UnitedHealth profit beats as medical costs stabilise

MINNESOTA (Reuters): UnitedHealth (UNH.N) reported a third-quarter profit on Friday that came in above analysts’ estimates due to lower-than-expected medical costs at the company’s health insurance unit.

Shares of the company, a bellwether for the health insurance industry, rose about 1% to $530 in premarket trading.

UnitedHealth’s profit beat and slight raise in annual forecast set the stage for quarterly earnings of other insurers in the industry that suffered a nearly $60-billion wipeout in market value in June following 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.

However, 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.

UnitedHealth reported its best quarter for the year, Jefferies analyst David Windley said, adding that the initial scare related to high demand for outpatient surgeries was fading.

The company’s $997 million investment income nearly doubled from last year and was also a positive contributor, according to Windley.

UnitedHealth’s third-quarter medical loss ratio, or the percentage of spend on claims versus premiums collected, was 82.3%. That compared with 83.2% in the second quarter.

Analysts had expected a ratio of 82.82% in the third quarter, according to LSEG data.

On an adjusted basis, UnitedHealth earned $6.56 per share, compared with estimates of $6.32.

Revenue from the insurance unit, the company’s largest, rose nearly 13% to $69.9 billion.

UnitedHealth also raised the lower end of its full-year adjusted 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 an annual profit of $24.84 per share.