Latest news with #AndrewWitty
Globe and Mail
11 hours ago
- Business
- Globe and Mail
UnitedHealth (UNH) CEO Hemsley Vows Cost Controls as Q1 Earnings Fall Short
UnitedHealth's (UNH) new CEO, Steve Hemsley, opened his tenure by apologizing for the company's first earnings miss since 2008, pledging to restore shareholder confidence and address rising care costs. Hemsley replaced Andrew Witty after the first-quarter shortfall, which was driven by unexpectedly high costs in the Medicare Advantage unit, prompting a suspension of the 2025 guidance as UnitedHealth recalibrated its financial outlook. Market Overview: UnitedHealth missed first-quarter earnings estimates for the first time since 2008 Medicare Advantage costs rose above forecast, leading to suspension of 2025 guidance Optum Rx pharmacy benefit manager and UnitedHealthcare insurer units faced higher-than-expected care costs Key Points: Hemsley committed to incorporating elevated care-cost assumptions into future pricing Company will review forecasting models and risk metrics across all business units Optum Rx and UnitedHealthcare divisions to undergo a comprehensive audit of practices Looking Ahead: Investors will watch for more accurate guidance tied to real medical-cost trends Execution of cost-control measures and transparent reporting will be critical to restoring confidence Containment of Medicare Advantage losses will determine near-term profitability and trust Bull Case: The return of Stephen Hemsley as CEO brings experienced leadership to UnitedHealth. Hemsley previously led the company from 2006 to 2017 and has a deep understanding of its operations. He has pledged to earn back shareholder trust and optimize quality in its health services. Hemsley has initiated a comprehensive review of all company policies, practices, and performance measures, including controversial areas like Medicare Advantage risk adjustment and pharmacy benefits management. This review will involve independent experts, and approaches will be modified where appropriate. The company plans to factor in higher care costs into its private insurance plans and next year's Medicare Advantage plans, which could help stabilize margins in the future. Despite recent setbacks, UnitedHealth has a history of resilience and delivering long-term value to shareholders, as evidenced by a total shareholder return of nearly 16% over the past five years. Hemsley expressed optimism about the company's future, stating that many of the issues are within UnitedHealth's control and capacity to resolve. Bear Case: UnitedHealth reported its first earnings miss since 2008 in the first quarter, driven by unexpectedly high medical costs in its Medicare Advantage unit, leading to a suspension of its 2025 financial outlook. The company's shares plummeted significantly following the earnings miss and guidance withdrawal, reflecting a sharp decline in investor confidence. Shares fell nearly 20% in pre-market trading after the initial Q1 earnings report and later hit their lowest closing price since October 2020. Rising care utilization, particularly in Medicare Advantage where physician and outpatient care activity was described as "twice the rate we anticipated," is a major challenge, straining medical costs and profitability. The Optum Health division faced reimbursement gaps due to members transitioning from exited plans who required costlier care than expected. The abrupt departure of former CEO Andrew Witty and the suspension of guidance less than a month after a previous downgrade indicate significant internal challenges and uncertainty regarding the company's financial trajectory. UnitedHealth faces reputational challenges and scrutiny over various practices, which new CEO Hemsley has acknowledged and pledged to review. Hemsley emphasized that future financial guidance would explicitly reflect rising care costs and that all segments must improve forecasting accuracy to rebuild trust. Analysts noted that UnitedHealth must demonstrate tangible progress in cost containment and deliver consistent, reliable forecasts to stabilize its stock and regain investor confidence.
