- Second Quarter Revenues of $46.5
Billion Grew 28% Year-Over-Year
- UnitedHealthcare Grew Revenues 14%
Year-Over-Year,Adding 2.1 Million More People in the Past 12
Months
- Optum Grew Revenues 52%
Year-Over-Year to $20.6 Billion
- Cash Flows from Operations were $1.7
Billion in the Quarter
- GAAP Net Earnings of $1.81 Per Share
Grew 10% Year-Over-Year
- Adjusted Net Earnings of $1.96 Per
Share Grew 13% Year-Over-Year
UnitedHealth Group (NYSE:UNH) reported second quarter results
reflecting well-balanced growth and disciplined execution across
its core businesses.
“Our businesses were privileged again this quarter to have grown
to serve more customers and consumers. We continue to invest to
differentiate our products and services to better serve our
customers and fuel future growth,” said Stephen J. Hemsley, chief
executive officer of UnitedHealth Group.
The Company narrowed its outlook for 2016 GAAP net earnings to a
range of $7.25 to $7.40 per share and adjusted net earnings to a
range of $7.80 to $7.95 per share.
Quarterly Financial Performance
Three Months
Ended
June 30, June 30, March 31,
2016
2015
2016
Revenues $46.5 billion $36.3 billion $44.5 billion Earnings From
Operations $3.2 billion $2.9 billion $3.0 billion Net Margin
3.8% 4.4% 3.6%
- UnitedHealth Group second quarter 2016
revenues grew 28 percent or $10.2 billion year-over-year to $46.5
billion. Growth was broad-based, with all businesses driving
sequential quarterly revenue increases. Year-over-year,
UnitedHealthcare revenues grew 14 percent and Optum revenues grew
52 percent, with revenue growth by business ranging from 18 percent
to 69 percent at Optum.
- Second quarter earnings from operations
grew 11 percent year-over-year to $3.2 billion and adjusted net
earnings grew 13 percent to $1.96 per share. Strengthened
sequential margins at Optum lifted the consolidated net margin 20
basis points higher to 3.8 percent, with comparable business
mix.
- Second quarter 2016 cash flows from
operations of $1.7 billion increased 45 percent year-over-year and
were 1 times net earnings in the quarter, up from 0.7 times net
earnings in second quarter 2015. Year-to-date 2016 cash flows from
operations of $4 billion grew 17 percent year-over-year and were
1.2 times year-to-date net earnings.
- The consolidated medical care ratio
increased 30 basis points to 82.0 percent in the second quarter,
and included more than 50 basis points or approximately $200
million of additional full year losses from ACA-compliant
individual products above previous projections and fully absorbed
within second quarter results.
- First half 2016 medical reserves
developed favorably year-to-date by $300 million, compared to $130
million in favorable development in the first six months of 2015.
Within the 2016 result, reserves developed unfavorably by $100
million in the second quarter, of which $60 million related to
specific items from prior years that do not impact on-going medical
trends. The current year component of development was due entirely
to higher medical costs in ACA-compliant individual products.
Overall, medical cost trends remain well-controlled and consistent
with expectations.
- The second quarter 2016 operating cost
ratio of 14.6 percent decreased 120 basis points year-over-year,
primarily due to changes in business mix. Effective operating cost
management and long-standing seasonal spending patterns combined to
improve the operating cost ratio 60 basis points on a sequential
quarter basis.
- The second quarter tax rate of 40
percent reflected the first quarter 2016 adoption of a new
accounting standard for stock-based compensation.
- Second quarter 2016 days claims payable
of 51 days increased 3 days year-over-year and were stable
sequentially; days sales outstanding of 18 days increased 3 days
year-over-year and 2 days sequentially, primarily due to higher
government receivable balances.
- The Company’s debt to total capital
ratio was 47.8 percent at June 30, 2016, down from 48.7 percent at
year end 2015. Second quarter 2016 annualized return on equity of
19.6 percent was consistent with second quarter 2015
performance.
