UnitedHealth ends 2014 with sizable profit

UnitedHealth Group Inc. beat the predictions of Wall Street analysts in the fourth quarter of 2014 in what turned out to be a better-than-expected year for the health insurer.

UnitedHealth's profit in the last three-month period rose 5.8% compared with the same quarter in 2013 to more than $1.5 billion. That equated to $1.55 in earnings per share, ahead of the analyst consensus of $1.50.

Full-year profit dropped 1% but still hovered around $5.6 billion. Earnings per share were $5.70, above what CEO Stephen Hemsley predicted at the company's investor day in December.

Last year was expected to be one of the most challenging for health insurers. Health care reform instituted cuts to the Medicare Advantage program, and 2014 was also the first year of the Patient Protection and Affordable Care Act exchanges, which presented a level of uncertainty and volatility.

But UnitedHealth closed the books in 2014 with near-record profits and easily the most revenue in the Minnetonka, Minnesota-based company's history. Full-year revenue reached $130.5 billion, up 6.5% from 2013.

Members of UnitedHealthcare, the company's health insurance subsidiary, continued to utilize fewer health care services, as the company's medical-loss ratio for the year came in at 80.9%, down from 81.5% in 2013.

UnitedHealth's consulting and data analytics arm, Optum, also remained the most profitable component of the company. Optum's earnings topped $1 billion in the fourth quarter, a 8.1% margin. By comparison, UnitedHealthcare's profit margin in the quarter was 5.7%.

Bob Herman writes for Modern Healthcare, a sister publication of Business Insurance.