UnitedHealth's 4Q Profit Rises 10 Percent
INDIANAPOLIS (AP) -- UnitedHealth Group Inc. said Thursday its fourth-quarter profit rose 10 percent, trumping Wall Street expectations, as premiums climbed and a drop in health care use continued to help the insurer.
The Minnetonka, Minn., insurer said fewer people used the health care system in the fourth quarter compared to the same quarter of 2009, a trend that also helped insurers in the third quarter. That, plus improvements in claims payment accuracy, helped push down the percentage of premiums the insurer paid on medical care in the quarter.
UnitedHealth said it earned $1.04 billion, or 94 cents per share, in the three months that ended Dec. 31. That's up from the $944 million, or 81 cents per share, a year ago. Revenue rose 10 percent to $24.03 billion from $21.78 billion.
Adjusted earnings were $1.05 per share, excluding a charge from the sale of a portion of its Ingenix business that the company also announced Thursday.
Analysts polled by FactSet had forecast a profit of 84 cents per share on $23.73 billion in revenue. Analysts typically exclude one-time items from their estimates.
UnitedHealth is the largest publicly traded health insurer based on total revenue. It is the first big health insurer to release its earnings every quarter, and many analysts and investors see it as a bellwether for the sector.
The company said premiums, the main portion of its revenue, grew 10 percent to $21.69 billion. Commercial enrollment edged up to 24.8 million from 24.6 million a year ago. That business includes employer-sponsored group coverage and offers higher profit margins than government-sponsored business like Medicaid.
The medical-loss ratio for the insurer's UnitedHealthcare business sank to 81.2 percent in the fourth quarter from 85.8 percent in the same quarter of 2009, when insurers were hit with swine flu cases. These ratios, known as MLRs, measure the percentage of premiums spent on medical care.
The ratio will take on added importance this year because the health care overhaul will require insurers to meet minimum MLRs or pay rebates to customers.
UnitedHealth said the MLR dropped in part due to moderated health system use. Analysts and insurance executives have said health care use dropped compared to 2009 due to the swine flu claims and a decrease in consumer spending that typically comes with a struggling or recovering economy.
UnitedHealth backed its 2011 forecasts of $3.50 to $3.70 per share in profit and $100 billion in revenue. Analysts expect net income of $3.72 per share and $99.86 billion in revenue on average.
The profit forecasts represent a drop from the company's 2010 performance. UnitedHealth's full-year profit grew 21 percent, to $4.63 billion, or $4.10 per share. Its revenue increased 8 percent to $94.16 billion.
Heading into the new year, the insurer has said it expects health care use to revert to normal levels, which will increase costs, and it will incur added costs from benefits mandated by the health care overhaul.
Leerink Swann analyst Jason Gurda said in a research note that he thought the insurer's guidance for the new year was conservative and will rise through the year.
But Citi analyst Carl McDonald said in a separate note that health care reform has "changed the prism for managed care plans." He said last year's performance won't be repeated this year, as "a good chunk of the earnings upside in 2010 would have been returned to shareholders had minimum MLRs been in place for 2010."
Shares of UnitedHealth fell 79 cents to $39.77 in late morning trading, while broader trading indexes were down slightly. The insurer's stock price had climbed more than 9 percent from the start of the year through Wednesday.
McDonald said some investors may be disappointed the insurer didn't raise its 2011 forecast.
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