UnitedHealth Group earnings up in Q4, hikes forecast due to tax bill
- UnitedHealth Group's revenues grew to $201 billion in fiscal year 2017, a 9% increase year-over-year compared to fiscal year 2016.
- The company's service arm, Optum, grew by $7.6 billion to $91.2 billion in 2017, a 9.1% increase.
- United raised its 2018 expected net earnings from $11.65 to $11.95 per share. Cash flow from operations is expected to range between $15-15.5 billion.
The health insurance giant continues to see revenue growth, fueled by operations growth.
Full year 2017 earnings from operations grew $2.3 billion, up 17.6% year-over-year to $15.2 billion. Full year 2017 cash flows from operations of $13.6 billion grew 38.8% year-over-year.
UnitedHealth Group CEO David Wichmann noted the company backs President Trump’s recent executive order allowing small businesses and groups of individuals to buy insurance as associations. The association health plans available to them do not have to meet certain requirements of the ACA, such as coverage of so-called essential health benefits.
“We have a great deal of experience in the area covered in the order, short-term policies, association plans and expanded use of HRAs,” Wichmann previously said during the Q3 call.
Wichmann added United is still reviewing the impact of the recently released association health plan rule, calling it important to be designed carefully to avoid unintended consequences.
In addition, the company benefited from the tax bill passed late last year, which is expected to boost the company's earnings and cash flow by $1.7 billion.
“That’s after an estimated $400 to $500 million reduction in premium revenues due to minimum loss ratio and lower net health insurers fee recapture effects and a $200 to $300 million additional investment in operating costs, as we accelerate existing initiatives in artificial intelligence, data analytics, individual health record custodianship, digital health, Net Promoter Score improvements and health related initiatives in local communities,” Wichmann said.
However, Jeff Alter, CEO of UnitedHealthcare Employer & Individual, warned of potential impacts of the Affordable Care Act health insurance tax, in an earnings call noting it would result in much higher premiums for consumers. UnitedHealthcare Group continues to advocate for a delay or permanent repeal of the tax, according to the conference call.
“If a deferral for 2018 occurs, we plan to return the value to those impacted by the tax,” Wichmann said.
United has been on a shopping spree for the past year. Late last month, the company made a bid for South American provider and insurer Banmédica SA. United's Optum announced plans to acquire Advisory Board Company's healthcare business and DaVita clinics last year while partnering with Walgreens on urgent care.
“2017 was a strong year for UnitedHealth Group by virtually every measure — topline growth, rising NPS, strengthening culture and service, strategic advances, operational execution, and, as a result, strong financial performance,” Wichmann said.
- Healthcare Dive UnitedHealth's Optum to buy DaVita clinics for $4.9B