- Second Quarter Revenues of $56.1
Billion Grew 12% Year-Over-Year
- Earnings from Operations Increased
13% to $4.2 Billion in Second Quarter
- Cash Flows from Operations were $4
Billion in the Quarter, 1.3x Net Earnings
- Second Quarter Net Earnings of $2.98
Per Share Grew 28% Year-Over-Year
- Second Quarter Adjusted Net Earnings
of $3.14 Per Share Grew 28% Year-Over-Year
UnitedHealth Group (NYSE: UNH) reported second quarter results,
with continued strong, well-diversified performance across the
enterprise.
“Today, UnitedHealth Group delivers increasing value to more
people, driven by strong execution, consistently high quality, deep
relationships and our distinctive combination of clinical,
technology and information capabilities. As we look ahead, we will
drive our growth on the strength of practical innovations that
anticipate and respond to increasing consumer expectations and
clear social needs,” said David S. Wichmann, chief executive
officer of UnitedHealth Group.
Based on first half 2018 results and the business outlook for
the balance of the year, the Company has raised its outlook for
2018 net earnings to a range of $11.80 to $12.05 per share and
adjusted net earnings to a range of $12.50 to $12.75 per share, and
now expects cash flows from operations to approach $15.5
billion.
Quarterly Financial Performance
Three Months
Ended
June 30, June 30,
March 31,
2018
2017
2018
Revenues $56.1 billion $50.1 billion $55.2 billion Earnings From
Operations $4.2 billion $3.7 billion $4.1 billion Net Margin
5.2% 4.6% 5.1%
- UnitedHealth Group’s second quarter
2018 revenues grew $6 billion or 12.1 percent year-over-year to
$56.1 billion.
- Second quarter earnings from operations
grew $473 million or 12.7 percent year-over-year to $4.2 billion.
Adjusted net earnings of $3.14 per share grew 27.6 percent, with an
improved net margin of 5.2 percent.
- Cash flows from operations of $4.0
billion were 1.3x net income in second quarter 2018, compared to
$2.2 billion and 0.9x net income in second quarter 2017.
- The consolidated medical care ratio of
81.9 percent in the second quarter of 2018 decreased 30 basis
points year-over-year, as the return of the health insurance tax
more than offset business mix changes and reduced levels of prior
year reserve development. Medical cost reserve development of $20
million was driven by positive development in cost estimates for
first quarter 2018 business.
- The operating cost ratio of 15.0
percent in the second quarter of 2018 increased 40 basis points
year-over-year, as business mix and operating cost efficiencies
were more than offset by the return of the health insurance
tax.
- The second quarter 2018 income tax rate
of 22 percent decreased 9.5 percentage points year-over-year,
reflecting the reduced federal statutory rate and stock-based
compensation activity, partially offset by the return of the
nondeductible health insurance tax for 2018.
- Second quarter 2018 days claims payable
decreased one day sequentially to 48 days; second quarter days
sales outstanding decreased one day sequentially to 18 days.
- Annualized return on shareholders’
equity was 24.4 percent in the second quarter, and the debt to
total capital ratio decreased 80 basis points sequentially to 40.8
percent at June 30, 2018.
- UnitedHealth Group repurchased 2.2
million shares for $500 million in the second quarter, bringing
year-to-date purchases to 13.8 million shares for $3.15 billion.
Dividends paid to shareholders were $866 million in the second
quarter and reflected raising the annual dividend payment rate by
20 percent to $3.60 per share inJune 2018.
UnitedHealthcare provides global health care benefits, serving
individuals and employers, and Medicare and Medicaid beneficiaries.
UnitedHealthcare is dedicated to simplifying the health care
experience, meeting consumer health and wellness needs and
sustaining trusted relationships with care providers.
Quarterly Financial Performance
Three Months
Ended
June 30, June 30,
March 31,
2018
2017
2018
Revenues $45.8 billion $40.8 billion $45.5 billion Earnings From
Operations $2.4 billion $2.2 billion $2.4 billion Operating Margin
5.1% 5.4% 5.3%
- UnitedHealthcare grew to serve 2.2
million more consumers1 year-over-year in the second quarter of
2018, with revenues growing by $5.1 billion or 12.4 percent to
$45.8 billion. Revenue growth was driven by an increasing number of
people served, a higher revenue membership mix, pricing increases
to cover expected medical cost trends and resumption of the health
insurance tax for 2018. Second quarter 2018 earnings from
operations of $2.4 billion grew 6.6 percent.
