This story was originally published on Healthcare Dive. To receive daily news and insights, subscribe to our free daily Healthcare Dive newsletter. Name: Krista Nelson Previous title: Chief operating officer, Optum Health New title: Chief executive officer, Optum Health Optum Health, the care delivery arm of UnitedHealth, has tapped Krista Nelson as its new CEO effective immediately. Nelson announced the C-suite reshuffling via LinkedIn last week. The executive has worked for UnitedHealthcare, UnitedHeal ...

Core Insights - Michael Burry has liquidated his position in UnitedHealth Group, selling 350,000 call options valued at approximately $109 million [1][2][4] - UnitedHealth shares have dropped 36% year-to-date, making it one of the worst performers in the Dow Jones Industrial Average [2][4] - The company is facing challenges from rising medical costs and regulatory scrutiny, impacting its profitability [2][7] Company Overview - UnitedHealth Group has a market capitalization of $300 billion and operates through four segments: UnitedHealthcare, Optum Health, Optum Insight, and Optum Rx [5] - The company reported adjusted earnings of $2.92 per share in Q3 2025, exceeding estimates, with a 12% year-over-year sales growth to $113 billion [6] - The medical care ratio has declined to 89.9% from 85.2% over the last 12 months, indicating some improvement in cost management [6] Financial Performance - UnitedHealth's stock is down nearly 50% from its all-time highs, offering a forward yield of nearly 3%, appealing to value and income investors [6] - Management is implementing extensive measures to restore profitability after facing mispricing issues that led to elevated medical cost trends throughout 2025 [7] - The Medicare Advantage business is experiencing a full-year trend of approximately 7.5%, while Medicare Supplement products are exceeding 11% [7]

Core Insights - Bretton Fund achieved an 8.21% return in Q3 2025, outperforming the S&P 500 Index which returned 8.12% [1] - UnitedHealth Group Incorporated (NYSE:UNH) is highlighted as a significant holding, with a one-month return of -4.29% and a 52-week loss of 39.26% [2][4] - The stock closed at $344.75 on October 30, 2025, with a market capitalization of $312.288 billion [2] Company Performance - UnitedHealth Group reported revenues exceeding $113 billion in Q3 2025, reflecting a 12% year-over-year growth driven by the expansion of domestic memberships [4] - The company experienced a significant stock decline, falling over 60% from its November 2024 high before a slight rebound, contributing 0.9% to the Bretton Fund [3] Investor Sentiment - The appointment of a new CEO and Berkshire Hathaway's initiation of a position in UnitedHealth Group have positively influenced investor sentiment [3] - UnitedHealth Group is ranked 18th among the 30 Most Popular Stocks Among Hedge Funds, with 159 hedge fund portfolios holding the stock at the end of Q2 2025, up from 139 in the previous quarter [4]

Core Insights - UnitedHealth reported strong Q3 earnings, exceeding market expectations and raising its guidance, indicating a potential recovery from previous lows [3][4][11] - The company’s revenue and profit growth signals a positive trend, with a 12% year-over-year revenue increase and a 4% increase in earnings per share [4][9] - Despite recent stock price recovery, UnitedHealth has significant upside potential in the coming years if operational improvements and customer growth continue [11][12] Financial Performance - Q3 revenue reached $113.161 billion, up from $100.820 billion in the same quarter last year, with a notable 16% increase in the UnitedHealthcare insurance segment [8] - The insurance segment's operating profit fell sharply from $4.2 billion to $1.8 billion, reflecting a profit margin drop from 5% to just over 2% [6][8] - Optum's revenue grew by approximately 8%, with OptumRx generating nearly $40 billion in revenue, a 16% increase year-over-year [5][8] Business Segments - The UnitedHealthcare insurance segment saw a 16% revenue increase, driven by pricing adjustments and a 1.5% increase in customer numbers [4][5] - The Medicare & Retirement segment experienced a significant 24% growth, contributing to the majority of new customers [5] - Optum Health's revenue remained flat at around $25 billion, indicating challenges in that segment [5][6] Profitability Challenges - The overall profit decline is attributed to rising medical costs, which increased by $14 billion, significantly impacting profit margins [8][9] - Management cited unfavorable cost trends and Medicare funding cuts as key factors for the profit pressure [7][9] - Despite the profit challenges, the company raised its adjusted EPS guidance for the year to at least $16.25, slightly above market consensus [9][10] Future Outlook - Analysts predict a significant recovery in profits over the next few years, with EPS expected to reach $26 by 2028 and $32 by 2029 [12] - If UnitedHealth can achieve these targets and maintain a P/E ratio of 18, the stock price could potentially rise to around $580 by 2029, representing a 55% increase from current levels [12] - The current dividend yield stands at 2.4%, adding to the overall attractiveness of the investment [12]

