UnitedHealth Group posts 23 percent profit jump

Oct. 18--UnitedHealth Group's shares advanced 5 percent in morning trading after the nation's largest health insurer beat analyst expectations for third-quarter earnings and raised its financial guidance for the year.

Its profit was up 23 percent over the same period last year, as Minnetonka-based UnitedHealth Group saw both enrollment growth and more revenue from its Optum division for health services.

Medical costs during the quarter grew more slowly than expected by analysts, and chief executive Stephen Hemsley said he expected the strong performance to continue into 2017.

For the first time in several quarters, UnitedHealth Group officials had little to say about the struggling business selling coverage through new government-run health exchanges launched under the federal Affordable Care Act. The financials losses continued during the third quarter, the company said, but fell within expectations.

"The exchange nightmare is likely soon to be over," wrote Sheryl Skolnick, an analyst with Mizuho Securities USA, in a note to investors. UnitedHealth Group is dropping out next year of exchanges in most states where it currently competes.

UnitedHealthcare did better than expected enrolling subscribers in Medicare Advantage plans, fully-insured commercial products and state Medicaid programs, wrote Ana Gupte, an analyst with Leerink, in a note to investors. At Optum, revenue grew and profit margins expanded in all three primary segments, Gupte said.

Optum is hired by health plans to manage pharmaceutical benefits. It also sells IT services to insurers, clinics and hospitals. Finally, the company provides direct care through clinics that it owns and partnerships with physician practices.

Optum's MedExpress business is the nation's largest urgent care provider, and is currently expanding into the Twin Cities. The company has plans for up to 19 urgent care centers in Minnesota by the end of 2017.

In early trading, the company's share's were trading up more than 5 percent at $141.74.

"As we move toward 2017, our enterprise is well positioned," Hemsley said during a conference call with investors. "You can hear the optimism."

Overall for the third quarter, UnitedHealth Group posted $1.97 billion in net income on $46.3 billion in revenue. It earned $1.6 billion on $41.5 billion in revenue in the year-ago quarter.

On a per-share basis, UnitedHealth Group's adjusted earnings were $2.17, which exceeded the $2.08 per share that was the consensus forecast of analysts surveyed at Thomson Reuters.

The company was providing coverage to 44.1 million people in the U.S. at the end of the third quarter, up from 43.9 million subscribers at the end of June and 42.3 million people a year ago.

UnitedHealth said it now expects full-year adjusted earnings to be about $8 a share, up from its previous forecast that was a range of $7.80 to $7.95 a share. It's the second quarter in a row that the company has become more optimistic about its full-year performance.

UnitedHealth is the Minnesota's largest publicly-traded firm by revenue and market capitalization and employs about 15,000 in the state.

Twitter: @chrissnowbeck

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