- UnitedHealthcare
Employer & Individual second quarter 2018 revenues of
$13.7 billion increased $742 million year-over-year.
UnitedHealthcare Employer & Individual grew to serve 50,000
more people through risk-based offerings in the quarter, while
fee-based products decreased by 60,000 people.
- UnitedHealthcare
Medicare & Retirement grew revenues by $2.1 billion or
12.6 percent year-over-year to $18.9 billion in the second quarter
of 2018. The business served 45,000 more seniors in the quarter,
including 30,000 in Medicare Advantage plans. The number of people
UnitedHealthcare Medicare & Retirement served through Medicare
Advantage grew by 450,000 or 10.4 percent year-over-year.
- In second quarter 2018, UnitedHealthcare Community & State revenues of
$10.7 billion grew $1.6 billion or 17.1 percent year-over-year,
reflecting 12-month membership growth of 330,000 people and
services to an increasing mix of individuals with higher clinical
needs. Second quarter membership grew 15,000 people
sequentially.
- UnitedHealthcare Global revenues
grew 33.5 percent year-over-year to $2.5 billion, due principally
to business expansion.
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 helps 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
June 30, June 30,
March 31,
2018
2017
2018
Revenues $24.7 billion $22.7 billion $23.6 billion Earnings From
Operations $1.8 billion $1.5 billion $1.7 billion Operating Margin
7.5% 6.7% 7.0%
- In the second quarter of 2018, Optum
revenues grew by $2 billion or 9.1 percent year-over-year to $24.7
billion. Optum’s operating margin of 7.5 percent expanded 80 basis
points year-over-year. Second quarter earnings from operations grew
$327 million or 21.5 percent year-over-year to $1.8 billion, with
double-digit percentage earnings growth rates for each business
segment.
- OptumHealth revenues of $5.9 billion grew $819
million or 16 percent year-over-year, driven by growth in care
delivery and behavioral health, digital consumer engagement and
health financial services. OptumHealth served 92 million people at
quarter end, having grown to serve 6 million more people2 or 7
percent over the past year.
- OptumInsight revenues grew 9.6 percent to $2.2
billion in second quarter 2018, leveraging its data analytics
capabilities for customers and driven by growth and expansion in
technology, business process and care provider advisory services.
OptumInsight’s contract backlog of $15.4 billion grew $2 billion or
14.9 percent year-over-year.
- OptumRx
second quarter 2018 revenues grew 7 percent year-over-year to $16.9
billion. OptumRx fulfilled 332 million adjusted scripts in second
quarter 2018, growing 3.1 percent over the prior year, with
favorable mix in specialty pharmacy and home delivery
services.
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 July 31, 2018. The conference call replay can also be
accessed by dialing 1-800-374-0934. This earnings release and the
Form 8-K dated July 17, 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., South
American and other jurisdictions’ regulations affecting the health
care industry; the outcome of the DOJ’s legal action relating to
the risk adjustment submission matter; 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; 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.
1 Reflects net consumer growth excluding the TRICARE military
health program, which concluded in 2017.
2 Reflects net consumer growth excluding the TRICARE military
health program, which concluded in 2017.
