UnitedHealth (UNH) Q1 2026 Earnings Transcript

Image source: The Motley Fool.

Date

April 21, 2026

Call participants

• Chief Executive Officer — Andrew Witty
• Chief Financial Officer — Wayne DeVeydt
• Chief Executive Officer, UnitedHealthcare — Tim Noel
• Chief Executive Officer, Optum — Patrick Conway
• President, UnitedHealthcare — Krista Nelson
• President, Pharmacy Care Services (OptumRx) — John Rex
• President, Optum Financial Services — Bobby Hunter
• Chief Digital and Technology Officer — Sandeep Dadlani

Takeaways

• Total revenues -- $111.7 billion, up 2% year over year, driven by disciplined pricing actions and changes in member mix.
• Adjusted earnings per share (EPS) -- $7.23, exceeding internal plan expectations and supported by strong quality metrics including robust cash flows and reserves.
• Medical care ratio (MCR) -- 83.9%, improved from 84.8% last year due to pricing discipline, medical cost management, and favorable reserve development.
• Operating cost ratio -- 13.8%, reflecting timing of operational, technology, AI, and customer experience investments, alongside $900 million in incentive compensation (versus $35 million prior year).
• Operating cash flow -- $8.9 billion, or 1.4 times net income, enabling reduction of debt-to-capital ratio to 42.9%, progressing toward a year-end target of 40%.
• Domestic membership -- 49.1 million, compared to 49.8 million at the end of last year, reflecting membership trends and market actions.
• Medicare membership update -- Anticipated full-year contract decline is now centered around a drop of 1.3 million members, in line with previous guidance.
• Medicaid outlook -- Management expects ongoing membership attrition and negative margins throughout the year, with modest margin improvements possible beginning in 2027.
• ACA membership -- Individual ACA segment is expected to contract by approximately one-third this year; focus is on bronze and gold tiers with member mix and utilization aligned to plan.
• OptumHealth adjusted earnings -- $1.3 billion, reflecting benefits from prior period reserve development and operational improvements, compared against a full-year target of $1.575 billion midpoint.
• Share repurchases -- At least $2 billion to deploy by the end of the second quarter, accelerated from original guidance, due to current intrinsic value discount in share price.
• AI-related investment -- Approximately $1.5 billion budgeted for AI initiatives in 2026, with a 2:1 return targeted on internal use cases over the coming years.
• Prior authorization automation -- 95% of requests now electronic; 50% processed in real time; 90% approved within one business day; goal to reduce medical prior authorizations by 30% or more by year end.
• Digital engagement -- Nearly 50% of members using UHC digital tools (up 42% over two years); 73 million digital visits in the first quarter; over 80% of consumer contacts now digital.
• OptumRx new clients -- Onboarded more than 800 new clients, while reducing call center volume by 25% via digital and AI-enabled self-service tools.
• Operating segment weighting -- UnitedHealthcare and OptumHealth earnings are weighted towards the first half (>75% first-half for UnitedHealthcare); OptumInsight and OptumRx earnings expected to be roughly 60% in the second half of the year.

Need a quote from a Motley Fool analyst? Email pr@fool.com

Risks

• Medicaid margins remain negative due to high medical cost trend and insufficient state funding, with management stating, “We continue to expect membership attrition and negative margins in 2026 in light of continuing high trend and insufficient funding, with modest margin improvements beginning in 2027.”
• Ongoing legislative developments, including Tennessee’s retail pharmacy-related legislation, are expected to negatively impact access for nearly 150,000 specialized patients per management.

Summary

UnitedHealth Group(NYSE:UNH) reported improved first quarter performance across all business segments, driven by realized pricing, operational improvements, and digital transformation initiatives. Management intensified its U.S.-centric strategy by completing the exit from non-U.S. businesses and refreshing half of its top 100 leadership roles, while initiating significant governance enhancements and committing $400 million from business divestiture proceeds to community health initiatives. The updated full-year outlook calls for adjusted EPS above $18.25, reflecting strong first half momentum and a prudent approach to remaining execution risks, with earnings and medical cost seasonality expected to follow established intra-year patterns. Strategic priorities include scaling AI investment and commercialization through OptumInsight, deploying new partnerships in rural healthcare, and implementing automation to improve prior authorization and member/provider engagement. Segmentally, OptumHealth reported favorable contract restatements and operational gains and will see the majority of full-year earnings in the first half; OptumRx and OptumInsight results are expected to strengthen later in the year as legacy offerings are replaced by AI-first solutions and new client onboarding matures.

• Costs related to $400 million in UnitedHealth Foundation allocations were fully funded by gains realized within OptumInsight following the divestiture of the U.K. business.
• Management stated, “We expect a conservative 2:1 return on these programs over the next few years, many paying back within the next 12 to 18 months.”
• Following board-level governance changes, a public responsibility committee and a new lead independent director have been established.
• Optum Financial Services agreed to acquire Allegis Technologies, with the deal expected to be accretive by 2027.
• OptumHealth’s value-based care model demonstrated a 35% reduction in skilled nursing admissions in the West region, with a 12% year-over-year increase in patient-facing hours after operational standardization in 70% of settings.
• UnitedHealthcare will accelerate rural hospital payments by 50% and exempt rural health care providers from most prior authorizations, aiming to bolster rural access and provider financial stability.
• OptumRx’s “PreCheck” prior authorization tool reduced prescription approval time from over eight hours to less than thirty seconds, achieving a 68% reduction in denials due to missing information and an 88% reduction in appeals.
• Chief Financial Officer Wayne DeVeydt reported that net prior period development (PYD) benefited quarterly results by “a little bit north of $500 million.”
• Final disposition of assets and prior year restructuring actions resulted in a $50 million net negative impact to first quarter adjusted results, with a $525 million gain from the successful sale of the U.K. business partly offset by foundation funding.

