UnitedHealth Group cut its annual profit forecast on Thursday in anticipation of higher-than-expected medical costs, triggering a 19% selloff in shares of the industry bellwether that reverberated across the sector.
The bleak forecast took investors by surprise as they were expecting the insurer, which kicks off the earnings season for the sector, to maintain its profit forecast on expectations that demand for medical services had stabilized in recent quarters.
UnitedHealth, however, said heightened demand for outpatient and physician services in its Medicare Advantage plans, which serve older adults and those with disabilities, was far above the planned 2025 increase.
“UnitedHealth Group grew to serve more people more comprehensively but did not perform up to our expectations, and we are aggressively addressing those challenges to position us well for the years ahead,” CEO Andrew Witty said in a statement.
Shares of peers, including Elevance, CVS Health, Cigna, Centene and Humana, fell between 4% and 9% in premarket trading.
The health insurance industry has been grappling with increased costs since mid-2023 due to a surge in demand for healthcare services under government-backed Medicare plans for older adults or individuals with disabilities.
Health insurance stocks had a rough 2024, hurt by lower government payments, elevated medical costs and public backlash against the sector after the murder of a UnitedHealth executive.
The murder of the company’s insurance unit head, Brian Thompson, late last year also unleashed a social media storm of patient dissatisfaction and ire over the health insurance industry’s practices, adding to the company’s woes.
However, insurer stocks have performed better in the past months despite a market rout triggered by escalating worries over President Donald Trump’s trade tariffs.
The company now expects 2025 adjusted profit per share to be between $26 and $26.50 per share, compared with its prior forecast of $29.50 to $30 per share. Analysts were expecting a profit of $29.73 per share for 2025, according to data compiled by LSEG.