- During second quarter 2016 the Company
increased the annual dividend payment rate by 25 percent to $2.50
per share.
UnitedHealthcare provides health care benefits, serving
individuals and employers ranging from sole proprietorships to
large, multi-site and national and international organizations;
delivers health and well-being benefits to Medicare beneficiaries
and retirees; manages health care benefit programs on behalf of
state Medicaid and community programs; and serves the nation’s
military service members, retirees and their families through the
TRICARE program.
Quarterly Financial Performance
Three Months
Ended
June 30, June 30, March 31,
2016
2015
2016
Revenues $37.6 billion $33.1 billion $35.9 billion Earnings From
Operations $1.9 billion $2.0 billion $1.9 million Operating Margin
5.2% 6.1% 5.2%
- UnitedHealthcare grew over the past
year to serve over 2.1 million more people in domestic medical
benefits markets, including 320,000 more people in the second
quarter. This broad-based growth trend is reflected in
UnitedHealthcare’s second quarter revenue growth of 14 percent or
$4.5 billion year-over-year, to $37.6 billion.
- Second quarter 2016 earnings from
operations for UnitedHealthcare of $1.9 billion decreased 4 percent
year-over-year. UnitedHealthcare’s second quarter operating margin
of 5.2 percent was stable sequentially but decreased 90 basis
points year-over-year, primarily due to $200 million in
ACA-compliant individual product losses beyond projections, as well
as overall reserve development.
UnitedHealthcare Employer & Individual
- Second quarter 2016 UnitedHealthcare
Employer & Individual revenues of $13.5 billion grew $1.7
billion or 14 percent year-over-year, driven by growth in the
number of consumers served and price increases to match medical
cost trends on risk-based products.
- UnitedHealthcare Employer &
Individual grew to serve 60,000 more people in the second quarter
and 1.1 million more people year-over-year. Second quarter was led
by commercial group and individual risk-based growth.
UnitedHealthcare Medicare & Retirement
- Second quarter 2016 UnitedHealthcare
Medicare & Retirement revenues of $14.3 billion grew $1.7
billion or 14 percent year-over-year, driven by growth in services
to seniors through both individual and employer-sponsored group
medical products in 2016.
- In Medicare Advantage, UnitedHealthcare
grew to serve 345,000 more seniors year-over-year, an 11 percent
increase, including 20,000 seniors in the second quarter.
- Medicare Supplement products grew 6
percent to serve 250,000 more people year-over-year, including
15,000 seniors in the second quarter.
- UnitedHealthcare’s stand-alone Medicare
Part D program served 4.9 million people at June 30, 2016, a
decrease of 135,000 people year-over-year, reflecting a planned
pull-back in Part D in 2016.
UnitedHealthcare Community & State
- Second quarter 2016 UnitedHealthcare
Community & State revenues of $8.3 billion grew $1.1 billion or
15 percent year-over-year, driven by strong overall growth and an
increasing mix of higher need members.
- In the past year, UnitedHealthcare grew
to serve 465,000 more people in Medicaid, an increase of 9 percent,
including 225,000 more people in second quarter 2016.
Optum is a health services business serving the broad health
care marketplace, including payers, care providers, employers,
governments, life sciences companies and consumers. Using advanced
data analytics and technology, Optum’s people help improve overall
health system performance: optimizing care quality, reducing costs
and improving the consumer experience and care provider
performance.
Quarterly Financial Performance
Three Months
Ended
June 30, June 30, March 31,
2016
2015
2016
Revenues $20.6 billion $13.6 billion $19.7 billion Earnings From
Operations $1.3 billion $864 million $1.1 billion Operating Margin
6.1% 6.4% 5.6%
- Second quarter 2016 Optum revenues of
$20.6 billion grew $7 billion or 52 percent year-over-year. Optum
earnings from operations grew 46 percent or $400 million
year-over-year to $1.3 billion, with earnings growth at or above 20
percent and solid operating margins across all business segments.
Strong growth in pharmacy care services increased operating
earnings and reduced Optum’s overall operating margin by 30 basis
points year-over-year to 6.1 percent.