Core Insights - UnitedHealth Group raised its annual profit forecast and aims for growth in 2026 and beyond, indicating positive momentum under new CEO Stephen Hemsley [1][3] - The company plans to provide a detailed 2026 forecast in January, with expectations for durable and accelerating growth [1] - Despite optimism, UnitedHealth shares remained flat on the announcement day [1] Financial Performance - UnitedHealth now projects 2025 adjusted profit of at least $16.25 per share, an increase from the previous forecast of $16.00, surpassing analysts' expectations of $16.20 [5] - Analysts anticipate a 2026 profit of $17.59 per share [6] Operational Challenges - Recovery in the Medicaid business is expected to be challenging due to a mismatch between payment rates and medical service costs, likely extending into the next year [2] - Behavioral health, specialty drugs, and home-health services have contributed to higher costs in Medicaid plans during the third quarter [4] Management Strategy - CEO Hemsley is focused on regaining investor and consumer trust following a difficult period for the company, which included various challenges [3] - The new Chief Financial Officer Wayne Devedyt indicated plans to reduce clinical service locations through Optum Health to improve profitability [6] - Shifting to plans with a narrower network of doctors is expected to help recover profit margins for the Optum Health unit [7]

Core Insights - UnitedHealth Group reported $113.16 billion in revenue for Q3 2025, a year-over-year increase of 12.2%, but a slight miss of -0.17% compared to the Zacks Consensus Estimate of $113.36 billion [1] - The EPS for the quarter was $2.92, down from $7.15 a year ago, but exceeded the consensus estimate of $2.75 by +6.18% [1] Financial Performance Metrics - Medical Care Ratio was reported at 89.9%, better than the seven-analyst average estimate of 90.9% [4] - Total people served in the Commercial Domestic Risk-based category was 8.44 million, slightly below the five-analyst average estimate of 8.45 million [4] - Total revenues from Investment and other income were $1.13 billion, exceeding the eight-analyst average estimate of $1.09 billion, but reflecting a year-over-year decline of -31.1% [4] - Revenues from Products were $13.3 billion, compared to the $13.8 billion average estimate, marking a +5.3% year-over-year change [4] - Revenues from Services reached $9.75 billion, surpassing the eight-analyst average estimate of $9.31 billion, with a year-over-year increase of +7.1% [4] - Premium revenues were $88.98 billion, slightly below the average estimate of $89.18 billion, with a year-over-year increase of +14.9% [4] - Revenues from Optum Rx were $39.68 billion, exceeding the estimated $38.58 billion, representing a +16% year-over-year change [4] - Total revenues from UnitedHealthcare were $87.07 billion, slightly above the six-analyst average estimate of $87.02 billion, with a year-over-year increase of +16.3% [4] Stock Performance - UnitedHealth shares returned +6% over the past month, outperforming the Zacks S&P 500 composite's +3.6% change [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating potential performance in line with the broader market in the near term [3]

