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(Sharecast News) - UnitedHealth Group reported first-quarter results that exceeded expectations and lifted its full-year outlook on Tuesday, as the American health insurer pointed to improved cost management and early benefits from operational changes.
The company posted adjusted earnings of $7.23 per share for the three months ended 31 March, ahead of analyst estimates, on revenue of $111.7bn, up 2% from $109.6bn a year earlier.
Net income was broadly flat at $6.28bn, or $6.90 per share, while operating earnings came in at $9.0bn.
Shares rose in premarket trading in New York following the release, with peers including Humana and Centene also gaining.
UnitedHealth raised its 2026 adjusted earnings guidance to more than $18.25 per share, up from a prior outlook of above $17.75.
Chief financial officer Wayne DeVeydt described the increase as "prudent," noting the company wanted to see further data in the coming months before revising expectations again.
Performance was supported by a better-than-expected medical cost ratio of 83.9%, down from 84.8% a year earlier and below Wall Street forecasts.
The improvement reflected tighter medical cost management, a milder flu season and favourable reserve development, although the company said utilisation and unit cost trends remained elevated.
Chief executive Stephen Hemsley said the group was "continuing to help simplify and modernize health care ... bringing greater value, affordability, transparency and connectivity," as it pushed ahead with a broader turnaround strategy aimed at restoring profitability and investor confidence after last year's earnings setback.
Both of the company's main divisions beat expectations.
The UnitedHealthcare insurance arm generated $86.3bn in revenue and $5.7bn in operating earnings, with margins expanding to 6.6% due in part to repricing actions.
However, membership declined in some segments, including Medicare Advantage, as the company continued to adjust pricing and benefits in response to cost pressures.
The Optum services division reported revenue of $63.7bn and operating earnings of $3.3bn, with margins of 5.2%.
Within Optum Health, adjusted operating earnings reached $1.3bn, exceeding forecasts, suggesting the unit was recovering faster than expected after being hit by rising medical costs last year.
UnitedHealth said it was starting to see returns from its investments in artificial intelligence, with plans to spend about $1.5bn on AI in 2026 and targeting at least a two-to-one return within 12 months.
The firm said it had also been streamlining operations, including selling its UK Optum business, refocusing on the US market and reshaping leadership.
As part of its capital strategy, UnitedHealth said it planned to repurchase at least $2bn of shares by the end of the second quarter and had agreed to acquire Alegeus Technologies, a platform for consumer-directed healthcare accounts, in a deal expected to close later in the year.
At 0818 EDT (1318 BST), shares in UnitedHealth Group were up 7.71% in premarket trading in New York at $348.46.
Reporting by Josh White for Sharecast.com.