Industry glossary

• Medical care ratio (MCR): The ratio of total medical costs paid to total premium revenue collected, indicating efficiency in managing health plan expenses.
• Adjusted earnings per share (EPS): Earnings per share figure excluding selected nonrecurring or non-operational items to provide a normalized view of operating performance.
• PDR (Premium Deficiency Reserve): A reserve established when expected future claims on a block of business exceed anticipated future premiums.
• Prior period development (PYD): Adjustments to reserves based on updated realization of claims obligations initially estimated in previous reporting periods.
• OptumInsight: The UnitedHealth Group business segment providing healthcare data analytics, technology, consulting, and managed services to external organizations and internal segments.
• OptumRx: The pharmacy benefit management (PBM) business unit within Optum, responsible for prescription fulfillment, formulary management, and related drug benefit administration.
• Value-based care: A healthcare delivery model that compensates providers based on patient health outcomes and cost efficiency rather than service volume.
• HCC (Hierarchical Condition Category): A risk adjustment coding system used to determine expected annual costs for Medicare Advantage and other risk-based contracts.
• Medicare Advantage (MA): Federal health insurance plan in which private insurers contract with Medicare to provide Part A and B benefits, frequently through managed care arrangements.

Full Conference Call Transcript

Andrew Witty: Good morning, and thank you for joining us today. The first quarter unfolded largely as expected, reflecting actions taken in the past several months to drive consistent performance across each business. The quarter saw continued progress in advancing our organization, performance culture, and better business practices. All of our major business segments exceeded plan for the quarter. At UnitedHealthcare, pricing is improving relative to elevated health care cost trends, and affordability initiatives are generating positive momentum. At OptumHealth, operational improvements continue to take hold as we more deeply embed disciplined, integrated, value-based care practices market by market. OptumInsight is seeing increased market interest with its AI-first enterprise approach.

Tim Noel and Patrick Conway will discuss these efforts in more detail in a minute. We are encouraged by the way the year has started. We remain grounded in the need for consistent execution in managed care fundamentals, and on a strategy to help build an integrated, value-based health system that together makes things better and simpler for care providers, patients, and customers. We are investing in AI-enabled modernization. While early, these capabilities are already improving experiences for consumers and care providers, increasing productivity, and reducing administrative burden. The application of technology has long been foundational to how this enterprise operates, and how we can help others across the health system improve their operations through OptumInsight.

We remain on track to invest nearly $1.5 billion in AI-related initiatives in 2026. I hope our conversation today gives you a sense of the momentum building in our company and the steps we have taken to strengthen the enterprise and position it for long-term success. We have refocused the organization squarely on U.S. healthcare, exiting non-U.S. businesses. We have refreshed nearly half of our top 100 leadership roles. Our accelerated technology and AI investments are showing meaningful potential, and we are actively evolving business practices in areas such as data and processing interoperability and speed, pharmacy practices, prior authorization, product and reporting transparency, and management practices more broadly.

At the corporate level, we strengthened governance by creating a public responsibility committee of the Board, naming a new lead independent director and new committee chair, adding a new independent director, and accelerating our board recruiting process. And we have redoubled community engagement and support, with renewed focus and resources to the UnitedHealth Foundation, and an expanding commitment to improving rural healthcare, expanding the healthcare workforce, strengthening maternal and children’s health, addressing the challenges of behavioral health, and more. We strive to be an organization of people proud to work for and with. These efforts and others will remain central to those goals.

With that, I will turn it over to Tim and Patrick to provide insights on our quarter and goals for the remainder of the year. Tim?

Tim Noel: Thanks, Steve. As Steve said, the actions initiated last year are driving early momentum in UnitedHealthcare, both in our business results and in the experiences members and care providers have when they engage with us. Medicare & Retirement results reflect disciplined pricing strengthened by affordability initiatives, in an elevated but stable medical trend environment. Community & State results continue to reflect the pressures in state-based rate environments but were within the overall expected range. Commercial and ACA results were consistent with pricing and trend assumptions, albeit still early in the year. Our 2026 approach prioritized margin recovery and product stability, with a deliberate trade-off on membership growth, particularly in Medicare and commercial markets.

Care utilization trends in the quarter remained consistent with our expectations for 2026. The quarter’s medical cost performance overall was driven primarily by net reserve development, better mix, and enrollment dynamics in government programs. As we monitor underlying utilization trends, they remain consistent with the high levels we saw in the prior year. At this distance, we anticipate trend to remain at the anticipated levels for 2026. In Medicaid, we remain focused on improvements in high-acuity care management and operating cost management. First quarter performance reflected a combination of favorable reserve development and early in-year medical cost experience.

We continue to expect membership attrition and negative margins in 2026 in light of continuing high trend and insufficient funding, with modest margin improvements beginning in 2027. Many state rate processes are still open for the remainder of 2026 and into 2027. Appropriately aligning state rates to elevated medical cost trends in these programs is essential to sustainably serving people who rely on them. We continue to advocate for this with state partners, alongside our own disciplined cost management and operational efficiencies. We are intensifying our work with states to address areas of potential fraud, waste, and abuse. For our commercial business, membership levels, renewals, and trends were generally in line with the expectations we shared with you.

The pricing actions we have previously discussed are materializing as intended, preserving margin while contributing to some moderation in growth. Self-funded offerings continue to perform well. We are approaching the 2027 selling season with a focus on appropriate pricing for the elevated cost environment and meeting employer needs for more modern tools to support consumer engagement and affordability. As anticipated, the individual ACA business continues to contract. We still expect total membership to decline by approximately one-third in 2026. Our approach in the ACA market continues to be directed toward the bronze and gold tiered products, where member mix and utilization rates are largely aligned with plan.

