Morning. I will be your conference operator today. Welcome to the conference call to discuss the combination of UnitedHealth Group and Ameal. A question and answer session will follow joint remarks from the company's. As a reminder, this call is being recorded.
Here is some important introductory information. This call contains forward looking statements under U. S. Federal Securities Laws. These statements are subject to risks and uncertainties that could cause actual results to differ materially from historical experience or present expectations.
A description of some of the risks and uncertainties can be found in the reports that we file with the Securities and Exchange Commission, including the cautionary statements included in our current and periodic filings. You will find additional information related to the discussions on this call in the press release we issued this morning, which may be accessed from the Investor page of UnitedHealth Group's website. At this time, of AML, Doctor. Edson Bueno. Please go ahead.
Good morning. Thank you for joining us this morning to discuss our combination with Emile and the formation of an important new growth platform for UnitedHealth Group. We are aligning with clearly the strongest, best managed healthcare company in Brazil and together we're committed to creating the leading healthcare company serving the Americas. For UnitedHealth Group, Emil represents an important step forward in establishing a distinctive international growth platform. For Emil, UnitedHealth Group provides access to distinctive resources and capabilities that will help advance care and service for consumers and expand and diversify services in Brazil and potentially other markets in the years to come.
With me by telephone and in person are a number of leaders from both organizations. Erwin Kliews, Emil's Corporate and Investor Relations Officer is with us today. We also have Gail Boudreaux, CEO of UnitedHealthcare Larry Renfro, CEO of Optum Dave Wickman, our CFO and President of UnitedHealth Group Operations and Technology and Executive Vice President, Simon Stephens, Head of UnitedHealth Group International. To begin discussing our agreement, I'm pleased to introduce my colleague, Doctor. Edson Bueno, the Founder and CEO of Emile.
He and I have gotten to know each other well in recent years and we are looking forward to Doctor. Bueno joining our Board of Directors. Edson?
Thank you, Steve. This is an exciting day for us at Amil. We believe we have found United Group the ideal health care partner that will enable to differentiate and grow our business over the long term, serving the needs of Brazil and beyond and do it in a way that fits well with our company and the culture. For some of the U. S.
Listeners, I thought it might help to provide some brief background on where our company and the market stands. Brazil has seen great success over the past 2 decades. Employment among our nearly 200,000,000 citizens has steadily risen and has reached a rate significantly above that of the United States. While individual per capita GDP has more than tripled since 2003. So our middle class is growing strongly.
The demand for quality and affordable private health care has accelerated it. Brazil is among the largest non U. S. Price to help benefit the market in the world. And this market is growing quickly as the country develops.
Our middle and upper classes have added 0.6000000 people since 2003. Only about 25% of the people have applied health care benefits and the penetration has been growing rapidly. Few things are more important to our large and rapidly growing middle class, the quality affordable medical care. Our private market offers great quality and access done what is available to the public system of the hospital and the clinic. So, private plan membership has increased by 30,000,000 people just since 2005.
Private plans differentiate themselves on access to quality care. In this environment, the hospitals and the care delivery services are a key source of distinction and the new homes in the basin of defined multimodeling hospitals and integrated care delivery resources in Brazil. Our government has an effective promoter of private sector health care, improvements to benefit rising standards for assets and increasing financial requirements, have strengthened marketing offering, Higher standards have caused weaker health plans to close or merge, steadily improving the quality of the private market choice for Brazilian consumers. As the government understands, every Brazilian citizen who receives private coverage to an employer or with their own money reduce the strength of the public health system. The private market remains significantly under penetrated and our government has a natural interest in promoting a quality price and market alternative system to add new and high quality capacity beyond the public system.
Thank you, Edson. We have been quietly evaluating international market potential for many years, including the Brazilian managed care market and have known and engaged with Emil for more than 3 years. We believe Emile under the leadership of Doctor. Bueno and his executive team is by far the strongest, best managed healthcare enterprise in Brazil and in all of Latin America. Emil was founded in 1978, just 1 year before our own company was founded.
And today, Emil is recognized as the most capable, largest and broadest managed care enterprise serving Brazil. It serves more than 5,000,000 people across a full range of products from high end comprehensive insurance offerings to basic HMOs and dental benefit plans. Amneal's market position has been built through a focus on strong innovative product offerings, a high quality selectively integrated care approach and affordable access to differentiated private healthcare delivery resources. While O'Neill operates in all of the key regions of Brazil, it is concentrated in Sao Paulo and Rio de Janeiro and has near term growth potential in these markets as well as in adjacent local markets, all of which are far from fully penetrated and served. A meal offers benefit plans and operates hospitals, clinics, outpatient facilities and other health resources in locales where those assets offer distinctive value to the consumer and provide appropriate rates of return.
Emula has demonstrated consistent financial discipline over the long term in both its organic growth and through its acquisition activities. A key to this success has been the thoughtful integration of hospital and care delivery resources. Aneel operates a distinctive model with a combination of owned and contracted care providers. They direct patients with complex needs to their own high quality facilities, where they can cost effectively deliver the required clinical care on an integrated basis. They complement this with the broadest healthcare delivery network in the country.
