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Core Insights - Oscar Health (OSCR) is a health insurance company primarily operating in the ACA marketplace across 18 states, focusing on individual health plans [1] Company Overview - Oscar Health specializes in providing health insurance plans to individuals, leveraging the ACA marketplace [1] Analyst Background - The analysis is conducted by an IMC qualified contributor with 5 years of experience in financial markets and over 2 years in primary investment research, focusing on smaller, under-covered companies for potential investment opportunities [1]

Core Insights - Oscar Health (OSCR) is a health insurance company primarily operating in the ACA marketplace across 18 states, focusing on individual health plans [1] Company Overview - Oscar Health specializes in providing health insurance plans, mainly targeting the Affordable Care Act (ACA) marketplace [1] - The company has been covered in previous analyses, indicating ongoing interest and monitoring of its performance [1] Analyst Background - The analysis is conducted by an IMC qualified contributor with 5 years of experience in financial markets and over 2 years in primary investment research [1] - The analyst adopts a bottom-up research approach, focusing on smaller, under-covered companies to identify mis-pricing and asymmetric investment opportunities [1]

Core Points - Health Net and the Centene Foundation announced a $1.1 million investment to the California Association of Food Banks to combat food insecurity affecting 1 in 5 Californians [1][3] - The grant will enhance food distribution and emergency food response in 12 counties, focusing on rural communities that face challenges in accessing nutritious food [2][4] - The investment aims to improve food delivery systems by funding infrastructure such as refrigerated trucks and cold storage [2][4] Investment Details - The investment will be allocated to 10 local food banks serving the targeted counties, empowering local organizations to meet increasing demand [3][4] - Health Net has committed over $247 million in funding to community-based organizations from 2020 to 2025 [4] Organizational Background - Health Net is a Medi-Cal managed care health plan serving over three million members in California, providing various health services [6][7] - The Centene Foundation focuses on investing in economically challenged communities and addressing social drivers of health [8] - The California Association of Food Banks, formed in 1997, partners with over 42 food banks to fight hunger in California [8]

Core Insights - Oscar Health is launching new health plans for individuals, families, and businesses in Tampa for the 2026 Open Enrollment period [1] Group 1 - The new health plans will be available on the individual marketplace [1]

Core Insights - Oscar Health is launching new health plans for individuals, families, and businesses in Arizona for the 2026 Open Enrollment period [1] Group 1 - The new health plans will be available on the individual marketplace [1] - The introduction of these plans aims to enhance access to healthcare for various demographics in Arizona [1]

