© Reuters. The UnitedHealth Group logo is seen on the side of one of their office buildings in Santa Ana, California, US, April 13, 2020. REUTERS/Mike Blake
(Reuters) – UnitedHealth Group’s quarterly profit beat Wall Street estimates on Friday as a smaller-than-expected jump in medical costs dampened concerns that a long-awaited resumption of surgical procedures would hurt earnings growth, lifting its shares 4%.
The results also lifted shares of competitors Humana (NYSE: ), Cigna (NYSE:) and CVS Health (NYSE:) between 2% and 2.5% in premarket trading.
Stocks fell across the sector last month after UnitedHealth (NYSE:) said it was recording higher payments on Medicare between April and early June, as seniors became more comfortable visiting doctors’ offices again as the risks of COVID receded.
Stevens analyst Scott Wedel said in a note that Cadence provides a “welcome respite today” after several weeks of pain for investors in health insurance companies.
UnitedHealth’s medical loss rate for the quarter — the ratio of claims spent to premiums collected — was 83.2%, compared to analyst expectations of 83.4%.
Medical costs for health insurers have been curbed during pandemic-led lockdowns as people delay non-urgent surgeries such as hip and knee replacements.
Seniors are usually covered by government-subsidized Medicare insurance plans, offered by insurance companies such as UnitedHealth and Humana.
UnitedHealth raised its lower end of its adjusted annual earnings forecast to $24.70, from $24.50 per share previously, while keeping the upper end unchanged at $25 per share.
Humana also warned of a jump in medical costs for this year in June after it cited similar concerns as UnitedHealth. The two companies are the largest providers of Medicare Advantage plans for seniors.
UnitedHealth reported adjusted earnings of $6.14 per share for the second quarter ended June 30, above analyst expectations of $5.99, according to IBES Refinitiv data.