As a reminder, we pledge to refund any 2020 profits from these plans, and our first quarter results reflect this pledge. In Medicare, medical trends remain elevated but in line with our pricing assumptions. This reflects continued service intensity and higher provider billing patterns consistent with what we saw exiting last year. This is an issue that we are squarely addressing. Turning to enrollment, results from the Annual Enrollment Period were largely as expected, and OEP retention has remained stable. At this point in the year, we expect membership to contract consistent with previous guidance but centering more around a drop of 1.3 million.

On the final Medicare Advantage rate notice for the 2027 plan year, we appreciate that the Trump administration better aligned funding with increasing healthcare costs. It is an important step to preserving stability for the millions of seniors who rely on MA and toward ensuring this vital program’s long-term sustainability. Turning now to our efforts to improve the patient and clinician experience when they engage with us. Starting with prior authorization: prior authorization remains a critically important tool for eliminating fraud, waste, and abuse, and for helping ensure patient safety and quality care. We also recognize it is a source of frustration, and we are working to reduce that. Nearly 95% of prior authorization requests are now submitted electronically.

About 50% of those are processed in real time and more than 90% are approved on average in one business day. We are working to enable more prior authorizations submissions to be made directly within care provider workflows, in addition to the steps we are taking to further reduce the overall number of medical prior authorizations by 30% or more by the end of this year. Member adoption of UHC AI-powered digital tools continues to grow. Almost half of all members are now enrolled for and using UHC digital access, up 42% over the last two years. We saw 73 million digital visits in Q1, reflecting sustained and growing engagement with our digital platform.

Digital self-service is now the primary way members interact with us, with over 80% of consumer contacts through digital formats, and an NPS in the top quartile of the industry. For care providers, digital channels continue to grow, with transaction volumes up 75% year over year and about 75% of in-network providers using our portal or API tools. This improves real-time access to eligibility, benefits, and claim status while reducing manual outreach, enabling clinicians to spend more time on caring for patients. We are intensifying our efforts to help independent rural health care providers. We will accelerate payments in all lines of business by 50% for rural hospitals and exempt rural health care providers from most medical prior authorization requirements.

We are building network partnerships between rural providers and leading regional health systems. Together, these initiatives will help lower costs and simplify processes for care providers and greatly enhance access to quality care for people in rural communities. All these efforts and others like them are part of our commitment to pursue and invest in new and innovative ways to fulfill our mission: to help people live healthier lives and help make the health system work better for everyone. With that, I will turn it over to Patrick. Thanks, Tim.

Patrick Conway: Across Optum, positive first quarter results reflect strength in operations, continued investment in growth, and changes that make engaging with us easier for patients and provider and clinician partners. I will start with OptumHealth. Adjusted earnings of $1.3 billion reflect pricing and operational improvements that began in 2025 as well as actions taken to improve contracts and reshape our value-based care portfolio to better align with the original purpose and risk profile for that strategy. As we have shared over the past three quarters, our efforts are focused on management and process improvements that steadily improve margins at OptumHealth for 2026 and accelerate into 2027.

A key part of the progress is OptumHealth’s return to a disciplined, integrated value-based care model. With increasing prices from health systems, rising patient acuity, and higher consumer expectations, integrated value-based care is the most effective way to improve outcomes and manage total cost of care over time. We are privileged to serve over 20 million people in our OptumHealth care models across the country, including over 4 million in fully value-based arrangements. Both patients and care providers do better when incentives are aligned toward care and not the quantity of services provided.

For example, new research published in the American Journal of Managed Care showed that among nearly 2 million dual-eligible patients, those in value-based care arrangements had 24% fewer acute inpatient hospital admissions and 29% fewer emergency room visits than patients in traditional Medicare. We are improving patient experience and outcomes through efforts to stabilize staffing, increase productivity, improve scheduling, and standardize workflows in both our value-based and fee-for-service models. It is this kind of operational focus that improves clinical outcomes by better focus and deployment of clinical resources to the right care, time, and setting, and that gives us a clear path to long-term sustainable margin levels of 6% to 8%.

One example is our West Region, where in response to rising patient acuity, we deployed more data-driven, clinically led navigation in areas such as hospital admission and discharge, skilled nursing facility transitions, and emergency department encounters. Since the last quarter, clinical reviews have increased by more than 50% with earlier patient intervention and more consistent care coordination. We are already seeing inpatient and skilled nursing admissions trending sharply below historical levels, including an approximately 35% reduction in skilled nursing admissions in the first month compared to last year. These efforts are expanding to additional markets and reflect how using real-time data, strong clinical leadership, and coordinated care to improve outcomes can drive more predictable performance.

Within our fee-for-service businesses, we have brought more managed structure and accountability, starting with clear scheduling guidelines, stronger regional leadership, and better data and analytics to match supply and demand. These new standards are now in place across nearly 70% of our settings and are on track to reach nearly 80% by the end of the second quarter. They have already driven a 12% year-over-year increase in patient-facing hours, which is better for both clinicians and patients. We are rapidly scaling self-service digital scheduling, including AI-enabled tools that guide patients to the right appointment and the right setting at the right time for them. That is improving access, reducing friction, and expanding capacity without adding incremental clinical burden.

Moving to OptumRx, we started the year by onboarding more than 800 new clients while reducing contact call center volume 25% through enhanced digital and AI-enabled self-service, with member satisfaction over 95%. Our unique PreCheck prior authorization capability reduces prescription approval time from over eight hours to under thirty seconds, and provides a 68% reduction in denials due to missing information and an 88% reduction in appeals, easing interactions for clients, members, and providers. First quarter utilization and drug cost trends were as expected, with scripts down slightly year over year reflecting some membership mix and attrition.

