Great. Welcome back to the Barclays Global Healthcare Conference. My name is Andrew Mok. I'm the Facilities and Managed Care Analyst here at Barclays, and we're pleased to welcome back UnitedHealthcare to the conference. Welcome. Thank you. With me on stage, I have Wayne DeVeydt, CFO, Patrick Conway, CEO of Optum, Robert Hunter, CEO of Government Programs, and Julie Murphy, Vice President of Investor Relations. Julie, why don't I kick it to you for opening comments? Great. Thank you. This presentation contains forward-looking statements under U.S. federal securities laws. These statements are subject to risks and uncertainties that could cause actual results to differ materially from historical experience or our expectations. Description of these, some of these risks and uncertainties can be found in our reports filed with the Securities and Exchange Commission from time to time, including cautionary statements included in our annual report on Form 10-K for the year 2024. Great. To kick things off, Wayne, as you look at the first few months of the year, how is performance tracking relative to expectations across your major business lines? Maybe to start off and just anchor everybody in the audience as a reminder, we guided for a greater than 8.5% growth for the year. I think it's fair to say our guidance was both prudent and hopefully conservative. W e took a view that we would grow across all of our lines of business this year. We're two months in. It's early, as you know, and two months isn't a trend necessarily, but I would say that we're encouraged with our strategy, we're encouraged with our pricing and product design. I would say things are lining up very nicely with the expectations we laid out in our January call around full year outlook, at this stage. Again, early in the year, but very encouraged across the board. Great. Well, let's dig into the Medicare segment. I think medical cost trend ran around 7.5% in 2025, and your 2026 bids and guidance assume an acceleration to roughly 10%. Can you help us understand what's driving that increase from 7.5%- 10%? Yeah. Do you want me to jump in? Yeah. Yeah. Thanks for the question, Andrew. Maybe just to ground on just one of the words you used, you talked about an acceleration of trend, maybe I'll just break into a couple components for you. You know, we completed 2025, and we talked about more in that kinda mid 7% range, and then there's kind of a roughly 250 basis point expansion of that trend to get to what we have projected for 2026. Importantly, inside of that number for 2026, the core utilization, what we call residual trend, we're assuming constant. We're not assuming acceleration, not assuming deceleration. A constant assumption there. When you think about the bridge to where we landed for 2026, it's really simplistically about two-thirds known rate elements. Think the physician fee schedule is a great example of it, right? The return of the doc fix for 2026 after not having it in 2025 creates a bit of a meaningful trend turnaround as you step into the year. Maybe in, inpatient rates with where those ultimately came in is another good example. The other third we've talked about is more of an accommodation for some of the unknown risk elements. Obviously those unknown risk elements come to fruition in different ways. One of them that we had in our mind certainly was around tariffs. You know, more to play out there. We're two months into the year, so I'm not gonna predict what's gonna happen on that front, but I feel good about the accommodation we have there on that unknown piece. I think to maybe just play off what Wayne said we took a very prudently conservative approach when we thought about pricing for 2026, when we thought about the assumptions for 2026, really early in the year, two months in. I feel good about where things sit right now and remain appropriately cautious as we look at what's happening, what's emerging, and we're using all of our tools to make sure we got our eye on everything. Great. On the 2027 Medicare Advance Notice, there's been a lot of discussion on the rebasing of the risk model, which places greater coefficient weights on skin substitutes at the expense of more chronic conditions. That seems like a fairly obvious flaw in methodology. Is that argument, resonating with the current administration? How likely do you think it is that CMS revisits the calibration here, potentially rerunning that regression after normalizing for those factors? Yeah. The good thing is we've submitted our comment letter. That comment letter is out there, and we really step through all the key elements that we focused on in our overall response. The one that you're talking about, the rebaselining, was certainly one of them. I don't necessarily disagree with the premise. I think that, one of the challenges when you use one year of data to calibrate a model is there's gonna be anomalies in any given year, right? In 2024 in particular, that anomaly, most pronounced was around wound care and some of the skin substitute elements. What you would see in our comment letter is we actually gave a nice little graphic of how that distribution plays out, and you can see how we're viewing that. It does show, obviously, skin sub is a bit of an outlier. What we wrote to, because I think there are challenges, right? This is a