The corporate logo of the UnitedHealth Group appears on the side of one of their office buildings in Santa Ana, California, U.S., April 13, 2020.
The corporate logo of the UnitedHealth Group appears on the side of one of their office buildings in Santa Ana, California, U.S., April 13, 2020. Reuters / MIKE BLAKE

UnitedHealth Group Inc on Friday raised its annual profit forecast for the second time this year, after the company topped estimates for quarterly results on lower medical costs in its health insurance business.

Shares of the largest U.S. healthcare company by market value rose nearly 2% in premarket trade.

Analysts said lower demand for elective healthcare procedures helped UnitedHealth control medical costs, which bodes well for other insurers including Cigna Corp, CVS Health and Elevance Health Inc.

UnitedHealth offers government and employer-backed health plans, and also operates the Optum unit which provides drug benefits and medical services, including primary care and home healthcare appointments.

UnitedHealth's medical costs have been in a flux through the pandemic, with lower spending on elective healthcare procedures offseting some of the impact of costs related to COVID-19 vaccinations, treatment and testing.

While medical care demand has improved with a retreat in COVID cases from their January highs, the pace of surgical procedures has still not fully recovered as hospitals struggle with an acute shortage of healthcare staff, benefiting UnitedHealth's health insurance business.

The company's medical-care ratio (MCR) or the percentage of premiums paid out for services fell to 81.5% in the quarter compared with expectations of 83%, according to Refinitiv data.

The magnitude of the beat indicates that deferred surgical procedures have not completely recovered, Evercore ISI analyst Michael Newshel said in a note.

Revenue at UnitedHealth's Optum unit rose 18% to $45.1 billion from a year earlier, constituting more than half of the company's top line in the quarter.

UnitedHealth said it now expects 2022 adjusted profit between $21.40 and $21.90 per share, compared with $21.20 to $21.70 per share forecast earlier.

The company reported total sales of $80.33 billion, topping estimates of $79.68 billion. Adjusted earnings of $5.57 per share also beat estimates of $5.20 per share.