UnitedHealth Group turned in a better-than-expected fourth quarter but surprised Wall Street with medical costs that soared 16%.
Shares of UnitedHealth and other major health care and insurance providers slipped Friday after the company announced results.
Health insurers dealt with rising medical costs for much of last year. UnitedHealth has said claims jumped from its Medicare Advantage business as more seniors got heart and orthopedic outpatient procedures.
The company covers about 7.7 million people with Medicare Advantage plans, which are privately run versions of the government's Medicare program mainly for people age 65 and older.
UnitedHealth also saw claims grow toward the end of the year in part from COVID-19 and because people sought vaccines and had other care addressed when they went to the doctor, company leaders told analysts.
“Seniors did really respond strongly to RSV vaccinations and scheduled physician visits,” Chief Financial Officer John Rex said.
UnitedHealth's medical costs, its largest expense, jumped to $62.23 billion in the quarter from $53.6 billion at the end of 2022.
But company leaders stressed that the rising costs wouldn't affect their expectations for 2024. The company said in late November that it expects adjusted earnings ranging between $27.50 and $28 per share in the new year.
FactSet says analysts forecast earnings of $27.87 per share.
Overall, UnitedHealth’s profit climbed nearly 15% to about $5.5 billion in the final quarter of 2023, and the company earned more than $22 billion on the year.
Earnings adjusted for one-time items totaled $6.16 per share in the fourth quarter, as revenue climbed 14% to $94.43 billion.
Analysts expected earnings of $5.98 per share on $92.13 billion in revenue in the final quarter of 2023.
UnitedHealth provides health insurance for more than 47 million people in the United States. It also provides care, pharmacy benefits management and technology services through its Optum segment.
The overall results “don't look great” despite the better-than-expected earnings, Leerink Partners analyst Whit Mayo said in a research note. He added that the company's care-providing arm, Optum Health, turned in “another lackluster quarter” with earnings that fell below expectations and shrinking profitability.
UnitedHealth is the first to report earnings every quarter, and many analysts see it as a bellwether for rivals.
Shares of Minnetonka, Minnesota-based UnitedHealth Group Inc. fell more than 4% to $516.63 Friday morning. The Dow Jones Industrial Average, of which UnitedHealth is a member, was down less than 1%.