UNH UnitedHealth Group Inc

• Total Revenues of $60.4 Billion Grew by 7% or $3.8 Billion Year-over-Year
• Operating Earnings Grew 9% to $5.0 Billion, Including Double-Digit Growth Rates in Each Optum Business
• Net Earnings Per Share were $3.67, Adjusted Net Earnings Per Share were $3.88, Bringing Year-To-Date Growth to 17%
• Cash Flows from Operations were $3.2 Billion in the Quarter, Bringing Year-To-Date Cash Flows from Operations to $12.3 Billion or 1.2x Net Income

Strong and diversified performance continued across UnitedHealth Group (NYSE: UNH) in the third quarter 2019.

“Optum and UnitedHealthcare are driving value for our customers, creating momentum to finish the year strongly and move into 2020 with an intense focus on accelerating the growth of our businesses by advancing quality, affordability and satisfaction for those we serve,” said David S. Wichmann, chief executive officer of UnitedHealth Group.

Based on strong third quarter 2019 results and its positive view for the rest of the year, the Company increased its full year net earnings outlook to $14.15 to $14.25 per share and adjusted net earnings to a range of $14.90 to $15.00 per share, both increasing $0.15 per share at the mid-point.

Quarterly Financial Performance

 

Three Months Ended

 

September 30,

2019

September 30,

2018

June 30,

2019

Revenues

$60.4 billion

$56.6 billion

$60.6 billion

Earnings from Operations

$5.0 billion

$4.6 billion

$4.7 billion

Net Margin

5.9%

5.6%

5.4%

• UnitedHealth Group’s third quarter 2019 revenues grew $3.8 billion or 6.7 percent year-over-year to $60.4 billion, led by double-digit percentage revenue growth for Optum. Year-to-date revenues grew 8 percent or $13.4 billion to $181.3 billion year-over-year.
• Third quarter earnings from operations grew $424 million year-over-year or 9.2 percent to $5.0 billion led by double-digit growth rates across each of the Optum businesses. Adjusted net earnings of $3.88 per share increased 13.8 percent, bringing year-to-date adjusted net earnings per share to $11.22, a 16.9 percent growth rate year-over-year.
• Cash flows from operations were $3.2 billion in the quarter and $12.3 billion or 1.2x net income year-to-date.
• Third quarter medical cost trends remained in line with expectations, with the health insurance tax deferral driving the 140 basis point year-over-year increase in the medical care ratio to 82.4 percent. Favorable medical reserve development was $140 million in the quarter, with $80 million related to 2019 and $60 million related to prior periods. Days claims payable of 49.3 days compared to 48.6 in the second quarter 2019 and 50.5 in the third quarter 2018.
• The third quarter operating cost ratio improved 20 basis points from the same period last year to 14.8 percent, reflecting the deferral of the health insurance tax and continued effects of operating cost productivity improvements, net of the effect of business mix changes and continued investments in innovation, service and growth.
• Third quarter dividends of $1.08 per share increased 20 percent year-over-year to $1 billion. The Company repurchased 2.6 million shares for $600 million in the quarter, bringing year-to-date purchases to 20.8 million shares for $5.1 billion.
• Return on equity of 26.2 percent in the period continued to reflect the Company’s efficient capital base and strong earnings profile.

UnitedHealthcare provides health care benefits globally, serving individuals and employers, and Medicare and Medicaid beneficiaries. UnitedHealthcare is dedicated to improving the value health care consumers receive by reducing the total cost of care, enhancing the quality of care received, improving health and wellness and simplifying the health care experience.

