(Bloomberg News circulated the following story by Alex Nussbaum on January 21, 2010.)
NEW YORK — UnitedHealth Group Inc., the biggest U.S. health insurer by revenue, beat analysts’ estimates for fourth-quarter profit as sales of coverage for the elderly grew and costs for treating swine flu tapered off.
Net income rose 30 percent to $944 million, or 81 cents a share, from $726 million, or 60 cents, a year earlier, when a $350 million legal settlement damped results, the Minnetonka, Minnesota-based company said today in a statement. Revenue also beat estimates.
Chief Executive Officer Stephen Hemsley expanded UnitedHealth’s enrollment in government-subsidized Medicare Advantage plans for people 65 and older by 20 percent in the quarter, even as the recession cut demand for employer-backed coverage. The company forecast in December that the membership losses in commercial plans would continue this year, while at a slower rate than before.
“Any positive comments about the 2010 operating environment would be welcome,” said Steven Shubitz, an Edwards Jones & Co. analyst in St. Louis. “Right now, the market’s expecting 2010 is going to be difficult all around for managed care.”
UnitedHealth predicted adjusted 2010 earnings of $2.90 to $3.10 a share, reaffirming its Dec. 1 forecast. The company said then that it expects losses in commercial insurance plans to slow this year even as the unemployment rate holds at about 10 percent.
52-Week High
The company’s shares sell for more than twice their 52-week low of $16.18, reached on March 5. They touched a 12-month high of $36.07 yesterday in New York Stock Exchange composite trading, after a Republican victory in Massachusetts’ U.S. Senate election dimmed Democrats’ hopes of passing an overhaul of U.S. health care.
The earnings beat the 73 cent average estimate of 17 analysts in a Bloomberg survey.
Profit was boosted by more than $2 billion in share buybacks, Shubitz said. Earnings in 2008’s fourth quarter were also cut by 18 cents after UnitedHealth settled an American Medical Association lawsuit that claimed the insurer had manipulated payments to out-of-network doctors.
The $350 million cost of the legal settlement, announced in January 2009, was booked in the fourth quarter of 2008.
Medical Costs
The company spent 81.3 percent of its fourth-quarter 2009 premiums on medical costs, compared with 80.8 percent a year earlier. The 2009 number was “better than expected,” partly due to a drop-off in costs for treating people in the outbreak of H1N1, or swine flu, the insurer said in its statement.
Enrollment fell to 32 million, from 32.9 million a year earlier. That included a 9.1 percent drop in UnitedHealth’s biggest revenue generator, policies in which the company assumes the financial risks of providing care for workers with job-based insurance. The company covered 9.4 million people in such plans.
Medicare membership was 4.5 million, compared with 4 million people a year earlier. Enrollment in plans administered for Medicaid, the government program for the poor, rose to 2.9 million from 2.5 million.
WellPoint Inc. of Indianapolis, the biggest insurer by enrollment, is due to report its earnings Jan. 27.