UnitedHealth Group and Emil share many common attributes. Both are disciplined operators, both focused on organic and acquisition based growth. Each is a market leader across multiple market segments. Both use capabilities and technology and data to further their performance and lean towards modern and progressive approaches. Both are innovative and evolve market specific strategies rather than sticking to a single approach.
Strong leadership skills and fundamental execution are deeply valued by both companies. And continuity of leadership is evident as the founders of both enterprises still serve as the Chairman of their Board. Emile will strengthen UnitedHealth Group. We expect to gain further insights into hospital and clinical operations benefiting both Optum and UnitedHealthcare. A meal's leaders add to our store of knowledge, deepening our capabilities in our core competency of clinical resource organization and delivery.
Importantly, Emile further diversifies our revenue and earnings streams and does so in a way that is operationally and culturally comfortable and positive for us. Emile's proven management team will stay with us for the long term, leading the growth and development of this enterprise. UnitedHealth Group will also be committed to strengthening the meal. We can be a strong partner for our growing market and we will leverage our long standing competencies in care management, Technology and Information, as well as expertise in insurance and managed care disciplines. Emile has well run systems today.
We believe we can help operate those systems efficiently and at higher scale, while providing access to our latest consumer health care innovations and service improvements. EMEA will also provide an important platform to establish Optum's presence in Brazil and Greater Latin America. The demand for market leading clinical software, data management and analytics, revenue management and compliance, cloud based hosted technology and managed care skills and tools really have no national boundaries. Emile's platform can establish Optum in Optum's market presence and facilitate its introduction to these important underserved markets. Adopting Optum's offerings and capabilities can strengthen, differentiate and diversify EMEAL as it has for UnitedHealth Group.
So with that context, I'll ask Dave Whitman to summarize the transaction structure for you and then take your questions. Dave? Thank you, Steve. We will purchase 90% of Emil's roughly 359,000,000 outstanding common shares for about $4,900,000,000 This includes our share of realizable Brazilian tax benefits worth the present value of $600,000,000 bringing our effective equity purchase price to approximately $4,300,000,000 The purchase will happen in 2 steps. Subject to regulatory approval, we will purchase approximately 60% of the outstanding shares from management, followed by the purchase of approximately 30% from public shareholders.
Ameal leadership, specifically Edson and his partner Doctor. Dulce Pugliese currently control approximately 70% of the shares and will sell roughly 60% to UnitedHealth Group, retaining the remaining 10% for at least 5 years. UnitedHealth Group plans to purchase the approximately 30 UnitedHealth Group will fund the purchases through a combination of cash on hand and debt. We expect our ratio of debt to total capital to be below 35% by the end of the Q2 of 2013. We expect the Emil to be slightly to our baseline earnings per share forecast for 2013.
We will be able to discuss that forecast in detail at our Investor Conference on November 27. Doctor. Bueno has committed to investing $470,000,000 of his net proceeds from the transaction in UnitedHealth Group Shares and holding those shares for the same 5 year term. We believe this will make him the largest individual owner of our shares. His retained ownership of Emile combined with this purchase signifies his deep personal commitment to the ongoing success of the combined organization.
We have posted a presentation on our website that reviews the opportunity in some detail. The presentation includes data on the growing Brazilian market and Emil's business and operations, competitive positioning and financial performance. We will keep it posted so you can review it at your convenience. Lastly, given the proximity to our scheduled earnings conference call, we will offer a brief update on our Q3. UnitedHealth Group 3rd quarter financial results are expected to be strong, supported by consistent fundamental execution across the enterprise.
UnitedHealthcare expects to have added over 650,000 people in the quarter, while delivering well managed medical cost performance. Optum remains fully on its growth and performance pace. Earnings are expected to be at least $1.45 per share. We will provide a full update during our Q3 conference call on October 16. We will take questions on our 3rd quarter results and 2012 outlook at that time.
Steve? Thanks, Dave. In closing our formal comments, I would summarize the following. We are combining the strengths of 2 capable well positioned market leading enterprises to advance health care and service to consumers growing needs for quality care at affordable cost, which is a growing worldwide challenge to advance, innovate and modernize the healthcare systems for the 2 largest and consistently fast growing markets in the world. We see the market potential in Brazil in many ways similar to the United States several decades ago and like in the United States continuing to evolve.
With Emil's leadership presence, capabilities and market knowledge combined with what UnitedHealthcare and Optum have learned and the capabilities and experience developed over the last 30 years, we believe we have never seen a more compelling opportunity for growth, value and service. O'Neill creates an ideal platform to better position from the perspectives of near term accretion and return to the exceptional long term growth, cash flow and return potential. Our financial position remains strong. We will be back under 35% debt to total capital levels by the end of the Q2 of 2013, if not sooner, based on how we pace our continuing share buyback program. We remain fully committed to the continued advancement of our dividend program without any interruption whatsoever.
