UnitedHealth profit drops 72% on legal settlement charge
NEW YORK (Reuters) – UnitedHealth Group Inc on Tuesday reported a 72 percent drop in quarterly profit on a big charge from a legal settlement and challenges in its businesses serving seniors and employers, although its results surpassed previously lowered expectations.
The largest U.S. health insurer by market value said second-quarter net earnings fell to $337 million, or 27 cents per share, from $1.23 billion, or 89 cents per share, a year earlier.
Excluding items, UnitedHealth earned 67 cents per share, 2 cents ahead of the analysts’ average forecast, according to Reuters Estimates.
Earlier this month, UnitedHealth estimated earnings for the quarter at 64 cents to 66 cents per share, excluding special items, far below analysts’ forecasts at the time.
Second-quarter revenue rose 6.7 percent to $20.3 billion.
Earnings from operations at its main health-care benefits unit fell 35 percent to $1.14 billion.
Pressure in its commercial business serving employers — where the company has cited tough competition — hurt margins and enrollment. Membership in the company’s plans for which it assumes full insurance risk fell by 95,000 from the first quarter to about 10.5 million members.
Profitability in the company’s Medicare business for seniors also was under pressure, as the company offered overly attractive benefits to those with special-needs plans.
The company’s consolidated medical care ratio, which measures the portion of premiums spent on medical costs, worsened to 83.2 percent from 80.3 percent a year ago.
Overall, the Minneapolis-based company provided medical benefits to 32.68 million members at the end of the quarter.
The company said it still expected full-year adjusted earnings per share of $2.95 to $3.05. UnitedHealth lowered the outlook earlier this month, marking the second such reduction to initial 2008 expectations.
UnitedHealth shares have fallen 59 percent so far this year, worse than the 44 percent drop for the Morgan Stanley Healthcare Payor index , amid setbacks for its commercial business for employers and Medicare plans for seniors.
The company earlier this month agreed to pay more than $900 million to settle lawsuits related to past stock options practices. The legal settlements brought it closer to moving past a scandal over the manipulation of stock option dates that led to the departure of William McGuire as chief executive.