UnitedHealth sticks to cautious forecast

(Reuters) - Insurer UnitedHealth Group Inc (UNH.N) stuck to a forecast for 2012 that says profits may fall, citing expectations for a rise in Americans' use of medical services that could drive up its claim costs.

Shares of UnitedHealth, the largest U.S. health insurer by market value, fell as much as 4.2 percent after investors had hoped it would raise its forecast. The profit view overshadowed the company's better-than-expected fourth-quarter results and pushed shares in the insurance sector lower on Thursday.

"The disappointment is they didn't up guidance," said Scott Schermerhorn, chief investment officer at Granite Investment Advisors, which holds UnitedHealth shares. "The reality is the fundamentals for this company going forward remain excellent, the stock still remains very inexpensive ... They've always been relatively conservative."

UnitedHealth Chief Executive Officer Stephen Hemsley told analysts on a conference call that the company continued to take an "appropriately cautious posture" on its 2012 performance.

In addition to the potential for rising use of healthcare services, Hemsley pointed to pressure on premium rates and government reimbursement on Medicare and Medicaid plans it manages, as well as investments to increase its pharmacy benefits business.

UnitedHealth, an industry bellwether because of its size and diversity of plans, is the first health insurer to report fourth-quarter results. Shares of rivals Aetna Inc (AET.N) and WellPoint Inc (WLP.N) fell as much as 2.7 percent and 2.6 percent, respectively, after UnitedHealth's report.

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.

RISING ENROLLMENT

UnitedHealth's 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. The ratio was more than 1 percentage point below Wall Street's expectation, according to Jefferies analyst David Windley.

"With no signs of a utilization spike yet, 2012 should get off to a good start," Windley said in a research note.

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. Analysts are looking for 2012 earnings of

$4.77.

For 2011, UnitedHealth reported earnings of $4.73 per share, a 15 percent increase over 2010.

UnitedHealth shares were down 3.2 percent at $52.19 in early afternoon on the New York Stock Exchange, off an earlier low at $51.70. Aetna shares were down 1 percent at $44.44 and WellPoint were up 8 cents at $72.25 on Thursday afternoon.

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