UnitedHealth Group's (NYSE: UNH) first-quarter earnings rose 13 percent, far surpassing estimates and setting a positive tone for the insurer as patients' ongoing moderate use of healthcare services limited its claims costs as a percentage of revenue, reports the Wall Street Journal.
Considered an industry bellwether because of its size and diversity, UnitedHealth's net income rose to $1.35 billion from $1.19 billion a year earlier. Revenue jumped 9.7 percent to $25.43 billion. And membership stood at nearly 34 million at the end of March, excluding standalone Medicare drug plans, reflecting a growth of 1.7 million, or 5 percent, according to Reuters.
UnitedHealth said it spent 81.4 percent of revenue on healthcare in the first quarter, Bloomberg reports. That compares with 81.3 percent a year earlier and 79.6 percent in the fourth quarter of 2010, notes the WSJ. Insurers are required to spend at least 80 percent under the health reform law's medical-loss ratio provision.
In January, CEO Stephen Hemsley said UnitedHealth would make adjustments to its forecasts after the first quarter once it better understood the impact of the reform mandates and whether demand for medical services was increasing. On Thursday, Hemsley said "we see expansive market opportunities opening in health benefits and health services," according to Bloomberg.
CRT Capital Group analyst Sheryl Skolnick called the results "very strong." Every membership group added customers, with commercial fee-only and Medicaid picking up the most. She also cited strong execution across UnitedHealth and was pleased to see expansion in its services business. Optum, UnitedHealth's information- and technology-based health services business, saw a 20 percent increase in revenue, while earnings were stable year over year, the WSJ notes.