UnitedHealth Beats by a Penny

The big health insurer reaffirms guidance as well.
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(UNH) - Get Report

posted its customary stronger-than-expected earnings Thursday and reaffirmed guidance for the second half of the year.

For its second quarter ended June 30, UnitedHealth made $809 million, or 61 cents a share, up from the year-ago $596 million, or 47 cents a share. Revenue surged to $11.11 billion from the year-earlier $8.7 billion.

Wall Street analysts had expected the big health insurer to make 60 cents a share on revenue of just over $11 billion.

The company said it added 580,000 individual customers in the latest quarter, while operating cash flow rose 27% to $1.3 billion and operating margin hit 11.8%. United Health also forecast third-quarter earnings of 63 cents a share and full-year profit of $2.46 a share, in line with the Thomson First Call analyst consensus estimates.

"We are particularly pleased with the continued growth of the various businesses within UnitedHealth Group," CEO William McGuire said in a Thursday morning press release. "For example, this year we have extended services to approximately 1 million more people in the major medical benefits businesses alone. These significant gains suggest that our product approaches and affordability initiatives present meaningful value differentiation to customers. And while it is gratifying to report these developments today, they more importantly represent the basis for a very positive future for our company."

The news comes just a week after the fast-growing Minnesota company unveiled its latest acquisition plan, an $8 billion bid for rival

PacifiCare Health Systems



The deal marries two leaders in the emerging area of so-called consumer-driven health plans. Investors and policymakers alike have embraced these plans as a way to bring down skyrocketing health care costs. The companies also said their merger will offer more services and simpler programs for older patients, especially in the key California market.

UnitedHealth said last week it expects its stand-alone earnings per share will grow by at least 15% in 2006, "without consideration of gains from UnitedHealth Group's own Medicare Part D programs or from the acquisition of PacifiCare."

Just last quarter, PacifiCare pointed to its booming Medicare business -- made even more important by looming Medicare reforms -- as one of the

key drivers of recent earnings gains.

HSA customers place money into a tax-exempt savings account to be used for health care services and then pay a low monthly premium for high-deductible insurance to cover any remaining needs. They retain any money left over in their accounts year after year and can maintain their same plans even when they change employers. The plans are designed to put consumers in control of their own health care spending and their use of health care services.

Just a year after HSAs became available, trade group America's Health Insurance Plans launched a Web site designed to educate the public about the new form of coverage. That Web site,

HSADecisions.org, received nearly 1 million hits during its first month on the Internet early this year.

Of course, UnitedHealth's prowess in that area is well established. As


has reported, the Minnetonka, Minn., company is banking on explosive growth in both health savings accounts and health reimbursement arrangements to drive earnings gains for years to come. By now, the company has been a longtime favorite on Wall Street -- regularly posting bulging, double-digit quarterly profit growth.

On Wednesday, UnitedHealth fell 39 cents to $51.39.