UnitedHealth’s lower costs than feared lift profit, shares

July 14 (Reuters) – UnitedHealth Group’s ( UNH.N ) quarterly earnings beat Wall Street estimates on Friday, as a smaller-than-expected jump in medical costs eased fears that a resumption of long-delayed surgical procedures would hit profit growth.

The company’s results allowed investors to breathe a sigh of relief after a $60 billion wipeout in industry market value last month, after UnitedHealth sounded the alarm about rising costs.

Shares ended up 7%, while rivals Humana ( HUM.N ), Cigna ( CI.N ) and Elevance Health ( ELV.N ) closed 2% to 5% higher on Friday.

The results were a “welcome respite” after weeks of pain for investors in health insurers, Stephens analyst Scott Fidel said in a note.

Chief Financial Officer John Rex said the company expects premiums for its Medicare Advantage plans for 2024 to be priced to cushion the blow from an increase in non-urgent surgeries.

Health insurers’ costs have remained low in recent years as pandemic-driven restrictions led to extended delays in elective procedures such as hip and knee replacements, especially among older adults at higher risk for Covid.

UnitedHealth said last month that Medicare-eligible adults had begun opting for these procedures as the COVID risk had decreased, leading to an increase in costs.

In June, Humana had warned of a jump in medical expenses this year, noting similar concerns.

UnitedHealth’s quarterly medical loss ratio — the percentage of claims expenses compared to premiums collected — was 83.2%, compared with analysts’ expectations of 83.4%, according to Refinitiv.

The healthcare conglomerate said it expects third-quarter medical costs to be “slightly lower” compared to second-quarter spending.

UnitedHealth had raised the lower end of its annual adjusted earnings forecast to $24.70, from $24.50 a share in April.

UnitedHealth’s second-quarter profit of $6.14 per share beat expectations of $5.99.

Reporting by Bhanvi Satija and Raghav Mahobe in Bengaluru; Editing by Pooja Desai and Vinay Dwivedi

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