- Each business grew revenues and
earnings from operations sequentially, with strong performance on a
comparable business mix lifting Optum’s operating margin by 50
basis points in the second quarter.
- OptumHealth revenues of $4.1 billion grew $627
million or 18 percent year-over-year due to growth in its health
care delivery businesses and expansion of behavioral services into
new Medicaid markets. OptumHealth served more than 80 million
consumers at June 30, 2016, reflecting growth of 4 million people
or 6 percent year-over-year.
- OptumInsight revenues grew 25 percent
year-over-year to $1.8 billion in the second quarter of 2016,
driven by growth in technology services, care provider revenue
management services and payer service offerings. OptumInsight’s
revenue backlog grew to $11.3 billion at June 30, 2016, an increase
of $1.5 billion or 15 percent year-over-year.
- OptumRx
revenues of $15.1 billion grew 69 percent year-over-year, driven by
acquisitions and organic growth. OptumRx grew script fulfillments
by 69 percent to 250 million adjusted scripts in the second quarter
of 2016.
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 August 2, 2016. The conference call replay can also be
accessed by dialing 1-800-283-4642. This earnings release and the
Form 8-K dated July 19, 2016 can also be accessed from the
Investors page of the Company’s website.
Non-GAAP Financial
Measures
This news release presents information about the Company’s
adjusted net earnings per share, which is a non-GAAP financial
measure 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
foregoing non-GAAP financial measure 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; assessments for insolvent payers under state guaranty
fund laws; our ability to 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
TRICARE programs, including sequestration and 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; our participation in federal and state health
insurance exchanges which entail uncertainties associated with mix
and volume of business; 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; 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, including our
acquisition of Catamaran; fluctuations in foreign currency exchange
rates on our reported shareholders’ equity and results of
operations; downgrades in our credit ratings; adverse economic
conditions, including decreases in enrollment resulting from
increases in the unemployment rate and commercial attrition; the
performance of our investment portfolio; impairment of the value of
our goodwill and intangible assets in connection with dispositions
or if estimated future results do not adequately support goodwill
and intangible assets recorded for our existing businesses or the
businesses that we acquire; increases in health care costs
resulting from large-scale medical emergencies; 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 Three and Six Months Ended June
30, 2016 - 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 June
30, Six Months Ended June 30, 2016 2015
2016 2015 Revenues Premiums $ 36,413 $ 31,961
$ 71,224 $ 63,635 Products 6,610 1,223 13,003 2,453 Services 3,269
2,865 6,409 5,571 Investment and other income 193
214 376 360 Total
revenues 46,485 36,263 91,012
72,019
Operating costs Medical
costs 29,872 26,127 58,302 51,917 Operating costs 6,793 5,738
13,551 11,572 Cost of products sold 6,106 1,124 11,983 2,238
Depreciation and amortization 511 379
1,013 757 Total operating costs
43,282 33,368 84,849
66,484
Earnings from operations 3,203
2,895 6,163 5,535 Interest expense (271 ) (151
) (530 ) (301 )
Earnings before income
taxes 2,932 2,744 5,633 5,234 Provision for income taxes
(1,172 ) (1,159 ) (2,246 ) (2,236 )
Net earnings 1,760 1,585 3,387 2,998 Earnings
attributable to noncontrolling interests (6 ) -
(22 ) -
Net earnings attributable to
UnitedHealth Group common shareholders
