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Presentation

UnitedHealth Group Incorporated beats earnings expectations. Reported EPS is $7.23, expectations were $6.58.

Operator: Good morning, and welcome to the UnitedHealth Group First Quarter 2026 Earnings Conference Call. A question-and-answer session will follow UnitedHealth Group’s prepared remarks. As a reminder, this call is being recorded. Here are some important introductory information. This call contains forward-looking statements under U.S. federal securities laws. These statements are subject to risks and uncertainties that could cause actual results to differ materially from historical experience or present expectations. A description of some of the risks and uncertainties can be found in the reports that we file with the Securities and Exchange Commission, including the cautionary statements included in our current and periodic filings.

This call will also reference non-GAAP amounts. A reconciliation of the non-GAAP to GAAP amount is available on the financial and earnings reports section of the company’s Investor Relations page at www.unitedhealthgroup.com. Information presented on this call is contained in the earnings release we issued this morning and in our Form 8-K dated April 21, 2026, which may be accessed from the Investor Relations page of the company’s website. I will now turn the conference over to the Chairman and Chief Executive Officer of UnitedHealth Group, Stephen Hemsley.

Stephen Hemsley: Thank you, Lisa. 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’s 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 Optum Health, operational improvements continue to take hold as we more deeply embed disciplined, integrated value-based care practices market by market. Optum Insight 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’re 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 Optum Insight.

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 at our company and the steps we’ve taken to strengthen the enterprise and position it for long-term success. We have refocused the organization squarely on U.S. health care 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’re 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, new committee chair, adding a new independent director and accelerating our Board recruiting process.

And we’ve redoubled community engagement and support with renewed focus and resources through the United Health Foundation and an expanding commitment to improving rural health care, expanding the health care workforce, strengthening maternal and children’s health, addressing the challenges of behavioral health and more. We strive to be an organization people proud to work for and with these efforts and others will remain central to those goals. With that, I’ll turn it over to Tim and Patrick to provide insights on our quarter and goals for the remainder of the year. Tim?

Timothy 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 prioritizes 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 trends 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 1/3 in 2026. Our approach in the ACA market continues to be directed towards 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 2026 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 health care costs. It’s 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 1 business day. We are working to enable more prior authorization 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 registered for and using UHC digital access.

We saw 73 million digital visits in Q1, up 42% over the last 2 years, 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 claims 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 for most medical prior authorization requirements.

And 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’ll turn it over to Patrick.

Patrick Conway: Thanks, Tim. Across Optum, positive first quarter results reflect strengthened operations, continued investment in growth and changes that make engaging with us easier for patients and provider and clinician partners. I’ll start with Optum Health. Adjusted earnings of $1.3 billion reflect pricing and operational improvements that began in the back half of 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 3 quarters, our efforts are focused on management and process improvements that steadily improve margins at Optum Health for 2026 and accelerate into 2027. A key part of the progress is Optum Health’s returned 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 patients in our Optum Health 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 towards care outcomes 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 standardized 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, 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% and with earlier patient intervention and more consistent care coordination. We’re 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’ve 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 in the right setting at the right time for them.

That’s improving access, reducing friction and expanding capacity without adding incremental clinical burden. Moving to Optum Rx. 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 8 hours to under 30 seconds and provides a 68% reduction in denial due to missing information and an 88% reduction in appeals, easing interaction 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 Optum Insight, 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 Optum Insight, Optum Financial Services continues to perform well and has agreed to acquire Alegeus 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’ll turn it over to you.

Wayne DeVeydt: All right. 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 Optum Health. 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. Our reported medical care ratio of 83.9% compares to 84.8% in the first quarter of 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 the first quarter of 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 1.4x 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 United Health 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 Optum Health, 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’ve updated our full year outlook to greater than $18.25 per share. This refresh 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 2/3 of earnings in the first half of the year and the remaining 1/3 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 Optum Health, we expect earnings to moderate throughout the year from Q1 levels with a significant majority of full year reported earnings occurring in the first half.

In contrast, Optum Insight and Optum Rx 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.

