UNH UnitedHealth Group Inc

By Kimberly Chin and Anna Wilde Mathews 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (April 17, 2019).

UnitedHealth Group Inc. raised its profit guidance for the year, as revenue growth across all of the company's businesses helped it post strong first-quarter results.

The company now projects earnings of $13.80 to $14.05 a share and adjusted earnings of $14.50 to $14.75 a share. Previously, UnitedHealth expected earnings of $13.70 to $14 a share and adjusted earnings of $14.40 to $14.70 a share.

Officials at the company, the parent of the nation's biggest health insurer, weighed in during a call with analysts on issues such as Democrats' proposals for universal government coverage and moves by the Trump administration to change the handling of drug rebates in the Medicare program.

The recent focus in Washington has helped push down the shares of the entire managed-care sector. Shares in UnitedHealth, which are off 11% this year, closed down 4% on Tuesday. Competitor Anthem Inc. was down nearly 7% on Tuesday, while Cigna Corp. was off nearly 8%. Analysts suggested the drops were due to the continued policy overhang.

UnitedHealth Chief Executive David Wichmann argued against so-called Medicare for All and other broad government-coverage plans, saying they would disrupt health care and hurt Americans' relationships with their doctors.

Mr. Wichmann said universal coverage was better achieved through current government and private approaches.

UnitedHealth officials also played down the impact of various changes to the handling of drug rebates.

John Prince, CEO of UnitedHealth's pharmacy-benefit manager, OptumRx, said the company expects "minimal impact on margins" from changes to rebates, because roughly 98% of clients already get rebates passed through to them.

Mr. Wichmann said the company's move to push drug rebates to individual consumers, which will take effect in plans sold to new clients starting next year, might pose some risk if customers don't want to make that shift.

So far, he said, customers have been "a little bit slower to adopt" the approach. He and Mr. Prince said the change is better for consumers and helps improve their compliance with drug regimens.

UnitedHealth officials also said a new Trump administration tweak designed to ease the impact of proposed changes on rebates in Medicare drug plans won't fully eliminate the proposal's upward impact on premiums, but will help. Yet despite the reassurance from UnitedHealth, analysts said investors remain worried about the political situation.

Peter Costa, of Wells Fargo, suggested in a research note that "continued fears around Medicare-For-All and pharmacy rebates as well as potential return" of a health-insurance tax that had been suspended were weighing on UnitedHealth's shares.

Ana Gupte, an analyst with Leerink Partners LLC, said UnitedHealth executives' reassuring comments might have accidentally magnified some investors' anxiety about universal-coverage proposals. "The fact that it was even addressed on the call made investors think, 'should we be more concerned?' " she said.

For the first quarter, UnitedHealth said its revenue increased 9% from a year earlier to $60.31 billion. Analysts polled by Refinitiv were expecting sales of $59.71 billion. Revenue from the UnitedHealthcare segment rose 7% to $48.9 billion, while sales at the Optum segment increased 13% to $26.4 billion.

First-quarter profit rose 22% to $3.47 billion, or $3.56 a share. Analysts had expected per-share earnings of $3.41.

UnitedHealth posted an adjusted profit of $3.73 a share, compared with analysts' estimates of $3.60 a share.

Mr. Wichmann said UnitedHealth had made progress in its Medicaid business, but it was still underperforming. The company recently said it would leave the Iowa Medicaid market. UnitedHealth is likely to achieve the lower end of its target margin range of 3% to 5% next year, he said.

Corrections & Amplifications UnitedHealth's shares have lost 7.6% year-to-date. A previous version of this article incorrectly said shares have gained 47%. (April 16, 2019)

Write to Kimberly Chin at kimberly.chin@wsj.com and Anna Wilde Mathews at anna.mathews@wsj.com

(END) Dow Jones Newswires

April 17, 2019 02:47 ET (06:47 GMT)

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