$ 1,754 $ 1,585 $ 3,365 $ 2,998
Diluted earnings per share attributable
to UnitedHealth Group common shareholders
$ 1.81 $ 1.64 $ 3.48 $ 3.10
Adjusted earnings per share
attributable to UnitedHealth Group common shareholders (a)
$ 1.96 $ 1.73 $ 3.77 $ 3.28
Diluted weighted-average common shares outstanding 967
966 967 967
(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, 2016 2015 Assets Cash and
short-term investments $ 10,974 $ 12,911 Accounts receivable, net
9,346 6,523 Other current assets 12,978 12,205
Total current assets 33,298 31,639 Long-term investments
22,211 18,792 Other long-term assets 64,094 60,823
Total assets $ 119,603 $ 111,254
Liabilities, redeemable noncontrolling interests and equity
Medical costs payable $ 16,632 $ 14,330 Commercial paper and
current maturities of long-term debt 6,364 6,634 Other current
liabilities 24,380 21,934 Total current
liabilities 47,376 42,898 Long-term debt, less current
maturities 26,834 25,331 Other long-term liabilities 7,362 7,564
Redeemable noncontrolling interests 1,744 1,736 Equity
36,287 33,725 Total liabilities, redeemable
noncontrolling interests and equity $ 119,603 $ 111,254
UNITEDHEALTH GROUP CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS (in millions) (unaudited)
Six
Months Ended
June 30,
2016 2015 Operating Activities Net earnings $
3,387 $ 2,998 Noncash items: Depreciation and amortization 1,013
757 Deferred income taxes and other (161 ) (190 ) Share-based
compensation 262 211 Net changes in operating assets and
liabilities (500 ) (344 ) Cash flows from operating
activities 4,001 3,432
Investing Activities Purchases of investments, net of sales
and maturities (3,581 ) (404 ) Purchases of property, equipment and
capitalized software (813 ) (716 ) Cash paid for acquisitions, net
(2,035 ) (1,778 ) Other, net 16 48 Cash
flows used for investing activities (6,413 ) (2,850 )
Financing Activities Common share repurchases (980 )
(953 ) Dividends paid (1,071 ) (833 ) Net change in commercial
paper and long-term debt 1,008 670 Other, net 684
995 Cash flows used for financing activities
(359 ) (121 ) Effect of exchange rate changes on cash and
cash equivalents 65 (69 ) (Decrease) increase
in cash and cash equivalents (2,706 ) 392 Cash and cash
equivalents, beginning of period 10,923 7,495
Cash and cash equivalents, end of period $ 8,217 $
7,887
UNITEDHEALTH GROUP SUPPLEMENTAL
FINANCIAL INFORMATION - BUSINESSES (in millions, except
percentages) (unaudited)
Three
Months Ended
June 30,
Six Months Ended
June 30,
2016 2015 2016 2015 Revenues
UnitedHealthcare $ 37,556 $ 33,073 $ 73,456 $ 65,696 Optum 20,623
13,588 40,307 26,403 Eliminations (11,694 ) (10,398 )
(22,751 ) (20,080 ) Total consolidated
revenues $ 46,485 $ 36,263 $ 91,012 $ 72,019
Earnings from Operations UnitedHealthcare $
1,942 $ 2,031 $ 3,796 $ 3,929 Optum (a) 1,261
864 2,367 1,606 Total
consolidated earnings from operations $ 3,203 $ 2,895
$ 6,163 $ 5,535
Operating Margin
UnitedHealthcare 5.2 % 6.1 % 5.2 % 6.0 % Optum 6.1 % 6.4 % 5.9 %
6.1 % Consolidated operating margin 6.9 % 8.0 % 6.8 % 7.7 %
Revenues UnitedHealthcare Employer &
Individual $ 13,509 $ 11,845 $ 26,329 $ 23,268 UnitedHealthcare
Medicare & Retirement 14,294 12,559 28,359 25,340
UnitedHealthcare Community & State 8,263 7,205 15,991 14,110
UnitedHealthcare Global 1,490 1,464 2,777 2,978 OptumHealth
4,065 3,438 8,063 6,727 OptumInsight 1,762 1,409 3,429 2,799
OptumRx 15,073 8,913 29,346 17,208 Optum eliminations (277 ) (172 )
(531 ) (331 )
(a) Earnings from operations for Optum for
the three and six months ended June 30, 2016 included $304 and $604
for OptumHealth; $333 and $579 for OptumInsight; and $624 and
$1,184 for OptumRx, respectively. Earnings from operations for
Optum for the three and six months ended June 30, 2015 included
$253 and $487 for OptumHealth; $271 and $493 for OptumInsight; and
$340 and $626 for OptumRx, respectively.
