Insurance Weekly Notes: MetLife, UnitedHealth

In our weekly insurance note for the week ended January 16, we take a look at how UnitedHealth (NYSE:UNH) is pushing for more innovation and research in its Optum division, its fastest growing business. Optum offers health care services such as pharmacy benefit management, financial management, software and information products and consulting services. We also review the latest developments related to MetLife’s (NYSE:MET) designation as a non-bank Systemically Important Financial Institution (SIFI).

UnitedHealth’s Push For Innovation In Optum

This week UnitedHealth (NYSE:UNH) announced the expansion of Optum Labs, a collaborative and innovation research center jointly started by the company’s Optum division and the Mayo Clinic. The company announced the addition of five new partners, namely The Brown University School of Public Health, Johns Hopkins Bloomberg School of Public Health, MIT Sloan School of Management, Novartis Pharmaceuticals Corporation and ResMed. ^[1] This takes the number of such collaborators to over 20, which already boasts partners such as the Harvard Medical School Department of Health Care Policy, the Medica Research Institute, Merck (NYSE: MRK) and the University of Maryland, Baltimore.

With Optum Labs, the company aims to use innovation to improve the quality and value of patient care through the use of technology, information databases, scientific expertise and knowledge tools. With the addition of these partners, management expects new areas of health care research to be probed.

We have a price estimate of $89 for UNH’s stock, valuing the company at approximately $85 billion. In 2014 Optum has been a significant contributor to the company’s growth. The company is slated to report its fourth quarter and full year 2014 earnings on Wednesday, January 21. ((Q4 2014 UnitedHealth Earnings Conference Call, Investor Relations))

See Full Analysis For UnitedHealth Group Here

MetLife Sues FSOC

Last month, MetLife was given a final designation as a non-bank SIFI by the Financial Stability and Oversight Council (FSOC) after being primarily designated in September 2014. FSOC’s assessment took into account the fact that MetLife is a large financial company, with assets that amounted to more than $900 billion at the end of September 2014, with more than 85% of its assets related to “activities that are financial in nature.” ^[2] The company, which has from the very beginning opposed the rationale behind the decision, announced this week that it will file a suit in a federal court to get the FSOC’s decision overturned. ^[3]

MetLife’s stock has seen a steep decline from around $55 in the middle of December since it was designated as a non-bank SIFI, which will place the company under the supervision of the Federal Reserve and impose greater regulatory scrutiny and stricter requirements pertaining to capital and public disclosures. We have a price estimate of $59 for MetLife’s stock, valuing the company at about $67 billion. During the first nine months of 2014, the company’s revenues grew by about 6% to over $35 billion. ^[4] We will be covering the final quarter and full year earnings for 2014 that the company is slated to report on February 12. ^[5]

See our Complete Analysis of MetLife here

1. Optum Labs Research Collaborative Strengthens Collective Resource Base Through Addition of Five Leading Organizations, UnitedHealth Press Release [↩]
2. BASIS FOR THE FINANCIAL STABILITY OVERSIGHT COUNCIL’S FINAL DETERMINATION REGARDING METLIFE, INC., U.S. Department of the Treasury [↩]
3. SEC-8K Filing, Jan 13, 2015 [↩]
4. SEC 10-Q Filing [↩]
5. MetLife Q4 2014 Earnings Conference Call, Investor Relations [↩]