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UnitedHealth Earnings Slip, But Revenue Climbs

01/17/2013 | 09:08am US/Eastern
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--Earnings down slightly on fewer excess reserves

--EPS still tops Street, but not by wide margins as in recent quarters

--Company cites good full-year cost trend for commercial business

(Updates throughout with details on results, analyst comment.)

 
   By Jon Kamp 
 

UnitedHealth Group Inc.'s (>> UnitedHealth Group Inc.) fourth-quarter earnings slipped slightly as the health insurer benefited less from excess reserves set aside to cover member costs. Revenue, though, surged on growing membership, and the company saw improved profits in its big health-services business.

The Minnetonka, Minn., company squeaked in ahead of Wall Street's per-share earnings expectations for the quarter, although not by the same margin as in recent quarters. Shares slipped 1.2% to $53 in premarket trading Thursday.

Analysts still said it was a good quarter for the industry bellwether, the largest managed-care company by revenue and typically the first to report quarterly results.

The "results look quite solid even though lacking the upside of prior [UnitedHealth] quarters" last year, Goldman Sachs analyst Matthew Borsch said.

UnitedHealth--which has taken a cautious view of potential pressure points this year, such as the still-weak economy--backed the 2013 financial guidance it issued in late November.

The company also noted a potentially good development regarding medical costs for its big commercial health-insurance business: Full-year costs trend rose less than expected.

Still, UnitedHealth's consolidated medical-care ratio, which reflects the portion of insurance premiums used for patient care, increased to 80.5% in the fourth quarter from 79.7% a year earlier. The increase reflects the smaller level of excess reserves. When patients rack up fewer bills than expected, the extra money set aide to cover costs benefits earnings.

UnitedHealth reported a profit of $1.24 billion, or $1.20 a share, compared with $1.26 billion, or $1.17 a share, a year earlier. The company had fewer shares outstanding in the recent quarter.

Revenue jumped 11% to $28.77 billion. Analysts polled by Thomson Reuters had forecast earnings of $1.19 a share on revenue of $28.24 billion.

Revenue got a boost from UnitedHealth's recent purchase of a majority stake in Brazilian insurer and hospital operator Amil Participacoes S/A (AMPIY, AMIL3.BR). UnitedHealth owns 65% of Amil and expects to buy an additional 25% in the first half of this year. The total deal is valued at about $4.3 billion in cash.

UnitedHealth's insurance business saw its revenue increase 11% to $26.9 billion in the recent quarter.

Revenue from Optum, the company's information- and technology-based health-services business, declined 1.3% to $7.5 billion, but the operating margin there rose to 6.1% from 3.7% a year earlier. UnitedHealth cited growth in higher margin products and efficiency improvements.

The company ended the year with 40.9 million medical members, including members added through the Amil deal, up 18% from a year earlier.

--Melodie Warner contributed to this article.

Write to Jon Kamp at jon.kamp@dowjones.com

Subscribe to WSJ: http://online.wsj.com?mod=djnwires

Stocks mentioned in the article : UnitedHealth Group Inc.
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