Humana CEO compensation for 2009 jumps 26 percent

By Tom Murphy
AP Business Writer / March 9, 2010

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INDIANAPOLIS—Health insurer Humana Inc. paid CEO Michael B. McCallister 26 percent more last year than in 2008, largely because of a $1.8 million performance-related bonus.

McCallister, 57, received compensation valued at $6.5 million for 2009, according to an Associated Press analysis of a proxy statement filed Tuesday.

That included a salary of about $1 million, the bonus and stock and options valued at $3.4 million when they were granted.

McCallister's compensation also included $164,380 for retirement savings, matching charitable contributions, insurance and other perquisites plus $132,848 worth of personal use of company aircraft. McCallister, who also serves as president, has been CEO since 2000. Humana is based in Louisville, Ky.

Humana's profit grew 61 percent in 2009 compared to 2008, when the company's performance investment income fell and claim expenses from its stand-alone Medicare prescription drug plans rose.

In 2009, Humana earned $1.04 billion, or $6.15 per share, on $30.96 billion in revenue. Humana's earnings goal was $6 per share. When it fell short of a similar goal in 2008, McCallister and other top executives did not receive a bonus.

For 2009, Humana's commercial enrollment fell, but Medicare Advantage enrollment rose 5 percent. Premiums from that part of the business jumped 12 percent in the fourth quarter.

Medicare Advantage plans are government-sponsored, privately run health insurance plans for seniors. Humana also administers Medicaid coverage and provides coverage through the military's Tricare program.

The health insurer's stock climbed 18 percent last year, to close 2009 at $43.89. That fell short of the Standard and Poor's 500 index 23 percent hike.

Humana, like other health insurers, saw its stock price bottom out in early March 2009 as the broader market tanked. The shares slowly recovered the rest of the year, buffeted by the evolving health care overhaul debate in Congress.

Investors and analysts have worried that proposed new taxes and regulations could hurt the industry. Insurers also have taken heat from President Obama for imposing large hikes recently in individual premiums while remaining highly profitable.

Humana is the first of the five largest health insurers to report its 2009 executive compensation.

The Associated Press calculations of total pay include an executive's salary, bonus, incentives, perks, above-market returns on deferred compensation and the estimated value of stock options and awards granted during the year.

The calculations don't include changes in the present value of pension benefits, and they sometimes differ from the totals that companies list in the summary compensation table of proxy statements filed with the Securities and Exchange Commission.

The AP's calculation also excludes money realized when options are exercised. So the $11 million McCallister realized when he exercised options on more than 400,000 shares is not reflected in AP's tally of his pay.

Humana shares fell 4 cents to $47.91 in Tuesday afternoon trading.