UnitedHealth swings to a loss but stock surges after adjusted profit beats views

By Tomi Kilgore and Eleanor Laise

Health insurer books a near $700 million hit from Change Healthcare hack during the quarter and sees more costs coming

Shares of UnitedHealth Group Inc. surged Tuesday after the health insurer swung to a large first-quarter loss but reported an adjusted profit that beat expectations by a wide margin amid strength in the Optum business.

The losses resulted from a $7 billion loss UnitedHealth recorded on the sale of its Brazil operations, and a loss of 74 cents a share, or about $683 million, as a result of a cyberattack on its Change Healthcare unit. The company (UNH) expects the cyberattack to reduce per-share earnings by $1.15 to $1.35, or about $1.1 billion to $1.2 billion, for the full year.

The net loss was $1.41 billion, or $1.53 a share, after net income of $5.61 billion, or $5.95 a share, in the same period a year ago.

Excluding the losses and other nonrecurring items, adjusted earnings per share rose to $6.91 from $6.26 a year earlier and beat the FactSet consensus of $6.61. That marked at least the 22nd straight quarter that the company has beat EPS expectations, based on available FactSet data.

The results mark the end of a rocky quarter for UnitedHealth. On top of the Change Healthcare hack, which is the subject of a congressional hearing Tuesday morning, the stock has been weighed down by investor disappointment with Medicare Advantage rates for 2025 and rising medical costs. The stock was also hit in late February after the Wall Street Journal reported that the Justice Department had launched an antitrust investigation into the healthcare giant. UnitedHealth declined to comment on an analyst question about the reported investigation on its earnings call on Tuesday and did not respond to a MarketWatch request for comment.

UnitedHealth shares jumped more than 6% early Tuesday amid investor relief that the company did not slash its full-year adjusted earnings guidance. For 2024, the company affirmed its adjusted EPS guidance range of $27.50 to $28, which compares with the current FactSet consensus of $27.50.

The rally helped the shares of other health insurers, with Humana Inc.'s stock (HUM) rising 2.4% Tuesday morning and CVS Health Corp. (CVS) shares (CVS) gaining 1.1%.

The Change Healthcare attack has disrupted pharmacy and medical claims processing and payments for many healthcare providers nationwide. The U.S. Department of Health and Human Services' civil rights office said in mid-March that it had launched an investigation into the attack, focusing on potential breaches of protected health information. UnitedHealth said Tuesday that it has provided over $6 billion in advance funding and interest-free loans to support affected providers.

UnitedHealth's medical-loss ratio, or the percentage of premium dollars spent on clinical services and quality improvement, rose to 84.3% in the first quarter from 82.2% a year ago and was above the FactSet consensus of 83.8%. That figure includes about 0.4 percentage point of provider-support costs related to the cyberattack response, the company said. That result seems to compare favorably with recently recalibrated expectations, Leerink Partners analysts said in a research report Tuesday.

"Overall care patterns are consistent with what we anticipated last year, headed into 2024," UnitedHealth CEO Andrew Witty said on the call Tuesday.

Total revenue grew 8.6% to $99.8 billion, above the FactSet consensus of $99.23 billion, as UnitedHealthcare revenue rose 7% to $75.4 billion and Optum revenue increased 12.9% to $61.1 billion.

UnitedHealth's Medicare Advantage members totaled 7.76 million as of March 31, up 2.8% from a year ago, while those under Medicaid declined 8.4% to 7.68 million.

The stock, which had closed on Friday at the lowest price seen since November 2021, has dropped 9.7% year to date amid weakness in shares of Medicare Advantage plan providers, while the S&P 500 SPX has gained 6%.

-Tomi Kilgore -Eleanor Laise

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04-16-24 1010ET

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