UnitedHealth 3Q profit rises 15% to $1.28B

MINNETONKA, Minn. – UnitedHealth Group (NYSE:UNH), the nation’s largest health insurer, today reported a 15-percent increase in third-quarter earnings, as an increase in profitability of government-sponsored medical plans outweighed an increase in expenses for employer-sponsored plans.
For the quarter ended Sept. 30, the company posted a profit of $1.28 billion or 95 cents per diluted share, compared with the year-ago quarter’s profit of 1.11 billion or 80 cents per share. The results beat the 92-cent median prediction from a Bloomberg News survey of 16 analysts.
Third-quarter revenue increased 4.0 percent to $18.68 billion, from the year-ago $17.97 billion. But revenue fell compared with the second quarter’s $19.00 billion, “as business growth in the quarter was more than offset by the timing of revenue recognition for Medicare products,” the company report said.
Among segments, UnitedHealthcare revenue rose to $8.95 billion from the year-ago $7.78 billion; Ovations revenue rose to $6.58 billion from the year-ago $6.39 billion; AmeriChoice revenue rose to $1.15 billion from the year-ago $0.95 billion; and Health Care Services revenue rose to $16.69 billion from $16.12 billion in the third quarter of 2006. Uniprise revenue edged up to $1.41 billion from the year-ago period’s $1.37 billion; Specialized Care Services’ rose to $1.16 from the year-ago $0.99; and Igenix revenue increased to $0.35 billion from the year-ago $0.25 billion. The Eliminations segment’s loss widened to $0.94 billion, from the year-ago period’s $0.77 billion.
Earnings from operations rose 16.1 percent to $2.16 billion from the year-ago $1.86 billion. The company’s consolidated operating margin expanded to 11.5 percent from the year-ago 10.4 percent, due to margin gains in the Health Care Services segment.
But third-quarter operating costs increased to 14.0 percent of revenue, from 13.5 percent in the year-ago period. The company cited growth in “higher-margin, fee-based businesses such as Igenix,” together with increased investment in technology, service and product enhancements and preparations for the Medicare Advantage marketing season.
Highlights of the quarter included the repurchase of 41 million common shares, for about $2 billion.
“Our diversified health-care service enterprise continued to perform well, with strong results from businesses such as AmeriChoice in Medicaid, Evercare in specialized senior programs, SecureHorizons in Medicare Advantage, Golden Rule in individual insurance and Ingenix in health informatics,” Stephen J. Hemsley, UnitedHealth’s president and CEO, said in a 6 a.m. statement.
“We have expanded our network of care providers, meaningfully strengthened service performance for customers and care providers, increased our engagement with health system stakeholders, and are poised for a strong fourth-quarter launch of AARP-branded Medicare products for 2008.”
For the full year, UnitedHealth Group now projects 2007 earnings of $3.49 to $3.50 per share, or 18 percent more than in 2006. Fourth-quarter earnings are expected to be slightly lower than the third quarter’s, due to projected seasonal increases in sales and marketing costs for Medicare Advantage and health-care costs for UnitedHealth.
“They’re essentially guiding down for the fourth quarter,” Sheryl Skolnick, an analyst with CRT Capital Group in Stamford, Conn., told Bloomberg News..
For 2008, the company is targeting earnings of $3.95 to $4.00 per share – including the effect of the Sierra Health Services acquisition, expected to close before the end of 2007, and a $7 billion share- repurchase program slated to begin in the current quarter.
UnitedHealth Group (NYSE:UNH) is a diversified health and well-being company based in Minnetonka, Minn. It offers a broad spectrum of products and services through six operating businesses – UnitedHealthcare, Ovations, AmeriChoice, Uniprise, Specialized Care Services and Ingenix – serving about 70 million individuals nationwide. Additional information is available at www.unitedhealthgroup.com.