US private health insurers have reaped the benefits of the pandemic. With lockdowns and fear of infection keeping Americans away from clinics, costly procedures like knee surgeries were postponed. As a result, leading health insurers in the country, including UnitedHealth, Cigna, Elevance Health (formerly known as Anthem), and Humana, have experienced record revenues and robust profits over the past three years.
Collectively, these four insurers made $35.6bn in profits on $753bn of revenues last year, leading to a rise in their shares. The S&P Managed Health Care Index reached an all-time high in October and remains 80% above its pandemic lows.
However, claims for surgeries and other medical procedures have started to increase again, signaling higher costs for insurers. Humana recently issued a warning about rising expenses, stating that its medical-loss ratio is expected to be at the upper end of its guidance range of 86.3% to 87.3% this year. A higher ratio means lower profits for the company.
UnitedHealth, as the sector leader, is best positioned among the four insurers to handle rising medical expenses. With an equity value of $432bn, UnitedHealth is more diversified than its peers. Its rapidly growing Optum unit, which offers a range of services from data analytics to pharmacy services, accounted for half of the group’s operating profits last year.
Despite analysts predicting double-digit growth in earnings for the next three years, UnitedHealth’s stock is trading below its three-year average at 18 times forward earnings. This presents an opportunity for patient investors to consider.
If you are a subscriber and would like to receive alerts when Lex articles are published, just click the button “Add to myFT,” which appears at the top of this page above the headline.
Denial of responsibility! VigourTimes is an automatic aggregator of Global media. In each content, the hyperlink to the primary source is specified. All trademarks belong to their rightful owners, and all materials to their authors. For any complaint, please reach us at – [email protected]. We will take necessary action within 24 hours.