New York Post
20 hours ago
- Business
- New York Post
UnitedHealth investors approve new CEO's $60M pay package despite turmoil following top executive's assassination
UnitedHealth investors on Monday approved a pay package that includes $60 million in stock to its new CEO – even as the company is plagued by financial losses, reported criminal fraud accusations and the shocking murder of a top executive. Stephen Hemsley, who previously served as UnitedHealth's chief executive for about a decade until 2017, returned to the top job last month after the healthcare giant reported its first earnings miss since 2008. Along with the $60 million award, which vests in three years, Hemsley will earn a $1 million annual salary. 5 Stephen Hemsley, who previously served as UnitedHealth's chief executive for about a decade, returned to the top job last month. AP 'Steve Hemsley's compensation is positioned at the median for CEOs of comparable companies and is substantially aligned with the interests of all company shareholders,' a UnitedHealth spokesperson told The Post in a statement. Helmsley's expected windfall comes after Andrew Witty stepped down last month following four years at the helm. The company's market capitalization has more than halved since its November peak, losing over $250 billion. 'We will take actions necessary to deliver the performance we are capable of while providing exceptional services and outcomes for customers, consumers, and care providers,' the healthcare giant said in a statement. In December, the company was rocked in December by the execution-style killing in midtown Manhattan of Brian Thompson, who led its insurance branch. Accused killer Luigi Mangione has pleaded not guilty. His trial is set to begin in 2026. 5 Former UnitedHealth CEO Andrew Witty testifies at a Senate Finance Committee hearing in May 2024. AP Shareholders sued UnitedHealth last month for allegedly concealing how backlash from the killing was damaging its business. In a proposed class action filed last month in Manhattan federal court, shareholders said the insurer defrauded them after Thompson's assassination by shifting away from strategies that led to higher-than-average claims denials, without revealing the impact on profitability. UnitedHealth is also facing investigations from the Department of Justice for possible criminal Medicare fraud, according to The Wall Street Journal. 5 In December, the company was rocked in December by the execution-style killing in midtown Manhattan of Brian Thompson, who led its insurance branch. AP 'We have not been notified by the Department of Justice of the supposed criminal investigation reported, without official attribution, in the Wall Street Journal on May 14th,' a UnitedHealth spokesperson told The Post, calling the Journal's reporting 'deeply irresponsible.' Shares were little changed on Monday after falling about 40% this year. The stock plunged 22% on April 17, wiping out about $119 billion of market value, after the insurer cut its 2025 forecast for adjusted profit per share to between $26 and $26.50 from between $29.50 and $30. 5 UnitedHealth slashed its forecast in April and later suspended it altogether. via REUTERS At Monday's annual shareholder meeting, Hemsley apologized for the company's performance and told investors that management is determined to 'earn back your trust and your confidence.' The company will conduct a review of its policies and practices related to risk assessment, managed care and pharmacy services, which will be looked over by independent experts, Hemsley said. Investors were left stunned by UnitedHealth's dismal earnings and forecast, especially after former CEO Andrew Witty had given such an upbeat outlook just a few months earlier. 5 Luigi Mangione, accused of fatally shooting Brian Thompson, in Manhattan state court in February. AP But Witty – a British executive without a background in the US insurance industry – took an optimistic tone with shareholders even as problems stacked up behind the scenes, employees told the Journal. He was more removed than previous chief executives, running the Minnesota-based company while living in Buckinghamshire, outside London, and flying back and forth to Washington and Minnesota via jet, according to property records and UnitedHealth's proxy documents. He never moved into the special CEO office at UnitedHealth's Minnesota headquarters, where Hemsley had once worked from, according to the Journal. Witty also shifted monthly executive meetings – which had been in-person under Hemsley and so intense they were called 'colonoscopies' – online, former executives told the Journal. He was more casual in the office, wearing tracksuit-style tops and bright colorful sneakers instead of a suit and tie, according to the report. Some of his top hires were former colleagues from GSK, the London-based pharmaceutical company, and lacked experience in the US insurance industry, the Journal said. UnitedHealth profits soared under Witty for a time, but his changes also left UnitedHealth more prone to risks, which backfired when Medicare payment rules changed. The government pays Medicare insurers more for sicker patients with certain diagnoses, and UnitedHealth was recording those lucrative illnesses at high rates, according to a Journal investigation. In 2023, however, the government limited or ended lucrative payments on many diagnoses. The new rules took effect the following year.
