In a story Oct. 17 about UnitedHealth Group Inc.'s second-quarter, The Associated Press reported erroneously that Medicare Advantage funding cuts reduced UnitedHealth's earnings by about 15 cents per share in the quarter. That is the earnings impact expected for the full year, not the quarter.
A corrected version of the story is below: UnitedHealth's 3rd-qtr profit edges up 1 percent UnitedHealth Group's 3rd-quarter profit rises 1 percent, health insurer narrows 2013 forecast By TOM MURPHY AP Business Writer
UnitedHealth Group Inc.'s third-quarter earnings inched up 1 percent in a rare performance that failed to trump Wall Street expectations. The nation's largest health insurer also gave a less-than-reassuring vibe Thursday by narrowing its 2013 forecast instead of raising it. Investors who sent the stock to a record high last month pushed the shares down Thursday in a slide that started well before markets opened.
The Minnetonka, Minn.-based insurer said Medicare Advantage funding cuts reduced earnings and contributed to a 13 percent hike in its medical costs during the quarter. Medical costs, which totaled $22 billion, are the insurer's largest expense.
UnitedHealth is the nation's largest provider of Medicare Advantage plans, which offer government-subsidized coverage for elderly and disabled people. The insurer has nearly 2.9 million people enrolled in the plans.
Medicare Advantage plans took a hit earlier this year when federal budget cuts took away money after insurers had set rates for the year. UnitedHealth CEO Stephen J. Hemsley told analysts on Thursday that the cuts will wind up shaving about 15 cents per share off earnings for the year.
These plans also face more cuts next year to help fund the federal health care overhaul, which aims to provide insurance coverage for millions of uninsured people. Overall, UnitedHealth earned $1.57 billion, or $1.53 per share, in the quarter that ended Sept. 30. That's up from $1.56 billion, or $1.50 per share, a year ago. Revenue jumped 12 percent to $30.62 billion.
Analysts expected earnings of $1.53 per share on $30.86 billion in revenue. Health insurance is UnitedHealth's largest business, but it also provides information technology services and pharmacy benefits management through it its Optum segment. Total revenue from that segment jumped 33 percent in the third quarter to $9.6 billion.
The company raised the bottom end of its previously forecasted range for 2013 earnings by a nickel to $5.40 to $5.50 per share. UnitedHealth hasn't changed the top end of that forecast since it made its first prediction last November. It normally raises the range a few times during the course of a year.
Analysts polled by FactSet expect $5.52 per share for 2013, on average. Shares of UnitedHealth fell 4.3 percent, or $3.24, to $71.95 in midday trading. Meanwhile the Dow Jones industrial average, of which UnitedHealth is a component, fell less than 1 percent.
UnitedHealth is the first health insurer to report earnings every quarter, and many see it as a bellwether for the sector. The shares of competitors like WellPoint Inc. and Aetna Inc. also slipped Thursday as well.
UnitedHealth's stock had climbed more than 38 percent so far this year as of Wednesday, and the shares reached a new, all-time high price of $75.88 on Sept. 16. Strong quarterly performances and dividend payouts have drawn investors to UnitedHealth and other insurers. Analysts say investors also have steadily gained more confidence in the sector as they realized that the health care overhaul won't hurt the industry as much as some originally worried.
Citi analyst Carl McDonald said in a Thursday morning research note that UnitedHealth "didn't have a terrible quarter by any means." But the high stock price means the bar for a good performance has risen the past couple of years.