UnitedHealth Gives Cautious Early View Of 2012 Trends

Managed-care operator UnitedHealth Group Inc. (UNH) signaled Tuesday that it will face tough earnings comparisons in 2012 amid a host of factors including high unemployment, patients seeking more care and costs pegged to the U.S. health-care overhaul.

The Minnetonka, Minn., company has steadily boosted its 2011 earnings forecast throughout this year, as it did for a third time on Tuesday, when quarterly results again beat Wall Street forecasts. But Chief Executive Stephen Hemsley signaled during a conference call that UnitedHealth is taking a cautious approach as it looks ahead.

"We are realistic about the challenging current market environment and the challenging earnings comparisons we will face in 2012," Hemsley said.

He said the company "will incorporate this cautious view" when it provides its 2012 outlook at an investor conference on Nov. 29. UnitedHealth didn't given any specifics on 2012 guidance numbers. Hemsley said the company expects to achieve "an earnings per share advance" in the coming year.

The company's shares fell 6.1% to $43.76 in recent trading. They are up about 21% on the year. Among other insurers, Aetna Inc. (AET) recently traded down 3.6% to $36.15 and WellPoint Inc. (WLP) traded off 3.3% to $63.46.

UnitedHealth's long-term growth prospects are "excellent," Hemsley said. The company isn't discouraged and has a lot of growth opportunities, but it is setting a careful tone in a challenging environment, he said.

"Caution is the appropriate tone to set at this stage," Hemsley said.

Looking ahead, UnitedHealth projects medical utilization will trend toward more normal historical and seasonal levels in the fourth quarter and heading into next year, Hemsley said. He noted that, while UnitedHealth has benefited this year from strong reserves that reflect prior overestimates on what it would have to pay for patient claims, reserve development next year will be affected by rebate calculations required by the health-care overhaul law.

Operating costs next year will continue to reflect investments in compliance and health-overhaul readiness, Hemsley said. The company is also investing to bolster its OptumRx pharmacy-benefit business ahead of a move in 2013 to bring a substantial amount of business in-house that is currently handled by Medco Health Solutions Inc. (MHS).

Meantime, the company expects unemployment to remain a continued problem next year. A low rate of new business formation will extend pressures on employment levels and overall growth in the commercial benefits business, Hemsley said.

-By Jon Kamp, Dow Jones Newswires; 617-654-6728; jon.kamp@dowjones.com

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