* CEO says 2013 earnings may miss analysts' estimates
* Third-quarter profit comes in ahead of forecast
* Shares unchanged after zigzagging
By Caroline Humer
Oct 16 U.S. insurer UnitedHealth Group Inc
reported a higher-than-expected quarterly profit on
Tuesday, but said Wall Street should not be too optimistic given
the weak economy and government efforts to rein in a growing
"We expect to grow revenues and earnings per share in 2013,"
Chief Executive Officer Stephen Hemsley said at the beginning of
a conference call with analysts. He warned, however, that the
largest U.S. health insurer faced "a considerable challenge" in
meeting analysts' estimates for next year, given market
Analysts on average expect 2013 earnings of $5.60 per share,
which would be up 6.7 percent to 7.7 percent from the company's
latest forecast for 2012.
The U.S. fiscal cliff - about $600 billion in looming tax
hikes and automatic spending cuts - is one problem, Hemsley
"Clearly we are focusing on its potential impact on
government programs and so forth, but there is nothing we can
actually specifically do," he said. "But it is a good reason why
we are staying more cautious than perhaps the marketplace."
The company's shares, which had initially fallen on his
remarks, later edged higher, but were unchanged at $57.49 at
The stock's zigzag is typical for the company, even when it
beats analysts' expectations.
The CEO uses the call to set the tone for the next year and
is not as pessimistic as he was a year ago, said CRT Capital
Group analyst Sheryl Skolnick.
"They are just being their usual cautious selves," she said.
"There is good reason to be cautious."
For the third quarter, UnitedHealth reported a 23 percent
rise in earnings, helped by higher enrollment and reduced
spending, and the company raised its full-year forecast.
Net income rose to $1.56 billion, or $1.50 per share, from
$1.27 billion, or $1.17 per share, a year earlier. On Oct. 8,
UnitedHealth said it was expecting earnings of at least $1.45
Revenue rose 8 percent to $27.3 billion as the company
enrolled an additional 670,000 people in its health plans, above
its estimate of more than 650,000. UnitedHealth said business
from the U.S. government's Medicaid and Medicare programs had
helped increase revenue.
At $1.50 per share, the earnings were about 25 cents higher
than what analysts had been expecting before the company gave
its $1.45-per-share estimate last week, according to Leerink
Swann analyst Jason Gurda.
The earnings increase reflected both growth from operations
and a gain of about 10 cents per share from reserves to cover
medical claims, he said. When claims come in lower than
forecast, companies can recognize financial gains.
The company said it would provide more information about its
2013 outlook at an investor meeting in November.
BOOST FROM MEDICARE, MEDICAID
Revenue from the Medicare program for the elderly and
UnitedHealth's retirement products increased 13 percent to $10
billion, helped by acquisitions and internal growth, the company
At UnitedHealth's business that includes the Medicaid
program for the poor, revenue rose 12 percent to $3.9 billion as
enrollment increased by 70,000 people.
Revenue at the largest business, employer and individual
plans for which the company administers services, increased 2
percent to $11.6 billion.
In businesses other than healthcare plans, revenue increased
in services and technology, but fell for the pharmacy operations
due to lower prescription volumes. Overall revenue for the group
was $7.2 billion, about flat from a year earlier.
The company spent 79 percent of its premiums on medical
claims during the quarter, which it said was 170 basis points
lower than a year earlier.
Americans' low use of healthcare services due to a weak
economy and high unemployment rate has been a boon for insurers
over the past two years as it reduced medical claims costs.
UnitedHealth raised its 2012 profit forecast to a range of
$5.20 to $5.25 per share from an earlier outlook of $4.90 to
$5.00. Analysts on average had been expecting $5.12 per share,
according to Thomson Reuters I/B/E/S.