Earnings Preview: UnitedHealth to post 3Q results

UnitedHealth kicks off 3rd-quarter reporting season for large health insurers Tuesday

• On 7:53 am EDT, Monday October 19, 2009

INDIANAPOLIS (AP) -- Managed care company UnitedHealth Group Inc., the largest commercial health insurer as measured by revenue, reports third-quarter results Tuesday. Here are key developments related to that period.

OVERVIEW: Much of the news concerning health insurers in the third quarter had nothing to do with their financial performance.

Minnetonka, Minn.-based UnitedHealth and many other companies in the managed care sector have seen their share prices climb and fall depending on investor reaction to the push for health care changes in Washington, D.C. Congress is debating plans to cover the uninsured and reduce health care costs. Several aspects of these bills have made investors and analysts edgy.

They worry about any fees that might be imposed on the industry, and they're also concerned about proposals to create a government-backed public option that would compete with private insurers.

Stocks also dipped when a health care proposal that does not include a public option advanced out of the Senate Finance Committee. The prospect of a health care overhaul has affected stock prices in the sector for several months.

Insurers also have dealt with sliding enrollment driven by high unemployment levels, as companies continue to trim jobs and reduce the number of people covered by their health plans.

Even so, insurance companies have still turned a profit. UnitedHealth earned $859 million, or 73 cents per share, on $21.6 billion in revenue in the second quarter.

UnitedHealth announced in July that it will pay about $510 million to buy Los Angeles-based Health Net Inc.'s operations in the northeastern United States. That includes 578,000 members in Connecticut, New York and New Jersey.

Also in the third quarter, a federal judge approved the last of the outstanding settlements regarding UnitedHealth's stock options backdating practices. A company spokesman has said UnitedHealth already accounted for the settlements, and they would not affect future earnings.

BY THE NUMBERS: Analysts surveyed by Thomson Reuters expect, on average, earnings of 76 cents per share on $21.6 billion in revenue.

ANALYST TAKE: Miller Tabak analyst Les Funtleyder said in a research note he expects UnitedHealth to report earnings of 77 cents per share, or a penny better than the Wall Street consensus.

However, he expects company shares to remain sensitive to efforts to overhaul the system.

"We expect the process will run into the middle of December, so we expect continued volatility among most of the health care sector related to chatter out of Washington," he wrote.

STOCK PERFORMANCE: UnitedHealth shares fell 12 cents, or less than 1 percent, to $25.04 in the third-quarter. Meanwhile, the Standard & Poor's 500 index rose 14 percent during the quarter.

WHAT'S AHEAD: UnitedHealth will be the first large health insurer to report quarterly earnings, and analysts see its performance as a bellwether for the sector. Indianapolis-based WellPoint Inc. reports earnings Oct. 28, Hartford, Conn.-based Aetna Inc. follows on Oct. 29, and Philadelphia-based Cigna Corp. announces results Nov. 5.

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