UnitedHealth's 2Q profit rises 31 percent
INDIANAPOLIS (AP) — Health insurer UnitedHealth Group said Tuesday its second-quarter profit jumped 31 percent as both enrollment and costs came in better than Wall Street expected.
The Minnetonka, Minn., insurer said it earned $1.12 billion, or 99 cents per share, in the three months ended June 30. That's up from the $859 million, or 73 cents per share, in the same period last year. Revenue grew 7 percent to $23.26 billion.
Analysts polled by Thomson Reuters forecast earnings of 75 cents per share on nearly $23 billion in revenue.
The insurer "delivered another stellar quarter," trumping Wall Street expectations in part because its enrollment and medical-loss ratio, which measures the percentage of premiums spent on medical costs, exceeded expectations, Sanford Bernstein analyst Ana Gupte said in a research note.
Commercial enrollment, which includes employer-sponsored insurance and individual coverage, fell by 440,000 from a year ago. That represents a decline of less than 2 percent, and a slight increase compared to the first quarter.
Commercial insurance makes up more than 75 percent of UnitedHealth's medical enrollment. Insurers have struggled with losses in the commercial sector as employers cut jobs during the recession, but that trend appears to be slowing.
UnitedHealth's total enrollment grew about 1 percent to 32.5 million compared to last year, as gains in Medicare and Medicaid businesses offset the commercial losses.
Enrollment growth looked good across the board and helped push the insurer to "very strong" results, Leerink Swann analyst Jason Gurda said in another research note.
The insurer spent 82.2 percent of its premium revenue on medical care for its commercial health insurance. That's down 2 percent from a year ago but up from 79 percent in the first quarter.
Medical-loss ratios give analysts a sense of whether insurance is priced correctly. The health care reform law passed earlier this year will require insurers to spend at least 85 percent of their premium revenue on medical care for large group coverage and 80 percent for individual and small group coverage.
Details of that part of the law have yet to be worked out, but Citi analyst Carl McDonald said the company's profit margins likely will have to fall next year, when those minimums are implemented.
UnitedHealth raised its profit forecast for this year. It now expects to earn $3.40 to $3.60 per share, up from $3.15 to $3.35 per share, on $93 billion in revenue.
Analysts expected a profit of $3.33 per share and $92.18 billion in revenue.
UnitedHealth is the largest publicly traded health insurer based on total revenue, and the second-largest based on enrollment, trailing only WellPoint Inc. It is the first big health insurer to release its earnings every quarter, and many analysts and investors see it as a bellwether for the sector.
In premarket trading, shares rose to $31.30 from Monday's close of $30.82.
AP Business Writer Marley Seaman contributed to this report from New York.