Quarterly Financial Performance

 

Three Months Ended

 

September 30,

2019

September 30,

2018

June 30,

2019

Revenues

$48.1 billion

$45.9 billion

$48.6 billion

Earnings from Operations

$2.7 billion

$2.6 billion

$2.6 billion

Operating Margin

5.5%

5.6%

5.4%

• UnitedHealthcare grew to serve 415,000 more people with medical benefits over the past year driven by growth in commercial and Medicare Advantage membership, and with greater focus on serving people with higher acuity needs. This led to revenue growth of 4.7 percent, or $2.2 billion, to $48.1 billion in the quarter. Third quarter 2019 earnings from operations at UnitedHealthcare grew by 3.8 percent to $2.7 billion driven by revenue growth and strong cost disciplines, offset by an extra day in the quarter and the impact of the health insurance tax deferral. Year-to-date, earnings from operations grew 13 percent.
  • Third quarter 2019 revenues at UnitedHealthcare Employer & Individual grew $557 million year-over-year to $14.3 billion, as UnitedHealthcare served just over 1 million more people with commercial benefits in the past year.
  • UnitedHealthcare Medicare & Retirement third quarter 2019 revenues advanced by 10.2 percent or $1.9 billion to $20.7 billion. Seniors served through Medicare Advantage grew by 315,000 over the last year to 5.23 million. Including those dually eligible for Medicare and Medicaid and served through UnitedHealthcare Community & State, total year-over-year growth in Medicare Advantage was nearly 450,000 people.
  • Revenues at UnitedHealthcare Community & State decreased $384 million to $10.7 billion in third quarter 2019, as third quarter membership declined 665,000 people year-over-year due to proactive market withdrawals as well as states balancing carriers and managing eligibility.
  • UnitedHealthcare Global third quarter 2019 revenues increased 3.6 percent year-over-year to $2.4 billion.

Optum is a health services business serving the global health care marketplace, including payers, care providers, health systems, 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 and physician experience.

Quarterly Financial Performance

 

Three Months Ended

 

September 30,

2019

September 30,

2018

June 30,

2019

Revenues

$28.8 billion

$25.4 billion

$28.0 billion

Earnings from Operations

$2.4 billion

$2.0 billion

$2.1 billion

Operating Margin

8.2%

8.0%

7.5%

• Optum third quarter 2019 revenues grew by 13.3 percent or $3.4 billion year-over-year to $28.8 billion. Optum’s third quarter 2019 earnings from operations advanced 16.1 percent to $2.4 billion. Year-to-date, earnings from operations grew 15 percent.
  • OptumHealth revenues in the third quarter 2019 of $8.1 billion grew 34.4 percent year-over-year or $2.1 billion, with strength and diversity of growth across care delivery and expansion of behavioral health services. OptumHealth served approximately 95 million people at September 30, 2019, as revenue per consumer increased 30 percent year-over-year, driven by growth in value-based care arrangements and expanded local care delivery offerings.
  • Third quarter 2019 revenues at OptumInsight grew 16.1 percent year-over-year to $2.6 billion, while revenue backlog advanced 21 percent year-over-year to $19.0 billion at quarter-end.
  • OptumRx revenues in third quarter 2019 of $18.5 billion increased 5.8 percent or $1.0 billion year-over-year, reflecting continued diversification to more clinically focused services, including specialty pharmacy care. In the third quarter 2019 OptumRx fulfilled 325 million adjusted scripts or a decline of 2 percent over the prior year, impacted by the one previously announced large client transition.

About UnitedHealth Group

UnitedHealth Group (NYSE: UNH) is a diversified health care 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 October 29, 2019. The conference call replay can also be accessed by dialing 1-800-839-1162. This earnings release and the Form 8-K dated October 15, 2019, 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 which are intended to take advantage of the “safe harbor” provisions of the federal securities law. The words “believe,” “expect,” “intend,” “estimate,” “anticipate,” “forecast,” “outlook,” “plan,” “project,” “should” and similar expressions identify forward-looking statements. These statements may contain information about financial prospects, economic conditions and trends and involve risks and uncertainties. Actual results could differ materially from those that management expects, depending on the outcome of certain factors including: our ability to effectively estimate, price for and manage medical costs; new or changes in existing health care laws or regulations, or their enforcement or application; the DOJ’s legal action relating to the risk adjustment submission matter; our ability to maintain and achieve improvement in quality scores impacting revenue; reductions in revenue or delays to cash flows received under government programs; changes in Medicare, the CMS star ratings program or the application of risk adjustment data validation audits; cyber-attacks, other privacy/data security incidents, or our failure to comply with related regulations; risks and uncertainties associated with the pharmacy benefits management industry; competitive pressures; changes in or challenges to our public sector contract awards; our ability to contract on competitive terms with physicians, hospitals and other service providers; failure to achieve targeted operating cost productivity improvements; increases in costs and other liabilities associated with litigation, government investigations, audits or reviews; failure to manage successfully our strategic alliances or complete or receive anticipated benefits of strategic transactions; fluctuations in foreign currency exchange rates; downgrades in our credit ratings; our investment portfolio performance; impairment of our goodwill and intangible assets; 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 from external financings to fund our obligations, maintain our debt to total capital ratio at targeted levels, maintain our quarterly dividend payment cycle, or continue repurchasing shares of our common stock. This above list is not exhaustive. We discuss these matters, and certain risks that may affect our business operations, financial condition and results of operations more fully in our filings with the SEC, including our reports on Forms 10-K, 10-Q and 8-K. 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 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 law.