UNITEDHEALTH GROUP Earnings Release Schedules and
Supplementary Information Quarter Ended June 30, 2018
- 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 GROUP CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS (in millions, except per share data) (unaudited)
Three Months Ended June 30,
Six Months Ended June 30, 2018
2017 2018 2017
Revenues Premiums $ 44,458 $ 39,585 $ 88,542 $ 78,523
Products 7,004 6,415 13,706 12,544 Services 4,269 3,797 8,373 7,231
Investment and other income 355 256
653 478 Total revenues
56,086 50,053 111,274
98,776
Operating costs Medical costs 36,427
32,549 72,290 64,628 Operating costs 8,386 7,328 16,892 14,350 Cost
of products sold 6,471 5,889 12,655 11,565 Depreciation and
amortization 598 556 1,180
1,089 Total operating costs
51,882 46,322 103,017
91,632
Earnings from operations 4,204 3,731
8,257 7,144 Interest expense (344 ) (301 )
(673 ) (584 )
Earnings before income
taxes 3,860 3,430 7,584 6,560 Provision for income taxes
(850 ) (1,080 ) (1,650 ) (2,019 )
Net earnings 3,010 2,350 5,934 4,541 Earnings
attributable to noncontrolling interests (88 ) (66 )
(176 ) (85 )
Net earnings attributable to
UnitedHealth Group common shareholders
$ 2,922 $ 2,284 $ 5,758 $ 4,456
Diluted earnings per share attributable
to UnitedHealth Group common shareholders
$ 2.98 $ 2.32 $ 5.85 $ 4.55
Adjusted earnings per share
attributable to UnitedHealth Group common shareholders (a)
$ 3.14 $ 2.46 $ 6.19 $ 4.83
Diluted weighted-average common shares outstanding 982
985 984 980
(a) See page 6 for a reconciliation of the
non-GAAP measure
UNITEDHEALTH GROUP CONDENSED CONSOLIDATED BALANCE
SHEETS (in millions) (unaudited)
June
30,
December 31, 2018 2017 Assets Cash and
short-term investments $ 21,860 $ 15,490 Accounts receivable, net
10,874 9,568 Other current assets 13,900 12,026
Total current assets 46,634 37,084 Long-term
investments 31,237 28,341 Other long-term assets 76,740
73,633 Total assets $ 154,611 $ 139,058
Liabilities, redeemable noncontrolling interests and equity
Medical costs payable $ 19,339 $ 17,871 Commercial paper and
current maturities of long-term debt 2,959 2,857 Other current
liabilities 39,754 29,735 Total current
liabilities 62,052 50,463 Long-term debt, less current
maturities 32,096 28,835 Other long-term liabilities 7,841 7,738
Redeemable noncontrolling interests 1,839 2,189 Equity
50,783 49,833 Total liabilities, redeemable
noncontrolling interests and equity $ 154,611 $ 139,058
UNITEDHEALTH GROUP CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS (in millions) (unaudited)
Six Months Ended
June 30,
2018 2017 Operating
Activities Net earnings $ 5,934 $ 4,541 Noncash items:
Depreciation and amortization 1,180 1,089 Deferred income taxes and
other (148 ) (89 ) Share-based compensation 358 332 Net changes in
operating assets and liabilities 5,052 2,754
Cash flows from operating activities 12,376
8,627
Investing Activities Purchases of
investments, net of sales and maturities (2,968 ) (2,082 )
Purchases of property, equipment and capitalized software (960 )
(925 ) Cash paid for acquisitions, net (2,636 ) (704 ) Other, net
(134 ) 55 Cash flows used for investing
activities (6,698 ) (3,656 )
Financing
Activities Common share repurchases (3,150 ) (1,045 ) Dividends
paid (1,588 ) (1,320 ) Net change in commercial paper and long-term
debt 2,683 (2,171 ) Other, net 2,842 3,724
Cash flows from (used for) financing activities 787
(812 ) Effect of exchange rate changes on cash and
cash equivalents (78 ) (7 ) Increase in cash and cash
equivalents 6,387 4,152 Cash and cash equivalents, beginning of
period 11,981 10,430 Cash and cash
equivalents, end of period $ 18,368 $ 14,582
Supplemental Schedule of Noncash Investing Activities Common
stock issued for acquisitions $ - $ 1,867
UNITEDHEALTH
GROUP SUPPLEMENTAL FINANCIAL INFORMATION - BUSINESSES
(in millions, except percentages) (unaudited)
Three Months Ended
June 30,
Six Months Ended
June 30,
2018 2017
2018 2017 Revenues
UnitedHealthcare $ 45,846 $ 40,788 $ 91,305 $ 80,924 Optum 24,726
22,671 48,327 43,908 Eliminations (14,486 ) (13,406 )
(28,358 ) (26,056 ) Total consolidated
revenues $ 56,086 $ 50,053 $ 111,274 $ 98,776
Earnings from Operations UnitedHealthcare $
2,357 $ 2,211 $ 4,757 $ 4,345 Optum (a) 1,847
1,520 3,500 2,799 Total
consolidated earnings from operations $ 4,204 $ 3,731
$ 8,257 $ 7,144
Operating Margin
UnitedHealthcare 5.1 % 5.4 % 5.2 % 5.4 % Optum 7.5 % 6.7 % 7.2 %
6.4 % Consolidated operating margin 7.5 % 7.5 % 7.4 % 7.2 %
Revenues UnitedHealthcare Employer &
Individual $ 13,708 $ 12,966 $ 27,122 $ 25,705 UnitedHealthcare
Medicare & Retirement 18,859 16,747 37,784 33,299
UnitedHealthcare Community & State 10,746 9,178 21,417 18,127
UnitedHealthcare Global 2,533 1,897 4,982 3,793 OptumHealth
$ 5,941 $ 5,122 $ 11,700 $ 9,855 OptumInsight 2,185 1,993 4,254
3,836 OptumRx 16,941 15,840 33,047 30,787 Optum eliminations (341 )
(284 ) (674 ) (570 ) (a) Earnings from operations for
Optum for the three and six months ended June 30, 2018 included
$570 and $1,058 for OptumHealth; $453 and $848 for OptumInsight;
and $824 and $1,594 for OptumRx, respectively. Earnings from
operations for Optum for the three and six months ended June 30,
2017 included $422 and $754 for OptumHealth; $372 and $666 for
OptumInsight; and $726 and $1,379 for OptumRx, respectively.
