UnitedHealth quarterly profit tops Wall Street views

NEW YORK (Reuters) - Health insurer UnitedHealth Group Inc (UNH.N) posted better-than-expected quarterly profit on Thursday, helped by moderating flu costs and growth in its businesses serving the elderly and low-income Americans.

The largest health insurer by market value said membership this year was running ahead of forecasts for its plans serving employers and Medicare recipients.

But the company maintained its 2010 profit projection, citing challenges including Medicare reimbursement pressures, and suggested analysts' first-quarter earnings estimates were too high.

After rising as much as 3.3 percent in opening trading, shares were down 1.2 percent at $34.15 in midmorning.

Analysts have said health insurer shares would be tied to developments related to health reform, after Tuesday's stunning election of a Republican to the U.S. Senate by voters in Massachusetts threw the reform process into uncertainty.

"It was a good quarter, quality was fine ... I just don't think anybody cares right now," said David Heupel, a portfolio manager with Thrivent Investment Management. "People are more interested in the ebbs and flows of reform and what's going to happen than what should be a fairly benign reporting environment."

Shares of UnitedHealth and rivals have soared in recent months on optimism that an overhaul of the U.S. healthcare system might not threaten profits as much as initially feared.

The company declined to comment on the outcome of reform in a conference call with analysts, saying the situation was fluid.

UnitedHealth's fourth-quarter net income rose 30 percent to $944 million, or 81 cents per share, from $726 million or 60 cents per share a year earlier, when the company took a big litigation charge.

Analysts on average expected 73 cents per share, according to Thomson Reuters I/B/E/S.

Revenue rose 6.5 percent to $21.78 billion. Analysts looked for $21.72 billion.

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

The company spent more premium revenue on medical costs -- 81.3 percent vs. 80.8 percent a year earlier -- but that ratio was better than company expectations. It said the intensity of the H1N1 outbreak, a cost issue cited by UnitedHealth last year, subsided during the quarter.

Its unit for Medicare plans serving the elderly saw revenue growth of 14 percent to $7.8 billion, while its unit for Medicaid plans for low-income Americans grew 34 percent to $2.3 billion. Enrollment rose in both businesses.

Like rivals, UnitedHealth is being hurt by the weak economy, because fewer people employed means fewer with health coverage.

For its UnitedHealthcare plans serving employers, the company reported a decline of 130,000 members from the end of the third quarter, to 24.63 million. But it said the plans would have seen growth of 40,000 members if not for job cuts at continuing clients.

Total membership stood at 32 million at the end of December.

UnitedHealth continues to project 2010 profit of $2.90 to $3.10 per share, down from $3.24 reported for 2009. Analysts expect $3.06 for 2010.

The prospect for broad U.S. health reform that would dramatically affect UnitedHealth and other insurers suddenly became uncertain with Tuesday's election. The victory by Republican Scott Brown robbed Democrats of the supermajority potentially needed to secure passage of sweeping legislation.

Though Wall Street viewed the development as largely positive for the health insurers, near-term stock gains may be capped by uncertainty over the next steps for reform and the group's recent strong run.

(Reporting by Lewis Krauskopf; Editing by Derek Caney, Dave Zimmerman and Matthew Lewis)