UnitedHealth beats revenue despite impact of cyberattacks

UnitedHealth Group reported better-than-expected revenue in its first-quarter results on Tuesday, even as the company is still dealing with the fallout from the cyberattack on its Change Healthcare subsidiary.

Here’s what the company reported compared to what Wall Street expected, according to a survey of LSEG analysts:

• Earnings to share: $7.16 per share adjusted vs. $6.61 expected
• Income: $100.08 billion adjusted vs. $99.26 billion forecast

UnitedHealth reported revenue of $99.8 billion, up from $91.9 billion in the same period last year. The adjusted revenue figure of $100.08 billion excludes the impact of the cyber attack.

The company said it incurred a charge of about $7 billion during the quarter to sell its Brazil operations, according to a statement on Tuesday. Currency effects from the sale in Brazil as well as adverse impacts from the cyberattack contributed to a net loss for the period, UnitedHealth said. The company reported a net loss of $1.41 billion, or $1.53 per share, compared with net income of $5.61 billion, or $5.95 per share, a year earlier.

UnitedHealth reported adjusted earnings of $6.91 per share for the quarter. The company said the adjusted figure excludes the sale in Brazil, but only part of the impact of the cyber attack. He broke down the effects of the cyberattack into two categories: “direct response” and “business disruption” costs.

Direct response efforts, such as UnitedHealth’s effort to restore Change Healthcare’s platforms, had an impact of 49 cents per share in the quarter. Business interruption costs, such as lost revenue for Change Healthcare, amounted to 25 cents per share. UnitedHealth said its adjusted earnings figure included business interruption impacts but excluded direct response costs. The $7.16 adjusted EPS figure excludes the full impact of the cyber attack.

The company said the total impact from the cyberattack in the first quarter was 74 cents per share and expects the full-year impact to be between $1.15 and $1.35 per share.

UnitedHealth reported a medical expense ratio, which is the amount of each premium dollar that goes to medical costs, of 84.3% in the first quarter. That included 40 core points of impact from the cyber attack, the company said. Analysts were expecting an MCR of 83.8%, according to StreetAccount. A lower ratio usually indicates higher profitability.

Shares of UnitedHealth rose more than 5% Tuesday morning. At Monday’s close, the stock was down about 15% for the year.

UnitedHealth is made up of two major business units: Optum and UnitedHealthcare. Optum offers a range of pharmacy services, consulting services and provides medical care to about 103 million consumers, according to the company’s website.

Optum reported revenue of $61.1 billion in the first quarter, up from $54.1 billion in the same period last year. UnitedHealth said Optum’s revenue growth was led by its patient care and pharmacy arms due to “strong expansion” in the number of people served.

In 2022, Optum completed a $13 billion merger with Change Healthcare, which provides payment and revenue cycle management tools. Change Healthcare processes more than 15 billion billing transactions annually, and one in three patient records passes through its systems, according to the company.

UnitedHealth disclosed in February that a cyber threat actor breached part of Change Healthcare’s information technology network, prompting the company to immediately take the affected systems offline. The fallout has been far-reaching across the healthcare industry, with many doctors left without a way to fill prescriptions or get paid for their services.

The company has been working to bring systems back online in recent weeks, and UnitedHealth said Tuesday it has advanced more than $6 billion to health care providers who need help.

UnitedHealth said it continues to make “significant progress” in restoring Change Healthcare services.

“I’m so grateful to our colleagues who continue to work tirelessly day and night to restore services, free up funds for providers and protect the broader healthcare system,” said Andrew Witty, CEO of UnitedHealth, during the company’s quarterly call with investors

UnitedHealth’s other business unit, UnitedHealthcare, provides insurance coverage and benefits services to millions of Americans, according to its website. UnitedHealthcare reported revenue of $75.4 billion in the first quarter, up from $70.5 billion a year ago.

The company said the growth was driven by an increase in the number of people served by UnitedHealthcare in the U.S. The unit’s total number of domestic consumers served grew by 2 million in the first quarter.

UnitedHealth said it upgraded its full-year net earnings outlook and expects to report between $17.60 and $18.20 per share, largely due to the cyber attack and the sale in Brazil.

During the company’s earnings call, UnitedHealth CFO John Rex said UnitedHealthcare is back to “pretty much back to normal in terms of claims activity” in the wake of the cyberattack. He said claims are flowing as expected.

In late February, the U.S. Department of Justice launched an antitrust investigation into UnitedHealth, according to a Wall Street Journal report. The company declined to comment on the matter during its call to investors.