- Revenues of $56.6 Billion Grew 12%
Year-Over-Year
- Earnings from Operations Grew 12% to
$4.6 Billion
- Cash Flows from Operations were $0.9
Billion; Adjusted Cash Flows from Operations were $6.1 Billion, or
1.9x Net Earnings
- Net Earnings of $3.24 Per Share Grew
29% Year-Over-Year
- Adjusted Net Earnings of $3.41 Per
Share Grew 28% Year-Over-Year
UnitedHealth Group (NYSE: UNH) reported third quarter results,
with continued strong, well-diversified performance across the
enterprise.
“These results reflect our businesses delivering increased value
at an accelerating pace to society and the millions of people we
serve – one person at a time,” said David S. Wichmann, chief
executive officer of UnitedHealth Group.
The Company raised its outlook for 2018 net earnings per share
to now approach $12.10, from the prior range of $11.80 to $12.05,
and adjusted net earnings per share to now approach $12.80, from
the prior range of $12.50 to $12.75.
Quarterly Financial Performance
Three Months
Ended
September 30, September 30, June
30,
2018
2017
2018
Revenues $56.6 billion $50.3 billion $56.1 billion Earnings From
Operations $4.6 billion $4.1 billion $4.2 billion Net Margin
5.6% 4.9% 5.2%
- UnitedHealth Group’s third quarter 2018
revenues grew $6.2 billion or 12.4 percent year-over-year to $56.6
billion, with strong revenue growth rates across both
UnitedHealthcare and Optum.
- Third quarter earnings from operations
grew $502 million or 12.3 percent year-over-year to $4.6 billion.
Adjusted net earnings of $3.41 per share grew 28.2 percent, with an
improved net margin of 5.6 percent.
- Adjusted cash flows from operations of
$6.1 billion were 1.9x net income in third quarter 2018.
- The consolidated medical care ratio of
81.0 percent in the third quarter of 2018 decreased 40 basis points
year-over-year, with the return of the health insurance tax more
than offsetting business mix changes and more moderate reserve
development. Favorable medical reserve development of $50 million
in the quarter was driven by $120 million in favorable development
related to 2018, partially offset by $70 million in unfavorable
development from 2017.
- The operating cost ratio of 15.0
percent in the third quarter of 2018 increased 30 basis points
year-over-year, as business mix changes and operating efficiencies
were more than offset by the return of the health insurance
tax.
- The third quarter 2018 income tax rate
of 22.5 percent decreased 10 percentage points year-over-year,
reflecting the reduced federal statutory rate and results of tax
planning and management, partially offset by the return of the
nondeductible health insurance tax for 2018.
- Third quarter 2018 days claims payable
increased three days sequentially and remained unchanged
year-over-year at 51 days. Days sales outstanding of 18 days was
flat sequentially while increasing two days year-over-year.
- Annualized return on shareholders’
equity increased 340 basis points year-over-year to 25.9 percent,
and the debt to total capital ratio decreased sequentially by
approximately two percentage points to 38.9 percent at September
30, 2018.
- UnitedHealth Group repurchased 1.9
million shares in the third quarter, bringing year-to-date
purchases to 15.7 million shares for $3.65 billion. Dividends paid
to shareholders were $866 million in the third quarter, reflecting
the 20 percent increase in the Company’s dividend rate in June
2018.
UnitedHealthcare provides global health care benefits, 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, September 30, June
30,
2018
2017
2018
Revenues $45.9 billion $40.7 billion $45.8 billion Earnings From
Operations $2.6 billion $2.4 billion $2.4 billion Operating Margin
5.6% 5.9% 5.1%
- UnitedHealthcare grew to serve 2.8
million more consumers1 year-over-year in the third quarter of
2018, with revenues growing by $5.2 billion or 12.8 percent to
$45.9 billion. Revenue growth was driven by an increasing number of
people served, greater membership growth in higher acuity programs,
pricing to cover expected medical cost trends and resumption of the
health insurance tax for 2018. Third quarter 2018 earnings from
operations of $2.6 billion grew 7 percent, while the operating
margin of 5.6 percent decreased 30 basis points year-over-year due
to higher growth in government program business.
