UnitedHealth Group Inc. UNH 4.59% raised its full-year outlook for 2021 and said the pandemic’s effects on its results matched its expectations, with costs tied to Covid-19 offset by dampened demand for elective healthcare procedures.
The health insurance and healthcare giant, the first major company in the managed-care industry to post its third-quarter results, forecast a full-year 2021 profit after adjustments of $18.65 a share to $18.90 a share, up about 22 cents at the midpoint of the range from its previous guidance.
UnitedHealth said its results are consistent with its earlier projection about Covid-19’s impact on 2021 profit. The company had said that the pandemic would hurt earnings by about $1.80 a share.
UnitedHealth also offered an early preview of its 2022 guidance. Chief Financial Officer John Rex said analysts’ current consensus estimates were reasonable, but likely toward the upper end of the company’s initial projections for next year’s adjusted earnings. According to a survey by FactSet, analysts are expecting full-year net income of $20.75 per share for 2022, and profit of $21.64 per share after adjustments.
UnitedHealth expects a smaller impact from Covid-19 care costs next year, compared with 2021, Mr. Rex said.
The CFO also said UnitedHealth will stick with its long-term projection of annual earnings per share growth of 13% to 16%.
UnitedHealth Chief Executive Andrew Witty, 56, didn’t participate in its earnings call, due to what the company said was an “urgent but straightforward procedure” last night for a kidney stone. UnitedHealth said the procedure went well and the CEO will return to his full duties in a few days.
Higher insurance membership as well as expansion in the Optum health-services business fueled growth in the third quarter, the company said.
Revenue for the quarter rose to $72.34 billion, up 11% year over year. The company’s profit, stripped of amortization and tax effects, was $4.52 a share. On average, analysts had been expecting $71.35 billion of revenue and adjusted earnings of $4.41 a share, according to FactSet’s survey.
Most of the revenue growth was from higher premiums, which rose 12% to $56.97 billion.
The company’s UnitedHealthcare insurance business posted membership growth both from more commercial customers and from more members with Medicare and Medicaid plans. Higher membership, which has grown by almost two million people since 2020, has helped drive greater premiums this year.
The company’s medical-loss ratio—a closely watched measure of the proportion of premiums paid out for medical care—was 83%, which was better than analysts had generally expected.
Mr. Rex said UnitedHealth saw around 60,000 hospitalizations related to Covid-19 in the third quarter, peaking with nearly 30,000 in August and falling off in September. Currently, around 5,000 people covered by UnitedHealth are getting inpatient treatment for conditions tied to Covid-19, he said, down by about 50% compared with the highest level seen during the quarter.
The Delta variant increased cases in some parts of the country over the summer, especially places that had relatively low vaccination rates. Cases have started dropping in many of those areas, though some states are experiencing increases.
Mr. Rex said UnitedHealth continued to see a pattern of patients downshifting their usual healthcare when Covid-19 became more prevalent, and vice versa. UnitedHealth said rates of scheduled procedures such as colonoscopies and joint replacements are steadily returning to normal levels.
One analyst, in asking a question, referenced a Wall Street Journal article about a recent report from the federal Department of Health and Human Services’ Office of Inspector General. The report focused on risk adjustment, a key process that affects insurers’ payments under the Medicare Advantage program. Tim Noel, chief executive of UnitedHealthcare Medicare & Retirement, said the company believed that the risk adjustment model is valuable and “something to build on and broadly support.”
Income from Optum, the company’s health-services arm, has also been rising. In the latest quarter, revenue grew 14% year over year, with revenue per customer improving as Optum expands its services.
OptumRx, Optum’s pharmacy-benefits division, saw prescriptions grow 6% year over year. That is another sign that more people are seeking healthcare again after skipping doctor visits for non-Covid-19-related issues last year.
Write to Anna Wilde Mathews at [email protected] and Matt Grossman at [email protected]
Corrections & Amplifications
Tim Noel, chief executive officer of UnitedHealthcare Medicare & Retirement, said the company believed that the risk adjustment model is valuable and “something to build on and broadly support.” An earlier version of this article misattributed that statement to UnitedHealth President Dirk McMahon. (Corrected on Oct. 14)
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