(Reuters) -UnitedHealth Group’s quarterly profit beat Wall Street estimates on Friday as a smaller-than-expected jump in medical costs allayed fears that a resumption in long-delayed surgical procedures would hit profit growth, sending its shares up 4%.
Shares across the sector slumped last month after UnitedHealth (NYSE:UNH) said it was recording higher payouts over medical care between April and early June, as older adults became more comfortable visiting doctors’ offices again as COVID risks receded.
The beat provides a “welcomed respite today” after several weeks of pain for investors in health insurance companies, Stephens analyst Scott Fidel said in a note.
UnitedHealth’s medical loss ratio for the quarter – the percentage of spend on claims compared to premiums collected – was 83.2%, compared to analysts’ expectations of 83.4%.
Health insurers’ medical costs were suppressed during pandemic-led lockdowns as people delayed non-urgent surgeries such as hip and knee replacements.
Older adults are usually covered by government-backed Medicare insurance plans, which insurers such as UnitedHealth and Humana offer.
UnitedHealth raised the lower end of its annual adjusted profit forecast to $24.70, from $24.50 per share previously, while keeping the top end unchanged at $25 per share.
Humana also warned of a jump in its medical costs for this year in June after noting similar concerns as UnitedHealth. The two companies are the biggest providers of Medicare Advantage plans for older adults.
UnitedHealth posted an adjusted profit of $6.14 per share for the second quarter ended June 30, above analysts’ expectations of $5.99, according to Refinitiv IBES data.