United Health Group reported better-than-expected sales in its first-quarter results on Tuesday, although the company is still grappling with the fallout from the cyberattack on its Change Healthcare subsidiary.
This is how the company did it:
- Merits: $7.16 per share adjusted, versus $6.61 analysts expected, LSEG said.
- Revenue: $100.08 billion adjusted, versus $99.26 billion expected by LSEG.
UnitedHealth reported revenue of $99.80 billion, up from $91.9 billion in the same period last year. The adjusted sales figure of $100.08 billion does not take into account the impact of the cyber attack.
The company said it incurred approximately $7 billion in costs from selling its Brazil operations during the quarter, according to a press release Tuesday. UnitedHealth said currency effects from the Brazil sale as well as the negative impact of the cyberattack contributed to a net loss in the period. The company reported a net loss of $1.41 billion, or $1.53 per share, compared with net income of $5.61 billion, or $5.95 per share, a year earlier.
UnitedHealth reported adjusted earnings of $6.91 per share for the quarter. The company said the adjusted figure excludes sales in Brazil but only takes into account a portion of the impact of the cyberattack. The impact of the cyberattack was divided into two categories: “direct response” and “business disruption” costs.
Direct response actions, such as UnitedHealth's efforts to restore Change Healthcare platforms, had an impact of 49 cents per share in the quarter. Business interruption costs, such as lost revenue from Change Healthcare, were 25 cents per share. UnitedHealth said its adjusted earnings figures took into account the impact of the business disruptions but did not take into account direct response costs. The adjusted EPS figure of $7.16 does not take into account the full impact of the cyberattack.
The company said the total impact of the cyberattack was 74 cents per share in the first quarter and expects the full-year impact to be between $1.15 and $1.35 per share.
UnitedHealth reported a first-quarter medical expense ratio, the amount of each premium dollar that goes toward medical costs, of 84.3%. This includes 40 basis points of the impact of the cyberattack, the company said. According to StreetAccount, analysts expected an MCR of 83.8%. A lower ratio typically indicates higher profitability.
Shares of UnitedHealth rose more than 5% on Tuesday morning. As of Monday's close, the stock was down about 15% for the year.
UnitedHealth consists of two major business units: Optum and UnitedHealthcare. According to the company's website, Optum provides a range of pharmacy services and consulting services and provides medical care to approximately 103 million consumers.
Optum reported first-quarter revenue of $61.1 billion, up from $54.1 billion in the same period last year. UnitedHealth said Optum's revenue growth was driven primarily by its patient care and pharmacy divisions as the number of people served “grew significantly.”
In 2022, Optum completed a $13 billion merger with Change Healthcare, which provides payment and revenue cycle management tools. According to the company, Change Healthcare processes more than 15 billion billing transactions annually and one in three patient records passes through its systems.
UnitedHealth announced in February that a cyber threat actor breached part of Change Healthcare's information technology network, prompting the company to immediately shut down the affected systems. The impact was widespread across the healthcare sector, with many doctors no longer able to fill prescriptions or be paid for their services.
The company has been working in recent weeks to bring systems back online, and UnitedHealth said Tuesday that it has paid out more than $6 billion to health care providers who need help.
UnitedHealth said it continues to make “significant progress” in restoring Change Healthcare services.
“I am extremely grateful to our colleagues who are working tirelessly day and night to restore services, unlock funding for providers and protect the overall health care system,” UnitedHealth CEO Andrew Witty said during the company’s quarterly conference call with investors.
UnitedHealth's other division, UnitedHealthcare, provides insurance coverage and benefits to millions of Americans, according to its website. UnitedHealthcare reported first-quarter revenue of $75.4 billion, up from $70.5 billion a year earlier.
The company said the growth was driven by an increase in the number of people served by UnitedHealthcare in the United States. The total number of domestic consumers served by the unit grew by 2 million in the first quarter.
UnitedHealth said it updated its full-year net income outlook and expects to report between $17.60 and $18.20 per share, largely due to the cyberattack and the Brazil sale.
During the company's earnings call, UnitedHealth CFO John Rex said that UnitedHealthcare is “largely back to normal in terms of claims submission activity” following the cyberattack. He said claims are flowing as expected.
According to a Wall Street Journal report, the U.S. Department of Justice opened an antitrust investigation into UnitedHealth in late February. The company declined to comment on the matter during its investor call.
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