UNH UnitedHealth Group Inc

By Anna Wilde Mathews and Anne Steele 

UnitedHealth Group Inc. on Tuesday posted a strong earnings beat as revenue continued to surge in its pharmacy-services business, and the biggest U.S. health insurer lifted the low end of its profit guidance for the year.

The Minnetonka, Minn., company now expects adjusted earnings for the year of about $7.80 to $7.95 a share, compared with its previous forecast -- raised in April -- for $7.75 to $7.95 a share.

But amid the positive news, the company included one ongoing dark spot: Affordable Care Act plans, which it will almost completely stop selling next year. The insurer booked another $200 million in full-year ACA-plan losses in the second quarter, bringing its projected total loss for the year to about $850 million, with about $245 million of that included in 2015 results and $605 million in 2016.

The even-bigger losses were tied to larger ACA-plan enrollment than expected, including more limited attrition. But more than that, costs mounted because enrollees were even sicker than projected, with more chronic conditions than last year, adding to the insurer's costs. Those including AIDS, hepatitis C, diabetes and chronic obstructive pulmonary disease.

Stephen J. Hemsley, UnitedHealth Group's chief executive, said that despite the ACA business, the medical-cost trend remained "well-controlled and consistent with expectations," a comment likely to reassure investors worried about a potential uptick in health spending. Company officials said the inpatient hospital admissions rate was lower than last year but flagged a few areas where costs had picked up, including specialty pharmacy and emergency- acquisition of pharmacy-benefit managerroom use.

The insurer's medical-loss ratio -- the percentage of premiums paid in claims -- ticked up 30 basis points to 82%, but that included more than 50 basis points of impact from the ACA plans.

UnitedHealth's health-services arm Optum continued to show strength, with revenue there jumping 51% to $20.6 billion, representing about 44% of the company's top line, powered by Optum's pharmacy-care services. The business has been buoyed by UnitedHealth's acquisition of pharmacy-benefit manager Catamaran Corp., which closed last July.

During the quarter, UnitedHealth added 305,000 customers, bringing its tally to roughly 47.98 million.

In all for the June quarter, the company reported a profit of $1.75 billion, or $1.81 a share, up from $1.59 billion, or $1.64 a share, a year earlier. Excluding certain items, adjusted per-share earnings rose to $1.96 from $1.73.

Revenue climbed 28% to $46.49 billion. Analysts had projected adjusted earnings of $1.89 a share on revenue of $45.05 billion.

Shares in the company, which kicks off earnings reports for health insurers, have risen 20% this year. In midday trading in New York, UnitedHealth shares slid 4 cents to $140.71.

Write to Anna Wilde Mathews at anna.mathews@wsj.com and Anne Steele at Anne.Steele@wsj.com

(END) Dow Jones Newswires

July 20, 2016 02:50 ET (06:50 GMT)

UnitedHealth (NYSE:UNH)
Historical Stock Chart
From Mar 2024 to Apr 2024

UnitedHealth (NYSE:UNH)
Historical Stock Chart
From Apr 2023 to Apr 2024