Health Insurer Raises View -- WSJ
July 19 2017 - 03:03AM
Dow Jones News
By Justina Vasquez and Anna Wilde Mathews
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (July 19, 2017).
UnitedHealth Group Inc. reported profit growth in the second
quarter and raised its projections for the year, fueled by its
Optum health-services arm, which highlighted the company's ongoing
expansion of its role as a health-care provider and data-analysis
shop.
The biggest U.S. insurer has almost completely exited the
Affordable Care Act marketplaces this year, which created a drag on
revenue but also reduced pressure on UnitedHealth's earnings, as
the company's net margin rose to 4.6% from 3.8% a year earlier.
That decision reduces the company's immediate exposure to the
ongoing uncertainty in Washington. Republicans' efforts to pass a
broad health overhaul bill through the Senate ran into potentially
fatal resistance from Republican Senators Monday night, and
Republicans said they would consider moving to repeal the ACA, with
the shift taking effect in two years. Like other insurers,
UnitedHealth may next year face the resumption of an ACA tax that
is currently under a moratorium and had been expected to be
repealed if Republican health-overhaul legislation passed.
During a call with analysts, UnitedHealth Chief Executive
Stephen J. Hemsley generally steered clear of discussing the
legislative state of play, referring briefly to uncertainty around
national and state policy as a headwind for 2018 and declining to
speculate about next steps. He also reiterated the company's
opposition to the health-insurance tax, which he said was a
specific headwind for next year and which he said would, if not
canceled, "further destabilize the market, which is already
fragile."
While UnitedHealth didn't offer specifics about its 2018
outlook, Mr. Hemsley offered broadly optimistic comments about the
company's growth prospects.
UnitedHealth on Tuesday raised its adjusted earnings-per-share
guidance for the year to between $9.75 and $9.90, from between
$9.65 and $9.85 previously.
Revenue rose 7.7% to $50.05 billion, slowed by withdrawals from
ACA individual markets, combined with the 2017 ACA
health-insurance-tax deferral. Revenue from the Medicare business
rose 17% to $16.7 billion. Optum's growth was tied to its OptumRx
pharmacy-benefit management unit and its OptumCare ambulatory-care
business, among other factors.
Analysts surveyed by Thomson Reuters had expected $50.06 billion
in revenue.
UnitedHealth once again highlighted its rapidly growing
footprint as a health-care provider, which was underscored by the
recent acquisition of Surgical Care Affiliates Inc. The company
said that Surgical Care Affiliates started a half-dozen new
outpatient facilities so far this year, while its MedExpress
urgent-care unit added 20 new clinics and it took over two new
physician practices. UnitedHealth said it feels it is in the "early
stages" of major expansion in its health-care provider
business.
Optum overall saw earnings from operations grow 21% to $1.5
billion.
On the insurance side, UnitedHealthcare's medical-loss ratio --
the percentage of premiums paid in claims -- increased less than
some analysts had projected, as the health-insurance tax deferral
was offset by an improved business mix, product performance and
favorable reserve development. It rose by 20 basis points
year-over-year to 82.2%.
The Minnetonka, Minn.-based company recorded a profit of $2.28
billion, or $2.46 a share, compared with $1.75 billion, or $1.81
per share, a year ago. Excluding certain items, UnitedHealth earned
$2.32 a share, compared with $1.96 a year ago. Analysts had
anticipated the company reporting a profit of $2.23 a share.
Shares in UnitedHealth, up 32% from a year ago, edged down 0.9%
on Tuesday.
Correction to UnitedHealth story Optum is UnitedHealth's
health-services arm. An earlier version of this article incorrectly
stated the unit was UnitedHealth's health-benefits platform. (July
18, 2017)
Write to Justina Vasquez at justina.vasquez@wsj.com and Anna
Wilde Mathews at anna.mathews@wsj.com
(END) Dow Jones Newswires
July 19, 2017 02:48 ET (06:48 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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