- Revenues Grew 9% Year-Over-Year to
$201 Billion
- Operating Earnings Exceeded $15.2
Billion, Up 18% Year-Over-Year
- Net Earnings of $10.72 Per Share and
Fourth Quarter Net Earnings of $3.65 Per Share included a One-Time,
Non-Cash Deferred Tax Benefit of $1.22 and $1.21 Per Share,
Respectively
- Adjusted Net Earnings were $10.07
Per Share for the Full Year, Up 25% Year-Over-Year, and Grew 23% to
$2.59 Per Share in the Fourth Quarter
- Cash Flows from Operations Grew 39%
Year-Over-Year to $13.6 Billion
UnitedHealth Group (NYSE: UNH) reported fourth quarter and full
year 2017 results reflecting continued broad-based growth and
strengthened operating performance across the enterprise. “We enter
2018 with both growth momentum and opportunity, as a result of our
focus on improving the experience of those we serve, combined with
actions taken to deepen our capabilities and presence in strategic
markets,” said David S. Wichmann, chief executive officer of
UnitedHealth Group.
As a result of The Tax Cuts and Jobs Act of 2017, UnitedHealth
Group’s 2017 net earnings of $10.72 per share included a $1.22 per
share non-cash benefit from the revaluation of the Company’s net
deferred tax liability. This one-time item affects the
comparability of results between periods, and accordingly has been
excluded from adjusted net earnings per share.
The Company revised its 2018 financial outlook to reflect the
effects of the U.S. corporate tax law changes, dedicating a
significant portion of the benefits to accelerating investments in
data analytics, technology and innovations to better serve
consumers and care systems and to advancing new and existing
business platforms. UnitedHealth Group now expects 2018 net
earnings of $11.65 to $11.95 per share and adjusted net earnings of
$12.30 to $12.60 per share. Cash flows from operations are expected
to range from $15 billion to $15.5 billion.
Quarterly and Annual Financial
Performance
Three Months Ended
Year Ended
December 31,2017
December 31,2016
September 30,2017
December 31,2017
December 31,2016
Revenues $52.1 billion $47.5 billion $50.3 billion $201.2 billion
$184.8 billion Earnings From Operations $4.0 billion $3.2 billion
$4.1 billion $15.2 billion $12.9 billion
Net Margin
6.9% 3.5% 4.9% 5.2%
3.8%
Net Margin Adjusted for Tax Reform1
4.6%
4.7%
1 The Tax Cuts and Jobs Act of 2017 resulted in a $1.2
billion favorable non-cash revaluation of UnitedHealth Group’s U.S.
net deferred tax liability, reducing the 2017 full year tax rate by
860 basis points to 22.8 percent and the fourth quarter tax rate by
32.7 percentage points to -1.4 percent and impacting the Company’s
GAAP net margin.
- UnitedHealth Group’s full year 2017
revenues of $201.2 billion grew 8.8 percent or $16.3 billion
year-over-year. Revenue growth was broad-based and balanced across
the businesses, reflecting strong demand for the Company’s product
and service offerings.
- Full year 2017 earnings from operations
grew $2.3 billion, up 17.6 percent year-over-year to $15.2 billion,
and adjusted net earnings grew 25.1 percent to $10.07 per share,
with fourth quarter adjusted net earnings growing 22.7 percent
year-over-year to $2.59 per share.
- Full year 2017 cash flows from
operations of $13.6 billion grew 38.8 percent year-over-year and
were 1.3 times net earnings, with an increasing mix of cash
generated by non-insurance businesses in 2017. Fourth quarter 2017
adjusted cash flows from operations were $2 billion.
- The full year 2017 consolidated medical
care ratio of 82.1 percent increased 90 basis points
year-over-year, as a 140 basis point increase from the health
insurance tax deferral was partially offset by $690 million in
favorable prior year reserve development in 2017, compared to $220
million in 2016. The fourth quarter 2017 consolidated medical care
ratio of 82.2 percent reflected consistent medical cost
trends.
- The full year 2017 operating cost ratio
of 14.7 percent declined 70 basis points year-over-year from 15.4
percent in 2016, as a 90 basis point decrease from the health
insurance tax deferral was partially offset by business mix.
