought PCA in 1997 as part of its acquisition of Physician Corporation of America. It's the latest of several managed-care companies, including WellPoint Health Networks, to exit the workers' compensation field in recent years.
The HMO also said last week that it's selling its individual Medicare supplemental business to United Teachers Associates Insurance of Austin, Texas, for an undisclosed sum. The unit serves 42,000 policyholders in 17 states.
Humana's fortunes have declined in the past year since the collapse of its proposed $5.5 billion merger with UnitedHealth Group.
Richter said he expects the company to earn $105.1 million, or 63 cents per share, in 1999, excluding charges. That's down from $213 million, or $1.27 per share, in 1998. Revenues should rise 3% to $9.9 billion during the same period, he said.