Largest US health insurer?s profits rise 30 percent

[Chadman]

Largest US health insurer?s profits rise 30 percent

By John Byrne
Thursday, January 21st, 2010 -- 8:59 am

As if to mock the Democrats' loss of Ted Kennedy's Senate seat and the subsequent and rapid unraveling of a healthcare bill that seemed determined to curb the excesses of the US health insurance industry, the largest US health insurer announced Thursday morning that its fourth quarter profits had climbed a whopping 30 percent.

UnitedHealth, the largest US health insurer by market capitalization, posted earnings of $944 million in the fourth quarter of 2009, up from $726 million in 2008.

The profit totals topped analyst estimates.

And, as if to add salt to the wound, an analyst for Goldman Sachs -- itself the target of post-bailout ire -- added that he thought the insurer's profits were "very solid" in a research note and said "they bode well for other managed care companies."

UnitedHealth Group's 4Q profit rises 30 percent

UnitedHealth Group's 4th-quarter profit climbs 30 percent on boost in premium revenue

TOM MURPHY
AP News

Jan 21, 2010 08:45 EST

Managed care company UnitedHealth Group said Thursday its fourth-quarter profit jumped 30 percent on higher premium revenue compared to the final quarter of 2008, when the insurer incurred a hefty legal settlement charge.


The Minnetonka, Minn., insurer earned $944 million, or 81 cents per share, in the three months that ended Dec. 31. That's up from $726 million, or 60 cents per share, in the same period of 2008.

At the end of 2008, UnitedHealth incurred a charge of 18 cents per share to resolve a class-action lawsuit over out-of-network medical services. The insurer paid $350 million to settle litigation involving pricing databases operated by its Ingenix subsidiary.

For the final quarter of 2009, revenue rose 6.5 percent to $21.78 billion. A 6.2 percent jump in premium revenue to $19.7 billion accounted for most of that growth.

Analysts surveyed by Thomson Reuters forecast a profit of 73 cents per share on $21.72 billion in revenue.

Goldman Sachs analyst Matthew Borsch called the insurer's results "very solid" in a research note and said they bode well for other managed care companies scheduled to report earnings. UnitedHealth is the largest commercial health insurer based on revenue and the first managed care company to report quarterly earnings. It is seen as a bellwether for the sector.

Leerink Swann analyst Jason Gurda called the performance a "modest positive."

"The company appears to have exceeded expectations based on a milder-than-originally-anticipated H1N1 flu season and continued strong growth in its Medicare and Medicaid business," Gurda said in a research note.

Enrollment in Medicare and Medicaid plans rose 12.5 percent to just under 7.4 million people.

But the company's higher-margin commercial business continued dropping during the quarter. It shed 6.5 percent to end at just over 24.6 million people. That segment consists mostly of employer-based and individual health plans.

UnitedHealth and other insurers have struggled with slumping commercial enrollment due to rising unemployment in the recession.

For the full year, profit rose to $3.82 billion, or $3.24 per share, from $2.98 billion, or $2.40 per share, in 2008. Revenue rose to $87.14 billion from $81.19 billion.

Looking ahead, the company reaffirmed its outlook for 2010 profit between $2.90 and $3.10. Analysts expect $3.06 in profit in 2010.

In premarket trading, shares of UnitedHealth changed hands at $34.94, up 39 cents from Wednesday's close.

 

[Mags]

Largest US health insurer?s profits rise 30 percent

By John Byrne
Thursday, January 21st, 2010 -- 8:59 am

As if to mock the Democrats' loss of Ted Kennedy's Senate seat and the subsequent and rapid unraveling of a healthcare bill that seemed determined to curb the excesses of the US health insurance industry, the largest US health insurer announced Thursday morning that its fourth quarter profits had climbed a whopping 30 percent.

UnitedHealth, the largest US health insurer by market capitalization, posted earnings of $944 million in the fourth quarter of 2009, up from $726 million in 2008.

The profit totals topped analyst estimates.