- UnitedHealthcare
Employer & Individual third quarter 2018 revenues of
$13.7 billion increased $680 million year-over-year.
UnitedHealthcare Employer & Individual grew to serve 65,000
more people through risk-based offerings in the quarter and 130,000
more people year-over-year. Fee-based offerings decreased by
245,000 people year-over-year, as expected.
- UnitedHealthcare
Medicare & Retirement grew revenues by $2.5 billion or
15.2 percent year-over-year to $18.8 billion in the third quarter
of 2018. In Medicare Advantage, the business served 525,000 more
people year-over-year, including 125,000 more people in the third
quarter, including 65,000 from the combination with Peoples Health
in the quarter.
- UnitedHealthcare
Community & State revenues of $11.1 billion grew $1.7
billion or 17.9 percent year-over-year, driven by growth of 255,000
people year-over-year, reflecting strong growth serving individuals
with higher clinical needs. Membership decreased 80,000 people in
the third quarter, with completion of the divestiture of
UnitedHealthcare’s plan serving 85,000 community-based members in
New Mexico.
- UnitedHealthcare
Global revenues grew 18.2 percent year-over-year to $2.4
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
September 30, September 30, June
30,
2018
2017
2018
Revenues $25.4 billion $22.9 billion $24.7 billion Earnings From
Operations $2.0 billion $1.7 billion $1.8 billion Operating Margin
8.0% 7.4% 7.5%
- In the third quarter of 2018, Optum
revenues grew by $2.5 billion or 11 percent year-over-year to $25.4
billion. Optum’s operating margin of 8.0 percent expanded 60 basis
points year-over-year. Third quarter earnings from operations grew
$334 million or 19.7 percent year-over-year to $2 billion,
reflecting strong double-digit percentage earnings growth rates for
each business segment.
- OptumHealth revenues of $6.1 billion grew $800
million or 15.2 percent year-over-year, driven by growth in care
delivery, behavioral health, digital consumer engagement and health
financial services. OptumHealth served 92 million people at quarter
end, having grown to serve 5 million more people2 over the past
year.
- OptumInsight revenues grew 12.5 percent to $2.3
billion in third quarter 2018, reflecting steady growth in data
analytics product and service offerings for customers and growth
and expansion in business process outsourcing and care provider
advisory services. OptumInsight’s contract backlog of $15.7 billion
grew $1.8 billion or nearly 13 percent year-over-year.
- OptumRx
third quarter 2018 revenues grew 9.3 percent year-over-year to
$17.4 billion. OptumRx fulfilled 331 million adjusted scripts in
third quarter 2018, growing 3.1 percent over the prior year, with
favorable mix in specialty pharmacy and home delivery services.
During the quarter, OptumRx strengthened its services to patients
being treated for complex diseases by adding capabilities in
community pharmacy, telepsychiatry and specialty pharmacy services
through the acquisitions of Genoa Healthcare and Avella Specialty
Pharmacy.
