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Investing.com -- On June 6, 2025, S&P Global Ratings revised its outlook on UnitedHealth Group Inc (NYSE:UNH). and its operating subsidiaries from stable to negative. This change was triggered by UnitedHealth’s suspension of its earnings guidance for 2025 and an unexpected leadership change. Despite this, S&P Global Ratings affirmed its long-term financial strength and issuer credit ratings on UnitedHealth’s operating subsidiaries.
The negative outlook indicates that UnitedHealth could face a one-notch rating downgrade in the next 12-24 months if it fails to make significant progress in reducing its financial leverage, which stood at 46.1% as of March 31, 2025. S&P Global Ratings expects the company’s financial leverage to decrease to 43%-45% by the end of 2025 and to around 40% by mid-2026 through 2027.
The company’s decision to withdraw its full-year earnings guidance was unusual, given its consistent financial performance in the past. UnitedHealth’s earnings pressures, particularly from Medicare Advantage (MA)-related issues affecting both UnitedHealthcare and OptumHealth, have worsened since it reduced its earnings guidance by approximately 12% in April 2025.
Despite these pressures, S&P Global Ratings expects UnitedHealth to generate favorable consolidated revenue growth of up to 12%-14% in 2025, albeit at a cost. Adjusted EBIT is expected to decrease compared to 2024, and the consolidated adjusted EBIT margin in 2025 is expected to dip below its historical level of 8%-9%.
S&P Global Ratings believes that UnitedHealth’s overall strategy, focusing on diversified insurance and health care services growth, remains sound. However, the company underestimated the negative earnings impact from MA plan exits by competitors and the implementation of the v28 risk model in its 2025 growth plan.
UnitedHealth’s broad scope means it faces a wide range of risk exposures across its different businesses. Key risks include the unconfirmed U.S. Department of Justice criminal investigation of UnitedHealth’s MA business practices and the Centers of Medicare & Medicaid Services’ new risk adjustment data validation audit strategy.
Despite the sudden resignation of the prior CEO, S&P Global Ratings believes that the appointment of Stephen J. Hemsley as the CEO adds stability to the organization. The company’s updated earnings outlook for 2025 is expected to be announced as soon as its second-quarter earnings announcement on July 29.
UnitedHealth’s financial obligations-to-adjusted EBITDA are expected to be above S&P Global Ratings’ long-term expectation of 2x in 2025, and adjusted EBITDA fixed charge coverage will likely be at the lower end of 8x-10x. The company is reassessing its capital plan as part of its broader reset of its earnings guidance for 2025.
As of March 31, 2025, UnitedHealth had pending, committed acquisitions of $4 billion. The company may continue to make targeted divestitures, which could provide some financial flexibility for its capital plan. S&P Global Ratings expects up to $10 billion of share repurchases in 2025, as well as shareholder dividends of about $8 billion.
S&P Global Ratings could lower its long-term ratings by one notch if UnitedHealth does not make meaningful progress in reducing its financial leverage in the next 12 to 24 months. An upgrade is unlikely given the current ratings, absent a major change in capital strategy reflected by significantly lower financial leverage or by capital and earnings improving based on S&P Global Ratings’ capital assessment.
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