UnitedHealth Group (NYSE:UNH) started 2018 on a positive note, with the giant health insurer reporting strong first-quarter results in April. Investors had high expectations for the second quarter as well after the company boosted its full-year 2018 outlook based on those first-quarter numbers.

Those expectations were put to the test when UnitedHealth Group announced its second-quarter results before the market opened on Tuesday. But investors were treated to good news once again. Here are the highlights from the health insurer's quarterly update.

A health insurance form with a piggy bank, coins, a pen, and a calculator.

Image source: Getty Images.

UnitedHealth Group results: The raw numbers

Metric 

Q1 2018 

Q1 2017 

Year-Over-Year Change

Revenue

$56.1 billion $50.1 billion

12.1%

Net income from continuing operations

$2.9 billion $2.3 billion

27.8%

Adjusted earnings per share (EPS)

$3.14 $2.46

27.6%

Data Source: UnitedHealth Group.

What happened with UnitedHealth Group this quarter?

UnitedHealth's impressive year-over-year revenue increase stemmed primarily from a $4.9 billion, or 12.3%, increase in premium revenue. This growth resulted from a combination of several factors. The company's total membership increased, but, perhaps more importantly, the revenue mix of its membership changed in a way that boosted revenue. UnitedHealth's revenue was also boosted by higher premiums and a return of the health insurance tax in 2018, which was passed along to customers.

The Optum health services segment again performed well. Second-quarter revenue for the unit increased $2.1 billion, or 9%, over the prior-year period. This growth was fueled primarily by increased revenue from care delivery and behavioral health, digital consumer engagement, and health financial services.

But it was the bottom line that really shined for UnitedHealth Group. The health insurer's GAAP net income and adjusted earnings soared. One key reason behind the improved earnings was that UnitedHealth kept its biggest expense -- medical costs -- under control. The company's consolidated medical care ratio, which measures medical costs as a percentage of total revenue, decreased by 30 basis points year over year in the second quarter to 81.9%.

In addition, UnitedHealth benefited from lower taxes. Thanks to the impact of U.S. tax reform, the company's provision for income taxes dropped $230 million, or 21.3%, from the prior-year period.

What management had to say

UnitedHealth Group CEO David S. Wichmann said:

Today, UnitedHealth Group delivers increasing value to more people, driven by strong execution, consistently high quality, deep relationships and our distinctive combination of clinical, technology and information capabilities. As we look ahead, we will drive our growth on the strength of practical innovations that anticipate and respond to increasing consumer expectations and clear social needs.

Looking forward

For the second consecutive quarter, UnitedHealth Group increased its full-year 2018 guidance. The company now expects 2018 net earnings will be between $11.80 and $12.05 per share. Adjusted net earnings for the full year are projected to be between $12.50 and $12.75 per share, up from the previous guidance of $12.40 to $12.65 per share. UnitedHealth also expects 2018 cash flows from operations of around $15.5 billion.

The factors that drove UnitedHealth's strong second-quarter performance should continue into the rest of the year. The company continues to attract new members, keep medical costs largely in check, and the Optum segment, particularly OptumHealth, is still growing. UnitedHealth Group appears to have the fundamental ingredients in place to keep winning.

 

Keith Speights has no position in any of the stocks mentioned. The Motley Fool recommends UnitedHealth Group. The Motley Fool has a disclosure policy.