UnitedHealth Results Top Expectations on Revenue Growth -- 3rd Update

By Michael Calia 

UnitedHealth Group Inc. reported a better-than-expected 5.8% increase in earnings for its December quarter, as the health-care company continued to benefit from revenue growth in premiums outpacing medical costs.

Shares of UnitedHealth rose 1.3% in premarket trading to $107.01, which would represent a new all-time high for the stock.

UnitedHealth, like its fellow health insurers, has sought to contain costs related to medical care, particularly as expensive, high-profile treatments for hepatitis C and cancer enter the market. Meanwhile, the company has benefited from growth in its government-sponsored plans as well as its health-services arm.

Overall, for the period ended Dec. 31, UnitedHealth posted earnings of $1.51 billion, or $1.55 a share, up from $1.43 billion, or $1.41 a share, a year earlier. Revenue improved 7.4% to $33.43 billion.

Analysts had projected a per-share profit of $1.50 and revenue of $33.1 billion.

As the biggest insurer and the first to report, UnitedHealth is seen as a bellwether, and its views on spending trends are closely monitored.

UnitedHealth said its medical-care ratio, a key industry metric that reflects the portion of insurance premiums used for patient care, fell to 79.8% in the fourth quarter from 81.2% a year earlier and was virtually flat from the 79.7% in the third quarter.

Revenue from premiums rose 6% to $29.38 billion, while medical costs increased 4.1% to $23.43 billion.

The company said it served 88.5 million individuals across all of its businesses as of Dec. 31, up from 88.2 million a year ago.

Its Medicare Advantage business added 15,000 customers year over year, while its community and state business grew its Medicaid enrollment by 1 million people in the past year. Fourth-quarter revenue rose 5% in its division that includes Medicare and 29% in the segment with Medicaid.

"The government businesses likely continued to come in better than expected," Sterne Agee analyst Brian Wright said. "We believe [UnitedHealth's] solid government results will boost the shares of the Medicaid and Medicare-focused plans today."

Optum, UnitedHealth's health-services arm, saw revenue rise 23% in the fourth quarter to $12.9 billion.

"The upside [in UnitedHealth's fourth quarter] was driven by the company's Optum business," Mr. Wright said.

For the new year, UnitedHealth reiterated its forecast for per-share earnings between $6 to $6.25 and revenue of $140.5 billion to $141.5 billion. Analysts polled by Thomson Reuters are expecting earnings of $6.17 a share and revenue of $140.9 billion.

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