Stephen Hemsley: Thanks, Wayne. Before we turn to your questions, let me kind of 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. Optum Health is clearly focusing on the right basic elements and gaining traction. Optum Insight has untapped potential in an AI-centric world. They’re 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’re getting after business units and functions alike and importantly, critical 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’re 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.

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Operator: [Operator Instructions] Our first question comes from A.J. Rice with UBS.

Albert Rice: Just to maybe drill down on the comments around what you’re seeing in trend. I know the last 2 years, I think the general consensus is the Medicare Advantage cost trend was running about 7% to 8%. I know that coming into this year, you guys described what you have been thinking about pricing for it being closer to 10%. You’re saying it’s been consistent so far with what you’ve seen historically in your expectations. I’m wondering, can we focus in on is it running close to 10%? Or is it more in the 7% to 8%? And if it’s accelerated, where has it accelerated or if it’s moderated, where is it moderating?

Stephen Hemsley: Tim, do you want to take that?

Timothy Noel: Yes. A.J., thank you for the question. So as we referenced broadly speaking, across UnitedHealthcare, trend is progressing in line with our expectation. And again, our focus for 2026 was to focus on margin recovery and product stability across all of these businesses. And we continue to see the utilization patterns continue at the high elevated levels that we experienced inside of 2025. And you’re correct. We were talking about a 7% to 8% trend in Medicare Advantage with a pricing assumption of around 10% into 2026. We’re seeing some modest favorability in the government programs which would then include Medicare Advantage, commercial very consistent with those expectations. It’s really early right now. We’ll 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, but progressing at those elevated high levels. We’re not seeing any inflection point, and we’re really comfortable with the pricing posture that we had coming into 2026 based on how things are playing out in the early innings.

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, but you talked about acuity and provider billing and how you’re 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 common trend across all products?

Timothy Noel: Kevin, I think I can — this is Tim. I think I can really 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 ’25. And as I just stated that’s really playing out. What we’ve done is a couple of things. We talked in the Medicare Advantage space of our product positioning, leaning more towards HMO-based products as a means to be able to better manage outlier activity. But broadly speaking, themes that you can think about in terms of how we’re managing it is we have better tools to early identify some of the outlier patterns that we’re seeing and were some of the trend drivers inside of 2025 and engage early with clinical programs with payment integrity programs, then also, in certain cases, take network actions, which we have done to be able to address those things.

And we are making good progress in that area, and we’ll continue to focus on affordability across all of the product lines inside of 2026 and probably be able to offer more information around that in the Q2 call as well.

Operator: We’ll move next to Andrew Mok with Barclays.

Andrew Mok: Could you help us unpack what’s driving the outperformance in Optum Health this quarter? Specifically, how much is contract or benefit-driven versus utilization driven? And can you clarify what’s driving the strong moderation in Optum Health profit such that the majority of earnings are recognized in the first half?

Stephen Hemsley: Sure, Krista.

Krista Nelson: Yes. Thanks, Andrew, for the question. We’re really encouraged by what we’re seeing in the first quarter, which is really a direct reflection of intentional actions that we’ve taken over the past few months to improve core performance. I’ll just call out two drivers of the performance improvement. First, we’re seeing medical from prior periods restate favorably relative to our expectations. But this is actually largely concentrated in markets where we’ve 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’ve increased and invested in leadership and process improvement and clinical reviews, we’ve actually seen a pretty sharp decline and improvement in unnecessary inpatient admissions as well as SNF admissions.

And again, just really pleased with what we’re seeing. We expect this performance to continue and also are scaling some of those efforts across all of our markets. The second driver I would point to is just we’ve seen continued improvement in operating performance, which includes cost management, which was a really big focus for us last year, but also just kind of fundamentals around operating execution. So the example we gave in our opening remarks just around scheduling. That was a key focus for us to make sure we’re creating access points for all of our patients. And year-over-year, after that focus, we’ve seen an improvement, 12% increase in patient-facing hours. That is happening actually across all of our regions where, again, we’ve just really focused on core operating improvement.

So I would say while it’s early, those two things are really giving us confidence that we’re focused in the right places and that we would expect some of this improved performance to continue rest of the year. I think to your last question, just around pacing, with the move of Optum Financial into Optum Insight, Optum Health is — really resembles our risk business in terms of seasonality. So that’s really why the majority — the significant majority really of the earnings will occur in the first half versus the second half.

