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United Health Group Competitive Advantages: Scale, Cost, Network – and Efficiency.

April 25, 2024. How does United Health Group (UHG) drive its competitive strength in the US healthcare market?

United Health Group comprises two distinct, complementary business platforms, United Healthcare and Optum. UnitedHealthcare offers health insurance benefits under 3 divisions. UnitedHealthcare Employer & Individual serves employers of every size and private or public sector. United Healthcare Medicare & Retirement serves Medicare beneficiaries, including Medicare Advantage, and retirees. United Healthcare Community & State manages benefits for state Medicaid and community programs.

Market Share drives scale and derivative network advantages. Through organic growth as well as serial acquisitions, United Healthcare has become the largest insurer in the US, by premiums written and number of lives covered. Of note, it has the greatest number of Medicare Advantage clients. Its market share in a number of local markets is large enough to drive competitive advantages of scale; with a majority local market share of customers insured, it can demand lower prices from medical providers. Accordingly, it can offer lower insurance premium prices to payer clients such as employers. The low prices resulting from scale advantages, support the competitive advantage of network effect. The employers attracted by low premium prices, attract providers who need access to the population of insured patents.

Business diversification confers economic resiliency

Optum contains 3 segments: Optum Health, Optum Rx, and Optum Insight. These are diverse businesses that reinforce the business agility and competitive strength of each other and the United Healthcare insurance platform.

Optum Rx is a Pharmacy Benefit Manager (PBM) which creates switching costs competitive advantage related to contracts with employers. PBM scale attracts drug makers and pharmacies who need access to the insured patient population. Low Cost competitive advantage results because the PBM can demand lower prices from these pharma companies and pharmacies. These lower prices attract employers, which attracts drug makers in a virtuous cycle. UNH actually ranks third in market share, among large US PBMs

Optum Health operates medical care providers; chiefly primary care, urgent care and outpatient surgeries, as well as a wide range of ancillary care services. Optum Health operational efficiency is guided by data, technology and analytics of Optum Insight, described below. These tools improve care practice and reduce cost. When patients covered by United Healthcare insurance use care from Optum Health, the relatively favorable value/cost ratio obviously reduces costs for the insurance group. But these attractive margins also attract business from other insurers.

The business diversification brought by Optum Health benefits UHG by increasing revenue when medical care utilization increases, such as during seasonal epidemics. This gives UHG an advantage which pure play insurers do not have because their medical loss ratio (MLR), the proportion of revenue paid in claims, must increase during such episodes.

Optum Health includes Optum Financial, including Optum Bank. With over 24 million consumer accounts, nearly $22 billion in assets under management, Optum Financial facilitates payment flows for consumers, via tools which include Health savings accounts, Flexible Spending Accounts, Health Reimbursement Arrangements and other financial benefits. Optum Financial charges fees and earns investment income on managed funds

Optum Insight is an analytics and consulting service business made possible by the digitalization and exploitation of data resulting from the considerable experience of UHG. It has likely the largest medical records data collection in the health insurance market, including over 285 million lives of clinical data and claims (URL 2023 10K) In this division, data is harnessed to various important applications for insurers, providers and patients. Meanwhile, the evolution and growth of the Optum Health care provider business gives United Health Group an experiential advantage that pure play insurers do not have. It serves as a living laboratory of the Optum Insight management intelligence.

In essence, the Optum Insight business consists in harnessing data to increase economic efficiency and consumer, payer and provider engagement in healthcare. Increasingly, this consists of the application of digital tools, with Artificial Intelligence (AI) in an important role. Software tools obtain a higher gross margin than the healthcare provider business they are deployed in. By reducing friction, improving the patient and provider experience and reducing costs of inefficiencies in the US healthcare system. Optum creates value which drives its competitive advantage.

For providers and insurers, Optum optimizes revenue cycle including coding, billing, utilization review. Medical records and claims data is exploited using AI, including novel natural language recognition software which it patented. It provides management consulting and clinical quality guidance resources to enable modernization of administration and improved business efficiency including value based care. Digital transformation reduces administrative costs and delays.