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 30, 2018. The conference call replay can also
be accessed by dialing 1-800-695-2533. This earnings release and
the Form 8-K dated October 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., 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 September 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 September 30,
Nine Months Ended September 30, 2018 2017
2018 2017 Revenues Premiums $ 44,613 $ 39,552
$ 133,155 $ 118,075 Products 7,344 6,665 21,050 19,209 Services
4,217 3,858 12,590 11,089 Investment and other income 382
247 1,035 725
Total revenues 56,556 50,322
167,830 149,098
Operating
costs Medical costs 36,158 32,201 108,448 96,829 Operating
costs 8,479 7,387 25,371 21,737 Cost of products sold 6,718 6,068
19,373 17,633 Depreciation and amortization 611
578 1,791 1,667
Total operating costs 51,966 46,234
154,983 137,866
Earnings from
operations 4,590 4,088 12,847 11,232 Interest expense
(353 ) (294 ) (1,026 ) (878 )
Earnings before income taxes 4,237 3,794 11,821 10,354
Provision for income taxes (953 ) (1,233 )
(2,603 ) (3,252 )
Net earnings 3,284
2,561 9,218 7,102 Earnings attributable to noncontrolling
interests (96 ) (76 ) (272 ) (161 )
Net earnings attributable to
UnitedHealth Group common shareholders
$ 3,188 $ 2,485 $ 8,946 $ 6,941
Diluted earnings per share attributable
to UnitedHealth Group common shareholders
$ 3.24 $ 2.51 $ 9.09 $ 7.06
Adjusted earnings per share
attributable to UnitedHealth Group common shareholders (a)
$ 3.41 $ 2.66 $ 9.60 $ 7.49
Diluted weighted-average common shares outstanding 983
989 984 983
(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, 2018 2017
Assets Cash and short-term investments $ 13,849 $ 15,490
Accounts receivable, net 10,992 9,568 Other current assets
13,913 12,026 Total current assets 38,754 37,084
Long-term investments 31,929 28,341 Other long-term assets
80,404 73,633 Total assets $ 151,087 $ 139,058
Liabilities, redeemable noncontrolling interests
and equity Medical costs payable $ 19,850 $ 17,871 Commercial
paper and current maturities of long-term debt 1,500 2,857 Other
current liabilities 35,027 29,735 Total
current liabilities 56,377 50,463 Long-term debt, less
current maturities 32,053 28,835 Other long-term liabilities 8,292
7,738 Redeemable noncontrolling interests 1,769 2,189 Equity
52,596 49,833 Total liabilities, redeemable
noncontrolling interests and equity $ 151,087 $ 139,058
UNITEDHEALTH GROUP CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS (in millions) (unaudited)
Nine Months Ended September 30, 2018
2017 Operating Activities Net earnings $ 9,218 $
7,102 Noncash items: Depreciation and amortization 1,791 1,667
Deferred income taxes and other (127 ) (291 ) Share-based
compensation 512 456 Net changes in operating assets and
liabilities 1,923 7,239 Cash flows from
operating activities 13,317 16,173
Investing Activities Purchases of investments, net of
sales and maturities (3,729 ) (3,566 ) Purchases of property,
equipment and capitalized software (1,505 ) (1,391 ) Cash paid for
acquisitions, net (5,824 ) (908 ) Other, net (187 )
(30 ) Cash flows used for investing activities (11,245 )
(5,895 )
Financing Activities Common share
repurchases (3,650 ) (1,173 ) Dividends paid (2,454 ) (2,046 ) Net
change in commercial paper and long-term debt 1,200 (4,877 ) Other,
net 1,211 3,639 Cash flows used for
financing activities (3,693 ) (4,457 ) Effect of
exchange rate changes on cash and cash equivalents (97 )
18 (Decrease) increase in cash and cash equivalents
(1,718 ) 5,839 Cash and cash equivalents, beginning of period
11,981 10,430 Cash and cash
equivalents, end of period $ 10,263 $ 16,269
Supplemental Schedule of Noncash Investing Activities Common
stock issued for acquisition $ - $ 2,164
UNITEDHEALTH GROUP SUPPLEMENTAL FINANCIAL INFORMATION -
BUSINESSES (in millions, except percentages) (unaudited)
Three Months Ended Nine Months Ended
September 30, September 30, 2018
2017 2018 2017 Revenues
UnitedHealthcare $ 45,937 $ 40,734 $ 137,242 $ 121,658 Optum 25,391
22,885 73,718 66,793 Eliminations (14,772 ) (13,297 )
(43,130 ) (39,353 ) Total consolidated
revenues $ 56,556 $ 50,322 $ 167,830 $ 149,098
Earnings from Operations UnitedHealthcare $
2,559 $ 2,391 $ 7,316 $ 6,736 Optum (a) 2,031
1,697 5,531 4,496 Total
consolidated earnings from operations $ 4,590 $ 4,088
$ 12,847 $ 11,232
Operating Margin
UnitedHealthcare 5.6 % 5.9 % 5.3 % 5.5 % Optum 8.0 % 7.4 % 7.5 %
6.7 % Consolidated operating margin 8.1 % 8.1 % 7.7 % 7.5 %
Revenues UnitedHealthcare Employer &
Individual $ 13,734 $ 13,054 $ 40,856 $ 38,759 UnitedHealthcare
Medicare & Retirement 18,789 16,306 56,573 49,605
UnitedHealthcare Community & State 11,054 9,378 32,471 27,505
UnitedHealthcare Global 2,360 1,996 7,342 5,789 OptumHealth
$ 6,052 $ 5,252 $ 17,752 $ 15,107 OptumInsight 2,254 2,004 6,508
5,840 OptumRx 17,437 15,953 50,484 46,740 Optum eliminations (352 )
(324 ) (1,026 ) (894 ) (a)
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. Earnings from operations for
Optum for the three and nine months ended September 30, 2017
included $513 and $1,267 for OptumHealth; $414 and $1,080 for
OptumInsight; and $770 and $2,149 for OptumRx, respectively.
