By TOM MURPHY
AP Business Writer
UnitedHealth Group's first-quarter net income dropped 14 percent, as the nation's largest health insurer paid out more for medical claims and booked a smaller gain due to leftover insurance claims.
The Minnetonka, Minn., company also said Thursday it still backs a forecast it made last November for 2013 earnings to range between $5.25 and $5.50 per share, but it expects less revenue because a big client changed its insurance coverage.
For the first quarter, UnitedHealth earned $1.19 billion, or $1.16 per share. That's down from $1.39 billion, or $1.31 per share, a year ago. Revenue rose 11 percent to $30.34 billion in the three months that ended March 31.
Its shares were steady at $62.03 per share in premarket trading Thursday.
The insurer booked a $280 million gain in the quarter because claims left over from previous quarters came in lower than expected, which allowed it to release money held in reserve. That compares to a $530 million gain in last year's quarter. These gains are essentially accounting adjustments, and the lower total means actual claims came in closer to what the insurer projected.
UnitedHealth said medical costs, which are by far its largest expense, climbed 13 percent to $22.57 billion in the quarter.
Analysts had labeled UnitedHealth's 2013 earnings forecast conservative after it came out last fall, and that isn't out of the norm for the insurer. But it normally raises the forecast through the year in part to reflect those gains it records from leftover claim totals. So far this year, it just backed the initial projection.
UnitedHealth Group Inc. says pressure from the federal government's sequestration cuts will affect the upper end of its earnings forecast range.
It also said it now expects revenue of about $122 billion in 2013, down from its previous range of $123 billion to $124 billion. The insurer said a very large client switched its insurance to a self-funded approach, where it pays the claims and the insurer just administers the policy. Self-funded plans bring in lower revenue for insurers.
UnitedHealth is the first major U.S. health insurer to announce earnings every quarter. Many analysts and investors see it as a bellwether for the managed care sector.
WellPoint Inc., the nation's second-largest insurer, reports earnings April 24, and Aetna Inc. follows on April 30.