UPDATE: UnitedHealth Aims For 2012 Growth Amid Challenges

Health insurer UnitedHealth Group Inc. (UNH) Monday issued financial targets for 2012 that indicate expectations for growth after a strong 2011, but are mostly below Wall Street expectations.

The Minnetonka, Minn., company, the largest managed-care firm by revenue, also backed its 2011 earnings outlook ahead of an investor conference Tuesday. Its shares rose 3.5% to $45.19 in recent trading and are up about 25% on the year.

Health insurers' earnings have been boosted this year by a continued trend of muted health-care usage due to economic turmoil. When patients make fewer visits to doctors' offices and operating rooms, they rack up fewer bills insurers have to cover. But UnitedHealth Chief Executive Stephen Hemsley talked on an October earnings call about a more cautious outlook for the coming year, when the company will face a number of pressure points, such as a potential rise to more normal health-care utilization levels plus investments linked to the health-care overhaul law.

For the new year, the company is forecasting earnings in a range of $4.55 to $4.75 per share on revenue of $107 billion to $108 billion. Analysts surveyed by Thomson Reuters had forecast, on average, 2012 earnings of $4.75 on revenue of $108.53 billion.

Although Wall Street is generally aiming higher, analysts still viewed UnitedHealth's guidance favorably while noting the company's 2011 earnings guidance has risen roughly 25% since it was first set a year ago. Similarly, analysts have assumed that recently issued 2012 projections from health insurers Humana Inc. (HUM) and Aetna Inc. (AET) reflected the companies setting low bars with plenty of room for increases.

"We expect this initial view is conservative, and that the company can comfortably achieve consensus views of $4.75 and also our bull case view of $5.00," Sanford Bernstein analyst Ana Gupte said in a research note.

Meantime, UnitedHealth's new guidance doesn't reflect the pending acquisition of privately owned Medicare Advantage sponsor XLHealth, although UnitedHealth has said the deal should add to per-share earnings next year. XLHealth anticipates it will post sales above $2 billion next year, so it will also give UnitedHealth a boost on the top line.

The deal, struck for undisclosed terms, is expected to close in the first half of 2012.

UnitedHealth said its 2012 outlook also excludes any estimate of costs to help cover policyholder claims for Penn Treaty, which UnitedHealth has called an "unaffiliated and potentially insolvent" long-term care insurer. Pennsylvania law requires insurers to fund Penn Treaty's obligations.

The company's per-share earnings guidance of $4.52 to $4.57 for this year is 12 cents above the EPS forecast given in October, but the difference reflects a new expectation that Penn Treaty-related costs will be pushed into the new year. Otherwise the 2011 outlook hasn't changed since the October earnings announcement.

-By Jon Kamp, Dow Jones Newswires; 617-654-6728; [e-mail]