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UnitedHealth profit falls, but still beats estimates.

UnitedHealth Group Inc. (Minnetonka MN) reported a 72% decline in quarterly profit on a big charge from a legal settlement and challenges in its businesses serving seniors and employers, although its results surpassed previously lowered expectations. The largest U.S. health insurer by market value also declared its shares undervalued and offered no negative surprises ae" relief for investors who have endured a spate of earnings warnings this year from the industry. UnitedHealth's shares finished higher for the week with Edward Jones analyst Aaron Vaughn saying, "There's no other shoes to fall, so they are rallying on that." Health insurers have plummeted this year on disappointing earnings forecasts stemming from a variety of setbacks. Even with last week's rally, the Morgan Stanley Healthcare Payor index is down 38% this year. UnitedHealth, the first insurer to report second-quarter earnings, has been the group's laggard, with its shares down nearly 60% through last week. Chief executive Stephen Hemsley called the shares "undervalued and compelling," and the company said it would continue buying back its stock, with more than $3 billion in repurchases planned for 2008. The company also said it would consider raising its dividend once its shares rebound.

For the latest quarter, net earnings fell to $337 million, or 27 cents per share, from $1.23 billion, or 89 cents, a year earlier. Excluding items UnitedHealth earned 67 cents per share, 2 cents above analysts' estimates. Earlier this month, UnitedHealth estimated earnings for the quarter at 64 cents to 66 cents per share, excluding special items, far below analysts' forecasts at the time. Second-quarter revenue rose 6.7% to $20.3 billion. Earnings from operations at its main healthcare benefits unit fell 35% to $1.14 billion. The company said pressure in its commercial business serving employers ae" where UnitedHealth has cited tough competition ae" hurt margins and enrollment. Company shares closed the week up $3.55, or 15%, at $27.45.
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Title Annotation:TOP STORIES
Article Type:Financial report
Date:Jul 28, 2008
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