Health insurers love to talk about profit margins. But return on equity — the metric investors actually use—reveals an industry generating outsized returns.
When UnitedHealth Group reported its first-quarter 2026 results, it disclosed something that didn’t make many headlines: an annualized return on equity of 26.2%.
That number — not the profit or operating margin — is what Wall Street uses to evaluate whether a business is making good use of the money investors have put into it. And by that measure, UnitedHealth wasn’t just profitable, it was posting returns that outpace the broader S&P 500, dwarf most of its sector peers, and rival industries that Americans actually regard as highly lucrative.
So why do we keep hearing about margins?
Because margins are the health insurance industry’s favorite misdirection. And understanding the difference between the two figures is essential to understanding why the health insurance business is far more profitable — and far more extractive — than its lobbyists want you to know.
What Margin Actually Measures
Profit margin measures how many cents of profit a company keeps for every dollar of revenue that flows through it. For a health insurer, revenue is primarily premiums and fees — the massive river of money that employers, individuals, and government programs pour in every month to pay for coverage.
That river is enormous. In 2025, UnitedHealth took in $447.6 billion in revenue — nearly half a trillion dollars. A 5% margin on $447.6 billion is still a lot of profit. But when industry defenders cite the 5% figure, they’re counting on you to hear “five cents on the dollar” and think health insurers are not all that profitable.
(Note: In its first quarter 2026 earnings press release, the company reported that in the first quarter of 2026, its insurance division, UnitedHealthcare, had an operating margin of 6.6% and that Optum, the division that operates a huge PBM and hundreds of physician practices and other clinical operations across the country, had an operating margin of 5.1%. The press release didn’t even mention return on equity. You have to look at the company’s 10Q filing with the SEC to find the 26.2% ROE disclosure.)
I know this tactic well because I used it myself. During my nearly sixteen years at Cigna, where I was vice president of corporate communications, one of my standard moves was to cite the most recent margin figure when talking to journalists or writing talking points for our Washington lobbyists to use with members of Congress and their staff. It was technically accurate yet deeply misleading — exactly the combination that makes for effective spin. The goal was to create the impression that Cigna was a low-profit business barely keeping the lights on, when the return on equity told an entirely different story. I never brought up ROE and can’t recall a reporter asking about it.
What Return on Equity Actually Measures
Return on equity — ROE — measures how much profit a company generates relative to the money its shareholders have invested. It is essentially a report card on management’s ability to turn the money shareholders have invested into earnings. Investors and analysts use it to evaluate whether a business is creating or destroying value.
By this measure, UnitedHealth’s performance is striking:
- Q1 2026: 26.2% annualized ROE
- Full-year 2023: 27.0% ROE
- Full-year 2022: 27.2% ROE
Even in 2025 — the year the Medicare Advantage cost crisis hammered earnings across the industry — UnitedHealth’s full-year ROE came in at 12.8%, which is still above the median for health care support services companies (roughly 9.9%, per the Stern NYU January 2026 sector database).
To put 26–27% in context: the S&P 500 long-run average ROE runs in the 14–18% range. The general and broader insurance sector average is around 19%. The health care support services sector average — the category that most directly captures managed care companies — sits at just under 10%. UnitedHealth, in its normal operating years, is generating returns nearly three times that sector median, making it one of the most capital-efficient, high-return enterprises in American corporate life.
How a Relatively Small Margin Becomes a Massive Return
Health insurers operate with enormous revenue bases relative to their equity. When a company takes in close to half a trillion dollars in revenue but only has around $100 billion in shareholders’ equity on its balance sheet, even a modest net margin generates a big return on the invested capital.
In the insurer’s case, the “borrowed” capital isn’t debt in the traditional sense — it’s the float. Premiums come in at the beginning of the month. Claims go out throughout the month and into the next. That gap — the time between collection and payment — allows insurers to invest billions in securities, real estate and other holdings, earning investment income on money that technically belongs to the people whose claims haven’t been paid yet. UnitedHealth consistently earns more than $1 billion in investment income every quarter. It made $1.1 billion on its investments in the first quarter of this year and $1.0 billion in the same quarter last year. In 2024, when the company made $34.4 billion in earnings from its operations, its investment income totaled $5.2 billion.
This means that the company’s business model compounds the ROE advantage at every level: high premium volume, leveraged equity base, investment float.
UnitedHealth’s ROE advantage is even clearer when you look across the sector. Humana — which has been savaged by Medicare Advantage losses and is now posting a last-twelve-months ROE of roughly 6.8% — shows what happens when the underlying business goes wrong. Elevance and Cigna, facing similar MA cost pressure through 2024 and 2025, have also seen their returns compress. (In a move that likely will boost ROE, Cigna last year sold all of its Medicare Advantage business.)
But here’s what’s important to understand about those compressed numbers: Not a single major insurer posted an actual loss for the full year 2024. As one observer noted, the investor panic of 2025 was triggered not by losses but by smaller profits than expected. Elevance’s stock dropped 20% in two days when the company announced it expected to earn $5.4 billion instead of $6.4 billion. In any other industry, $5.4 billion in annual profit would not be considered a crisis.
UnitedHealth’s annualized 2026 ROE of 26.2% — reported even as the company is under federal criminal investigation — suggests the underlying earnings machine remains intact beneath the turbulence.
What the Sector Data Actually Shows
The NYU Stern sector database, updated as of January 2026 using data across thousands of U.S. companies, puts the managed care picture in relief:
- Health care support services: 9.89% median ROE
- General insurance: 19.07%
- Property and casualty insurance: 18.71%
- Drugs/pharmaceuticals: 24.04%
- Financial services (non-bank/non-insurance): 28.82%
UnitedHealth’s historical 27% ROE places it at or near the top of all of these categories — not just its own sector, but across the American corporate economy (with the exception of some of the biggest tech companies, whose ROEs are consistently at the very top). The company that processes your prior authorization denial is generating returns that rival the most profitable financial services firms in the country and even has a greater return than most pharmaceutical companies.
A December 2025 analysis by Milliman, an actuarial firm, made explicit what the ROE data implies. Examining the spread between for-profit and nonprofit health insurers, the analysts found that for-profit companies hold less capital and surplus relative to their premium volume — and that this “additional leverage leads to an even higher return on equity than their nonprofit and not-for-profit counterparts.”
What that means is that for-profit insurers have engineered their balance sheets to maximize the return on every dollar of equity, using premium float and leverage, in ways that nonprofit plans structurally cannot replicate.
Why This Matters for Policymakers
The margin talking point is not merely misleading — it is strategically deployed to block reform.
When Congress considers capping insurer profits, or lowering Medicare Advantage overpayments, or modifying and strengthening the Affordable Care Act’s medical loss ratio requirements, the industry’s first move is to present itself as a low-margin business operating on thin ice.
The margin talking point says: don’t look at us, we’re barely getting by. The ROE data gives the lie to this. A company earning 26% on equity is not on thin ice. It is extracting premium value from the health care system at a rate that most American industries can only envy — and doing so while denying claims, managing risk scores, and fighting every form of regulatory oversight.
HENRY KOTULA 