UnitedHealth juiced up its business outside health insurance in a better-than-expected second quarter while key competitors scrambled to add enrollment in a wave of mega-mergers sweeping the sector.
The nation’s largest health insurer said Thursday that operating earnings climbed about 19 percent to $864 million for its Optum business segment, which provides pharmacy benefits management and technology services, among other products. That contributed to 13 percent overall profit growth in the quarter and another earnings forecast increase for the company.
The Blue Cross-Blue Shield carrier Anthem Inc., Aetna Inc. and Centene Corp. all have made multibillion-dollar offers to buy smaller rivals in recent weeks, as health insurers look to bulk up their technology and save costs by combining. They also are looking to stoke enrollment in areas like Medicare Advantage, the fast-growing privately run version of the federal government’s coverage program for people who are over 65 or disabled.
UnitedHealth, already the nation’s largest Medicare Advantage plan provider, is wrapping up its own acquisition valued at more than $12 billion of the pharmacy benefits manager Catamaran Corp. It said Thursday it expects to close that deal later this month.
Pharmacy benefits managers, or PBMs, run prescription drug plans for employers, insurers and other customers, and they are seen as a key weapon in the fight to contain rising drug costs because they can use leverage that comes from their size to help restrain prices.
That deal helped prompt UnitedHealth on Thursday to raise its forecast for 2015 revenue by $11 billion to about $154 billion. It also hiked its profit forecast for the second time this year. The insurer now expects net earnings for 2015 to range between $6.25 and $6.35 per share, up from a forecast it had raised in April to $6.15 to $6.30 per share.
Analysts expect, on average, earnings of $6.26 per share on $143.48 billion in revenue.
“Consistent with our thinking, 2015 earnings power is stronger than previously anticipated,” BMO Capital Markets analyst Jennifer Lynch said in a research note.
In the second quarter, UnitedHealth’s earnings grew 13 percent to $1.59 billion.
Per share results of $1.64 per share topped average analyst expectations for $1.57 per share, according to Zacks Investment Research.
Health insurance is still UnitedHealth’s main business, and the insurer saw operating earnings from that grow 11 percent to $2 billion in the quarter. Total enrollment grew about 2 percent to 45.9 million people.
The insurer said medical costs, its biggest expense, remained controlled and within expectations. Investors and analysts have been looking for several quarters now for signs that medical costs are starting climbing more briskly.
UnitedHealth Group Inc., based in Minnetonka, Minnesota, is the first insurer to report earnings every quarter. Many analysts and investors see it as a bellwether for other insurers.
Its shares slipped $1.59 to $124.27 more than an hour before markets opened Thursday and after the company announced results.
The stock had already climbed about 25 percent since the beginning of the year, as of Wednesday, while the Standard & Poor’s 500 index has advanced slightly more than 2 percent.
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