Stephen Hemsley: Krista, thank you. So mostly utilization and the result of management.

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

Justin Lake: I wanted to stay on Optum Health for a minute, and I appreciate all the details there. I wanted to make sure the — first of all, 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’d 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, maybe you could share something similar on kind of how the businesses are running at Optum Insight, Rx versus internal expectations because those looked a little lighter than consensus was expecting.

Stephen Hemsley: Okay. I think that’s three, Justin, if I’m counting. So maybe, Wayne, you might take the first. Krista, the second, and then we’ll maybe come back to the third.

Wayne DeVeydt: Yes, Justin, let me unpack this. I think I can address this fairly easily. As you think about Optum Health, 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 loss contract as well as the final disposition of assets in the quarter. The one thing I would say around Optum Insight and Rx, very similar to Optum Health. It’s very important to recognize in the prepared remarks that these are fully burdened by incentive compensation this year in Q1, and they were not fully burdened in Q1 of last year comparing $900 million to roughly $35 million.

So that really creates an unusual anomaly for our sell-side investor analysts out there that are trying to model this, and that was why we tried to call that out. I would say that all 4 segments did actually exceed our internal plan expectations. Krista, do you want to maybe address the prior year?

Krista Nelson: Yes. Yes. So to your question, just on some of the prior period development, while some of this was favorable to our expectations, I just also want to reiterate, it’s really based on specific actions that we took in the fourth quarter. So the performance is coming in a little bit better, but I’m not surprised by just how it’s coming in, given some of the intentional work that we’ve done. I also mentioned that we are seeing some improvement in our operating costs, which is also contributing. But also, it’s early in the year, and we’re taking a really prudent approach to make sure that we see another quarter of medical mature. And then frankly, we also continue to focus on some of the basic blocking and tackling. There still remains a significant amount of opportunity for Optum Health to achieve its full potential. And so again, we’re just focused on core performance and improving that consistently across our markets.

Operator: And we’ll move now to Stephen Baxter with Wells Fargo.

Stephen Baxter: A couple of questions about Medicare Advantage. I guess 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 just as add-on to that specific question, as we about the moving parts. Have you indicated that you’d participate in the BALANCE program for GLP-1s? And if you are indicating that you’d participate, do you anticipate the industry thresholds for participation will be met?

Stephen Hemsley: Bobby, do you want to take that?

Bobby Hunter: Yes. Thanks, Stephen, for the question. So on the final notice, maybe just to start, I do want to express my appreciation for the active and ongoing engagement that we’ve had with CMS. The changes made by CMS in the final notice were both important and impactful for the program and more importantly, for the Medicare beneficiaries. However, also, I need to acknowledge the reality that while the expected medical trend for 2027 is still meaningfully above these funding levels. So consistent with our strategy in 2026, we’re going to remain focused on financial sustainability, product durability and then the path to margin recovery that we’re on within that 2% to 4% long-term range that we’ve discussed. For 2026, maybe just to hit that one as a jumping off point, we’re 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.

And then for 2027, our aspiration is to be in the upper half of the 2% to 4% long-term range and doing that while continuing to deliver the quality, the value and delivering on the full expectations that I know that our members have of us. As it relates to your question about the BALANCE program, so we’ve been a good active dialogue with both CMS and CMMI on that front. We’d like to find a path to yes, there on coverage over time, but there are some notable challenges and outstanding questions with the currently planned structure. So we’re still working through that process internally, and we look forward to continuing the dialogue with CMS. We have provided some specific recommendations that we believe would serve all stakeholders really well.

As you know, we’ll be participating in the Bridge demo here starting in July, and I think we’ll learn a lot about the best way to advance this priority through that experience. Thanks for the question.

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

Lisa Gill: Just want to understand a couple of things. The first would be the Optum Insight and Optum Rx really being back half weighted. It seems like that’s a little bit higher than it’s been historically. So is there anything to think about there? And then secondly, since we last spoke last quarter, the PBM legislation has passed. And I just want to understand, are there any incremental investments that you need to make? I know you’ve 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?

