(Reuters) – UnitedHealth Group Inc reported a first-quarter profit above estimates and raised its 2019 earnings forecast, driven by strength in its pharmacy benefit management business and higher enrollment for its health plans.
FILE PHOTO: Traders work at the post where UnitedHealth Group is traded on the floor of the New York Stock Exchange (NYSE) in New York, U.S., January 31, 2018. REUTERS/Brendan McDermid/File Photo
The largest U.S. health insurer’s shares rose 2 percent to $235 in pre-market trading.
The industry bellwether, which is the first health insurer to report quarterly results, raised its full-year adjusted earnings forecast to between $14.50 and $14.75 per share from its prior view of $14.40 to $14.70.
“We find this notable, as UnitedHealth has historically been conservative in adjusting guidance early in the year,” Cantor Fitzgerald analyst Steven Halper said.
The health insurance sector recorded its largest weekly share price decline last week since March 2009, as worries persist over proposed changes to the industry-wide system of rebates paid to insurers by drugmakers.
UnitedHealth continues to deliver consistent performance, but now the question is whether any rebound in shares can be sustained amid the political overhang that has plagued the sector, Evercore ISI analyst Michael Newshel said.
Optum, which is UnitedHealth’s fastest-growing unit, brought in sales of $26.36 billion in the quarter, a jump of nearly 12 percent from a year earlier.
The rebates, integral to the business model of pharmacy benefit managers (PBMs) like UnitedHealth’s Optum, have been a target of the Donald Trump administration that has prioritized lowering prescription drug prices in the country.
The unit benefited from growth in its care delivery, behavioral health and health financial services, the company said.
Last year, rivals Cigna Corp and Aetna Inc combined with Optum’s two largest rivals, Express Scripts Holding and CVS Health Corp.
UnitedHealth’s medical care ratio, which compares premiums with the cost of delivering medical care, worsened to 82 percent, from 81.4 percent last year, on deferral of the health insurance tax, the company said. Analysts on average were expecting 82.2 percent.
In the quarter ended March 31, net earnings attributable to UnitedHealth’s shareholders rose 22.2 percent to $3.47 billion, or $3.56 per share, driven by the addition of 880,000 more members to its health plans.
The company reported adjusted earnings of $3.73 per share, beating estimates of $3.60 per share, according to IBES data from Refinitiv.
Total revenue rose 9.3 percent to $60.31 billion, ahead of estimates of $59.7 billion.
Reporting by Tamara Mathias and Manojna Maddipatla in Bengaluru; Editing by Shounak Dasgupta