The Edson Bueno to both Emil and UnitedHealth Group and his participation on our Board is distinctive and signifies the deep commitment on both sides to the success and potential of this relationship. This is a new growth channel for UnitedHealth Group and its shareholders, building on what is already the most diversified enterprise in healthcare today. And that diversified enterprise is growing and performing consistently in service to consumers, care providers, government programs and enabling and modernizing the health care system in this country and now beyond. So operator, if you could please assemble the questions, we'd be happy to take your questions for the balance of this call. Thank you.
You. We'll take our first question from the side of Josh Raskin with Barclays. Go ahead. Your line is open.
Thanks. Good morning. Thank you. First question, I guess, Steve, really relates around some of the comments that you made around the international expansion thought process. It sounds like you've been, as you said, quietly looking at international opportunities for several years.
You've mentioned knowing Emile and their management team for the last 3 years. So I guess I'm curious why now? What makes this the most compelling value creation opportunity you've ever seen today? And I guess a lateral to that would be, should we read anything into the domestic opportunities in light of this latest use of capital?
Sure. So obviously, we are a competency based enterprise. We think that the competencies of care management, healthcare information and analysis and technology enabling enablement are leverageable and leverageable beyond the domestic markets. We have been interested in continuing to diversify our business for some time and have been very impressed by the economic growth, political stability and the orientation around the managed care that Brazil has demonstrated. So that market has been appealing to us for some time as a good base for us to take our 1st international step.
It was really the opportunity and growth of that marketplace, the opportunity to further diversify our business, the interest of the competencies that EMEAL has around kind of the operations of their own care delivery services that continues to build our competencies in these areas. These are all what I would say were compelling to us and an opportunity to allocate our capital in a new area for long term growth. It doesn't really say anything at all negative about the domestic marketplace. We think and I said on several times in calls such as these about the significant growth opportunities in terms of coverage expansion, expansion in Medicaid, the expansion in Medicare and the demographic trends in Medicare, the opportunities for duals and then the downstream implications across the healthcare system that plays so well into Optum's capabilities. So no shortage on that end, but this gives us an opportunity to pursue a new growth channel and growth platform in a new marketplace and really not create any conflict in terms of the domestic marketplace, particularly in a time when we think the reform opportunities are probably pretty compelling.
So for a variety of reasons, we think this is really excellent timing.
And then can I just ask one question around the public versus private Brazilian market? I guess, is there an easy way to prove and I understand just reputationally and it seems almost sort of everyone thinks of it that way. But what are some of the proof points in terms of the outcomes at EMEAL versus the public system? How do we sort of get some data on proving the point that you guys are providing better care in Brazil relative to the public system?
Well, I don't think that this venue is the right one to establish kind of statistics on that level. But I would say the market boats for itself. If you take a look at how the market has been responding to the resources of Emile and Emile's approaches not only to the position of its benefits, but also to its services. So I would say, if you want to test the marketplace, I think you can see the market's response to a meal. Beyond that, I think in subsequent settings, we can speak to the quality of their outcomes, the range of services they offer and their position in their various markets.
But I would tell you from my perspective, the consistent response to EMEAL and its consistent growth would suggest to me the market's reaction.
Okay. Maybe November 27 is a better forum.
Right.
All right. Thanks, Steve.
We'll probably at some point in time have a session where we really kind of focus on a meal in the Brazilian marketplace given the importance of this. So over time in our various settings, we'll continue to deepen the market's understanding of a meal in Brazil.
Okay, great.
Next question please.
We'll go next to the side of Matt Borsch with Goldman Sachs. Go ahead. Your line is
open. Yes. Thank you. I was hoping you could talk a little bit about what revenue synergies you see as you bring things from UnitedHealth Group to bear with Emile? And what range of services you think specifically you can apply to what Emile already does in ways that you believe are going to improve their operations?
And how much of that thinking guided your decision here?
I'll begin. I'll ask Simon Stephens and Dave Wittmann to also perhaps kind of join in, in this response. But I would just observe broadly that behaviors in the Brazilian market, consumer behaviors that appetites in the Brazilian market don't really appear to be that different than those of the United States. Consumers are coming into that market. We think they've been encouraged into that market by government policies, attracted to private health care coverage, attracted to the resources, the care resource that private health care represents.
They're behaving like consumers. They're interested in a range of benefit services. They're interested in the quality of the assets and the convenience and diversity of assets that are available. They're interested in mobile applications and modern technology. They're interested in all the same things that an American consumer is interested in.
In many respects, that marketplace is even freer for the consumer to pursue. Simon, if you want to add to that?
Yes. Thanks, Steve. I would just add on the health benefit side of the equation that over the past few years, we've been expanding our international health benefits, particularly for multinational companies with global workforces. And many of UnitedHealthcare's largest employer customers in the U. S.
Have sizable operations and workforce.
To the Brazilian market. And we believe that we will see increased productivity. Although it's highly automated, we believe we can advance automation in EMEAL. We're confident also with respect to just fundamental kind of workforce management techniques, the application of those could be helpful in this market as well. So we do see some synergies there.
