The company also issued its latest defense of its decision to replace ousted CEO William McGuire with his right-hand man, operating chief Stephen Helmsley. Helmsley also received backdated stock options, according to a lawyers' report issued earlier this week on the matter, but didn't know at the time. McGuire, by contrast, was portrayed as having signed off on backdated options at the company.
The Minnetonka, Minn., company made $1.1 billion, or 79 cents a share, for the quarter ended Sept. 30, up from the year-ago $800 million, or 61 cents a share. Sales rose to $18.01 billion from $11.6 billion a year earlier.
Analysts surveyed by Thomson Financial were looking for a 76-cent profit on sales of $18.27 billion.
Excluding acquisitions, third-quarter sales rose 20% from a year ago, UnitedHealth said.
Consolidated third quarter operating margin improved to 10.3% from 9.1% in the second quarter of 2006, reflecting diversified growth coupled with effective continuing cost management and improved underlying business performance in multiple businesses. But margins fell from 11.3% a year ago due to business mix changes driven by Medicare Part D offerings and the acquisition of PacifiCare Health Systems.
The consolidated medical care ratio (medical costs as a percentage of premium revenues), which includes all businesses and products, declined 50 basis points on a sequential quarter basis to 81.1%. As expected, on a year-over-year basis the consolidated medical care ratio increased due to the impact of the acquisition of PacifiCare and the commencement of Medicare Part D.
UnitedHealth is likely to delay the filing of its quarterly reports on Form 10-Q for the second and third quarters of 2006, in order to complete its analysis of its previously filed financial statements in light of the independent committee of the board's report on stock option practices. The company said earlier this week that longtime CEO McGuire would step down as a result of the probe's findings.
"The actions we announced last week establish a blueprint for the company's governance and internal controls," said Chairman Richard Burke. "We deeply regret the deficiencies relative to our historical stock option programs cited in the Independent Committee's report and apologize to all our stakeholders for them. The actions we adopted are designed to help ensure that UnitedHealth Group meets the highest possible standards of corporate governance, in compensation matters and other areas.
"The Board unanimously appointed Steve Hemsley as CEO after fully considering his strong performance at the Company and all facts pertaining to the Independent Committee's review. Each of the directors believes that our decision and Steve's leadership are in the best interests of UnitedHealth Group, our employees, customers and shareholders. Steve will be a strong and capable leader for UnitedHealth Group's future."
UnitedHealth said it expects to see earnings rise 15% next year off this year's full-year target of $2.96 a share or so. That's in line with the Wall Street estimate. The company put sales at $79 billion or above, where the estimate is $80 billion.