UnitedHealth Group Inc , the largest U.S. health insurer, on Tuesday reported better-than-expected quarterly profit and said it expects 2017 earnings to grow in line with analyst estimates as it mostly exits the government-subsidized insurance market.
The company had previously said it was losing money this year on the individual insurance business created under U.S. President Barack Obama's national healthcare reform law, which it sells in about two dozen states, and that it would pull out of most of the market next year.
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Shares rose over 5 percent in morning trading to $141.45.
UnitedHealth Chief Executive Stephen Hemsley said 2017 earnings could beat Wall Street expectations if the company ends 2016 with strong financial growth. Analysts expect 2017 earnings of $9.07 per share, according to Thomson Reuters I/B/E/S.
The company also raised its forecast for 2016 adjusted net earnings to about $8.00 per share, from $7.80-$7.95 per share.
UnitedHealth said the Obamacare business was in-line with its expectations for the third quarter with a loss of about $200 million.
Revenue from the company's Optum business, which manages drug benefits and offers healthcare data analytics services, rose 9 percent to $21.1 billion.
The company said its consolidated medical care ratio, or the amount it spends on medical claims compared with the insurance premiums it brings in, decreased 60 basis points to 80.3 percent in the third quarter.
UnitedHealth, which also sells employer-based insurance as well as Medicare, Medicaid and Obamacare health plans, said medical cost trends remained within expectations.
Net earnings attributable to shareholders rose to $1.97 billion, or $2.03 per share, in the third quarter ended Sept. 30, from $1.60 billion, or $1.65 per share, a year earlier.
On an adjusted basis, the health insurer earned $2.17 per share, beating the average estimate of $2.08, according to Thomson Reuters I/B/E/S.
Total revenue rose to $46.29 billion from $41.49 billion, slightly above estimates of $46.09 billion.
UnitedHealth is the first of the major health insurers to report earnings. Aetna Inc and Humana Inc have also said they will pull back from the Obamacare individual insurance market in 2017, citing financial losses due to the costs of covering members who are sicker than expected.
The third-quarter results suggest UnitedHealth has now largely ring-fenced the risk within the premium deficiency reserve that it boosted in the second quarter, Credit Suisse analysts said in a note on Tuesday.
Up to Monday's close, the company's shares had gained about 14 percent this year, compared with a 3.7 percent decline in the S&P 500 healthcare index .
(Reporting by Ankur Banerjee in Bengaluru and Caroline Humer in New York; Editing by Shounak Dasgupta and Meredith Mazzilli)