complicated recalibrating the model is not an easy task. I don't want to make it sound like it's something easy for CMS to do. It's a challenging process. Whether or not they could actually fully recalibrate and do something different in this timeframe, I don't know, I'd leave that to them, but that's a tall order. What we wrote to is, do you consider a deferral so t hat you can rerun it and take the time to, take a little bit of a modified approach, or do you phase it in, right? Similar to other risk model changes in the past, do you do more of a phase in to kind of mute the impact and maybe give a little bit of time to then do some of that recalibration work? I think, any of those solutions we've proposed to them are as things that we're supportive of. Ultimately we wanna get it right? We wanna get it right. They wanna get it right and move the industry forward in the right spot. Have they been receptive? Is the dialogue constructive, do you think? You know, during the comment period, right, they're somewhat limited on what they can say. I'm certainly not looking to put words in their mouth, because there are very clear rules of the road of what you can do in that engagement. We have had opportunity to meet with them, right? We've had opportunity to meet with them and just like we do with kind of in all comment periods, really ground our perspective in data and just bring the data forward and kinda let the data speak. We've had the opportunity to do it, which I am incredibly grateful for, to just bring our data to the table and engage in that dialogue. What they do with it obviously is their discretion, but we'll continue to bring that forward as we identify new things, learn new things, and be as supportive as we can in that dialogue that we're having. Great. Another point you raised in your comment letter was that AI technology and revenue cycle tools are structurally increasing productivity and revenue yield across the healthcare system. These are relatively new dynamics that CMS may not have had to consider in the past. From your perspective, what specifically needs to change in how the administration builds its forward forecasts so that technology-driven effects are reflected accurately rather than mistaken for temporary noise or coding behavior? Yeah. Yep. I mean, we wrote to it that way because that is something we've seen, and we've talked about it, right? We've talked about it on our earnings call, some of the emergence of that trend acceleration in 2025 obviously that had an impact on us that we then had to consider when we thought about pricing and the design for 2026 and beyond. I think what we've really grounded for CMS and the folks that we've talked to when we've had these discussions is about the importance of again, really grounding the utilization, the unit cost, and the forward-looking assumptions in just the reality of what we're seeing in healthcare costs today, right? We're, you know, I think specifically we're not asking for an accommodation in 2026 and 2027 assumed trends in the growth rate of acceleration. We're not. But we also don't believe that a significant deceleration is probably the right spot to be, either, and certainly not something that we're seeing in the provider behavior, the utilization of services, the intensity of services. For us, it's really about, when we looked at what's happening in physician utilization or inpatient utilization, we're looking more for consistency, right? Consistency from what you've seen in 2024, 2025, and how that's projected forward to 2026 and 2027. The same thing really applies around the rate element. You know, more about consistency than assuming an acceleration or deceleration. I think that would get the industry and the overall funding level to a spot where the rate does kinda more appropriately reflect the actual cost of healthcare today and the importance of, you know, benefit sustainability and other things for the consumers that rely on MA. Great. Let's move on to some of the other business lines. In Medicaid, I think you reiterated expectations for margins to be down about 100-170 basis points. Can you first give us a sense for how Medicaid medical cost trend developed in the second half of 2025, and what level of trend you're assuming for 2026? Related to that, can you provide an update on any conversations around 41 and 71? Yeah Rate negotiations? Maybe, yeah, let me first frame up kind of our outlook and some of the key dependencies. Then I'll have Robert comment a little bit more on trend and what we're seeing. The one thing to keep in mind is that we know that generally speaking, states are a bit slower in responding to trend in the beginning periods in time. Part of our goal is to recognize that some of these rate increases are coming in on July 1, right? Relative to our expectations of 6%-7% kind of rate increases, we're optimistic based on the early negotiations and early feedback. As you know, until you get to July 1, you don't really know where this plane is going to land. I think that's an important part. With that in mind, it was important for us as we finished out 2025 to take a conservative posture on trend, because again, until we had more clarity around the rate environment, it would be inappropriate and obviously not prudent to lean in. I think it's fair to say that our assumptions