That being said, we'll be cautious about offering too much assistance in the early stages given the Brazilian culture and whatnot. On the technology front, they're already migrating to a single technology. You probably know the history of Emil has a number of acquisitions in its past and they've done a spectacular job of migrating to a single technology platform having completed 2 thirds of that migration today. And it's operating very, very effectively. They operate very efficiently.
I'm very impressed not only by the breadth of their technology, but also the applications that they've developed for self-service and whatnot.
Matt, it's Larry Renfro. Maybe I'll just make Steve has made a lot of very good comments about Optum. I'll just give you a couple of thoughts. As you know, we're very, very focused on a what I'll call our 3 year business plan and meeting our objectives of our 15% ROIC and 6% margin by 2015. In getting there, I think you know that 50% of that comes from very strong cost management as well as 50% from growth.
And according to our thoughts on this, we believe the pairing of these two organization is a perfect fit. I mean, when you look at our technology, consulting, outsourcing, as Steve said a lot of this on the health information analytics,
that just fits perfectly
with Emil as well as some of the things that we might be able to do on implementing PBM management in Brazil. The other thing I'd just add is that on the integrated care side, we believe we'll learn a lot from Emile on the collaborative care side that will fit in the whole integrated care delivery.
And if I just one last follow-up, the operating hospitals is a new one I think for United. Is that something that gave you pause or something that you see as an opportunity to learn and expand on potentially in other countries?
So Matt, as you know, we have been moving into the adjacencies of the chronic care continuum with our collaborative care efforts. And really when you get into and understand how EMEAL has very thoughtfully integrated its own care delivery resources into an open market network and how it uses those effectively in its specific markets for them. It's all the same as it is here. Healthcare is local. It's operated locally.
And so they've been very thoughtful about how they feather in their own care delivery resources. And yes, we are interested in better insight and learning about how they operate very effectively. I would say the strongest part of EMEAL's operating prowess is their operations in the care delivery assets. It really is impressive and I think we have a lot to learn and that was one of the areas of competency that attracted us.
Thank you.
Next question please.
We'll go next to the side of Justin Lake with JPMorgan. Go ahead. Your line is open.
Justin?
Mr. Lake, please check your mute function.
Hello? There you are.
Hi, this is Justin. Sorry about that. You guys still with me?
Actually, we never got any part of it. So you can just start from the top.
Sorry about that. Steve, you talked about the strong returns on investments here. Given the acquisition is only expected to be slightly accretive in 2013, I would assume you expect more significant contributions over time. So I was just hoping you could walk us through whether maybe there are any one time items acting as a headwind in 2013? And what do you think the long term growth rate of this company is maybe comparing it to the 13% to 16% growth you target you have for UnitedHealth Group?
Thanks.
Sure. Again, this is something we can really only respond to broadly. I think that we are cautious going in with respect to pursuing this investment and we'll talk more specifically at our investor conference with respect to the contributions we think a meal can make in the near term. But this investment was really postured to create a 3rd meaningful growth platform for our business, a new direction of further diversification and really is a long term investment. If you stand back and take a look at the impressive growth attributes, so this is really all about growth, growth attributes of the Brazilian market and how it's evolving and how it looks to us like the potential that the United States marketplace had 20 or more years ago.
When you take a look at the growth potential of establishing it as a platform to diversify that in Brazil and Latin America for Optum. And when you just broadly stand back and look at the growth attributes of EMEAL itself, it is probably a factor of let Dave speak to twice the growth potential of what we see the domestic marketplace being and that is really the elements that we think really drive return. I think we can bring efficiencies and make our contributions in those ways from an operational and technology point of view. But this investment really is around growth, the pursuit of a dramatic new market. If you think about it, we will be arguably a market leader in the United States and Brazil and Latin America.
So the 2 best performing, most consistent growth markets for healthcare, and we would have the 2 best assets and those assets are now going to commit to working more effectively with each other and I think they have some complementary things to offer each other. So that's the premise of it, if you will. And I don't know if you have anything more to add, Dave? Maybe just a few brief comments, Justin, to add. We'd expect a strong return on investment.
In terms of headwinds, just being specific, we see nothing in particular, possibly the slowdown of the global economy could be 1. But I'd expect steady paced earnings growth. And then as it relates to the growth rates for the business, as Steve said, the growth rates in Brazil are much stronger led by the top line growth opportunity due to the expansion of the middle class and the privatization of healthcare broadly. So as Steve indicated, we'd expect it to be 2x the pacing of U. S.-based investments.
And Justin, maybe Edson, if you are out there and have a base on this, do you have a perspective on the growth attributes in Brazil?
Yes. I believe that for example, this year for example, the economy here in Brazil everybody knows that is increasing lower than 2%. But the projection for next year for the government, for economic minister and everybody is closer to 4%. I believe that's a great growth. And the government took a lot of did a lot of movements to do it.
And about the health care, the health care, I believe that we will continue to grow the same way, because the government has a lot of investment, but there's not enough to treat the whole population. And the best situation right now is that we have 200,000,000 people is that right now we have 48,000,000 people in the health care industry. I believe that each time that we grow the private health care, the government has the same money to treat much better the people the other people. And because of that, I believe that we will continue to grow very, very well. And right now, you can see that here in Brazil, 38,000,000 people moved from class B to C and the 24,000,000 people moved from Class B to A.