Stephen Hemsley: Yes, we’ll handle those separately. Wayne, do you want to talk about the slope?

Wayne DeVeydt: Yes. The one thing I would say on the slope is for Optum Insight, I would view this as what we’re doing is a couple of things. One is slowly decommissioning old products that were not AI-based and reinvesting in those products through the AI investments. So you’re getting the slow rundown of those products in Q1 and then the investments to transfer those over into more AI based. And I think you’ll see the benefits of that coming into the back half. Relative to Optum Rx, we are onboarding almost 800 new clients this year, of which the vast majority of those will be going into next year in terms of the actual run rate. So you’re getting the full impact of those onboarding starting early in the year. But I think as the year progresses and we begin to migrate and bring folks over, you’ll start to see that subside.

And I would also just remind you that we’ve assumed a little bit of lower script volume, obviously, due to the membership that we had. But as the year progresses, I think you’ll see some of our G&A initiatives and AI investments coming through, and that will actually improve the outlook in the back half.

Stephen Hemsley: Thanks, Wayne. And Patrick and Jon, do you want to address PBM?

Jon Mahrt: Sure. Happy to. Thanks again for the question, Lisa. So if I look at PBM, first, let me hit the — I’ll hit the punch line, which is we’ve 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, just to hit that one head on, our GPO is domiciled in the U.S. So no impact as we think about GPO. Broadly, I want to hit a couple of things. First, look at what’s happening in Tennessee, and I would just say that we’re really concerned about that legislation as we sit here today, primarily for what it means for access. What’s playing out in Tennessee is targeted at the retail pharmacy space, but the impact here goes well beyond the intented scope of retail.

Specifically for us, it will harm access for nearly 150,000 Tennesseans with complex conditions, think cancer, think HIV, think serious mental illness that rely on specialty and behavioral health pharmacies designed to uniquely serve those populations. So very concerned, and we’ll continue to advocate for those that we serve in Tennessee and elsewhere. Beyond that, with other emerging legislation, I want to say that our work over the last 2 years has put us in the leadership position in the industry, and you referenced that with the transparency comments. It goes even beyond transparency. There’s 4 drivers here, Lisa, maybe just to touch on. First is the independent pharmacy stability. As you know, again, we don’t play in the retail space. We rely on a vibrant pharmacy network for more than 80% of the claims that flow through our PBM.

And so we’re well ahead of the curve with 100% of our independent pharmacies reimbursed at a cost-based reimbursement mechanism. We’re leaning into health system pharmacies through our CPS business as well and expanding the reach for those pharmacies. The second driver is consumer affordability. On that front, Price Edge now serves 14 million members. And between Price Edge, Specialty Savings IQ and our Critical Drug Affordability, we’ll deliver more than $1.5 billion this year in affordability to the patients that we serve through this business. The third driver is the patient provider experience. Patrick mentioned PreCheck by prior auth on this one. We’re moving that from scale with the Cleveland Clinic to serve more than 20 health systems this year and continuing the work in the streamlining of prior authorizations for 180 drugs.

And I’ll round out least on payer transparency. This is what’s driving our growth. Wayne mentioned a record growth year. We’re experiencing another strong selling season, and that’s largely driven by a compelling 15-part transparency guarantee for those that we serve. So we feel good about our leadership position have accounted for all this in our guidance. Thanks again for the question.

Stephen Hemsley: Patrick, do you want to comment?

Patrick Conway: Just on overall Optum because it’s come in a couple of ways. Look, all 3 segments, as we said, exceeded expectations. If you look at Optum Health, core management of medical trend and operational execution. Optum Rx has a lot of momentum in the marketplace, winning new clients, and renewals, but also ahead in the policy agenda and leading. And then Optum Insight, as Wayne and others mentioned, Sandeep and team leading AI-first product and services that we’re making those investments now. And those investments are starting to pay dividends. And as Steve said in the opening, we’ll pay dividends in the long term.

Stephen Hemsley: Yes. And ahead on PBM business practices because we’ve been at this for a couple of years. So great question, thank you.