- Year end 2017 days claims payable of 50
days decreased one day sequentially and year-over-year; 2017 days
sales outstanding rose one day sequentially and year-over-year to
17 days due to the mix of health care services revenues.
- Driven by net earnings growth,
including the deferred tax revaluation, return on equity increased
to 24.4 percent in 2017. The debt to total capital ratio decreased
740 basis points year-over-year to 38.9 percent at December 31,
2017. Dividend payments grew 22.6 percent year-over-year to $2.8
billion, and the Company repurchased 8.6 million shares for $1.5
billion in 2017.
UnitedHealthcare provides global health care benefits, serving
individuals and employers, and Medicare and Medicaid
beneficiaries.
Quarterly and Annual Financial Performance
Three Months Ended
Year Ended
December 31,2017
December 31,2016
September 30,2017
December 31,2017
December 31,2016
Revenues $41.6 billion $37.9 billion $40.7 billion $163.3 billion
$148.6 billion Earnings From Operations $1.8 billion $1.4 billion
$2.4 billion $8.5 billion $7.3 billion Operating Margin 4.2%
3.7% 5.9% 5.2%
4.9%
- UnitedHealthcare’s full year 2017
revenues of $163.3 billion grew $14.7 billion or 9.9 percent
year-over-year. In 2017, UnitedHealthcare grew to serve 2 million
more people across domestic employer-sponsored, Medicare and
Medicaid benefit offerings. UnitedHealthcare grew to serve 480,000
more consumers in the fourth quarter of 2017, helping lift revenues
by 9.6 percent year-over-year to $41.6 billion. Full year 2017
earnings from operations of $8.5 billion grew 16.3 percent, driven
by diversified revenue growth and improved operating performance.
Fourth quarter 2017 earnings from operations of $1.8 billion were
ahead of the Company’s outlook, due to strong business growth and
increased reserve development. Comparisons of 2017 results with
those of 2016 are affected by the health insurance tax deferral and
a $350 million industry guarantee assessment in fourth quarter
2016.
- UnitedHealthcare
Employer & Individual served nearly 30 million people at
December 31, 2017. Full year 2017 revenues of $52.1 billion
decreased $1 billion year-over-year, including nearly $200 million
in the fourth quarter, due to the effects of the ACA Individual
market withdrawals and health insurance tax deferral. These factors
offset revenue increases from strong year-over-year growth of
465,000 people in commercial risk-based group benefit offerings,
including 130,000 people in the fourth quarter.
- UnitedHealthcare
Medicare & Retirement served nearly 9 million people
with medical benefit products at year end 2017, reflecting growth
of 12.4 percent or approximately 1 million people. Growth was
diversified, reflecting a balanced mix in Medicare Advantage,
including serving more people in both the individual market and the
employer-sponsored group retiree market, and through Medicare
Supplement. Revenues grew by $9.7 billion or 17.2 percent to $66
billion in 2017, including growth of 16.7 percent to $16.4 billion
in the fourth quarter.
- In 2017, UnitedHealthcare Community & State grew to
serve 6.7 million people across 28 state customers and the District
of Columbia. Full year growth of 815,000 people, or 13.8 percent,
included serving 330,000 more people in the fourth quarter.
Revenues of $37.4 billion grew $4.5 billion or 13.7 percent
year-over-year, with fourth quarter revenues increasing 15 percent,
reflecting strong membership gains in 2017.
- UnitedHealthcare
Global served 4.1 million people at December 31, 2017.
Revenues of $7.8 billion grew 24.6 percent, with fourth quarter
revenues of $2 billion increasing 11.7 percent year-over-year.
Revenue growth was driven by disciplined pricing, the full year
impact of 2016 acquisitions and an improved currency exchange rate.
Performance strengthened in 2017 as a result of pricing actions and
advancements in clinical integration, as well as improvements in
operating costs.
