UnitedHealth Group Inc. (UNH) third quarter earnings came in at 89 cents per share, ahead of the Zacks Consensus Estimate of 76 cents. The earnings showed an improvement over the prior year EPS of 75 cents per share mainly due to an uptick in net earnings.

As reported by the company, earnings from operations (EBIT) were $1.5 billion and net earnings were $1.0 billion, an increase from $1.4 billion and $0.9 billion, respectively, in the prior-year quarters. Operating margin of 7.7% remained stable on a year over year basis.

Operating costs increased to $20.0 billion from $18.6 billion last year. The consolidated medical care ratio remained within the range of management expectations at 82.0%, up 30 basis points year over year. The increase includes the mix effect of an increased proportion of public and senior markets risk-based business year over year, as well as from elevated medical costs related to the H1N1 influenza virus.

UnitedHealth realized $90 million in net favorable development in its estimates of medical costs incurred during the quarter.

UnitedHealth reports revenue in four segments – Premium Revenue, Management Services, Investment Income and Products.

Premium revenue increased 7.8% year over year to $19.7 billion, principally due to strong organic growth in risk-based offerings in the public and senior markets businesses, as well as price increases reflecting underlying medical cost increases in the health benefits business.

Management Service revenue of $1.3 billion was up 3.8% year over year, while Product revenue of $490 million increased 13.4% year over year due to volume growth at Prescription Solutions. 
Investment income decreased 2.1% year over year to $140 million. Though cash and invested asset balances increased, capital market conditions reduced yields on the company’s cash and other short duration, high quality investment portfolio.   

UnitedHealth expects full year 2009 earnings of approximately $3.15 per share, at the high end of its previous guidance, and cash from operations of approximately $5 billion.
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