Operator: And we’ll go to Dave Windley with Jefferies.

David Windley: I wanted to come back to Optum Health or — yes, the Optum Health on the PDR and the lives associated with that, I believe, are in a couple of tranches of that add up to 1 million lives that you’re kind of in various stages of negotiation and scaling on. And I wondered if you could give us an update on the status of those? And are you at a point where you’re 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 rightsizing down to the logical profitable base of lives that you can manage in VBC?

Stephen Hemsley: Okay. If I understand that, basically, there’s two pieces to that, the PDR and then kind of how we’re engaging in the market. So Wayne will touch on the PDR and Krista will pick up the market.

Wayne DeVeydt: Yes. Thanks, Dave. Let me just quickly on the PDR. We laid out, what we estimated the PDR to be for the full year. It was north of $600 million, and that was a reflection of contracts that we fully anticipate either renegotiating to appropriate rates or we will de-delegate or exit. You’ll see the numbers actually slightly lower in Q1. That is a reflection of some of the assets that we disposed of in the quarter that had a PDR associated with them. But the team is still in active negotiations. I’ll let Krista comment on that.

Krista Nelson: Yes. Dave, thanks for the question. So we — I mean, we are really in active negotiations and continue to partner with all of our payer partners just across our portfolio and really pleased with the progress underway. We started significantly earlier. We’ve put a lot more data and infrastructure and support and leadership behind this. And frankly, at this distance, there’s still a number of levers we can work through with all of our payers, whether that’s product and benefit design for 2027, network opportunities, looking at the markets and the footprint that we’re in as well as recalibrating appropriate rates. And I think just like Wayne mentioned, I’ll reiterate our confidence in making sure that we get these items settled and get into a better position for 2027.

Stephen Hemsley: I think that kind of reflects a little bit of the cultural change in terms of the way we’re engaging and how we are working with relationships kind of across the board in a constructive way. So great response, Krista.

Operator: And we’ll move to Ann Hynes with Mizuho Securities.

Ann Hynes: I just want to focus on AI. I know it sounds like you’re doing a lot of investment. Can you share some maybe targets you have on how you think AI will — from the cost side, maybe like SG&A, do you have a target internally, how you think it could save? And then just also on the revenue side with Optum Insight, do you think your investment in AI could like structurally shift the growth rate of that segment?

Stephen Hemsley: Yes. I think it’s true on both fronts. So Sandeep, do you want to start?

Sandeep Dadlani: Sure. Thanks, Ann, for the question. As we said earlier, we are spending about $1.5 billion in AI across UnitedHealth Group. Think about it this way, 1/3 of this is explicitly invested into software products and platform, accelerating Optum Insight’s transition of business models into an AI-first software and services firm. The remaining 2/3 is spent across signature end-to-end processes and functions across UnitedHealth Group. Let me give you some examples. Areas like consumer member experience, you must have noticed we just launched Avery, a generative AI chatbot answering member questions for UnitedHealthcare, which will be expanded to over 20 million members by the year-end. Another example is in administrative simplification, Tim spoke about prior auths and the automation in UHC as well as Optum Health and Optum Rx. A third area is clinical workflows.

For example, Ambient rollout for physicians and nurses in Optum Health and then summarization capabilities for nurses and clinical reviews. And then functions like HR, finance, marketing, fundamentally reimagining these processes and areas. In the end, all internal investments in AI use cases is routed through Optum Insight and has the potential to be commercialized outside of UHG, and we expect to return conservatively of 2:1 on these programs over the next few years, many of them paying back within the next 12 to 18 months. Optum Insight AI-first products are already seeing great external traction. Example, this quarter, we launched Digital prior auth in keeping with the enterprise priority on prior auths. We already have a couple of payer clients and provider clients using them, another 50 clients in the pipeline.

And the early results are that prior auths submitted through our software have shown a 96% approval rates on first submissions. Optum Real, an AI-first platform launched a couple of quarters ago, now has 0.5 billion transactions year till date and expects to close the year at over 2.5 billion transactions. And Optum AI, our new AI consulting arm has already signed its first few contracts, helping companies like LabCorp through their operational AI initiatives. So that should give you a good sense of AI inside and outside the company. Thank you.

