UnitedHealth cuts outlook and cost – shares climb

UnitedHealth on Wednesday cut its outlook for fiscal 2008 but the health insurance giant also said it was cutting costs, a move that sent shares higher and seemed to give a lift to the rest of the sector.

UnitedHealth on Wednesday cut its outlook for fiscal 2008 but the health insurance giant also said it was cutting costs, a move that sent shares higher and seemed to give a lift to the rest of the sector.

UnitedHealth said it now expects full-year earnings to end up between $2.95 and $3.05 a share with revenue around $81 billion, down from the company's previous projection of $3.55 to $3.60 a share. Analysts polled by FactSet Research had expected the company to post earnings of $3.51 a share for the period.

The company also said it believes it will lose 800,000 of its enrolled members. And its gross margins face continued pressure amid an "intensely competitive" commercial market, the company said.

UnitedHealth also said it plans to streamline its technology, operations, network management and clinical work, an effort that the company said on a conference call with analysts should result in the loss of 4,000 jobs.

That proved encouraging to investors, who drove up shares more than 6% at one point. UnitedHealth shares were up 2.2% to $26.20 in recent action.

In the conference call, Chief Executive Stephen J. Helmsley sees a cautiously improving outlook for 2009 but doesn't expect a breakout year for the business.

Still, the moves by UnitedHealth, the biggest player in the industry moves seemed to lift other insurers, which had been down in recent days and were ready for some good news.