Growth opportunities continue to power the health insurer
higher.
Dan
Caplinger
Oct 16,
2018 at 9:31PM
Health
insurance plays a vital role in promoting the growth of the healthcare
industry, and UnitedHealth Group (NYSE:UNH) has been a leader in health
insurance for years. Over the past year, UnitedHealth has made a key transition that has helped it
avoid some of the headwinds that its peers have had to deal with, and smart
strategic moves have put the health insurer in position to take maximum
advantage of favorable trends in certain areas of the market.
Coming
into Tuesday's third-quarter financial report, UnitedHealth investors had high hopes for
the health insurer, and they weren't disappointed with the company's numbers.
With strong momentum, UnitedHealth has high expectations that 2019 could be an
even better year operationally than 2018 was, and that's making shareholders
more excited than ever in the business.
Healthy
results for UnitedHealth
UnitedHealth's
third-quarter results were just the latest in a series of encouraging
performance from the health insurer. Revenue of $56.6 billion was up 12% from
year-ago levels, outpacing what those following the stock had expected to see
on the top line by a narrow margin. Net income jumped 28% to $3.28 billion, and
after allowing for some extraordinary items, adjusted earnings of $3.41 per
share topped the consensus forecast among investors by $0.12 per share.
Fundamentally,
UnitedHealth was able to fend off threats and build on strengths. The insurer's
medical care ratio improved by nearly half a percentage point to 81%. Although
operating costs rose slightly to 15% because of the return of the health
insurance excise tax, falling income tax rates helped to offset the overall
impact to the bottom line.
From a
segment perspective, UnitedHealth enjoyed balanced growth. The UnitedHealthcare
health insurance business saw revenue rise nearly 13% as the company saw growth
in customer counts and better pricing practices. The best gains for the
business came from the community & state and Medicare & retirement
divisions, as well as from UnitedHealth's global business. Relatively slow
growth in employer and individual policies had a detrimental impact on margin
levels, but overall, the numbers were solid.
Meanwhile,
UnitedHealth's Optum unit saw its top line rise 11%. The strongest growth came
from the unit's OptumHealth health management business, and the OptumInsight
unit also did well on strength in data analytics and services offerings. Even
the OptumRx pharmacy benefit management unit managed to see revenue climb 9%
from year-ago levels.
What's
next for UnitedHealth?
CEO David
Wichmann sees plenty of good things ahead. "[Our] results provide a sense
of the capacities to advance growth within our business," Wichmann said,
"capacities rooted in the breadth and adaptability of our business
approach and, above all, in our mission: helping people live healthier lives
and helping make the health system work better for everyone."
UnitedHealth's
promising future also had immediate positive impacts on the health insurer's
near-term guidance. The company now expects to post adjusted earnings for the
full year of about $12.80 per share. That's up from its previous range of
between $12.50 and $12.75 per share, and UnitedHealth believes that its core
competencies in areas like data analytics for physician referrals, on-demand
healthcare benefits, integrated medical and pharmacy information systems,
and consumer digital health platforms should
translate to further growth in the years to come.
UnitedHealth
investors were quite happy with the report, and the stock climbed nearly 5% on
Tuesday following the morning announcement. The healthcare sector still has
plenty of opportunities for innovative leaders to find ways to make sure that
patients benefit from all the medical and technological advances available to
them, and thus far, UnitedHealth has done a lot to put itself in position to be
the go-to provider for cutting-edge services to help improve healthcare
experiences across its network.
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