Strong 3Q earnings prompt UnitedHealth to up 2010 profit goals

Ho-hum. Another quarter, another double-digit profit gain.

UnitedHealth Group Inc. (NYSE:UNH) boosted its end-of-the-year profit forecast, thanks to a strong third quarter that blew through Wall Street estimates.

The nation’s largest private insurer, based in Minnetonka, Minnesota, said it now expects to earn $3.85 to $3.95 per share for the year, compared to its earlier estimate of $3.40 to $3.60 a share.

For the third quarter, UnitedHealth said it earned $1.3 billion, or $1.14 per share, a nearly 19 percent gain from the same quarter a year ago. Wall Street analysts had expected 84 cents a share, according to Yahoo! Finance.

Revenue jumped nine percent to $24 billion from $22 billion during the same period in 2009.

“Fundamental execution, increasing business diversity, and on-going product and service innovation continue to be key elements anchoring the company’s sustained growth,” said CEO Stephen Hemsley.

Most of UnitedHealth’s profit gain game from its core insurance business, which includes the former Ovations (retirement) and Americhoice (community and state) units. Earnings from operations jumped 44.4 percent to $1.79 billion from $1.24 billion from the same quarter last year, thanks to solid revenue growth and cost controls, the company said.

UnitedHealth’s faster growing Health Services businesses, including OptumHealth, Ingenix, and Prescription Solutions, saw revenues increase 14 percent to $6.24 billion from $5.47 billion during the same period a year ago.

But the cost of that growth eroded profitability as earnings from operations fell 19 percent to $352 million; profit margins slumped to 5.6 percent from 7.9 percent due to “higher levels of investment in areas of business expansion and growth,” the company said.

For example, Ingenix made four acquisitions in recent months, snapping up Axolotl, Executive Health Resources, Picis Inc., and A-Life Medical since late July.