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Earnings Preview: UnitedHealth reports 4Q results

The Associated Press

Investors will tune in for an update on UnitedHealth Group Inc.'s Medicare Advantage prospects when the nation's biggest health insurer reports its fourth quarter results Thursday.

WHAT TO WATCH FOR: Competitor Humana Inc. shook up some health insurance stocks late last week, when it said funding cuts for the government-subsidized program may be greater than expected next year.

Investors and analysts are anxious about this because the government will release preliminary 2015 rate information next month. Funding for Medicare Advantage plans, which are privately run versions of the federal Medicare program for the elderly and disabled people, is being scaled back in part to help fund the health care overhaul.

UnitedHealth is the biggest provider of Medicare Advantage plans, and Humana is the second largest. UnitedHealth and other insurers have warned for several quarters that government funding cuts are pressuring their business, and some analysts expect enrollment growth for the plans to slow this year.

Investors also may learn more Thursday about how the overhaul is affecting UnitedHealth's business. The insurer based in Minnetonka, Minn., said last month that the massive federal law, which aims to cover millions of uninsured people, will take a $1.1 billion bite out of its after-tax operating earnings this year.

WHY IT MATTERS: UnitedHealth is the largest U.S. health insurer and the first to announce earnings every quarter. Many analysts and investors see it as a bellwether for the managed care sector. WellPoint Inc., the nation's second largest insurer, reports results Jan. 29.

WHAT'S EXPECTED: Analysts forecast, on average, earnings of $1.40 per share on about $31.17 billion in revenue, according to FactSet.

2012 QUARTER: UnitedHealth's fourth-quarter earnings slipped 1 percent, as a rise in costs from medical claims and other expenses countered revenue gains. The insurer earned $1.24 billion, or $1.20 per share. Total revenue climbed 11 percent to $28.77 billion.