at year-end were conservative, and we're seeing some of that play out early. Nonetheless, this is really about rate and where we're gonna go. Bobby, anything you wanna add? Yeah. No, super well said. I would just say that from a pure trend perspective, I mean, we're assuming pretty good consistency. You know, between 2025 and 2026. In 2025 for us, trend was above where the rates came in, and we're assuming the same thing is going to exist in 2026. We're doing everything we can to address affordability, to partner with states. We've got some kinda known hot items, I think for Medicaid broadly around behavioral and specialty pharmacy and some of the home care services that we're partnering with states to try to find solutions and act on those as quickly as possible. There does still continue to be a disconnect between the actual trend and the rates that we're pursuing. Great. Turning to the individual ACA exchanges, I know it's a small business for you, but it is a dynamic situation, so I did wanna touch on it. You previously indicated exchange membership could be down more than 500,000 for the year. As we approach mid-March, can you share how effectuations are tracking so far, and how much of that expected decline you anticipate to see in the first quarter? Yeah. 500,000 is still kind of the right zone for us. We're not moving off of that number. I would say as you pace through the first couple months, obviously what's happening is some of the grace period. You know, wear-off and disenrollment that comes from that. I would say with what we've seen the first couple months, I think that we're still tracking towards that realization of the 500,000. Think about roughly half of that Likely as a result of some of that kinda grace period, timeframe. Think kinda, end of March, beginning of April timeframe. Then the other half really plays out throughout SEP as just kinda more natural wear-off occurs of, the enrollment, and then with some of the SEP rule changes, less of a kinda pipeline to fill that gap. Great. Turning to Optum Health, I wanted to clarify some of the fourth quarter items and run rate. Optum Health underperformed guidance by, I think, roughly $600 million in the fourth quarter. You attributed that primarily to one-time items. Can you walk us through the key drivers of that shortfall and help us understand how much of the $600 million is truly one-time as we think about the right run rate looking ahead? Yeah. About 70% is one-time item. The other 30%, investments. Think value-based care investments, clinical investments, infrastructure investments to support value-based care, and those continue to run into this year, to be clear, as we make those investments for the long term. W e're confident in Optum Health, in the guidance we put out for this year and the growth in that guidance, as Wayne alluded to. We're also confident in the long-term trajectory of Optum Health, both in the value-based care platform, and the integrated nature of that platform. As a reminder, it's a diverse set of businesses. We also have services, ambulatory surgical centers, home health hospice, so a diverse platform that we're confident in the long-term growth. Right. You also booked a $620 million PDR for expected 2026 contract losses. Were those related to external third-party contracts or internal UHC contracts? Mechanically, should we consider that a tailwind for 2027? Yeah. I'll start, Wayne. Feel free to add in. External, and do think of it, you know, those contracts, we will either exit them or get the rate update we need for 2027, so that does provide that tailwind for 2027. Yeah. The way to think about it is, with the loss contract, in theory, there's an accounting benefit that comes through in 2026 'cause you're amortizing the PDR. We are carving that out, for our non-GAAP so that you can see we're not taking that benefit when we provide our guidance. Conceptually, that benefit becomes real and tangible in 2027. The way to look at it is, I think a question we get is, "are you really gonna be able to get rates where you need them on that big of a chunk of a loss reserve contract?" These contracts range from losing a - 2% margin up to, say, a 10% margin, 11% margin. There is a very large chunk that's very close on the J curve to where the profitability needs to be for us. We do think we'll recapture a substantial portion of that, meaning we're either going to get priced right, or we're gonna exit it. Ultimately, it does become a tailwind for 2027. Great. Sticking with Optum, after stripping out Optum Financial, which was running around, I think, 44% margins in 2025, the standalone Optum Health pro forma margins finished at around 1.5%. Could you outline the key building blocks of the margin bridge from current levels back to the 6%-8% long-term target? What underpins your confidence in that margin target without the higher margin Optum Financial business? Yeah. We are still confident in the long-term margin target. Let's break down the business. You've got integrated value-based care, where a couple things that are positive attributes to call out. One, you're at or above that target margin for the more mature cohorts of patients. You're also at or above that target margin at about 30% of geographies. That shows you we can get the performance to that level in the integrated value-based