Stephen Hemsley: Thanks, Sandeep. So I think really good potential. I think we’re going to be very measured as we go about this in terms of expectation because I think it’s new for everybody. But definitely, we are leaning into this. We think it can be quite impactful to our enterprise and to this whole industry. So good question. Thank you.

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

Erin Wilson Wright: Great. I wanted to just follow up on the AI and automation front. And what should we, though, expect in terms of these savings accelerating in 2027, ’28? I guess, should we anticipate that the cost and contributions or 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. Just in terms of buybacks, you announced a $2 billion today. I guess I just wanted to be clear what was embedded in guidance from a share repurchase standpoint.

Stephen Hemsley: I’ll let Wayne handle the second one. The first one is a very good question. This is kind of uncharted territory when you think about the scope that this could have. So we aren’t giving any guidance with respect to the compounding effect, if you will, of these kinds of changes across the business. But I will comment and reinforce something Sandeep said, and that is we’re really deploying it kind of across the enterprise, looking at our large core processes with an idea of modernizing those and then ultimately taking those to the outside marketplace. And then the large overall functions typical of an organization of this size and scope. And I think the potential is great. But I think it would be very premature to offer you kind of guidance in terms of what the impact of those could be.

But I wouldn’t be making these investments if we didn’t think that these were not only strategically important to maintaining the competitiveness of our organization, but also having long-term positive impact, mostly for the consumer and the experience that others will have with us. And then secondarily, with very natural productivity lift that it should produce. Wayne, do you want to take the other one?

Wayne DeVeydt: Yes. Relative to capital deployment, our original guidance was approximately $2.5 billion back half loaded. So think of later Q3, Q4. At this stage with the intrinsic value discount we see, we thought it was important for shareholders that we would get at that sooner and the confidence we have in our results. So no changes in the guidance but view it as we are moving quicker at this stage.

Stephen Hemsley: And ultimately headed back to kind of where we were. So this is kind of restoring where we were in terms of this program that had been in place for almost 20 years.

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

George Hill: Wayne, a quick accounting question is, 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 OH impact?

Wayne DeVeydt: I think ultimately, you’ll see when we file the Q, PYD on a net basis is around a little bit north of $500 million for the organization. While that benefits the quarter, it’s important to recognize that we believe we’ve established somewhat of a similar level of conservatism or prudent view, I would say, at March 31. Until we can see more of this development in April and May from Q1. I think at this stage, it would just be prudent to have a bit of patience right now. But that’s roughly the net number that came through from the prior year.

Stephen Hemsley: I do think that — everybody needs to understand that this is the first quarter. Second quarter is usually quite informative in terms of the rest of the year. And so we’re, I think, appropriately positioning ourselves based upon what we see so far. We’ll take about two more questions, please, and then we’ll be available to answer questions through the balance of the day.

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

Hua Ha: Just a quick clarification. First, how much of the $400 million contribution to the United Health Foundation is Optum Insight? And then my real question, just wanted — yes, sorry. And then my real question I just wanted to ask about the proposed MA risk model recalibration. So I understand it’s now delayed. But when it is eventually implemented, possibly in 2028, a significant number of chronic condition code reimbursement is being cut, and the magnitude of those cuts is what appears concerning to us, the top 10 HCC code being chronic condition making up the majority of RAF prevalence all across the industry and presumably higher for value-based care providers. So with the reimbursement of some of those codes being cut down to 20%.

This concerns us for Optum Health. So again, I know it’s delayed, but when it is eventually implemented, how do you expect the impact to Optum Health versus industry average? Do you still believe impact should be roughly in line with the industry average? And 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?

Stephen Hemsley: Well, I’m not sure that’s a question or a statement, but we’ll respond to that. Let’s take the first part.

Wayne DeVeydt: Yes. Relative to the $400 million contribution to the foundation, we are trying to match those contributions relative to where the gains reside. So when we sold and closed our European operations. The gains were all within Optum Insight, north of $500 million and the entire foundation then came out of Optum Insight. And that is included in the reconciliation to our adjusted segments that we provided in the press release.