Optum thus provides diverse resources to enable client insurance or care provider businesses to improve their performance. Especially the smaller companies in these industries tend to have thin margins. A contract with a consulting client may include a financial or performance outcome which must be attained in order for Optum to be paid for practice changes or software tools it advised and managed. At times, the Optum Health segment acquires businesses that were not financially successful enough to remain independent, as in the recent case of the national physician practice network of Steward Health.

Optum Insight reinforces the competitive advantage of the United Healthcare Group by increasing efficiency and raising margins of all UHG business segments. And Optum’s management consulting services do not benefit UHG just by compensation for the services rendered. Contracts whereby Optum Insight is deeply involved in clients operations likely have advantages of switching costs. Moreover, a client such as a medical provider group which increases profitability because of Optum management consulting, can raise United Health insurance margins by tolerating lower insurance reimbursement, in order to serve the patient population of United Health insured consumers. This is where the larger amounts of revenue is created, as a result of the work Optum does to reduce business costs for the care provider entity, such as hospital or practice. The management consulting work of Optum reinforces the scale and low cost competitive advantages that enable UHG to attract employers and other payers of health insurance.

Of the 4 business segments of UHG, Optum Insights has the highest operating margin. However, because of recurrent acquisitions, Optum Rx and Optum Health segments have grown faster in size. Nevertheless, as I described, I feel the business activities housed in this smallest segment are key to sustaining the company’s competitive advantage.

Over 10 years from 2013 to 2022 (I read 10 years of annual reports for this), UHG Operating Earnings were contributed by the 4 business segments in proportions which changed as follows. In 2013: United Health: 74%, Optum Health: 9.85%, Optum Insight: 8.6%, Optum Rx: 7.4%. In 2022: United Health: 50%, Optum Health 21%, Optum Insight: 13%, Optum Rx 16%. Over the decade, the percentage of Operating Earnings provided by United Health insurance segment declined from 74% to 50% of the corporate total, with those of the other three segments increasing. Earnings of Optum Rx and Optum Health rose more than those of Optum Insight, because they included the earnings of newly acquired companies.

The Operating Margins of the 4 segments have changed as follows: 2013: United Health insurance: 6.4%, Optum Health: 9.9%, Optum Insight: 19%, Optum Rx: 3.1%. 2022: United Health: 5.8%, Optum Health: 8.5%, Optum Insight: 24.6%, Optum Rx: 4.4%. Optum Insight is the most profitable as a business, although it produces the smallest proportion of operating profits.

Regarding current valuation of the stock, the price/earnings (PE) ratio is currently 21, approximately the same as the average of the last 10 years.

From 2014 to 2023, annual diluted EPS rose 4.186 times over, from 5.7 to 23.86 dollars per share. Meanwhile, ROIC, in mid-teens, and ROA, over 20%, have been quite consistent. Discovering United Health Group (UNH), a Novel Portfolio Holding. | amateurinvestor.net In recent quarterly earnings reports, the stock sells off somewhat when the medical loss ratio (MLR) is reported to exceed analyst expectations, regardless of the fact that UNH beats earnings expectations. It also declined when CMS raised Medicare reimbursement less than expected. Thus, the stock price is essentially unchanged for the year.

As we intimated previously, a preeminently successful health insurance company such as UHG has a history of continuing to raise revenue and profitability despite the apparently ever-present nemesis of medical costs, and ever reluctant (but inevitably materializing) payment for these costs. Having started a position in UNH about a year ago, ideally I would have waited until some of these transient misfortunes occurred, in order to obtain a lower price. Apparently, we do not live in an ideal world.

