UnitedHealth's profit fuels health insurer stocks

Insurers were all doom and gloom about the healthcare overhaul, but things don't seem too bad for them today.

UnitedHealth Group (UNH), widely viewed as a bellwether for the industry, reported a better-than-expected​ 13% increase in profit for the first quarter. It was the first earnings report among large insurers under new spending rules from last year's healthcare law, Reuters reported.

Health-insurer stocks rose in response, with many hitting 52-week highs, as investors cheered the news. UnitedHealth's stock price hit a 52-week high of $48.90, but closed the day up 8% to $47.81.

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UnitedHealth reported a $1.35 billion profit, or $1.22 a share, up from $1.19 billion a year earlier. That blew away analyst expectations of 89 cents a share. Revenue rose 9.7% to $25.43 billion, far more than the $24.95 billion analysts were expecting.

Even more encouraging was UnitedHealth's guidance for the full year. Earnings will now be between $3.95 and $4.05 a share, with revenue approaching $101 billion, the company said. Previously, UnitedHealth had estimated earnings at between $3.50 and $3.70 a share and revenue at $100 billion.

The healthcare law gave health insurers minimum spending levels for patient care this year, and that was concerning to shareholders. But UnitedHealth has several things going for it, including enrollment growth and increasing margins. Membership hit nearly 34 million at the end of March, a 5% increase. And people didn't seem to need as many medical services as expected.

"It was a great quarter," one Gleacher & Co analyst told Reuters. "The question has been what is enrollment going to look like and what are medical costs going to look like. And I'd say this pretty much confirms, at this point at any rate, the best hopes that you could have had."

UnitedHealth earnings fueled a rise today among other health insurers. WellPoint (WLP) closed up 4.1%, Cigna (CI) rose 3.2%, Humana (HUM) rose 1.3% and Coventry Health Care (CVH) was up 3.5%.