Cullen Capital Management, LLC, operating under the name Schafer Cullen Capital Management, Inc. (SCCM), has released its “SCCM Value Equity Strategy” third-quarter investor letter. A copy of the letter can be downloaded here. The US equity market continued the rally in the third quarter, with the S&P 500 returning 8.1% and the Russell 1000 Value surging 5.3%. The value equity strategy returned 6.9% (gross of fees) and 6.8% (net of fees) in the quarter, while the Russell 1000 Value and S&P 500 returned 5.3% ...

Core Insights - UnitedHealth Group appointed Dr. Scott Gottlieb, former FDA commissioner, to its board of directors, which is significant for the company as it faces rising costs in health insurance, particularly in Medicare Advantage plans [2][3][4] Company Overview - UnitedHealth Group operates the largest health insurer in the U.S., UnitedHealthcare, and one of the largest health services companies, Optum, which includes pharmacy benefit management and various medical care provider assets [4] Industry Context - The health insurance industry is currently challenged by the introduction of new, expensive biotechnology drugs, such as GLP-1 drugs for weight loss, which adds pressure on insurers [3][4] Leadership and Expertise - Dr. Gottlieb brings extensive experience from both public and private sectors, having served in key roles during previous administrations and is recognized for advocating integrated healthcare approaches [5][6] - His appointment is expected to enhance UnitedHealth's strategic direction in making healthcare more innovative and affordable while improving patient outcomes [7]

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 - The London Company Income Equity Strategy reported a 6.0% gross (5.8% net) appreciation in its portfolio for Q3 2025, outperforming the Russell 1000 Value Index which increased by 5.3% [1] - The rally in US equities was attributed to the Fed rate cut, solid corporate earnings, and enthusiasm around AI [1] Company Analysis: UnitedHealth Group Incorporated (NYSE:UNH) - UnitedHealth Group is the largest and most diversified health insurer in the U.S., operating through segments such as UnitedHealthcare and Optum, which provide healthcare services and technology solutions [3] - The stock experienced a one-month return of -10.57% and a 52-week loss of 44.56%, closing at $330.83 with a market capitalization of $299.679 billion on November 4, 2025 [2] - The company benefits from a strong integrated model that provides efficiency and improved outcomes, supported by demographics driving Medicare Advantage enrollment [3] - Despite near-term elevated medical costs impacting margins, these challenges are viewed as temporary, with the company adjusting future plans to reflect higher costs [3] - UnitedHealth's recurring revenue base and diversified earnings provide attractive downside protection, presenting a compelling opportunity for investors [3]

Core Viewpoint - The investment interest from notable investors Michael Burry and Warren Buffett in UnitedHealth Group suggests a potential recovery opportunity for the company despite recent setbacks [2][4][14] Company Overview - UnitedHealth Group is a leading player in the U.S. health insurance industry but has faced challenges, including disappointing earnings, the loss of its CEO, and a Department of Justice investigation into its Medicare billing practices [4][10] Investment Actions - In the second quarter, Burry acquired 20,000 shares and 350,000 call options, while Buffett purchased 5,039,564 shares of UnitedHealth [5][12] Financial Performance - UnitedHealth reported over $113 billion in revenue with double-digit growth and net income exceeding analysts' expectations [12] - The company raised its 2025 earnings guidance to at least $14.90 per share, up from $14.65 [12] Recovery Potential - The company is addressing its issues, focusing on repricing and market positioning, which are controllable factors [10] - Efforts to enhance the Optum business, including narrowing the provider network, are expected to yield positive results [11] Valuation - Currently trading at 20 times forward earnings estimates, the stock is considered attractively priced if recovery is anticipated [9][13]

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 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]

Core Insights - UnitedHealth Group (NYSE: UNH) reported adjusted EPS of $2.92, exceeding the consensus estimate of $2.82 by $0.10, while revenue fell short at $113.2 billion compared to the expected $114.19 billion, missing by $990 million [3][12] - Operating income saw a significant decline of 50% year-over-year, dropping to $4.3 billion from $8.7 billion, indicating underlying operational challenges despite the EPS beat [4][12] - The company raised its full-year 2025 guidance to at least $16.25 per share in adjusted earnings, reflecting cautious optimism for future performance [10] Financial Performance - Adjusted EPS: $2.92, beating expectations by $0.10 [12] - Revenue: $113.2 billion, missing expectations by $990 million [12] - Operating Income: $4.3 billion, down 50% year-over-year [12] - Operating Cash Flow: $5.9 billion [12] Segment Analysis - UnitedHealthcare, the insurance unit, reported a revenue increase of 16% year-over-year to $87.1 billion, indicating strong growth in this segment [6][12] - Optum, the health services and technology division, experienced slower growth at 8%, generating $69.2 billion in revenue, raising concerns about its future growth potential [6][12] Challenges and Outlook - Management highlighted ongoing challenges such as elevated medical cost trends and Medicare funding reductions, which may impact future performance [7] - The revenue miss suggests that the company is facing constraints on pricing power, despite managing volume effectively [9] - The upcoming earnings call will be crucial to assess management's outlook on medical cost trends and pricing power, which could influence stock performance [11]

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]

Core Insights - UnitedHealth Group reported third quarter 2025 results, demonstrating continued execution on its performance agenda and a focus on sustainable growth, raising its full-year earnings outlook to at least $14.90 per share and adjusted earnings to at least $16.25 per share [2][5][39] Financial Performance - Consolidated revenues for Q3 2025 reached $113.2 billion, a 12% increase year-over-year, with earnings from operations at $4.3 billion and a net margin of 2.1% [4][6][7] - Adjusted earnings per share (EPS) for Q3 2025 were $2.92, while GAAP EPS was $2.59 [5][6][35] - Cash flows from operations were reported at $5.9 billion, equating to 2.3 times net income [5][12] Segment Performance - UnitedHealthcare revenues grew 16% year-over-year to $87.1 billion, driven by Medicare & Retirement and Community & State segments, serving 50.1 million consumers domestically [6][13] - Optum revenues increased by 8% year-over-year to $69.2 billion, primarily due to growth in Optum Rx [6][20] - The medical care ratio (MCR) was reported at 89.9%, reflecting utilization in line with expectations, with a year-over-year increase of 470 basis points attributed to elevated cost trends and Medicare funding reductions [6][8] Operational Metrics - Operating cost ratio for Q3 2025 was 13.5%, reflecting investments to support future growth [6][12] - UnitedHealthcare's operating margin decreased to 2.1% from 5.6% year-over-year, primarily due to elevated medical cost trends [13][29] - Optum's operating margin for Q3 2025 was reported at 3.6%, down from 7.0% in the previous year [20][29] Future Outlook - The company remains focused on strengthening performance and positioning for durable growth in 2026 and beyond, as indicated by the raised earnings outlook [2][5][39]