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Strong revenue growth powers UnitedHealth second-quarter profits

What weak economy? UnitedHealth Group Inc. (NYSE: UNH) Tuesday boosted its annual profit forecast, thanks to a strong revenue growth across all of its businesses in the second quarter. The Minnetonka, Minnesota-based company, the nation’s largest private health insurer, said it now expects to earn $3.40 to $3.60 a share on revenue of $93 billion […]

What weak economy?

UnitedHealth Group Inc. (NYSE: UNH) Tuesday boosted its annual profit forecast, thanks to a strong revenue growth across all of its businesses in the second quarter.

The Minnetonka, Minnesota-based company, the nation’s largest private health insurer, said it now expects to earn $3.40 to $3.60 a share on revenue of $93 billion compared to its earlier projection of $3.15 to $3.35 per share on revenue of $92 billion.

For the second quarter, UnitedHealth said profits jumped 31 percent to $1.1 billion from $859 million during the same period a year ago. Total revenue grew 7.4 percent to $23.3 billion from $21.7 billion.

“We’re seeing our businesses getting stronger,” CEO Stephen Hemsley told analysts during a conference call. “We have a positive outlook for 2011. All of this is encouraging and all [of] it is broad based.”

Hemsley credited UnitedHealth’s performance to local market focus, aided by national scale and flexible pricing.

“Our sales and distribution worked more effectively than they ever have before,” he said.

The company’s core benefits business, which includes UnitedHealthcare, Ovations and AmeriChoice, generated $21.64 billion, a nearly 7-percent gain from the second quarter 2009. In that period, UnitedHealth added 1.1 million customers from government and senior citizen markets, but lost 400,000 commercial customers because of growing unemployment.

UnitedHealth’s services businesses, which includes Ingenix, OptumHealth and Prescription Solutions, generated $6.2 in revenue, a 16-percent jump from the same period a year ago.

The company noted particularly strong growth from healthcare technology and services, and drug benefit management programs. For example, its Prescription Solutions unit saw revenue grow 18 percent to $4.21 billion.

Hemsley said UnitedHealth still has a lot of  room to grow in health services, which is why the company will continue to invest most of its expansion capital in these markets.

“We actually feel like we’re under-weighted in services,” he said.

For 2011, Hemsley said the company faced significant headwinds including weak-economic recovery, low-interest rates that depresses the value of its investment portfolio and state budget shortfalls, specifically with Medicaid programs for the poor.