Financial Data and Key Metrics Changes - The company reported adjusted earnings per share of $2.92, slightly ahead of expectations [28] - Revenues exceeded $113 billion, reflecting a 12% year-over-year growth, driven by domestic membership expansion of over 780,000 lives year to date [29] - The medical care ratio was 89.9% in the quarter, compared to 85.2% in the same quarter last year, with the full year trending toward the lower end of projections [29] Business Line Data and Key Metrics Changes - UnitedHealthcare's medical cost trends remain historically high but consistent with second quarter guidance, expected to continue throughout 2025 [10] - Medicare Advantage is forecasted to have a full-year 2025 trend of approximately 7.5%, consistent with previous expectations [11] - Optum Health's performance was in line with expectations, reflecting natural seasonality and pull forward of some investments [23] Market Data and Key Metrics Changes - The company expects membership contraction of approximately 1 million in total Medicare Advantage, including individual and group markets [12] - In the ACA markets, average rate increases of over 25% have been submitted in nearly all participating states, likely reducing ACA enrollment by approximately two-thirds [14] - Medicaid funding levels are not sufficient to cover health needs, with expectations of continued challenges through 2026 [15] Company Strategy and Development Direction - The company is focused on returning to consistent enterprise-wide performance levels and is committed to value-based care [7][9] - Actions are being taken to narrow networks and emphasize appropriately aligned physicians and services [8] - The company plans to balance earnings growth ambitions in 2026 with investments for sustainable double-digit growth beginning in 2027 [9] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in returning to solid earnings growth next year, despite external challenges such as Medicare cuts and Medicaid funding pressures [8][9] - The company anticipates 2026 to be a transition year, with a focus on operational rigor and prudent pricing [17] - Management is optimistic about the long-term growth potential of Medicare Advantage, despite current pressures [62] Other Important Information - The company is investing more than $450 million in employee incentives and contributions to the UnitedHealth Foundation [30] - The debt-to-capital ratio remains stable at 44.1%, with expectations to trend closer to 40% in the second half of 2026 [31] - The company is accelerating investments in AI applications to improve enterprise performance [34] Q&A Session Summary Question: Update on sub-businesses in Optum Health - The revenue breakdown is 65% value-based care, 15% care delivery fee-for-service, and 20% payer employer services, with two-thirds of VBC serving UnitedHealthcare [40][42] Question: Competitive position of Optum Insight - Optum's competitive position is strong, with a focus on AI-first products and modernization of existing services [46][50] Question: Membership declines in Medicare Advantage - The company expects approximately 1 million membership contractions in 2026, with a disciplined approach to pricing impacting both group and individual markets [60][62] Question: Medical cost trends in the employer market - Medical cost trends are approximately 11%, with employers evaluating various strategies for 2026 [93]

Financial Data and Key Metrics Changes - The company reported adjusted EPS of $2.92, slightly ahead of expectations, with revenues exceeding $113 billion, reflecting a 12% year-over-year growth [25][26] - The medical care ratio increased to 89.9% from 85.2% year-over-year, with the full year trending toward the lower end of previous projections [26][27] - Operating cost ratio was 13.5%, reflecting larger investments in technology and personnel than originally planned [27] Business Line Data and Key Metrics Changes - UnitedHealthcare's medical cost trends remain historically high but consistent with second quarter guidance, with a forecasted full-year 2025 trend of approximately 7.5% in Medicare Advantage [7][8] - Optum Health's performance was in line with expectations, with anticipated margin improvement across all segments in 2026, despite ongoing Medicare funding cuts [22][23] - The company expects membership contraction of approximately 1 million in total Medicare Advantage, including individual and group markets, due to competitive market dynamics and strategic plan exits [9][10] Market Data and Key Metrics Changes - The company anticipates a challenging environment in Medicaid due to insufficient funding levels, with margins expected to decline further in 2026 [12][13] - The commercial market is expected to contract in line with broader market trends, but self-funded offerings continue to show strong traction [10][11] - The ACA markets are seeing average rate increases of over 25%, with expected enrollment reductions of approximately two-thirds [11] Company Strategy and Development Direction - The company is focused on returning to consistent enterprise-wide performance levels and enhancing operational rigor, particularly in value-based care [4][5] - There is a commitment to narrowing networks and emphasizing appropriately aligned physicians and services to improve competitiveness [5][6] - The company plans to balance earnings growth ambitions with investments that will drive sustainable double-digit growth beginning in 2027 [6] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in returning to solid earnings growth in 2026, despite external challenges such as Medicare cuts and Medicaid funding pressures [5][6] - The company is committed to engaging actively with investors and stakeholders, with plans for an investor conference in the latter half of 2026 [6] - Management highlighted the importance of operational discipline and the need to manage costs effectively in the current environment [33][36] Other Important Information - The company is investing significantly in technology and employee incentives, with over $450 million allocated to these areas [28] - The debt-to-capital ratio remains stable at 44.1%, with expectations to trend closer to 40% in the second half of 2026 [29] - The company is taking aggressive steps on affordability initiatives to improve overall medical trends relative to pricing [32] Q&A Session Summary Question: Update on sub-businesses in Optum Health - The revenue breakdown is 65% value-based care, 15% fee-for-service, and 20% payer employer services, with two-thirds of VBC serving UnitedHealthcare [38][39] Question: Competitive position of Optum Insight - Optum's competitive position is strong, with new AI-first products showing promising results and a focus on evolving traditional services to AI-based offerings [43][44] Question: Membership declines in Medicare Advantage - The company expects approximately 1 million membership contractions in 2026, with a disciplined approach to pricing impacting both group and individual segments [54][56] Question: Medicaid margin recovery - The company expects break-even margins in 2025, with further degradation in 2026 due to funding dislocation, but anticipates recovery in 2027 and 2028 [80][81] Question: Employer market medical cost trends - Medical cost trends are approximately 11%, with employers increasingly interested in value-based care and integrated solutions [83][85]

