UnitedHealth Cutting Jobs, Reduces 2008 Outlook

Minnetonka, MN (AHN) - UnitedHealth Group announced Wednesday they will cut 5 percent of their workforce or roughly 4,000 jobs. The company also said higher costs will cut into 2008 profits.

The job cuts come as part of a restructuring initiative to lower overall costs.

The health insurer expects 2008 adjusted profit of $2.95 to $3.05 per share on revenue around $81 billion, down from prior estimates of $3.55 to $3.60 per share.

Analysts surveyed by Thomson Financial have forecast a profit of $3.52 per share on revenue of $81 billion.

"During the second quarter, our risk-based businesses produced a lower level of gross margin than expected, and we also experienced a continuation of the pressures we saw in the first quarter," said Chief Executive Stephen J. Hensley, according to the Associated Press.

The company said an "intensely competitive" commercial business environment has increased pressure on its gross margins.

UnitedHealth also said it's paying $895 million to settle lawsuits for options backdating. They will also pay $17 million to resolve a suit related to the Employee Retirement Income Security Act.

The lawsuits stem from a 2006 complaint filed in a Minnesota U.S District Court.

Shares of UnitedHealth (UNH) are trading 1 percent lower in Wednesday's session.