UnitedHealth Group Inc. reported an expected 29% drop in third-quarter profit but said a weak economy would hurt health-plan enrollments next year.Third-quarter net income fell to $920 million, or 75 cents a share, from $1.28 billion, or 95 cents a share, a year earlier. The earnings included three cents a share in charges.
Revenue for the quarter ended Sept. 30 climbed 7.9% to $20.16 billion.
Investors reassured that UnitedHealth's exposure to issuers of failed mortgage investments and capital market turmoil appears minimal bid up the stock as much as 9% intraday on the news. In 4 p.m. composite trading on the New York Stock Exchange, shares of the Minnetonka, Minn.-based health-insurance giant were up 4%, or 96 cents, or 4%, to $22.63
UnitedHealth and other managed-care stocks have been battered more than most in recent weeks amid worries that their investment portfolios are vulnerable to the global credit crisis.
The company Thursday described its balance sheet as "strong," with nearly 30% of its $20 billion portfolio is in cash or cash equivalents and the rest in what it said were diversified, high-quality investments. The company said it incurred a loss equal to two cents a share on investments during the quarter and that it reduced its debt by $337 million in the period.
But UnitedHealth's chief executive, Stephen Hemsley, provided a cautious outlook for the company in 2009, citing the "economic and political climate." He added that higher job losses would likely mean steeper declines in health-plan membership next year and that enrollment in the first quarter would be down "significantly" from year's end.
UnitedHealth is the largest health insurer by revenue and the first in its category to report results each quarter. This year it has twice lowered profit expectations amid problems keeping premiums ahead of medical costs and declines in health-plan enrollments.
UnitedHealth forecasts 2009 earnings of between $2.90 and $3.15 a share, excluding investment income, on revenue of between $84 billion and $86 billion.
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