UnitedHealth posts modest earnings beat, soft revenue guidance as insurer plots turnaround

Core Viewpoint - UnitedHealth Group reported a modest earnings beat for the fourth quarter but provided soft revenue guidance for 2026, indicating challenges due to higher medical costs and a strategic turnaround plan [1][3]. Financial Performance - For the fourth quarter, UnitedHealth's adjusted earnings per share were $2.11, slightly above the expected $2.10, while revenue was $113.2 billion, below the anticipated $113.82 billion [9]. - The company expects 2026 revenue to exceed $439 billion, reflecting a 2% year-over-year decline, which is the first revenue decline in a decade [3][4]. Strategic Changes - UnitedHealth is implementing a turnaround strategy that includes shrinking membership, raising prices, cutting benefits, and increasing transparency to restore profitability and reputation [2]. - The company is focusing on American domestic businesses and divesting operations in the U.K. and South America [5]. Membership and Medical Costs - A significant decline in U.S. membership is expected, with a reduction of more than 3 million members in 2026 [4]. - Medical costs for Medicare Advantage patients have increased due to a rise in hospital visits for delayed procedures, although costs in the fourth quarter were high but not exceeding expectations [7]. Medicare Impact - The transition to Medicare's new coding system (V28) is expected to result in a $6 billion revenue hit in 2026, affecting both UnitedHealthcare and its Optum health-care unit [5]. - Proposed flat payment rates for Medicare Advantage by the Centers for Medicare and Medicaid Services have negatively impacted shares of UnitedHealth and other insurers [6]. Medical Benefit Ratio - For 2026, UnitedHealth anticipates a medical benefit ratio of 88.8%, an improvement from the 89.1% ratio reported for 2025, indicating better profitability [8].