- First Quarter Revenues of $48.7
Billion Grew 9.4% Year-Over-Year
- Excluding ACA Individual Offerings,
UnitedHealthcare Grew to Serve 2.5 Million More People in
the Past 12 Months
- Optum Earnings from Operations Grew
16%, With Every Optum Segment Reporting Double-Digit Percentage
Earnings Growth
- Cash Flows from Operations were $6.5
Billion in First Quarter; Adjusted Cash Flows from Operations were
$2 Billion
- First Quarter Net Earnings of $2.23
Per Share Grew 34% Year-Over-Year
- First Quarter Adjusted Net Earnings
of $2.37 Per Share Grew 31% Year-Over-Year
UnitedHealth Group (NYSE: UNH) reported first quarter results,
led by continued broad-based growth across the enterprise.
“Our focus on quality and consistency in everything we do for
those we serve across the health system continues to strengthen our
business each quarter. These efforts are driving consistent growth
and strong bottom line performance across our businesses,” said
Stephen J. Hemsley, chief executive officer of UnitedHealth
Group.
UnitedHealth Group raised its financial outlook, now expecting
2017 revenues of approximately $200 billion, GAAP net earnings of
$9.10 to $9.30 per share and adjusted net earnings of $9.65 to
$9.85 per share. Management projects cash flows from operations of
approximately $12 billion.
Quarterly Financial Performance
Three Months
Ended
March 31, March 31, December 31,
2017
2016
2016
Revenues $48.7 billion $44.5 billion $47.5 billion Earnings From
Operations $3.4 billion $3.0 billion $3.2 billion Net Margin
4.5% 3.6% 3.5%
- UnitedHealth Group’s first quarter 2017
revenues of $48.7 billion grew 9.4 percent or $4.2 billion
year-over-year. UnitedHealthcare’s withdrawal from ACA Individual
markets, combined with the 2017 health insurance tax deferral,
reduced consolidated first quarter 2017 revenues by approximately
$1.6 billion and lowered the revenue growth rate by 4.1 percent.
These factors affect the comparability of first quarter results
with prior periods throughout the financial statements.
- First quarter earnings from operations
grew 15 percent year-over-year to $3.4 billion. Adjusted net
earnings per share grew 31 percent to $2.37 per share.
- Cash flows from operations were $6.5
billion in first quarter 2017. Adjusted cash flows were $2.0
billion compared to $2.3 billion in first quarter 2016, as strong
underlying cash flow growth was impacted by roughly $800 million of
offsets from ACA-related factors referenced above.
- The first quarter 2017 consolidated
medical care ratio of 82.4 percent increased 70 basis points
year-over-year, impacted by a 150 basis point increase from the
health insurance tax moratorium offset by reduced levels of
individual ACA business and other factors. Medical cost reserves
developed favorably by $450 million in first quarter 2017, compared
to $360 million in first quarter 2016.
- The first quarter 2017 operating cost
ratio of 14.4 percent decreased 80 basis points year-over-year,
again due to the health insurance tax moratorium.
- The first quarter 2017 income tax rate
declined to 30 percent due to the insurance tax deferral, as well
as increased stock-based compensation activity. The full year 2017
tax rate is now estimated to be 32.5 percent, down from a previous
outlook of 34 percent to 34.5 percent.
- First quarter 2017 days claims payable
of 50 days decreased one day year-over-year and sequentially; first
quarter days sales outstanding rose two days year-over-year and
sequentially to 18 days, due to growth in government-based
offerings.
- Annualized return on shareholders’
equity increased 300 basis points year-over-year to approximately
22 percent in first quarter, while the debt to total capital ratio
decreased 550 basis points year-over-year to 43.5 percent at March
31, 2017.
UnitedHealthcare provides global health care benefits, serving
individuals and employers, Medicare and Medicaid beneficiaries and
the nation’s military, retirees and their families.
Quarterly Financial Performance
Three Months
Ended
March 31, March 31, December 31,
2017
2016
2016
Revenues $40.1 billion $35.9 billion $37.9 billion Earnings From
Operations $2.1 billion $1.9 billion $1.4 billion Operating Margin
5.3% 5.2% 3.7%
- UnitedHealthcare’s first quarter 2017
revenues of $40.1 billion grew $4.2 billion or 11.8 percent
year-over-year. UnitedHealthcare grew to serve 2.5 million more
people year-over-year across its employer-sponsored, Medicare,
Medicaid and international medical benefit offerings, partially
offset by a reduction of 900,000 people served through individual
products as the Company withdrew from virtually all ACA Individual
markets. In the first quarter of 2017 UnitedHealthcare served 1.5
million more consumers, before a reduction of 765,000 people served
through ACA Individual products, for net growth of 730,000
people.
