(Reuters) - UnitedHealth Group Inc (N:UNH) on Wednesday reported a better-than-expected quarterly profit due to strength in the pharmacy benefit business and maintained its forecast for the year, sending the company's shares up nearly 3% before the bell.
UnitedHealth, the first health insurer to report results this earnings season, said its quarterly numbers reflect minimal impact from COVID-19 as the U.S. incidence of the fast-spreading respiratory illness worsened only late in the quarter.
The company said Andrew Witty, head of UnitedHealth's pharmacy benefit unit, Optum, will take a leave of absence to help lead the World Health Organization's new initiative for COVID-19 vaccine development.
UnitedHealth said it will continue to evaluate the impact of COVID-19 as the year progresses.
"UNH's outlook demonstrates how well protected managed care sector earnings will be from the COVID-19 crisis in near term from the unprecedented restrictions on elective health care," Stephens analyst Scott Fidel said.
The largest U.S. health insurer said it continues to expect adjusted net earnings of $16.25 to $16.55 per share for the year, the mid-point of which is above analysts' estimate of $16.22, according to Refinitiv IBES data.
Health insurers including UnitedHealth, Cigna Corp (N:CI) and Anthem Inc (N:ANTM) have announced measures to reduce patient cost sharing on COVID-19 testing and care.
For the quarter ended March 31, earnings attributable to UnitedHealth shareholders fell 2.5% to $3.38 billion, or $3.52 per share, hurt by a 7.1% jump in operating expenses.
However, the company reported medical loss ratio - the percentage of premiums paid out for medical services - of 81.0%, a decrease of 1% from a year earlier, benefiting from the return of the industry-wide health insurance fee.
The ratio beat analysts' estimates of 81.57%.
"Deferred and avoided care from the broad economic shutdown likely more than offset the narrower direct costs of COVID-19 patients," Evercore ISI analyst Michael Newshel said.
Revenue from its Optum unit, which manages drug benefits and offers healthcare data analytics services, rose 24.6% year-over-year to $32.84 billion.
UnitedHealth's core business that sells health insurance plans brought in $51.07 billion in sales, a 4.4% rise from a year earlier.
The company reported adjusted earnings of $3.72 per share, beating estimates of $3.63. Total revenue for the quarter rose 6.8% to $64.42 billion, beating Street estimates of $64.32 billion.