UNITEDHEALTH GROUP SUPPLEMENTAL FINANCIAL INFORMATION -
BUSINESS METRICS
UNITEDHEALTHCARE CUSTOMER PROFILE (in
thousands)
June
30,
March
31,
December 31,
June
30,
People Served 2018 2018 2017
2017 Commercial group: Risk-based 7,905 7,860 7,935
7,765 Fee-based 18,415 18,475 18,595
19,110 Total commercial group 26,320 26,335 26,530 26,875
Individual 480 475 485 540
Total
Commercial (a) 26,800 26,810 27,015
27,415 Medicare Advantage 4,790 4,760 4,430 4,340 Medicaid
6,710 6,695 6,705 6,380 Medicare Supplement (Standardized)
4,505 4,490 4,445 4,360
Total Public
and Senior 16,005 15,945 15,580
15,080
Total UnitedHealthcare - Domestic Medical 42,805
42,755 42,595 42,495 International 6,020 6,095
4,080 4,115
Total UnitedHealthcare - Medical
48,825 48,850 46,675 46,610
Supplemental Data Medicare Part D stand-alone
4,730 4,770 4,940 4,935
OPTUM PERFORMANCE METRICS June 30, March
31, December 31, June 30, 2018 2018
2017 2017 OptumHealth Consumers Served (in
millions) (a) 92 91 88 86 OptumInsight Contract Backlog (in
billions) $ 15.4 $ 15.2 $ 15.0 $ 13.4 OptumRx Quarterly Adjusted
Scripts (in millions) 332 332 333 322
(a) Excludes TRICARE of 2.9 million at
December 31, 2017 and June 30, 2017.
Note: UnitedHealth Group served 140
million unique individuals across all businesses at June 30,
2018.
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.
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. 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. 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 GROUP RECONCILIATION OF NON-GAAP
FINANCIAL MEASURES (in millions, except per share data)
(unaudited)
ADJUSTED NET EARNINGS PER SHARE
Three Months EndedJune
30,
Six Months EndedJune 30,
ProjectedYear
EndedDecember 31,
2018 2017
2018 2017 2018 GAAP net
earnings attributable to UnitedHealth Group common shareholders $
2,922 $ 2,284 $ 5,758 $ 4,456 $11,625 to $11,875 Intangible
amortization 220 220 440 439 ~885 Tax effect of intangible
amortization (56 ) (81 ) (111 ) (163 )
~(220) Adjusted net earnings attributable to UnitedHealth Group
common shareholders $ 3,086 $ 2,423 $ 6,087 $
4,732 ~$12,300 to $12,550 GAAP diluted earnings per
share $ 2.98 $ 2.32 $ 5.85 $ 4.55 $11.80 to $12.05 Intangible
amortization per share 0.22 0.22 0.45 0.45 ~0.90 Tax effect per
share of intangible amortization (0.06 ) (0.08 )
(0.11 ) (0.17 ) ~(0.20) Adjusted diluted earnings per
share $ 3.14 $ 2.46 $ 6.19 $ 4.83
~$12.50 to $12.75
ADJUSTED CASH FLOWS FROM
OPERATIONS Six Months Ended June 30,
2018 2017 GAAP cash flows from
operations $ 12,376 $ 8,627 Less: July CMS premium payments
received in June (5,166 ) (4,454 ) Adjusted cash
flows from operations $ 7,210 $ 4,173
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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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