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Healthcare Insurer's Profit Soars

October 20, 2006|From Reuters

Insurer UnitedHealth Group Inc., whose chief executive is leaving amid a stock option scandal, Thursday posted a 38% rise in third-quarter profit, helped by gains from its Medicare drug plans and its acquisition of Cypress-based PacifiCare Health Systems.

Shares rose 5.5%, as UnitedHealth's better-than-expected results heartened investors after a scathing report released Sunday by its independent counsel that said the company had backdated options.

"It looks like the loss of the CEO and options scandals have not derailed the fundamentals," said John Farrall, a healthcare analyst with National City Private Client Group.

Incoming CEO Stephen Hemsley told analysts during a conference call that the company was "thoroughly and swiftly" putting in place the corporate governance overhaul announced by the UnitedHealth board in the wake of the report.

Net income at the Minneapolis-based company rose to $1.1 billion, or 79 cents a share, from $800 million, or 61 cents, a year earlier. Analysts, on average, expected 76 cents, according to Reuters Estimates.

Shares of UnitedHealth, the top U.S. health insurer by market value, rose $2.65 to $50.65 on Thursday. They remain down 19% this year, more than rivals' shares, because of the option probe and the industry's uncertain prospects.

The Securities and Exchange Commission, the U.S. attorney's office for the Southern District of New York and the Minnesota attorney general are investigating the company.

Top lawmakers on the Senate Finance Committee also have sent UnitedHealth a letter seeking information about a reported $1.1-billion exit package for William McGuire, who is leaving as CEO by Dec. 1.

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