UnitedHealth outlook hurts shares in sector

UnitedHealth Group Inc. said Thursday that it earned $1.2 billion in the fourth quarter, but its tepid outlook for 2007 dragged down its shares and those of other health insurers.

UnitedHealth also did not disclose per-share earnings or comparisons with last year because it was still trying to sort out the accounting for its stock option scandal and has said past earnings filings will be restated.

UnitedHealth shares fell $1.85, or 3.3%, to $53.80. Other insurers were off as well.

The drops came after UnitedHealth, the nation’s second-largest health insurer, said it expected medical costs to rise about 7.5% during 2007. That forecast for the closely watched barometer for health insurers is low by historical standards but not as low as last year’s 7%, Piper Jaffray analyst Melissa Mullikin said.

UnitedHealth also reduced the number of customers it expected to add to its Medicare Advantage insurance -- 80,000 to 100,000 people this year, down from the 180,000 it previously predicted.

The $1.2-billion profit would be a 38% increase over the $870 million it reported a year earlier, although the year-earlier profit is among the earnings that UnitedHealth may have to restate. Revenue for the quarter was $18.16 billion.

The latest results work out to 86 cents a share. Analysts surveyed by Thomson Financial were expecting 85 cents on revenue of $18.23 billion.

Minnetonka, Minn.-based UnitedHealth said it expected to earn $4.7 billion to $4.75 billion for all of 2007 -- in line with its earlier estimates -- and $980 million to $1 billion during the first quarter. Earlier this month it projected 2007 revenue of $79.5 billion.

It warned that 2007 profit could change depending on expenses for the stock option matter.