care. We've right-sized the risk platform, both in terms of geographies, arrangements, where we pulled back from PPOs, and as Wayne and I just talked about, also contractual changes. We were able to accomplish much of that in 2026, and then we'll move forward in 2027 and are in those negotiations right now with our various payer partners. That's sort of the integrated value-based care. The other attribute I'd call out within Optum Health, and these businesses service that integrated value-based care platform. You've got things like home health and hospice, double-digit margins, growing, performing well. Ambulatory surgical platform around 20% margins, growing, performing well. Within Optum Health, you've got a diverse set of businesses, including ones in a double-digit margin territory. You've also got payer employer services. As we've said, double-digit margins, growing, performing well. It's a diverse business that there's multiple pathways to get back to that target margin range. Andrew, the one thing I would help people anchor on is if you think about this year, we said we would improve margins by at least 30 basis points. That's our floor. We would, obviously, hopefully do better than that as we progress this year. That's carving out the loss contract reserve we talked about, which obviously next year is a dollar for dollar improvement in margins. The one thing we've highlighted is, a lot of these on the J curve are right at the point of an inflection where you'll start to see the positives. I think as Patrick said on our year-end call, we're not looking at basis points for 2027. We're looking at points of improvement in the margin in 2027, and this year is kind of that final year of lapping the investments, getting through the loss contract window, and then you'll really see the ramp-up happen in 2027 and 2028. Yeah. As Wayne said, the two, you know, the rate notice and where it lands is a big factor for 2027, which you heard from Bobby, and we agree. It's not reflective of the underlying cost trends, so we'll watch that closely, and our payer negotiations. We're confident in the progression over time, as Wayne said. Great. There's been a lot of moving pieces in Optum Insight over the last few years. Yeah. Taking a step back, can you help us understand the composition of that business today? Maybe bucket the earnings into core categories like SaaS, consulting, managed services, and financial, and then talk about how you'd rank order the investment priorities across those groups going forward. Yeah. You've got a payer-oriented business, where we work with about eight out of ten payers across the country, by the way, through things like authorizations, clinical programs, really supporting their back office through technology. That business is performing well, and as you put AI behind that business, it creates even more opportunity. You've got a provider-oriented business, think RCM, et cetera. Once again, a business with a strong base. We also work with about eight out of ten hospitals and health systems across the country in some way. Once again, you put AI behind that. Tangible example, there's a product called Crimson, which, when I used to work in health systems, I used 20 years ago. Still exists, still a big customer base. You put AI behind it's now Crimson AI. Actually, the savings, we put out a release on this, the impact, et cetera, with our customers is greater, and you're seeing greater sales. A tangible example of powering product by AI. The other one that we've talked about publicly is Optum Real. You know, real-time settlement of claims, really across payer and provider, partnering with UHC first, and now partnering with other payers and providers to settle that claim in real time so the payer knows what they're paying, the provider knows what they're paying, and by the way, the consumer knows their copay. Now bring in Optum Financial, which you may ask more about. Now Optum Financial can help settle that transaction. We're increasingly moving to AI products, software-driven products, that we're seeing a lot of momentum in the marketplace. Now, I will say, this will be a journey. If you're selling products now that's hitting 2027, 2028 and beyond. We're still developing a whole portfolio of products, investing about $1.5 billion into AI across the enterprise, this year. You know, very bullish about the long-term trajectory of Optum Insight and Optum Financial. Also wanna say, if you think about this year, it's an investment year really building up to that long-term growth. Great. Speaking of investments, I think you pointed to $1 billion of mostly AI-enabled cost efficiencies in 2026. Can you give us a sense for how much runway is left on these efforts, and how we should think about the impact beyond 2026, and specifically looking at, you know, what impact, you know, we should expect on the G&A ratio? We're in the very early innings, and I would literally put the AI journey as the bottom of the first inning at best. While we've taken out almost $1 billion in costs going into 2026 related to AI, we think that number actually incrementally grows going into 2027, and then incrementally grows as we move into 2028. Ultimately, the impact on the OCR is one to be determined and the questions about journey and pace. What I can tell you is our $1.5 billion we're