And I believe and the other thing that's happening here in Brazil, you can see from 2,003 to 2011, our GDP used to per capita used to be $3,000 And right now it's $12,000 And how the government continue to invest the same amount of money and each time technology and everything that the medical cost is increasing And I believe this is a great opportunity for us. And the other thing is about our company. You can see the last 8 years, we grew more than 19%, the revenue grew. And with the last 2 years, 28 percent at least. I believe that with United that has a lot of capital, has a lot of technology, has a lot of experience in membership and everything.
We can control much better our G and A and many other things of our company. I believe that because of that. And the other thing, as you know, that I can talk to everybody all the time when I take some decisions by life generally, the feeling sometimes is more important than the numbers. And I believe that in the future, the future you needed to have a global company. And because of that, I was very interesting into being part of health care group, UnitedHealthcare Group, because I analyze all the groups in the world and I found that UnitedHealthcare is the best group to join with us because it can bring wonderful thing in technology and everything to our country.
And we have a very good experience in partial vertical integration with hospital, helipids and everything. And I believe that it will be a wonderful game gaming situation and I'm very open to learn everything from UnitedHealthcare people.
Edson, thank you. Justin, I think that should be plenty of response. So we'll move to the next question please.
We'll go next to the site of Assis Guggenheim from Raymond James. Go ahead. Your line is open.
Hi, good morning, everyone. So I have a question about the operations of hospitals. In Brazil, it's not allowed to have foreign ownership of hospitals. But actually, I think you can if you own a managed care operator. I'd like to know what is UnitedHealth's views on the ownership of hospitals, if they think there could be any potential legal discussions regarding the ownership of hospitals.
And if that's the case, what would be like what the company will do with all these assets on BioMeal in the country? Thank you.
Yes. Actually, I think Erwin is probably the most qualified to respond to this, but I would say that we were well aware of those policies that they do permit Managed Care Enterprises to own hospitals and that we will obviously get this fully vetted and approved by all the appropriate authorities before proceeding. But Erwin can probably provide you a little more insight with respect to the relationship between hospital ownership and Managed Care Enterprises in Brazil. Erwin?
Sure, Steve.
First of all, everybody have to keep in mind that Amil is currently a public company and 90% of our free flow belongs to foreign investors. So if we could have any problems with that issue, this could be already happened when we went public 5 years ago. But the rationale against these foreign investments in essential services in Brazil is related when you have divestments into hospital business as a revenue center, treating hospitals as a business. Inside a mill, hospitals facilities are verticalized infrastructures. Most of the occupancy rate of our facilities are from our own members.
So it's not a revenue center. Our approach on the hospital is not to generate revenues. Is to treat as a cost center and save money and deliver products at lower prices and affordable prices for more people in our country. And if you need any more details on that, Guilherme, you can call me directly and I can explain it, okay?
Just kind of a follow-up, if I may, is because I think what is different now is that, Camille, I know that the company has a lot of foreign investors as of now, even before the entrance of UnitedHealth. But now I think the control is going to be owned by a foreign company. Do you think that there could be any discussion because of that change, Erwin, or anything related to that?
So I'll begin. Obviously, as I said before, we will make sure this is fully vetted from that perspective. We will not we would need to get full approvals in the country to proceed on this. But the backdrop in terms of the policies have been to allow for managed care enterprises to integrate hospitals into their business model, that there has been foreign investment, that the demands in the country are such that there has been a progressive attitude towards structures that will bring modern healthcare to bear to serve a very rapidly growing middle class and believe that those are the reasons that they have been advancing those policies and have been advancing them for some time. We think these are fully aligned with that.
And obviously, we have done diligence along those lines. And I don't know, Erwin, if you have more to add to that or not?
Steve, I would like to add something. I'm asking Guen. How Guillermo, how are you? And I will tell you one thing. First of all, when we bought, for example, 2,002, we bought from Cigna Anico, you could see that they used to have hospital labs and everything inside of this company.
And the many others foreign investors have been here with no problem. The other thing, when we went public, the IPO we consult the union government attorney and they explained very well that in this kind that Amil for example membership is hospital is correct and they approve it. You understand? I believe because of that and they have many example and with this kind of things, I believe that we don't have any problem because of that. It's my perception.
Okay. That's helpful. Thank you, guys.
Thank you. Next question, please.
We'll go next to the side of Kevin Fischbeck with Bank of America. Go ahead. Your line is open.
Okay, great. Thank you. You guys have done a pretty good job going through what you see as the opportunities from this transaction. But probably like a bunch of people on the call, we're just ramping up here on the Brazilian marketplace. And I was wondering if you could talk a little bit more about the competitive dynamics in Brazil, but really kind of focusing more I guess as you did your due diligence on the company and on the sector.
I guess what were the 2 or 3 biggest risks that you felt you had to get your head around before you decided to deploy $5,000,000,000 into this market?
