Written by Shriparna Roy and Bhanvi Sathya
(Reuters) – UnitedHealth’s high medical costs and lower-than-expected earnings in the fourth quarter highlighted persistent challenges in the insurance sector, sending the healthcare conglomerate’s shares down about 4% before the bell on Thursday. .
The earnings report was the company’s first since the shocking killing of UnitedHealth Insurance CEO Brian Thompson, which sparked controversy over health insurance claim denials and high premiums.
Rising medical costs in government-backed Medicare plans for seniors and changes in eligibility criteria for Medicaid plans have weighed on the health insurance industry for more than a year.
UnitedHealth’s quarterly medical expense ratio (the percentage of premiums spent on medical care) was 87.6%, compared to an estimated 85.95%, according to data compiled by LSEG. Typically, companies aim for a ratio closer to about 80%.
“This shows that this problem is far from over, and some investors are looking ahead to 2025 with a better outlook,” said James Harlow, senior vice president at Novare Capital Management, which owns the company’s stock. I was hoping that we might see a trend.”
Shares of rivals CVS Health and Elevance Health also fell about 3% in premarket trading.
UnitedHealth said the quarter was also weighed down by lower payments from U.S. states for members of its Medicaid plan.
Jeffrey Rogers, senior research analyst at F/m Investments, said investors are waiting for details on cost trends in 2025 and whether falling revenues are a concern this year.
“The market seems disappointed that this archetypal overachiever only achieved his 2024 goal and maintained his lackluster 2025 outlook,” said Morningstar analyst Julie Utterback. ” he said.
The company maintained its 2025 adjusted earnings forecast at $29.50 to $30.00 per share. This year’s medical expense ratio is expected to be 86-87%.
Overall sales for the fourth quarter were $100.81 billion, below expectations of $101.76 billion due to lower-than-expected insurance premiums.
On an adjusted basis, UnitedHealth earned $6.81 per share, beating expectations of $6.72 per share.
(Reporting by Sriparna Roy and Bhanvi Satija in Bengaluru; Editing by Shonak Dasgupta and Saumyadev Chakrabarty)
