UnitedHealth improves profit view as medical costs remain low

The UnitedHealth Group corporate logo is seen on the side of one of their office buildings in Santa Ana, California, U.S., April 13, 2020. REUTERS/Mike Blake

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July 15 (Reuters) – UnitedHealth Group Inc (UNH.N) on Friday raised its full-year profit forecast for the second time this year, after the company beat quarterly earnings estimates due to lower medical costs in its health insurance business.

Shares of the largest US health care company by market value rose nearly 2% in premarket trading.

Analysts said lower demand for elective healthcare procedures has helped UnitedHealth control medical costs, which bodes well for other insurers, including Cigna Corp (CI.N), CVS Health and Elevance Health Inc (ELV.N).

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UnitedHealth offers government and employer supported health plans, and also operates the Optum Unit which provides pharmacy benefits and medical services, including primary care and home care appointments.

UnitedHealth’s medical costs have been in constant flux throughout the pandemic, with lower spending on elective healthcare procedures offsetting some of the impact of costs related to COVID-19 vaccinations, treatment and testing. .

While demand for medical care has improved with a decline in COVID cases from their January highs, the pace of surgeries has still not fully recovered as hospitals grapple with an acute shortage healthcare personnel, benefiting UnitedHealth’s health insurance business.

The company’s medical care ratio (MCR), or percentage of premiums paid for services, fell to 81.5% in the quarter, versus expectations of 83%, according to Refinitiv data.

The magnitude of the beating indicates that the delayed surgical procedures have not fully recovered, Evercore ISI analyst Michael Newshel said in a note.

Revenue for UnitedHealth’s Optum unit rose 18% to $45.1 billion from a year earlier, constituting more than half of the company’s revenue in the quarter.

UnitedHealth said it now expects adjusted earnings for 2022 to be between $21.40 and $21.90 per share, down from $21.20 to $21.70 per share forecast earlier.

The company reported total sales of $80.33 billion, beating estimates of $79.68 billion. Adjusted earnings of $5.57 per share also beat estimates of $5.20 per share.

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Reporting by Amruta Khandekar and Manas Mishra in Bengaluru; Editing by Vinay Dwivedi

Our standards: The Thomson Reuters Trust Principles.

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