Yahoo
a day ago
- Business
- Yahoo
UnitedHealth Declines 40.4% YTD: Here's Why it's Still Not a Bargain
UnitedHealth Group Incorporated UNH shares have tumbled 25.4% in the past month alone, bringing their year-to-date loss to 40.4%. That's well below the performance of both the broader industry (-29.2%) and the S&P 500 (flat). Among its peers, Humana Inc. HUM has declined just 8.1% and Elevance Health, Inc. ELV has gained 4%, underscoring UNH's uniquely sharp decline. Image Source: Zacks Investment Research Historically considered a defensive healthcare stock, UnitedHealth's consistent earnings, stable dividend, and low beta (0.45) made it a favorite among risk-averse, long-term investors. But this year's selloff may not be a buying opportunity; it looks more like catching a falling knife. UnitedHealth is facing simultaneous pressures across multiple business lines. The company missed both earnings and revenue estimates in the first quarter and withdrew its 2025 financial guidance. Meanwhile, rising medical costs, especially in the Medicare Advantage segment, continue to compress margins. Higher-than-expected patient volumes, particularly high-acuity cases, have further strained profitability. Moreover, CEO Andrew Witty stepped down, prompting the return of longtime executive Stephen Hemsley. Soon after, a Wall Street Journal report revealed a criminal investigation into alleged Medicare fraud. Additional setbacks include a major expansion of Medicare Advantage audits by the Centers for Medicare and Medicaid Services, raising the risk of penalties and reimbursement clawbacks. While Hemsley's $25 million stock purchase offered brief reassurance, the bounce was short-lived. The stock fell again after reports emerged alleging the company secretly incentivized nursing homes to avoid hospital transfers, an accusation the Department of Justice declined to pursue due to insufficient evidence, but one that damaged UNH's reputation nonetheless. Investor sentiment is rapidly Zacks Consensus Estimate for UNH's 2025 EPS has seen 12 downward revisions in the past month, while the 2026 EPS estimate has seen 10, without a single upward revision. Earnings for 2025 are now projected to decline by 17.3%, even as revenues are still expected to climb 12.9% year over year. (See the Zacks Earnings Calendar to stay ahead of market-making news.) Image Source: Zacks Investment Research At first glance, UnitedHealth appears attractively priced, trading at a forward P/E of 12.31X, well below its five-year median of 19.20X. However, that multiple still sits above the industry average of 11.50X. By comparison, Humana trades at 15.18X and Elevance at 10.54X, placing UnitedHealth somewhere in the middle despite the selloff. Image Source: Zacks Investment Research But valuation alone is not enough to justify entry. Regulatory risk, cost pressures and reputational damage pose real threats to the company's business model. Optum Rx, UNH's pharmacy benefit manager, may also face headwinds from regulatory moves targeting PBMs' pricing power. President Trump's "most-favored nation" executive order will likely affect 'middlemen' and facilitate the direct sale of drugs to patients. Whether these issues mark a temporary rough patch or signal deeper structural challenges remains to be seen. Either way, the margin of safety appears thin at the moment. Despite the turmoil, UnitedHealth retains significant competitive advantages. Its vertically integrated model, scale, and investments in AI and digital health position it to navigate long-term industry trends. Medicare Advantage rate increases in 2026 could provide some relief to margins. As of March 31, 2025, UnitedHealthcare served 50.1 million members, up 1.9% year over year, driven by growth in self-funded commercial plans. U.S. healthcare spending continues to rise with an aging population and increasing chronic disease rates, trends that ultimately play to UnitedHealth's strengths. Financially, the company remains on solid footing. It generated $5.5 billion in operating cash flow in the first quarter, up significantly from $1.1 billion the year prior and ended the quarter with $34.3 billion in cash and short-term investments. It also returned over $5 billion to shareholders through dividends and stock buybacks. UnitedHealth's near-term outlook remains clouded by a series of setbacks, including regulatory probes, leadership change, rising costs and the withdrawal of 2025 guidance. While the company maintains a strong market position and generates solid cash flow, these challenges have sharply undermined investor confidence. Ongoing legal scrutiny and continued earnings downgrades have only deepened uncertainty around a potential recovery. With no clear catalysts in sight and the stock underperforming significantly, UnitedHealth carries a Zacks Rank #5 (Strong Sell). Investors may be better served waiting for signs of stabilization before re-entering. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report UnitedHealth Group Incorporated (UNH) : Free Stock Analysis Report Humana Inc. (HUM) : Free Stock Analysis Report Elevance Health, Inc. (ELV) : Free Stock Analysis Report This article originally published on Zacks Investment Research ( Zacks Investment Research Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Reuters
a day ago
- Business
- Reuters
UnitedHealth plans to earn back shareholder trust, CEO says
NEW YORK, June 2 (Reuters) - UnitedHealth Group's (UNH.N), opens new tab new CEO Steve Hemsley on Monday apologized for the company's recent earnings underperformance, and vowed it will curb rising costs in its insurance business and optimize quality in its health services moving forward. "We are well aware we have not fulfilled your expectations or our own. We apologize for that performance, and we're humbly determined to earn back your trust and your confidence," Hemsley said at the company's annual shareholder meeting. Hemsley replaced former CEO Andrew Witty in May, following the healthcare giant's first earnings miss since 2008. Along with the appointment, UnitedHealth suspended its earnings outlook, as it weighed higher-than-expected costs in its Medicare Advantage unit for adults 65 and older and people with disabilities.