Stephen Hemsley: And that’s going to be a pattern we follow to the extent we get gains and things like that, we are invested in the notion that the foundation can be used as a means to really advance the health care system kind of be part of the responsibility we bear for that. We did that in the past and had kind of strayed from that in the last few years and just we’re returning to that theme with real commitment. And Bobby, do you want to talk about, start with the…

Bobby Hunter: Yes. Thanks, Michael. I’ll start with kind of our view on modernization of the program, and I’ll kick it to Krista to then talk a little bit about the Optum Health dynamic. So maybe just kind of big picture, we’re again, very appreciative of the active and ongoing engagement with CMS in the zones around modernization opportunity. I’m not going to speculate on what changes could happen to the program in future years. That said, we do believe there are opportunities to improve the program. We support modernization. We for example, 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, more transparent, and Krista will get into it, but we see value-based care as a critical and foundational tool to ensuring that success long term.

In terms of risk adjustment, specifically, we actually wrote to our modernization agenda in response to both the advance notice and proposed technical rule. So big picture, we remain supportive of a policy that advances and improves the program. But I think as you saw in this last rate cycle, it’s important that we all acknowledge that this work is complicated and should be done thoughtfully with appropriate testing and staging and with program stability at the forefront. And in that regard, we stand ready to partner in any and all respects. So maybe then, Krista, if you want to add on the value-based care Optum Health piece.

Krista Nelson: Yes. I would just start by echoing what Bobby said just, again, appreciative of the improvement that CMS made. More importantly, their commitment to the Medicare Advantage program and really foundational their commitment to value-based care. The direction of their comments just continue to reinforce what our patients experience and what our payers experience, which is our value-based care model delivers better outcomes, improved health status, better experience and a lower total cost of care for the patients that we serve. And that alignment of incentives is really central to CMS’ goal, which they have stated is for all of Medicare, not even just for Medicare Advantage. And so again, just reiterating our commitment to value-based care has really never been stronger.

Our focus is really on just improving our execution and our core operating performance in our model, working closely with our payer partners to thoughtfully expand this to more patients and more providers over time. And at this distance, it’s really too early to suggest what the impact could be for 2028. But I would also just say inside of some of the proposed changes, there were puts and takes for complex populations. And that’s really where our model has a significant benefit for patients as well as our payer partners. And again, we just remain focused on core fundamentals, improving outcomes for our patients and making sure that we can continue to scale value-based care for more patients over time.

Stephen Hemsley: And that should carry the day at the end of the day. So we have time for one more question, and then we’ll be done.

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

Sarah James: 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 bridging that to your earlier comments on traction you’re seeing from engaging members in clinical programs and network actions, can you clarify what cost categories you’re seeing that move the needle on?

Stephen Hemsley: Sure. Tim, do you want to comment on it?

Timothy Noel: Yes. Thanks, Sarah, for the questions. So again, a little early to get into that level of specificity on utilization patterns. But I think generally, this modest outperformance that we’ve cited in government programs under the umbrella of UHC, which is largely aligned with our expectations. There’s no category I would spike out as being out of line compared to what our expectations were and the modest favorability that we’ve talked about around government programs is really kind of across the board based on the visibility that we have at this distance in Q1.

Stephen Hemsley: Patrick?

Patrick Conway: Just on the Optum side of house, Optum Rx is purpose-built to help payers and employers manage drug costs, and we’ll save billions and billions of dollars again this year, focus on affordable access to drugs as Jon described, and has been leading in the marketplace. On Optum Health, as Krista described, 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, and it’s really purpose-built for some of the most complex patients that need this care the most. And our payer partners, whether that’s UnitedHealthcare or others, as Bobby said, and we hear this from external payers as well, want that care for their members because it’s better quality, better experience and more affordable care.

Stephen Hemsley: Thanks, Patrick. So thank you all for the time today. As we kind of build on the momentum as we get started in this year, we realize there’s a great deal more work to do. And I think you’ll see sustainable progress to position this enterprise to serve all of its stakeholders in a progressively better way quarter after quarter. That’s kind of our agenda. And we’re going to return to that, and we’ll see you next quarter. Thank you.

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

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