Health insurer’s stock suffers second-biggest price decline since it starting trading 39 years ago
Shares of UnitedHealth Group Inc. took a dive Wednesday to suffer their worst percentage performance in three years, after the health insurer said it was facing higher costs from pent-up demand for surgeries.
The stock UNH, -6.43% was by far the biggest decliner within the Dow Jones Industrial Average DJIA, -0.68%, and was among the worst performers in the S&P 500 SPX, +0.08%, along with fellow health insurers with Medicare Advantage exposure.
UnitedHealth’s stock dropped 6.4% to a one-year closing low of $459.86. That was the biggest percentage decline since it sank 7.2% on June 11, 2020.
The stock’s price decline of $31.45 was the second-biggest since it started trading in October 1984, behind only the $47.00 (17.3%) plunge on March 16, 2020, at the height of the COVID-19 pandemic.
The selloff was cut about 207 points off the Dow’s price, as the Dow fell 232.79 points, or 0.7%, while the S&P 500 gained 0.1%.
The selloff comes after Chief Financial Officer John Rex said late Tuesday at a Goldman Sachs investor conference that there were indications of “pent-up demand” from senior citizens to have hip and knee procedures and cardiology checkups, which could hurt results from UnitedHealth’s Medicare business.
Oppenheimer analyst Michael Wiederhorn said while other insurers that presented at recent conferences didn’t mention similar trends, he believed UnitedHealth’s comments will weigh on the entire sector.
He said rival Humana Inc. HUM, -11.24% was potentially the most exposed, given its larger Medicare Advantage presence. And on cue, Humana’s stock was the S&P 500’s biggest decliner, tumbling 13.8%.
Some of the S&P 500’s other big losers were also in the Medicare Advantage business, as Centene Corp.’s CNC, -6.94% stock sank 6.9%, Elevance Health Inc. ELV, -6.89% shares shed 6.8% and CVS Health Corp.’s CVS, -7.76% stock slid 7.8%.
UnitedHealth’s stock has an outsized impact on the Dow’s price
UnitedHealth’s stock is the highest-priced component of the Dow, which is a price-weighted index, unlike the S&P 500, which is a market-capitalization-weighted index. That means the stock’s moves affect the Dow more than any other component.
At Wednesday’s closing prices, a 1% move in UnitedHealth’s stock represents about a 30-point move in the Dow, while a 1% move in Walgreens Boots Alliance Inc.’s WBA, -1.38% stock, which is the lowest priced, has about a 2-point effect on the Dow.