UnitedHealth: Strategic shift in response to the crisis

There are moments in the life of a company when the tide turns, sometimes abruptly. For UnitedHealth Group, the largest health insurer in the US, 2025 will be remembered as a year of turmoil. Against this backdrop, the arrival of a new CFO, Wayne DeVeydt, on September 2, looks as much like an attempt to regain control as a strong signal to investors that the course must change… and quickly.

The departure of John Rex, CFO since 2016, marks a new episode in a series of unprecedented shake-ups. Following the hasty departure of CEO Andrew Witty in May, replaced by Stephen Hemsley (a long-standing figure within the group), DeVeydt's appointment completes a spring and summer of upheaval. DeVeydt is no novice: as former CFO of Elevance (formerly Anthem), he knows the ins and outs of the sector and the demands of large-scale mergers and acquisitions, as demonstrated by the acquisition of Amerigroup in 2012.

However, behind these personnel changes lies a darker reality: UnitedHealth is struggling to control its medical costs amid skyrocketing spending on Medicare, Medicaid, and commercial insurance. Hemsley's message is clear: "change and reform" are now the watchwords, with a stated commitment to restoring operational discipline, humility, and transparency.

Quarterly results down sharply

Q2 2025 results reflect the scale of isshock. Revenue reached $112bn, up 13% y-o-y, but adjusted EPS ($4.08) fell under the weight of structural factors: a massive underestimation of medical trends, pricing errors and one-off charges of $1.2bn.

UnitedHealthcare, the insurance arm, saw its operating profits plunge by $1.9bn, mainly due to additional medical costs estimated at $6.5bn, compared to initial forecasts. Over half of this came from the Medicare portfolio, where the annual trend is now climbing to 7.5% against an anticipated 5%. The commercial and Medicaid segments are also under pressure, with cost growth of 11% and 20% respectively in certain categories.

Optum, the healthcare services subsidiary, is facing a $6.6bn hit compared to its initial expectations, largely due to V28 regulatory cuts and an influx of complex patients from competing plans.

2025 forecast: a challenging trajectory

The company is now targeting adjusted earnings of at least $16 per share, down from much higher ambitions at the start of the year. The medical cost ratio (MCR) is expected to reach 89.25% for the year, reflecting the continued increase in healthcare utilization and the rising intensity of medical procedures.

At the same time, UnitedHealth will have to absorb several billion dollars in additional costs in the coming quarters. Added to this is the completion of the acquisition of Amedisys ($3.3bn), which required major concessions to antitrust authorities and a fine of $1.1m.

Towards 2026: price increases, refocusing and drastic cuts

For 2026, the watchword is margin recovery. In Medicare Advantage, anticipated price increases are based on a 10% medical trend scenario, accompanied by benefit cuts and the withdrawal of more than 600,000 policyholders, particularly from PPO products, which are considered less controllable. In commercial business, pricing will be adjusted dynamically to offset higher costs, while certain positions in the ACA markets may be abandoned.

In Medicaid, the gap between public funding and the actual level of health risk is expected to continue to weigh on the business, with negative margins expected in 2026.

At Optum, the priority is to stabilize performance, particularly by refocusing healthcare offerings on more profitable models and reducing exposure to overly risky contracts. AI and technology integration will be used as levers to both improve the patient experience and reduce operating costs, with a target reduction of $1bn by 2026.

A necessary shift, but one fraught with challenges

UnitedHealth is entering a phase of rapid reform. The announced strategy (price increases, reduced exposure to loss-making plans, targeted investments in high-value assets such as home care) is consistent with restoring margins. But it faces several risks: loss of market share, political pressure on Medicare Advantage, imperfect execution of turnaround plans, and a stricter regulatory environment with ongoing federal investigations.

For investors, UNH remains a key leader, but is currently weighed down by an unfavorable environment and costly internal mistakes. Visibility for 2026 remains limited, although 2027 could mark a return to a more robust growth trajectory. Several large funds and talented managers have taken or strengthened their positions in recent months, including Viking Global Investors, Torray Funds, Christophe Davis (Davis Advisors), Dodge & Cox, Robert Olstein (Olstein Capital), Lee Ainslie (Maverick Capital) and Yacktman Asset Management.