INDIANAPOLIS ? UnitedHealth Group Inc.'s third-quarter net income edged slightly lower as medical costs climbed and some health care use picked up, but the insurer's revenue grew and it raised its 2011 earnings forecast.
The Minnetonka, Minn., managed care company's medical claims paid rose 7 percent to $18.41 billion compared to last year's quarter, mainly due to price increases. UnitedHealth also said Tuesday it saw a "modest increase" in utilization trends for doctor's offices and outpatient care.
UnitedHealth and other insurers have turned in strong performances over the past few quarters in part because health care use has grown at a slower rate than they expected when they set premiums. Analysts say utilization growth tends to slow after a recession, as consumers pull back on their health care spending.
Insurers have said they expect use trends to return to normal levels later this year. Utilization typically picks up in the second half of the year after people pay off their deductibles and seek care before the deductibles renew in the new year.
But Leerink Swann analyst Jason Gurda said in a Tuesday morning research note he was "somewhat perplexed" by the insurer's report of an increase in doctor's office utilization because data points suggest a year-over-year decline in use.
UnitedHealth, the largest U.S. health insurer based on revenue, reported net income of $1.27 billion, or $1.17 per share, in the three months that ended Sept. 30. That compares with $1.28 billion, or $1.14 per share, in the same quarter last year, when the company had more shares outstanding. Revenue rose 7 percent to $25.28 billion.
Analysts forecast earnings of $1.12 per share on $25.41 billion in revenue.
The insurer said Tuesday that it now expects 2011 earnings to range between $4.40 and $4.45 per share on more than $101 billion in revenue. That compares with its previous forecast for earnings of $4.15 to $4.25 per share on $101 billion in revenue.
Analysts expect 2011 earnings of $4.39 per share on $101.5 billion in revenue.
UnitedHealth shares dropped 60 cents, or 1.3 percent, to $46 in premarket trading.
Revenue from UnitedHealth's largest segment, UnitedHealthcare, grew 6 percent to $23.64 billion, as the company's medical enrollment rose 5 percent to 34.4 million people compared to last year's quarter. UnitedHealthcare includes commercial coverage like employer-sponsored group insurance and government-funded Medicare and Medicaid business.
A 4 percent gain in commercial enrollment helped that segment's performance. Commercial insurance generally offers higher profit margins for insurers than government business.
UnitedHealth's Optum businesses, which focus on health services information and technology, recorded a 22 percent jump in revenue to $7.22 billion.
UnitedHealth is the first managed care company to report earnings each quarter and many analysts see it as a bellwether for the group. WellPoint Inc. reports third-quarter results Oct. 26, and Aetna Inc. follows the next day. Humana Inc. reports its earnings Oct. 31, and Cigna Corp. announces results Nov. 3.
Goldman Sachs analyst Matthew Borsch said in a research note UnitedHealth's performance bodes well for the sector, although he believes strong results are already broadly expected.
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