UNITEDHEALTH GROUP SUPPLEMENTAL FINANCIAL
INFORMATION - BUSINESS METRICS
UNITEDHEALTHCARE CUSTOMER PROFILE (in
thousands) People Served June 30, 2016
March 31, 2016 December 31, 2015 June 30, 2015
Commercial risk-based 8,695 8,600 8,285 8,105 Commercial
fee-based, including TRICARE 21,790 21,825
21,445 21,295
Total Commercial 30,485 30,425 29,730
29,400 Medicare Advantage 3,550 3,530 3,235 3,205
Medicaid 5,675 5,450 5,305 5,210 Medicare Supplement (Standardized)
4,215 4,200 4,035 3,965
Total
Public and Senior 13,440 13,180 12,575
12,380
Total UnitedHealthcare - Domestic Medical
43,925 43,605 42,305 41,780
International 4,050 4,065 4,090 4,080
Total UnitedHealthcare - Medical 47,975
47,670 46,395 45,860
Supplemental
Data Medicare Part D stand-alone 4,940
4,990 5,060 5,075
OPTUM PERFORMANCE
METRICS June 30, 2016 March 31, 2016
December 31, 2015 June 30, 2015 OptumHealth
Consumers Served (in millions) 80 79 78 76 OptumInsight Contract
Backlog (in billions) $ 11.3 $ 11.0 $ 10.4 $ 9.8 OptumRx Quarterly
Adjusted Scripts (in millions) 250 252 258 148 Note:
UnitedHealth Group served 132 million unique individuals across all
businesses at June 30, 2016, 132 million at March 31, 2016, 129
million at December 31, 2015, and 102 million at June 30, 2015.
UNITEDHEALTH GROUP RECONCILIATION OF NON-GAAP
FINANCIAL MEASURE ADJUSTED NET EARNINGS AND EARNINGS PER
SHARE (a) (in millions, except per share data) (unaudited)
Three Months Ended June 30, Six Months Ended June 30,
Projected
Year Ended
2016 2015 2016 2015 December 31,
2016 GAAP net earnings $ 1,754 $ 1,585 $ 3,365 $ 2,998 $7,025
to $7,200 Intangible amortization 223 133 438 265 ~880 Tax effect
of intangible amortization (83 ) (47 ) (158 )
(93 ) ~(325) Adjusted net earnings $ 1,894 $ 1,671
$ 3,645 $ 3,170 $7,575 to $7,750 GAAP
diluted earnings per share $ 1.81 $ 1.64 $ 3.48 $ 3.10 $7.25 to
$7.40 Intangible amortization per share 0.23 0.14 0.45 0.27 ~0.90
Tax effect of intangible amortization per share (0.08 )
(0.05 ) (0.16 ) (0.09 ) ~(0.35) Adjusted
diluted earnings per share $ 1.96 $ 1.73 $ 3.77
$ 3.28 $7.80 to $7.95
(a) GAAP and adjusted net earnings and
earnings per share are attributable to UnitedHealth Group common
shareholders.
Use of Non-GAAP Financial Measure
Adjusted earnings per share is a non-GAAP financial measure and
should not be considered a substitute for or superior to a
financial measure calculated in accordance with GAAP. Management
believes that the use of adjusted earnings per share provides
investors and management useful information about the earnings
impact of acquisition-related intangible asset amortization. This
non-GAAP measure does not reflect all of the expenses associated
with the operations of our business as determined in accordance
with GAAP. As a result, one should not consider this measure in
isolation.
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UnitedHealth GroupInvestors:Brett Manderfeld, 952-936-7216Vice
PresidentorJohn S. Penshorn, 952-936-7214Senior Vice
PresidentorMedia:Don Nathan, 952-936-1885Senior Vice
PresidentorTyler Mason, 424-333-6122Vice President
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