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Health insurance plays a vital role in promoting the growth of the healthcare industry, and UnitedHealth Group (NYSE: UNH) has been a leader in health insurance for years. Over the past year, UnitedHealth has made a key transition that has helped it avoid some of the headwinds that its peers have had to deal with, and smart strategic moves have put the health insurer in position to take maximum advantage of favorable trends in certain areas of the market.
Coming into Tuesday's third-quarter financial report, UnitedHealth investors had high hopes for the health insurer, and they weren't disappointed with the company's numbers. With strong momentum, UnitedHealth has high expectations that 2019 could be an even better year operationally than 2018 was, and that's making shareholders more excited than ever in the business.
Image source: UnitedHealth Group.
Healthy results for UnitedHealth
UnitedHealth's third-quarter results were just the latest in a series of encouraging performance from the health insurer. Revenue of $56.6 billion was up 12% from year-ago levels, outpacing what those following the stock had expected to see on the top line by a narrow margin. Net income jumped 28% to $3.28 billion, and after allowing for some extraordinary items, adjusted earnings of $3.41 per share topped the consensus forecast among investors by $0.12 per share.
Fundamentally, UnitedHealth was able to fend off threats and build on strengths. The insurer's medical care ratio improved by nearly half a percentage point to 81%. Although operating costs rose slightly to 15% because of the return of the health insurance excise tax, falling income tax rates helped to offset the overall impact to the bottom line.
From a segment perspective, UnitedHealth enjoyed balanced growth. The UnitedHealthcare health insurance business saw revenue rise nearly 13% as the company saw growth in customer counts and better pricing practices. The best gains for the business came from the community & state and Medicare & retirement divisions, as well as from UnitedHealth's global business. Relatively slow growth in employer and individual policies had a detrimental impact on margin levels, but overall, the numbers were solid.
Meanwhile, UnitedHealth's Optum unit saw its top line rise 11%. The strongest growth came from the unit's OptumHealth health management business, and the OptumInsight unit also did well on strength in data analytics and services offerings. Even the OptumRx pharmacy benefit management unit managed to see revenue climb 9% from year-ago levels.