UnitedHealth 4Q profit rises on prescription services growth

MINNEAPOLIS -- Health insurer UnitedHealth Group Inc. said Tuesday its fourth-quarter earnings climbed 3 percent, as growth in prescription services and Medicaid plans offset a smaller profit in its core health coverage division.

UnitedHealth shares dropped about $2.21, or 4.1 percent, to $52.20 in opening trading on Tuesday. Over the past year they have traded between $45.82 and $59.46.

Net income for the quarter ended Dec. 31 rose to $1.22 billion, or 92 cents per share, from $1.18 billion, or 84 cents per share, a year ago.

Revenue climbed to $18.71 billion from $18.13 billion in the year-ago period.

Analysts surveyed by Thomson Financial expected a profit of 92 cents per share on higher revenue of $18.78 billion.

Profits in UnitedHealth's largest division, Health Care Services, fell $50 million, or 3 percent, to $1.6 billion, even as revenue rose 2 percent to $17.57 billion. The company said the decrease was due to a seasonal rise in health care spending at UnitedHealthcare, and higher costs for new market launches, advertising and enrollment costs in its Ovations unit for seniors.

Membership in Ovations Medicare supplement programs grew by 30,000 seniors, or 1 percent, in the fourth quarter, while participation in Medicare Advantage offerings was flat in the quarter.

Enrollment in UnitedHealthcare and Uniprise, its divisions for employer health coverage, declined by 50,000 people for the fourth quarter. For the full year, enrollment in those programs dropped by 175,000 people, or 0.7 percent, as the company tries to integrate its PacifiCare acquisition. UnitedHealth said its "repositioning" of PacifiCare would continue through the first half of 2008.

UnitedHealth said fourth-quarter revenue increased 24 percent to $1.2 billion in its AmeriChoice division for managing Medicaid plans. AmeriChoice added 245,000 people during the year as it expanded in Tennessee and Texas, including 10,000 in the fourth quarter.

"We are pleased with the momentum Americhoice has generated this past year," said President and Chief Executive Stephen J. Hemsley on a conference call.

He said UnitedHealth had a "minimal" exposure to subprime mortgages at the beginning of the fourth quarter, and further reduced its exposure by the end of the year.

He said UnitedHealth is in advanced discussions with the Justice Department over its planned acquisition of Sierra Health Services Inc., and he expects it to close "in the near future."

Minnetonka-based UnitedHealth said it still expects earnings of about $3.95 to $4 per share for 2008, with cash flows from operations expected to approach $7 billion. First-quarter profit is expected in the range of 82 cents to 84 cents per share.

Wall Street is forecasting quarterly earnings per share of 83 cents and full-year profit of $3.96 per share.

For the full year, UnitedHealth earned $4.65 billion, or $3.42 per share, up almost 12 percent from $4.16 billion in 2006. Revenue rose 5 percent to $75.43 billion, from $71.54 billion a year ago.