UnitedHealth kicked off earnings season for the managed-care sector with a 22% rise in second-quarter profit, as results were boosted by expanded membership, growth in premium and services revenue, and a slower rise in medical costs.
The Minnetonka, Minnesota, one of the nation's largest managed-care providers and considered a bellwether of the industry, said net income rose to $1.2 billion, or 87 cents a share, from $981 million, or 70 cents a share, a year earlier. The company had predicted second-quarter earnings of 80 cents to 82 cents a share.
UnitedHealth's revenue increased 6.7% to $18.93 billion from $17.86 billion a year earlier.
On average, analysts polled by Thomson Financial expected earnings of 81 cents a share and revenue of $19.06 billion.
UnitedHealth's medical-loss ratio, or the percentage of premium revenue used to pay patient bills, was 80.5%, an increase of 1.1 percentage points year-over-year and 2.2 percentage points sequentially.
UnitedHealth's medical costs rose slightly to $13.9 billion from $13.4 billion a year earlier.
Ovations' Revenue Rises
Revenue at the company's health care services unit rose to $17 billion from $16.06 billion, as Ovations revenue rose to $6.9 billion from $6.37 billion.
Ovations serves seniors and encompasses Medicare products, including the Part-D prescription-drug benefit program.
Revenue for UnitedHealthcare, the company's biggest health-insurance unit, inched up to $8.95 billion from $8.79 billion a year ago. AmeriChoice revenue increased to $1.13 billion from $898 million a year ago, and membership rose 205,000 in the quarter and increased by 290,000 from a year earlier.
Looking ahead, for the third quarter, UnitedHealth expects earnings of 91 cents to 93 cents a share.
For 2007, the company raised its 2007 earnings estimate to $3.43 to $3.48 a share, excluding items, on revenue of $76 billion. Including items, earnings should be $3.35 to $3.40 a share. Previously, the company expected 2007 earnings of $3.34 to $3.38 a share including items, and $3.42 to $3.36 a share excluding items.
On average, analysts expect third-quarter earnings of 92 cents a share and full-year earnings of $3.45 a share.
UnitedHealth seems to have recovered from last year's stock-options backdating scandal that resulted in a restatement of previous profits that cut earnings by $1.55 billion total.
UnitedHealth shares closed Wednesday's regular trading session up 1.1%, or 58 cents, at $53.58.