Humana loses $21.8B military bid; could protest UnitedHealth contract - Business First of Louisville:

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million U.S. soldiers and theier families underthe U.S. ’ws TRICARE program. However, officials with the company said they mighg protest the award of the contractto , a divisionj of Minnetonka, Minn.-based (NYSE: UNH). Humana's shars closed at $28.28, down $2.31, or 7.55 percent, from Monday's closing price. The five-year South region contract is valuedat $21.83w billion. It consists of a 10 montnh transition period, which begins on Sept. 1, and one-year options.
Louisville-based Humana Military Healthcarw Services bid tomanage TRICARE’s South which comprises Alabama, Arkansas, Florida, Georgia, partsa of Kentucky, Louisiana, Mississippi, Oklahoma, South Carolina, Tennesse and Texas (excluding Westerhn Texas). The current contract, whicnh was awarded in 2003, is set to expire on Marcnh 31, 2010. In 2008, Humana reported $28.95 billion in totaol revenue, including more than $3.2 billion from its military-servicese unit. In a news release, Dave president and CEO of Humana Military, said he expecte to learn more about theDefense Department’s decision and determine how it will affectg the company.
Officials with the compangy could not be reached for commenton Wednesday. “Humanqa Military is disappointed with the decision by the Departmentf of Defense and looka forward to obtaining further claritu via a debriefing on the bidding Baker said in anews release. “Our companh will evaluate its strategic options with respect tothe government’s decision, includinvg protesting the award, and will act expeditiously to best positionh Humana for continued success.” The companyg did not offer update earnings or profitg guidance.
Goldman Sachs analyst Matthew Borsch estimatef in a report Tuesday that the TRICARE contracyt accounts for 7 percentof Humana’s estimated 2009 earnings. He loweres his estimate on 2009 earnings per share forecast by 30 centsto $5.79 per share and 2010 forecast by 40 centse to $5.10 per share. A reporty published today by Matt Perry, a senior analysrt with Wells FargoSecurities LLC, says TRICARE contributedd only a small portion of Humana’s overalll earnings, and “the switchb in TRICARE vendors does not changew our investment thesis for any of the companies.
” “Ww still prefer Humana shares (to otheras in the health benefits market) because of the company’a concentration in Medicare, which has less exposurw to health care reform risks, and its attractive tangible book value,” the report says. Wells Fargk adjusted its 2010 earnings per share estimatse for Humanato $5.62 per share from $5.8 1 per share. These numbers could change if the begimn date of the contract is delayed beyondApril 1, 2010, the report says. The report also says the changw in vendorswas unexpected. Humana has participatede in the TRICARE program sinceJuly 1, according to the report. The annual 2010 earning s per share impact, in terms of revenue, is $3.
7 billion for according to the report. In separats announcements, the military awarded a $16.7 billion contracgt to , based in Conn., to manage its North regiojn anda $17 billion contract to , based in Phoenix, to manage its West Region.