UnitedHealth Settles Options Suit and Lowers Outlook
By THE ASSOCIATED PRESS
MINNEAPOLIS — The health insurer UnitedHealth Group lowered its 2008 profit outlook on Wednesday, citing reduced commercial business and higher-than-expected Medicare-related costs.
Shares slipped 2.4 percent, or 62 cents, to $25.01 in premarket trading.
Separately, the company said it agreed to pay $895 million to settle a class-action lawsuit with the California Public Employees Retirement System, which is known as Calpers, and Alaska Plumbing and Pipefitting Industry Pension Trust. The complaint 2006 suit filed in the Federal District Court in Minnesota related to historical stock options practices.
The company now forecasts 2008 adjusted profit of $2.95 to $3.05 a share on revenue in the $81 billion range, down from previous estimates of $3.55 to $3.60 a share. Analysts surveyed by Thomson Financial expected profit of $3.52 a share on revenue of $81.02 billion.
“During the second quarter, our risk-based businesses produced a lower level of gross margin than expected, and we also experienced a continuation of the pressures we saw in the first quarter,” the chief executive Stephen J. Hemsley, said in a statement.
The company said it was seeing greater-than-expected pressure on premium yields, because of an “intensely competitive” commercial business environment. UnitedHealth is reducing risk-based business, which is affecting earnings performance, and said it is paying out more than expected for Medicare Part D prescription drug offerings and special needs plans serving seniors with chronic conditions.
Medical cost trends for corporate customers remain within its previously projected range of 7.5 percent, plus or minus 50 basis points for 2008. For the full year, UnitedHealth Group is projecting a higher total medical care ratio in the range of 82.5 percent, with a commercial medical care ratio in the range of 83.3 percent.
This is above previous medical loss ratio estimates of 81.3 percent and 82.3 percent, plus or minus 50 basis points. A medical loss ratio indicates how many premium dollars are being paid out on benefit claims.
The managed care company will provide additional information when it reports second-quarter earnings on July 22. Elsewhere in the sector, the fellow health insurer Coventry Health Care lowered its full-year outlook last month; Aetna and Humana have backed their previous estimates.
MINNEAPOLIS — The health insurer UnitedHealth Group lowered its 2008 profit outlook on Wednesday, citing reduced commercial business and higher-than-expected Medicare-related costs.
Shares slipped 2.4 percent, or 62 cents, to $25.01 in premarket trading.
Separately, the company said it agreed to pay $895 million to settle a class-action lawsuit with the California Public Employees Retirement System, which is known as Calpers, and Alaska Plumbing and Pipefitting Industry Pension Trust. The complaint 2006 suit filed in the Federal District Court in Minnesota related to historical stock options practices.
The company now forecasts 2008 adjusted profit of $2.95 to $3.05 a share on revenue in the $81 billion range, down from previous estimates of $3.55 to $3.60 a share. Analysts surveyed by Thomson Financial expected profit of $3.52 a share on revenue of $81.02 billion.
“During the second quarter, our risk-based businesses produced a lower level of gross margin than expected, and we also experienced a continuation of the pressures we saw in the first quarter,” the chief executive Stephen J. Hemsley, said in a statement.
The company said it was seeing greater-than-expected pressure on premium yields, because of an “intensely competitive” commercial business environment. UnitedHealth is reducing risk-based business, which is affecting earnings performance, and said it is paying out more than expected for Medicare Part D prescription drug offerings and special needs plans serving seniors with chronic conditions.
Medical cost trends for corporate customers remain within its previously projected range of 7.5 percent, plus or minus 50 basis points for 2008. For the full year, UnitedHealth Group is projecting a higher total medical care ratio in the range of 82.5 percent, with a commercial medical care ratio in the range of 83.3 percent.
This is above previous medical loss ratio estimates of 81.3 percent and 82.3 percent, plus or minus 50 basis points. A medical loss ratio indicates how many premium dollars are being paid out on benefit claims.
The managed care company will provide additional information when it reports second-quarter earnings on July 22. Elsewhere in the sector, the fellow health insurer Coventry Health Care lowered its full-year outlook last month; Aetna and Humana have backed their previous estimates.
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