- First quarter 2017 earnings from
operations for UnitedHealthcare of $2.1 billion increased 15
percent from 2016, driven by strong, diversified growth and
increased operating margins.
UnitedHealthcare Employer & Individual
- First quarter 2017 revenues of $12.7
billion were essentially flat year-over-year due to the previously
disclosed ACA withdrawal and health insurance tax deferral
effects.
- UnitedHealthcare Employer &
Individual first quarter 2017 underlying growth of 480,000 people
served in commercial group plans was more than offset by a 765,000
member decline resulting from ACA Individual market
withdrawals.
- The Department of Defense extended
UnitedHealthcare’s TRICARE service contract term through December
31, 2017.
UnitedHealthcare Medicare & Retirement
- UnitedHealthcare Medicare &
Retirement grew revenues by $2.5 billion or 17.7 percent
year-over-year to $16.6 billion in first quarter 2017.
- UnitedHealthcare served 8.7 million
seniors with medical benefit products at first quarter end, growth
of 12 percent year-over-year. In the first quarter of 2017, the
business served 760,000 more seniors, including 675,000 through
employer-sponsored group and individual Medicare Advantage
products.
UnitedHealthcare Community & State
- In the first quarter of 2017,
UnitedHealthcare Community & State revenues of $8.9 billion
grew $1.2 billion or 15.8 percent year-over-year, reflecting strong
membership growth with an increasing mix of higher need
individuals.
- UnitedHealthcare Community & State
served 310,000 more people in the first quarter, and is
implementing awards in California, Missouri, Nebraska and Virginia
this year.
Optum is a health services business serving the global health
care marketplace, including payers, care providers, employers,
governments, life sciences companies and consumers. Using
information, technology and clinical insights, Optum’s people help
improve overall health system performance: optimizing care quality,
reducing health care costs and improving the consumer experience
and health system performance.
Quarterly Financial Performance
Three Months
Ended
March 31, March 31, December 31,
2017
2016
2016
Revenues $21.2 billion $19.7 billion $22.2 billion Earnings From
Operations $1.3 billion $1.1 billion $1.8 billion Operating Margin
6.0% 5.6% 8.1%
- In first quarter 2017, Optum revenues
grew year-over-year by $1.6 billion or 7.9 percent to $21.2
billion. Optum’s operating margin of 6 percent improved 40 basis
points year-over-year. First quarter earnings from operations
increased by double-digit percentages for every reporting segment,
and overall earnings from operations grew $173 million or 15.6
percent year-over-year to $1.3 billion.
- OptumHealth revenues of $4.7 billion grew $735
million or 18.4 percent year-over-year, driven by growth in care
delivery, behavioral services and health financial services.
OptumHealth serves approximately 85 million consumers – serving 6
million more people over the past year.
- OptumInsight revenues grew 10.6 percent to $1.8
billion in first quarter 2017, driven by growth in revenue
management services, business process services and technology
services. OptumInsight contract backlog grew by more than $0.5
billion from the end of 2016, finishing the first quarter at $13.1
billion.
- OptumRx
first quarter 2017 revenues grew 4.7 percent year-over-year to
$14.9 billion. OptumRx fulfilled 322 million adjusted scripts in
first quarter 2017, an increase of 15 million scripts or 4.9
percent over the prior year.
About UnitedHealth Group
UnitedHealth Group (NYSE: UNH) is a diversified health and
well-being company dedicated to helping people live healthier lives
and helping make the health system work better for everyone.
UnitedHealth Group offers a broad spectrum of products and services
through two distinct platforms: UnitedHealthcare, which provides
health care coverage and benefits services; and Optum, which
provides information and technology-enabled health services. For
more information, visit UnitedHealth Group at
www.unitedhealthgroup.com or follow @UnitedHealthGrp on
Twitter.
Earnings Conference Call
As previously announced, UnitedHealth Group will discuss the
Company’s results, strategy and future outlook on a conference call
with investors at 8:45 a.m. Eastern Time today. UnitedHealth Group
will host a live webcast of this conference call from the Investors
page of the Company’s website (www.unitedhealthgroup.com).
Following the call, a webcast replay will be available on the same
site through May 2, 2017. The conference call replay can also be
accessed by dialing 1-800-839-3735. This earnings release and the
Form 8-K dated April 18, 2017 can also be accessed from the
Investors page of the Company’s website.
