By Angela Chen
UnitedHealth Group Inc. on Thursday reported a 29% increase in
March quarter earnings and raised its full-year guidance as the
health insurer benefits from growth in its health-services business
and a lower impact from medical costs.
Shares of UnitedHealth, up 50% over the past year, rose 2.7% to
$120.51 in premarket trading. The stock fell 2.2% Wednesday after
hospital operator HCA Holdings Inc. reported a better-than-expected
outlook for the March quarter, raising concerns about higher
health-care costs for insurers.
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. As the biggest insurer, UnitedHealth is seen as a
bellwether, and its views on spending trends are closely
monitored.
The company said its medical-care ratio, a key industry metric
that reflects the portion of insurance premiums used for patient
care, fell about 1% to 81.1% from a year earlier. Helping the ratio
was the company's higher revenue from premiums, which jumped 13% to
$31.68 billion in the first quarter.
Meanwhile, Optum--UnitedHealth's health-services arm--saw
revenue rise 15% to $12.8 billion. Within the group, revenue from
OptumHealth increased 27% to $3.3 billion. OptumHealth provides
care-delivery and health-management services for third-party payers
like employers, payers and government entities.
"Looks like other payers have decided to continue to trust Optum
despite its affiliation with" UnitedHealth, said Mizuho Securities
USA analyst Sheryl Skolnick.
The company raised its full-year revenue outlook by $2 billion
to $143 billion and increased per-share earnings expectations to a
range of $6.15 to $6.30 from the previous range of $6.00 to
$6.25.
Analysts polled by Thomson Reuters were expecting earnings of
$6.21 a share and revenue of $141.68 billion.
"First-quarter results suggest to us that [UnitedHealth] is now
firmly back in growth mode," Susquehanna Financial Group analyst
Chris Rigg said.
For the period ended March 31, UnitedHealth posted earnings of
$1.41 billion, or $1.46 a share, up from $1.1 billion, or $1.10 a
share, a year earlier.
Revenue improved 13% to $35.76 billion.
Analysts had projected a per-share profit of $1.35 and revenue
of $34.63 billion.
UnitedHealth's revised year outlook includes the costs of 10
cents per share from the proposed combination with Catamaran
Corp.
In March, UnitedHealth agreed to acquire Catamaran, the
fourth-largest pharmacy-benefit manager in the U.S. by volume of
prescriptions processed, for $12.8 billion in cash. The deal was
seen helping UnitedHealth to bulk up its pharmacy-benefit business
amid growing concern from employers and insurers about the rising
costs of cutting-edge drugs.
Write to Angela Chen at angela.chen@dowjones.com
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