Optum is a health services business serving the global health
care marketplace, including payers, care providers, employers,
governments, life sciences companies and consumers. Using
market-leading information, data analytics, 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 and Annual Financial Performance
Three Months Ended
Year Ended
December 31,2017
December 31,2016
September 30,2017
December 31,2017
December 31,2016
Total Revenues $24.4 billion $22.2 billion $22.9 billion $91.2
billion $83.6 billion Earnings From Operations $2.2 billion $1.8
billion $1.7 billion $6.7 billion $5.6 billion Operating Margin
9.1% 8.1% 7.4% 7.4% 6.7%
- In 2017, Optum revenues grew by $7.6
billion or 9.1 percent to $91.2 billion, with fourth quarter
revenues increasing to $24.4 billion or 10 percent year-over-year,
led by double-digit percentage growth at OptumHealth and
OptumInsight. Optum’s full year earnings from operations grew $1.1
billion or 19.3 percent year-over-year to $6.7 billion, and the
full year operating margin strengthened 70 basis points to 7.4
percent. All Optum reporting segments grew earnings from operations
by 20 percent or more in the fourth quarter of 2017, with overall
fourth quarter earnings increasing 23.8 percent and operating
margin reaching 9.1 percent, led by expected seasonal strength from
OptumInsight.
- OptumHealth revenues of $20.6 billion grew $3.7
billion or 21.7 percent year-over-year, including growth of 21.1
percent in the fourth quarter to $5.5 billion, driven primarily by
growth and market expansion in care delivery, as well as growth in
consumer health engagement services, behavioral health services and
health financial services. OptumHealth served approximately 91
million people at year end 2017, having grown to serve 8 million
more people during the year.
- OptumInsight revenues grew 10.3 percent to $8.1
billion in 2017, with fourth quarter revenues of $2.2 billion
increasing 8.1 percent year-over-year, driven by growth in revenue
management and business process services. OptumInsight’s backlog
ended the year at $15 billion, up 19 percent year-over-year.
- In 2017, OptumRx revenues increased 5.5 percent
year-over-year to $63.8 billion. Fourth quarter revenue of $17
billion increased 7.3 percent year-over-year. OptumRx fulfilled 1.3
billion adjusted scripts in 2017, growth of 59 million scripts or
4.7 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 January 30, 2018. The conference call replay can also
be accessed by dialing 1-800-839-3613. This earnings release and
the Form 8-K dated January 16, 2018 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; 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; cyberattacks 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; failure to achieve targeted
operating cost productivity improvements, including savings
resulting from technology enhancement and administrative
modernization; 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 InformationYear Ended December
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 - 2018 Outlook Revised for the Impact of Tax
Reform - Reconciliation of Non-GAAP Financial Measures
UNITEDHEALTH GROUPCONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS(in millions, except per share data)(unaudited)
Three Months Ended
December 31,
Years Ended
December 31,
2017 2016 2017 2016 Revenues
Premiums $ 40,378 $ 36,752 $ 158,453 $ 144,118 Products 7,157 6,959
26,366 26,658 Services 4,228 3,563 15,317 13,236 Investment and
other income 298 261 1,023
828 Total revenues 52,061
47,535 201,159 184,840
Operating costs Medical costs 33,207 29,696 130,036
117,038 Operating costs 7,820 7,817 29,557 28,401 Cost of products
sold 6,479 6,308 24,112 24,416 Depreciation and amortization
578 527 2,245 2,055
Total operating costs 48,084
44,348 185,950 171,910
Earnings from operations 3,977 3,187 15,209 12,930
Interest expense (308 ) (268 ) (1,186 )
(1,067 )
Earnings before income taxes 3,669 2,919
14,023 11,863 Benefit (provision) for income taxes 52
(1,211 ) (3,200 ) (4,790 )
Net earnings 3,721 1,708 10,823 7,073 Earnings
