VALUATION HIGHLIGHTS

1. Optum (OptumHealth(Care Delivery), OptumInsight (Consulting), OptumRx (PBM)) constitutes 57% of the Trefis price estimate for UnitedHealth Group's stock.
2. United HealthCare (Employment & Individual, Medicare, Medicaid, International) constitutes 43% of the Trefis price estimate for UnitedHealth Group's stock.

WHAT HAS CHANGED?

UNH Stock Performance In Recent Years

The changes in UNH stock over the recent years has been far from consistent. Returns for the stock were 45% in 2021, 7% in 2022, 1% in 2023, and -2% in 2024.In comparison, returns for the S&P 500 have been 27% in 2021, -19% in 2022, 24% in 2023, and 23% in 2024 - indicating that UNH underperformed the S&P in 2023 and 2024.

Latest Earnings

UnitedHealth Group reported total revenue of $100.8 billion in Q4 2024, reflecting a 6.8% y-o-y growth. This increase was driven by higher sales in both UnitedHealth and Optum segments, which grew 4.7% and 9.4% (y-o-y), respectively. The operating margin stood at 8.2%. The company reported an adjusted EPS of $6.81 per share as compared to $6.16 in the prior year quarter.

Outlook for 2025

UnitedHealth Group expects its sales to be in the range of $450 billion to $455 billion in 2025, versus $400.3 billion in 2024. The company's adjusted earnings per share are expected to be in the range of $29.50 and $30.00.

POTENTIAL UPSIDE & DOWNSIDE TO TREFIS PRICE

Below are key drivers of UnitedHealth Group's value that present opportunities for upside or downside to the Trefis price estimate for the company's stock:

• Total U.S. Medicare Enrollments: UnitedHealth Group's Medicare & Retirement business is a significant source of value, according to Trefis estimates. This segment constitutes 21% of the Trefis price estimate. Medicare enrollments have hovered around 14-15 million over recent years. Considering a low population growth rate of <1%, Medicare is poised to remain the most vital contributor. Medicare Advantage is a privately managed alternative to the original Medicare, which the federal government governs. In the past few years, the market share of Medicare Advantage plans has been increasing, with UnitedHealth Group as the market leader. Strong market presence and diversified product portfolios have been drivers of this growth. We expect this growth to continue, backed by the aging population and the growing penetration of Medicare Advantage plans.
• UnitedHealthcare's Average Monthly Medicare Premiums: UnitedHealth has seen a gradual increase in its average monthly Medicare premiums from $532 in 2020 to $763 in 2024. This trend is expected to continue, and we estimate the figure to be north of $1,000 by the end of our review period. However, if the growth is slower and the average premium hovers around the $800 mark, there is a potential downside of 5% to the Trefis price estimate.
• Business Growth In OptumRx Division: Revenue from the OptumRx division has been increasing at an average growth rate of 12% between 2020 and 2024. By the end of the Trefis forecast period, we expect OptumRx to touch the $240 billion mark. If the division can post strong sales growth of over 15% annually, there will be a 5% upside to the Trefis price estimate.

BUSINESS SUMMARY

UnitedHealth Group ("UNH") is the largest health insurance company in the United States, with consolidated revenue of $400 billion in 2024. Through its UnitedHealthcare and Optum subsidiaries, the company provides health benefits and health services to its customers. In 2024, the total number of customers served by Optum Health was over 100 million.Its UnitedHealthcare insurance subsidiary operates in four primary divisions:

• UnitedHealthcare Employment and Individual (Private Insurance): Provides health benefit plans and services to national employers, corporations, small businesses, and individuals.
• UnitedHealthcare Community and State (Medicaid): Provides managed care services to state Medicaid programs, which serve economically disadvantaged or medically under-served individuals.
• UnitedHealthcare Medicare and Retirement (Medicare): Provides privately administered Medicare services to retirees as Medicare Advantage(Part C). It also provides prescription drug plans(Part D) as supplementary services.
• UnitedHealthcare International: Provides healthcare services to governments, corporates, and individuals in more than 150 countries.

The company's Optum subsidiary operates in three primary divisions:

• OptumHealth: Provides a range of specialized health and wellness services such as mental health treatment, substance abuse treatment, and individual counseling.
• OptumInsight: The consulting division of United Health Group provides data and analytics services, healthcare expertise, and technology to clients from the healthcare industry.
• OptumRx: A pharmacy benefits management business that processes prescription drugs for its customers through network pharmacies and helps them to manage costs.