Fitch revises UnitedHealth’s outlook to negative amid profit pressure

Investing.com -- Fitch Ratings has revised UnitedHealth Group (NYSE:UNH)’s outlook to negative from stable while affirming the insurer financial strength ratings of its subsidiaries at ’AA-’.

The rating agency maintained UnitedHealth’s long-term issuer default rating and senior unsecured notes at ’A’, along with United HealthCare Services, Inc.’s issuer default rating at ’A’.

The outlook change follows UnitedHealth’s second quarter earnings call on Tuesday, where the company provided guidance indicating significantly reduced operating performance for the remainder of 2025. This performance decline suggests the company will meet its financial leverage downgrade sensitivities for the year, with only a partial recovery expected in 2026.

Fitch cited weakened operating performance as a key rating driver, noting that UnitedHealth’s financial performance was "very strong until 2025." The company now faces pressure on operating margins and profitability due to unexpectedly high healthcare costs, driven by elevated utilization and unit costs. Fitch estimates the operating EBITDA margin will be approximately 6.5% in 2025, down from 9.8% in 2024.

The rating agency also highlighted pressure on capitalization and leverage metrics, which are likely to remain above guidelines for the current rating category in 2025 and possibly into 2026. Fitch estimates debt/EBITDA will reach approximately 2.7x in 2025, up from about 2.0x in 2024, while the financial leverage ratio will be approximately 43% at year-end.

UnitedHealth, the largest U.S. health insurer and health services provider by total medical membership, faces several emerging headwinds that may challenge its margin recovery efforts. These include ongoing elevated healthcare utilization trends, potentially higher acuity in the Medicaid risk pool, and the likely expiration of enhanced Premium Tax Credits for Affordable Care Act individual exchange business.

The company is also facing a Department of Justice investigation into aspects of its participation in the Medicare Advantage program, which Fitch views as an "event risk" with an unpredictable outcome.

For the outlook to return to stable, UnitedHealth would need to show material improvement of its financial leverage ratio and debt/EBITDA ratio toward 40% and 2.0x, respectively.

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