attributable to noncontrolling interests (104 ) (24 )
(265 ) (56 )
Net earnings attributable to
UnitedHealth Group common shareholders
$ 3,617 $ 1,684 $ 10,558 $ 7,017
Diluted earnings per share attributable
to UnitedHealth Group common shareholders
$ 3.65 $ 1.74 $ 10.72 $ 7.25
Adjusted earnings per share
attributable to UnitedHealth Group common shareholders (a)
$ 2.59 $ 2.11 $ 10.07 $ 8.05
Diluted weighted-average common shares outstanding 991
970 985 968
(a) See page 7 for a reconciliation of the non-GAAP measure
UNITEDHEALTH GROUPCONDENSED CONSOLIDATED BALANCE
SHEETS(in millions)(unaudited)
December
31,2017 December 31,2016 Assets
Cash and short-term investments $ 15,490 $ 13,275 Accounts
receivable, net 9,568 8,152 Other current assets 12,026
12,452 Total current assets 37,084 33,879
Long-term investments 28,341 23,868 Other long-term assets
73,632 65,063 Total assets $ 139,057 $ 122,810
Liabilities, redeemable noncontrolling interests and
equity Medical costs payable $ 17,871 $ 16,391 Commercial paper
and current maturities of long-term debt 2,857 7,193 Other current
liabilities 29,735 25,668 Total current
liabilities 50,463 49,252 Long-term debt, less current
maturities 28,835 25,777 Other long-term liabilities 7,737 7,592
Redeemable noncontrolling interests 2,189 2,012 Equity
49,833 38,177 Total liabilities, redeemable
noncontrolling interests and equity $ 139,057 $ 122,810
UNITEDHEALTH GROUPCONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS(in millions)(unaudited)
Years
Ended
December 31,
2017 2016 Operating Activities Net earnings $
10,823 $ 7,073 Noncash items: Depreciation and amortization 2,245
2,055 Deferred income taxes and other (748 ) (1 ) Share-based
compensation 597 485 Net changes in operating assets and
liabilities 679 183 Cash flows from
operating activities 13,596 9,795
Investing Activities Purchases of investments, net of
sales and maturities (4,319 ) (5,927 ) Purchases of property,
equipment and capitalized software (2,023 ) (1,705 ) Cash paid for
acquisitions, net (2,131 ) (1,760 ) Other, net (126 )
37 Cash flows used for investing activities (8,599 )
(9,355 )
Financing Activities Common share
repurchases (1,500 ) (1,280 ) Dividends paid (2,773 ) (2,261 ) Net
change in commercial paper and long-term debt (2,615 ) 990 Other,
net 3,447 1,540 Cash flows used for
financing activities (3,441 ) (1,011 ) Effect of
exchange rate changes on cash and cash equivalents (5 )
78 Increase (decrease) in cash and cash equivalents
1,551 (493 ) Cash and cash equivalents, beginning of period
10,430 10,923 Cash and cash equivalents, end
of period $ 11,981 $ 10,430
Supplemental
Schedule of Noncash Investing Activities: Common stock issued
for acquisition $ 2,164 $ -
UNITEDHEALTH
GROUPSUPPLEMENTAL FINANCIAL INFORMATION - BUSINESSES(in
millions, except percentages)(unaudited)
Three Months Ended
December 31,
Years Ended
December 31,
2017 2016 2017 2016 Revenues
UnitedHealthcare $ 41,599 $ 37,948 $ 163,257 $ 148,581 Optum 24,392
22,167 91,185 83,593 Eliminations (13,930 ) (12,580 )
(53,283 ) (47,334 ) Total consolidated
revenues $ 52,061 $ 47,535 $ 201,159 $ 184,840
Earnings from Operations UnitedHealthcare $
1,762 $ 1,398 $ 8,498 $ 7,307 Optum (a) 2,215
1,789 6,711 5,623 Total
consolidated earnings from operations $ 3,977 $ 3,187
$ 15,209 $ 12,930
Operating Margin
UnitedHealthcare 4.2 % 3.7 % 5.2 % 4.9 % Optum 9.1 % 8.1 % 7.4 %
6.7 % Consolidated operating margin 7.6 % 6.7 % 7.6 % 7.0 %
Revenues UnitedHealthcare Employer &
Individual $ 13,307 $ 13,504 $ 52,066 $ 53,084 UnitedHealthcare
Medicare & Retirement 16,390 14,043 65,995 56,329
UnitedHealthcare Community & State 9,938 8,642 37,443 32,945
UnitedHealthcare Global 1,964 1,759 7,753 6,223 OptumHealth
$ 5,463 $ 4,513 $ 20,570 $ 16,908 OptumInsight 2,247 2,079 8,087
7,333 OptumRx 17,015 15,857 63,755 60,440 Optum eliminations (333 )
(282 ) (1,227 ) (1,088 ) (a) Earnings from operations for
Optum for the three months and year ended December 31, 2017
included $556 and $1,823 for OptumHealth; $690 and $1,770 for
OptumInsight; and $969 and $3,118 for OptumRx, respectively.
