UnitedHealth Group Inc., the nation's largest health insurer, reported a tiny uptick in third-quarter profit, disappointing investors who have bid up the company's shares in recent months.
The Minnetonka, Minn., company said government funding cuts to Medicare Advantage plans were one drag during the quarter, but it said overall medical costs remained in check.
The company said net income for the quarter ended Sept. 30 was $1.57 billion, or $1.53 a share. That was up 1% from $1.56 billion, or $1.50 per share, for the same period a year ago. Revenue in the quarter rose 12% to $30.6 billion.
Shares of UnitedHealth were off 5%, or $3.72, to $71.47 in midday trading.
Some analysts attributed the sell-off to the fact UnitedHealth didn't surpass Wall Street's expectations or raise the top end of its profit forecast, as it often does during the year.
"United didn’t have a terrible quarter by any means," Citigroup analyst Carl McDonald said in a research note.
"But we can’t forget that these stocks are all trading at or near 52-week highs, with valuation multiples above historical norms, so the bar is a lot higher than it’s been over the last couple of years."
UnitedHealth is the first major health insurer to report third-quarter results, and it often sets the tone for the industry.
WellPoint Inc., which runs Anthem Blue Cross in California and 13 other Blue Cross plans, reports earnings next week.
During the third quarter, UnitedHealth said it added 275,000 people to its commercial, Medicare and Medicaid health plans for a total membership of 45.3 million.
Compared to other insurers, UnitedHealth has been more cautious about participating in new government-run exchanges that are part of the federal Affordable Care Act.
For instance, UnitedHealth opted out of California's exchange and it is leaving the state's individual insurance market entirely at year end. It remains a big player in the employer insurance market and serving Medicare enrollees in California and nationwide.