UnitedHealth Reports Better-Than-Expected Profit

UnitedHealth Group Inc reported an increase of about 6 percent in quarterly profit on Thursday, beating analysts' estimates, as most of its insurance plans grew and medical claim costs remained stable.

July 19, 2012

* Q2 EPS $1.27 vs $1.19 Wall St view

* Sees FY EPS $4.90-$5.00 vs Street view $4.99

* First insurer to report since court ruling on health law

* Shares rise 2 pct in premarket trade

(Adds comments, details, trading)

July 19 - UnitedHealth Group Inc reported an increase of about 6 percent in quarterly profit on Thursday, beating analysts' estimates, as most of its insurance plans grew and medical claim costs remained stable.

The biggest U.S. health insurer by market value also slightly raised its forecast for full-year earnings, and was the first insurer to report results since the Supreme Court upheld President Barack Obama's healthcare law late last month.

UnitedHealth's shares rose 2 percent to $57.49 in premarket trading.

Shares of large health insurers have underperformed the broader market since the landmark ruling on the law, which more tightly regulates the industry and adds new fees.

Investors have also been wary about the industry after a spotty first quarter earnings season, in which several top companies - though not UnitedHealth - reported profits short of analyst estimates.

The second-quarter report from UnitedHealth, considered a bellwether because of its size and diversity of plans, "should calm investor fear given the tumultuous (first quarter) peppered by misses by most of UNH peers," Sanford Bernstein analyst Ana Gupte said in a research note.

UnitedHealth's second-quarter net income rose to $1.34 billion, or $1.27 per share, from $1.27 billion, or $1.16 per share, a year earlier. Analysts, on average, expected it to earn $1.19 per share, according to Thomson Reuters I/B/E/S.

Revenue grew 8 percent to $27.3 billion.

Enrollment in UnitedHealth's plans stood at nearly 35.9 million at the end of June, up about 5 percent. Enrollment increased in its Medicare plans for older people, Medicaid plans for low-income Americans and fee-based plans for employers for which it administers services.

UnitedHealth shares have outperformed those of rivals WellPoint Inc and Aetna Inc this year and trade at a more than 35-percent premium to them based on price-to-earnings ratios.

Investors have been encouraged by UnitedHealth's broad range of health plans, including its big business in Medicaid and Medicare, and a diverse profit stream from other healthcare service offerings such as pharmacy benefits and data and analytics products.

In the quarter, the company spent 81.3 percent of its premiums on medical claims, compared with 81.4 percent a year ago. That was a touch lower than the 81.8 percent expected by Wells Fargo analyst Peter Costa.

Americans' low use of healthcare services has proved to be a boon for health insurers over the past two years, by reducing their medical claim costs and increasing profits. But investors have been bracing for such utilization of healthcare services to start rising again.

UnitedHealth forecast full-year earnings of $4.90 to $5.00 per share, higher than its previously forecast $4.80 to $4.95 a share. It was the second time the company has boosted its 2012 forecast. Analysts expect it to earn $4.99 a share.

The company expects revenue of $110 billion for 2012.

(Reporting by Lewis Krauskopf in New York; Editing by Lisa Von Ahn and Bernadette Baum)