UnitedHealth Group is a health and well-being company. Co. provides a range of products and services through two platforms: UnitedHealthcare, which provides health care coverage and benefits services; and Optum, which provides information and technology-enabled health services. Co. has four reportable segments across its two business platforms, UnitedHealthcare and Optum: UnitedHealthcare, which includes UnitedHealthcare Employer & Individual, UnitedHealthcare Medicare & Retirement, UnitedHealthcare Community & State and UnitedHealthcare International; OptumHealth; OptumInsight; and OptumRx.
UNH’s moat as a managed care company is evidenced by its sizable membership base and solid provider network. The firm’s return on investment capital (ROIC) is further evidence that they are one of the best performing managed care companies in this space.
UnitedHealth Group shares are trading at extended valuations. The shares appear fully valued. The company is no secret especially after being added to the Dow a few years ago. Operational bright spots are claim expenses are developing favorably, medical trend are at the low end of the expected range, and per-member, per-month yields are solid. Public exchange enrollment is running ahead of plan. Recently purchased Optum divisions quarterly revenues should approach the $14 billion mark, with more than $8 billion coming from the Rx branch that focuses on pharmacy benefit management.
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Competencies in diversified health benefits market segment
National scale helping leverage competencies and brand
Strong presence in high margin health services business
Significant level of indebtedness affecting flexibility for expansion
Litigations likely to impact the financial soundness and brand image of the group
Health Care Reform presents new challenges
Negative publicity likely to affect private health insurance business
Increasing competition likely to erode the market share and profitability of the group
Inclusion of uninsured population to drive membership base growth
Favorable trends towards low cost generic drugs uptake could help save costs
Demand for employee sponsored programs likely to increase market share
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The information presented in this report has been obtained from sources believed to be reliable, but accuracy and completeness cannot be guranteed. All material is subject to change without notice. The views and opinions expressed are those of Focused Stock Research and/or WALT ST Investment Management, Ltd. and in no way reflect the views and opinions of Investment Consultants nor their Broker Dealers.