What Happened?
Shares of health insurance company UnitedHealth (NYSE:UNH) fell 16% in the afternoon session after the company announced the unexpected departure of its CEO, Andrew Witty, for personal reasons, leading to uncertainty in leadership as former CEO Stephen Hemsley returns. Also, it suspended its full-year 2025 financial outlook, citing a continued acceleration in care activity and higher-than-anticipated medical costs, particularly within its Medicare Advantage plans.
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What The Market Is Telling Us
UnitedHealth’s shares are somewhat volatile and have had 11 moves greater than 5% over the last year. But moves this big are rare even for UnitedHealth and indicate this news significantly impacted the market’s perception of the business.
The previous big move we wrote about was 26 days ago when the stock dropped 22.9% on the news that the company reported underwhelming first-quarter 2025 results as its sales and profits fell below Wall Street expectations.
The real story was the sudden rise in health care activity among seniors in its Medicare plans, which pushed costs higher and hurt profits. Some of those activities were delayed visits dating back to the COVID period. As a result, while revenue grew 10% from the previous year, costs grew faster. This reflected in the medical care ratio, which ticked up, meaning more of each dollar went to covering claims, and the company expected the ratio to increase significantly in the near term.
Guidance was the biggest concern. The new full-year earnings forecast came in well below what analysts had been expecting, mainly because the company saw its care (medical costs in its privately run Medicare plans) and funding issues lasting longer.
Overall, this was a disappointing quarter. While top-line growth was decent, bottom-line pressures and reimbursement risk remain unresolved, clouding the earnings outlook.
UnitedHealth is down 36.7% since the beginning of the year, and at $319.36 per share, it is trading 48.9% below its 52-week high of $625.25 from November 2024. Investors who bought $1,000 worth of UnitedHealth’s shares 5 years ago would now be looking at an investment worth $1,148.
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