(Reuters) -UnitedHealth Group Inc beat Wall Street expectations for fourth-quarter profit on Friday, as lesser COVID-related expenses kept a check on medical costs at its health insurance business.
Health insurers’ costs have been in flux during the pandemic, but have eased over the past year as COVID-related hospitalizations have fallen from their peak.
UnitedHealth’s medical cost ratio – the percentage of payout on claims compared to its premiums – fell by nearly a percent to 82.8%, marginally lower than analysts’ estimates of 82.87%, according to Refinitiv IBES data.
Bernstein analyst Lance Wilkes said the improvement in the ratio was due to the high COVID-19 spike that was seen last year.UnitedHealth had also factored in “less intense but moderately higher than normal” flu season during its investor conference in November, so analysts were expecting flu-related hospitalizations to partially offset gains from lower COVID hospitalization.
Stephens analysts Scott Fidel said UnitedHealth’s beat was also aided by higher investment and other income, which came in at $855 million for the reported quarter, up 5% from a year earlier.
Revenue from Optum rose 16.5% to $47.87 billion, aided by strong growth in its health service and pharmacy benefit management business.
Optum includes the company’s pharmacy benefit management business that helps negotiate the terms of coverage between health insurers, their clients and drug manufacturers.
Excluding items, the company reported a profit of $5.34 per share for the quarter ended Dec. 31, beating analysts’ estimates of $5.17 per share, according to Refinitiv IBES data.
UnitedHealth’s revenue rose 12% to $82.79 billion, beating estimates of $82.59 billion.
Shares of UnitedHealth were down 0.3% at $494 in premarket trade.
(Reporting by Leroy Leo and Khushi Mandowara in Bengaluru; Editing by Shailesh Kuber)