January 19, 2012 / 11:23 AM / 6 years ago

UnitedHealth profit tops views as enrollment rises

3 Min Read

(Reuters) - UnitedHealth Group Inc (UNH.N) posted a higher-than-expected fourth-quarter profit on Thursday, helped by increased membership across its array of health plans.

The largest U.S. health insurer by market value also backed its 2012 earnings forecast, which includes the potential for a decline in profit but which many analysts have seen as conservative. Shares rose 1.4 percent.

"As the bellwether and first to report, UnitedHealth results bode well for managed care earnings season," Goldman Sachs analyst Matthew Borsch said in a research note.

UnitedHealth's quarterly net income rose to $1.26 billion, or $1.17 per share, compared with $1.04 billion, or 94 cents per share, a year earlier.

Analysts on average were expecting $1.04 per share, according to Thomson Reuters I/B/E/S.

Revenue rose 8 percent to $25.92 billion, about $230 million ahead of estimates.

"It was a solid fourth-quarter, nicely ahead of consensus," Susquehanna Financial Group analyst Chris Rigg said. "I don't think the results will be particularly surprising to the investment community."

Membership increased to about 34.6 million, up 5 percent. The company reported gains in its Medicare plans for the elderly and Medicaid plans for low-income Americans, as well as in its commercial plans serving employers.

"Enrollment growth remained strong, across the board," Leerink Swann analyst Jason Gurda said.

For its commercial plans, UnitedHealth spent 82.8 percent of its premium revenue on medical claims, more than the 80.9 percent a year ago. The company cited rebates paid to customers due to the new healthcare law that requires insurers spend a certain amount of premium revenue on medical care.

It also pointed to the "unusually low" use of healthcare services a year ago as a factor in the increase in costs for this year. Health insurers have been benefiting from low claim costs during the weak economy, as Americans have delayed doctor visits and procedures, but investors have been worried that a rebound in use of healthcare could hurt the companies' profits.

UnitedHealth's overall medical care ratio of 79.7 percent was only slightly higher than a year ago, indicating that costs might have been exceptionally low for its other plans such as Medicare, according to analysts.

UnitedHealth backed its 2012 profit forecast, given in November, of $4.55 to $4.75 per share on revenue of $107 billion to $108 billion. For 2011, UnitedHealth reported earnings of $4.73 per share. Analysts are looking for 2012 earnings of $4.77.

The company in November also forecast an increase in membership in 2012, to well above 35 million, as gains in its Medicare and Medicaid plans more than offset declines in some plans serving employers and individuals.

UnitedHealth shares rose 1.4 percent to $54.70 in premarket trading. Through Wednesday, they had risen more than 6 percent this year.

Reporting By Lewis Krauskopf in New York; Editing by Lisa Von Ahn, Dave Zimmerman

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