UnitedHealth’s Earnings

UnitedHealth (UNH) posted earnings of 70 cents a share, two cents more than estimates. The company also guided higher for the year.

UnitedHealth, the largest managed-care company in terms of revenue, is the first such provider to report each earnings season and is typically seen as a harbinger for the rest of the industry. UnitedHealth’s steady gains in health-plan enrollment, higher premiums and still-moderate medical cost growth seemed to allay investor concerns that a price war among health insurers is breaking out anytime soon.
Investors have wondered about the direction of health insurers’ profits for some time. With the overall market for employer-financed health care stagnant, many insurers are struggling to gain new business without cutting into the robust profit margins that they have enjoyed in recent years.
But while price competition has gotten much more heated in health-insurance markets such as New Jersey and Florida, UnitedHealth’s chief executive, William McGuire, said there are few signs of a price war in most other places. Enrollment in the company’s fully insured health plans (as opposed to the ones it administers for employers for a fee) did fall by 45,000 members. But much of that decline was due to the sale of some businesses to satisfy regulatory requirements for its PacifiCare acquisition. Otherwise, its overall health-plan membership climbed by 180,000 to 28.3 million enrollees from the first quarter.
In the earnings report and on a conference call with analysts, UnitedHealth executives steered clear of discussing the inquiries into past stock-option grants to top company executives, including Dr. McGuire. Since questions over the timing of some of those grants first surfaced in March, federal prosecutors, the Securities and Exchange Commission and the company’s board have launched separate inquires, and UnitedHealth has said it may have to restate as much as $286 million in earnings over the past three years.

The shares are up about 5% today.

Posted by on July 19th, 2006 at 2:33 pm


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