Non-GAAP Financial
Information
This news release presents non-GAAP financial information
provided as a complement to the results provided in accordance with
accounting principles generally accepted in the United States of
America (“GAAP”). A reconciliation of the non-GAAP financial
information to the most directly comparable GAAP financial measure
is provided in the accompanying tables found at the end of this
release.
Forward-Looking
Statements
The statements, estimates, projections, guidance or outlook
contained in this document include “forward-looking” statements
within the meaning of the Private Securities Litigation Reform Act
of 1995 (PSLRA). These statements are intended to take advantage of
the “safe harbor” provisions of the PSLRA. Generally the words
“believe,” “expect,” “intend,” “estimate,” “anticipate,”
“forecast,” “outlook,” “plan,” “project,” “should” and similar
expressions identify forward-looking statements, which generally
are not historical in nature. These statements may contain
information about financial prospects, economic conditions and
trends and involve risks and uncertainties. We caution that actual
results could differ materially from those that management expects,
depending on the outcome of certain factors.
Some factors that could cause actual results to differ
materially from results discussed or implied in the forward-looking
statements include: our ability to effectively estimate, price for
and manage our medical costs, including the impact of any new
coverage requirements; new laws or regulations, or changes in
existing laws or regulations, or their enforcement or application,
including increases in medical, administrative, technology or other
costs or decreases in enrollment resulting from U.S., Brazilian and
other jurisdictions regulations affecting the health care industry;
the outcome of the Department of Justice’s legal actions relating
to risk adjustment submission matters; assessments for insolvent
payers under state guaranty fund laws; our ability to maintain and
achieve improvement in CMS star ratings and other quality scores
that impact revenue; reductions in revenue or delays to cash flows
received under Medicare, Medicaid and other government programs,
including the effects of a prolonged U.S. government shutdown or
debt ceiling constraints; changes in Medicare, including changes in
payment methodology, the CMS star ratings program or the
application of risk adjustment data validation audits;
cyber-attacks or other privacy or data security incidents; failure
to comply with privacy and data security regulations; regulatory
and other risks and uncertainties of the pharmacy benefits
management industry; competitive pressures, which could affect our
ability to maintain or increase our market share; changes in or
challenges to our public sector contract awards; our ability to
execute contracts on competitive terms with physicians, hospitals
and other service providers; increases in costs and other
liabilities associated with increased litigation, government
investigations, audits or reviews; failure to manage successfully
our strategic alliances or complete or receive anticipated benefits
of acquisitions and other strategic transactions; fluctuations in
foreign currency exchange rates on our reported shareholders equity
and results of operations; downgrades in our credit ratings; the
performance of our investment portfolio; impairment of the value of
our goodwill and intangible assets if estimated future results do
not adequately support goodwill and intangible assets recorded for
our existing businesses or the businesses that we acquire; failure
to maintain effective and efficient information systems or if our
technology products do not operate as intended; and our ability to
obtain sufficient funds from our regulated subsidiaries or the debt
or capital markets to fund our obligations, to maintain our debt to
total capital ratio at targeted levels, to maintain our quarterly
dividend payment cycle or to continue repurchasing shares of our
common stock.
This list of important factors is not intended to be exhaustive.
We discuss certain of these matters more fully, as well as certain
risk factors that may affect our business operations, financial
condition and results of operations, in our filings with the
Securities and Exchange Commission, including our annual reports on
Form 10-K, quarterly reports on Form 10-Q and current reports on
Form 8-K. Any or all forward-looking statements we make may turn
out to be wrong, and can be affected by inaccurate assumptions we
might make or by known or unknown risks and uncertainties. By their
nature, forward-looking statements are not guarantees of future
performance or results and are subject to risks, uncertainties and
assumptions that are difficult to predict or quantify. Actual
future results may vary materially from expectations expressed or
implied in this document or any of our prior communications. You
should not place undue reliance on forward-looking statements,
which speak only as of the date they are made. We do not undertake
to update or revise any forward-looking statements, except as
required by applicable securities laws.