I think a number of us can respond to that, but we obviously were looking to validate the continued growth trajectory of EMEAL and really assess its capabilities to continue to grow, serve a growing market, move not only from its concentrations in Sao Paulo and Rio de Janeiro, but also into the adjacent markets beyond that, so that we could see the growth trajectory of this enterprise and validate its, we think, distinctive model in terms of how it uses its own care delivery resources and open market networks in an effective way. Keep in mind, it has the largest network in the country. So it really has considerable resources to bring to bear to continue to support its growth. Dave can speak to the operations and technology. He talked about that before very solid.
Dave? Yes. They're very solid. I really see no issue there. I mean, it's fundamentally the company's ability to continue to grow.
Edson did a fabulous job laying out the growth patterns of the past. Obviously, we expect that to go forward in the future. So a lot of work around that. Ability to manage their margins, they have distinctive margin largely enabled by their owned strategic delivery operations. And then also just evaluation of the business as it scales, what the leverage is on its general administrative costs overall.
So those are the areas that we probably spent the most time on. Simon, thanks.
Okay. Thanks. I guess maybe just one quick one. I don't know if this is the right form again. I guess we're going to talk about this on the Investor Day.
But since you as you mentioned before, you guys have been thinking about international for a while, but you finally have made a big investment here. I mean, do you have any thoughts about longer term how big OUS might be for the company over the next 5 years as a percentage of revenue or profits? I mean, how do you think about that opportunity in deploying capital internationally versus deploying it in the U. S. Given the opportunities in both areas?
Yes. What I would say, Juan, we are very well positioned in the U. S, extraordinarily well positioned on the UnitedHealthcare side and operating well with I think a very strong path forward there. And the Opta business as Larry has indicated very focused, very well positioned, very much on its game and its commitment for 15% return by 2015. So very solid there and continuing to invest on that on both sides.
If you look back at this year alone, we have made meaningful investments in the UnitedHealthcare business with the XL transaction and properties in Florida in Medicare. We've made investments ongoing investments in Optum. Generally, they are smaller in nature just given the fragmented nature of that business, that marketplace. And then we've actually made probably more initiatives that I'll ask Simon to speak to in the international marketplace than people might broadly be aware of. We have been building that slowly for the last couple of years and been making some very nice progress.
We'll continue to do that, but we're not we are interested in growing a more diversified platform, but we are not
signaling any dramatic shift in capital along those lines. Simon? Thanks, Steve. As you say, we have been quietly expanding our international footprint over the past few years. Our international businesses through Optum provide health technology and clinical programs in Europe and the Middle East.
We're supporting individual countries healthcare systems in India, the U. K, number of other European countries. And through United Healthcare International, we are now offering international health insurance for companies with multinational workforces. And in addition, through our Frontier Medex division providing on-site support for global industries such as oil and gas, infrastructure, logistics and so on. So yes, there has been this quiet expansion in our international footprint.
But clearly, EMEAL is the very significant step for us in international markets building on our benefits and services platforms. And our focus will be in the near term in Brazil. There's so much that's
such a compelling marketplace and Emil has such a strong and potential growth positioning in that marketplace that we will focus on optimizing our position here and then look at other market opportunities as they present themselves. One of the things that was compelling about Brazil is how that market has progressed over the last decade and we'll have to watch other markets to see if they follow similar patterns. Next question please.
We'll go next to the side of Ana Gupte with Sanford Bernstein. Go ahead. Your line is open.
Yes, thanks. Good morning. So a couple of questions. 1 on the Health Benefits side in terms of synergies. Are you expecting margin expansion as you leverage your own scale and care management and data capabilities?
And can you give us a trajectory of what that might be for the EMEAL business?
Yes. I will have Edson and Erwin speak broadly to kind of the margin prospects with respect to Emile. We are obviously interested in bringing some resources to bear that address their cost structure. And then as I said earlier, consumer attributes in terms of their product offering, some of the innovations that have been successful for us in this marketplace. But in terms of speaking broadly to margin potential, margin expansion potential, Edson, do you want to comment?
Yes. I can comment a little bit. I'm very optimistic generally. And yes, you can have a little problem in short terms or the middle of the way, but I believe that with United and our G and A and many other things with high-tech and everything. I believe that we can say that we have the revenue growth at least in 2 digits.
And our margin will expand a little bit year by year.
Thank you. Next?
So then again on the Optum side, you had quantified a $500,000,000,000 I think addressable opportunity at your last Investor Day. Is anything in Brazil or ex U. S. Likely to be over and above that? And as you think about total potential addressable market in Brazil, including dental, where I think you've been doing some work in Brazil already, how much is the progression of earnings growth on that platform?
So I'll let Larry respond to this, but I would tell you that the growth potential that we talked about with Optum did not include Brazil. So Brazil would be on top of that. And he can comment himself, but we already have some activities in those markets on the Optum level. Larry?
Sure. And as Steve said, the $500,000,000,000 market was the domestic market. So it did not include anything Brazil. We have not sized that yet, expect to do that. Most of the discussion mainly Emil in terms of their internal operations and how Optum might fit.
