UnitedHealth profit, forecast get lift from stabilizing medical costs

Bhanvi Satija and Mariam Sunny
Updated ·2 min read
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By Bhanvi Satija and Mariam Sunny

(Reuters) -Healthcare conglomerate UnitedHealth beat analysts' estimates for third-quarter profit on Friday, powered by lower-than-expected medical costs at its health insurance unit.

Shares of the health insurance industry bellwether rose nearly 4% to $544.46 after it also slightly raised its annual forecast.

Warnings from UnitedHealth and Humana in June that older adults were getting more comfortable opting for surgeries delayed during the pandemic had caused a $60-billion wipeout in insurers' market value on fears of a spike in medical costs.

Levels of elective surgeries remained more "stable" than the second quarter and were still high among older adults, CFO John Rex said on Friday.

UnitedHealth's third-quarter medical loss ratio, or the percentage of spend on claims versus premiums collected, was 82.3%. That compared with 83.2% in the second quarter.

Analysts had expected a ratio of 82.82%, according to LSEG data.

UnitedHealth reported its best quarter for the year, Jefferies analyst David Windley said, adding that the initial scare related to high demand for outpatient surgeries was fading.

The company said it expects the upper end of its fiscal 2024 profit forecast to be in line with Wall Street estimates. That provided some comfort to investors worried about the industry's outlook for 2024, Morningstar analyst Julie Utterback said.

Analysts expect UnitedHealth to report a full-year profit of $27.86 per share.

Health insurers are expected to face challenges next year due to policy changes for government-backed health insurance plans, including lower government payment rates for Medicare Advantage.

On an adjusted basis, UnitedHealth earned $6.56 per share in the third quarter, compared with estimates of $6.32.

The company raised the lower end of its fiscal 2023 adjusted profit forecast for the second straight time to $24.85 per share from $24.70, while maintaining the higher end at $25.00.

Analysts were expecting an annual profit of $24.84 per share.

Shares of other insurers Humana, Elevance Health, Cigna Group, Centene and CVS Health rose between 1% and 2%.

(Reporting by Mariam Sunny and Bhanvi Satija in Bengaluru; Editing by Sriraj Kalluvila and Shounak Dasgupta)