Arvind Mallik, Jonathon Fite, and Paul Ucheoma of KMF Investments presented their thesis on UnitedHealth (US: UNH) at Wide-Moat Investing Summit 2026.
Thesis summary:
UnitedHealth Group is the largest managed care firm in the US by revenue, nearly $450bn in FY2025, and by medical members, about 50m. Jonathon, Arvind, and Paul describe a vertically integrated “payvider” that owns both sides of the cost stack: the UnitedHealthcare insurance arm, 77% of revenue and about half of operating income, works alongside Optum, spanning OptumRx (the third-largest PBM, with 23% share), Optum Insight (data and analytics), and Optum Health (care delivery).
That integration has produced the lowest MLR in the peer group, about 82-83% before 2024, along with the highest margins and returns: UNH’s 10-year ROE averages about 22%, ahead of CVS, Cigna, Elevance, and Humana. Optum’s data improves insurance pricing in a flywheel, and most of Optum’s business is done internally for UnitedHealthcare. Arvind argues that owning the cost stack makes UNH a downstream AI winner with more room than pure-play payers to optimize costs.
The thesis rests on a solvable dislocation. Across 2024 and 2025 the industry mispriced Medicare Advantage (MA) as post-pandemic utilization overshot actuarial assumptions, with medical costs running 7-10% above reimbursement growth. UNH’s MLR rose from the low 80s to about 89% in 2025, operating earnings fell about 40%, and the shares dropped from roughly $600 to a low near $237. Arvind frames the error as annually repriceable, not a multi-decade liability, with the MLR set to revert toward 80-85%.
Management has acted. Stephen Hemsley returned as CEO and bought $25m of stock at about $290; Wayne DeVeydt joined as CFO. The company is exiting unprofitable MA and ACA business, shedding 3m+ members, raising rates, spending $1.6bn on AI toward a $1bn G&A reduction, and reaffirming a 13-16% EPS growth target. Jonathon notes Hemsley’s variable pay is entirely equity-based and largely locked until 2030, and that buybacks resume in H2 2026, with DeVeydt calling the stock the best acquisition available.
The shares recently traded near $400, up more than 60% from the low. At that level Arvind’s reverse DCF implies about 5% growth, against a 7%+ demographic top-line tailwind and the 13-16% EPS target. KMF’s FCF-based DCF, assuming 16% annual FCF growth and a 1% yearly share-count reduction, yields intrinsic value of $500-600, with sellside targets at $410-466. Risks include MA rate cuts, PBM reform, the October 2025 DOJ antitrust suit, and another medical cost shock.
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Wide-Moat Investing Summit 2026 was held from June 23-26, 2026. The content of this website is not an offer to sell or the solicitation of an offer to buy any security. The content is distributed for informational purposes only and should not be construed as investment advice or a recommendation to sell or buy any security or other investment, or undertake any investment strategy. There are no warranties, expressed or implied, as to the accuracy, completeness, or results obtained from any information set forth on this website. BeyondProxy’s officers, directors, employees, and/or contributing authors may have positions in and may, from time to time, make purchases or sales of the securities or other investments discussed or evaluated herein.
