Health insurer UnitedHealth Group (UNH) Thursday reported a lower profit for the first quarter, as higher expenses more than offset a rise in revenues. The company backed its full year earnings view, but scaled down its revenue forecast to account for a customer conversion.
UNH noted that the quarter was marked with strong enrollment growth in each of UnitedHealthcare's benefits businesses combined with diversified revenue growth and broad-based margin expansion at Optum.
Net earnings attributable to UnitedHealth Group common shareholders fell to $1.192 billion from last year's $1.388 billion. Earnings per share slid to $1.16 from $1.31. On average, 21 analysts polled by Thomson Reuters expected earnings of $1.14 per share for the quarter. Analysts' estimates typically exclude special items.
Total revenues increased 11 percent to $30.34 billion from last year's $27.28 billion and included the conversion of one very large public sector customer from risk-based to fee-based benefits. Analysts expected revenues of $30.49 billion.
Noting that this conversion would reduce annual revenues by $2.5 billion, UNH said the conversion was partially offset by higher-than-expected overall business growth.
Health services business unit Optum's revenues climbed 15 percent to $8.4 billion, led by organic growth across its services portfolio, including pharmacy growth, and the insourcing of UnitedHealthcare commercial customers.
UnitedHealthcare, the company's network-based health care benefits provider unit, reported that revenues climbed 11 percent to $28.3 billion, driven by an increase of 6.4 million consumers with medical benefits.
Total operating costs increased 13 percent to $28.201 billion, amid sharply higher Medical costs.
Total UnitedHealthcare - Medical membership increased to 42.02 million from 35.57 million.
Looking ahead, the firm said that although the April 1 sequestration cuts were not included in previous projections, the company continues to see 2013 net earnings in the range of $5.25 to $5.50 per common share, recognizing sequestration pressures the top end of that range.
The company now sees 2013 revenues of $122 billion, compared to the previous forecast of $123 billion to $124 billion, accounting for the customer conversion in the first quarter.
Wall Street looks for full year earnings of $5.51 per share on revenues of $123.76 billion.
UNH closed at $62.03 on Wednesday.
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