Warren Buffett Warned That Insurance Companies’ ‘Only Products Are Promises.’ That Didn’t Stop Him From Buying 5,039,564 Shares of UnitedHealth Stock.

Warren Buffett has never been one to mince his words. And perhaps that’s why folks from Wall Street and Main Street have followed the “Oracle of Omaha” and his business decisions for decades. When Buffett’s holding company makes an equity investment, people pay close attention, and many retail investors choose to make those same buys.

Buffett’s purchase of UnitedHealth Group (UNH) in the second quarter of 2025, when his Berkshire Hathaway (BRK.B) purchased 5,039,564 shares of UNH stock, was particularly noteworthy. The health insurer has been struggling since the assassination of UnitedHealth CEO Brian Thompson, and has now run into trouble with regulators. UNH is one of the worst-performing stocks in the S&P 500 Index ($SPX) this year, down 32.45% in 2025.

The Oracle is no stranger to the insurance business, with companies like GEICO and National Indemnity under the Berkshire umbrella. However, Buffett doesn’t always sound sweet on insurance. In fact, in 1977, he wrote, “Insurance companies offer standardized policies which can be copied by anyone. Their only products are promises. It is not difficult to be licensed, and rates are an open book. There are no important advantages from trademarks, patents, location, corporate longevity, raw material sources, etc., and very little consumer differentiation to produce insulation from competition.”

Buffett used this lead-in to ultimately say that Berkshire was “very fortunate” to have the managers it did running its businesses back in 1977. But along the way, he was also quick to point out that “the nature of the insurance business magnifies the effect which individual managers have on company performance.”

So how should investors reconcile Buffett’s big Q2 buy with his decades-old comments on the insurance biz? There are several reasons Buffett could still see UnitedHealth as a smart bet, especially at today’s depressed prices.

First, the market may be punishing UNH more harshly than the fundamentals warrant. The company still boasts one of the largest health‐insurance membership bases in the U.S., deep relationships with employers and hospitals, and a sprawling, profitable services arm in Optum. Those structural advantages aren’t easy to replicate, even in an industry Buffett once described as “commoditized.”

Second, Berkshire has a long history of buying high-quality businesses when the headlines are bleak. Buffett has repeatedly demonstrated a willingness to step in when “panic” creates an attractive entry point.

Third, the company’s long-term tailwinds are powerful. An aging U.S. population, rising demand for managed care, and the ongoing shift toward value-based healthcare all support steady growth for insurers with scale and data capabilities. Optum’s analytics and pharmacy-benefit operations give UnitedHealth a diversified revenue mix and a technology edge that may help it stay ahead of rivals.

Finally, Buffett’s own comments from 1977 underscore why management matters. The CEO tragedy and regulatory concerns highlight how critical strong leadership will be in guiding UnitedHealth through turbulence.

In the Q2 earnings call, UnitedHealth’s leadership team kicked things off by saying “… I know you are eager to get into the underlying details of our revised financial outlook. We will do so. But at this moment, I believe it’s also important to convey the tone we’re setting at this enterprise. More than anything, it is a tone of change and reform born out of recommitment to our mission to help people live healthier lives and help make the health system work better for everyone. It’s a mission that requires a commitment to a culture of values, of service, responsibility, integrity, and humility.”

For an investor who thrives on patience and disciplined buying when fear reigns, UnitedHealth’s current troubles may not be a deterrent at all; they may be the very reason Buffett is sweet on the stock despite its only “product” being “promises.”

On the date of publication, Sarah Holzmann did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. This article was originally published on Barchart.com