In Optum Insight, digital transformation, including AI, will continue to progress into the healthcare industry, liberating value, and no doubt United Healthcare Group will continue to lead here. Whereas AI is now a “hot topic” and expected to create vast stockholder wealth in a rush, healthcare insurance companies never seem to be popular. It seems UNH stock is held hostage to expectations regarding the MLR, regardless of its ability to consistently beat earnings expectations. The advantage of this is that it is less likely to rise euphorically, with subsequent dramatic drops in price. Instead, it must earn its way up in price through demonstrated, sustained earnings growth. As it has done, with an average annual return of 25.18% as of April 24, 2024, since March 1990. The total return calculator (including dividend reinvestment) only goes back to that date. But the stock had doubled between IPO on October 16, 1984, and April 1990.

Context of Competitive Advantage in the Health Care Insurance System.

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Feb 15, 2024. In early 2023, I became aware that United Health Group (UNH) was likely to possess a durable competitive advantage, since it had evolved over about 40 years to become a market dominating company, with an impressive total stockholder return. In order to discover the basis for this competitive advantage, I searched in vain for a book written by or about UNH founders or the company history. I did find a book about the US Healthcare insurance system history: Ensuring America’s Health: the Public Creation of the Corporate Health System. Christy Ford Chapin, published 2017. The following historical outline of the US health insurance system takes liberally from this interesting book.

From the inception of the income tax in 1913, fringe benefits including employee health insurance, were made tax deductible. Over time, public demand grew for comprehensive health insurance. At the time of price controls during the war time economic policies of FDR, employers offered the tax-deductible employee health insurance fringe benefit to augment compensation and attract workers. The employer tax deduction for employee health insurance was more specifically codified in the Internal Revenue Act of 1954.

In insurance markets other than health insurance, the insured outcome is something that all parties to the insurance contract have an incentive to avoid. A driver tries to avoid car damage, a home owner avoids burning his house down; the insurer certainly shares the sentiment. As premiums exceed claims most of the time, the company can accumulate a “float” of funds to be invested in order to earn additional income and build the financial resources to fund future claims. The size of the financial reserves thus accumulated, is the basis for the insurer’s promised ability to back claims successfully.

In contrast, in the health insurance market, the customer finds it desirable to make claims for service, a sentiment shared by the provider, and there are no clear definitions as to what services are legitimately necessary for health. This means that health insurance is unprofitable in the sense that claims paid will tend to approach premium revenue, leaving no room for accumulation of float. This means that it is a peculiar property of the US health insurance market, that the insurance company must be an important arbiter of the reimbursement rate for health care services. Because in order to be profitable, the insurance company must devote systematic attention to controlling medical costs, where neither customer nor service provider have an incentive to do so.

Because of the poor economics of health insurance, early (following the Great Depression era) insurance policies covered a limited range of essentially catastrophic coverage. In the 1940s employers began to offer naturally desirable more comprehensive health insurance partly to stymie labor unions’ influence. As private insurance spread rapidly to become a popular benefit, unions demanded comprehensive coverage for their members as a counter for moderated wage increase. Physicians’ groups encouraged private insurance, while insisting on fee for service, and fended off insurer influence over reimbursement or choice of care. Physicians feared insurer restrictions on price and provider independence, which they considered to be a gateway to government sponsored coverage and associated control of reimbursement and practice. Private insurance companies, while unsettled about low margins, had similar fears regarding the development of government insurance, therefore tended to supply demand for progressively more comprehensive policies. Their business grew rapidly. Health care insurance was paid for by a third party, namely the employer, union or government. Regarding government payment, at this point in history, it was the growing Federal Employees Health Benefits Program which paid for and in effect subsidized private insurance for federal employees. With prices determined by providers and ancillary healthcare service or equipment providers, who could be confident their costs would be covered, consumers were not restrained by prices, and healthcare price inflation exceeded that in the rest of the economy.

In the absence of other restraint on prices, private insurers gradually began to take a role in determining reimbursement. They were aided over time and experience by the evolution of actuarial data needed to do this effectively. As health insurance became more comprehensive, the many claims to be covered, involved innumerable conditions and treatments. Over time, the complex data sets needed to make sense of claims administration were developed, at times including data sharing among different companies. This developed expertise in controlling reimbursement costs.

