Neutral but See 560 BPS of Individual MA Margin Expansion Opp Across CY27-CY28

研报英文原文证据摘录

Neutral but See 560 BPS of Individual MA Margin Expansion Opp Across CY27-CY28

low.

CenterWell PCO. In CY25, CenterWell PCO was breakeven to slightly negative margin. We believe

The Villages Health acquisition is a ($70.0M) PCO operating income headwind in CY26, MaxHealth

is a slight tailwind. We believe MaxHealth is incremental to CY26 CenterWell revenue and operating

income guide. Excluding The Villages, we believe CY26 PCO operating margins are expected to be

largely flat y/y. Based on proprietary KOL diligence, we describe the headwinds facing highly

optimized capitated primary care providers like The Villages in note here on Optum Health.

Insurance segment MLR and operating cost ratio cadence. From an MLR perspective, we

believe HUM is guiding up a few hundred BPS every quarter similar to CY25. We believe 2Q26

guidance calling for just above 91.0% implies ~91.2%. We are modeled slightly favorable to that at

91.1%. We model a 684 BPS spread between 1Q26 reported Insurance segment MLR and 4Q26E

Insurance segment MLR. See Row 45 in Segment Earnings tab of PSC model. We believe HUM is

assuming operating efficiencies y/y improve over the course of the year; while MLR deteriorates due

to typical seasonality, in addition to what ends up being a compounding Stars headwind as the dollar

Stars headwind is ratable but medex increases seasonally.

Trend and completion rates. We believe HUM is thinking about trend at a 6.0% level for medical

and LDD for pharmacy. That is consistent with CY25 and remains the expectation for CY26.

Everything the company is seeing YTD suggests that estimate is correct to slightly conservative.

From a visibility perspective, HUM can see pharmacy claims almost immediately. Pharmacy claims

complete with in a week or so.