UnitedHealth Group reported 2012 earnings this morning of more than $5.5 billion on $110.6 billion in revenue, an 8 percent increase in earnings and 9 percent increase in gross revenue from 2011.
Net earnings for the company's fourth quarter, which ended Dec. 31, were $1.2 billion or $1.20 per share, which was in line with Wall St. analyst estimates compile by Bloomberg. While the performance was in line with analysts' expectations, it brings to an end a stretch of 15 consecutive quarters of beating consensus earnings estimates.
Company executives pointed to a surge in enrollment and an increase in premiums as the primary drivers of the 2012 results, with the added benefit that medical costs did not rise as rapidly last year as UnitedHealth had forecast.
"Overall a solid quarter with few surprises, but less impressive than the company's performance earlier in the year," said Leerink Swann analyst Jason Gurda in a note to investors. "On the positive side, (UnitedHealth's) noted medical cost trend came in below 5.5 percent compared to its 3Q commentary that trend was running at 5.5 percent.
The cost trend increase was significantly lower than UnitedHealth had anticipated at the beginning of the year, when it forecast costs would grow at 6.0 percent in 2012. Market consensus at the time was that the cost trend would accelerate in 2012 as the economy improved and members sought treatments that they had put off during the economic downturn.
The company did see fourth quarter medical costs increase in the fourth quarter by 12 percent to $20.8 billion.
Executives said the performance of the company's health services business Optum and its three divisions, which rose by 65 percent, was particularly strong. The company also significantly increased its membership to 40.9 million, with 4 million new members alone coming from its acquisition earlier in the year of Brazil's largest insurance company Amil Participacoes S.A. for $3.5 billion.
UnitedHealth estimates for 2013 revenues remained at $123 billion to $124 billion and net earnings in the range of $5.25 to $5.50 per share per prior guidance.
The market's reaction to the company earnings was tepid, with UnitedHealth shares trading up 28 cents to $53.94, an increase of about .5 percent or roughly in line with the daily movement of the broader markets.