Healthcare inflation was a public policy issue which led to the formation of Medicare and Medicaid, the feared government sponsored plans, after at least a decade of discussion and negotiation. By that time the private health insurers had established a business infrastructure to address billing and payments. In the political conflict between proponents leaning toward a government single payer system and those for private insurance, the use of the private insurance company model to administer the government sponsored systems, subject to government regulation and funding, was appealing as a viable compromise.

The creation of fully government funded health insurance, administered as it was by private insurers, who would thereby profit, meant that the private insurer model was further embedded in the structure of the US health care. As price inflation did not abate, the insurance companies gradually increased their control over reimbursement, leading to DRGs, formation of HMOs, PPOs, and the current system, of which value based care is the latest attempt to maximize value per cost, while optimizing outcome as a value to the customer.

In summary: private health insurers play an indispensable role as mediator, or market maker, in the US health system. They insure comprehensive health insurance, which most of the population regards as indispensable. This is paid for at least as a strongly established expectation, if not legal entitlement, by employers and, ultimately, state and federal government. Because of the natural incentive to consume healthcare, in the peculiar economics of healthcare insurance policies, claims made tend to chase the level of premiums revenue, and gross margins are correspondingly attenuated. But because of inexorably expanding demand, and reliable payment for insurance, health insurer revenues will tend to continue rising. A company which has a market dominating position in this ecosystem, has access to total addressable market which will likely grow for the foreseeable future. Market growth is driven by population growth, especially of the aged; increase in price and frequency of utilization; increase in government funding, among other factors.

The question remains, how can a company establish a market dominating position in this system? It would need to widen the gap between claims expenses and premiums revenue; that is, minimizing the medical loss ratio (MLR), funds paid for medical costs of members, divided by premiums revenue. By economies of scale, in which an insurer accesses a relatively larger population of customers (potential patients) as members, it could demand relatively lower reimbursement prices from healthcare providers. Meanwhile, access to a large number of providers attracts contracts from large corporate employers and large numbers of individuals, government entities or other payors. Moreover, it can build access to a diversified network of healthcare facilities that build on mutual synergies, to encourage lower prices as well as attract business from payors. For instance, association with a large number of rehabilitation medicine providers could lead them to accept a lower reimbursement bid, if the insurer is also associated with a correspondingly large number of referring orthopedists.

Other than minimizing the MLR relative to premiums revenue, the health insurer could create additional revenue streams by selling other services, derived from its experience in insuring, that raise productivity and lower costs for its customers as well as providers. For example, healthcare billing software, clinical pathway analytics, pharmacy services.

Finally, the insurer could build or acquire healthcare providers that are incentivized to reduce cost relative to value through management guidelines developed by the previous insurance experience.

In a subsequent article, I will outline how United Healthcare uses these strategies to maintain a consistent competitive advantage relative to other insurers.

Discovering United Health Group (UNH), a Novel Portfolio Holding.

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Feb 9, 2024. In 2022, risk-on stocks in the US markets fell. My portfolio holdings at the time, Microsoft (MSFT), Adobe (ADBE) and Visa (V), all growth stocks, participated to varying degrees. They all have persistently high gross and net margins, and consistently high returns on invested capital. These are key signs of the presence of a durable competitive advantage of their business, and these are traits I screen for in routine searches for investments. In spite of their outstanding financial accounting features, all were falling in 2022. MSFT and ADBE especially had price earnings multiples which had been climbing for years, based on expectations of continued earnings growth. They were therefore vulnerable to a downward revision of earnings expectation.

But not all stocks in the market were falling. I wondered, was it possible that there were companies with strong business qualities, but which I had previously failed to identify as investment candidates, because their financial statements had features which differed from those of my customary investments? I reasoned that furthermore, such undiscovered businesses would likely have historical returns which did not necessarily correlate with those of my current portfolio holdings.

Somehow, sometime in late 2022 I discovered, or was affronted by, the somewhat outrageous but undeniable fact that the largest public health insurance company, United Health Group (UNH), had an average annual return since its IPO, higher than that of the mighty MSFT. As of Jan 31, 2023, using a free online stock total return and dividend calculator, I found the average annual return of UNH since IPO on Oct 16, 1984, was 26.14%. This beating MSFT, which since its IPO March 16, 1986 had a average annual return of 25.14%.

