UnitedHealth Group Q4 Earnings Call Highlights

UnitedHealth Group (NYSE:UNH) executives emphasized a renewed focus on execution, portfolio discipline, and technology investment during the company’s fourth-quarter and full-year 2025 earnings call, while outlining expectations for earnings growth in 2026 amid headwinds from Medicare funding reductions and Medicaid rate shortfalls.

2025 results and a $1.6 billion after-tax charge

Chairman and CEO Stephen Hemsley said the company finished 2025 with adjusted earnings per share (EPS) of $16.35, “slightly ahead” of expectations. Results excluded a $1.6 billion net-of-tax charge (or $1.78 per share) that management described as largely non-cash and primarily related to actions within Optum.

CFO Wayne DeWitt said the charge had three main components:

• Approximately $800 million tied to a true-up for remaining cyber-attack-related activities, including net collection expectations associated with provider loans and other customer balances.
• A net gain of about $440 million related to portfolio optimization activities for assets the company is exiting or plans to exit.
• A $2.5 billion charge tied principally to restructuring and other actions, including contract reassessments, real estate rationalization, and workforce reductions. DeWitt noted about $625 million of this amount was related to a lost contract reserve for third-party contractual relationships within Optum that are “structurally unprofitable” and could not be exited for 2026.

For full-year 2025, DeWitt reported revenue of nearly $448 billion, up 12% from 2024, driven by domestic membership growth of over 415,000. The medical care ratio was 89.1%, “slightly better” than expectations, and included about 20 basis points of negative impacts primarily associated with the lost contract reserve. Operating cost ratio was 13.3%, which DeWitt said was slightly higher than anticipated due to about 40 basis points of charge-related impacts, including roughly $800 million in broad-based employee incentives and funding to the UnitedHealth Foundation. Operating cash flow was $19.7 billion, about 1.5 times net income.

2026 outlook: adjusted EPS above $17.75, revenue around $440 billion

Management guided to 2026 adjusted EPS of greater than $17.75, which Hemsley said implies growth of at least 8.6%. DeWitt added expectations for revenue of approximately $440 billion, net EPS of at least $17.10, and operating cash flow of at least $18 billion (about 1.1 times net income).

DeWitt said the company expects “slightly under two-thirds” of full-year earnings to be generated in the first half, reflecting business mix and Part D benefit changes under the Inflation Reduction Act. The 2026 medical care ratio outlook is 88.8% ± 50 basis points, and the operating cost ratio outlook is 12.8% ± 50 basis points.

As part of portfolio realignment, leadership said Optum Financial Services will move from Optum Health to Optum Insight starting in 2026. DeWitt also said the company expects leverage to continue improving and to reach its long-term debt-to-capital target of approximately 40% before year-end, with a return to “historical capital deployment practices” expected in the second half of 2026.

UnitedHealthcare: pricing reset and expected membership contraction

UnitedHealthcare CEO Tim Noel said the company ended 2025 with medical care patterns “in line with our updated outlook,” supporting pricing decisions for 2026. In Medicare, Noel said the 2025 medical cost trend was approximately 7.5%, and the company is planning for a 10% trend expectation in 2026, citing elevated utilization, physician fee schedule increases, and higher service intensity per encounter.

Noel said UnitedHealthcare expects Medicare Advantage membership contraction in 2026, estimating a decline of 1.3 million to 1.4 million members across group, individual, and dual special needs plans. He attributed the larger-than-originally-anticipated losses to competitive dynamics and higher planned shopping during the annual enrollment period, noting the company’s approach favored margin recovery. He said the company expects approximately 50 basis points of Medicare margin improvement in 2026 versus 2025.

On Medicaid, Noel said the business is expected to face incremental pressure in 2026 due to state funding shortfalls. While the company received “some rate relief,” Noel said it expects continued mismatch between rates and acuity to pressure performance in 2026. He projected Medicaid membership contraction of approximately 565,000 to 715,000, including D-SNP members, due to reduced eligibility and an exit from one state. In response to a question, Noel said aggregate Medicaid rate increases are projected at 6% to 7% for 2026, which he said remains below medical trend.

In commercial lines, Noel said pricing in employer group and fully insured business aligns with continued increases in care activity for 2026. In the individual ACA market, he said the company repriced nearly all states in response to higher medical trends and elevated needs among ACA beneficiaries in 2025, actions he said were intended to maintain participation in all states served in 2025. He also noted the company has “voluntarily pledged to rebate ACA market profits back to our ACA customers this year” as policymakers work on affordability.

