UnitedHealth 1Q profit climbs, enrollment improves

Health insurer UnitedHealth Group Inc. raised its 2010 profit outlook Tuesday and reported better-than-expected first-quarter earnings as enrollment losses slowed for its commercial business.

The Minnetonka, Minn., insurer said it now anticipates a 2010 profit of $3.15 to $3.35 per share, up from the $2.90 to $3.10 per share it projected earlier this year. Analysts polled by Thomson Reuters expect, on average, earnings of $3.08 per share.

CEO Stephen J. Hemsley told analysts Tuesday morning the new guidance offered "a pretty fair representation" of where the company stands, considering it still faces high unemployment, challenging Medicare reimbursement and budget pressures on state Medicaid programs.

"We might hope to do better if in fact the employment outlook were to change, but I think where we've set guidance is a pretty measured spot," he said.

The largest publicly traded health insurer based on revenue said its profit rose 21 percent in the first quarter to $1.19 billion, or $1.03 per share. That's better than the $984 million, or 81 cents per share, reported a year ago.

Revenue climbed 5 percent to $23.19 billion from $22 billion.

Analysts surveyed by Thomson Reuters, whose estimates typically exclude one-time items, expected a much smaller profit of 69 cents per share on revenue of $22.76 billion.

UnitedHealth's commercial enrollment, which consists mostly of employer-sponsored group insurance and private individual coverage, fell 4 percent to 24.5 million people.

Commercial insurance generally offers higher profit margins for insurers than government business like Medicaid or Medicare Advantage. Health insurers have been struggling with losses in that business, as employers cut jobs and reduced the number of people covered by their private health insurance plans.

That might be changing. Stifel Nicolaus analyst Tom Carroll noted that UnitedHealth's fee-based commercial business, where the insurer administers policies and doesn't provide the actual insurance, grew compared to the final quarter of 2009.

"This may be an early sign that the commercial market is stabilizing," he said in a research note.

UnitedHealth also reported increased enrollment in Medicare Advantage and said its Medicaid programs added 350,000 people in the first quarter from last year.

UnitedHealth is the first big health insurer to report its earnings every quarter. Goldman Sachs analyst Matthew Borsch said in a research note the results bode well for the rest of the sector "and are consistent with our view of strong industry pricing and moderate cost trends."

UnitedHealth said earlier this year it expected to lose 500,000 to 950,000 people from its commercial business this year. But it now expects that loss to be between 400,000 and 500,000 people.

Insurers Humana Inc., WellPoint and Aetna Inc. will report their earnings later this month, with Cigna Corp. providing its results in May.

Shares of UnitedHealth shed 1 cent to $31.22 in morning trading.

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AP Business Writer Michelle Chapman contributed to this report from New York.

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