The nation's second largest managed care provider, UnitedHealth Group Inc. (UNH), said Thursday that first-quarter earnings rose 41 percent from a year ago, driven by higher premiums and strong customer growth. Weaker-than-expected revenues, however, weighed on Wall Street.

Net income increased to $779 million, or $1.16 per share, for the January-March period, up from $554 million, or 88 cents per share, a year ago.

Revenue climbed 34 percent to $10.89 billion from $8.14 billion last year, as premiums revenue grew to $9.87 billion from $7.26 billion in the year-ago period.

Analysts surveyed by Thomson Financial were looking for the company to report earnings of $1.13 per share on sales of $11.02 billion.

Shares of UnitedHealth fell $2.99, or 3.1 percent, to $92.97 on the New York Stock Exchange (search). The stock has traded in a 52-week range of $58.61 to $99.75.

Customer growth strengthened for UnitedHealth Group businesses in the first quarter. Gains include about 600,000 people at Uniprise and nearly 100,000 at UnitedHealthcare, more than 1.8 million new individuals served through Specialized Care Services, 45,000 more people purchasing Medicare supplement products from Ovations, and growth of 15,000 seniors in the company's Medicare Advantage programs.

UnitedHealth said quarterly operating margin improved to 11.5 percent from 10.8 percent last year, reflecting diversified growth and effective management of medical and operating expenses.

Chairman and Chief Executive William W. McGuire told analysts it was "about as good a quarter as we have seen, and the outlook for the future (is) very strong."

McGuire raised the company's 2005 earnings outlook to $4.85 to $4.90 per share, up 23 percent to 24 percent, on revenue of at least $45 billion. Analysts had been expecting earnings of $4.82 per share on revenue of $45.43 billion.

"It is shaping up to be a very strong year," he said.

He said medical costs are still dropping, though more slowly than last year. And new health plans that have some people paying as much as 30 percent of their health care costs are making people more conservative about getting medical care, he said.

But he also warned that state and federal budget pressures could slow enrollment at AmeriChoice, which manages Medicaid programs in some states. Some states are making it harder for beneficiaries to enroll or renew, the company said, and it predicted enrollment growth of just 35,000 to 50,000 for the rest of 2005.