UnitedHealth Group on Thursday raised its full-year earnings target for the second time this year after a strong performance mainly in its Optum unit helped the largest U.S. health insurer beat quarterly profit expectations.
The unit, which manages drug benefits and offers healthcare data analytics services, has been helping the company withstand fluctuations in its core health insurance business due to pandemic-induced changes in patients' use of medical services.
Spending on medical services at the company's health insurance business, UnitedHealthcare, rebounded in the latter part of last year due to Covid-19 testing and treatment-related customer assistance measures, after patients and hospitals had delayed care at the height of the pandemic.
For the quarter ended June 30, the company reported a medical loss ratio - the percentage of premiums spent on medical services - of 82.8%, compared with 70.2% a year earlier. Analysts were expecting 83.08%, according to IBES data from Refinitiv.
"This is a solid start to MCO (managed care organization) earnings season with core utilization rebounding but still below normalized levels," Evercore ISI analyst Michael Newshel said.
Nearly half of all Americans have been fully vaccinated according to the latest government data and daily new Covid-19 cases ebbed in May and June, encouraging people to return to doctors' offices for routine, non-elective medical care.
UnitedHealth now expects adjusted earnings of $18.30 to $18.80 per share in 2021, compared with its previous forecast of $18.10 to $18.60. The forecast includes a potential negative impact of $1.80 per share related to Covid-19 costs.
The guidance leaves room for potential deferred care or Covid costs in the back half of the year given the uncertainty around the pandemic, Newshel said.
Revenue from UnitedHealth's Optum unit in the reported quarter rose 17.2% to $38.3 billion.
UnitedHealth reported adjusted earnings of $4.70 per share, beating estimates of $4.43 per share.