BUSINESS

Insurer UnitedHealth tops 3rd quarter expectations, raises 2014 forecast

10/16/2014 07:46 EDT | Updated 12/16/2014 05:59 EST
UnitedHealth Group's third-quarter earnings inched up 2 per cent but that was enough to help the nation's largest health insurer trump Wall Street expectations and raise its 2014 forecast for the first time this year.

The Minneapolis-based insurer said Thursday that health care use continues to remain restrained, due in part to its medical management push. Revenue from its Optum information technology services business segment jumped 21 per cent in the quarter.

Its shares rose more than 4 per cent in afternoon trading.

Overall, UnitedHealth earned $1.6 billion, or $1.63 per share, in the quarter that ended Sept. 30. That compares to earnings of $1.57 billion, or $1.53 per share, last year. Revenue climbed 7 per cent to $32.76 billion.

Analysts expected, on average, earnings of $1.53 per share on $32.68 billion in revenue, according to Zacks Investment Research.

Health insurance is UnitedHealth's largest business by far, and the insurer covered nearly 45 million people in the third quarter, about 1 per cent less than it did in last year's quarter. The company's biggest expense, medical costs, climbed 5 per cent to $23.1 billion in the quarter after soaring 13 per cent in last year's quarter.

Investors and analysts have been watching this growth for signs that it might speed up faster than insurers expect, which can affect their pricing and forecasts. UnitedHealth is the first insurer to report earnings every quarter, and many see it as a bellwether for the sector.

Revenue from UnitedHealth's Optum business climbed to $12 billion in the third quarter.

The insurer now expects full-year, 2014 earnings to range between $5.60 and $5.65 per share. That's up from its previous forecast for $5.50 to $5.60 per share.

Analysts expect $5.58 per share.

Shares of UnitedHealth, a component of the Dow Jones industrial average, rose $3.49, or 4.3 per cent, to $85.66 in late afternoon trading. Its shares had climbed 9 per cent so far this year through Wednesday's close and have set several all-time high prices in 2014. It traded as high as $88.85 in early September.