Group 1: Apple Inc. - Warren Buffett's Berkshire Hathaway sold 20 million shares of Apple in the second quarter, reducing its position by approximately 70% since late 2023, while Apple remains the largest holding in the portfolio valued at $313 billion [1][2] - Apple accounted for 43% of smartphone sales in the second quarter, significantly outperforming its closest competitor Samsung, and has a strong presence in personal computers, smartwatches, and tablets, which enhances consumer loyalty and pricing power [5][6] - The company has faced challenges in innovation, particularly in artificial intelligence, with delays in the anticipated AI features and a lack of major new products since 2017, raising concerns about its high valuation at 40 times earnings [7][8] Group 2: UnitedHealth Group - Warren Buffett initiated a new position in UnitedHealth Group, a diversified healthcare company with a market cap of $331 billion, which operates through two segments: UnitedHealthcare and Optum [10][11] - UnitedHealth has faced significant challenges, including underestimating expenses by $6.5 billion in 2025, leading to an 18% decline in earnings in the first half of 2025 due to rising medical costs and utilization [12][13] - The company is under investigation by the Justice Department for potential antitrust violations and billing practices, contributing to its shares trading 42% below record highs, indicating caution for potential investors [13][14]

Core Viewpoint - UnitedHealth Group's stock has experienced a rally in the third quarter, influenced by Warren Buffett's investment, with upcoming earnings reports potentially impacting share performance [1][6]. Earnings Estimates - Analysts predict UnitedHealth will report third-quarter revenue of $113.06 billion, an increase from $100.82 billion in the same quarter last year [2]. - The company has missed revenue estimates for five consecutive quarters, following a streak of 15 consecutive beats [2]. - Expected earnings per share for the third quarter are $2.79, down from $7.15 in the previous year [2][3]. Analyst Insights - Analysts have been raising price targets for UnitedHealth stock ahead of earnings, with notable increases from firms like Jefferies, Goldman Sachs, JPMorgan, Mizuho, and Barclays [4][6]. - Baird analyst Michael Ha expressed caution regarding the Optum Health division, citing potential headwinds from government changes to Medicare Advantage, estimating an $11 billion impact over three years [5]. Market Reactions - Following Berkshire Hathaway's stake announcement, UnitedHealth shares have rallied over 30%, although they remain 44% below their November 2024 highs [6]. - The stock has historically declined by an average of about 10% after the last four quarterly earnings reports [7]. Key Items to Watch - Buffett's stake in UnitedHealth, valued at $1.84 billion, could serve as a validation point during the earnings call [8][9]. - Investors will be attentive to any commentary regarding pricing pressures from the White House, particularly concerning the proposed TrumpRx platform, which could affect UnitedHealth's Optum Rx division [11][12]. - Analysts will also look for guidance updates, as the company had previously suspended its 2025 performance outlook [13].