By Tamara Mathias
(Reuters) – UnitedHealth Group Inc, the largest U.S. health insurer, reported second-quarter medical costs slightly higher than Wall Street expectations on Tuesday, sending its shares down nearly 2 percent before the opening bell.
The company said that its medical loss ratio, or the percentage of premiums paid out for medical services, was 81.9 percent in the quarter, short of consensus estimates of 81.8 percent, according to Leerink.
While the ratio was actually better than 82.2 percent a year ago, the company typically beats Wall Street estimates.
“The miss is small, but invites scrutiny, as evidenced by the pressure on the stock premarket,” Jefferies analyst David Windley said.
The company’s shares, which have risen nearly 17 percent this year, were down at $251.96 in premarket trade.
The slight miss overshadowed the company’s earnings beat and its higher full-year earnings forecast on the back of almost half-million retirees joining its health insurance plans.
Medicare Advantage plans, an important business for insurers that service retirees, brought in $2.1 billion more in sales from a year earlier.
“Overall, we view the quarter as solid but just meeting the bar for expectations may underwhelm,” Michael Newshel, an analyst at Evercore ISI, said in a note.
The company now expects adjusted earnings per share of $12.50 to $12.75 in the year, compared with its previous forecast of $12.40 to $12.65, a range that some analysts called conservative in the face of strong performance in the sector.
Revenue from the company’s Optum unit, through which it acts as an industry middleman in pharmacy benefits management, rose 9 percent to $24.73 billion.
Net earnings attributable to shareholders rose nearly 28 percent to $2.92 billion in the quarter ended June 30.
Excluding items, the company earned $3.14 per share, above the average analyst estimate of $3.04, according to Thomson Reuters I/B/E/S.
Total revenue rose 12 percent to $56.09 billion, in line with analysts’ estimates.
(Reporting by Tamara Mathias in Bengaluru; Editing by Arun Koyyur and Maju Samuel)