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UnitedHealth Group Reports Q2 2018 Earnings, Stock Down 1.9%

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UnitedHealth Group reports its Q2 2018 earnings results

Today, UnitedHealth Group (UNH) reported its earnings results for the second quarter of fiscal 2018. The company reported sales of $56.1 billion, up ~12% on a year-over-year basis. The sales reported for the quarter were in line with analysts’ sales estimates.

UNH’s adjusted EPS for Q2 2018 came in at $3.14 per share, ahead of analysts’ estimates of $3.04. The adjusted EPS represented year-over-year growth of ~27.6%. UnitedHealth Group’s earnings from operations rose by ~12.7% and were reported at $4.2 billion. The company also announced a stellar increase in its cash flows from operations, which came in at $4 billion, compared to $2.2 billion in Q2 2017.

After the company released its earnings results, UNH was trading ~1.8% down before the market opened.

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UNH’s medical care ratio continued to decline

For a health insurance company, the medical care ratio measures medical costs as a percentage of premium revenues. UnitedHealth Group registered a consolidated medical care ratio of 81.9% in Q2 2018, representing a 30 basis point decrease from Q2 2017. However, on a sequential basis, the company reported an increase in its medical care ratio compared to its 81.4% in Q1 2018. This rise was due to the return of the health insurance tax, which more than offset the changes in the business mix and reduction in the prior year’s reserve development levels. These factors also affected the company’s medical care ratio in the prior quarter.

Segment performance

In the first quarter, UnitedHealth Group’s UnitedHealthcare business registered year-over-year sales growth of ~12.4% to $45.8 billion. The business performance was driven by a consumer increase, revenue membership mix growth, a pricing increase, and health insurance tax resumption. Further, the UnitedHealthcare business reported earnings from operations of $2.4 billion, up ~6.6% year-over-year.

UnitedHealth Group’s Optum business registered sales of $24.7 billion, up ~9.1% year-over-year. Each segment under the Optum business registered double-digit growth. The operating margin for the business expanded by 80 basis points in Q2 2018.

UNH raised its earnings guidance for fiscal 2018

During its Q2 2018 earnings announcement today, UNH also raised its fiscal 2018 guidance. The adjusted EPS for fiscal 2018 are expected in the range of $12.50–$12.75, up from $12.40–$12.65.

UnitedHealth Group’s peers Anthem (ANTM), Aetna (AET), and Cigna (CI) are expected to register sales growth of 2.3%, -0.06%, and 8.6%, respectively.

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