UnitedHealth 4Q Report: Stocks Dip Amid Surging Medical Costs

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TL/DR –

UnitedHealth Group’s Q4 results beat expectations, but was still hit by soaring medical costs, which increased by 16% to $62.23 billion. The rising costs were attributed to increased claims from its Medicare Advantage business and the impact of COVID-19, but the company remained confident that it wouldn’t affect its expectations for 2024. Despite net profits for the quarter rising 15% to around $5.5 billion and annual earnings exceeding $22 billion, the company’s shares slipped as analysts highlighted underwhelming performance from its Optum Health arm.


UnitedHealth Q4 Performance Surpasses Expectations Despite Soaring Medical Costs

UnitedHealth Group’s Q4 earnings exceeded forecasts, although the company experienced an unexpected 16% surge in medical costs. The news affected the stock of UnitedHealth and other major healthcare and insurance providers, causing a minor slip.

The healthcare industry wrestled with increasing medical expenses throughout the previous year. UnitedHealth noted a significant uptick in claims from its Medicare Advantage business due to more seniors undergoing heart and orthopedic outpatient procedures.

At present, the company covers approximately 7.7 million people with Medicare Advantage plans, a privately-operated alternative to the government’s Medicare program specifically for those aged 65 and older. UnitedHealth reported a late-year surge in claims, partly due to COVID-19 and increased vaccine uptake, along with other health-related treatments during doctor visits.

UnitedHealth’s CFO, John Rex, mentioned seniors’ robust response to RSV vaccinations and planned physician visits. The company’s primary expenditure, medical costs, rocketed to $62.23 billion in the fourth quarter, up from $53.6 billion at 2022’s end.

Despite rising costs, UnitedHealth leadership maintains that these will not affect their 2024 projections. The company predicts adjusted earnings between $27.50 and $28 per share in the forthcoming year, with analysts forecasting earnings of $27.87 per share.

UnitedHealth’s Strong Year-End Results

UnitedHealth Group ended 2023 on a high, with Q4 profits up nearly 15% at $5.5 billion and $22 billion earned over the year. Adjusted for one-off items, Q4 earnings were $6.16 per share, with revenue climbing 14% to reach $94.43 billion.

The company was expected to earn $5.98 per share on $92.13 billion in Q4 revenue. UnitedHealth currently provides health insurance for over 47 million Americans and delivers various services, such as care provision, pharmacy benefits management, and technology, through its Optum segment.

Analyst’s View on UnitedHealth’s Performance

Leerink Partners Analyst Whit Mayo labelled the company’s results as “not looking great”, despite exceeding earnings expectations. Optum Health, UnitedHealth’s care-providing arm, turned in “another lackluster quarter”, with earnings below expectations and dwindling profitability.

UnitedHealth, which is seen as a bellwether for its industry rivals, is always the first to report earnings each quarter. Shares of the Minnesota-based company dropped more than 4% to $516.63 Friday morning, while the Dow Jones Industrial Average, which counts UnitedHealth as a member, saw a less than 1% decrease.


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