And, as if to add salt to the wound, an analyst for Goldman Sachs -- itself the target of post-bailout ire -- added that he thought the insurer's profits were "very solid" in a research note and said "they bode well for other managed care companies."

UnitedHealth Group's 4Q profit rises 30 percent

UnitedHealth Group's 4th-quarter profit climbs 30 percent on boost in premium revenue

TOM MURPHY
AP News

Jan 21, 2010 08:45 EST

Managed care company UnitedHealth Group said Thursday its fourth-quarter profit jumped 30 percent on higher premium revenue compared to the final quarter of 2008, when the insurer incurred a hefty legal settlement charge.


The Minnetonka, Minn., insurer earned $944 million, or 81 cents per share, in the three months that ended Dec. 31. That's up from $726 million, or 60 cents per share, in the same period of 2008.

At the end of 2008, UnitedHealth incurred a charge of 18 cents per share to resolve a class-action lawsuit over out-of-network medical services. The insurer paid $350 million to settle litigation involving pricing databases operated by its Ingenix subsidiary.

For the final quarter of 2009, revenue rose 6.5 percent to $21.78 billion. A 6.2 percent jump in premium revenue to $19.7 billion accounted for most of that growth.

Analysts surveyed by Thomson Reuters forecast a profit of 73 cents per share on $21.72 billion in revenue.

Goldman Sachs analyst Matthew Borsch called the insurer's results "very solid" in a research note and said they bode well for other managed care companies scheduled to report earnings. UnitedHealth is the largest commercial health insurer based on revenue and the first managed care company to report quarterly earnings. It is seen as a bellwether for the sector.

Leerink Swann analyst Jason Gurda called the performance a "modest positive."

"The company appears to have exceeded expectations based on a milder-than-originally-anticipated H1N1 flu season and continued strong growth in its Medicare and Medicaid business," Gurda said in a research note.

Enrollment in Medicare and Medicaid plans rose 12.5 percent to just under 7.4 million people.

But the company's higher-margin commercial business continued dropping during the quarter. It shed 6.5 percent to end at just over 24.6 million people. That segment consists mostly of employer-based and individual health plans.

UnitedHealth and other insurers have struggled with slumping commercial enrollment due to rising unemployment in the recession.

For the full year, profit rose to $3.82 billion, or $3.24 per share, from $2.98 billion, or $2.40 per share, in 2008. Revenue rose to $87.14 billion from $81.19 billion.

Looking ahead, the company reaffirmed its outlook for 2010 profit between $2.90 and $3.10. Analysts expect $3.06 in profit in 2010.

In premarket trading, shares of UnitedHealth changed hands at $34.94, up 39 cents from Wednesday's close.

Well, Chad, this is just 4th quarter figures - not sure what the 1st 3 quarters looked like, but...

Let's say profits were up 30% for the industry...

Last year, Insurance companies made a 2.2% profit margin (which placed them 35th in profit by industry in the US). Not a very high figure certainly.

So a 30% increase would make their profit margin 2.86%. I don't know about you, but I don't view that as a very high profit margin - not compared to most industries.

Showing "company A made $xxxxx million" is rather meaningless, without taking into account the size of the company. The article above is meant to shock people, but is not a true indication of reality. HealthCare companies (like many companies in the US) are BIG companies - with big absolute profits, but low profit margins.

 

[rusty]

Well, Chad, this is just 4th quarter figures - not sure what the 1st 3 quarters looked like, but...

Let's say profits were up 30% for the industry...

Last year, Insurance companies made a 2.2% profit margin (which placed them 35th in profit by industry in the US). Not a very high figure certainly.

So a 30% increase would make their profit margin 2.86%. I don't know about you, but I don't view that as a very high profit margin - not compared to most industries.

Showing "company A made $xxxxx million" is rather meaningless, without taking into account the size of the company. The article above is meant to shock people, but is not a true indication of reality. HealthCare companies (like many companies in the US) are BIG companies - with big absolute profits, but low profit margins.

Mag I will give you this they broke even prior to the 30% increase.However most companies LOST money last year.Leave it to a healthcare provider to make a 30% gain before the year ends to just show us that healthcare companies have us by the balls.

