Humana CEO sees 2010 compensation slide 6 percent
Health insurer Humana Inc. paid Chairman and CEO Michael B. McCallister 6 percent less last year than in 2009, as a decline in option awards outweighed a bump up in the long-standing executive's performance-related bonus.
McCallister, 58, received 2010 compensation valued at $6.1 million from the Louisville, Ky., insurer, according to an Associated Press analysis of a proxy statement filed Monday.
That included a salary of about $1 million, a performance-related bonus totaling more than $2 million, and options awards valued at $2.5 million, which was down from about $3.4 million in 2009. The insurer makes the award after reviewing the stock programs at peer companies, and Humana said the award also reflects, in part, the executive's contribution to company performance.
McCallister's compensation also included a retirement plan contribution totaling $296,118, and $212,333 for the personal use of company aircraft, which was up 60 percent from 2009.
McCallister has worked for Humana since 1974 and served as CEO since 2000, longer than the leader of any other major health insurer. Last August, Humana also named him chairman, succeeding David A. Jones Jr. The CEO does not receive additional retainers for serving as board chairman and director.
His salary also stayed relatively flat compared to 2009 because he requested no increase.
But his bonus climbed from $1.79 million in 2009 as Humana recorded earnings per share of $6.47 in 2010, well above its target of $5.25 per share.
"The target was considered a challenging goal, based on the prospects of our government and commercial businesses, including the impact of health care reform, and an uncertain economy," the company said in its proxy.
Humana shares climbed 25 percent last year to close 2010 at $54.74. That increase easily trumped the Standard & Poor's 500 index, which rose 12.8 percent.
Health insurance stocks were buoyed in part by strong company performances. Health care use slowed more than insurers anticipated, and the flu season was mild.
Insurance stocks also have mostly climbed since last summer, as the health care overhaul started to unfold and investors saw minimal impact from the first few provisions of the massive law that aims to cover millions of uninsured people.
Humana's net income rose last year to $1.1 billion, compared with just over $1 billion, or $6.15 per share, in the prior year. Revenue rose more than 9 percent to $33.9 billion.
Enrollment in the insurer's lucrative Medicare Advantage business reached nearly 1.8 million by the end of 2010, up 17 percent from a year ago. Medicare Advantage plans are privately run versions of the government's Medicare program, which provides health coverage for the elderly and disabled. Subsidized by the government, the plans offer basic Medicare coverage topped with extras like vision or dental coverage or premiums lower than standard Medicare rates.
Humana also offers Medicaid and commercial coverage and insurance for military members and their families. It is the fifth largest health insurer and the first of a group that includes UnitedHealth Group Inc. and WellPoint Inc. to report its 2010 executive compensation.
The Associated Press executive compensation formula is designed to isolate the value the company's board placed on the executive's total compensation package during the last fiscal year. It includes salary, bonus, performance-related bonuses, 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, making the AP total different in most cases from the total reported by companies to the Securities and Exchange Commission.
Humana shares fell $1.72, or 2.7 percent, to $62.84 in afternoon trading.