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 earnings for the sector, to maintain its profit outlook on expectations that demand for medical services had stabilized in recent quarters.
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.
UnitedHealth 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.
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.
“Nobody was expecting this level of a miss or cut to guidance,” said Kevin Gade, chief operating officer of Bahl & Gaynor, which owns UnitedHealth’s stock.
The forecast also weighed on shares of industry peers, including Elevance, CVS Health, Cigna, Centene and Humana. Their shares fell between 3% and 13% in premarket trading, putting the sector on track to shed more than $130 billion in valuation if losses hold.
“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.
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 insurance unit head, Brian Thompson, late last year.
Thompson’s fatal shooting 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.
“This was a stock that was a safe haven for so many among tariffs and policy uncertainty,” Gade said.
Hospital operators HCA Healthcare and Tenet Healthcare gained between 3% and 7%, helped by the insurer’s comments on higher demand for medical services.
