Why This Reliable Health Insurance Stock Keeps Trending Upward

Revenue and earnings for UnitedHealth Group (UNH 1.45%) continued to beat guidance in its latest earnings report. And despite already serving 100 million customers, the health insurer has room to grow. In this episode of "The Rank" on Motley Fool Live, recorded on April 11, Fool.com contributors Brian Withers, Matt Frankel, and Jason Hall discuss what lies ahead for its stock.

Matt Frankel: Yes. UnitedHealth Group, it's one of the biggest health insurance providers in the world. They operate their business through two main segments. If you're not familiar, because I know Jason mentioned at the beginning of the show that this one that he was most surprised about, and I'm sure a lot of people are in that same boat.

Jason Hall: Not that I was most surprised about, but I think the average person looking at that list would have been the most surprised about.

Frankel: Sure. They're the one that's not like all out growth story that you know that well. They have full range of health benefits under their UnitedHealthcare brand. They do employee and employer in individual coverage, Medicare coverage, community coverage for economically disadvantaged people. A lot of programs like that, and global coverage. They provide a lot of health insurance for people living outside the United States. Between all those things, they have roughly 50 million total members. Then they have their Optum subsidiary. That is really, in my opinion, the reason that it's done so well over the past I think in the main slide, it was about 17, 18 years since it's been there. They have pharmacy services, they have a big analytics business, their customers are hospitals, physicians, and health plans.

Hall: A hundred million.

Frankel: A hundred million customers. I was getting there. [laughs] They provided a healthcare directly through local providers to 100 million different customers. As you can see there, they've done really well over the past year or so, handily beaten the market. It's nice that this was not a pandemic play, this is not one that pulled back in the past few months. Their revenue and earnings continue to beat guidance. Optum continues to do fantastically well, they're about to make a big acquisition. They have big dividends, repurchasing a lot of stock. There's not a whole lot not to like about this. This is the value stock of the bunch, which is maybe why I like it so much. I see Brian and Jason both smiling about that. But Jason, what do you think?

Hall: I don't know if I'd say value, but it's definitely a megatrend stock because you think about the aging of the U.S. population, the extended life of that aging population. Baby boomers, there's going to be 80 million of them in less than a decade and they're going to live longer than any generation before. I think that's a big trend for a company like UnitedHealth, it has so many things. Its ability to continue to move into international markets as the global middle class grows and people want to access to healthcare, and as companies look for things to bring to the table to help be more competitive. Even in markets, I think where we see more like single-payer or government-mandated controlled health, unless things that are done by private companies, I think UnitedHealth has a wonderful future ahead of it. I don't know if I'd call it a value stock, I think it's reasonably priced and it's probably more antifragile from future government mandates affecting the insurance industry than people maybe want to acknowledge. Brian, you ranked this seventh.

Brian Withers: Yeah, I rated it 7 and part of the reason why I rated it lower than you guys was, I look at this business. I listen to you guys talk about all these growth drivers and these are all the growth drivers they have and have had, add more members, healthcare costs going up, going into new regions. I don't know that it's got a ton of optionality outside of offering health insurance and prescription pay. Matt, you mentioned the analytics piece, but that's around insurance and healthcare conditions. Maybe this is just a little bit naive and it's not in my wheelhouse, but I think a number of the other companies that I ranked above it have more optionality over the next 20 years. If we look at the United Health Group 20 years from now, it's just going to a bigger version of what it is today, at least that's my view.