Globe and Mail
a day ago
- Business
- Globe and Mail
UnitedHealth Declines 40.4% YTD: Here's Why it's Still Not a Bargain
UnitedHealth Group Incorporated UNH shares have tumbled 25.4% in the past month alone, bringing their year-to-date loss to 40.4%. That's well below the performance of both the broader industry (-29.2%) and the S&P 500 (flat). Among its peers, Humana Inc. HUM has declined just 8.1% and Elevance Health, Inc. ELV has gained 4%, underscoring UNH's uniquely sharp decline. Historically considered a defensive healthcare stock, UnitedHealth's consistent earnings, stable dividend, and low beta (0.45) made it a favorite among risk-averse, long-term investors. But this year's selloff may not be a buying opportunity; it looks more like catching a falling knife. UNH's Mounting Headwinds UnitedHealth is facing simultaneous pressures across multiple business lines. The company missed both earnings and revenue estimates in the first quarter and withdrew its 2025 financial guidance. Meanwhile, rising medical costs, especially in the Medicare Advantage segment, continue to compress margins. Higher-than-expected patient volumes, particularly high-acuity cases, have further strained profitability. Moreover, CEO Andrew Witty stepped down, prompting the return of longtime executive Stephen Hemsley. Soon after, a Wall Street Journal report revealed a criminal investigation into alleged Medicare fraud. Additional setbacks include a major expansion of Medicare Advantage audits by the Centers for Medicare and Medicaid Services, raising the risk of penalties and reimbursement clawbacks. While Hemsley's $25 million stock purchase offered brief reassurance, the bounce was short-lived. The stock fell again after reports emerged alleging the company secretly incentivized nursing homes to avoid hospital transfers, an accusation the Department of Justice declined to pursue due to insufficient evidence, but one that damaged UNH's reputation nonetheless. Investor sentiment is rapidly Zacks Consensus Estimate for UNH's 2025 EPS has seen 12 downward revisions in the past month, while the 2026 EPS estimate has seen 10, without a single upward revision. Earnings for 2025 are now projected to decline by 17.3%, even as revenues are still expected to climb 12.9% year over year. (See the Zacks Earnings Calendar to stay ahead of market-making news.) UNH Not Cheap Enough to Chase At first glance, UnitedHealth appears attractively priced, trading at a forward P/E of 12.31X, well below its five-year median of 19.20X. However, that multiple still sits above the industry average of 11.50X. By comparison, Humana trades at 15.18X and Elevance at 10.54X, placing UnitedHealth somewhere in the middle despite the selloff. But valuation alone is not enough to justify entry. Regulatory risk, cost pressures and reputational damage pose real threats to the company's business model. Optum Rx, UNH's pharmacy benefit manager, may also face headwinds from regulatory moves targeting PBMs' pricing power. President Trump's "most-favored nation" executive order will likely affect 'middlemen' and facilitate the direct sale of drugs to patients. Whether these issues mark a temporary rough patch or signal deeper structural challenges remains to be seen. Either way, the margin of safety appears thin at the moment. Is There a Path Forward for UnitedHealth? Despite the turmoil, UnitedHealth retains significant competitive advantages. Its vertically integrated model, scale, and investments in AI and digital health position it to navigate long-term industry trends. Medicare Advantage rate increases in 2026 could provide some relief to margins. As of March 31, 2025, UnitedHealthcare served 50.1 million members, up 1.9% year over year, driven by growth in self-funded commercial plans. U.S. healthcare spending continues to rise with an aging population and increasing chronic disease rates, trends that ultimately play to UnitedHealth's strengths. Financially, the company remains on solid footing. It generated $5.5 billion in operating cash flow in the first quarter, up significantly from $1.1 billion the year prior and ended the quarter with $34.3 billion in cash and short-term investments. It also returned over $5 billion to shareholders through dividends and stock buybacks. Final Verdict: Wait for Stability UnitedHealth's near-term outlook remains clouded by a series of setbacks, including regulatory probes, leadership change, rising costs and the withdrawal of 2025 guidance. While the company maintains a strong market position and generates solid cash flow, these challenges have sharply undermined investor confidence. Ongoing legal scrutiny and continued earnings downgrades have only deepened uncertainty around a potential recovery. With no clear catalysts in sight and the stock underperforming significantly, UnitedHealth carries a Zacks Rank #5 (Strong Sell). Investors may be better served waiting for signs of stabilization before re-entering. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here. Zacks Names #1 Semiconductor Stock It's only 1/9,000th the size of NVIDIA which skyrocketed more than +800% since we recommended it. NVIDIA is still strong, but our new top chip stock has much more room to boom. With strong earnings growth and an expanding customer base, it's positioned to feed the rampant demand for Artificial Intelligence, Machine Learning, and Internet of Things. Global semiconductor manufacturing is projected to explode from $452 billion in 2021 to $803 billion by 2028. See This Stock Now for Free >> Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Humana Inc. (HUM): Free Stock Analysis Report Elevance Health, Inc. (ELV): Free Stock Analysis Report