UNITEDHEALTH GROUP Earnings Release Schedules and Supplementary Information Quarter Ended September 30, 2019 - 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 Measure

UNITEDHEALTH GROUP

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in millions, except per share data)

(unaudited)

 

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

 

2019

 

2018

 

2019

 

2018

Revenues Premiums

$

47,397

 

$

44,613

 

$

142,074

 

$

133,155

 

Products

 

7,546

 

 

7,344

 

 

23,971

 

 

21,050

 

Services

 

4,942

 

 

4,217

 

 

13,756

 

 

12,590

 

Investment and other income

 

466

 

 

382

 

 

1,453

 

 

1,035

 

  Total revenues

 

60,351

 

 

56,556

 

 

181,254

 

 

167,830

 

  Operating costs Medical costs

 

39,041

 

 

36,158

 

 

117,164

 

 

108,448

 

Operating costs

 

8,960

 

 

8,479

 

 

25,892

 

 

25,371

 

Cost of products sold

 

6,627

 

 

6,718

 

 

21,606

 

 

19,373

 

Depreciation and amortization

 

709

 

 

611

 

 

2,002

 

 

1,791

 

  Total operating costs

 

55,337

 

 

51,966

 

 

166,664

 

 

154,983

 

  Earnings from operations

 

5,014

 

 

4,590

 

 

14,590

 

 

12,847

 

  Interest expense

 

(449

)

 

(353

)

 

(1,267

)

 

(1,026

)

  Earnings before income taxes

 

4,565

 

 

4,237

 

 

13,323

 

 

11,821

 

  Provision for income taxes

 

(936

)

 

(953

)

 

(2,752

)

 

(2,603

)

  Net earnings

 

3,629

 

 

3,284

 

 

10,571

 

 

9,218

 

  Earnings attributable to noncontrolling interests

 

(91

)

 

(96

)

 

(273

)

 

(272

)

  Net earnings attributable to UnitedHealth Group common shareholders

$

3,538

 

$

3,188

 

$

10,298

 

$

8,946

 

  Diluted earnings per share attributable to UnitedHealth Group common shareholders

$

3.67

 

$

3.24

 

$

10.65

 

$

9.09

 

  Adjusted earnings per share attributable to UnitedHealth Group common shareholders (a)

$

3.88

 

$

3.41

 

$

11.22

 

$

9.60

 

  Diluted weighted-average common shares outstanding

 

963

 

 

983

 

 

967

 

 

984

 

  (a) See page 6 for a reconciliation of the non-GAAP measure

 

 

 

 

UNITEDHEALTH GROUP

CONDENSED CONSOLIDATED BALANCE SHEETS

(in millions)

(unaudited)

 

 

September 30,

 

December 31,

 

2019

 

2018

Assets Cash and short-term investments

$

15,818

$

14,324

Accounts receivable, net

 

10,964

 

11,388

Other current assets

 

16,759

 

12,980

  Total current assets

 

43,541

 

38,692

  Long-term investments

 

36,840

 

32,510

Other long-term assets

 

93,328

 

81,019

  Total assets

$

173,709

$

152,221

    Liabilities, redeemable noncontrolling interests and equity Medical costs payable

$

20,939

$

19,891

Commercial paper and current maturities of long-term debt

 

6,387

 

1,973

Other current liabilities

 

35,315

 

