UnitedHealth Group (UNH-$307.86 US, NYSE). A Winner on COVID-19 Social Distancing Policies.

UnitedHealth Group appears to be a clear beneficiary, from a cost perspective, as a result of quarantine and social distancing measures enacted by various government levels in the United States, as well as an aversion by the public to consume primary medical services and care covered through UnitedHealth Group insurance policies.

While there has been talk by the media of enormous costs to the medical system in the fight against COVID-19, trends experienced by most health insurance companies indicate that, overall, the US health care system has experienced a meaningfully lower expense structure from an insurance coverage perspective. An aversion to travelling to hospitals, a fear of meeting personally with physicians and temporary deferrals in obtaining slots for non-urgent patient surgeries, for Q1, resulted in lower overall claims for private health insurance firms. As UnitedHealth is the largest company in the space, their first quarter profits rose above expectations due to lower submitted claims. I would expect that this trend will persist for the entirety of 2020. On a negative front, there will be fewer employees covered by private insurance firms such as UnitedHealth, should unemployment remain at current elevated levels. The trade-off between the lower medical cost expenses vs ongoing policy revenues might offset a decline in total insured policies in force, which, if proven correct, could enable UnitedHealth to meet and possibly beat modest forward expectations for the balance of 2020.

The results at UnitedHealth were sufficiently strong that a dividend hike would have normally been warranted with the positive quarterly results. From an optics perspective, it would have been highly unseemly for UNH to have raised their dividend at a time of a health care crisis, so it was certainly the wise course of action, for the near term, to not raise the payout. The media would have latched onto news of a dividend increase by UNH at the height of the crisis and run the company through a grist mill of negative press for several news cycles; why risk the ire of a hostile press in the short term when a dividend hike may be announced, more quietly, at a later date? Nevertheless, it speaks well financially that the dividend coverage rate continues to grow steadily and bodes well for future payout hikes.