Earnings Preview: UnitedHealth reports 1Q Thursday

UnitedHealth Group Inc. will give investors and analysts an initial look at how 2013 is developing for health insurers when it reports first-quarter results on Thursday.

WHAT TO WATCH FOR: Big hospital chains like HCA Holdings Inc. and Health Management Associates Inc. recently reported sluggish admissions in the first quarter, and while that's bad for hospital stocks, it may help the performance of health insurers who wind up with fewer claims to pay.

Insurers have benefited from slower-than-expected growth in health care use, which can ultimately help their profitability. Analysts have said in recent quarters that they see signs of use picking up, but no consensus has emerged on where the trend is heading or what is driving it.

Investors will be looking for an update on that trend from UnitedHealth. The Minnetonka, Minn., insurer said in last year's first quarter that medical costs, its largest expense, jumped 6 percent, but that was driven mostly by price hikes, not a use increase.

UnitedHealth said last fall it would expand its reach outside the United States by spending about $4.9 billion to buy a majority stake in Brazilian health benefits and care provider Amil Participacoes SA. The company is the largest health insurer in Brazil and also owns hospitals and clinics.

The insurer then said in January its enrollment jumped 18 percent in last year's fourth quarter due to that deal. Investors will look for any other updates on that deal's impact.

UnitedHealth also told analysts in January that it may be choosy about the online health insurance exchanges it participates in next year as part of the health care overhaul's coverage expansion. The overhaul will debut income-based tax credits next year that are expected to help millions of people buy insurance coverage through the exchanges. UnitedHealth said its involvement in the exchanges will be based on whether it is financially viable for the insurer.

Investors and analysts are thirsty for updates on how the overhaul's coverage expansions next year will affect the industry.

UnitedHealth frequently beats analyst expectations and often raises its annual earnings forecast when it reports quarterly results. It said in January it expects 2013 earnings of $5.25 to $5.50 per share on revenue ranging from $123 billion to $124 billion.

WHY IT MATTERS: UnitedHealth is the largest U.S. health insurer and the first 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.

Health insurance is UnitedHealth's largest business, but it also operates segments that sell information technology services and pharmacy benefits management. UnitedHealth also is the largest provider of Medicare Advantage plans, which are privately run versions of the government's Medicare program for the elderly and disabled people.

Shares of UnitedHealth have climbed more than 15 percent so far in 2013, a bigger leap than the 11 percent advance of the Dow Jones industrial average, of which UnitedHealth is a component.

WHAT'S EXPECTED: Analysts forecast, on average, earnings of $1.14 per share on $30.51 billion in revenue, according to FactSet.

LAST YEAR'S QUARTER: UnitedHealth's earnings climbed 3 percent in last year's first quarter. The insurer earned $1.39 billion, or $1.31 per share, on $27.29 billion in revenue in a performance that topped Wall Street expectations.