UnitedHealth Group, a prominent US healthcare conglomerate, surpassed analysts’ projections for Q3 profit on Friday, propelled by lower-than-anticipated medical expenses within its health insurance division. The announcement triggered a nearly 4% surge in shares for the bellwether of the health insurance industry.
In June, the health insurer forewarned investors of a trend among older adults opting for postponed surgeries during the pandemic, potentially leading to a surge in medical costs. This disclosure resulted in a market value loss of $60 billion. However, according to Chief Financial Officer John Rex, levels of elective procedures have remained steady since the second quarter, particularly among older demographics. Coupled with UnitedHealth’s medical loss ratio of 82.3%, down from 83.2% in the preceding quarter, this performance culminated in the company’s most robust third quarter of the year, as highlighted by Jefferies analyst David Windley.
The company has also marginally revised its annual outlook, anticipating the upper threshold of its fiscal 2024 profit projection to align with Wall Street estimates. This development offers a degree of reassurance to investors who have been apprehensive about the industry’s outlook for 2024, according to Morningstar analyst Julie Utterback. UnitedHealth reported adjusted third-quarter earnings of $6.56 per share, surpassing the projected $6.32 per share, while full-year earnings are anticipated to reach $27.86 per share. Furthermore, the health insurer has elevated the lower end of its fiscal 2023 adjusted profit forecast to $24.85 per share, up from $24.70, while maintaining the upper end at $25.00.
Forecasts indicate potential challenges in the coming year due to policy shifts affecting government-backed health insurance plans, including reduced government payment rates for Medicare Advantage. In response to UnitedHealth’s positive performance, shares of other leading insurers such as Humana, Elevance Health, Cigna Group, Centene, and CVS Health experienced modest gains of 1-2%, underscoring confidence in the health industry and its future prospects for the fiscal year.
In summation, the Q3 results of UnitedHealth Group showcase the health insurer’s capacity to weather the initial shock from postponed surgeries, while also adeptly managing medical costs below expectations, yielding a notable profit. This has positioned the organization favorably from a financial perspective, offering investors a measure of stability in uncertain times.