Financial Data and Key Metrics Changes - The company delivered financial performance consistent with expectations despite significant market volatility, reiterating the full year outlook [5][6] - Total revenue for Q2 was flat year over year, supported by insurance repricing and higher interest income [18][19] - Adjusted earnings per diluted share was $1.15, with GAAP earnings per diluted share at $0.77 [26][29] - Adjusted EBITDA for the quarter was $105 million, representing an adjusted EBITDA margin of 8.5% [26][29] Business Line Data and Key Metrics Changes - Professional services revenue declined 8% year over year due to lower WSE volumes and the discontinuation of a specific client-level technology fee [23][24] - Total insurance revenue grew 1% in Q2, with revenue per average enrolled member increasing by approximately 9% year over year [24][29] - Operating expenses decreased by 2% year over year, benefiting from automation and workforce strategy [25][26] Market Data and Key Metrics Changes - The company finished the quarter with approximately 339,000 total WSEs, down 4% year over year, and 309,000 co-employed WSEs, down 8% [19][20] - Customer hiring improved slightly, with a year-over-year increase of about half a percentage point [7][20] - The second quarter saw a modest three-quarter positive trend in year-over-year CIE [7][8] Company Strategy and Development Direction - The company aims for total revenues to achieve a compounded annual growth rate of 4% to 6% and adjusted EBITDA margins to expand to 10% to 11% [7][14] - Investments are being made in distribution capabilities and benefits offerings ahead of the fall selling season [5][12] - The company is focused on improving service, distribution, and offerings while managing expenses prudently [6][14] Management's Comments on Operating Environment and Future Outlook - Management noted that the challenging market environment has resulted in weaker business sentiment, impacting sales conversion rates and customer hiring [6][19] - There is confidence in new sales growth based on encouraging results from market testing with new health plan offerings [10][12] - The company is on track to achieve its historical retention rate of 80% or better despite the economic uncertainty [17][18] Other Important Information - The company paid a dividend of $0.275 per share, representing a 10% increase year over year [27][28] - The full year guidance remains unchanged, with total revenues expected to be in the range of $4.95 billion to $5.14 billion [28][29] Q&A Session Summary Question: Can you discuss how top of funnel activity and pace of prospective client decision-making has trended since Q1? - Management noted that both macro uncertainty and healthcare cost inflation have contributed to a lengthening sales cycle [32][33] Question: How is sales headcount trending through Q2? - Sales headcount is slightly lower than a year ago, but management is confident in the productivity of the remaining reps and the quality of new hires [35][36] Question: Are you seeing any actions from competitors that are different versus last year? - Management indicated that while the competitive environment is tough, TriNet has maintained a disciplined approach to pricing and has invested in its Insurance Services group [41][42] Question: Can you speak to healthcare trends in the quarter? - Management observed similar trends in healthcare costs, with slight anomalies in large complex claims, but overall trends were in line with expectations [45][46] Question: How did client hiring and CIE trend throughout the quarter? - CIE showed steady improvement throughout the quarter, particularly in technology and financial services sectors [50][52] Question: Can you review some of the major comparison dynamics for the back half of the year? - Management expects to see seasonality in insurance cost ratios and has adjusted forecasts for professional services revenue and expenses [70][71] Question: What are the expectations for the broker channel in the back half of the year? - Management expects additive contributions from both national and local brokers in the second half of the year [76][78]

Core Viewpoint - UnitedHealth Group is positioned as the more attractive investment compared to Humana, driven by its diversified revenue streams, consistent earnings performance, and strategic focus on technology and innovation [21][22]. Group 1: UnitedHealth Overview - UnitedHealth has a market capitalization of $480 billion and operates through two main segments: UnitedHealthcare and Optum, providing health benefits and data-driven healthcare services [3]. - The company serves 50.68 million people as of December 31, 2024, and has consistently exceeded earnings expectations, with an average surprise of 2.5% over the past four quarters [4]. - Financially, UnitedHealth ended 2024 with $29.1 billion in cash and short-term investments, with a total debt-to-capital ratio of 43.9% [5]. - In 2024, UnitedHealth returned $16 billion to shareholders through share repurchases and dividends, with a dividend yield of 1.52% [6]. - Strategic investments in technology and value-based care through Optum position UnitedHealth as a leader in healthcare innovation [7]. Group 2: Humana Overview - Humana has a market capitalization of $30.7 billion and focuses heavily on government-sponsored programs, particularly Medicare Advantage (MA), covering 16.3 million members as of December 31, 2024 [8]. - The company has shown earnings strength, surpassing analyst estimates with an average surprise of 15.4% over the last four quarters [9]. - However, Humana faces challenges, including a profit warning due to high medical costs, with a benefits expense ratio rising to 89.8% in 2024 [10]. - Humana's lack of diversification and reliance on MA make it more vulnerable to policy changes and demographic shifts [11]. Group 3: Comparative Analysis - The Zacks Consensus Estimate for UnitedHealth's 2025 sales and EPS indicates a year-over-year increase of 12.7% and 7.5%, respectively, while Humana's estimates are only 8% and 0.9% [13][14]. - In terms of valuation, UnitedHealth trades at 18X forward 12-month earnings, slightly less than Humana's 18.27X, both above the industry average of 15.55X [16]. - Over the past month, UnitedHealth's shares have outperformed Humana, the industry, and the S&P 500 Index [18]. Group 4: Conclusion - UnitedHealth is deemed the better investment opportunity due to its diversified business model and robust performance, while Humana's recent challenges and higher valuation make it a less attractive option [21][22].