Don't forget the cross sell opportunities that we believe that we'll have as well. As you look at their care network and their relationships and so forth, we believe there'll be a tremendous amount of expansion. But I would tell you at this point in time and we'll try to get that ready by the Investor Conference in November. But I don't have the numbers, but we know it will be a large number.
Can I get one last one in? So how is the international division now going to be organized and reporting? Is Doctor. Buna reporting to Simon? And is this likely a building block for other potential things?
And I know what you said just now that you don't have any plans immediately to allocate capital else there. And will you break this out in financials?
I think given the I'll just broadly comment that just given the nature of this investment, it's unique for us, really doesn't draw in domestic integration issues and really draws on so many of the aspects of our enterprise that we'll approach this at least in the near term kind of from what I'll call a team perspective, because if you really think about it, much of the product innovation and a lot of the insurance skills and disciplines are drawn from UnitedHealthcare. A lot of the technology and so forth are drawn from UnitedHealth Group. There's a whole array of offerings that Optum can bring to bear. So we will use our most senior leadership team to really operate as a team as we approach this. This will be a very different kind of approach and integrating from in comparison to how we have approached domestic acquisition.
And then I would offer something that I think is really important and distinctive and that is you have an extraordinarily strong leadership team in EMEAL. They are very strong operators. They have been advancing to position a market leadership in their own market. Edson Bueno is extraordinarily familiar with the Brazilian marketplace, is very across the whole spectrum of not only care delivery, but the insurance disciplines and benefit disciplines as well. They have done an extraordinary job.
And one of our goals is to make sure that we're embracing and supporting that team. Emil will continue to operate under his leadership in Brazil. That team will continue to go forward. It will be a Brazilian based enterprise. I think it would be a mistake for us to do anything other than to bring whatever capabilities we can bring to bear to advance the agenda of that platform in that marketplace.
Great. Thanks so much.
Thank you. Next question please.
We'll go next to the side of Ralph Giacobbe with Credit Suisse. Go ahead. Your line is open. Thanks. Good morning.
Can you talk maybe about any regulation that may be different than the U. S. Market, I guess first? And then second, I think to your last comment. So the brand in Brazil will stay, Emile, as is today?
Yes. The brand in Brazil will stay. Where I could start you off with the regulations in Brazil is that they are all different. They are 100% different. What I would offer is that there is a common theme and that is the government and regulatory authorities are well involved in the health care sector.
It's an important social sector. So government policies are critically involved in that sector and we will respect those as we do in the United States. But they have been moving directionally towards free market private healthcare sector to relieve the pressure on the public system there. And the regulations and their policies have been consistent with that and consistent with that for probably the decade or more. Erwin or Edson, do you want to comment further?
Maybe the working relationship you have with the authorities in that marketplace?
Yes. I believe that the regulation here is doing very well. And my perspective in the future that will continue this way, because they needed to increase the number of memberships in private health care, because then it's much better for the government because the government has the budget and the budget is very difficult to increase the budget. And because of that, they are stimulating the private health care. And right now, for example, we don't have control about the medical operations with many other subjects that you have in the United States.
And I believe that because of that the perspective the future, I believe that is good in my perception. Ed, so just complementing a little bit if you
allow me. Regulation is helping the overall health care system in Brazil to improve because every time that regulatory agency here we call ANS brings new rules, new benefits to cover, new provision guarantees, things like that. You have less companies operating and more efficient companies present in the market, improving the overall quality of the health care in the country. And this is, let's say, in favor of government interest to have well established and solid companies with good quality of services.
That's why we say that there are many things about this that remind us of the United States 20 or more years ago, because the marketplace has really kind of got that energy about it in terms of the private sector and the newness of these products and resources coming to the marketplace and the population's response. Next question please.
We'll go next to the side of Scott Faisel with Deutsche Bank. Go ahead. Your line is open. Thanks. Can you talk a little bit about how you expect the mix of growth to flesh out between organic and inorganic in the future?
I know Emile has done a lot of acquisitions in the past. So do you expect that growth will still be driven in the future by M and A? Or do you think it will be more balanced? And maybe talk about some of the initial feedback that you've gotten from regulators and sort of the political dynamic down there in terms of the ability to continue on the M and A path, given that Emile will now be owned by a large foreign insurer? Thanks.
Sure. Maybe I'll give Dave an opportunity to respond in terms of the split and then Edson and Erwin could comment with respect to the reaction in terms of the market in Brazil. Dave? Great. Scott, I think just to reiterate, 1st, a growing middle class in a thriving economy, ongoing expectation around consolidation just naturally from 1600 or so managed care plans to something smaller than that possibly getting to the size of the U.
S. Which is sub-five hundred as it stands today. And you have a dynamic as well in that market where there this conversion from indemnity based plans to managed care, which is much more efficient vehicle for the private sector overall. So those three things I think underscore the tremendous organic growth potential that sits inside EMEAL and that was the primary purpose of this acquisition. That being said, Emile is an excellent acquirer and integrator of plans.
And I could certainly see us in the future deploying more capital in this marketplace for acquisition related activity. Edson, any comments?
