UnitedHealth Group Incorporated Q3 FY2025 earnings call

• Introducing new leaders, strengthening underperforming businesses, identifying opportunities and inefficiencies, and recommitting to mission and culture.
• Repricing within UnitedHealthcare on track to drive operating earnings growth from margin improvement in 2026.
• In less mature businesses like Optum Health and Optum Insight, efforts to improve operations and make investments will show measured progress in 2026.
• Belief in the need for impact of value-based care remains intact, with confidence in returning to expected performance standards.
• Focused on activities aligning with long-term future and disciplined about moving on from non-aligned activities.
• In Optum Health, team taking steps to refocus business to original mission, narrowing networks, etc.
• Keen sense of urgency throughout the enterprise, recognizing pace of progress varies across businesses.
• Investment in technology and AI to enhance member experience and optimize core performance.
• Capital and liquidity framework: Paused strategic acquisitions and share buyback, aiming to return to long-term debt-to-capital ratio around 40% and interest coverage ratios in line with historic levels.

UnitedHealthcare: Repricing is on track to drive operating earnings growth from margin improvement in 2026. Medical cost trends were historically high but consistent with guidance. Medicare business performance in line with expectations; trend in Medicare Advantage forecast at ~7.5% for full year 2025. Commercial focused on pricing and cost management; ~60% of group commercial insured offerings priced for 2026. ACA markets: rate filings with average increases over 25%, service area reductions expected to reduce ACA enrollment by ~2/3. Medicaid: funding mismatch issue, progress in bridging gap with states. Optum Health: Focus on value-based care, narrowing networks, exiting lower-performing contracts. 2026 margin improvement expected; value-based care membership to shrink by ~10% in 2026 before returning to growth in 2027. Fee-based care services: early results in East region with 3% per visit productivity increase. Optum Insight: Performing solidly but not at potential, investments in technology and AI. Optum Rx: Double-digit revenue growth in pharmacies, strong selling season, focus on pricing, transparency, and quality.

• Repricing within UnitedHealthcare on track to drive solid operating earnings growth from margin improvement in 2026.
• Less mature businesses like Optum Health and Optum Insight efforts to show measured progress in 2026 and take more time to fully bear fruit.
• Guidance for 2026 to be shared with fourth quarter results in January; currently comfortable with current consensus and making investments to accelerate returns in 2026 and position for stronger growth in 2027 and beyond.
• Repricing efforts to be a catalyst for earnings growth, with solid year-over-year results expected in Commercial and Medicare businesses.
• Expect stability and measured return to growth in Optum entities, with investments in Optum Health and Optum Insight that may slow 2026 growth but accelerate 2027 growth.
• Effective tax rate expected to return to normalized level in 2026, and investment income to continue moving lower as interest rates decline.

• External challenges including continued headwinds in 2026 from industry-wide Medicare cuts by previous administration and Medicaid funding and program pressures.
• Mispricing and suboptimal market positioning in 2025 as a result of which pressure was experienced.
• Challenges in less mature businesses like Optum Health and Optum Insight where efforts to improve operations and make investments will take more time to fully bear fruit.
• Funding mismatch issue in Medicaid where rate adequacy and member acuity mismatch will likely extend through 2026.

Q: Josh Raskin with Nephron Research asked for an updated view on sub businesses in Optum Health, specifically revenue breakdown and membership details.

A: Patrick Conway said revenue breakdown is 65% VBC, 15% care delivery fee-for-service, 20% payer/employer services; within VBC, ~2/3 serves UnitedHealthcare. Krista Nelson mentioned anchored to long-term potential of 6%-8% margin.

Q: A.J. Rice with UBS asked about Optum Insight's competitive position and investment needs.

A: Sandeep Dadlani discussed Optum Insight's AI-first products like Optum Real, Optum Integrity One, Crimson AI, and investment in AI-first workforce.

Q: Justin Lake with Wolfe Research asked about commercial margins.

A: Tim Noel said commercial business will make meaningful progress towards returning to 7%-9% margin range, with 2026 likely still 150 basis points below low end but longer-term range attainable.

Q: Stephen Baxter with Wells Fargo asked about Medicare Advantage membership declines.

A: Robert Hunter said ~1 million membership contraction in 2026 across MA, including group and individual, with breakdown of exits and market pressures; expects 2026 growth in line with 2025 and believes in long-term growth potential of MA.

Q: Kevin Fischbeck with Bank of America asked about Optum Health retrenchment and TAM.

A: Krista Nelson said deeply committed to value-based care, focused on operating discipline and core to expand and grow in future, positioned for long-term success in value-based care.

Q: George Hill with Deutsche Bank asked about discretionary expenses in Q3.

A: Wayne DeVeydt said ~1/3 of $450 million+ is commitment to foundation, rest is investments in people, with much of it recurring and part of core business.

Q: Lisa Gill with JPMorgan asked about utilization in back half of year.

A: Tim Noel said utilization tracking in line with expectations, consistent with second quarter guidance, with normal seasonality and some bias towards first half earnings.

Q: Andrew Mok with Barclays asked about Medicare Part D drug benefit change.

A: Robert Hunter said multiyear metered approach to benefit planning, cautious approach to benefit design for 2026 considering demo program dynamics, and feeling aligned to industry on benefit design.

Q: Ann Hynes with Mizuho Securities asked about Medicaid margins.

A: Unknown Executive said Medicaid margin expected to be breakeven in 2026, with margin degradation due to funding mismatch, but sees 2026 as trough and expects return to ~2% margin over 18-24 months.

Q: Lance Wilkes with Bernstein asked about employer market.

A: Dan Schumacher said trends in 2025 and 2026 at ~11%, Surest continuing to capture share, and employers evaluating integrated advanced advocacy solutions and combining medical and Rx benefits.

Q: Scott Fidel with Goldman Sachs asked about dividend and portfolio rationalizations.

A: Wayne DeVeydt said no changes in dividend practices, and Krista Nelson said Optum Health is being reshaped back to original intent, considering clinical quality, operating cost performance, and population risk for portfolio rationalization.

Q: Erin Wilson Wright with Morgan Stanley asked about turning around Optum Health.

A: Krista Nelson said progress expected throughout, with faster progress in some fee-for-service improvement and progress on value-based portfolio, and more back half weighted but expect progress.

Q: David Windley with Jefferies asked about V28 headwind mitigation and VBC membership.

A: Krista Nelson said half of V28 headwind mitigated through payer contracting across all payers, ~90% complete with contracting, and VBC membership to decline by ~10% in 2026.

Q: Jessica Tassan with Piper Sandler asked about CMS receptivity and MA.

A: Tim Noel said encouraged by CMS receptivity, having fact-based conversations to modernize the program and provide stability for beneficiaries.

Q: Benjamin Mayo with Leerink Partners asked about provider coding and IDR.

A: Tim Noel said trend influenced by higher service intensity, higher-cost sites, etc., and using AI in payment integrity programs and payment policy efforts to address, with IDR not a material trend driver.