As manufacturers continue to implement significant drug price increases and with more complex specialty drugs representing over 50% of drug spend, the role of pharmacy care is more important than ever in helping patients access affordable drugs. At OptumInsight, new AI-first products continue to gain traction. Optum Real is helping payers and care providers deal more efficiently with administrative functions such as claim adjudication and coverage validation, and can reduce manual contact costs by 76%. Other AI initiatives help automate provider, payer, and internal workflows, improving accuracy, reducing administrative burden, and strengthening our role as a technology partner for the health system.

Within OptumInsight, Optum Financial Services continues to perform well and has agreed to acquire Allegis Technologies, a leading health financial services business. This is an important step in providing more flexible, consumer-centered solutions for the people we serve. This transaction is expected to be accretive in 2027. Our AI-enhanced performance gives just a flavor of what Optum can do to help physicians and clinical care teams, payers, and patients. Wayne, I will turn it over to you.

Wayne DeVeydt: Thank you, Patrick, and good morning. Our first quarter results reflect improving fundamentals and a strengthening of operations across our businesses. As Steve mentioned, all our operating segments exceeded our plan for the quarter, with particular strength in Medicare and OptumHealth. For the first quarter, we reported adjusted earnings per share of $7.23, well ahead of our expectations and backed by strong quality metrics, including cash flows and reserves. We continue to balance near-term performance with disciplined investment in longer-term strategic priorities. Total revenues in the quarter were $111.7 billion, reflecting 2% growth year over year, driven by disciplined pricing actions and member mix.

We now serve 49.1 million total members domestically, compared to 49.8 million at the end of 2025. Turning to medical costs, a reported medical care ratio of 83.9% compares to 84.8% in 2025 and is a result of pricing discipline, strong medical cost management, and favorable reserve development. The first quarter benefited modestly from seasonal dynamics, including lower-than-expected respiratory activity. Consistent with our guidance, we expect some of these dynamics to moderate as we move further into the second quarter, particularly given the impact of IRA-related changes to Part D seasonality, which meaningfully shifted the earnings profile beginning in 2025.

Importantly, underlying utilization trends remain broadly consistent with our expectations, and we are seeing early signs of improved alignment between pricing and medical cost trends. The operating cost ratio was 13.8% in the quarter, reflecting the timing of targeted investments across operations, technology and care delivery, as well as incremental investments in areas such as AI, customer experience, cybersecurity, and community engagement. We also recorded approximately $900 million in incentive compensation for the quarter, as compared to $35 million in 2025, reflecting our performance. We continue to expect operating cost ratio trends to normalize over the course of the year as these investments scale and begin to deliver productivity benefits.

Our operating results were supported by solid operating cash flows of $8.9 billion in the quarter, or 1.4 times net income. Our capital priorities remain consistent: invest in growth, strengthen our balance sheet, and return value to shareholders. With our cash flow performance this quarter, we were able to bring the debt-to-capital ratio down to 42.9%, on track to our year-end goal of 40%. We initiated share repurchases earlier than anticipated and expect to deploy at least $2 billion by the end of the second quarter. Based on our current share price and the deep intrinsic value discount at which our shares are currently trading, returning value through share repurchases will remain a priority.

And we anticipate further capital allocated into strategic acquisitions that support long-term growth. We will be measured in pursuing such assets, while prudently managing our balance sheet. One other item of note for the quarter: as previously discussed, as part of the restructuring actions taken in the fourth quarter of 2025, we will continue to remove from our 2026 adjusted results the residual impacts of those actions. The net negative impact of these items was about $50 million for the quarter and was excluded from adjusted earnings per share. This impact includes, among other things, a $525 million gain on the sale of our U.K. business, which was successfully closed in the first quarter.

We used $400 million of these net proceeds to provide additional funding to the UnitedHealth Foundation. Our intention is to improve the focus and discipline of our core operations while using proceeds from nonrecurring gains to further advance our mission by helping build healthier communities and a robust health care workforce. In addition, at OptumHealth, we had the positive impact of the lost contract offset by the final true-up of losses related to assets which were held for sale as of December and divested during the first quarter. While it is still early in the year, we have updated our full-year outlook to greater than $18.25 per share.

This refreshed view balances the performance we saw in the first quarter with a prudent level of patience to see how the remaining months evolve. Our earnings cadence for the year remains consistent with prior expectations. We continue to expect approximately two-thirds of earnings in the first half of the year and the remaining one-third in the second half. That said, the earnings profile varies meaningfully across the portfolio. UnitedHealthcare earnings are over 75% weighted to the first half of the year. Similarly, for OptumHealth, we expect earnings to moderate throughout the year from Q1 levels, with the significant majority of full-year reported earnings occurring in the first half.

In contrast, OptumInsight and OptumRx are more naturally weighted to the back half, with each generating approximately 60% of earnings in the second half. This pattern also similarly influences the progression of our medical cost ratio, with first-half levels more than 250 basis points below the midpoint of our full-year guidance and second-half levels more than 200 basis points above. Overall, this has been a strong start to the year, as we continue to improve our business performance and advance our mission. Steve, back to you.

Andrew Witty: Thanks, Wayne. Before we turn to your questions, let me summarize where I think our company stands today. This was a solid quarter across all segments, positioning us for similarly solid progress going forward. The historic disciplines and innovations of UnitedHealthcare are rounding back into place. OptumHealth is clearly focusing on the right basic elements and gaining traction. OptumInsight has untapped potential in an AI-centric world; they are starting to sell business and building broader service relationships around that reality. But to evolve more modern scale solutions and for users to be ready to embrace them will take more time in my mind, later into 2026 and into 2027.

Our enterprise-wide AI ambitions are meaningful and the agenda is in motion. We are getting after business units and functions alike and, importantly, processes that are core to several of our businesses. This is not just a matter of being more productive at what we already do, but a reimagining of how we organize, operate, and work going forward. Few, if any, large organizations have ever done things like this at this scale, so we match our desire for speed with prudence and humility. We remain focused on advancing business and management processes and continue making progress in areas such as governance, transparency, stakeholder experience, and more.

