UnitedHealth Group Inc. posted a higher-than-expected 3 percent rise in quarterly profit on Thursday, benefiting from an increase in membership across its health plans and lower-than-expected medical claims.
The largest U.S. health insurer by market value also raised its full-year profit outlook, and its shares rose 1.2 percent.
Health insurers largely posted higher-than-expected profits in 2011, driven by Americans' low use of medical services as they avoid doctor visits and procedures in a weak economy, and Wall Street was eager to see if the trend has continued this year.
Shares of UnitedHealth and its rivals have far outperformed the broader market since the start of 2011.
However, several analysts said investors were expecting a strong quarter and improved outlook from UnitedHealth, possibly capping share gains.
Leerink Swann analyst Jason Gurda called the report "a relatively solid quarter and increase in guidance, but UnitedHealth has put up very strong first quarters in recent years and expectations may be high."
Investors also are concerned about the impact to the health insurance industry from theU.S. Supreme Court's decision on President Barack Obama's U.S. healthcare overhaul law, which is expected in June. Such worries may prevent health insurance stocks from significant gains during the first-quarter reporting period, which UnitedHealth kicked off with its results.
UnitedHealth's first-quarter net income rose to $1.39 billion, or $1.31 per share, from $1.35 billion, or $1.22 per share, a year earlier.
The profit topped the analysts' average estimate by 14 cents per share, according to Thomson Reuters.
Revenue rose 7 percent to $27.28 billion, slightly ahead of Wall Street's target.
Membership stood at 35.57 million at the end of March, up about 5 percent from a year earlier.
The company spent 81 percent of its premiums on medical claim costs, down from 81.4 percent a year ago. The spending was also below the 81.9 percent expected by Susquehanna Financial Group analyst Chris Rigg.
The first quarter "outperformance relative to our estimates was driven by lower-than-expected medical costs," Rigg said in a research note.
The company raised its 2012 earnings forecast to a range of $4.80 to $4.95 per share. Analysts have been looking for $4.84.
In February, UnitedHealth projected 2012 earnings of $4.60 to $4.80 per share, after closing its deal for privately held Medicare specialist XLHeath Corp.
UnitedHealth shares have climbed 13 percent so far this year, in line with the Morgan Stanley Healthcare Payor index of health insurers.