Fourth-quarter earnings up 30 percent at UnitedHealth

By CHEN MAY YEE, Star Tribune

Last update: January 21, 2010 - 10:33 AM
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* Star Tribune 100
* Executive compensation
* Non-profit 100


Minnetonka-based UnitedHealth Group Inc. said Thursday that fourth-quarter profit rose 30 percent as growth in its government businesses offset losses in commercial enrollment.

Part of the jump was accounted for by the fact that the U.S.'s biggest health insurer incurred a big legal settlement charge in the final quarter of 2008 to resolve a lawsuit over out-of-network reimbursements.

Net profit for the quarter ended Dec. 31 was up 30 percent to $994 million, or 81 cents per share, beating analyst forecasts of 73 cents per share.

Revenue was up 6 percent to $21.8 billion.

"UnitedHealth delivered a relatively strong performance in 2009 despite a difficult economy," Chief Executive Stephen Hemsley said in a conference call with Wall Street analysts.

For the full year, profit rose 28 percent to $3.8 billion. Revenue was up 7 percent at $87.1 billion.

Enrollment in its Medicare and Medicaid plans rose 12.5 percent to 7.4 million people. However, commercial enrollment was down 6 percent to 24.6 million people.

Among the headwinds UnitedHealth and other U.S. insurers faced last year was the loss of members as people lost their jobs, higher Cobra costs and medical costs associated with the H1N1 flu pandemic.

Chen May Yee 612-673-7434
Recent Business stories
Tar

 

[Mags]

Mag I will give you this they broke even prior to the 30% increase.However most companies LOST money last year.Leave it to a healthcare provider to make a 30% gain before the year ends to just show us that healthcare companies have us by the balls.

Hey Rusty:

Well, I have always been a believer that any US company has the "right" to earn a profit - the relative amount of profit that is appropriate, is always debatable.

You give health companies way too much credit in saying "make a 30% gain before the end of the year to show us that healthcare companies have us by the balls". Healthcare is tough - profitability is tied to 2 main drivers - claims, which certainly can vary from quarter to quarter, and investment income - which has not been great the last couple of years. Companies typically set their rates once per year, many on Jan 1st. So, it is possible they "got lucky" in the 4th quarter.

Think of it this way - how many businesses are out there that don't know their cost of goods sold before they sell their product? Best Buy knows how much the TV cost that they are selling. GM knows the cost of every vehicle they sell. But insurance? It is so variable and depends on so many factors that are outside of the insurance companies' control.

That is what makes insurance such a difficult industry. Even life insurance is easy compared to health. In life, you KNOW you are going to have a claim, you know HOW MUCH it is going to be, but you just don't know WHEN it will happen.

In healthcare, you know you will have claims. You don't know: how many there will be (because there is typically more than 1), how much each claim will be, and when each will occur. It is a very difficult prediction exercise.

A rule in investing (whether it be in the market or in actual companies) is the riskier the investment, the greater the potential return needs to be to justify that investment. For that reason alone, insurance companies should have higher profit margins - in many cases, it is just as easy to lose money (like last year) as it is to make money.

It's funny how people say "health companies" screw us - well, it's not funny, but it does make me wonder. The average INDIVIDUAL health insurance policy today (covering husband/wife) runs about $3,500 per year. Insurance cmpanies today return anywhere from 70-80% in benefits. Yet people feel like they are getting a raw deal UNLESS they get real sick and rack up $100,000+ of medical claims. THEN they think they got fair value. It takes a lot of healthy people to pay for the sick ones.

Yet, people don't blink an eye out of paying $1,000 for home insurance (how often do you file a homeowner's claim) or $2,000 a year for auto insurance (again, don't file a claim often).

I think the difference is, people can think of the costs of these items in financial terms - how much the house or car cost, and would it would cost to replace it. People take their health for granted - and the costs it would take to "fix" it. Someone else is paying. No, we are all paying.

It is also funny to see the folks that get their oil changed every 3,000 miles and take care of their cars very well, but think nothing of having a BMI of 30 and being obese.....

