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UH Says 1st-Quarter Net Income Rose 39%

Insurance: UnitedHealth Group beats forecasts as it adds customers, trims medical spending and raises premiums.

April 19, 2002|From Bloomberg News

UnitedHealth Group Inc., the biggest U.S. health insurer, said first-quarter profit rose 39% as it added customers at big employers, raised premiums and controlled medical spending.

Net income rose to $295 million, or 92 cents a share, from $212 million, or 64 cents, a year earlier, the company said. Revenue rose 5.9% to $6.01 billion.

UnitedHealth, which passed rival Aetna Inc. this year to become the biggest health insurer in the U.S., has gained customers in plans it manages for self-insured businesses. The insurer also increased premiums faster than medical costs rose and has worked with doctors to curb costs for patients with conditions such as stroke and diabetes.

The company was expected to earn 85 cents, the average estimate of analysts surveyed by Thomson Financial/First Call.

Shares of Minnetonka, Minn.-based UnitedHealth rose $4.69, or 5.9%, to $84.26 on the New York Stock Exchange.

UnitedHealth raised its 2002 earnings forecast to $3.84 to $3.86 a share, up from the $3.07 a share it earned last year. Analysts had expected profit of $3.65. Earnings are expected to rise at least 15% in 2003 and 2004, the company said.

The company said membership rose to 17.1 million in the quarter from 16.5 million a year earlier.

Premiums probably will rise about 16% this year, though employers will cut benefits or raise the amount workers pay for things such as drugs and doctor visits to limit the increase to 13%, Chief Executive William McGuire said.

McGuire said costs probably will rise about 12%, driven by increases for prescription drugs, hospital care, lab tests and medical specialties such as gastroenterology.

UnitedHealth restructured in 1998 after its plan to buy rival Humana Inc. collapsed. The company in 1999 became the first health maintenance organization to stop requiring patients to get medical care authorized before seeing a doctor, gaining it some advantage in the HMO market.

Since then, the company has cut hospital costs for patients with conditions such as heart problems, stroke and diabetes by working with physicians to improve care.

UnitedHealth has focused on self-funded customers at big employers and mid-sized firms as rivals Cigna Corp. and Aetna Inc. struggle. Cigna is moving customers to a new computer system, causing some service problems, and Aetna has raised rates and canceled unprofitable accounts to battle rising medical costs.

"They're capitalizing on the weakness of others, but they'll face more competition for that business," France said. "Everybody wants to be like United."

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