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UnitedHealth Group Inc., the biggest U.S. health insurer by revenue, beat analysts’ estimates for fourth-quarter profit as sales of coverage for the elderly grew and costs for treating swine flu tapered off.

Net income rose 30 percent to $944 million, or 81 cents a share, from $726 million, or 60 cents, a year earlier, when a $350 million legal settlement damped results, the Minnetonka, Minnesota-based company said today in a statement.

Chief Executive Officer Stephen Hemsley expanded UnitedHealth’s enrollment in government-subsidized Medicare Advantage plans for people 65 and older by 20 percent in the quarter, even as the recession cut demand for employer-backed coverage. The report followed the election of Republican Scott Brown to a U.S. Senate seat in Massachusetts, a move that may block a Democratic-backed overhaul of health care.

The UnitedHealth results should add to the “political tailwinds” for insurers, said Brian Wright, a Collins Stewart LLC analyst in New York, by telephone.

Still, UnitedHealth isn’t raising its forecast for this year, even with enrollment figures and medical costs looking better than expected, because the economy’s outlook is still cloudy, Hemsley said on a conference call today with analysts.

‘Unparalleled’ Environment

“This is kind of an economic environment that is unparalleled in my lifetime,” Hemsley said. “That environment is quite challenging and that is what we need to conscious of. We have a lot of work to do in 2010 to hit the guidance we’ve offered.”

UnitedHealth on Dec. 1 forecast adjusted 2010 earnings of $2.90 to $3.10 a share. The company said then that it expects losses in commercial insurance plans to slow this year even as the unemployment rate holds at about 10 percent.

UnitedHealth rose 5 cents to $34.60 at 10:14 a.m. in New York Stock Exchange composite trading, and earlier gained as much as 3.3 percent. The Standard & Poor’s Managed Care Health Index of six companies fell less than a percent.

The earnings beat the 73-cent average estimate of 17 analysts in a Bloomberg survey.

Share Buybacks

Profit was boosted by more than $2 billion in share buybacks, said Steven Shubitz, an Edwards Jones & Co. analyst in St. Louis, before the report.

Earnings in 2008’s fourth quarter were cut by 18 cents after UnitedHealth settled an American Medical Association lawsuit that claimed the insurer had manipulated payments to out-of-network doctors.

The $350 million cost of the legal settlement, announced in January 2009, was booked in the fourth quarter of 2008.

The company spent 81.3 percent of its fourth-quarter 2009 premiums on medical costs, compared with 80.8 percent a year earlier. The 2009 number was “better than expected,” partly due to a drop-off in costs for treating people in the outbreak of H1N1, or swine flu, the insurer said in its statement.

Enrollment fell to 32 million, from 32.9 million a year earlier. That included a 9.1 percent drop in UnitedHealth’s biggest revenue generator, policies in which the company assumes the financial risks of providing care for workers with job-based insurance. The company covered 9.4 million people in such plans.

Medicare membership was 4.5 million, compared with 4 million people a year earlier. Enrollment in plans administered for Medicaid, the government program for the poor, rose to 2.9 million from 2.5 million.

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Tags: Health insurance, Insurance