INDIANAPOLIS ? UnitedHealth Group Inc.'s fourth-quarter net income jumped 20 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 medical costs, its largest expense, climbed 8 percent to $18.6 billion compared with 2010's fourth quarter, when utilization hit unusually low levels.
The insurer also saw an increase in its medical-loss ratio, or MLR, which measures the percentage of premiums it spends on medical care.
UnitedHealth said that grew partially because of rebates required under the health care overhaul. A measure that started last year requires insurers to give rebates to customers if they fail to meet minimum MLRs.
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.
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.
UnitedHealth said its enrollment climbed 5 percent compared to the 2010 quarter to 34.6 million people, helped in part by growth in Medicare Advantage. Those are privately run versions of the government's Medicare program for the elderly and disabled people and a big potential source of growth for insurers as the baby boomer generation ages and becomes eligible for the plans.
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. They expect, on average, earnings of $4.77 per share.
McDonald said the unchanged forecast probably has more to do with the new year being less than three weeks old than any major concern.
UnitedHealth is the largest health insurer based on revenue and the first to report earnings every quarter. Many see the company as a bellwether for managed-care companies. 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.
Goldman Sachs analyst Matthew Borsch said in a research note UnitedHealth's performance bodes well for the sector, where strong results are expected.
UnitedHealth shares climbed 5 cents to $53.99 in premarket trading.
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