UnitedHealth Group 1st-Quarter Profit Falls 7.8%--Update

By Tess Stynes 

UnitedHealth Group Inc. on Thursday said its first-quarter earnings fell 7.8%, though the health insurer's membership ranks grew year over year.

UnitedHealth is the first major health insurer to report its results for the latest quarter, the first period to reflect the Affordable Care Act. Planned reductions in government funding for Medicare Advantage and other provisions of the health law are expected to affect the managed-care provider's performance this year.

UnitedHealth reported a profit of $1.1 billion, or $1.10 a share, down from $1.19 billion, or $1.16 a share, a year earlier. Revenue rose 4.5% to $31.7 billion.

Analysts polled by Thomson Reuters expected per-share profit of $1.09 and revenue of $31.99 billion.

UnitedHealth said provisions and newly effective taxes related to the Affordable Care Act and a reduction in government spending known as the sequestration reduced per-share earnings in the latest period by nearly 35 cents.

"We performed steadily in the first quarter, with continued momentum from our Optum health services platform and year-over-year growth across our UnitedHealthcare health benefits platform offset by headwinds from new ACA taxes and Medicare Advantage funding deficiencies," Chief Executive Stephen Hemsley said.

The company said that, as expected, its first-quarter tax rate of 42% increased by more than 5 percentage points owing to provisions in the Affordable Care Act.

However, UnitedHealth also affirmed its 2014 outlook. Looking ahead, analysts and investors likely will be watching for any comments on how lower Medicare Advantage rates and public health-insurance exchanges will impact its long-term outlook. UnitedHealth is among the companies that have limited their participation in the new health-insurance marketplaces, where consumers shop for coverage.

UnitedHealth had improved its results recently through membership growth. At the end of the latest period, the number of people who had health coverage through the UnitedHealthcare insurance business reached 44.7 million, compared with 42 million a year earlier and 45.4 million people at the end 2013.

UnitedHealth's medical loss ratio, which reflects the portion of premiums used to cover health claims, fell to 82.5% in the latest quarter from 82.7% a year earlier.

Revenue at the company's UnitedHealthcare insurance business grew 3.6% to $29.25 billion. Revenue from Optum, the company's health-services arm, rose 29% to $11.2 billion

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