Yes. Since that we went to IPO in 2007, generally we suggest for our investors that we would grow and around 10% organic growth every year. And this is what 2,008, 2,009, 2010, 2011. And we will continue to say that we will get at least 10% organic growth. And I can tell you that we delivered the average in this 3 4 years 14 to 15.
Then above 40, 40 or 50, 50 more than we suggest. And we believe that we can continue to suggest around 10%, but perhaps we can deliver a little more.
So one of the things that attracted us here is the alignment is that common view of an orientation towards organic growth and complementing it with thoughtful expansions over time. And Emil has taken that same posture over the last several years. And then the last thing I'd comment is that, while yes, we will be the owner of this enterprise, it is our clear intention and commitment that this operate as a Brazilian based enterprise that it will be fully remain that way as it has in the past that is the market leader. This investment, I think, can signify the confidence that we have in the marketplace and in the EMEAL team and management and that they will be the very much the center of this business as they have in the past and that we will bring whatever we can bring to bear to advance and improve it, but they will be the end market leader. We are this is so different than you might anticipate from a domestic kind of an approach.
So I'd like to emphasize that. And now we'll just basically have time for one more question, please.
We'll go next to the side of Cheryl Skolnick with CRT Capital Group. Go ahead. Your line is open.
Good morning and thank you for letting me ask a question. First of all, Steve, I think by the end of December when most of this transaction closes, there's one thing off your never list that you can cross off and that's the ownership of hospitals. So congratulations. That's a
long list actually of things that we never would do and have done.
Yes, sir. I know and good for you. I'm curious, you've alluded to this. I think we've sort of danced around this. But first of all, this is not your first major foray into an international opportunity.
The U. K. Must have provided you with some insights as to how to proceed both positively and negatively because it's not your first time at the dance. And then I saw I'd welcome some insight in I'd recognize these are not the same, but perhaps similar to the way the UK could have gone if medicine would have become more privatized there. The second thing is talk to us in terms of, if you would, the pace of your integration of Emile.
And by that, I don't mean the domestic integration. I mean, how long do you think it will take you before we see both businesses being comfortable enough to introduce be it the technology, the UnitedHealth Benefits, product innovations or the full suite of Optum services that may be appropriate both internally at EMEAL and externally for clients and networks?
So I will offer a response that I think we need to be very respectful of the fact that we have to go through regulatory approval processes and so forth. But as Erwin suggested, those processes are appear to be much faster than what we experienced here in the United States. So on the presumption that the approval process moves forward as we have hoped in the next quarter, we will have essentially be in a position of investment control. We will engage and we have already developed I think very significant relationships with the EMEAL team. We will be engaged in the same processes for oversight that we do in our enterprise, monthly operating meetings, quarterly focus on operations.
So we will be moving very, very quickly with respect to the introduction of product features, the introduction of what we can bring to bear with respect to technology and operations. Our diligence has revealed a wide spectrum of opportunities that would we believe would be very near term. So this from that point of view will go very, very rapidly. And what's also interesting is that in that marketplace, there is the opportunity to introduce products, services and so forth. I'd say on a more agile basis than the United States that their regulatory processes and so forth are very responsive.
And so I think we can move very quickly. So we are would be hoping that by the beginning of the year that we would be introducing product features and elements that would be distinctive in that marketplace.
Simon? Yes. Hi, Cheryl. So just picking up your point about our other experience internationally. As you say, we have been working in the U.
K. Supporting the government funded National Health Service there, which is an example of where Optum is the right entry point and platform for us in that country, in that system providing health technology, clinical support for physicians inside the National Health Service has been the opportunity for us. But then equally in other markets where there is more of a private financing system, We find ourselves now providing international health benefits to people living in 70 countries through UnitedHealthcare's Global Solutions. And within the last 12 months, you've seen us formalize new partnerships with insurers in the Middle East and Australia. So as you say, obviously, the scale and the significance of what we're doing with EMEAL is a significant step up from those activities.
But in terms of operating internationally, we've been doing that for a decade or more.
I just round out the comment by the EMEAL management team and Doctor. Bueno himself have actually been very astute students
of
the U. S. Healthcare marketplace and of United and they have their own ideas about the things that they see to be most attractive and they could introduce most immediately. So we really have 2 dynamics going here. We have an organization interested to offer in advance anything we have to offer.
And we also have a whole dynamic where the meal management team clearly has remarkable familiarity with us and knows the kinds of things that they would like to get introduced in their market both in their products and in their operations. So we believe this will go very rapidly.
Like 2 kids and 2 really interesting candy stores. I thank you for all of that. And I'll just congratulations and let us know when you're ready to buy hospitals domestically.
Well, thank you. And with that, we will close this. We are very excited about the combination of UnitedHealth Group and Emil. And we do look forward to talking to you again during our conference in Q3, which comes up just next week on 16th and then later at our Investor Conference probably at the end of November. So we thank you again for joining us this morning and look forward to questions.
John Penshorn others will be available through the course of the day if you have further questions. Thank you very much for joining us this morning.