We have a mixed up world, that is for sure....

 

[rusty]

Hey Rusty:

Well, I have always been a believer that any US company has the "right" to earn a profit - the relative amount of profit that is appropriate, is always debatable.

You give health companies way too much credit in saying "make a 30% gain before the end of the year to show us that healthcare companies have us by the balls". Healthcare is tough - profitability is tied to 2 main drivers - claims, which certainly can vary from quarter to quarter, and investment income - which has not been great the last couple of years. Companies typically set their rates once per year, many on Jan 1st. So, it is possible they "got lucky" in the 4th quarter.

Think of it this way - how many businesses are out there that don't know their cost of goods sold before they sell their product? That is what makes insurance such a difficult industry. Even life insurance is easy compared to health. In life, you KNOW you are going to have a claim, you know HOW MUCH it is going to be, but you just don't know WHEN it will happen.

In healthcare, you know you will have claims. You don't know: how many there will be (because there is typically more than 1), how much each claim will be, and when each will occur. It is a very difficult prediction exercise.

It's funny how people say "health companies" screw us - well, it's not funny, but it does make me wonder. The average INDIVIDUAL health insurance policy today (covering husband/wife) runs about $3,500 per year. Insurance cmpanies today return anywhere from 70-80% in benefits. Yet people feel like they are getting a raw deal UNLESS they get real sick and rack up $100,000+ of medical claims. THEN they think they got fair value. It takes a lot of healthy people to pay for the sick ones.

Yet, people don't blink an eye out of paying $1,000 for home insurance (how often do you file a homeowner's claim) or $2,000 a year for auto insurance (again, don't file a claim often).

I think the difference is, people can think of the costs of these items in financial terms - how much the house or car cost, and would it would cost to replace it. People take their health for granted - and the costs it would take to "fix" it. Someone else is paying. No, we are all paying.

It is also funny to see the folks that get their oil changed every 3,000 miles and take care of their cars very well, but think nothing of having a BMI of 30 and being obese.....

We have a mixed up world, that is for sure....

You fail to mention the cost of a family of 4 or more.That part must of been an oversight .I have a feeling you must work in the healthcare industry.

 

[Mags]

You fail to mention the cost of a family of 4 or more.That part must of been an oversight .I have a feeling you must work in the healthcare industry.

I was just giving an average - normally 2.1 members are on a policy. 4 is above the average......

While I do not work for a specific company, I do advise clients in the healthcare industry, so you are correct. Guilty as charged

 

[rusty]

I was just giving an average - normally 2.1 members are on a policy. 4 is above the average......

While I do not work for a specific company, I do advise clients in the healthcare industry, so you are correct. Guilty as charged

One good thing about my insurance is tax-free flex spending.You cant beat that.The cost per family should be lower,I think.

 

[Mags]

The cost per family should be lower,I think.

Not sure what you mean here.... is that you feel it is too expensive, and the cost should be less? Or do you have proof that doctors/hospitals are making too much and should charge less?

There are so many cost drivers in health care. Personally, I think Gas and Food should cost less. Alcohol and Tobacco too.

It's heartening to know the insurance industry is only making 2.2% (as of last year). They aren't gouging anyone. Many industries do - look at the markup on furniture (50%+) sometime. Or hire a lawyer by the hour.....

Yes, insurance companies have admin costs that add to the cost. This is no different than any industry. We need to pay people salaries so they can live, work, and pay taxes. Can you imagine how cheap food would be if we didn't pay middle men upon middle men, and pay for the Grocery store to advertise? We have similiar situations in food - where I live, there is only 1 grocery store chain of significance... they can set the market. Similiar to insurance in rural markets.......

I'd argue that the government should nationalize food - cut the cost, incent people to buy healthier food instead of twinkies. Food is more important to live - everyone needs to eat (and well) and most families pay more for food each month than they do healthcare......

OK, I got a bit off topic there... :shrug:

 

[Mags]

One good thing about my insurance is tax-free flex spending.You cant beat that.

