Earnings Preview: UnitedHealth reports on 4Q Thurs

UnitedHealth Group Inc. will give investors their first sense for whether major health insurers have been bitten by an intense flu season when it reports fourth-quarter results Thursday.

WHAT TO WATCH FOR: The current flu season started developing earlier than normal, and experts have warned that a tough season is shaping up, after the previous one was particularly mild.

Investors worry that a spike in flu claims can hurt insurer profitability, especially if the number of claims is more than companies had budgeted for. Mark Bertolini, the CEO of UnitedHealth competitor Aetna Inc., said last week that while they have seen a spike in flu intensity, they don't expect expenses to exceed the normal range of $40 million to $50 million for a season.

UnitedHealth normally does not make a lot of headlines between quarterly earnings reports, but the insurer made a splash in October when it said it would spend 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.

Investors will be looking for more information on that deal's impact on UnitedHealth's balance sheet.

UnitedHealth said in October it expects 2012 earnings of between $5.20 and $5.25 per share. In November, it issued its initial 2013 forecast for earnings of $5.25 to $5.50 per share. Analysts and investors also will be looking for an increase to its 2013 forecast.

Analysts expect, on average, earnings of $5.25 per share in 2012 and $5.56 per share for 2013, according to FactSet.

UnitedHealth shares wound up growing 7 percent last year to close 2012 at $54.24. The health insurer's stock rose and fell throughout the year and dipped along with other health insurers after President Barack Obama won re-election. Meanwhile, the Standard & Poor's 500 index climbed more than 13 percent.

WHY IT MATTERS: UnitedHealth, based in Minnetonka, Minn., 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 Jan. 23. Aetna follows on Jan. 31, and Humana Inc. reports its results Feb. 4.

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.

WHAT'S EXPECTED: Analysts forecast, on average, earnings of $1.20 per share on $28.18 billion in revenue.

2011 QUARTER: UnitedHealth earnings in the final quarter of 2011 jumped 21 percent even though total medical costs, its largest expense, rose 8 percent to $18.6 billion. The insurer earned $1.26 billion, or $1.17 per share, on $25.92 billion in revenue. The performance topped analyst forecasts.

Despite the earnings growth, UnitedHealth did not raise its 2012 forecast and noted that price increases, especially for inpatient hospital care, were pressuring its performance.