October 26, 2018

UNH – Market expectations are for declining Uniform ROA, but management is confident about growth, cost reductions, and Medicare Advantage


  • UnitedHealth Group Incorporated (UNH:USA)currently trades near corporate averages relative to UAFRS-based (Uniform) Earnings, with a 20.4x Uniform P/E. At these levels, the market has bearish expectations for the firm, but management is confident about their growth in South America, Medicare Advantage offerings, and reduction of costs
  • Specifically, management is confident that their integration of medical and pharmacy information will simplify administration, improve drug selection, and reduce overall costs. Additionally, they are confident that their return on equity for Q3 2018 was 26%, and that they have the opportunity to transform the pharmacy-care services to positively impact people‚Äôs lives. Moreover, they are confident that PBMs play an important role in providing discipline to drug price increases across the market. Furthermore, they are confident that they saw strong organic growth in South America, and that they are effectively managing medical cost trends. In addition, they are confident that they saw strong growth in their Medicare Advantage offerings in Q3 2018, and that they provide personalized navigation and new benefits without raising costs for the members of the program. However, they are also confident that their medical care ratio was lower than last year, primarily due to the impact of health insurance tax
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