UNH to Kick Off MCOs 1Q Earnings on April 15th: UNH will be the first MCO to report 1Q21 earnings results, setting the tone for the group. Given the updates provided by several of the MCOs in early March and our recent hospital surveys, we broadly expect the group to meet or beat our 1Q21 EPS estimates.

We Expect Solid Results: The magnitude of earnings beats for MCOs is traditionally highest in 1Q but tapers off as the year progresses. This trend is driven by seasonality in some of the key business lines and more benefit from prior year development in 1H than in 2H. Sometimes MCOs limit upside by reinvesting their 2H outperformance by accelerating investment spending or increasing reserve accruals, etc. Several of the MCOs presented at investor conferences in early March and indicated that utilization trends were in-line with or better than expectations. Specifically, HUM continues to expect depressed utilization for Q1 and part of Q2. The declines in utilization HUM saw in Jan (20%) and Feb (15-16%) were said to be in-line with its expectations. Anthem indicated that entering 2021, it forecast that 1Q21 utilization would be well above baseline. While Jan played out as expected, the utilization decline from Jan to Feb was steeper than expected, and continued in to March. While it is still expected to be above baseline, 1Q21 (as of early March) was playing out better than ANTM expected. UNH indicated that COVID-19 incidence for Jan and Feb ran higher than it would have expected meaning COVID-19 costs were higher than UNH anticipated; however, more than offsetting this impact was more care deferral than the company would have expected during those two months. This likely means that 1H21/2H21 earnings mix will be more balanced (50%/50%), as opposed to the normal 48%/52% (which UNH expected for 2021). By line of business, UNH has seen Commercial be close to baseline, Medicare a little below baseline, and Medicaid a little further below baseline than Medicare. Cigna indicated that new COVID-19 case counts and hospitalizations declined quite a bit after its peak in the Dec/Jan time frame with non-COVID utilization continuing to be an offsetting factor. CI now expects Q1 EPS to be toward the top half of the 20-22% FY21 EPS range it previously anticipated.