UnitedHealth raises 2015 forecast while medical costs weigh

UNITEDHEALTH GROUP Inc., the biggest U.S. health insurer, raised its full-year forecast after saying that profit gained in the second quarter, helped by its booming Optum technology and services unit.
UNITEDHEALTH GROUP Inc., the biggest U.S. health insurer, raised its full-year forecast after saying that profit gained in the second quarter, helped by its booming Optum technology and services unit.

NEW YORK – UnitedHealth Group Inc., the biggest U.S. health insurer, raised its full-year forecast after saying that profit gained in the second quarter, helped by its booming Optum technology and services unit.

Second-quarter net income climbed to $1.59 billion, or $1.64 a share, from $1.41 billion, or $1.42 a share, a year earlier, UnitedHealth said Thursday in a statement. That beat the average analyst estimate of $1.58 a share.

Revenue also increased 11 percent in the second quarter to $36.3 billion from $32.6 billion a year ago.

Medical costs hurt the company, however, and UnitedHealth shares fell 1.5 percent at 9:52 a.m. in New York. UnitedHealth spent 81.4 cents of every premium dollar on patient care in the second quarter, a measure known as the medical loss ratio, compared with 81.6 cents a year earlier. That’s higher than some investors anticipated, said Brian Wright, an analyst with Stern Agee & Leach Inc.

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“We had expected better medical costs in the quarter,” though the long-term business is sound, Wright said in a note to clients

Including the anticipated purchase of Catamaran Corp., UnitedHealth now predicts earnings per share of $6.25 to $6.35, up from an earlier forecast of $6.15 to $6.30. Full-year revenue may be $154 billion, an increase from an estimate of $143 billion.

UnitedHealth is the first U.S. managed-care company to report second-quarter earnings. Investors may look to the results for clues to how the rest of the industry performed. Anthem Inc., the second-largest U.S. health insurer by membership, is scheduled to post results on July 29.

Obamacare

As the industry adjusts to regulatory changes and new customers from the Patient Protection and Affordable Care Act, health insurers are in the midst of a consolidation wave that could reduce the number of big players to three from five. Aetna Inc. struck a $35 billion deal this month to buy Humana Inc., and in June Anthem went public with an offer for Cigna Corp.

UnitedHealth hasn’t stayed on the sidelines. The Minnetonka, Minnesota-based company agreed in March to acquire pharmacy benefits manager Catamaran, which would more than double the number of customers served by OptumRx, the pharmacy management unit that’s part of Optum.

UnitedHealth will continue to be active in deals, CEO Stephen Hemsley said on a call with investors Thursday. The company will “continue to fill in market positions and to build on capabilities,” Hemsley said.

Optum has been growing faster than UnitedHealth’s main insurance business. The unit’s operating earnings rose 19 percent from a year earlier to $864 million, and it recorded $13.6 billion in revenue.

Medical membership rose to 45.9 million as of June 30, from 45.8 million on March 31.

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