MW UnitedHealth sees a surprise jump in seniors getting treatment, and stock suffers biggest drop in decades

By Tomi Kilgore

Stock is headed for its worst day since 1998 after insurer reports first quarterly earnings miss in years and slashes full-year outlook

Shares of UnitedHealth Group Inc. took a historic plunge Thursday after the health insurer slashed its full-year outlook and missed quarterly earnings expectations for the first time in years, citing increased care activity in its Medicare Advantage business.

Basically, a lot more seniors sought treatment than previously expected. The company started seeing the problem as the quarter closed in March, with increases being most notable in physician and outpatient services.

Chief Executive Andrew Witty said on the post-earnings call with analysts that the company had been planning for 2025 care activity to increase at a similar rate as in 2024.

"Instead, though, first-quarter 2025 indications suggest care activity increased at twice that rate," Witty said, according to a FactSet transcript.

The stock $(UNH)$ tumbled 23.5% toward a one-year low in afternoon trading, to put it on track for its biggest one-day selloff since it sank 28.4% on Aug. 6, 1998.

The price decline of $137.32, which was nearly triple the current one-day record drop of $49.11 on Oct. 15, 2024, chopped about 844 points off the price of the Dow Jones Industrial Average DJIA. The Dow was down 299 points, or 0.8%, in recent trading, while the S&P 500 index SPX climbed 0.8%. (Follow MarketWatch's live coverage of the stock market.)

The stock's dramatic reaction could in part be because, as Mizuho analyst Anne Hynes said, management didn't answer all investors questions during the earnings call, which suggests a lack of clarity on the company's part, as it is still early in the year.

The selloff in UnitedHealth's stock was weighing on shares of its peers, as Humana Inc.'s $(HUM)$ dropped 7.7%, CVS Health Corp.'s $(CVS)$ were down 1.3%, Elevance Health Inc.'s slid 2.2% and Centene Corp.'s $(CNC)$ shed 1.8%.

But Mizuho's Hynes said the problems UnitedHealth is having appear to be more company specific, and not a warning for the health-insurer industry. She noted that last week, CVS reiterated its full-year guidance, while Elevance Health said it Thursday that it plans to affirm its outlook when it reports results next week.

UnitedHealth said it now expects 2025 adjusted earnings per share, which excludes nonrecurring items, in a range of $26 to $26.50, down from a previous guidance range of $29.50 to $30.

That means yearly EPS is headed for its first decline - from $27.66 in 2024 - since 2008, during the financial crisis.

Another issue the company had was "unanticipated changes" in the membership of its Optum Medicare business, which is multipayer and includes more than just UnitedHealthcare members. Witty said some new Medicare patients that the business added had been under plans that stopped covering certain markets, so care activity had been unusually low.

"They experienced a surprising lack of engagement last year, which led to 2025 reimbursement levels well below what we would expect, and likely not reflective of their actual health status," Witty said.

He also hammered home the point that UnitedHealth's Optum Rx pharmacy benefit manager business plays a "vital role" in keeping drug prices down. That comes as PBMs, referred to by many as drug middlemen, have faced criticism from the public, from both sides of the aisle in Congress and from President Donald Trump for causing drug-price hikes.

Witty said it wasn't PBMs that were driving prices up. "Drug manufacturers continue to increase what they charge Americans, in some cases 10 times what they charge people in Europe," he said.

Don't miss: UnitedHealth fights back: Blame drugmakers for high stocks, not the 'middlemen.'

For the first quarter to March 31, the company swung to net earnings of $6.29 billion, or $6.85 a share, from a net loss of $1.41 billion, or $1.53 a share, in the same period a year ago, which included impacts from the Change Healthcare cyberattack and losses in Brazil.

Adjusted EPS rose to $7.20 from $6.91 a year ago but missed the average analyst EPS estimate compiled by FactSet of $7.29.

That was the first quarterly EPS miss in at least five years, based on available FactSet data going back to the first quarter of 2020.

The medical-care ratio for the quarter, or the percentage of premium dollars spent on services - lower is better - increased to 84.8% from 84.3% due to ongoing Medicare funding reductions and higher senior-care activity.

Total revenue for the quarter grew by 9.8% to $109.58 billion, but that also missed the FactSet consensus of $111.53 billion.

UnitedHealthcare revenue increased 12.3% to $84.6 billion. The total number of people served was up to 50.13 million from 49.18 million, as total community and senior people served rose to 20.13 million from 19.77 million.

Optum revenue was up 4.6% to $63.9 billion, as Optum Rx revenue jumped 13.9% but Optum Health revenue fell 5.3%. The number of Optum Health consumers served fell to 99 million from 104 million.

Witty did provide some hope for investors as they look past 2025 and into 2026. The company said the Medicare Advantage payment rates for 2026 recently released by the government will start reflecting the accelerating costs seen for years and help undo the price-cutting implemented by the Biden administration.

UnitedHealth's stock has now lost 11.5% this year, while the S&P 500 has dropped 9.6%.

-Tomi Kilgore

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April 17, 2025 14:21 ET (18:21 GMT)

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