UnitedHealth Group Inc. lifted the lower end of its annual profit forecast as lower-than-expected-medical costs helped the company beat quarterly earnings estimates.
(Bloomberg) — UnitedHealth Group Inc.
lifted the lower end of its annual profit forecast as lower-than-expected-medical costs helped the company beat quarterly earnings estimates.
Full-year adjusted earnings will be $24.85 to $25 a share, the health insurer said Friday in a statement, an increase of 15 cents at the lower end of the range.
Third-quarter profit was $6.56 a share, while Wall Street expected $6.32.
The shares rose as much as 3.5% at the New York market open, their biggest intraday gain since July. The news lifted stocks of other insurers including Humana Inc., Cigna Group and Elevance Health Inc.
UnitedHealth also said analysts’ estimates for 2024 adjusted earnings — currently at $27.87 a share according to data compiled by Bloomberg — is consistent with the initial outlook range the company expects to offer next month at its investor conference.
The company is the first and largest health insurer to report results and is seen as a bellwether for the sector.
Earlier this year, its management said they were seeing an increase in medical expenses with people getting procedures they’d put off during the height of the pandemic, sparking a selloff in health insurance stocks.
But in the third quarter, spending wasn’t as high as expected: UnitedHealth’s medical-loss ratio, a measure of how much premium revenue goes to pay for care, was just 82.3%, beating analysts’ view of 82.8%.
Some analysts said before the report that they expected any rise in medical costs to be manageable.
“The leading carriers have enough agility to meet earnings expectations” despite increases in care expenses, RBC Capital Markets analyst Ben Hendrix said Oct. 9 in a research note.
Overall revenue rose 14% to $92.4 billion, handily beating estimates.
The company’s Optum Health unit, which includes physician groups and other care delivery, saw operating income decline by 0.4%, the first annual drop since 2014, according to a separate RBC note Friday.
Investments in value-based care, in which doctors take on financial risk for the full cost of patients’ medical needs, have tightened margins before, RBC said.
Moving more patients into those arrangements has driven growth at UnitedHealth’s Optum services division. Optum results may have been affected by severance expenses for layoffs, TD Cowen analyst Gary Taylor wrote.
(Updates with shares, Optum Health details starting in third paragraph)
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