Earnings from operations for Optum for the three months and year
ended December 31, 2016 included $420 and $1,428 for OptumHealth;
$563 and $1,513 for OptumInsight; and $806 and $2,682 for OptumRx,
respectively.
UNITEDHEALTH GROUPSUPPLEMENTAL
FINANCIAL INFORMATION - BUSINESS METRICS
UNITEDHEALTHCARE CUSTOMER PROFILE(in thousands)
People Served December 31,
2017
September 30,
2017
December 31,
2016
Commercial group: Risk-based 7,935 7,805 7,470 Fee-based
18,595 18,610 18,900 Total commercial group
26,530 26,415 26,370 Individual 485 515 1,350 Fee-based TRICARE
2,850 2,855 2,860 - - -
Total
Commercial 29,865 29,785 30,580
Medicare Advantage 4,430 4,390 3,630 Medicaid 6,705 6,375 5,890
Medicare Supplement (Standardized) 4,445 4,415
4,265
Total Public and Senior 15,580
15,180 13,785
Total UnitedHealthcare - Domestic
Medical 45,445 44,965 44,365 International 4,080
4,080 4,220
Total UnitedHealthcare - Medical
49,525 49,045 48,585
Supplemental Data Medicare Part D stand-alone
4,940 4,945 4,930
OPTUM PERFORMANCE
METRICS December 31,
2017
September 30,
2017
December 31,
2016
OptumHealth Consumers Served (in millions) 91 90 83
OptumInsight Contract Backlog (in billions) $ 15.0 $ 13.9 $ 12.6
OptumRx Quarterly Adjusted Scripts (in millions) 333 321 318
Note: UnitedHealth Group served 139 million unique individuals
across all businesses at December 31, 2017.
UNITEDHEALTH
GROUP2018 OUTLOOK REVISED FOR THE IMPACT OF TAX
REFORM(in millions, except per share data and percentages)
Business Revenue Ranges
Earnings from
Operations
Operating Margin
Range
UnitedHealthcare $179,000 – $181,000 $9,100 – $9,500 5.0% – 5.3%
Optum 99,000 – 100,000 $7,600 – $7,800 7.6% – 7.9% Eliminations
(55,000) – (56,000) Range of $223,000 -
$225,000 $16,700 – $17,300 7.4% – 7.8%
Consolidated UnitedHealth Group 2018 Targets
UnitedHealth Group Medical Care Ratio 81.5% ± 50 bps Operating Cost
Ratio 15.3% ± 30 bps Depreciation and Amortization $2,350 – $2,400
EBITDA (a) $19,050 – $19,700 Investment and Other Income $1,000 –
$1,050 Interest Expense $1,200 – $1,250 Tax Rate ~24% Net Earnings
Attributable to UnitedHealth Group Shareholders $11,475 – $11,775
Net Margin 5.1% – 5.3% Diluted Weighted-Average Shares 982 – 987
Diluted Net Earnings Per Common Share to UnitedHealth Group
Shareholders $11.65 – $11.95 Adjusted Earnings Per Common Share (a)
$12.30 – $12.60 Cash Flows from Operations $15,000 – $15,500
Dividends Paid (at current rate) ~$2,900 Share Repurchase $3,000 –
$4,000 Capital Expenditures ~$2,000
(a) See page 7 for a reconciliation of the
non-GAAP measures
UNITEDHEALTH GROUP Reconciliation of
Non-GAAP Financial Measures - Adjusted Net Earnings per
Share - Net Margin Adjusted for Tax Reform - Adjusted Cash Flows
from Operations - EBITDA
Use of Non-GAAP Financial
Measures
Adjusted net earnings per share, adjusted
cash flows from operations, net margin adjusted for tax reform and
EBITDA 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.
