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Investing.com - UnitedHealth (NYSE:UNH) has suspended its full-year financial forecast due to a bigger-than-anticipated spike in medical costs, while CEO Andrew Witty has decided to step down from the helm of the company.
Shares in UnitedHealth tumbled by more than 8% in premarket U.S. trading on Tuesday.
In a statement, UnitedHealth said Witty’s departure was due to personal reasons. Stephen Hemsley was appointed as Witty’s successor, effective immediately.
Hemsley, who previously served as CEO from 2006 to 2017, will also remain Chairman. Witty will be a senior adviser to Hemsley, UnitedHealth added.
"We see the replacement of [Witty] as a proactive step to address the combination of operational missteps and policy pressure," analysts at Bernstein said in a note to clients.
Witty had overseen a tumultuous time for the company, particularly after the shooting death late last year of Brian Thompson, who led its insurance arm. Earlier this month, UnitedHealth was sued by shareholder for allegedly covering up how the killing had impacted its operations.
Meanwhile, UnitedHealth said it had suspended its 2025 outlook, citing higher-than-estimated medical expenses related to many new beneficiaries from government-backed Medicare Advantage plans for older adults. Care activity has continued to accelerate and broaden out to "more types of benefit offerings than seen in the first quarter", the firm noted.
However, UnitedHealth expects to return to growth in 2026.
The company had previously reported its first earnings miss since 2008 in April, and offered a downbeat forecast for the year. Investors had been hoping that it would maintain its profit guidance due to resilient demand for medical services.
Like other health insurance providers, UnitedHealth has been grappling with an uptick in medical costs as more people with Medicare plans choose to go ahead with elective surgeries previously delayed during the pandemic. Its Optum Health division, which houses the prescription drug plans it runs for Medicare, has also faced pressure from patients needing more care.