(Reuters) – UnitedHealth Group Inc (UNH.N), the largest U.S. health insurer, on Tuesday posted quarterly profit that beat estimates as it kept medical costs within expectations despite the added demand for services due to a strong flu season and raised its 2018 outlook.
Shares of UnitedHealth rose 2.9 percent to $237 in premarket trading.
ISI Evercore analyst Michael Newshel said in a research note that he believed the earnings beat came from the Optum business, which includes its pharmacy benefit manager, data analysis and physician groups.
UnitedHealth has added more doctors, urgent care centers and surgery centers through a series of acquisitions.
UnitedHealth’s medical care ratio, or the percentage of premiums paid out for medical services, improved to 81.4 percent from 82.4 percent a year earlier.
The company raised its full-year adjusted earnings forecast to a range of $12.40 to $12.65 per share from a range of $12.30 to $12.60.
The health insurance sector has gone through a number of big takeover deals in the past year as companies consider how to stay competitive.
Recent deals include insurer Aetna Inc’s (AET.N) $69 billion merger with CVS Health Corp (CVS.N) and smaller rival Cigna Corp (CI.N) acquisition of Express Scripts Holding Co (ESRX.O), the largest U.S. independent pharmacy benefit manager, for $54 billion.
UnitedHealth’s net earnings rose to $2.84 billion, or $2.87 per share, in the first quarter ended March 31 from $2.17 billion, or $2.23 per share, a year earlier.
Excluding items, the company earned $3.04 per share.
Total revenue rose 13.3 percent to $55.19 billion.
Analysts, on average, expected earnings of $2.89 per share on revenue of $54.86 billion, according to Thomson Reuters I/B/E/S.
Reporting by Caroline Humer in New York and Tamara Mathias in Bengaluru; Editing by Shounak Dasgupta, Anil D’Silva and Jeffrey Benkoe