October 16, 2012

Oct 16 UnitedHealth Group Inc. reported a 23 percent rise in third-quarter earnings on Tuesday as enrollment in its plans increased and spending declined, and the largest U.S. health insurer raised its full-year forecast.

Shares of UnitedHealth rose 2.6 percent to $59 in trading before the market opened.

The company said net income had risen to $1.56 billion, or $1.50 per share, from $1.27 billion, or $1.17 per share, a year earlier. On Oct. 8, UnitedHealth said it was expecting earnings of at least $1.45 per share.

Revenue rose 8 percent to $27.3 billion as the company enrolled an additional 670,000 people in its health plans, above its estimate of more than 650,000. UnitedHealth said business from the U.S. government's Medicaid and Medicare programs had helped increase revenue.

"Overall, it looks solid," Leerink Swann analyst Jason Gurda said.

At $1.50 per share, the earnings were about 25 cents higher than what analysts had been expecting before the company gave its $1.45-per-share estimate last week, Gurda said.

The earnings increase reflected both growth from operations and a gain of about 10 cents per share from reserves to cover medical claims, he said. When claims come in lower than forecast, companies can recognize financial gains.


Revenue from Medicare, a healthcare program for older people, and UnitedHealth's retirement products increased by 13 percent to $10 billion, helped by acquisitions and internal growth, the company said.

UnitedHealth's business that includes Medicaid, the program for the poor, generated a 12 percent revenue increase to $3.9 billion, the company said, as it added 70,000 people during the quarter.

Revenue for the company's largest business, employer and individual plans for which it administers services, increased 2 percent to $11.6 billion.

In businesses other than healthcare plans, revenue increased in services and technology, but fell for the pharmacy operations due to lower prescription volumes. Overall revenue for the group was $7.2 billion, about flat from a year earlier.

The company spent 79 percent of its premiums on medical claims during the quarter, which it said was 170 basis points lower than a year earlier.

Americans' low use of healthcare services has been a boon for health insurers over the past two years as claim costs fell and profits increased.

UnitedHealth raised its forecast for full-year earnings to a range of $5.20 to $5.25 per share from an earlier outlook of $4.90 to $5.00. Analysts on average had been expecting $5.12 per share, according to Thomson Reuters I/B/E/S.

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