UnitedHealth Group's fourth-quarter earnings jumped 15 percent and topped expectations, as the nation's largest health insurer added millions of customers and booked a sizeable gain from a business that doesn't sell insurance.
But the Minnetonka, Minn., company's shares slipped more than 2 percent Thursday in premarket trading as analysts waited for more insight into potential funding cuts for a key element of its business.
UnitedHealth's total enrollment grew 11 percent compared to the final quarter of 2012, as it added Medicare Advantage customers and started a contract to cover military members and their families through the government's Tricare program.
The insurer also said operating earnings from its Optum segment jumped 43 percent to $655 million in the quarter. Optum provides information technology services and pharmacy benefits management. It also owns or contracts with doctor practices around the country to deliver care. UnitedHealth executives frequently tout its growth prospects to analysts.
Overall, UnitedHealth earned $1.43 billion, or $1.41 per share, in the three months that ended December 31. That's up from $1.24 billion, or $1.20 per share, in the 2012 quarter. Total revenue climbed 8.2 percent to $31.12 billion.
Analysts expected, on average, earnings of $1.40 per share on $31.15 billion in revenue, according to FactSet.
UnitedHealth Group Inc. is the first insurer to report earnings every quarter. Many see it as a bellwether for other insurers.
Total enrollment grew to 45.4 million from 40.9 million at the end of 2012 to help the insurer's revenue rise. That included a gain of nearly 17 percent in the company's Medicare Advantage business.
Medicare Advantage plans are privately run versions of the government's Medicare program that covers health care costs for the elderly and disabled people. UnitedHealth is the nation's largest provider of that coverage with nearly 3 million customers.
The government pays insurers who run Medicare Advantage plans more per enrollee than the cost of care for people with traditional Medicare coverage. In return, the plans offer extras like dental and vision coverage that patients with traditional Medicare don't receive.
But funding for the plans is being scaled back in part to help pay for the health care overhaul, the massive federal law that aims to provide insurance for millions of uninsured people.
Investors are worried about these cuts, and UnitedHealth has warned repeatedly about the pressure they place on its performance. But investors also like the diversity of UnitedHealth's revenue sources, which also include commercial health insurance, coverage for the state and federally funded Medicaid program and the Optum business.
For 2013, UnitedHealth earned $5.63 billion, or $5.50 per share, on $122.49 billion in revenue.
The insurer still expects 2014 earnings to range between $5.40 and $5.60 per share on revenue of $128 billion to $129 billion, the same forecast it announced last month before its annual investor meeting.
Analysts expect, on average, earnings of $5.64 per share on $130.59 billion in revenue.
UnitedHealth shares fell 84 cents to $74 in premarket trading about a half hour before the market open after rising as high as $78 earlier. The stock jumped nearly 39 percent last year to close 2013 at $75.30 after setting several all-time high prices that the insurer has already topped in the new year.