UnitedHealth on Thursday raised its 2021 adjusted profit target, as tight control on medical costs helped the largest U.S. health insurer handily beat first-quarter profit estimates.
The industry bellwether's shares were up about 2% premarket.
UnitedHealth's first quarterly earnings since new Chief Executive Officer Andrew Witty took the reins in February will reset Wall Street expectations for all health insurers, some analysts said.
"This is a good start to earnings that bodes well for the entire MCO group," Evercore ISI analyst Michael Newshel said in a client note.
Newshel said the sentiment was already positive on managed care organizations (MCO) or health insurers given the muted use of non-Covid healthcare services despite a sharp drop in Covid-19 cases in the quarter.
Analysts were expecting a rebound in demand for the services postponed at the height of the pandemic and it to weigh on health insurers' profits in 2021.
A steady rise in costs related to testing, treatment and vaccination against the coronavirus has, however, pressured health insurers as they shell out millions of dollars to help their customers get the services.
But UnitedHealth's medical loss ratio - the percentage of premiums paid out for medical services - stood at 80.9% for the quarter ended March 31, compared with 81% a year earlier.
Analysts on average were expecting 82.9%, according to IBES data from Refinitiv.
UnitedHealth now sees 2021 adjusted earnings of $18.10 to $18.60 per share, up from its previous forecast of $17.75 to $18.25. The outlook includes about $1.80 per share hit from COVID-19 costs.
"This means that further 2021 guidance raises could still be ahead, if the full anticipated COVID headwinds ultimately do not materialize," said Stephens analyst Scott Fidel.
UnitedHealth's first quarter adjusted earnings per share were $5.31, well above estimates of $4.38 per share.