UnitedHealth Group Inc., the largest U.S. health insurer, raised its 2015 forecast and posted first-quarter profit that topped analysts’ estimates amid higher revenue from its Optum technology business. The shares jumped.
Earnings, excluding certain items, will be $6.15 to $6.30 a share, the Minnetonka, Minnesota-based insurer said Thursday in a statement. The company had said as recently as last month that 2015 profit would be $6 to $6.25 a share.
Growth at UnitedHealth has been fueled by the Optum business, which provides technology and consulting, and manages pharmacy benefits. Optum’s revenue increased 15 percent during the period to $12.8 billion.
“You’re getting double digit revenue growth pretty much across the board,” said Sheryl Skolnick, an analyst at Mizuho Financial Group Inc. “Despite absorbing the cost at OptumRx of the pending deal with Catamaran, it was pretty much of a monster quarter for Optum.”
To bolster Optum’s pharmacy business, UnitedHealth struck a deal last month to buy rival Catamaran Corp. for $12.8 billion. Firms like Catamaran help administer the drug coverage in health plans, working with employers and insurers to negotiate with drug companies and pharmacies. Optum now covers about 30 million people, and the Catamaran deal will add another 35 million.
First-quarter net income rose to $1.41 billion, or $1.46 a share, from $1.1 billion, or $1.10, a year earlier. Analysts had estimated $1.35 per share on average.
UnitedHealth is the first managed-care company to report first-quarter results. The shares rose 3.7 percent to $121.60 at the close in New York, leading a rally among health insurers.
Aetna Inc. advanced 3.2 percent, while Cigna Corp. added 2 percent and Anthem Inc. rose 2.4 percent.
The industry has been adjusting to new taxes and regulations under the Patient Protection and Affordable Care Act, known as Obamacare. UnitedHealth has benefited from an expansion of coverage, though profit margins can be narrower in government-funded programs like Medicaid.
Revenue increased 13 percent to $35.8 billion, topping analysts predictions for $34.6 billion. The company said Thursday it expects $143 billion in revenue this year, an increase of $2 billion from its previous forecast.
UnitedHealth’s earnings view for 2015 includes absorbing about 10 cents per share from the Catamaran purchase. The combination will add about 30 cents per share to earnings in 2016, the company said.
Operating profit at the health insurer climbed to $1.9 billion from $1.4 billion a year earlier. The company spent 81.1 cents of every premium dollar on medical care, down from spending 82.5 cents a year earlier.
UnitedHealth’s results were particularly noteworthy after HCA Holdings Inc., the biggest for-profit U.S. hospital chain, reported Wednesday that admissions and emergency department visits climbed, Skolnick said. That raised questions about whether medical spending would jump at health insurers.
“Somebody bore the cost of HCA’s historic volume,” she said. “It wasn’t United.”