UNITEDHEALTH GROUP Earnings Release
Schedules and Supplementary Information Quarter Ended March
31, 2017 - Condensed Consolidated Statements of
Operations - Condensed Consolidated Balance Sheets - Condensed
Consolidated Statements of Cash Flows - Supplemental Financial
Information - Businesses - Supplemental Financial Information -
Business Metrics - Reconciliation of Non-GAAP Financial Measures
UNITEDHEALTH GROUPCONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS(in millions, except per share
data)(unaudited)
Three Months Ended March 31,
2017 2016 Revenues Premiums $ 38,938 $ 34,811
Products 6,129 6,393 Services 3,434 3,140 Investment and other
income 222 183 Total revenues
48,723 44,527
Operating
costs Medical costs 32,079 28,430 Operating costs 7,022 6,758
Cost of products sold 5,676 5,877 Depreciation and amortization
533 502 Total operating costs
45,310 41,567
Earnings from
operations 3,413 2,960 Interest expense (283 )
(259 )
Earnings before income taxes 3,130
2,701 Provision for income taxes (939 ) (1,074
)
Net earnings 2,191 1,627 Earnings
attributable to noncontrolling interests (19 ) (16 )
Net earnings attributable to UnitedHealth
Groupcommon shareholders $ 2,172 $ 1,611
Diluted earnings per share attributable
toUnitedHealth Group common shareholders $ 2.23 $
1.67
Adjusted earnings per share attributable
toUnitedHealth Group common shareholders (a) $ 2.37
$ 1.81 Diluted weighted-average common shares
outstanding 975 967 (a) See page
6 for a reconciliation of the non-GAAP measure
UNITEDHEALTH GROUPCONDENSED CONSOLIDATED BALANCE
SHEETS(in millions)(unaudited)
March
31,2017 December 31,2016 Assets
Cash and short-term investments $ 19,352 $ 13,275 Accounts
receivable, net 9,595 8,152 Other current assets 12,042
12,452 Total current assets 40,989 33,879
Long-term investments 25,760 23,868 Other long-term assets
70,408 65,063 Total assets $ 137,157 $ 122,810
Liabilities, redeemable noncontrolling interests and
equity Medical costs payable $ 17,650 $ 16,391 Commercial paper
and current maturities of long-term debt 7,747 7,193 Other current
liabilities 32,146 25,668 Total current
liabilities 57,543 49,252 Long-term debt, less current
maturities 26,154 25,777 Other long-term liabilities 7,798 7,592
Redeemable noncontrolling interests 1,667 2,012 Equity
43,995 38,177 Total liabilities, redeemable
noncontrolling interests and equity $ 137,157 $ 122,810
UNITEDHEALTH GROUPCONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS(in millions)(unaudited)
Three
Months Ended
March 31,
2017 2016 Operating Activities Net earnings $
2,191 $ 1,627 Noncash items: Depreciation and amortization 533 502
Deferred income taxes and other (46 ) 151 Share-based compensation
196 157 Net changes in operating assets and liabilities
3,582 (119 ) Cash flows from operating activities
6,456 2,318
Investing
Activities Purchases of investments, net of sales and
maturities (1,339 ) (2,073 ) Purchases of property, equipment and
capitalized software (507 ) (425 ) Cash paid for acquisitions, net
(468 ) (1,697 ) Other, net 25 14 Cash
flows used for investing activities (2,289 ) (4,181 )
Financing Activities Common share repurchases (682 )
(500 ) Dividends paid (596 ) (477 ) Net change in commercial paper
and long-term debt (189 ) 1,599 Other, net 2,992
880 Cash flows from financing activities 1,525
1,502 Effect of exchange rate changes on cash
and cash equivalents 20 34 Increase
(decrease) in cash and cash equivalents 5,712 (327 ) Cash and cash
equivalents, beginning of period 10,430 10,923
Cash and cash equivalents, end of period $ 16,142 $
10,596
Supplemental Schedule of Noncash Investing
Activities Common stock issued for acquisitions $ 1,860 $ -
UNITEDHEALTH GROUPSUPPLEMENTAL FINANCIAL
INFORMATION - BUSINESSES(in millions, except
percentages)(unaudited)
Three Months Ended
March 31,
2017 2016 Revenues UnitedHealthcare $ 40,136 $
35,900 Optum 21,237 19,684 Eliminations (12,650 )
(11,057 ) Total consolidated revenues $ 48,723 $
44,527
Earnings from Operations
UnitedHealthcare $ 2,134 $ 1,854 Optum (a) 1,279
1,106 Total consolidated earnings from
operations $ 3,413 $ 2,960
Operating
Margin UnitedHealthcare 5.3 % 5.2 % Optum 6.0 % 5.6 %
Consolidated operating margin 7.0 % 6.6 %
Revenues UnitedHealthcare Employer & Individual $ 12,739
$ 12,820 UnitedHealthcare Medicare & Retirement 16,552 14,065
UnitedHealthcare Community & State 8,949 7,728 UnitedHealthcare
Global 1,896 1,287 OptumHealth $ 4,733 $ 3,998 OptumInsight
1,843 1,667 OptumRx 14,947 14,273 Optum eliminations (286 ) (254 )
(a) Earnings from operations for Optum for the three
months ended March 31, 2017 and 2016 included $332 and $300 for
OptumHealth; $294 and $246 for OptumInsight; and $653 and $560 for
OptumRx, respectively.
