INDIANAPOLIS ? UnitedHealth Group Inc.'s fourth-quarter net income jumped 21 percent, but the insurer saw signs of health care use picking up and left its 2012 earnings forecast unchanged.
The Minnetonka, Minn., company said Thursday utilization started rising in the last half of the year, as commercial health insurance costs increased 5.5 percent in 2011. That was a larger increase than in 2010 but still smaller than the jumps of 7 percent or more that insurers saw before the recession.
UnitedHealth and other health insurers have been helped in recent quarters by health care use that has risen at rates that were slower than expected when they set premiums. Industry analysts and other experts have said use tends to rise at slower levels after a recession, as consumers cut back on spending.
Many analysts think this trend will continue into 2012, but insurers have warned that they expect growth in use to return to normal levels.
Citi analyst Carl McDonald said patient volumes at hospitals are picking up, but they remain relatively low, and it's unclear yet whether health care use is on the rebound. He noted that use typically picks up in the fourth quarter, when patients with high-deductible health plans seek care before their deductibles renew in the new year.
The company told analysts Thursday that while use is climbing, price increases for inpatient hospital care are the biggest reason behind its growth in medical costs.
"It's an area of intense pressure and intense focus for us as a business," said Daniel J. Schumacher, chief financial officer for UnitedHealthcare, the insurer's largest segment.
UnitedHealth earned $1.26 billion, or $1.17 per share, in the three months that ended Dec. 31. That's up from $1.04 billion, or 94 cents per share, in the same quarter last year.
Revenue grew 8 percent to $25.92 billion.
Analysts surveyed by FactSet had forecast, on average, earnings of $1.03 per share on $25.64 billion in revenue.
Total medical costs, UnitedHealth's largest expense, climbed 8 percent to $18.6 billion in the quarter. Enrollment grew 5 percent to 34.6 million people compared to the 2010 quarter.
For the full year, UnitedHealth earned $5.14 billion, or $4.73 per share, on $101.9 billion in revenue.
The insurer reiterated a 2012 forecast it announced in November that calls for earnings to range between $4.55 and $4.75 per share on revenue of $107 billion to $108 billion. Analysts have labeled that forecast conservative and expect, on average, earnings of $4.77 per share.
UnitedHealth CEO Stephen J. Hemsley told analysts on Thursday that while his company's results surpassed expectations, they don't alter the insurer's forecast. He said the company is taking "an appropriately cautious posture" on 2012.
"We expect steadily increasing medical utilization over the course of the year," Hemsley said.
UnitedHealth shares climbed more than 6 percent this year leading up to Thursday's earnings announcement. The stock then slipped 3 percent, or $1.62, to close at $52.32 Thursday. Analyst Les Funtleyder suspects that some of that drop may be attributable to investors taking profits.
"Everyone expected a good quarter and they got one," said Funtleyder, healthcare portfolio manager at Miller Tabak, which owns UnitedHealth shares.
UnitedHealth is the largest health insurer based on revenue and the first to report earnings every quarter. WellPoint Inc. reports on its fourth-quarter performance Wednesday. Aetna Inc. releases results Feb. 1, Cigna Corp. follows on Feb. 2 and Humana Inc. rounds out the earnings reports of the largest health insurers on Feb. 6.
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