UnitedHealth earnings fall but top expectations

[April 21, 2009]  MINNEAPOLIS (AP) -- Health insurer UnitedHealth Group Inc. posted a slightly smaller profit on a decline in investment income and higher costs but still topped analyst expectations.

Enrollment fell in higher-margin employer-sponsored plans, the Minnetonka, Minn.-based health insurer said, while rising in less-profitable government-sponsored and senior citizen plans. The company said investment and other income fell 43 percent to $158 million because of the difficult market.

Earnings fell to $984 million or 81 cents per share. That's down from $994 million or 78 cents per share in last year's first quarter.

Revenue rose to 8.4 percent to $22 billion from $20.3 billion because of growth in senior and government plans, as well as acquisitions.

Analysts were expecting earnings of 68 cents per share on revenue of $21.37 billion.

The share of premiums paid out to cover medical claims stayed flat at 82.4 percent. Enrollment fell slightly.

Operating profit margins in the company's health care services segment fell eight-tenths of a percentage point to 6.4 percent because of the shift from privately sponsored plans and growth in senior and government plans. As unemployment has risen, many insurers have seen their employer-sponsored business shrink or grow more slowly.

The growth in government-sponsored business could raise concerns among investors already worried about a planned tightening of federal reimbursement rates in the Medicare Advantage program.

Shares of UnitedHealth and several other insurers also dipped in late February and early March after President Barack Obama unveiled a proposed budget that includes smaller Medicare Advantage payments to insurers. The possibility of reduced payments for these rapidly growing, privately administered plans remains a concern.

The sector has also been hit by broader fears about the future of Obama's effort to rework the U.S. health care system and what effect it might have on private insurers.

UnitedHealth backed its outlook for full-year earnings of $2.90 to $3.15 per share, though it said the broad range reflected the uncertain economy.

[Associated Press]

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