UnitedHealth net income rises 47 percent on cost cuts

Keith Snider

Thursday, Oct. 14, 2004 | 11:23 a.m.

UnitedHealth Group Inc., the biggest U.S. health insurer and a player in the Nevada market, said third-quarter profit rose 47 percent after the company controlled costs and gained customers through the July purchase of Oxford Health Plans Inc.

Net income increased to $698 million, or $1.04 a share, from $476 million, or 77 cents, a year earlier, the Minnetonka, Minn.-based company said in a statement. Revenue rose 36 percent to $9.86 billion from $7.24 billion.

Chief Executive William McGuire is adding members through acquisitions while U.S. job growth is too slow to bolster health-plan membership. He bought Oxford Health this year to gain 1.5 million customers in the New York area, where UnitedHealth also has accounts with Fortune 500 companies. McGuire bought Mid Atlantic Medical Services Inc. to expand around Washington, D.C.

"They're behaving as if they're a smaller aggressive company," said Michael Obuchowski, who manages about $35 million for Altanes Investments LLC in New York and owns UnitedHealth shares. "If you have a good track record of being able to bring these companies into the fold, it creates momentum."

UnitedHealth was expected to earn $1 a share, the average estimate of analysts surveyed by Thomson Financial.

The company's shares rose $1.90, or 2.6 percent, to $73.91 at 9:43 a.m. in New York Stock Exchange composite trading today. They had climbed 24 percent this year.

Earnings will be about $1.07 a share in the fourth quarter, bringing full-year earnings to $3.92, the company said. In July, UnitedHealth forecast profit of $3.79 to $3.82 a share this year, excluding the Oxford acquisition. The company earned $2.96 a share last year.

The company said 2005 earnings will be $4.70 to $4.75 a share, 8 cents higher than the range it previously expected.

UnitedHealth has used Internet transactions to cut costs and boost earnings as premium increases slowed.

"They need to control medical costs; that's what it's all about," Obuchowski said. "When the economy grows 3 or 4 percent, costs are going to increase."

In Nevada, UnitedHealth insurers about 82,000 people, most of whom work for large companies, said Gregory Thompson, spokesman for UnitedHealth's West and Midwest regions.

"We're definitely always looking to expand in the market,"he said. "We're looking at expanding into the smaller and mid-size markets."

UnitedHealth, which has increased its advertising in the Las Vegas area, plans to offer more options for health and vision insurance, health savings accounts and medical management.