UNH UnitedHealth Group Inc

By Lisa Beilfuss 

UnitedHealth Group Inc. said profit declined in its latest quarter as the biggest U.S. health insurer struggles with its health-care exchange segment.

The Minnetonka, Minn., company in November said it had suffered major losses on policies sold on the Affordable Care Act's exchanges in 2015, and warned that those losses would continue this year. Exchanges represent a small share of UnitedHealth's overall membership and revenue, but UnitedHealth said it booked a $245 million loss in the fourth quarter for advance recognition of 2016 losses.

UnitedHealth said the exchanges contributed to the company's consolidated medical-care ratio--the amount of premiums used to pay patient medical costs--rising to 82.7% in the fourth quarter, up from 80.9% in the third quarter and 80.1% in fourth quarter 2014. In addition, the company set aside $95 million in reserves for expected losses stemming from a state Medicaid contract.

Ongoing strength in UnitedHealth's health-services arm Optum helped counter weakness in its exchange business. Revenue there jumped 70% to $21.9 million, representing half of the company's top line, powered by Optum's prescription segment. The business has been buoyed by UnitedHealth's acquisition of pharmacy-benefit manager Catamaran Corp., which closed in July.

During the quarter, UnitedHealth added 315,000 customers, bringing its tally to roughly 13.5 million.

Overall, the company reported a profit of $1.22 billion, or $1.26 a share, down from $1.51 billion, or $1.55, a year earlier. Excluding certain items, per-share profit declined to $1.40 from $1.64.

Revenue increased 30% to $43.60. Analysts expected earnings of $1.38 a share on revenue of $43.23 billion.

UnitedHealth, which kicks off earnings reports for health insurers, backed its outlook for 2016, still projecting $7.60 to $7.80 in adjusted earnings per share and at least $180 billion in revenue. Analysts are looking for $7.72 in adjusted per-share profit and $181.37 billion in sales for the year.

In its Optum business, the company said it expects to fill 1 billion adjusted prescriptions this year, up from 778 million in 2015.

Shares in the company, down 9.5% over the past three months, rose 0.8% to $110.16 in premarket trading.

Write to Lisa Beilfuss at lisa.beilfuss@wsj.com

(END) Dow Jones Newswires

January 19, 2016 08:36 ET (13:36 GMT)

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