How could this be? In order to find some basis for the first-class total stock return of United Health Group over its history as a public company, I naturally needed to check out its financial statements and relevant ratios. One pretty good source of this information that I use is stockanalysis.com. There, I found that in the past 10 years, UNH gross margin was never as high as 30%, and net profit margin barely reached 6% in 2022. These poor margins were the reason UNH had been rejected in my occasional screens for good investments up until now.

Brief research into UNH history told a story of a company which grew through mergers and acquisitions as well as organically, to become the dominant public diversified health insurer.

Upon further review of UNH financial statements and ratios, we do see some inviting accomplishments over the past 10 years. Notwithstanding relatively low profit margins, revenue has grown consistently. Annual earnings growth has outpaced revenue growth, suggesting economic value added. Return on invested capital (ROIC) has been in mid-teens. Return on equity (ROE) has been over 20% for most of the past decade. Return on assets (ROA) has been almost always lower than 8%; balance sheet assets, including goodwill, have grown along with revenue. This is likely because UNH has grown through acquisitions. Liabilities have kept pace and in fact grown a bit faster than equity, However, the debt/ equity ratio has usually ranged between approximately 50% and 75%. Indebtedness has grown somewhat but interest coverage is still about 10x currently.

We see evidence of consistent consideration for shareholders. The company paid dividends annually since 1990, and increased the dividend annually since 2010. Consistent growth in free cash flow, accompanied by reduction in number of shares outstanding.

The combination of sound financial statements and the world class shareholder return since IPO in the 1980s, suggests the existence of a durable competitive advantage, interestingly, in spite of the narrow gross and net profit margins. The longevity of the company implied it had successfully adapted to maintain its competitiveness in the evolving healthcare market. Durable competitive advantage, and the ability to continue adapting its product in a profitable way, to the market as it evolves, in order to perpetuate the company’s market dominance, are the seminal qualities of my favored type of long equity investment, which I term the “eternal company”.

How could a company continue to grow its earnings over 5 decades, surviving 6 recessions, while earning a net profit margin of less than 6% ? I endeavored to discover the history and basis for UNH competitive advantage, which I will describe in a subsequent article.

Balanced fear and trust in portfolio construction

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1-10-2024 Humans have an emotional basis for thought, including their portfolio investment decisions. Therefore, practically speaking, a successful investment strategy must be able to operate while being associated with these emotions, functioning both in spite of, as well as because of them.

The market correction of 2022 was related to the Federal Reserve’s increase of interest rates, with consequent fears of prospective slowing of economy, and associated adjustments in analysts’ models and earnings estimates. Market downturns cause fear among holders of stocks. This is not totally avoidable, and it happened to me.

Why was I afraid? Unfortunately, I had committed a major error in my role as investor, an error which had become a pattern over several preceding years. New time constraints occurred, related to devotion family demands, passionate commitments to fulfilling personal pursuits, and duty to professional demands. Therefore, over a few years I had much reduced my formerly practically constant reading about my companies and investing in general.

Bearing in mind the nature of my investments, “eternal companies” with a durable competitive advantage that have the “culture” and capital, human and financial, to adapt to continue dominating their market. These companies can weather an economic downturn and rise with the recovery and continue on their march to growth. We know this because they have done so repeatedly over their history, and they continue to develop the qualities which drive this durability. And so these companies do not require constant monitoring to see if their earnings are finally coming into existence, or if paying customers are appearing, as is the case with some novel hot companies. Indeed, this is one specific advantage of the “eternal company” concept for the individual investor who has done the work to select investments, but does not want to spend an inordinate amount of time on an ongoing basis, worrying about his portfolio.

