UnitedHealth Group Inc, the largest U.S. health insurer, on Wednesday reported a better-than-expected fourth-quarter profit as it added new customers in government-paid plans and its Optum pharmacy management business hit record revenue.
Profit in its health insurance business, which includes commercial and government customers, was helped by medical costs that the company described as being "well controlled," and decreased inpatient hospital use per person in 2014.
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Low hospital and medical use has helped keep medical claims down and profits up at insurers during the past several years, even as the U.S. healthcare system has undergone major reform under the Affordable Care Act.
"We believe these results offer a solid finish to a year of transition," BMO Capital Markets analyst Jennifer Lynch said in a research note.
UnitedHealth's shares rose 2.2 percent in premarket trading.
The company reported a medical care ratio, or the amount it spends on medical claims compared with the insurance premiums that it brings in, of 79.8 percent. It was 81.2 percent a year earlier.
Health insurers have faced many changes during the past few years as the national healthcare reform law, often called Obamacare, took effect. The law has brought higher fees and taxes for insurers and has also created a new individual healthcare insurance market and expanded the ranks of Medicaid, which has helped increase revenue.
The company reported quarterly revenue of $33.4 billion, up from $31.1 billion a year earlier. Revenue in its Optum pharmacy management business increased to $8.5 billion from $6.9 billion a year earlier.
UnitedHealth said it sees 2015 revenue at between $140.5 billion and $141.5 billion and net earnings in the range of $6 to $6.25 per share.
Analyst's were expecting 2015 net earnings of $6.17 per share on revenue of $140.90 billion, according to Thomson Reuters I/B/E/S.
The company's earnings rose to $1.5 billion, or $1.55 per share, in the quarter ended Dec. 31, from $1.4 billion, or $1.41 per share, a year earlier.
Analysts had expected a profit of $1.50 per share and revenue of $33.11 billion. (Reporting by Caroline Humer in New York and Amrutha Penumudi in Bengaluru; Editing by Maju Samuel and Alden Bentley)