UnitedHealth's 1Q Profit Climbs 13 Percent
INDIANAPOLIS (AP) -- UnitedHealth Group Inc.'s first-quarter earnings rose 13 percent and trumped Wall Street expectations as the health insurer reversed last year's enrollment losses and benefited from slower increases in health care use.
It also raised its 2011 earnings forecast.
The insurer said Thursday that it earned $1.34 billion, or $1.22 per share, in the three months that ended March 31. That's up from $1.19 billion, or $1.03 per share, in the same quarter last year. Revenue rose 10 percent to $25.43 billion.
Analysts expected 89 cents per share on $24.97 billion in revenue.
Company shares jumped 7.6 percent, or $3.36, to $47.60 in pre-market trading.
UnitedHealth, based in Minnetonka, Minn., is the largest publicly traded health insurer based on revenue and the second-largest based on enrollment, trailing only WellPoint Inc. It is the first big health insurer to release its quarterly earnings, and analysts said Thursday its performance bodes well for the rest of the managed care sector.
The company now expects 2011 earnings per share to range between $3.95 and $4.05, a big increase from its previous forecast of $3.50 to $3.70. It also said revenue will approach $101 billion for the year, up from $100 billion.
Analysts have said the old outlook was conservative. They had expected earnings of $3.83 per share.
UnitedHealth said its commercial enrollment, which includes employer-sponsored group insurance and private individual coverage, climbed 4 percent to 25.6 million people. In last year's first quarter, it fell 4 percent.
Commercial insurance generally offers higher profit margins for insurers than government business like Medicaid or Medicare Advantage. Health insurers struggled with losses in that business during the recession, as employers cut jobs and the number of people covered by insurance, but that trend started easing last year.
Health insurance premiums, most of UnitedHealth's revenue, rose 9 percent in the quarter to $23 billion.
UnitedHealth and its competitors said slower increases health care use helped their performances over the second half of last year.
UnitedHealth said Thursday that trend continued in the first quarter, although the company expects use to pick up later this year.
UnitedHealth also said its medical-loss ratio, or MLR, increased slightly to 81.4 percent in the quarter.
Insurers and analysts are paying extra attention this year to these ratios, which measure the percentage of premiums spent on claims and can tell analysts whether insurance is priced correctly. The health care overhaul now requires insurers to meet minimum MLRs or issue a rebate to customers.
The rebates will be paid next year. UnitedHealth said it accounted for them when it tallied its MLR, but it did not state a specific amount it attributes to the potential rebates.
The first quarter was a litmus test for the new rule's impact on insurers, and UnitedHealth turned in a strong quarter, Bernstein analyst Ana Gupte said in a research note.
"It confirms our thesis that margins can expand despite the headwind from MLR rebates," she wrote.
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