31,345

  Total current liabilities

 

62,641

 

53,209

  Long-term debt, less current maturities

 

38,507

 

34,581

Other long-term liabilities

 

12,814

 

8,204

Redeemable noncontrolling interests

 

1,991

 

1,908

Equity

 

57,756

 

54,319

  Total liabilities, redeemable noncontrolling interests and equity

$

173,709

$

152,221

UNITEDHEALTH GROUP

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions)

(unaudited)

 

 

Nine Months Ended September 30,

 

2019

 

2018

Operating Activities Net earnings

$

10,571

 

$

9,218

 

Noncash items: Depreciation and amortization

 

2,002

 

 

1,791

 

Deferred income taxes and other

 

(4

)

 

(127

)

Share-based compensation

 

525

 

 

512

 

Net changes in operating assets and liabilities

 

(836

)

 

1,923

 

  Cash flows from operating activities

 

12,258

 

 

13,317

 

  Investing Activities Purchases of investments, net of sales and maturities

 

(2,028

)

 

(3,729

)

Purchases of property, equipment and capitalized software

 

(1,421

)

 

(1,505

)

Cash paid for acquisitions, net

 

(8,200

)

 

(5,824

)

Other, net

 

338

 

 

(187

)

  Cash flows used for investing activities

 

(11,311

)

 

(11,245

)

  Financing Activities Common share repurchases

 

(5,101

)

 

(3,650

)

Dividends paid

 

(2,908

)

 

(2,454

)

Net change in commercial paper and long-term debt

 

8,192

 

 

1,200

 

Other, net

 

404

 

 

1,211

 

  Cash flows from (used for) financing activities

 

587

 

 

(3,693

)

  Effect of exchange rate changes on cash and cash equivalents

 

(37

)

 

(97

)

  Increase (decrease) in cash and cash equivalents

 

1,497

 

 

(1,718

)

  Cash and cash equivalents, beginning of period

 

10,866

 

 

11,981

 

  Cash and cash equivalents, end of period

$

 

12,363

 

$

 

10,263

 

UNITEDHEALTH GROUP

SUPPLEMENTAL FINANCIAL INFORMATION - BUSINESSES

(in millions, except percentages)

(unaudited)

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

2019

 

2018

 

2019

 

2018

Revenues UnitedHealthcare

$

48,105

 

$

45,937

 

$

145,595

 

$

137,242

 

Optum

 

28,763

 

 

25,391

 

 

83,152

 

 

73,718

 

Eliminations

 

(16,517

)

 

(14,772

)

 

(47,493

)

 

(43,130

)

  Total consolidated revenues

$

60,351

 

$

56,556

 

$

181,254

 

$

167,830

 

  Earnings from Operations UnitedHealthcare

$

2,655

 

$

2,559

 

$

8,251

 

$

7,316

 

Optum (a)

 

2,359

 

 

2,031

 

 

6,339

 

 

5,531

 

  Total consolidated earnings from operations

$

5,014

 

$

4,590

 

$

14,590

 

$

12,847

 

  Operating Margin UnitedHealthcare

 

5.5

%

 

5.6

%

 

5.7

%

 

5.3

%

Optum

 

8.2

%

 

8.0

%

 

7.6

%

 

7.5

%

Consolidated operating margin

 

8.3

%

 

8.1

%

 

8.0

%

 

7.7

%

    Revenues UnitedHealthcare Employer & Individual

$

14,291

 

$

13,734

 

$

42,407

 

$

40,856

 

UnitedHealthcare Medicare & Retirement

 

20,698

 

 

18,789

 

 

62,649

 

 

56,573

 

UnitedHealthcare Community & State

 

10,670

 

 

11,054

 

 

33,038

 

 

32,471

 

UnitedHealthcare Global

 

2,446

 

 

2,360

 

 

7,501

 

 

7,342

 

  OptumHealth

$

8,133

 

$

6,052

 

$

21,994

 

$

17,752

 

OptumInsight

 

2,617

 

 

2,254

 

 

7,145

 

 

6,508

 

OptumRx

 

18,454

 

 

17,437

 

 

55,194

 

 

50,484

 

Optum eliminations

 

