UnitedHealth Group Inc.
(
UNH
) reported its fourth-quarter 2012 earnings of $1.20 per share,
in line with the Zacks Consensus Estimate. Earnings, however,
increased 2.6% on a year-over-year basis.
The company posted revenues of $28.8 billion, up 11.0% year over
year and better than the Zacks Consensus Estimate of $28.3
billion. The year-over-year increase was an outcome of
higher premiums and escalated product revenue in the health
benefits business (UnitedHealth Care), coupled with strong
revenue growth at the service segment as well as the
international segment.
For the full year 2012, net income per share of $5.28 was a penny
ahead of the Zacks Consensus Estimate of $5.27 per share. Full
year 2012 revenues were $110.6 billion, up 9% year over year.
During the quarter, UnitedHealth's medical costs increased 12.0%
year over year to $20.8 billion. Total operating costs increased
12.2% year over year to $26.7 billion.
Segment performance
During the reported quarter, UnitedHealth's health benefits
segment - UnitedHealthcare - witnessed revenue growth of 11.0%
year over year to $26.9 billion. Earnings from operations,
however, declined 11% to $1.6 billion, due to lower levels of
reserve development in the quarter compared with the prior-year
quarter.
Revenue from the company's other segment - the health services
segment branded as Optum - remained unchanged at $7.5 billion on
a year-over-year basis. Earnings from operations, however, surged
65% year over year to $459 million. The company is aggressively
expanding this segment in order to diversify its earnings. It
expects Optum to contribute more than 30% of the earnings mix.
Membership Enrollment
UnitedHealth had 40.9 million members in its enrollment at the
end of the quarter, up 6.355 million year over year. Most of the
membership gains were in the international markets aided by the
recent acquisition of Brazil-based Amil.
Capital Position
Cash flows from operations were $7.2 billion for the full year,
including $1.7 billion in the fourth quarter. On a year-over-year
basis, fourth-quarter 2012 days sales outstanding in accounts
receivable of 9 days and days claims payable of 49 days both
increased by one day.
Share Repurchases and Dividend
UnitedHealth Group bought back 57 million shares for a total
consideration of $3.1 billion in 2012 and paid $820 million in
shareholder dividends in 2012, up 26% year over year. The full
year 2012 return on equity was 18.7%.
2013 Guidance Affirmation
The company has reaffirmed the previously issued earnings
guidance for 2013. It continues to expect revenues of $123
billion to $124 billion and net earnings in the range of $5.25 to
$5.50 per share.
During the quarter, UnitedHealth announced the big acquisition of
Amil Participacoes S.A. of Brazil for $4.3 billion. The company
is aggressively expanding its international business to offset
the stringent regulatory pressures at home.
UnitedHealth's peers such as
Aetna Inc.
(
AET
),
CIGNA Corp.
(
CI
),
WellPoint Inc.
(
WLP
),
Humana Inc.
(
HUM
) are all expected to release their third-quarter earnings
shortly.
UnitedHealth currently retains a Zacks Rank #3 (Hold). We are
also maintaining our long-term Neutral recommendation on the
shares.
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