Underpinning these steps is the undertaking to deeply reenergize our mission and culture across this company, an effort in which our leaders and people are engaged avidly. This management team believes we are a long way from performing to our full potential, and we are committed to getting to that potential quarter after quarter and reporting to you on our progress. With that, operator, please open the line for questions.

Operator: The floor is now open for questions. At this time, if you have a question or comment, please press [inaudible]. You may remove yourself from the queue by pressing star 2 on your touchtone phone. We ask you to limit yourself to one question. If you ask multiple questions, we will only be answering the first question so we can respond to everyone in the queue this morning. Our first question comes from AJ Rice with UBS.

AJ Rice: Hi, everybody. Thanks for the question. Just to maybe drill down on the comments around what you are seeing in trend. I know the last two years, I think the general view is the Medicare Advantage cost trend was running about 7% to 8%. I know that coming into this year, you described what you had been thinking about pricing for being closer to 10%. You are saying it has been consistent so far with what you have seen historically in your expectations. I am wondering, can we focus in on is it running close to 10%? Or is it more in the 7% to 8%? And if it has accelerated, where has it accelerated?

If it has moderated, where is it moderating?

Tim Noel: Good morning, AJ. Thank you for the question. As we referenced, broadly speaking across UnitedHealthcare, trend is progressing in line with our expectation. Our focus for 2026 was to focus on margin recovery and product stability across all of these businesses. We continue to see the utilization patterns continuing with high, elevated levels that we experienced in 2025. You are correct: we were talking about a 7% to 8% trend in Medicare Advantage with a pricing assumption of around 10% into 2026. We are seeing some modest favorability in the government programs, which would then include Medicare Advantage; commercial is very consistent with those expectations. It is really early right now.

We will have a more fulsome view when we talk in Q2 and can get down into some of the specific service categories. But right now, the takeaway is modest favorability in government programs, progressing at those elevated high levels. We are not seeing any inflection point, and we are really comfortable with the pricing posture that we had coming into 2026 based on how things are playing out in the early innings.

Andrew Witty: Thanks, Tim. Next question, please.

Operator: Our next question comes from Kevin Fischbeck with Bank of America.

Kevin Fischbeck: Great. Maybe just following up on that trend question. I think you specifically mentioned this in context to the Medicare Advantage; you talked about acuity and provider billing and how you are trying to address that. So can you maybe size how much of the trend component is this acuity dynamic? And then what exactly you can do to address it and how it may happen. And then just clarify, was that really just an MA comment, or was that a comment across all products? Thanks.

Tim Noel: Kevin, I can address that across all products. When you think about trend drivers, our assumption is that the activity that we would see for 2026 will be pretty consistent with what we saw in 2025, and as I just stated, that is really playing out. What we have done is a couple of things. In the Medicare Advantage space, our product positioning is leaning more towards HMO-based products as a means to be able to better manage outlier activity.

Broadly speaking, themes you can think about in terms of how we are managing it: we have better tools to early identify some of the outlier patterns that we are seeing that were trend drivers inside of 2025, and we engage early with clinical programs, with payment integrity programs, and also in certain cases take network actions, which we have done, to be able to address those things. We are making good progress in that area. We will continue to focus on affordability across all the product lines inside of 2026 and then probably be able to offer more information around that in the Q2 call as well.

Andrew Witty: Thanks, Tim. Next question, please.

Operator: We will move next to Andrew Mok with Barclays.

Andrew Mok: Hi, good morning. Could you help us unpack what is driving the outperformance in OptumHealth this quarter? Specifically, how much is contract or benefit-driven versus utilization-driven? And can you clarify what is driving the strong moderation in OptumHealth profits such that the majority of earnings are recognized in the first half? Thanks.

Krista Nelson: Thanks, Andrew, for the question. We are really encouraged by what we are seeing in the first quarter, which is a direct reflection of intentional actions that we have taken over the past few months to improve core performance. I will call out two drivers of the performance improvement. First, we are seeing medical from prior periods restate favorably relative to our expectations, largely concentrated in markets where we have really focused on clinical and medical management efforts.

Patrick highlighted one of the examples in the West where we saw an opportunity to help support members in key moments of transition, and as we have increased and invested in leadership and process improvement and clinical reviews, we have actually seen a pretty sharp improvement in unnecessary inpatient admissions as well as SNF admissions. We expect this performance to continue and are scaling some of those efforts across all of our markets. The second driver I would point to is continued improvement in operating performance, which includes cost management—a really big focus for us last year—but also fundamentals around operating execution.

The example we gave in our opening remarks around scheduling was a key focus to make sure we are creating access points for all of our patients. Year over year, after that focus, we have seen a 12% increase in patient-facing hours. That is happening across all of our regions where we have focused on core operating improvement. While it is early, those two things are giving us confidence that we are focused on the right places and that we would expect some of this improved performance to continue for the rest of the year. To your last question on the pacing, with the move of Optum Financial into OptumInsight, OptumHealth really resembles a risk business in terms of seasonality.

So that is why the significant majority of the earnings will occur in the first half versus the second half.

Andrew Witty: Krista, thank you. So mostly utilization and the result of management. Great. Thank you. Next question, please.

Operator: Our next question comes from Justin Lake with Wolfe Research.

Justin Lake: Thanks. I wanted to stay on OptumHealth a minute. I appreciate all the details there. First, the $1.3 billion of adjusted earnings—is that the right comparable to the guidance of $1.575 billion at the midpoint, on an adjusted basis? And then, Krista, you mentioned that some of the benefit was from PYD. I would like to understand what the internal expectation was because that $1.3 billion is significantly higher than I think anybody expected. I just want to understand what you were expecting internally and maybe how much of the difference versus internal was PYD versus run rate?