FYI - this was to be severly limited in the Senate Heatlh Care bill - the amount you could spend tax free was limited to $2,500.

 

[Chadman]

Mags, thorough, thoughtful responses as always. I am really pressed for time today/tonight, busy day here at work and a big test to study for and complete by midnight tonight. So, won't have much time to respond. Just wanted to say that I'm taking it all in, and will comment later.

One small thing - you mentioned when talking about how much in pure profits a company makes, it doesn't reflect the actual situation for a company. I would agree with that - by same token, a company as large as these that maintains a 2.(whatever) profit margin at the levels these companies take in money probably isn't an accurate reflection of how well they are doing. 2% of a penny isn't very much money - 2% of a bazzillion dollars is a lot of money. If it wasn't, I'm sure they charge a lot more that they already do. The profit margins they have been operating under have made them some of the very largest companies in the world, and have allowed them to buy up competitors in increasing numbers. Which, effectively monopolizes the market, and protects their relatively small profit percentages, but extremely high real profit dollars.

Again, thanks for taking the time. I value your posts - far too few with any content here of late.

 

[DOGS THAT BARK]

Well, Chad, this is just 4th quarter figures - not sure what the 1st 3 quarters looked like, but...

Let's say profits were up 30% for the industry...

Last year, Insurance companies made a 2.2% profit margin (which placed them 35th in profit by industry in the US). Not a very high figure certainly.

So a 30% increase would make their profit margin 2.86%. I don't know about you, but I don't view that as a very high profit margin - not compared to most industries.

Showing "company A made $xxxxx million" is rather meaningless, without taking into account the size of the company. The article above is meant to shock people, but is not a true indication of reality. HealthCare companies (like many companies in the US) are BIG companies - with big absolute profits, but low profit margins.

I put link up here just few months back on same thing ranking all fortune 500 companys--sheeez

Mags you need to make you an archives where you don't have to search same issue and put up link every other month.

heres a good example-- few weeks back--this comes up every 6 months with same result--

http://www.madjacksports.com/forum/showthread.php?t=394070&page=2

:talk: I put up the the facts and kurby --until next time.

If we could just get them converted where thed'd get fair and balance view like most americans--

CABLE NEWS RACE
TUES. JAN. 19, 2010
ELECTION NIGHT

FOXNEWS HANNITY 6,809,000
FOXNEWS GRETA 6,399,000
FOXNEWS O'REILLY 5,228,000
FOXNEWS BECK 3,446,000
FOXNEWS BAIER 3,338,000
FOXNEWS SHEP 3,241,000
CNN KING 1,681,000
CNN COOPER 1,508,000
CNN BROWN 1,308,000
MSNBC OLBERMANN 1,274,000
MSNBC MADDOW 1,236,000
CNN BLITZER 1,135,000
CNNHN BEHAR 845,000
MSNBC HARDBALL 798,000

--wouldn't have to dig up the stats

Chad--a point I'd like to make--from insurance stand point -forcing people to buy insurance and no underwriting would be a gold mine for insurance agents--so it isn't from selfish standpoint I am against bill as is.

I am sure ins co could/would lower rates if they were like gov and could print money to cover their their deficits.

Now for umpteenth time---


Top industries: Most profitable

<TABLE class=cnnsnapDataWrapper border=0 cellSpacing=0 cellPadding=0><TBODY><TR vAlign=top><TD class=cnnmainCol><DIV id=cnnmagFeatData><SCRIPT>if (location.pathname.match('assets')) { document.write('<div id="industryTopNav" class="Tab1Visible">');} else if (location.pathname.match('equity')) { document.write('');} else { document.write('');}</SCRIPT>