However, because I was no longer keeping close track of my investments, having reduced my immediate awareness of my portfolio companies’ current achievements and strengths, I was vulnerable to the fear which affects the ignorant in a market downturn. In the anxious and volatile market of Summer 2022, recession was widely predicted by economists for early 2023. I began to read again. I did not in panic sell my holdings at the low points. This was because I know they are sound investments and this attachment has an emotional tone. However, while I refreshed and reestablished my current knowledge of the repertoire of business strengths of my companies, I felt the need to do something to protect my portfolio from a time period of losses of unpredictable duration. I searched for a suitable candidate investment to which I might allocate part of my capital. One which did not correlate with my current holdings and might therefore better withstand a possible upcoming recession.

Thus, at approximately the end of January 2023 I shifted some funds from my current holdings, to a novel portfolio component: United Healthcare Group (UNH). I reallocated approximately 1/3 of funds from ADBE, 1/4 from MSFT, and less than 1/4 from V. I made these moved because of anxiety regarding recession, rising interest rates and the effects on tech and digital finance stocks. But I made only a partial reallocation, because I trusted my current companies would certainly eventually recover and in fact likely take market share during any recession.

As the broad market recovered in the second half of 2022, it became clear that I had traded a portion of funds out of my current holdings, just in time to miss the major recovery run ups of 12.3% for V, 49.3% for MSFT and 60.6% for ADBE. In contrast, UNH only appreciated approximately 8% between January30 and the end of 2023. My return on investment for 2002 would have been better had I remained fully invested in my original portfolio of eternal companies.

This episode yielded a couple of investor lessons. By regularly reading, keeping informed about your own investments, you are continually aware of the reason that they are sound investments. Had I done this, I might have held onto my ADBE, MSFT and V with more confidence, knowing that the companies would certainly survive and thrive. Even should a recession have occurred, as companies riding a wave of secular market expansion, they would play an early part in the rebound of market sentiment as the prospect of tangible economic growth reappeared ahead.

Second, equally important: regularly search for novel portfolio candidate companies which are in a different business and sector than current holdings. Do this research in anticipation of a change in economic conditions which makes the novel companies a relatively better value. In this way, you can be ready to shift allocation into them at this relatively lower valuation compared to your current holdings. Moreover, preferential selection of companies in different sectors promotes construction of a portfolio whose future performance is less vulnerable to economic changes which harm a specific sector. Finally, keep informed of valuation conditions in the various market sectors so as to know when they are likely to present relatively better values and opportunities for purchase.

Because I did not maintain this regular, anticipatory research, I had yet to identify new portfolio candidates with relatively more attractive valuations, by the time MSFT, ADBE and V hit new highs in the second half of 2021. Instead, I delayed until they had already reached subsequent 52 week lows in Spring of 2022. I therefore lost the initial period of advantaged returns which could have resulted from diversification into non-correlating holdings.

Notwithstanding my apparently poorly timed UNH purchase, portfolio performance (IRR) for calendar year 2023 was quite good at 43.2% This was a product of both the durability of my long term holdings, and that of the new investment. I continued to trust in my long term holdings and therefore resisted selling them completely even in the face of significant price declines. This was balanced by anxiety regarding further losses related to a recession, prompting my search for a company meeting my investment criteria, with returns not likely to correlate with my current holdings.

I admit these emotionally related errors not just because I value transparency and truthfulness. It is important to know that an investing strategy can be reasonably successful in spite of your fears. A strategy which depends on perfect logic is pure fantasy.

Interestingly, the selection of UNH actually represents an evolution of my eternal company criteria. This innovation was stimulated by necessity, the mother of invention. I will describe my process for selecting UNH in a separate article.

Amateur Investor Beats S&P performance at 1y, 5y and 10y at end of 2023

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	1y(%)	3y (%)	5y (%)	10y (%)
Amateur Investor	43.2	8	21.2	20.1
VOO	26.33	9.97	15.66	12
Brk-b	15.46	15.43	12.76	11.64
VBIAX	17.58	3.73	9.61	7.73

Performance of Amateur Investor portfolio compared with Vanguard S&P500 index ETF VOO, Berkshire Hathaway Brk-b, Vanguard Balanced Index Fund VBIAX.

