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Second-quarter profits could prove to be the best ever for health insurance companies as delayed surgeries and doctor visits promise to keep costs in check – for now.

If analyst estimates are to be believed, industry bellwether UnitedHealth Group Inc. is poised to show record-high adjusted earnings per share when it becomes the first in the group to report quarterly results on July 15. Record-breaking profit reports may be in store for Anthem Inc. and Centene Corp. as well.

But when Americans resume seeking regular health-care services, costs will certainly pick back up for insurers.

Delayed Surgeries and Checkups Help Keep Insurers in Good Health

It “may be one of the biggest upside quarters for MCOs we see for some time,” RBC analyst Frank Morgan said of managed care organizations. The period could also be a “low point” for medical loss ratios – a measure of how much insurance premium goes toward paying medical providers. The lower the ratio, the better for insurers’ profits.

But while Covid-19 wanes in some places and infections surge in states such as California, Texas, Florida and Arizona, a recovery in surgical procedures is anyone’s guess. Estimates compiled by Bloomberg suggest third-quarter earnings will drop off from second-quarter highs.

Given the uncertain outlook, companies may offer “conservative” forecasts for the rest of the year, Morgan wrote in a note to clients.

“While there are questions about the longer-term trade for the group given the ultimate impact of Covid on the economy and even the outcome of the Presidential election, we believe investors will stay with their positions given the near-term potential for earnings upside, especially considering that valuations are still well off peak highs,” Morgan wrote.

Separately, Goldman Sachs analyst Robert Jones, who started coverage on the sector in June, said with managed care companies trading at historical lows on a price to earnings basis, and muted political risks, “this could be an opportunity to buy the stocks.”

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