Adjusted net earnings per share excludes
from the relevant GAAP metric, as applicable, intangible
amortization and other items, if any, that do not relate to the
Company's underlying business performance. 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. In addition,
adjusted net earnings per share excludes the earnings impact of the
deferred tax revaluation recognized after The Tax Cuts and Jobs Act
of 2017 was enacted in December 2017 and the recognition of the
Company's estimated share of guaranty association assessments
resulting from the liquidation of Penn Treaty Network America
Insurance Company and its subsidiary (Penn Treaty). Management
believes the exclusion of these items provides a more useful
comparison of the Company's underlying business performance from
period to period.
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.
Management believes that the use of net
margin adjusted for tax reform provides investors and management
useful information about the performance of the underlying business
prior to the impact of the deferred tax revaluation recognized in
2017.
Management believes that the use of EBITDA
provides investors and management useful information about our
operating earnings before interest, taxes, depreciation and
amortization.
UNITEDHEALTH GROUPRECONCILIATION OF NON-GAAP
FINANCIAL MEASURES(in millions, except per share
data)(unaudited)
ADJUSTED NET
EARNINGS PER SHARE Three Months Ended
December 31,
Years Ended
December 31,
Projected
Year Ended
December 31,
2017 2016 2017 2016 2018
GAAP net earnings attributable to
UnitedHealth Group common shareholders
$ 3,617 $ 1,684 $ 10,558 $ 7,017 $11,475 to $11,775 Tax reform
impact (1,197 ) - (1,197 ) - - Penn Treaty impact - 350 - 350 -
Intangible amortization 227 222 896 882 ~835 Tax effect (85
) (213 ) (334 ) (454 ) ~(210)
Adjusted net earnings attributable to
UnitedHealth Group common shareholders
$ 2,562 $ 2,043 $ 9,923 $ 7,795 $12,100
to $12,400 GAAP diluted earnings per share $ 3.65 $ 1.74 $
10.72 $ 7.25 $11.65 to $11.95 Tax reform impact per share (1.21 ) -
(1.22 ) - - Penn Treaty impact per share - 0.36 - 0.36 - Intangible
amortization per share 0.23 0.23 0.91 0.91 ~0.85 Tax effect per
share (0.08 ) (0.22 ) (0.34 ) (0.47 )
~(0.20) Adjusted diluted earnings per share $ 2.59 $ 2.11
$ 10.07 $ 8.05 ~$12.30 to $12.60
NET
MARGIN ADJUSTED FOR TAX REFORM
Three Months
Ended
December 31,
Year Ended
December 31,
2017 2017 GAAP net
earnings attributable to UnitedHealth Group common shareholders $
3,617 $ 10,558 Tax reform impact (1,197 ) (1,197 )
Net earnings adjusted for tax reform
attributable to UnitedHealth Group Common shareholders
$ 2,420 $ 9,361 GAAP net margin 6.9 % 5.2 %
Net margin adjusted for tax reform 4.6 % 4.7 %
UNITEDHEALTH GROUPRECONCILIATION OF NON-GAAP FINANCIAL
MEASURES(in millions)(unaudited)
ADJUSTED CASH FLOWS FROM OPERATIONS Three Months
Ended
December 31,
2017 2016 GAAP cash flows from operations $ (2,577 )
$ (1,409 ) Add: October CMS premium payments received in September
4,568 3,777 Adjusted cash flows from
operations $ 1,991 $ 2,368
EBITDA
Projected Year Ended
December 31, 2018
GAAP net earnings $11,800 to $12,200 Provision for income taxes
3,700 – 3,850 Interest expense 1,200 – 1,250 Depreciation and
amortization 2,350 – 2,400 EBITDA $19,050 to $19,700
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UnitedHealth GroupInvestors:Brett Manderfeld, 952-936-7216Vice
PresidentorJohn S. Penshorn, 952-936-7214Senior Vice
PresidentorMedia:Tyler Mason, 424-333-6122Vice President
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