By Michael Calia
UnitedHealth Group Inc. reported a better-than-expected 5.8%
increase in earnings for its December quarter, as the health-care
company continued to benefit from the growth in premium revenue
outpacing medical costs.
Shares of UnitedHealth rose 2.4% in morning trading to $108.15.
Earlier Wednesday, the stock hit a new all-time high of
$108.98.
UnitedHealth, like its fellow health insurers, has sought to
contain costs related to medical care, particularly as expensive,
high-profile treatments for hepatitis C and cancer enter the
market. Meanwhile, the company has benefited from growth in its
government-sponsored plans as well as its health-services arm.
Overall, for the period ended Dec. 31, UnitedHealth posted
earnings of $1.51 billion, or $1.55 a share, up from $1.43 billion,
or $1.41 a share, a year earlier. Revenue improved 7.4% to $33.43
billion.
Analysts had projected a per-share profit of $1.50 and revenue
of $33.1 billion.
As the biggest insurer and the first to report, UnitedHealth is
seen as a bellwether, and its views on spending trends are closely
monitored.
UnitedHealth said its medical-care ratio, a key industry metric
that reflects the portion of insurance premiums used for patient
care, fell to 79.8% in the fourth quarter from 81.2% a year earlier
and was virtually flat from the 79.7% in the third quarter.
The company said medical-cost trends were "well controlled,"
with lower hospital use per capita. The company is assuming a
"moderate increase" in health-care utilization this year, but it is
"not seeing any indication" of an uptick in January, said Dan
Schumacher, chief financial officer of UnitedHealthcare.
UnitedHealthcare also is expecting an increase in costs related to
treatments for hepatitis C, he said.
Analysts had been watching hospital usage, amid reports of
strong volumes by hospital companies, and for signs of an increase
in health-care spending related to the flu.
Revenue from premiums rose 6% to $29.38 billion, while medical
costs increased 4.1% to $23.43 billion.
The company said it served 88.5 million individuals across all
of its businesses as of Dec. 31, up from 88.2 million a year
ago.
UnitedHealth said its insurance arm has enrolled more than
400,000 people through the health law exchanges, ahead of its
schedule, and it expects its sign-ups to be close to 500,000, the
upper end of its projected range. UnitedHealthcare increased its
presence in the marketplaces to 23 states this year and plans to
"expand our footprint" next year, though it will only be in a few
markets in California, said Jeff Alter, who heads the insurer's
employer and individual business.
The insurer also is seeing a "few percent" of the small-business
market dropping off into the new marketplaces, it said. "We have
not seen a significant erosion of our small group business," Mr.
Alter said.
UnitedHealth's Medicare Advantage business added 15,000
customers year over year, while its community and state business
grew its Medicaid enrollment by 1 million people in the past year.
Fourth-quarter revenue rose 5% in its division that includes
Medicare and 29% in the segment with Medicaid.
"The government businesses likely continued to come in better
than expected," Sterne Agee analyst Brian Wright said. "We believe
[UnitedHealth's] solid government results will boost the shares of
the Medicaid and Medicare-focused plans today."
In its call with analysts, UnitedHealth also emphasized that it
is continuing to increase the share of its contracts with
health-care providers that tie reimbursement to efficiency and
quality goals. Spending under such contracts will be more than $43
billion this year, up from around $36 billion in 2014, the company
said, adding that it is seeing cost savings from such provider
deals.
Optum, UnitedHealth's health-services arm, saw revenue rise 23%
in the fourth quarter to $12.9 billion.
"The upside [in UnitedHealth's fourth quarter] was driven by the
company's Optum business," Mr. Wright said.
For the new year, UnitedHealth reiterated its forecast for
per-share earnings between $6 to $6.25 and revenue of $140.5
billion to $141.5 billion. Analysts polled by Thomson Reuters are
expecting earnings of $6.17 a share and revenue of $140.9
billion.
Write to Anna Wilde Mathews at anna.mathews@wsj.com and Michael
Calia at michael.calia@wsj.com
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