UNITEDHEALTH GROUP SUPPLEMENTAL FINANCIAL
INFORMATION - BUSINESS METRICS
UNITEDHEALTHCARE CUSTOMER PROFILE (in thousands)
September 30, June 30,
December 31, September 30,
People Served
2018 2018 2017 2017 Commercial
group: Risk-based 7,955 7,905 7,935 7,805 Fee-based 18,365 18,415
18,595 18,610 Total commercial group 26,320 26,320 26,530 26,415
Individual 495 480 485 515
Total Commercial (a) 26,815
26,800 27,015 26,930 Medicare Advantage 4,915 4,790 4,430 4,390
Medicaid 6,630 6,710 6,705 6,375 Medicare Supplement (Standardized)
4,540 4,505 4,445 4,415
Total Public and Senior 16,085
16,005 15,580 15,180
Total UnitedHealthcare - Domestic
Medical 42,900 42,805 42,595 42,110 International 6,070 6,020
4,080 4,080
Total UnitedHealthcare - Medical 48,970 48,825
46,675 46,190
Supplemental Data Medicare Part D
stand-alone 4,725 4,730 4,940 4,945
OPTUM
PERFORMANCE METRICS September 30, June 30,
December 31, September 30, 2018 2018
2017 2017 OptumHealth Consumers Served (in
millions) (a) 92 92 88 87 OptumInsight Contract Backlog (in
billions) $15.7 $15.4 $15.0 $13.9 OptumRx Quarterly Adjusted
Scripts (in millions) 331 332 333 321 (a) Excludes TRICARE
of 2.9 million at December 31, 2017 and September 30, 2017.
Note: UnitedHealth Group served 140 million unique individuals
across all businesses at September 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 GAAP net earnings per share, intangible amortization and other
items, if any, that do not reflect the Company's underlying
business performance. Management believes 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 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 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
Projected
Three Months Ended Nine Months Ended Year
Ended September 30, September 30,
December 31, 2018 2017 2018
2017 2018
GAAP net earnings attributable to
UnitedHealth Group common shareholders
$ 3,188 $ 2,485 $ 8,946 $ 6,941 Approaching $11,925 Intangible
amortization 221 230 661 669 ~900 Tax effect of intangible
amortization (54 ) (86 ) (165 ) (249 )
~(225) Adjusted net earnings attributable to UnitedHealth Group
common shareholders $ 3,355 $ 2,629 $ 9,442 $
7,361 Approaching $12,600 GAAP diluted earnings per
share $ 3.24 $ 2.51 $ 9.09 $ 7.06 Approaching $12.10 Intangible
amortization per share 0.22 0.23 0.67 0.68 ~0.90 Tax effect per
share of intangible amortization (0.05 ) (0.08 )
(0.16 ) (0.25 ) ~(0.20) Adjusted diluted earnings per
share $ 3.41 $ 2.66 $ 9.60 $ 7.49
Approaching $12.80
ADJUSTED CASH FLOWS FROM
OPERATIONS Three Months Ended Nine Months
Ended September 30, September 30,
2018 2017 2018 2017 GAAP cash flows
from operations $ 941 $ 7,546 $ 13,317 $ 16,173 Add: July CMS
premium payments received in June 5,166 4,454 - - Less: October CMS
premium payments received in September -
(4,568 ) - (4,568 ) Adjusted cash flows from
operations $ 6,107 $ 7,432 $ 13,317 $ 11,605
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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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