April 21, 2009 / 10:21 AM / 10 years ago

UnitedHealth profit slips, but results beat Street

NEW YORK (Reuters) - UnitedHealth Group Inc (UNH.N) posted sharply higher-than-expected quarterly profit on Tuesday, sending its shares up 4.5 percent as the insurer also retained more customers than anticipated.

The largest U.S. health insurer by market value added more people to its Medicare plans for seniors and saw medical costs eat less into premium revenue than analysts expected. Despite the earnings beat, UnitedHealth kept its 2009 profit forecast, citing economic uncertainty.

UnitedHealth kicked off the reporting season for health insurers, whose shares have been battered by disappointing 2008 results, the weak economy and uncertainty over the financial impact of potential U.S. health reform measures.

First-quarter net income fell to $984 million, or 81 cents per share, from $994 million, or 78 cents per share, a year earlier, when Minneapolis-based UnitedHealth had more shares outstanding.

The results beat the analysts’ average forecast by 14 cents a share, according to Reuters Estimates.

“Results appear to be stronger than expected across all key metrics,” Goldman Sachs analyst Matthew Borsch said in a research note.

Revenue rose 8.4 percent to $22 billion.

UnitedHealth’s membership in its commercial plans stood at 25.44 million on March 31, a decline of 905,000 from the end of 2008. Some 445,000 fewer people were enrolled in the more lucrative plans for which the company assumes full insurance risk.

But the decline was less steep than UnitedHealth had feared, as the company retained more customers than expected.

Overall membership stood at 32.43 million, up slightly from a year ago. The company added 200,000 people to its Medicare plans, already ahead of its 2009 target.

The fewer-than-expected membership declines “indicates to us that corrections put in place over the last year to improve service are finally gaining tangible traction,” BMO Capital Markets analyst Dave Shove said in a research note.

UnitedHealth’s medical care ratio, a key measure of premium revenue spent on medical costs, was flat at 82.4 percent. The result was better than the 83.8 percent expected by UBS analysts.

A weaker flu season than a year ago helped moderate medical costs, the company said.

Profit at the company’s prescription benefit unit jumped 43 percent to $140 million, helped by volume growth.

UnitedHealth continues to forecast 2009 earnings of $2.90 to $3.15 per share, saying the broad range reflects the uncertain economic climate.

Wachovia analyst Matt Perry said management’s cautious outlook also reflected the company’s recent earnings misses.

UnitedHealth shares rose to $25.30 in premarket trading from Monday’s close of $24.21 on the New York Stock Exchange.

Through Monday, shares of UnitedHealth had fallen about 9 percent in 2009, compared with a 7 percent drop for the S&P Managed Health Care index .GSPHMO.

Reporting by Lewis Krauskopf; Editing by Lisa Von Ahn

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