By Angela Chen And Anna Wilde Mathews
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 3.4% to
$121.33 in late-afternoon 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.
Dan Schumacher, chief financial officer of the health-insurance
unit UnitedHealthcare, said the company had planned for a modest
increase but "has not seen any acceleration in underlying
utilization" of health services in the first quarter.
Dave Wichman, president of parent UnitedHealth Group, flagged
the company's "clinical engagement strategies and our ability to
manage medical costs," particularly strategies on inpatient
hospital costs. The company also pointed to its efforts to shift
away from reimbursing health-care providers with fees for each
service.
Meanwhile, Optum--UnitedHealth's health-services arm--saw
revenue rise 15% to $12.8 billion. Within the group, revenue from
OptumHealth rose 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.
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.
Larry Renfro, chief executive of Optum, said Thursday that the
company believes it should be able to retain the business of health
plans that are clients of Catamaran, even though they compete with
UnitedHealth Group's insurance arm.
The company will have to provide "transparency" and "privacy and
security around information and data," he said, but "as long as we
execute, we should be fine."
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.
"First-quarter results suggest to us that [UnitedHealth] is now
firmly back in growth mode," Susquehanna Financial Group analyst
Chris Rigg said.
Write to Angela Chen at angela.chen@dowjones.com and Anna Wilde
Mathews at anna.mathews@wsj.com
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