Please ensure Javascript is enabled for purposes of website accessibility

UnitedHealth Group Optum-izes Its Q4 Results

By Sean Williams - Jan 16, 2014 at 12:59PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

UnitedHealth Group delivers strong growth from its pharmacy services business but sees its medical cost ratio rise anyway.

The nation's largest health insurer, UnitedHealth Group (UNH -0.10%), kicked off earnings season for the sector this morning by producing generally positive growth and profit figures, but was held back by ongoing reimbursement concerns.

For the quarter ended Dec. 31, 2013, UnitedHealth Group reported $31.12 billion in revenue, a slightly better than 8% increase from the year-ago period, as it added 170,000 new members. Net earnings for the fourth-quarter increased by 18% to $1.4 billion, or $1.41 per share.

The real story on the earnings growth front continues to be its health care services operations, Optum, which saw revenue spike 35% from the year-ago period to $10.2 billion, led by a 31% growth surge in its pharmacy services revenue. This is also the same operating segment that includes Quality Software Services, the company which has overseen the fixes of the Obamacare website, Optum also delivered a 43% increase in its operating income for the quarter.

UnitedHealth's more traditional insurance enrollment operations saw modest membership gains in the fourth quarter and full year, however the shift from risk-based to fee-based services affected revenue negatively.

On the downside, concerns exist with regard to the company's Medicare Advantage business, a type of supplemental insurance purchased by seniors to help defray the costs that Medicare doesn't cover. Although revenue was up 11% to $11 billion in the fourth quarter, UnitedHealth's medical care ratio increased 70 basis points to 81.2% (a higher number is less favorable) signaling lower reimbursements from the government for this key program.

Looking ahead, UnitedHealth reaffirmed its full-year fiscal 2014 forecast which calls for revenue of $128 billion to $129 billion, implying about 5% year-over-year growth at the midpoint, with EPS expected in a range of $5.40 to $5.60, implying flat EPS growth.

Shares are down roughly 3% in midday trading.


Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.

The Motley Fool recommends UnitedHealth Group. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

UnitedHealth Group Incorporated Stock Quote
UnitedHealth Group Incorporated
$536.73 (-0.10%) $0.53

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/10/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.