Stealth Stake Sales Helped UnitedHealth Beat Wall Street Targets

Until this year, UnitedHealth Group Inc. had managed to pull off an impressive feat: more than 60 consecutive quarters of earnings that beat Wall Street estimates.

As the end of last year approached, that streak was getting harder to maintain. Ballooning medical costs and stricter government payment policies were eroding the health conglomerate’s profit margin.

But shortly before the books closed for 2024, more profits appeared. They came from the discreet sale of stakes in business units to firms including Warburg Pincus and KKR & Co., according to people familiar with the matter. Some of the deals included terms that could require UnitedHealth to buy the interests back at a higher price in a matter of years, the people said. Bloomberg's Michelle Davis reports.

Those terms — along with UnitedHealth’s insistence that transactions be completed by Dec. 31 and not be publicized even after they closed — gave people with knowledge of the deals the sense that the insurance giant was putting them together with an eye toward meeting earnings targets.

In the end, the deals helped UnitedHealth book an additional $3.3 billion of annual profit, mostly in the fourth quarter. The company alluded to the dispositions in its January earnings statement and analyst call, saying they improved operating costs. It disclosed the $3.3 billion in its annual report the next month, without specifying what it sold.

Details about UnitedHealth's year-end deals haven't been previously reported and the effect on earnings went little noticed by Wall Street analysts at the time. Without the gain, the company would have missed estimates for the first time in more than 15 years.

UnitedHealth counted the $3.3 billion from asset sales toward last year’s operating income and adjusted earnings per share, two closely watched profit measures. At the same time, it excluded a $7.1 billion loss on the sale of its Brazil business from those measures. The moves were “unusual” but allowed under US accounting rules, said Jack Ciesielski, an accounting analyst and the founder of R.G. Associates Inc. in Baltimore.

“If the company is manufacturing earnings by chopping up their furniture or selling their assets, that’s not exactly a great business model,” Ciesielski said. “The risk is that it might be masking a weakness in the operations.”

A UnitedHealth spokesman said the company had valid business reasons for the deals and has consistently reported gains and losses from routine asset sales — what it calls “portfolio refinement” — in operating costs and adjusted earnings. The sale of the Brazil unit was excluded because the company left the market entirely, making it an infrequent occurrence that included losses from foreign currency effects, he said.

“We certainly stand by our practices yet these matters are hardly news, since we disclosed the information through quarterly earnings calls, SEC filings and more dating back to January,” he said in an emailed statement.

Companies report adjusted earnings figures to give investors a clearer view of the ongoing profitability of an enterprise, often by excluding events such as asset sales that don't reflect the normal course of business. There's no formal definition of the figures under accounting rules, but companies are required to be consistent about which kinds of items are included or excluded, Ciesielski said. As long as the company can argue the transactions were fundamentally different — as UnitedHealth does with its Brazil sale — there’s no conflict with disclosure rules, he said.

UnitedHealth went on to snap its streak of earnings outperformance in the first quarter and withdraw its forecast for 2025, citing higher-than-expected costs in Medicare Advantage. Chief Executive Officer Andrew Witty abruptly resigned in May, replaced by former CEO Stephen Hemsley. The Wall Street Journal reported the next day that the insurer is under criminal investigation over Medicare billing practices. The company has defended its practices.

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