COMPANY DESCRIPTION

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.

 

ECONOMIC MOAT

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.

 

OUTLOOK

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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STRENGTHS

  • Competencies in diversified health benefits market segment

  • National scale helping leverage competencies and brand

  • Strong presence in high margin health services business 

WEAKNESSES

  • Significant level of indebtedness affecting flexibility for expansion

  • Litigations likely to impact the financial soundness and brand image of the group 

THREATS

  • 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 

OPPORTUNITIES

  • 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 

The above report is for information purposes only, and is not a solicitation or offer to buy or sell any securities. Past performance is no guarantee of future performance. Neither diversification nor asset allocation ensures a profit or guarantees against loss. Before investing, investors should consider their risk tolerance, investment objectives, time horizon, available capital, and charges and expenses.  

 

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.

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