UnitedHealth Group reported sharply lower second-quarter earnings because of several unusual events, including a big payout for a shareholder settlement and costs related to recent job reductions.
For the quarter ending June 30, net income for the Minnetonka-based health insurer fell to $337 million, or 27 cents per share, from $1.23 billion, or 89 cents per share, a year ago.
However, excluding the effect of the special items, which also included the sale of several senior insurance businesses in Nevada, the company earned 67 cents per share. That's more than the 64 cents per share on average expected by analysts.
Because news of the settlement and job cuts came out weeks ago, and because adjusted earnings turned out better than expected, the company's stock rose $2.38, or almost 10 percent, to $26.21 Tuesday.
The company reiterated its commitment to focusing on local markets, where it faces stiff competition from Blue Cross.
"During the first and second quarters, we initiated important actions to improve our performance, and we are seeing progress on those actions," said chief executive Stephen Hemsley.
On July 2, the company said it would pay $895 million to settle a class-action lawsuit led by the California Public Employees Retirement System. It also said it was cutting 4,000 jobs nationally, or just under 6 percent of its workforce, and reduced its forecast 2008 profit for the second time.
For 2008, the company continues to forecast earnings of $2.95 and $3.05 per share and cash flow from operations close to $5 billion. It plans to buy back more than $3 billion of its own shares in the full year, reiterating its view that company shares were undervalued.
