(Reuters) - UnitedHealth Group Inc UNH.N on Wednesday raised its annual profit forecast after its quarterly profit beat estimates, helped by growth in its Optum unit that manages drug benefits, and a slower-than-expected rebound in demand for deferred care.
Shares of the largest U.S. health insurer were up about 1% at $334.4 before the bell.
Large U.S. health insurers, including UnitedHealth, benefited from lower health care spending in the first half of the year, which more than offset pandemic-related additional costs.
The companies, however, signaled a rebound in demand for deferred services in May and June and projected higher medical costs for the second half of the year.
UnitedHealth reported a medical loss ratio (MLR) - the percentage of premiums paid out for medical services - of 81.9%, lower than last year’s 82.4% and analysts’ estimate of 83.55%, according to IBES data from Refinitiv.
The lower MLR is below consensus and much closer to normal after hitting 70.2% in the second quarter, but availing health care services remained below pre-pandemic levels, Evercore ISI analyst Michael Newshel said.
UnitedHealth said results for the third quarter also reflect costs from the company’s customer cost-sharing initiatives for COVID-19 testing and treatment.
Revenue from its Optum unit rose 21.4% to $34.92 billion in the quarter ended Sept. 30.
UnitedHealth’s largest health insurance business brought in $50.4 billion in sales for the quarter, a near 5% rise from a year earlier. Growth in sales of its government-backed health plans for seniors, people with disabilities and those with low-income was offset by a decline in employer-sponsored plans.
The company reported adjusted earnings of $3.51 per share for the quarter, beating estimates of $3.09 per share.
UnitedHealth raised its annual 2020 adjusted profit forecast to between $16.50 per share and $16.75 per share, from its previous range of $16.25 per share to $16.55 per share.
Reporting by Manojna Maddipatla in Bengaluru; Editing by Vinay Dwivedi
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