News Column

UnitedHealth 2Q profit narrows but handily beats estimates

July 17, 2014

By Evan Ramstad, Star Tribune (Minneapolis)

July 17--UnitedHealth Group's second-quarter profit slipped 2 percent on taxes and other expenses, but revenue grew sharply on payments from government programs and fast growth of its data services business.

The nation's largest health insurer raised its outlook for the rest of the year and chief executive Stephen Helmsley said Thursday it would expand its participation on government-run insurance exchanges to around two dozen states next year from four this year.

UnitedHealth's net profit fell to $1.41 billion from $1.44 billion a year earlier. On a per-share basis, profit rose to $1.42 from $1.40 and was far above analysts' forecasts of $1.26.

Revenue also came in above expectations, jumping 7 percent to $32.6 billion.

UnitedHealth shares, which have been trading at record levels for much of this year, climbed 3 percent in the first hour of trading today to a new intraday high.

The Minnetonka-based company, Minnesota's largest by revenue, gets about two-thirds of its revenue from insurance and one-third from its Optum subsidiary, which provides insurance-related data services to hospitals, government agencies and employers. Optum grew 28% in the latest period, far outpacing the bigger business.

In addition to Optum, UnitedHealth said revenue growth was led by its public and senior markets and by its pharmacy services business.

It said the effects of the federal health care reform law, or Affordable Care Act, reduced its after-tax profit margin of 4.3 percent by 90 basis points. Its taxes grew by nearly 6 percentage points to 41.3 percent due to the law.

But UnitedHealth also said that medical cost trends "remained moderate and consistent with expectations." Its medical care ratio, the portion of insurance premiums used for health care, rose to 81.6 percent from 81.5 percent. And the company will join the insurance offerings through the government exchange in more states.

The company told investors to expect full-year revenue of around $130 billion, up from its previous guidance of $128 billion. It narrowed its profit range to $5.50 to $5.60 a share, the upper half of its previous guidance of $5.40 to $5.60 a share.

Evan Ramstad -- 612-673-4241


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Source: Star Tribune (Minneapolis, MN)

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