investing this year is still not enough for where we wanna take this company in the next two years. Right. We've already started building the future pipeline of how can we accelerate that even more aggressively in 2026, and then going into 2027. Ultimately, the impact on the OCR should be significant. Again, we should be talking points, not basis points. I think this is an industry, as you know, that generally has moved in the basis points because of a top-line revenue. We're talking about moving it points because of real cost takeout, and real efficiency. I don't wanna commit to a number, but I would say ultimately that there are functions where 70%, 80%, 90% should be fully automated from start to finish. Just a point of reference though you might find interesting. We had probably our best January enrollment and call center experience that we've had in the company's history. We obviously used AI as a major component of it. In one single day, we answered over 3 million calls. We had over 45,000 of those happen simultaneously. The average speed of answer was 18 seconds. First call resolution was north of 90%. It's really unbelievable when you look at our history of what we've done and where we've been at. You know, candidly, the agents are smarter by the end of the day than they were at the beginning of the day, and they're not sick. Right. There's lessons we can learn, though, and we're taking those lessons for kind of round two as we go into 2027 and doubling down on those investments. I think you're gonna really start to see real value creation in terms of G&A takeout, and I think you're gonna see it really start to compound aggressively in 2027 and beyond. Yeah. Two just super brief additional examples. In RCM, as you use AI and technology, you bring more people out of the process, increases the margin profile. In the Rx space, and Wayne will speak to this, we onboard a record number of clients, incredibly satisfied, and actually now using it. T he vast majority of your transactions in RX can be solved AI plus digital, and actually it's a better consumer experience, and it's less costly. Great. Maybe the last few minutes here. Another item I wanted to touch on today was within Optum Rx. There's been several PBM reform items in the last few months, including legislation that enforces rebate pass-through in the commercial market. How do you expect these changes to impact the business over the next few years? Yeah, we were ahead of these in Optum Rx, so it will not impact the business. We had already announced 100% commercial rebate pass-through, rolling that across our contract base. We've already done cost-based reimbursement to remind people, for all drugs, all pharmacies, not a niche number of drugs. We had done already things in prior authorization and reauthorization changes, just removing friction. Our Optum Rx team has a ton of momentum. They've had record sales years for a number of years now, and what's resonating in the marketplace is the transparency we provide for clients, the clinical programs that drive affordability, and an integrated solution, including with UnitedHealthcare and other payers that we serve, where we integrate medical and pharmacy and do that well on behalf of they serve. We're winning in the payer and the employer market in Optum Rx and doing very well. Great. With greater clarity on the legislative environment, sounds like you're well into your investment cycle on the AI side. As you return to a more normalized capital deployment in the second half of the year, how should we think about the priorities across share repurchase, dividends, and M&A? Within that framework, are there any key strategic priorities you see within M&A? Maybe to bring it together, we said, we anticipate generating at least $18 billion of free cash flow this year. We will be maintaining and growing our dividend. Historical practice has been the case, and we've already got approval from our board to continue that practice, so you'll see that occur this year. That leaves us a decent amount of powder for debt paydown, buybacks, and M&A. Relative to debt paydown, though, we have committed that we would get our debt-to-capital closer to 40%. We fully expect to be there in the back half of this year, with just regular terms coming due in Q1 and Q2, and we're just paying it down. We will be actively in the buyback program again this year. While we have a decent amount of powder for M&A, I mean, candidly, based on the intrinsic value that we are currently trading at on a discount basis, there's probably no better acquisition than ourselves right now. You'll see us probably get more aggressive in that space if the market dislocation continues to exist. Last thing I would say is, look, we think that Optum Insight and Optum Health is a big part of the future of this company. We believe in the VBC model with high conviction, and we know we have to prove it to everybody in this room that it's there, and the margins are coming back, and we're confident we'll do that. I would say, fintech on the Optum Insight. We're gonna go all in on AI and fintech, and we think we can become an important part of the healthcare technology ecosystem over time. Great. Well, with that, we're out of time. Thank you so much for joining, and please enjoy the rest of the conference. Thank you. Thank you.