* 2nd-quarter EPS beats Street view by 15 cents
* Shares rise 6 pct, boosting other health insurers
* Company strikes more positive tone on private Medicare
(Adds CEO comments, analyst comments, updates share price)
By Caroline Humer
July 18 UnitedHealth Group Inc posted a
bigger-than-expected rise in quarterly profit as it enrolled
more people in private and government-sponsored health insurance
plans and said it expects long-term growth after U.S. healthcare
reform takes effect.
Shares rose nearly 6 percent on Thursday as the company said
it was "strongly positive" about the future despite near-term
challenges tied to decreased funding for its privately run
Medicare Advantage health plans for seniors and costs related to
President Barack Obama's healthcare law.
UnitedHealth, the largest U.S. health insurer, and
competitors are preparing to enroll new members, and cope with
new taxes next year, as key elements of "Obamacare" take effect.
The government will expand the Medicaid program for the poor in
many states, and state-based health exchanges will start selling
subsidized insurance to individuals. About 7 million people are
expected to sign up for insurance next year.
UnitedHealth is planning to sell insurance plans on only
about a dozen exchanges next year but said it sees the exchanges
as a possible growth market in the future.
Describing private Medicare as "seriously underfunded" based
on previously announced cuts in government payments,
UnitedHealth's CEO, Stephen Hemsley, said the company was still
committed to the program.
"The company took a more balanced view on Medicare Advantage
than it had on the first-quarter conference call," said Chris
Rigg, analyst at Susquehanna Financial. "Given that Medicare
Advantage has been a growth-driver, those comments are obviously
helping the stock."
UnitedHealth reported a profit of $1.44 billion, or $1.40
per share, in the second quarter, outstripping expectations.
That compared with $1.34 billion or $1.27 per share a year
Analysts had forecast earnings of $1.25 per share according
to ThomsonReuters I/B/E/S.
Revenue rose to $30.4 billion. Analysts had expected $30.5
The results pulled up shares of UnitedHealth competitors,
including WellPoint Inc, which reports earnings next
week, Aetna Inc and Cigna Corp. Shares of Humana
Inc, which mostly sells private Medicare plans, were up
2.9 percent at $87.92 at midday on Thursday.
TIGHTENS FORECAST FOR 2013
UnitedHealth raised the low end of its 2013 outlook by 10
cents a share to $5.35 while keeping the high end at $5.50.
Analysts had forecast $5.44.
It said the number of people enrolled in its insurance
plans, including through small businesses, large corporations,
the military, Medicare Advantage and Medicaid, was 89.2 million
at the end of June, up from 86 million at the end of March.
The company said it had spent 81.5 percent of its premiums
on medical claims during the quarter, an increase of 20 basis
points from a year earlier.
In its commercial business where it sells insurance to
employers, the company said this ratio fell.
The health reform law sets targets for this ratio. It has
also required many insurance plans to include more free
Even so, insurers have continued to book profits as they
benefited from Americans' reduced use of medical services over
the past several years, which means fewer claims to pay.
Operating earnings were flat in the company's insurance
business and increased in the Optum health technology unit,
The government's decision early this month to roll back a
portion of the health law that would have required employers
with more than 50 workers to provide insurance or pay a fine has
had no significant impact on its business, a top UnitedHealth
"Employers who currently offer insurance are going to
continue to do that," said Gail Boudreaux, who runs that
business. "There is a lot of change coming to the marketplace
and the intense focus is around affordability."
The company recently announced plans to expand the number of
enrolled members in plans that are based on some sort of shared
cost savings, such as accountable care organizations.
A shift to more products with high deductibles in which
consumers bear more up-front health costs, called
consumer-directed health care products, continued as membership
in these plans grew 18 percent year-over-year to 5.7 million
consumers at the end of June, the company said.
UnitedHealth shares were up 5.9 percent at $70.13 at midday
Thursday on the New York Stock Exchange.
(Editing by Lisa Von Ahn and Matthew Lewis)