Insurer UnitedHealth Group Inc. said Tuesday its third-quarter profit jumped 23 percent, propelled in part by premium growth, enrollment gains and moderate healthcare use.
The Minnetonka, Minn., managed care company also raised its 2010 profit expectation for the second time this year. It now expects earnings per share to range from $3.85 to $3.95, up from a previous forecast of $3.40 to $3.60 per share.
Analysts polled by Thomson Reuters expect, on average, earnings of $3.60 per share.
The performance, coupled with the big profit guidance increase "couldn't come at a worse time politically," Citi analyst Carl McDonald said in a research note.
Health insurers have fallen under greater government scrutiny since the federal government passed healthcare reform to expand coverage of the uninsured earlier this year. The Department of Health and Human Services is still working out particulars of the law, including how to enforce minimum medical loss ratios that will start next year.
Those ratios measure the percentage of revenue from premiums an insurer spends on medical care. The government still has to decide how much flexibility it will grant in making insurers abide by these minimums or pay refunds to consumers.
"United beating its initial earnings guidance this year by over $1.6 billion pre-tax certainly doesn't help the industry's cause," McDonald said.
UnitedHealth earned $1.28 billion, or $1.14 per share, in the three months that ended Sept 30. That's up from the $1.04 billion, or 89 cents per share, it earned in the same quarter last year.
Revenue was up 9 percent to $23.67 billion, led by a 9 percent jump in premiums to $21.47 billion.
Analysts polled by Thomson Reuters forecast earnings of 84 cents per share on about $23 billion in revenue.
The insurer's total health benefits enrollment climbed 2 percent to 32.7 million. Its commercial enrollment, which includes employer-sponsored group coverage and individual plans, fell less than 1 percent to 24.7 million, compared with the same quarter last year.
Health insurers struggled with commercial enrollment losses during the recession, as employers cut jobs and reduced the number of covered people. But that appears to be moderating.
Last year, UnitedHealth's commercial enrollment dropped 6 percent in the third quarter compared with the same quarter in 2008.
UnitedHealth said "moderated" use of healthcare helped push down its commercial medical loss ratio to 80.9 percent from 84.6 percent.
The insurer also benefited in the third quarter because claims leftover from previous quarters came in lower than expected. The company said it realized $230 million in favorable prior-period reserve development compared with $190 million in last year's third quarter.
UnitedHealth is the largest publicly traded health insurer based on total revenue and the second-largest based on enrollment, trailing only WellPoint Inc. It is the first big health insurer to release its earnings every quarter, and many analysts and investors see it as a bellwether for the sector.
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