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September 20, 2017

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UnitedHealth raises 2016 forecast after 3rd quarter results

UnitedHealth Group hiked its 2016 earnings forecast again after its profit swelled 23 percent to nearly US$2 billion in the third quarter, helped by gains both in and outside its core insurance business.

The nation's biggest health insurer now expects adjusted, full-year earnings of about US$8 per share, up from its previous forecast of US$7.80 to US$7.95 per share.

Wall Street had been projecting per-share earnings of US$7.93, according to FactSet, and the company's stock rose before the opening bell Tuesday.

Operating earnings jumped more than 10 percent to US$2.1 billion for the company's UnitedHealthcare business, which sells individual and employer-sponsored coverage and runs Medicaid and Medicare plans.

Health insurance is UnitedHealth's main business, but it also has been growing its Optum business, which provides pharmacy benefits management and technology services and runs clinics and doctor's offices. Operating earnings from that segment surged 36 percent to US$1.5 billion.

Overall, UnitedHealth earned US$1.97 billion in the three-month period that ended Sep. 30, up from US$1.6 billion in the previous year's quarter. Adjusted earnings totaled US$2.17 per share in the most recent quarter.

The results topped expectations on Wall Street, where analysts forecast earnings of US$2.08 per share, according to Zacks Investment Research.

UnitedHealth posted revenue of US$46.29 billion in the quarter, above the average analyst forecast for US$45.87 billion.

UnitedHealth shares have climbed 14 percent since the beginning of the year, outpacing other national health insurers, while the Standard & Poor's 500 index has climbed 4 percent.

UnitedHealth, based in Minnetonka, Minnesota, is the first major insurer to announce earnings every quarter, making it an industry bellwether.

The insurer offered no update Tuesday on its performance in the Affordable Care Act's public exchanges.

UnitedHealth said in July that it expected to lose around US$850 million from its ACA-compliant individual business, which amounts to a small slice of its total operation. CEO Stephen Hemsley told analysts then that his company would have no meaningful exposure next year to the exchanges, a key element in the law's push to expand coverage.

UnitedHealth grew fast in the ACA exchanges, expanding to sell coverage in 34 states this year. But next year, it will only offer coverage on exchanges in three states: Nevada, Virginia and New York.

Other insurers also have struggled in developing the still-new business, and defections from the exchanges are expected to hurt customer choice in many markets later this fall, when the enrollment period begins for 2017 plans.

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