UnitedHealth Beats Q1 Estimates On Solid Growth Across Divisions

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UnitedHealth Group

UnitedHealth Group (NYSE:UNH), the largest health insurer in the U.S., announced its first quarter results on Tuesday. As expected, the company posted strong figures for the quarter ending March 31, with revenues growing 9.4% over the prior year quarter to $48.7 billion and operating income rising over 15% year over year (y-o-y) to $3.4 billion, driven by solid performance across divisions.

Robust performance by both the company’s pharmacy services business, Optum, as well as the health care benefits division, UnitedHealthCare, helped improve UnitedHealth’s operating margin by 40 basis points and net margin by 80 basis points over the prior year quarter. The company’s net earnings increased 31% y-o-y to $2.37 per share, beating consensus estimates by 20 cents.

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Buoyed by strong results in the first quarter, the company slightly raised its guidance for full year 2017 and now expects to generate revenue of $200 billion and adjusted earnings of $9.65 – $9.85. unh-38

Segment Performance

UnitedHealthCare: The UnitedHealthCare division posted revenues of $40.1 billion for the quarter, an increase of about 12% y-o-y. This was primarily driven by a 3.6% increase in the number of customers served to 49.4 million. In terms of the bottom line, the division’s operating income grew 15% to $2.1 billion and its operating margin improved 16 basis points to 5.3%, owing to a favorable base effect of lower segment earnings related to the individual Affordable Care Act market in Q1 2016. Over the long term, the company expects margins in government-based projects to be around 3-5% and in commercial projects to be in the mid-to-high single digit range. unh-36
Optum: Optum again reported solid results. Segment revenues grew almost 8% y-o-y, but operating income grew about 16% driven by growth across all three sub-segments – OptumHealth, OptumInsight, and OptumRx.unh-37

OptumHealth reported revenues of $4.7 billion, an increase of over 18% y-o-y, owing to a 6 million increase in customers served (85 million) and 10% increase in revenue per customer ($55.7 per quarter). This was primarily driven by growth in health care delivery businesses, as well as the expansion of behavioral services into new Medicaid markets.

OptumInsight reported revenues of $1.8 billion, an increase of 11% on a y-o-y basis, driven by revenue management, business process outsourcing and technology services.

OptumRx, UnitedHealth’s PBM business, reported revenue increase of 5% y-o-y to $14.9 billion, driven by 5% increase in number of adjusted scripts fulfilled.


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