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What Are UnitedHealth Group’s Growth Opportunities?

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Oct. 21 2015, Updated 9:07 a.m. ET

International market performance

In 3Q15, UnitedHealthcare Global recorded revenues worth $1.3 billion, which was a decline of 29% on year-over-year (or YoY) basis.

Though the graph shows a drop in revenues in 3Q15, if the revenues earned from international markets are measured using 2015 foreign exchange rates for all periods, then the business actually registered YoY revenue growth of 9% in 3Q15.

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UnitedHealthcare Global

UnitedHealth Group’s (UNH) UnitedHealthcare Global is a diversified health services business that offers health plans and other related services to individuals located in markets outside the US. In 3Q15, the business offered medical benefit services to about 4 million people across 125 countries in the world. The majority of the international enrollments are located in Brazil. To know more about UnitedHealth Group’s international operations, please refer to What’s UnitedHealth Group’s strategy for international expansion?

To strengthen their presence in international markets, health insurance companies such as Cigna (CI), UnitedHealth Group (UNH), Aetna (AET), and Humana (HUM) have been involved in mergers and acquisitions or joint ventures with local insurance companies in these markets. In 2012, UnitedHealth Group acquired Amil Participações to enter the Brazilian market. In addition to supporting Amil, the company is also involved in building Optum’s presence in Brazil.

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UnitedHealth Group is also focused on expanding in the United Kingdom market with its revenue cycle management solution, Optum360. Currently, Optum360 serves 7,500 employees across 1,600 hospitals in the US. This accounts to total billings of about $50 billion. The company plans to leverage the US experience to penetrate the United Kingdom market.

Federal government opportunity

Medicare, the Department of Defense, federal employee benefit plans, and state-run health programs are actively involved in improving their performance. UnitedHealth Group is focusing on this opportunity for future growth to provide care and technology services through Optum to these entities.

Instead of directly investing in UnitedHealth Group, investors can get exposure to UnitedHealth Group through the iShares U.S. Healthcare Providers ETF (IHF). UnitedHealth Group accounts for about 13% of IHF’s total holdings.

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