And then lastly, if you could share something similar on how the business is running at OptumInsight and OptumRx versus internal expectations, because those looked a little lighter than consensus was expecting. Thank you.

Wayne DeVeydt: Justin, let me unpack this. Yes, you should be comparing the $1.3 billion of adjusted earnings to the guide of $1.575 billion that we provided originally for our true run rate. We believe that is a clean view of looking at the business and removes noncash accounting implications of the lost contract as well as the final disposition of assets in the quarter. On OptumInsight and OptumRx, very similar to OptumHealth, it is important to recognize that these are fully burdened by incentive compensation this year in Q1, comparing approximately $900 million to roughly $35 million last year.

That really creates an unusual anomaly for our sell-side analysts that are trying to model this, and that was why we tried to call that out. I would say that all four segments did exceed our internal plan expectations.

Krista Nelson: On the prior period development, while some of this was favorable to our expectations, I want to reiterate it is really based on specific actions that we took in the fourth quarter. The performance is coming in a little bit better, but I am not surprised by how it is coming in given the intentional work that we have done. We are also seeing some improvement in our operating costs, which is contributing. It is early in the year, and we are taking a prudent approach to make sure that we see another quarter of medical mature, and we will continue to focus on basic blocking and tackling.

There remains a significant amount of opportunity for OptumHealth to achieve its full potential, and we are focused on core performance and improving that consistently across our markets.

Andrew Witty: Thanks, Krista. Next question, please.

Operator: We will move now to Steven Baxter with Wells Fargo.

Steven Baxter: Yes. Hi, thanks. A couple of questions about Medicare Advantage. With visibility to the final rate, I would love to hear if you could discuss your confidence level in further margin recovery for 2027. And then as an add-on, as we think about the moving parts, have you indicated that you would participate in the Balance Program for GLP-1s? And if you are indicating that you will participate, do you anticipate the industry thresholds for participation will be met? Thank you.

Bobby Hunter: Thanks, Steven, for the question. On the final notice, I want to express my appreciation for the active and ongoing engagement that we have had with CMS. The changes made by CMS in the final notice were both important and impactful for the program, and more importantly for Medicare beneficiaries. However, the widely expected medical trend for 2027 is still meaningfully above these funding levels. So consistent with our strategy in 2026, we will remain focused on financial sustainability, product durability, and then the path to margin recovery that we are on.

For 2026, we are only a couple of months into the year, but feel good about achieving the 50 basis point year-over-year margin advance that we had previewed last quarter. For 2027, our aspiration is to be in the upper half of the 2% to 4% long-term range, while delivering the quality and value our members expect of us. As it relates to your question about the Balance Program, we have been in good active dialogue with both CMS and CMMI. We would like to find a path to yes on coverage over time, but there are some notable challenges and outstanding questions with the currently planned structure.

We are still working through that process internally and look forward to continuing the dialogue with CMS. We provided specific recommendations that we believe would serve all stakeholders well. As you know, we will be participating in the Bridge demo starting in July; we think we will learn a lot about the best way to advance this priority through that experience. Thanks for the question.

Andrew Witty: Thank you. Next question, please.

Operator: Our next question comes from Lisa Gill with JPMorgan.

Lisa Gill: Thanks very much. I want to understand a couple of things. The first would be the OptumInsight and OptumRx back-half weighting. It seems like that is a little bit higher than it has been historically. Is there anything to think about there? And then secondly, since we last spoke last quarter, the PBM legislation has passed. Are there any incremental investments that you need to make? I know you have been a lot more transparent than others, but is there anything to think about? And if you do come to a settlement with the FTC, do we need to think about redomiciling the GPO to the U.S., and is there any cost there?

Wayne DeVeydt: On the slope for OptumInsight, we are slowly decommissioning old products that were not AI-based and reinvesting in those products through AI investments. You are getting the slow rundown of those products in Q1 and then the investments shift them into more AI-based offerings. I think you will see the benefits of that coming into the back half. Relative to OptumRx, we are onboarding almost 800 new clients this year, of which the vast majority will contribute to next year’s run rate. You are getting the full impact of onboarding starting early in the year, and as the year progresses and we begin to migrate and bring folks over, you will start to see that subside.

We have assumed a little bit lower script volume due to membership, but as the year progresses, our G&A initiatives and AI investments will come through and improve the outlook in the back half.

John Rex: Sure. Happy to. Thanks for the question, Lisa. On the PBM front, we have accounted for these impacts in our guidance both for the remainder of 2026 as well as our out-year guidance. As it relates to the GPO, our GPO is domiciled in the U.S., so no impact there. Broadly, I will hit a few points. First, look at what is happening in Tennessee. We are really concerned about that legislation primarily for what it means for access. What is playing out in Tennessee is targeted at the retail pharmacy space, but the impact goes well beyond the intended scope of retail.

Specifically for us, it will harm access for nearly 150,000 Tennesseans with complex conditions—cancer, HIV, serious mental illness—who rely on specialty and behavioral health pharmacies designed to uniquely serve those populations. Beyond that, with emerging legislation, our work over the last two years has put us in the leadership position in the industry. It goes beyond transparency.

Four drivers: independent pharmacy stability—we rely on a vibrant pharmacy network for more than 80% of the claims that flow through our PBM, and we are well ahead of the curve with 100% of our independent pharmacies reimbursed at a cost-based mechanism, and we are leaning into health system pharmacies through our CPS business; consumer affordability—Price Edge now serves 14 million members, and between Price Edge, Specialty Savings IQ, and our critical drug affordability, we will deliver more than $1.5 billion this year in affordability to the patients that we serve; the patient-provider experience—Patrick mentioned PreCheck prior auth, which we are expanding from scale with Cleveland Clinic to serve more than 20 health systems this year, while streamlining prior authorizations for 180 drugs; and payer transparency—this is driving our growth, with another strong selling season, largely driven by a compelling 15-part transparency guarantee for those that we serve.

