UnitedHealth Group beat profit expectations in the fourth quarter even as spending related to the COVID-19 pandemic significantly cut earnings from its health insurance business.

The cost of caring for pandemic patients accounted for about 11% of care activity during the fourth quarter, up from about 6% from July to September, said John Rex, the company's chief financial officer, during a Wednesday call with investors.

The company's UnitedHealthcare health insurance division paid for 65,000 inpatient admissions related to COVID-19 during the quarter, Rex said, with 20% of the admissions occurring in October and 50% in December.

As the cost of direct care increases for COVID-19 patients, UnitedHealthcare also is watching for a delayed cost impact as people who deferred care earlier in the pandemic are now returning for services. Delays in the spring generated huge profits at the time for UnitedHealthcare, the nation's largest health insurer.

"During the fourth quarter, we saw overall average care activity return to seasonal baselines, compared to the just over 95% [of baseline] we cited for the third quarter," Rex said. The company previously reported that demand for health care services fell to two-thirds of baseline levels at its low point this spring.

Pandemic costs in the fourth quarter included financial relief to customers to "correct economic imbalances," the company said in a statement, as well as financial reserves for additional rebates. UnitedHealthcare has provided the help since premiums set for 2020 have exceeded actual care costs by a greater margin than expected.

While earnings from operations were off considerably at UnitedHealthcare compared with the year-ago quarter, the company's fast-growing Optum division for health care services saw earnings from operations grow slightly. Optum posted a profit margin of nearly 9%, compared with just under 1% at UnitedHealthcare.

Optum includes a pharmacy-benefits management division as well as OptumInsight, which provides data and analytics consulting, and OptumHealth, which operates a fast-growing network of clinics across the country.

The clinic business includes about 50,000 employed or affiliated physicians, a number that should grow by about 10,000 in the coming year, said David Wichmann, UnitedHealth Group chief executive.

Overall in the fourth quarter, UnitedHealth Group posted $2.2 billion in earnings on $65.47 billion of revenue, down from a quarterly profit in the year-ago quarter of $3.5 billion. Adjusted earnings per share of $2.52 beat by 11 cents the expectations of analysts surveyed by Refinitiv.

UnitedHealth Group is Minnesota's largest company by revenue, with full-year sales in 2020 growing to $257.1 billion. The company on Wednesday affirmed its 2021 earnings guidance of adjusted net earnings between $17.75 to $18.25 per share.

Projections for the coming year include an estimated hit of about $2 billion in pandemic costs. Those expenses include testing and treatment costs, the downstream impact of health care deferred in 2020 and economic factors such as unemployment.

UnitedHealth shares slipped in Wednesday trading, closing at $350.84, off $1.35 for the day.

Christopher Snowbeck • 612-673-4744

Twitter: @chrissnowbeck