• Return on Revenues
• Return
  on Assets
• Return on Shareholders' equity

<TABLE class=cnnwith220inset border=0 cellSpacing=0 cellPadding=0><THEAD><TR><TH class=cnncol1>Industry Rank</TH><TH class=cnncol2>Industry</TH><TH class=cnncol3>2008 Profits
as % of
Revenues
</TH></TR></THEAD><TBODY><TR><TD class=cnncol1>1</TD><TD class=cnncol2>Network and Other Communications Equipment</TD><TD class=cnncol3>20.4</TD></TR><TR><TD class=cnncol1>2</TD><TD class=cnncol2>Internet Services and Retailing</TD><TD class=cnncol3>19.4</TD></TR><TR><TD class=cnncol1>3</TD><TD class=cnncol2>Pharmaceuticals</TD><TD class=cnncol3>19.3</TD></TR><TR><TD class=cnncol1>4</TD><TD class=cnncol2>Medical Products and Equipment</TD><TD class=cnncol3>16.3</TD></TR><TR><TD class=cnncol1>5</TD><TD class=cnncol2>Railroads</TD><TD class=cnncol3>12.6</TD></TR><TR><TD class=cnncol1>6</TD><TD class=cnncol2>Financial Data Services</TD><TD class=cnncol3>11.7</TD></TR><TR><TD class=cnncol1>7</TD><TD class=cnncol2>Mining, Crude-Oil production</TD><TD class=cnncol3>11.5</TD></TR><TR><TD class=cnncol1>8</TD><TD class=cnncol2>Securities</TD><TD class=cnncol3>10.7</TD></TR><TR><TD class=cnncol1>9</TD><TD class=cnncol2>Oil and Gas Equipment, Services</TD><TD class=cnncol3>10.2</TD></TR><TR><TD class=cnncol1>10</TD><TD class=cnncol2>Scientific, Photographic, and Control Equipment</TD><TD class=cnncol3>9.9</TD></TR><TR><TD class=cnncol1>11</TD><TD class=cnncol2>Household and Personal Products</TD><TD class=cnncol3>8.7</TD></TR><TR><TD class=cnncol1>12</TD><TD class=cnncol2>Utilities: Gas and Electric</TD><TD class=cnncol3>8.7</TD></TR><TR><TD class=cnncol1>13</TD><TD class=cnncol2>Aerospace and Defense</TD><TD class=cnncol3>7.6</TD></TR><TR><TD class=cnncol1>14</TD><TD class=cnncol2>Food Services</TD><TD class=cnncol3>7.1</TD></TR><TR><TD class=cnncol1>15</TD><TD class=cnncol2>Industrial Machinery</TD><TD class=cnncol3>6.9</TD></TR><TR><TD class=cnncol1>16</TD><TD class=cnncol2>Food Consumer Products</TD><TD class=cnncol3>6.7</TD></TR><TR><TD class=cnncol1>17</TD><TD class=cnncol2>Electronics, Electrical Equipment</TD><TD class=cnncol3>6.5</TD></TR><TR><TD class=cnncol1>18</TD><TD class=cnncol2>Commercial Banks</TD><TD class=cnncol3>5.2</TD></TR><TR><TD class=cnncol1>19</TD><TD class=cnncol2>Telecommunications</TD><TD class=cnncol3>5.1</TD></TR><TR><TD class=cnncol1>20</TD><TD class=cnncol2>Chemicals</TD><TD class=cnncol3>5.0</TD></TR><TR><TD class=cnncol1>21</TD><TD class=cnncol2>Construction and Farm Machinery</TD><TD class=cnncol3>5.0</TD></TR><TR><TD class=cnncol1>22</TD><TD class=cnncol2>Insurance: Life, Health (stock)</TD><TD class=cnncol3>4.6 </TD></TR><TR><TD class=cnncol1>23</TD><TD class=cnncol2>Information Technology Services</TD><TD class=cnncol3>4.5</TD></TR><TR><TD class=cnncol1>24</TD><TD class=cnncol2>Computers, Office Equipment</TD><TD class=cnncol3>4.3</TD></TR><TR><TD class=cnncol1>25</TD><TD class=cnncol2>Metals</TD><TD class=cnncol3>3.9</TD></TR></TBODY></TABLE>


</TD></TR></TBODY></TABLE>

 

[Mags]

Chad--a point I'd like to make--from insurance stand point -forcing people to buy insurance and no underwriting would be a gold mine for insurance agents

Don't agree here - for example, in the IM market, the minimum LR is to go from 65% to 80%. Companies have to find somewhere to cut that expense - the only real way is commissions. So agents will see a huge drop in commissions. Yes, Premiums will be 50% higher or so due to guaranteed issue driving much higher premium rates, but commission rates will drop more than the increase in premium.