Patrick Conway: All three Optum segments exceeded expectations. OptumHealth is focused on core management of medical trend and operational execution. OptumRx has momentum in the marketplace, winning new clients and renewals, and leading on the policy agenda. OptumInsight, as Wayne noted, is delivering AI-first products and services that we are investing in now; those investments are starting to pay dividends and will pay more in the long term.

Andrew Witty: And ahead on PBM business practices because we have been at this for a couple of years. Great question. Thank you. Next one, please.

Operator: We will go to Dave Windley with Jefferies.

Dave Windley: Hi. Good morning. Thanks for taking my question. I wanted to come back to Optum on the PDR and the lives associated with that. I believe there are a couple of tranches that add up to a million lives that you are in various stages of negotiation and scaling on. Could you give us an update on the status of those? And are you at a point where you are having conversations with new provider groups or new populations of members that you could add into your value-based care base? Or are we still right-sizing down to the logical, profitable base of lives that you can manage in VBC? Thank you.

Wayne DeVeydt: Thanks, Dave. We laid out what we estimated the PDR to be for the full year; it was north of $100 million. That was a reflection of contracts that we fully anticipate either renegotiating to appropriate rates or we will de-delegate or exit. That is also a reflection of some of the assets that we disposed of. You will see the numbers slightly lower in Q1 in the quarter that had a PDR associated with them. The team is still in active negotiations.

Krista Nelson: We are really in active negotiations and continue to partner with all of our payer partners across our portfolio, and we are pleased with the progress underway. We started significantly earlier, and we have put a lot more data, infrastructure, support, and leadership behind this. At this distance, there are still a number of levers we can work through with all of our payers—product and benefit design for 2027, network opportunities, evaluating the markets and footprints we are in, as well as recalibrating appropriate rates. I will reiterate our confidence in getting these items settled and getting into a better position for 2027.

Andrew Witty: I think that reflects a cultural change in terms of the way we are engaging and how we are working with relationships across the board in a constructive way. Next question, please.

Operator: We will move to Ann Hynes with Mizuho Securities.

Ann Hynes: Good morning. Thank you. I want to focus on AI. I know it sounds like you are doing a lot of investment. Can you share targets you have on how you think AI will contribute from the cost side—G&A? Do you have a target internally for how much AI could save? And then on the revenue side with OptumInsight, do you think your investment in AI could structurally shift the growth rate of that segment?

Sandeep Dadlani: Thanks, Anne, for the question. As we said earlier, we are investing about $1.5 billion in AI across UnitedHealth Group. Think about it this way: a third is invested into software products and platforms, accelerating OptumInsight’s transition into an AI-first software and services firm. The remaining two-thirds is spent across signature end-to-end processes and functions across UnitedHealth Group.

Examples include consumer member experience—we launched Avery, a generative AI chatbot answering member questions for UnitedHealthcare, which will be expanded to over 20 million members by year end; administrative simplification—Tim spoke about prior auth automation in UHC, as well as in OptumHealth and OptumRx; clinical workflows—ambient rollout for physicians and nurses in OptumHealth and summarization capabilities for nurses and clinical reviews; and functions like HR, finance, and marketing—fundamentally reimagining these processes. All internal investments in AI use cases are routed through OptumInsight and have the potential to be commercialized outside of UHG. We expect a conservative 2:1 return on these programs over the next few years, many paying back within the next 12 to 18 months.

OptumInsight AI-first products are already seeing external traction—this quarter we launched digital prior auth; we already have a couple of payer and provider clients using them with another 50 clients in the pipeline, and early results show a 96% approval rate on submissions. Optum Real, an AI-first platform launched a couple of quarters ago, now has half a billion transactions year-to-date and expects to close the year at over 2.5 billion transactions. And OptumAI, our new AI consulting arm, has signed its first contracts helping companies like LabCorp through their operational AI initiatives.

Andrew Witty: Thanks, Sandeep. We are going to be very measured as we go about this. It is new for everybody, but we are leaning into this. We think it can be quite impactful to our enterprise and to this whole industry. Good question. Next, please.

Operator: Our next question comes from Erin Wright with Morgan Stanley.

Erin Wright: Great. Thanks. I wanted to follow up on the AI and automation front. What should we expect in terms of these savings accelerating in 2027 and 2028? How do we weigh the cost and then contributions of some of the efficiency gains there, and how could this accelerate or even drive upside to the long-term target margins across the different segments? And then just one quick follow-up on capital deployment. In terms of buybacks, you announced the $2 billion today. I wanted to be clear what was embedded in guidance from a share repurchase standpoint. Thanks.

Andrew Witty: That is a very good question. This is uncharted territory when you think about the scope this could have. We are not giving guidance with respect to the compounding effect of these kinds of changes across the business, but to reinforce what Sandeep said, we are deploying across the enterprise, looking at large core processes, modernizing those, and ultimately taking those to the outside marketplace, as well as large functions typical of an organization of this size. The potential is great, but it would be premature to offer guidance on the impact.

We would not be making these investments if we did not think they were strategically important to maintaining the competitiveness of our organization and having long-term positive impact—mostly for the consumer and the experience others will have with us, and secondarily with very natural productivity lifts.

Wayne DeVeydt: Relative to capital deployment, our original guidance was approximately $2.5 billion back-half loaded—think later Q3 and Q4. At this stage, with the intrinsic value discount, we thought it was important for shareholders to get at that sooner, given the confidence we have in our results. No changes in the guidance—view it as we are moving quicker at this stage and ultimately restoring where we were in terms of this program that had been in place for almost twenty years.

Operator: Our next question comes from George Hill from Deutsche Bank.

George Hill: Good morning, and thanks for taking the question. Wayne, quick accounting question: could you quantify the PYD or the impact of the PYD in the quarter, and is there a way to break that out between the UHC impact and the OptumHealth impact? Thanks.

