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MarketScreener Homepage  >  Equities  >  Nyse  >  UnitedHealth Group    UNH


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UnitedHealth Net Falls on Medical Costs

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01/17/2013 | 07:16am EDT

--Earnings down slightly on less excess reserves

--EPS still tops Street, but not by wide margins as in recent quarters

--CEO expresses confidence in coming years

UnitedHealth Group Inc.'s (>> UnitedHealth Group Inc.) fourth-quarter earnings slipped slightly as the health insurer benefited less from excess reserves set aside to cover member costs.

Revenue, though, surged on growing membership, and the company saw improved profits in its big health-services business.

The Minnetonka, Minn., company squeaked in ahead of Wall Street's per-share earnings expectations for the quarter, although not by the same margin as in recent quarters. UnitedHealth also backed financial forecasts for the current year while Chief Executive Stephen Hemsley expressed confidence about the longer road ahead.

UnitedHealth and other managed-care companies are bracing for big changes starting next year, when major parts of the health-care overhaul law click into place, bringing a mix of coverage-expanding benefits and costs. Mr. Hemsley said UnitedHealth believes it can grow earnings in 2014.

Also, "2014, 2015 and beyond hold the potential to be periods of positive growth and opportunity for our businesses," Mr. Hemsley said on a conference call Thursday.

The CEO indicated UnitedHealth broadly plans to compete on state-based exchanges set to open later this year under the health law, creating new marketplaces for people to seek coverage. But like executives at other big insurers, Mr. Hemsley voiced caution as the marketplace evolves, and he loosely framed his company's fluid plans.

He said UnitedHealth could participate in 10 to 25 or more exchanges, but with no firm commitment.

Shares of the industry bellwether were up 0.5% to $53.91 in recent trading, and other major insurers, including Aetna Inc. (>> Aetna Inc.) and WellPoint Inc. (>> WellPoint, Inc.), also gained.

The "results look quite solid even though lacking the upside of prior [UnitedHealth] quarters" last year, Goldman Sachs analyst Matthew Borsch said.

UnitedHealth reported a profit of $1.24 billion, or $1.20 a share, compared with $1.26 billion, or $1.17 a share, a year earlier. The company had fewer shares outstanding in the recent quarter.

Revenue jumped 11% to $28.77 billion. Analysts polled by Thomson Reuters had forecast earnings of $1.19 a share on revenue of $28.24 billion.

Revenue got a boost from UnitedHealth's recent purchase of a majority stake in Brazilian insurer and hospital operator Amil Participacoes SA (AMPIY, AMIL3.BR). UnitedHealth owns 65% of Amil and expects to buy an additional 25% in the first half of this year. The total deal is valued at about $4.3 billion in cash.

UnitedHealth's consolidated medical-care ratio, which reflects the portion of insurance premiums used for patient care, increased to 80.5% in the fourth quarter from 79.7% a year earlier. The increase reflects the smaller level of excess reserves.

When patients rack up fewer bills than expected, the extra money set aside to cover costs can benefit earnings. While this happened again, UnitedHealth saw a bigger boost a year earlier, when health insurers were broadly benefiting from muted health-care usage trends because of the economic downturn.

UnitedHealth said medical costs for its commercial health-insurance business rose less than expected last year, even though an active flu season has members seeking more care. The company backed its forecast for how much costs will rise this year, and Mr. Hemsley reassured analysts on the call that UnitedHealth is confident about its pricing in the marketplace.

Analysts and investors often focus on whether health insurers set prices well enough to cover increasing health costs, and this has been a pressing question recently after an analyst report raised concern about the issue. Mr. Hemsley described 2013 pricing as "competitive, but better than 2012 for us."

UnitedHealth's insurance business saw its revenue increase 11% to $26.9 billion in the recent quarter.

Revenue from Optum, the company's information- and technology-based health-services business, declined 1.3% to $7.5 billion, but the operating margin there rose to 6.1% from 3.7% a year earlier. UnitedHealth cited growth in higher margin products and efficiency improvements.

The company ended the year with 40.9 million medical members, including members added through the Amil deal, up 18% from a year earlier.

-Melodie Warner contributed to this article.

Write to Jon Kamp at jon.kamp@dowjones.com

Subscribe to WSJ: http://online.wsj.com?mod=djnwires

Stocks mentioned in the article : UnitedHealth Group Inc., Aetna Inc., WellPoint, Inc.
Stocks mentioned in the article
ChangeLast1st jan.
UNITEDHEALTH GROUP 0.75% 266.65 Delayed Quote.6.24%
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Financials (USD)
Sales 2019 245 B
EBIT 2019 19 184 M
Net income 2019 13 581 M
Debt 2019 21 622 M
Yield 2019 1,47%
P/E ratio 2019 19,1x
P/E ratio 2020 16,8x
EV / Sales2019 1,12x
EV / Sales2020 1,03x
Capitalization 253 B
Duration : Period :
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Technical analysis trends UNITEDHEALTH GROUP
Short TermMid-TermLong Term
Income Statement Evolution
Mean consensus BUY
Number of Analysts 26
Average target price 289,60  $
Last Close Price 266,65  $
Spread / Highest target 29,4%
Spread / Average Target 8,61%
Spread / Lowest Target -11,9%
EPS Revisions
David Scott Wichmann Chief Executive Officer & Director
Stephen J. Hemsley Executive Chairman
John Franklin Rex Chief Financial Officer
Richard J. Migliori Chief Medical Officer & EVP-Medical Affairs
Richard T. Burke Non-Executive Chairman
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1st jan.Capitalization (M$)