Small group will see lesser decreases in commissions, but they will decrease.

The agent that only sells health insurance will not have a very long future ahead of them, in my mind. They will have to transition to other products....

 

[Mags]

One small thing - you mentioned when talking about how much in pure profits a company makes, it doesn't reflect the actual situation for a company. I would agree with that - by same token, a company as large as these that maintains a 2.(whatever) profit margin at the levels these companies take in money probably isn't an accurate reflection of how well they are doing. 2% of a penny isn't very much money - 2% of a bazzillion dollars is a lot of money. If it wasn't, I'm sure they charge a lot more that they already do. The profit margins they have been operating under have made them some of the very largest companies in the world, and have allowed them to buy up competitors in increasing numbers. Which, effectively monopolizes the market, and protects their relatively small profit percentages, but extremely high real profit dollars.

[\QUOTE]

Yes, it is big absolute dollars. But I argue that makes no difference. If you invested $10,000, you would not accept a lower rate of return because you invested more than if you made a $50 investment.

Most of the companies that we are talking about are public companies - if fact, many of you probably own them in your mutual funds and don't even know it. So, when you divide a Billion dollars by a Gazillian shares - well, it doesn't add up to much. Most of us are not happy with a 2% return on investment - not when you are taking the risk into account.

All big companies make big pure profit dollars - because they have a lot of money invested, like a Time Warner or Microsoft.

I still think profit margin is the appropriate measure. Otherwise, by that logic, a small mom and pop store than makes a 50% profit margin on $100,000 in revenues, by your definition, isn't doing very well.

By my standards, I'd invest $100K every day of the week (if I had it, of course) to make $50K annually....

 

[Chadman]

And Wayne, I remember posting more than once about the record profit margins of the Medical Malpractice Insurance companies the same time you were posting that post, with no response that I can remember, so I guess it's not all one sided when it comes to that issue? Seems to me that if the lawyers and the lawsuits were so prohibitive and costly, the medical malpractice companies would not be showing such record profit MARGINS and profits, would they? Seems they'd be hurting? And those costs DO hurt all of us, every time we go to the doctor.

And what the hell does Fox News have to do with this thread? We know (some of us do) Murdoch has bought his ratings, just like he's buying up targeted spots of the "mainstream media." He literally paid per subscriber to get his message out there, so it's still no surprise he has good ratings - he paid to get that audience, which has always caused me pause as to his ultimate motivations, being an Australian, not American.

 

[Chadman]

Mags, I understand your point, but seriously, if their profit margins are prohibitive or not good enough as a business model, then why are they continuing to do business like they are? Why are they growing so much, and buying up even more competitors and controlling more of the market?

And which would you rather have in your hand, 2% of what the big insurance companies make in profit, or 50% of the theoretical mom and pop operation you mentioned? There's no doubt that there are factors that are creating less profit for those companies - high costs of unfettered drug companies for instance, but they really are all in this together, it would seem. Everyone is benefiting from providing the services and products, except mom and pop, the business owners, the major corporations paying out a huge percentage in healthcare costs, etc.

When you can maintain and control 2% of a bazzillion dollars, merely by raising premiums whenever necessary, and you hold on to a majority of the market and continue to buy up the competitors while maintaining that profit margin, what's the real concern?

 

[Chadman]

One other thing. With today's ruling by the Conservative Supreme Court, I'd guess any healthcare reform will be dead on arrival, since these companies can now fund any election race they want, and control candidates all over the country. I look forward to seeing that wonderful republican healthcare reform bill that you mentioned come to light in the next few years, with the profits of these companies heading straight into the political arena to fend off any challenge to their business model.

