UnitedHealth Group (tkr: UNH) is the largest health insurer in the United States, covering 50 million lives across a diverse membership base. The company has leading market positions in all private and public health insurance segments, including Medicare and Medicaid as well as employer-based coverage and military service members. Its size gives it price negotiation power with providers, the ability to create or buy provider networks and spread its costs over a large population. UnitedHealth Group has consistently outperformed its peers and successfully navigated the upheaval in the insurance markets following the Affordable Care Act and the current attempts to repeal it. UNH is also operating businesses in South America, where it owns a large health insurer in Brazil and recently entered into an agreement to acquire Banmedica, a vertically-integrated health services company based in Santiago, Chile with 890,000 covered lives, clinics and five hospitals.

In particular, we believe the company’s rapidly-expanding Optum division truly sets it apart from other insurers. Optum Health Services operates three business segments: OptumHealth, population health management and health care delivery; OptumInsight, which provides health information, technology, services and consulting to participants in the health care industry; and OptumRx, UNH’s pharmacy benefits manager, which is on track to fill over 1.2 billion prescriptions this year. Optum serves 124 million individuals (nearly 40% of the US population) and four out of five major US hospitals. Optum also has a network of more than 67,000 pharmacies. In the last two years, OptumHealth has made a major push into the acquisition of facilities such as urgent care centers and outpatient surgicenters. Additionally, Optum recently announced that it would acquire DaVita Medical group, which serves 1.7 million patients per year in 300 medical clinics and urgent care centers. The continued expansion into direct provision of care allows UNH to better steer patients to the most appropriate level of care, with the goal of saving money for everyone while still ensuring that people get the services they need. Optum has been a major growth driver for UNH over the past several years. The integration of Optum’s services with the health insurance business represents an evolving model of healthcare and UNH has been ahead of this curve.

UnitedHealth Group is a core holding in our healthcare sector. We believe it is positioned for further growth with its successful Optum division, and that it will perform well regardless of any legislative changes we might see down the road.

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