(This story was updated at 12:45 p.m. ET.)
There appears to be no slowing down the country's largest health insurance company. UnitedHealth Group's profit soared by double digits in the second quarter, driven by higher membership, lower medical claims and large growth in its Optum business.
Profit in the quarter jumped almost 13% to $1.59 billion, equaling $1.64 in earnings per share, beating Wall Street's estimates. Roughly 45.9 million people had a UnitedHealthcare plan as of June 30, a bump of 875,000 people year to date.
Because of the company's earnings growth and the soon-to-be-completed acquisition of Catamaran Corp., UnitedHealth raised its outlook for the rest of the year. It now expects revenue of $154 billion by the end of 2015, a jump of $11 billion. UnitedHealth said earlier this year it was buying Catamaran, a pharmacy benefits manager, for $12.8 billion in cash and absorbing it within the Optum segment. The deal is now expected to close by the end of July.
Every line of business recorded a jump in revenue, similar to the first quarter this year. UnitedHealth's government plans remained the largest area of growth on the insurance side.
Medicare and Medicaid plans represented 60% of UnitedHealthcare's revenue, a reversal from the pre-Affordable Care Act era when employer-sponsored plans ruled the insurance industry. The Minnetonka, Minn.-based company has more than 3.2 million Medicare Advantage members, maintaining its place as the largest private Medicare insurer in the country. But that could change soon, as a potential Aetna-Humana merger would surpass UnitedHealthcare.
UnitedHealth CEO Stephen Hemsley said on an investor call Thursday that he would not comment on the spate of deals occurring in the industry. In addition to Aetna and Humana, Anthem is pursuing a $54 billion acquisition of Cigna Corp., and Centene Corp. is buying Health Net for $6.8 billion. UnitedHealth was rumored as a buyer of Aetna or Cigna.
However, the possibility of UnitedHealth buying a large insurance peer appears to be losing traction. Once the company completes its Catamaran deal, it will have a debt-to-capital ratio of 48%, which is far above the usual 25% to 35% that health insurers have generally targeted. UnitedHealth expects to reduce that debt total “in short order,” executives said Thursday, which may prevent the company from making a big move in the near term.
Hemsley said that in the future UnitedHealth will “continue to diversify our business” and make moves as necessary.
One of the few blemishes in UnitedHealthcare's quarter was a loss of 30,000 people in its individual health plans. The insurer added 570,000 ACA exchange customers during this year's open enrollment, but attrition of people paying their premiums led to the lower figure.
Despite the overall membership gains and economic data that show much higher healthcare spending this year, UnitedHealth said its medical spending was down year over year in the second quarter. The company's medical-care ratio, which shows how much of premium dollars it is spending on healthcare claims, was 81.4%—a drop of 0.2% from the same period a year ago. That may be partially explained by the increased cost-sharing borne by the privately insured.
Optum, UnitedHealth's consulting and technology services arm, is still the most profitable segment of the company. Optum works with hospitals, doctors, employers and other payers and healthcare groups on everything from data analytics to pharmacy management. Optum's revenue increased 16% in the second quarter to $13.6 billion. Its operating margin was 6.4%.
UnitedHealth's total revenue for the first six months of 2015 hit $72 billion, a 12% spike from the first half of last year.