 

[DOGS THAT BARK]

Mags Don't know how they can cut commissions much more and expect me to write it. Anthem BC BS in Ky went to per contract vs % on groups few years back --I figured it cut renewals on that block of business about 30%.

Chad Just saying the media puts out # to fit an agenda. Exactly what does increasing profits quarter on quarter tell anyone--except they improved over previous. You could still be losing money.

Reminds me of Gumby's grift immediately after loss in Mass.

The Grift
He gets on the soap and trys and rally people against the banks--"I'm going to get our money back"
Fact of the matter
- is banks have paid much of money back already --in fact we have collectd 1.8 billion in interest.
http://www.nytimes.com/2009/06/10/business/economy/10tarp.html?_r=1

Psst Gumby -why not get on your union commrades and the money we gave to them (GM and Chrysler) and will continue to give with 0 hope of return.
Why?-- much easier to rally sentiment against bank-wall st-insurance co ETC. despite the facts.

You think I'm wrong--go back and read your topic post--they got you to believe that because a company had 30% increase over another period that something was terribly wrong.
:0corn

 

[Mags]

Mags, I understand your point, but seriously, if their profit margins are prohibitive or not good enough as a business model, then why are they continuing to do business like they are? Why are they growing so much, and buying up even more competitors and controlling more of the market?

And which would you rather have in your hand, 2% of what the big insurance companies make in profit, or 50% of the theoretical mom and pop operation you mentioned? There's no doubt that there are factors that are creating less profit for those companies - high costs of unfettered drug companies for instance, but they really are all in this together, it would seem. Everyone is benefiting from providing the services and products, except mom and pop, the business owners, the major corporations paying out a huge percentage in healthcare costs, etc.

When you can maintain and control 2% of a bazzillion dollars, merely by raising premiums whenever necessary, and you hold on to a majority of the market and continue to buy up the competitors while maintaining that profit margin, what's the real concern?

Chad, they are "growing" as the premiums have gone up in response to expenses (claims) going up.... now, it is advantagous to continue to make 2% of a bigger pie.... but remember, insurance companies are just one investment for consumers - and with a 2% profit margin and a fair amount of risk of return, people will take their investment dollars and invest somewhere else. Which will put downward pressure on the stock price.

A big insurance company is "owned" by a whole bunch on investors - big and small alike. They all demand a reasonable return for their money invested.

Clearly, for almost any company, there are advantages to getting bigger - that is one way to increase profit margins, as you are spreading fixed costs over a larger revenue base.

I still don't think people should be upset at a 2% profit margin. I'd be much more upset with industries on Wayne's list that are making 10% or more, and demanding to get better value for those services. Many of those are things we all buy each day or each month (telecommunications for example).

And Wayne - if the 80% LR was a reality, you'd see all companies decrease commissions in the individual market - they'd have to. And many companies would put much more effort into selling direct, to eliminate the commission stream, with is a companies' largest non-claims expense in an insurance premium.

 

[Mags]

One other thing. With today's ruling by the Conservative Supreme Court, I'd guess any healthcare reform will be dead on arrival, since these companies can now fund any election race they want, and control candidates all over the country. I look forward to seeing that wonderful republican healthcare reform bill that you mentioned come to light in the next few years, with the profits of these companies heading straight into the political arena to fend off any challenge to their business model.

Chad - my guess on all of this is that the WH will drop reform and take it off the list - and obviously eat a little crow.

There IS appetite for reform in the country - and I'm confident we'll see it at the state level, which is exactly where it should occur. State insurance departments are much more intune with the issues in their state (not all state's issues are the same). You'll see state reform in the next year or two that will address some of the issues the WH was looking at.

I trust state DOI's to do the right thing, rather than the WH. The clearly understand the issues and tradeoffs much better than the WH.

The other obvious advantage is that we'll have 50 different "laboratories" to try various approaches - and states can learn from each other what works and what does not. Lot of things sound good in theory, but don't work in practice due to the unintendended consequences that nobody predicted.

And there was signficant downside in the bills that were being debated - and I"m sure there was many unintended impacts that nobody would be able to predict.