[1/2] A UnitedHealth Group health insurance card is seen in a wallet in this picture illustration October 14, 2019. REUTERS/Lucy Nicholson/Illustration/File Photo Acquire Licensing Rights
Oct 13 (Reuters) – UnitedHealth (UNH.N) reported a third-quarter profit on Friday ahead of analysts’ estimates, helped by a lower-than-feared rise in medical costs at the company’s health insurance unit.
The industry bellwether’s shares rose nearly 2% to $534.06 in premarket trading, lifting shares of rival Humana (HUM.N) up 1%.
UnitedHealth’s profit beat and slight raise in annual forecast set the stage for other insurers in the industry that suffered a nearly $60-billion wipeout in market value in June, on fears of a spike in medical costs.
Medical costs for health insurers have stayed low in recent years as the pandemic and related restrictions caused extended delays in elective procedures such as hip and knee replacements, especially among older adults at higher risk of serious disease or death from COVID-19.
UnitedHealth and Humana (HUM.N), the two biggest providers of government-backed Medicare Advantage plans for people aged 65 and above, flagged in June that older adults were getting more comfortable opting for these long-delayed surgeries.
Demand for outpatient surgeries in the third quarter has shown a more “steady trend”, compared to the second quarter, Stephens analyst Scott Fidel said ahead of the earnings report.
UnitedHealth said in July it expects quarterly medical costs to be “a little bit lower” sequentially.
In the third quarter, the company’s medical loss ratio, the percentage of spend on claims compared to premiums collected, was 82.3%, versus 83.2% in the second quarter.
Analysts had expected a ratio of 82.82% in the third quarter, according to LSEG data.
UnitedHealth’s revenue from premiums collected rose more than 12% to $72.34 billion.
On an adjusted basis, the company earned $6.56 per share, compared with estimates of $6.32.
UnitedHealth also raised the lower end of its annual profit forecast for the second straight quarter to $24.85 per share from $24.70, and maintained the higher end of its forecast at $25.00 per share.
Analysts were expecting a profit of $24.84 per share.
Reporting by Mariam Sunny and Bhanvi Satija in Bengaluru; Editing by Shounak Dasgupta
Our Standards: The Thomson Reuters Trust Principles.
UnitedHealth profit beats on lower-than-feared medical costs