January 4, 2024. Annualized Performance of Amateur Investor portfolio at 1y, 3y, 5y and 10y (%), as of the last trading day of 2023, December 29. Performance is compared with those of various securities of interest. The S&P500 broad US market index is represented by the Vanguard S&P 500 ETF (VOO). Brkb-b is the affordable Class B share of Berkshire Hathaway Inc. (Warren Buffet, Chairman, CEO and President). The conservative, traditional 60/40 stock/bond allocation strategy is represented by the Vanguard Balanced Index Fund (VBIAX).

1-3-2024. 2023 was an eventful year, including predictions of recession; the failure of China growth to happen after the Communist regime decided to loosen up on draconian covid related lock downs; a liquidity scare in the US related to devaluation of bank assets caused by rapid rise in treasury bond rates. Portfolio performance was poor in the first quarter. In response, I found a new investment in a sector I had hitherto avoided, but decided to reallocate some funds into United Healthcare Group (UNH). While the reallocation, as it turned out, was poorly timed in the sense that the current holdings of V, MSFT ADBE subsequently recovered wonderfully. However, UNH has a strong competitive advantage and management culture has proven itself over time, generating a top flight total shareholder return since IPO in 1984. I will describe my approach to UNH in a separate article. This involved an innovation of the eternal company criteria.

MSFT:	41%
UNH	21.5%
V	20%
ADBE	16.28%
MELI	1.17%
Cash	0.02%

Amateur Investor portfolio holdings, by proportion %

Microsoft continues to grow its Azure cloud revenue and usage and gradually take market share from Amazon;s AWS. It has become a leader in AI application for developers, and in workflows for information workers, using AI presented as a “copilot”. These are reportedly increasing worker productivity significantly. The addition of AI capabilities into the repertoire of Microsoft productivity products could produce a hockey stick increase in revenue.

Adobe is integrating generative AI capabilities (Adobe Firefly) into its flagship Creative Cloud, Document Cloud and Experience Cloud applications and has created an AI-first online suite of applications in Adobe Express. AI integration in Experience Cloud makes personalized and real time marketing more facile and efficient, exposing more, non-professional users to creativity and sophisticated digital marketing. The freemium Adobe Express suite too, introducers a greater number of non-professional creatives to digital creative applications. As the market of potential Adobe application users expands, Adobe management plans over time, to leverage use of generative AI into price increases according to the value added. As a leading digital marketing software provider for enterprises, Adobe enables companies to build custom AI large language models in which no alien copyrighted material is used, and the company branded content is for their exclusive use.

Visa continues to expand its network into novel areas such as B2B payments (Visa Direct), cross border payments. Where potentially competing networks are used, such as RTP (such as Zelle), Visa is still required to provide services needed to bring the payment service up to expectations regarding security and other features. Visa continues to partner with leading novel fintech companies to give them access to global markets in payments.

UNH continues to acquire relevant healthcare services companies and develop its value based care coverage and provider network, as it evolves as a diversified healthcare company, providing healthcare insurance, healthcare services, ancillary services, pharmacy benefits and digital information applications. UNH products are indispensable and must be paid for, whether by individuals, or more likely by third parties such as employers, unions, government. The diversified array of healthcare services combined with market dominating insurance creates network effects and cost advantages.

Mercado Libre continues to build its ecommerce ecosystem, with ecommerce, Mercado Libre; fintech: digital payment, Mercado Pago, credit, Mercado Credito; logistics, Mercado Envios; and advertising, Mercado Ads. The logistics network reaches from distribution centers to neighborhood stores that serve as service centers for delivery and returns, as well as for local SMB sellers supplying into the ecosystem. As delivery efficiency has resulted in speed and reliability greater than normally available otherwise, this is an important pillar of MELI competitive advantage, bringing sellers and buyers into the ecosystem, where each component is advantaged by combination with the other.

While we continue to pray for the world’s people in their difficulties, I feel these companies will continue to adapt and thrive, while enabling people to accomplish more.