Noel said UnitedHealthcare expects overall membership contraction of 2.3 million to 2.8 million in 2026, with an estimated 13% adjusted operating earnings growth across UHC driven by margin recovery and pricing actions. He said these efforts are expected to expand UHC operating earnings margins by 40 basis points, though the company expects to operate slightly below its historical margin range until 2027.

Noel also highlighted operational efficiency initiatives, including AI and machine learning, with anticipated operating cost reductions of nearly $1 billion in 2026. He said more than 80% of member calls leverage AI tools to improve speed and accuracy.

Optum: execution focus, segment expectations, and operational reshaping

Optum CEO Patrick Conway said Optum’s 2026 outlook reflects adjusted earnings growth across all three segments, ranging from low to high single digits, with margin expansion of 20 to 90 basis points across the portfolio. Conway said growth is expected to be “somewhat tempered” in 2026, with momentum expected to build in the back half of the year and into 2027.

In Optum Rx, Conway said operating earnings growth is expected to come from margin expansion of about 20 basis points, supported by a selling season that added over 800 new customer relationships. He said new pricing models have been implemented to provide greater transparency and cost-based reimbursement to pharmacies, and the company removed reauthorization requirements for 180 drugs. Conway said over 95% of customers elected full rebate pass-through in 2026, with remaining customers expected to transition by the end of 2027. He also said Optum Rx members save over $2,200 in annual prescription costs due to efforts moderating manufactured drug price increases.

In Optum Insight, Conway forecast earnings growth of greater than 4% with about 90 basis points of margin expansion, driven by new sales, product commercialization, cost management, and higher volumes in core businesses. He described the rationale for aligning Optum Financial Services with Optum Insight, arguing that combining AI-driven revenue cycle tools with payment and financing capabilities could modernize healthcare transactions.

In Optum Health, Conway said the company expects operating earnings growth of approximately 9% with about 30 basis points of margin expansion, citing a “back-to-the-basics” approach to integrated value-based care. He said the business narrowed its affiliated network by nearly 20% since the prior year, streamlined risk membership by about 15%, and reduced electronic medical record platforms to three strategic EMRs from 18 previously. Conway said practices operating in the integrated model are driving down total cost of care by up to 30% with patient Net Promoter Scores near 90.

During Q&A, Optum Health leadership said fourth-quarter results were “slightly disappointing” to expectations and reflected restructuring actions and one-time items. They said that excluding restructuring and the move of Optum Financial, adjusted earnings are now about $1.5 billion as a “new baseline.” Executives also reiterated that Optum Health’s long-term margin target range of 6% to 8% remains intact, while noting continued work is required and expecting modest improvement in 2026.

Policy, Medicare funding concerns, and new transparency commitments

Noel criticized the Medicare Advantage Advance Notice published the day before the call, saying it did not reflect utilization and cost trend realities. He said the company would work with CMS before rates are finalized, and warned the proposal could lead to “meaningful benefit reductions” and potentially additional changes to geographic footprint and plan benefits, while noting it was too early to provide point estimates for 2027 membership or margins.

Hemsley also highlighted broader corporate initiatives, including a renewed focus on mission and culture, accelerated adoption of “modern intelligent technologies,” and a push for greater trust and transparency. He said the company plans to invest nearly $1.5 billion in 2026 in technology efforts and expects at least as much in 2027. He also said UnitedHealth will begin publishing results in areas such as prior authorizations and claim approval rates, performance statistics, data and trends, rebate practices, and certain business policies and practices. Management said independent reviews of business practices published in December found controls and oversight to be strong, with additional reviews planned in 2026 focused on metrics, including risk assessment accuracy, clinical policy accuracy, and pharmacy services.

About UnitedHealth Group (NYSE:UNH)

UnitedHealth Group Inc is a diversified health care company headquartered in Minnetonka, Minnesota, that operates two primary business platforms: UnitedHealthcare and Optum. Founded in 1977, the company provides a broad range of health benefits and health care services to individuals, employers, governmental entities and other organizations. Its operations span commercial employer-sponsored plans, individual and Medicare and Medicaid programs, and services for customers and health systems in the United States and selected international markets.

UnitedHealthcare is the company’s benefits business, administering health plans and networks, managing provider relationships, and offering coverage products for employers, individuals, and government-sponsored programs.