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Dear Mr. Berko:

Dear L.P.:

Lots of insecure and impotent men lie about the number of shares they own, and the larger their lie, the more serious their problem. But don’t challenge him, because you have nothing to gain. Then there’s always the probability that he may not be spoofing you, and it’s never pleasant to wipe egg from one’s face — I know!

Humana Inc. (HUM-$72.58) is one of the nation’s largest managed health insurance companies, with 12 million members in its medical benefits programs and 2.5 million members in its specialty insurance programs. Those programs include Medicare, which provides benefits for seniors over 65 as well as disabled persons under 65; TRICARE, which provides health care to dependents of active military personnel plus benefits to retired military personnel and their dependents; and Medicaid, which delivers health-care services primarily to low-income Americans. And then there’s HUM’s commercial business, which consists of a topsy-turvy labyrinth of individual, group, psychiatric and geriatric policies including dental, life and short-term disability.

Some observers believe that HUM might even be considering health insurance for dogs and cats. However, before this receives regulatory approval, Congress wants to be certain that HUM’s human customers won’t be required to use the same medical personnel as their pets. But considering the IQ of the average congressperson, that requirement may be difficult to legislate.

Ten years ago, HUM’s earnings were in the deep-blue dumps but beginning in 2002, HUM began rolling on all 18 wheels and profits started to soar. They look as if they might continue soaring. CIBC World Markets, Credit Suisse, Standard & Poor’s, Atlantis Research, Goldman Sachs, Reuters, Market Edge, Smith Barney, S.G. Cowen, Salomon, Prudential and others believe Humana is a solid buy. And why not? The conservative Value Line Investment Survey reckons that HUM will continue its meteoric earnings climb to $7 a share in the coming three years and suggests that HUM could trade above $120 at that time. This is an impressive company.

In 2007, after billing $25 billion in premiums and after paying its 23,000 employees billions of dollars in salaries, after paying billions of dollars for lawyers, accountants, interest, printing, advertising and sales commissions, after spending billions of dollars for rent, phone bills, heating and air conditioning, computers, copiers, shredders, desks, fax machines, tables, bookcases, metal file cabinets, chairs, pens, pencils, stationery, copy paper, staples, paper clips, interest costs, and after paying its four top executives salaries and bonuses of $46 million and after paying negotiated fees to doctors and hospitals — all from your premium dollars — this impressive health insurer earned nearly a billion wonderful, beautiful dollars. That’s the equivalent of 1,000 average-size suitcases stuffed with $100 bills, each weighing 17 pounds.

Just imagine the hundreds of billions of dollars spent by the health insurance industry from your monthly premiums for salaries, bonuses, perks, transportation, advertising, office supplies and equipment, commissions, rent, etc. — before a single nickel is paid to the doctors, pharmacists and hospitals. What’s left over is tens and tens of billions of dollars of profits every year — and we wonder why our health insurance premiums are so high. According to my friend Downtown Bobby Brown, HUM’s future earnings as well as those of Aetna, Kaiser Permanente, WellPoint, the Blues, United, etc. are coated with magic paint.

Though I don’t cotton to companies earning billions of dollars from the misery of policyholders, I can’t deny HUM’s enormous continued profit potential. Profits are not constrained by loyalty, ethnicity or morals, and HUM (as well as competing health insurers) remains in the position to squeeze billions of dollars in net income from its unique services, which are approved by Congress.

HUM’s business is basically recession- and inflation-proof. If costs rise, HUM either reduces your benefits or raises your premiums or reduces reimbursement schedules to hospitals and doctors — or a combination of all three. And if costs fall, HUM still raises its premiums. Only the Mafia, which doesn’t spend much on office supplies and never files a tax return, has it better. Well, considering that one can’t purchase stock in the Mafia, health insurers like HUM are a perfect second selection. And I think HUM is a superb choice among its peers.

Please address your financial questions to Malcolm Berko, P.O. Box 1416, Boca Raton, Fla. 33429 or e-mail him at malber@adelphia.net.© Copley News Service