Wayne DeVeydt: Hey, George. Good morning. Ultimately, you will see when we file the 10-Q, PYD on a net basis is a little bit north of $500 million for the organization. While that benefits the quarter, it is important to recognize that we believe we have established a similar level of conservatism or prudent view at March 31 until we can see more of this development in April and May from Q1. It is prudent to have a bit of patience right now, but that is roughly the net number that came through from the prior year.

Andrew Witty: Everybody needs to understand that this is the first quarter. Second quarter is usually quite informative in terms of the rest of the year. We are appropriately positioning ourselves based upon what we see so far. We will take about two more questions, please, and then we will be available to answer questions through the balance of the day. Next question, please.

Operator: Our next question comes from Michael Hall with Baird.

Michael Hall: Hi, thank you. Just a quick clarification first: how much of the $400 million contribution to the UnitedHealth Foundation is OptumInsight? And then my real question: I wanted to ask about the proposed MA risk model recalibration. I understand it is now delayed, but when it is eventually implemented, possibly in 2028, a significant number of chronic condition code reimbursements are being cut. The magnitude of those cuts is what appears concerning to us. The top 10 HCC codes being chronic conditions make up the majority of RAF prevalence across the industry and presumably higher for value-based care providers. With the reimbursement of some of those codes being cut down to 20%, this concerns us for OptumHealth.

Again, I know it is delayed, but when it is eventually implemented, how do you expect the impact to OptumHealth versus industry average? If you still believe the impact should be roughly in line with the industry average, how do you justify that when your value-based care business is purpose-built to care for polychronic members and therefore disproportionately exposed to these material cuts to chronic conditions? Thank you.

Wayne DeVeydt: Relative to the $400 million contribution to the foundation, we are matching those contributions relative to where the gains reside. When we sold and closed our European operations, the gains were all within OptumInsight—north of $500 million—and the entire foundation contribution then came out of OptumInsight. That is included in the reconciliation to our adjusted segments provided in the press release. That will be a pattern we follow to the extent we get gains. We are invested in the notion that the foundation can be used as a means to really advance the health care system and be part of the responsibility we bear for that.

We did that in the past, had strayed from it in the last few years, and we are returning to that theme with real commitment.

Bobby Hunter: On modernization of the program, we are very supportive of the active and ongoing engagement with CMS in zones around modernization opportunity. I am not going to speculate on changes in future years. We do believe there are opportunities to improve the program. We support modernization; for example, we advocated for chart linking, which was just finalized in the final rule and final notice. We are committed to making the system simpler, more efficient, and more transparent, and we see value-based care as a critical and foundational tool to ensuring success long term. In terms of risk adjustment specifically, we wrote to our modernization agenda in response to both the Advance Notice and proposed technical rule.

Big picture, we remain supportive of policy that advances and improves the program, but as you saw in this last rate cycle, this work is complicated and should be done thoughtfully with appropriate testing and staging and with program stability at the forefront. In that regard, we stand ready to partner in any and all respects.

Krista Nelson: I would echo what Bobby said. We appreciate the improvements that CMS made and, more importantly, their commitment to the Medicare Advantage program and to value-based care. The direction of their comments continues to reinforce what our patients and payers experience: our value-based care model delivers better outcomes, improved health status, better experience, and a lower total cost of care for the patients we serve. That alignment of incentives is central to CMS’s goal for all of Medicare. Our commitment to value-based care has never been stronger. Our focus is on improving our execution and core operating performance, working closely with our payer partners to thoughtfully expand to more patients and more providers over time.

It is too early to suggest what the impact could be for 2028, and within the proposed changes there were puts and takes for complex populations. That is where our model has significant benefit for patients and our payer partners. We remain focused on fundamentals—improving outcomes and scaling value-based care.

Andrew Witty: And that should carry the day at the end of the day. We have time for one more question, and then we will be done.

Operator: Our last question comes from Sarah James with Cantor Fitzgerald.

Sarah James: Thank you. I want to try to unpack MLR outperformance under the lens of cost categories. Can you speak to trends across physician, hospital, and drugs—how those are performing in the different books versus expectations—and then bridge that to your earlier comments on traction you are seeing from engaging members in clinical programs and network actions? Can you clarify what cost categories you are seeing that move the needle on? Thank you.

Tim Noel: Thanks, Sarah, for the questions. It is a little early to get into that level of specificity on utilization patterns, but generally, the modest outperformance that we have cited in government programs is largely aligned with our expectations. There is no category I would spike out as being out of line compared to what our expectations were. The modest favorability in government programs is really across the board, based on the visibility we have at this distance in Q1.

Patrick Conway: On the Optum side, OptumRx is purpose-built to help payers and employers manage drug cost—we will save billions of dollars again this year, focused on affordable access to drugs. As Krista described for OptumHealth, these are programs that decrease admissions for patients, keep them out of the hospital, get people into their homes where they want to be, and care for them across the care continuum. It is purpose-built for some of the most complex patients. Our payer partners—UnitedHealthcare and others—want that care for their members because it is better quality, better experience, and more affordable.

Andrew Witty: Thanks, Patrick. Thank you all for the time today. As we build on the momentum at the start of this year, we realize there is a great deal more work to do. I think you will see sustainable progress to position this enterprise to serve all of its stakeholders in a progressively better way quarter after quarter. That is our agenda. We will return to that, and we will see you next quarter. Thank you.

Operator: This does conclude today’s conference. Thank you for your participation.

This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. Parts of this article were created using Large Language Models (LLMs) based on The Motley Fool's insights and investing approach. It has been reviewed by our AI quality control systems. Since LLMs cannot (currently) own stocks, it has no positions in any of the stocks mentioned. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability.

The Motley Fool recommends UnitedHealth Group. The Motley Fool has a disclosure policy.