UNITEDHEALTH
GROUPSUPPLEMENTAL FINANCIAL INFORMATION - BUSINESS
METRICS UNITEDHEALTHCARE CUSTOMER
PROFILE(in thousands) People Served
March 31,
2017
December 31,
2016
March 31,
2016
Commercial group: Risk-based 7,695 7,470 7,115 Fee-based
19,155 18,900 18,945 Total commercial group
26,850 26,370 26,060 Individual 585 1,350 1,485 Fee-based TRICARE
2,860 2,860 2,880
Total Commercial 30,295 30,580 30,425
Medicare Advantage 4,305 3,630 3,530 Medicaid 6,200 5,890
5,450 Medicare Supplement (Standardized) 4,350 4,265
4,200
Total Public and Senior 14,855
13,785 13,180
Total UnitedHealthcare - Domestic
Medical 45,150 44,365 43,605 International
4,165 4,220 4,065
Total
UnitedHealthcare - Medical 49,315 48,585
47,670
Supplemental Data Medicare Part D
stand-alone 4,955 4,930 4,990
OPTUM PERFORMANCE METRICS March 31,
2017
December 31,
2016
March 31,
2016
OptumHealth Consumers Served (in millions) 85 83 79
OptumInsight Contract Backlog (in billions) $ 13.1 $ 12.6 $ 11.0
OptumRx Quarterly Adjusted Scripts (in millions) 322 318 307
Note: UnitedHealth Group served 137 million unique individuals
across all businesses at March 31, 2017.
UNITEDHEALTH
GROUP Reconciliation of Non-GAAP Financial
Measures - Adjusted Net Earnings per Share -
Adjusted Cash Flows from Operations
Use of
Non-GAAP Financial Measures Adjusted net earnings per share and
adjusted cash flows from operations are non-GAAP financial
measures. Non-GAAP financial measures should be considered in
addition to, but not as a substitute for, or superior to, financial
measures prepared in accordance with GAAP. Management believes that
the use of adjusted net earnings per share provides investors and
management useful information about the earnings impact of
acquisition-related intangible asset amortization.
Management believes that the use of
adjusted cash flows from operations provides investors and
management with useful information to compare our cash flows from
operations for the current period to that of other periods, when
the Company does not receive its monthly payment from the Centers
for Medicare and Medicaid Services (CMS) in the applicable quarter.
CMS generally remits their monthly payments on the first calendar
day of the applicable month. However, if the first calendar day of
the month falls on a weekend or a holiday, CMS has typically paid
the Company on the last business day of the preceding calendar
month. As such, quarterly operating cash flows determined in
accordance with GAAP may occasionally include CMS premium payments
for two months or four months. Adjusted cash flows from operating
activities presents operating cash flows assuming all CMS payments
were received on the first calendar day of the applicable
month.
UNITEDHEALTH GROUPRECONCILIATION OF NON-GAAP
FINANCIAL MEASURES(in millions, except per share
data)(unaudited)
ADJUSTED NET
EARNINGS PER SHARE (a)
Three Months EndedMarch
31,
ProjectedYear
EndedDecember 31,
2017 2016 2017 GAAP net earnings $ 2,172 $
1,611 $8,900 to $9,100 Intangible amortization 219 216 ~890 Tax
effect of intangible amortization (82 ) (76 ) ~(330)
Adjusted net earnings $ 2,309 $ 1,751 $9,460 to
$9,660 GAAP diluted earnings per share $ 2.23 $ 1.67 $9.10
to $9.30 Intangible amortization per share 0.22 0.22 ~0.90 Tax
effect of intangible amortization per share (0.08 )
(0.08 ) ~(0.35) Adjusted diluted earnings per share $ 2.37 $
1.81 ~$9.65 to $9.85 (a) GAAP and adjusted net
earnings are attributable to UnitedHealth Group common
shareholders.
ADJUSTED CASH FLOWS FROM
OPERATIONS
Three MonthsEndedMarch
31,
2017 GAAP cash flows from operations $ 6,456 Less: April CMS
premium payments received in March (4,442 ) Adjusted cash
flows from operations $ 2,014
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UnitedHealth GroupInvestors:Brett Manderfeld, 952-936-7216Vice
PresidentJohn S. Penshorn, 952-936-7214Senior Vice
PresidentorMedia:Tyler Mason, 424-333-6122Vice President
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