© Reuters. FILE PHOTO: The corporate logo of the UnitedHealth Group appears on the side of one of their office buildings in Santa Ana, California, U.S., April 13, 2020. REUTERS/Mike Blake/File Photo
(Reuters) -UnitedHealth Group Inc on Thursday raised its profit forecast for the year after reporting a quarterly profit that beat analysts’ estimates, helped by growth at its Optum healthcare services unit.
Revenue from fast-growing Optum, which manages drug benefits and provides medical and healthcare data services, rose 18.9% to $43.26 billion in the quarter ended March 31. The company’s health insurance unit brought in revenue of $62.6 billion, an increase of 13.6%.
The largest U.S. health insurer’s costs have been under pressure throughout the pandemic, but gains from lower spending on elective medical procedures cushioned some of the hit from higher costs related to COVID-19 vaccination, testing and treatment.
However, the Omicron variant drove COVID-19 cases in the United States to record highs in January, with rival Anthem Inc warning of an uptick in related costs in the first quarter.
UnitedHealth (NYSE:)’s medical care ratio rose to 82% for the first quarter due to COVID-19, but was still below analysts’ estimates of 82.29%, according to Refinitiv IBES data.
A lower medical care ratio, the percentage of premiums paid out for medical services, indicates a tighter rein on costs.
In contrast to Anthem, UnitedHealth in January forecast a softer blow from the pandemic, on expectations that added costs related to the Omicron surge would be offset by delays in non-urgent healthcare procedures.
“UNH continually produces steady and consistent results despite an ever-changing environment,” Oppenheimer analyst Michael Wiederhorn said, adding that the company’s performance should also lend support for other health insurers heading into earnings.
UnitedHealth said it now expects an adjusted profit of between $21.20 and $21.70 per share in 2022, compared with its prior forecast of $21.10 to $21.60 per share.
On an adjusted basis, the company earned $5.49 per share beating estimates of $5.38 per share.