UnitedHealth expects bigger hit to annual profit from hack costs

(Reuters) -UnitedHealth on Tuesday forecast a bigger hit to earnings this year from a February hack at its tech unit, as it rolls out loans to support affected healthcare providers and records higher expenses from notifying customers.

Shares of the company fell 2.4% despite a beat on second-quarter profit as the health insurance titan spent more on members’ medical services, a closely tracked metric by investors.

The company expects a 30-cent higher hit to full-year adjusted profit from the disruptions caused by the hack at its Change Healthcare (NASDAQ:) unit.

UnitedHealth (NYSE:) attributed the change to its loan program for providers affected by the hack, and the costs from notifying customers about any potential data breach.

Information made vulnerable in the attack is believed to include health insurance member IDs, patient diagnoses, treatment information and social security numbers.

The hack at the unit, which processes about 50% of U.S. medical claims, was one of the worst to hit the American healthcare industry and hit payments to doctors and healthcare facilities.

The company said on Tuesday it had restored the majority of the affected services from the hack.

Still, UnitedHealth maintained its full-year adjusted profit forecast of between $27.50 and $28.00 per share.

The company’s medical loss ratio, which is the percentage of premiums spent on medical care, was 85.1% in the second quarter, compared with 83.2% a year earlier.

Analysts on average expected the industry bellwether to report a ratio of 84.40%.

Insurers have grappled with elevated medical costs as a turnover in people enrolled in Medicaid plans led to a shift toward sicker patients.

Demand for medical care among older adults has also exceeded industry expectations since late last year.

The market was already expecting a miss on medical cost ratio due to disruptions related to the hack, said Kevin Gade, portfolio manager at Bahl & Gaynor.

UnitedHealth posted an adjusted quarterly profit per share of $6.80, compared with analysts’ average estimate of $6.66, according to LSEG data.

The company also signaled an impact to annual net earnings from the planned sale of its remaining South America operations.