From Darlings to Prey: Wall Street’s Alligators Snap at Big Insurance

2024 was a tough year for Big Insurance on Wall Street, as plummeting stock prices and rising investor scrutiny put health insurers in the crosshairs.

Big health insurance companies used to be Wall Street darlings, but that changed dramatically in 2024, so much so that you can now count investors among a growing list of influential folks who are beginning to question the value proposition of those behemoths. Big Insurance is now up to its neck in alligators, and investors are arguably the biggest – and most existentially threatening – alligator of all.

You can be sure Wall Street’s current view of health insurers is far more troubling to industry executives than the scrutiny the companies are now getting from lawmakers, regulators, class-action attorneys, the media and their own customers. That’s because as insurers’ stock prices decline, so does the executives’ personal net worth: The lion’s share of their compensation is paid in the form of stock options and grants. 

Overall, 2024 was a very good year for investors. As The Washington Post reported last week, the stock market soared “despite Americans’ widespread discontent with the economy…” The Post noted that the S&P 500 and Nasdaq composite index rose to record highs, as did the Dow Jones Industrial Average. 

But for individuals and institutions that owned stock in any of the seven New York Stock Exchange health insurance conglomerates, 2024 was a very bad year. In fact, in all my years in the industry and as an industry observer, I have never seen so much market capitalization – more than a hundred billion dollars – vanish in a single year. (CVS/Aetna alone lost approximately $47.6 billion in market cap last year.)

Consider this:

• Shares of Humana, where I used to work and which gets most of its revenues from the Medicare Advantage program, plummeted 45.89% in 2024.

• Shares of CVS, which owns Aetna and the big pharmacy benefit manager Caremark, and which is also a big player in the Medicare Advantage business, dropped 44.89%.

• Shares of Elevance, the company previously known as Anthem that owns more than a dozen of the country’s biggest Blue Cross plans, fell 21.92%.

• Shares of Centene and Molina, which get almost all their revenue from the government’s Medicare and Medicaid programs, declined 21.15% and 21.66% respectively. 

• Share’s of Cigna, where I also used to work and which owns and operates one of the country’s big three PBMs (Express Scripts), fell 9.49%.

Meanwhile, the Dow ended 2024 up 12.8%, while the S&P 500 gained 24%. And the Nasdaq ended the year up a whopping 30.77%.

2024: Big Insurers’ Share Prices Compared to S&P 500; Dow Jones Industrial Average and Nasdaq

The company that fared the least worst was UnitedHealth Group; it’s shares were down 4.74% for the year. UnitedHealth’s stock price declined sharply last January when the company had to acknowledge to investors that it had paid more claims during the last three months of 2023 than Wall Street had expected, but it recovered in subsequent months and reached a high of $630.73 on November 11. But over the following seven weeks, UnitedHealth’s shares dropped 20%.

Clearly, investors have become concerned that the days of getting handsome returns on their investments in these companies might be over as both Republicans and Democrats in Congress and state legislatures – as well as federal and state regulators and attorneys general – have taken aim at insurers’ Medicare Advantage and PBM business practices, which we at HEALTH CARE un-covered have reported over the past two years. And there is no indication that President-elect Trump will let up on the scrutiny.

We will see next week, when UnitedHealth, the biggest of the investor-owned insurers, announces its fourth quarter and full-year 2024 earnings, if Wall Street thinks the industry can turn the ship around – or decides its likely a Titanic. 

Of the seven NYSE-listed insurers, UnitedHealth is always the first to report quarterly earnings. Investors will be looking for evidence that the company has figured out how to return to profitable growth – and, specifically, if it pulled enough levers during the final quarter of 2024 to reduce the percentage of revenue it paid out in medical claims. (Health insurers consider it a loss when they pay a claim, hence the term medical loss ratio.) Patients often suffer physically, mentally and financially when insurers pull those levers – by cranking up the use of prior authorization, denying claims and making health plan enrollees pay more out of their own pockets before their coverage kicks in – but investors profit when they do all of those things.

UnitedHealth is expected to publish its latest earnings news release on its website around 6 a.m. next Thursday, January 16. Then at 8:45 a.m. EST, UnitedHealth CEO Andrew Witty and other company executives will host a call with Wall Street financial analysts to provide additional information and answer analysts’ questions for a few minutes. 

If you’ve never listened in on an insurer’s call with analysts, you should listen to this one. I expect it will be like any other in some respects but also entirely different because it will be the first time some of the company’s top executives will have talked in a public forum since the murder on December 4 of UnitedHealthcare chief executive Brian Thompson. Thompson and Witty were in New York that day to brief investors and analysts in person about the company’s plans and prospects for profitable growth in 2025 and beyond. 

As someone who used to work closely with Cigna’s investor relations team in advance of these quarterly earnings calls, I can assure you that they are always highly scripted. The executives who have speaking roles read from remarks written by the IR team and vetted by the company’s lawyers and PR people. The result is language laden with industry jargon and often incomprehensible to a lay person. Still, you’ll get a sense of what the executives choose to emphasize – and what they go to great lengths to obscure – and what additional information the analysts, who work for big investment banks, will want to know and what they care about. 

For next Thursday’s call, expect Witty to offer scripted but, I’m sure, heartfelt remembrances of Thompson, who led the division that operates the company’s Medicare Advantage, Medicaid, employer-sponsored, group and individual health insurance plans. But also expect Witty and other executives to ultimately focus on actions the company has and will continue to take to “manage” medical expenses going forward. Since there likely will be more people listening in on this call than usual, I expect the executives – unlike in previous calls – to talk a bit about how they truly care for the health and well-being of their customers. But what analysts and investors will care most about is the “guidance” the executives provide about expected profitability — specifically, earnings per share — this year. 

How investors react to what they hear on the call and read in the news release will become clear almost immediately when the NYSE opens for business at 9:30. If Witty et al can persuade investors and analysts that they’ve righted the ship and can fight off all the other alligators, the stock price will climb. If the executives fail to pull that off, the value of UnitedHealth’s shares — and most likely the shares of the other six companies — will tumble. 

Note: UnitedHealth’s call with analysts will be webcast on the company’s investor relations page at www.unitedhealthgroup.com. The company says a replay of the call will be available through January 30 on the website.