UnitedHealth Profit Rises Despite ACA-Related Costs -- Update

By Allison Prang Features Dow Jones Newswires

UnitedHealth Group Inc.'s core insurance and health-services businesses grew in its latest quarter, despite a dent in revenue caused by the company's decision to pull out of most Affordable Care Act markets.

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The latest quarterly results from the nation's largest health insurer come as the market has been roiled by policy changes in Washington, D.C. to the ACA. President Donald Trump last week signed an executive order seeking to provide lower-cost plans in the individual insurance market, and he is poised to end payments to insurers that offset subsidies to low-income consumers.

Guiding the company through the shifting landscape is David Wichmann, the former UnitedHealth president who took the reins as chief executive Sept. 1. Former CEO Stephen Hemsley now serves as executive chairman.

UnitedHealth also said Tuesday it expects 2017 earnings on an adjusted per-share basis to "approach" $10, up from its prior forecast of $9.75 to $9.90.

Shares were up 4.92% in early-morning trading. They are up 21% year to date.

UnitedHealth has grown in recent months after it bought Surgical Care Affiliates Inc. and confirmed last month it was exploring the purchase of Banmedica, a health-care company in Chile, in what analysts estimate could be a $2.8 billion deal.

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The Advisory Board Co. recently announced it was selling its health care business to Optum, UnitedHealth's health-services business, in a deal that is expected to close at the end of this year or early next year.

Revenue from the Optum business increased 8.4% to $22.9 billion in the latest quarter, compared with $21.1 billion in the same period last year. The division's operating margin expanded to 7.4%, from 6.9% a year ago. Revenue at OptumRx, the division's prescription business, increased 4.7% to $16 billion. Expansion in delivery of care drove a 21% increase in revenue from the division's OptumHealth business, to $5.3 billion.

Revenue from the UnitedHealthcare insurance business grew 9.6% from a year earlier to $40.7 billion, driven by increased enrollment in employer-sponsored plans, as well as Medicare, Medicaid and international programs.

Overall, UnitedHealth reported adjusted net earnings of $2.6 billion, or $2.66 per share, compared with $2.1 billion this time last year. Analysts were predicting $2.56 per share.

Revenue rose 8.7% to $50.3 billion, but consolidated revenue took a $1.6 billion-dollar hit from ACA-related factors, including the withdrawal from markets and a health-insurance tax deferral.

Write to Allison Prang at allison.prang@wsj.com

(END) Dow Jones Newswires

October 17, 2017 10:09 ET (14:09 GMT)