An Unwavering Approach at UnitedHealth Group

In the company's third-quarter earnings call on Thursday, UnitedHealth Group (NYSE: UNH  ) President and CEO Stephen Hemsley noted that the company continued to maintain its disciplined pricing approach "across the commercial benefits market even at the cost of membership growth."

I can definitely respect his approach in this instance, and I believe it is in the company's best interests in the long run. Enrollment is down slightly since June, but with the bulk of the decreased enrollment numbers coming from the company's risk-based business, shareholders should not be overly concerned.

This disciplined pricing approach has not only enabled the company to improve its operating margin by 110 basis points on a year-over-year basis, but it has also brought about a 160-basis-point improvement in the insurer's medical care ratio compared to its year-ago quarter.

Overall, business continues strong, with diluted third-quarter EPS increasing 19% on a 4% rise in total revenue. The lackluster performance of UnitedHealth's stock also gave the company a compelling reason to repurchase $2 billion of its common stock during the quarter. It also announced intentions to buy back an additional $7 billion by the end of UnitedHealth's fiscal year in 2008.

As for UnitedHealth's competition, results have been mixed thus far in 2007. Aetna (NYSE: AET  ) is up an impressive 23% year to date, and Cigna (NYSE: CI  ) is up 16.0% over the same time. WellPoint (NYSE: WLP  ) , on the other hand, has lagged the market, with its current stock price about the same as it was at the beginning of the year.

For investors with the patience to ride out the current lull in UnitedHealth's stock price, better days should be ahead, thanks to the approach the company's management team has implemented.

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