We expect higher revenues at UnitedHealthcare and Optum segments to drive UnitedHealth Group Inc.’s UNHfirst-quarter results scheduled to release on Apr 17, 2018. Results should benefit from a reduction in corporate tax, partly offset by decline in premium revenues due to minimum loss ratio and lower net health insurance fee recapture effects.
Alongside, the company is expected to incur additional investment and operating costs in order to accelerate existing initiatives and artificial intelligence, data analytics, individual health record custodianship, digital health, net promoter score improvements and health related initiatives in local communities. These accelerated investments will lead to $200 million to $300 million in incremental operating expense for 2018. A part of these spend will be borne by the company in the first quarter, which might increase operating expense.
Factors to Influence Q1 Results
Revenue Growth at UnitedHealthcare:This segment is expected to witness an increased revenue led by growth in the number of individuals served across its business lines and price increases for underlying medical cost trends, which might be partially offset by a reduction in the number of people served in ACA-compliant individual products. The Zacks Consensus Estimate for the segment’s revenues is $44.7 billion, up 11.5% year over year.
Higher Membership:We expect membership enrollment growth at the company. This should be led by broad-based growth across group sizes and regions in the commercial group market on the back of gains in services to small groups, which should drive membership in risk-based benefit plans. Fee-based commercial group business might be under pressure due to the non-renewal of one public sector customer. We expect to see higher Medicare advantage membership from growth in individual and employer-sponsored group Medicare Advantage plans. Strong customer retention and new sales should cause higher membership in Medicaid.
Higher Contribution from Optum:Results should also show an increase in revenues from its health services’ segment Optum, driven by higher contribution from sub-segments OptumHealth, OptumInsight and OptumRx. Revenues and earnings from operations increased at OptumHealth primarily due to organic and acquisition-related growth in care delivery. OptumInsight should see growth in revenue management services and business process services, whereas OptumRx should see an upside from client and consumer growth. The Zacks Consensus Estimate for revenues from the segment is $23.6 billion, up 11.3% year over year.
The bottom line should further get a cushion from the shares bought back in the first quarter.