Shares of
UnitedHealth Group
and other insurance providers tumbled Wednesday after the company said that seniors have been catching up on procedures delayed during the pandemic, leading to rising costs for insurers.
At a Goldman Sachs Global Healthcare Conference on Tuesday, Tim Noel,
UnitedHealth’s
(ticker: UNH) chief executive for Medicare and retirement, said that as mask mandates are dropped at medical offices and pandemic fears subside “more seniors are just more comfortable accessing services for things that they might have pushed off a bit like knees and hips.”
“We’re just seeing more services which, again, we’re really happy to see that our seniors are accessing the care that they need,” Noel added.
But increased surgeries mean increased costs for health insurers.
UnitedHealth
said that it anticipates the company’s second-quarter medical cost ratio, or medical costs divided by premium revenue, to be at the high-end or slightly above its full-year outlook.
Shares of UnitedHealth were falling 7% to $456.50, and were on pace for their largest percentage decrease since June 2020, according to Dow Jones Market Data. UnitedHealth also was the worst performer in the
Dow Jones Industrial Average,
subtracting 223.16 points from the index Wednesday.
Other health insurer stocks also declined.
Humana
(HUM) was the worst performer in the
S&P 500
after tumbling 12% to $451.53. It was on pace for its largest percentage decrease since January 2022.
Cigna
(CI) was down 3.6%, and
CVS Health
dropped 6.1%.
“Given concerns regarding cost trends since Q1:23 earnings, we expect the group to be under pressure because the bellwether of the group is guiding MLR [medical loss ratio] higher,” Mizuho Securities analyst Ann Hynes wrote in a research note. She maintained her Buy rating on UnitedHealth and $600 price target.
J.P. Morgan analyst Lisa Gill rates UnitedHealth as Overweight with a $562 price target. She wrote in a research note that UnitedHealth’s comments “will increase the perceived risk for the group going into 2Q earnings even though the impact could vary significantly depending on each company’s pricing/utilization assumptions.”
Truist Securities analyst David MacDonald wrote in a research note that he expects management’s commentary to create some “chop” on Wednesday. He cut his price target on UnitedHealth to $580 from $610 and lowered his full-year earnings estimates to $24.80 a share from $24.90.
However, MacDonald maintained his Buy rating on UnitedHealth and wrote that “we remain bullish on UNH tied to its highly complementary platforms, significant scale/diversification, broad/expanding suite of service capabilities, the ongoing move towards value-based care and sizable balance sheet/significant free cash flow.”
Shares of medical device makers were rising Wednesday.
Stryker
(SYK) was up 5.3% to $297.45,
Zimmer Biomet
(ZBH) gained 4.2% to $142.59, and
Medtronic
(MDT) was up 2% to $88.33.
Write to Angela Palumbo at [email protected]
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