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Health insurer Humana Inc posted a 39 per cent decline in profit on Monday, hurt by losses on investments, and forecast relatively tepid growth for its Medicare plans for seniors, sending shares down nearly four per cent.

Health insurer Humana Inc posted a 39 per cent decline in profit on Monday, hurt by losses on investments, and forecast relatively tepid growth for its Medicare plans for seniors, sending shares down nearly four per cent.

The large US provider of Medicare plans, whose results have been hurt this year by high costs for its drug benefit plans, forecast a rebound in 2009 profit that exceeded analyst estimates.

Stifel Nicolaus analyst Thomas Carroll said the 2009 earnings growth looked "very favorable," but that the Medicare enrollment projection fell below market expectations.

"It was somewhat taken for granted that strong Medicare enrollment growth would just be there, and clearly the company is not guiding in that direction," Carroll said.

Humana executives told analysts on a conference call that the competitive environment for Medicare was challenging for 2009, but that it was intent on maintaining a five per cent operating pre-tax profit margin for its Medicare business.

Medicare is a federal government program that contracts with companies, and investors are worried that the new administration will cut payments to health insurers and make the program less profitable.

Humana's third-quarter net income fell to $183 million, or $1.09 per share, compared with $302.4 million, or $1.78, a year ago.

Results included 40 cents a share in losses from investments and sales of distressed securities.

Excluding those losses, earnings were $1.49 per share, two cents ahead of the average estimate of analysts, according to Reuters Estimates.

Health-insurer stocks, already down this year due to a series of profit warnings, have been pressured in recent weeks during the credit crisis as investors worry about potential sizable write-downs and the strength of the companies' balance sheets.

Humana in March severely cut its 2008 profit forecast, blaming high costs in Medicare drug benefit plans. It maintained the problems were correctable and that its growth trajectory would bounce back in 2009.

Louisville, Kentucky-based Humana forecast 2009 earnings per share of $5.90 to $6.10, implying growth of more than 50 percent, according to Goldman's Borsch. The average Reuters estimate was $5.87 a share.

The company expects membership in its full-service Medicare Advantage plans to grow by 25,000 to 75,000 by the end of 2009, compared to expected growth of 300,000 members this year. It expects membership in its commercial plans for employers to be little changed.

Stifel's Carroll had expected Medicare Advantage growth of 200,000 members for next year.

The company's benefit expense ratio, a key measure of medical costs as a percentage of premium revenues, worsened to 83.1 per cent in the quarter from 81.3 per cent a year ago, reflecting its Medicare drug-plan woes. But the result came in better than the 83.7 per cent expected by Goldman Sachs analyst Matthew Borsch.

"Operating metrics look very solid," Borsch said in a research note of the third-quarter results.

Revenues rose 13 percent to $7.15 billion.

Operating expenses at the company shot up more than 17 per cent to $6.85 billion.

The company cut its fourth-quarter forecast to $1.00 to $1.10 per share, hurt by ten cents per share in lower investment income.

Shares of Humana fell $1.36, or 3.7 per cent, to $34.91 in morning trade on the New York Stock Exchange. The shares have fallen some 54 per cent this year, less than a 57 percent drop for the S&P Managed Health Care index .

(Reporting by Lewis Krauskopf; additional reporting by Shradhha Sharma in Bangalore; editing by Derek Caney, Dave Zimmerman)