(441

)

 

(352

)

 

(1,181

)

 

(1,026

)

 

(a)

  Earnings from operations for Optum for the three and nine months ended September 30, 2019 included $748 and $2,062 for OptumHealth; $632 and $1,589 for OptumInsight; and $979 and $2,688 for OptumRx, respectively. Earnings from operations for Optum for the three and nine months ended September 30, 2018 included $622 and $1,680 for OptumHealth; $534 and $1,382 for OptumInsight; and $875 and $2,469 for OptumRx, respectively. UNITEDHEALTH GROUP SUPPLEMENTAL FINANCIAL INFORMATION - BUSINESS METRICS   UNITEDHEALTHCARE CUSTOMER PROFILE (in thousands)   People Served September 30,2019 June 30,2019 December 31,2018 September 30,2018 Commercial: Risk-based

 

8,605

 

8,325

 

8,495

 

8,450

Fee-based

 

19,230

 

19,090

 

18,420

 

18,365

Total Commercial

 

27,835

 

27,415

 

26,915

 

26,815

Medicare Advantage

 

5,230

 

5,190

 

4,945

 

4,915

Medicaid

 

5,965

 

6,360

 

6,450

 

6,630

Medicare Supplement (Standardized)

 

4,510

 

4,495

 

4,545

 

4,540

Total Public and Senior

 

15,705

 

16,045

 

15,940

 

16,085

Total UnitedHealthcare - Domestic Medical

 

43,540

 

43,460

 

42,855

 

42,900

International

 

5,845

 

6,070

 

6,220

 

6,070

Total UnitedHealthcare - Medical

 

49,385

 

49,530

 

49,075

 

48,970

  Supplemental Data Medicare Part D stand-alone

 

4,415

 

4,430

 

4,710

 

4,725

  OPTUM PERFORMANCE METRICS   September 30,2019 June 30,2019 December 31,2018 September 30,2018   OptumHealth Consumers Served (in millions)

 

95

 

95

 

93

 

92

OptumInsight Contract Backlog (in billions)

$

19.0

$

18.5

$

17.0

$

15.7

OptumRx Quarterly Adjusted Scripts (in millions)

 

325

 

343

 

348

 

331

    Note: UnitedHealth Group served 136 million unique individuals across all businesses at September 30, 2019.

UNITEDHEALTH GROUP

RECONCILIATION OF NON-GAAP FINANCIAL MEASURE

(in millions, except per share data)

(unaudited)

 

ADJUSTED NET EARNINGS PER SHARE(a)

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

Projected Year Ended December 31,

 

 

2019

 

2018

 

2019

 

2018

 

2019

GAAP net earnings attributable to UnitedHealth Group common shareholders

$

3,538

 

$

3,188

 

$

10,298

 

$

8,946

 

$13,650 - $13,750

Intangible amortization

 

262

 

 

221

 

 

729

 

 

661

 

~1,000

Tax effect of intangible amortization

 

(64

)

 

(54

)

 

(180

)

 

(165

)

~(245)

Adjusted net earnings attributable to UnitedHealth

 

Group common shareholders

$

3,736

 

$

3,355

 

$

10,847

 

$

9,442

 

$14,405 - $14,505

 

GAAP diluted earnings per share

$

3.67

 

$

3.24

 

$

10.65

 

$

9.09

 

$14.15 - $14.25

Intangible amortization per share

 

0.27

 

 

0.22

 

 

0.75

 

 

0.67

 

~1.00

Tax effect per share of intangible amortization

 

(0.06

)

 

(0.05

)

 

(0.18

)

 

(0.16

)

~(0.25)

Adjusted diluted earnings per share

$

3.88

 

$

3.41

 

$

11.22

 

$

9.60

 

$14.90 - $15.00

(a)

 

Adjusted net earnings per share is a non-GAAP financial measure. 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. As amortization fluctuates based on the size and timing of the Company’s acquisition activity, management believes this exclusion provides a more useful comparison of the Company's underlying business performance and trends from period to period. While intangible assets contribute to the Company’s revenue generation, the intangible amortization is not directly related. Therefore, the related revenues are included in adjusted earnings per share.

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