- Total Revenues of $60.6 Billion Grew 8%
Year-Over-Year
- Earnings from Operations Increased 13% to
$4.7 Billion
- Net Earnings of $3.42 Per Share Grew 15%
Year-Over-Year
- Adjusted Net Earnings of $3.60 Per Share
Grew 15% Year-Over-Year
- Cash Flows from Operations were $5.9
Billion in the Quarter
UnitedHealth Group (NYSE: UNH) reported second quarter 2019
results with continued well diversified strength in
performance.
“Our results in the quarter reflect strong and balanced
performance from both Optum and UnitedHealthcare and are driven by
the 320,000 women and men of UnitedHealth Group who focus every day
on creating value for those we serve,” said David S. Wichmann,
chief executive officer of UnitedHealth Group.
Based on strong first half 2019 results and confidence in the
remainder of the year, the Company increased its full year net
earnings outlook to $13.95 to $14.15 per share, and adjusted net
earnings to $14.70 to $14.90 per share.
Quarterly Financial Performance
Three
Months Ended
June 30,
2019
June 30,
2018
March 31,
2019
Revenues
$60.6 billion
$56.1 billion
$60.3 billion
Earnings from Operations
$4.7 billion
$4.2 billion
$4.8 billion
Net Margin
5.4%
5.2%
5.7%
- UnitedHealth Group’s second quarter 2019 revenues grew $4.5
billion or 8.0 percent year-over-year to $60.6 billion, led by
double-digit percentage revenue growth at UnitedHealthcare Medicare
& Retirement, OptumRx and OptumHealth.
- Second quarter earnings from operations grew 12.8 percent or
$540 million year-over-year to $4.7 billion. Adjusted net earnings
of $3.60 per share advanced 14.6 percent.
- Cash flows from operations were $5.9 billion in the quarter and
$9.1 billion or 1.3x net income year to date.
- Second quarter medical cost trends remained well managed, with
the revenue effect from the deferral of the health insurance tax
driving the 120 basis point increase in the consolidated medical
care ratio year-over-year to 83.1 percent. Favorable medical
reserve development was $270 million this quarter and days claims
payable remained consistent at 49 days.
- The second quarter operating cost ratio of 13.9 percent
improved 110 basis points from the same period last year,
reflecting the deferral of the health insurance tax and continued
effects of productivity advances and operating cost management
disciplines.
- Higher investment and other income was driven by higher
interest yields and investment balances, earnings from
well-performing minority investments and a $100 million venture
investment gain.
- Second quarter dividend payments grew to $1.0 billion as the
annual dividend rate was increased 20 percent to $4.32 per share in
June 2019. In the second quarter, 6.4 million shares were
repurchased for $1.5 billion, bringing year-to-date purchases to
18.2 million shares for $4.5 billion.
- Return on equity of 25.1 percent in the period continued to
reflect the Company’s strong and diverse earnings profile and
efficient capital base.
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
June 30,
2019
June 30,
2018
March 31,
2019
Revenues
$48.6 billion
$45.8 billion
$48.9 billion
Earnings from Operations
$2.6 billion
$2.4 billion
$3.0 billion
Operating Margin
5.4%
5.1%
6.0%
- UnitedHealthcare grew second quarter 2019 earnings from
operations by 12.1 percent to $2.6 billion driven by revenue growth
and strong cost disciplines. The business grew to serve 705,000
more people with medical benefits over the past year, including a
greater mix of people with higher acuity needs, helping grow
revenues by $2.7 billion, or 6.0 percent, to $48.6 billion in the
quarter.
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.
Quarterly Financial Performance
Three
Months Ended
June 30,
2019
June 30,
2018
March 31,
2019
Revenues
$28.0 billion
$24.7 billion
$26.4 billion
Earnings from Operations
$2.1 billion
$1.8 billion
$1.9 billion
Operating Margin
7.5%
7.5%
7.1%
- Optum revenues of $28.0 billion grew by 13.4 percent or $3.3
billion year-over-year in the second quarter of 2019. Optum’s
second quarter 2019 earnings from operations advanced 13.8 percent
to $2.1 billion due to strong revenue growth and stable, strong
operating margin performance.
- OptumHealth revenues advanced $1.2
billion or 20.3 percent year-over-year to $7.1 billion in second
quarter 2019, with strength and diversity of growth across care
delivery, behavioral health services and complex care management.
OptumHealth served approximately 95 million people at June 30,
2019, and the average revenue per consumer increased 17 percent
year-over-year, driven by growth in value-based care arrangements
and continued strong demand for OptumHealth’s expanding service and
product offerings.
- OptumInsight revenues of $2.3
billion grew 7.0 percent year-over-year in the quarter, while
revenue backlog grew over 20 percent year-over-year to $18.5
billion at quarter-end driven by health care operations and
technology, revenue management, and payer and advisory
services.
- OptumRx revenues in second quarter
2019 increased 11.7 percent or $2.0 billion year-over-year to $18.9
billion, reflecting market share gains and continued
diversification of services provided, including a higher mix of
specialty pharmacy care services. OptumRx fulfilled 343 million
adjusted scripts in second quarter 2019, growing 3.3 percent over
the prior year.
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 August 1, 2019. The conference call replay can also be
accessed by dialing 1-800-695-0715. This earnings release and the
Form 8-K dated July 18, 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
within the meaning of the 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; cyberattacks
or other privacy or data security incidents; failure to comply with
privacy and data security regulations; regulatory and other risks
and uncertainties of the pharmacy benefits management industry;
competitive pressures, which could affect our ability to maintain
or increase our market share; changes in or challenges to our
public sector contract awards; our ability to execute contracts on
competitive terms with physicians, hospitals and other service
providers; failure to achieve targeted operating cost productivity
improvements, including savings resulting from technology
enhancement and administrative modernization; increases in costs
and other liabilities associated with increased litigation,
government investigations, audits or reviews; failure to manage
successfully our strategic alliances or complete or receive
anticipated benefits of acquisitions and other strategic
transactions; fluctuations in foreign currency exchange rates on
our reported shareholders’ equity and results of operations;
downgrades in our credit ratings; the performance of our investment
portfolio; impairment of the value of our goodwill and intangible
assets if estimated future results do not adequately support
goodwill and intangible assets recorded for our existing businesses
or the businesses that we acquire; failure to maintain effective
and efficient information systems or if our technology products do
not operate as intended; and our ability to obtain sufficient funds
from our regulated subsidiaries or the debt or capital markets to
fund our obligations, to maintain our debt to total capital ratio
at targeted levels, to maintain our quarterly dividend payment
cycle or to continue repurchasing shares of our common stock.
This list of important factors is not intended to be exhaustive.
We discuss certain of these matters more fully, as well as certain
risk factors that may affect our business operations, financial
condition and results of operations, in our other periodic and
current filings with the SEC, 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 Quarter Ended June 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 EndedJune 30, Six Months EndedJune 30,
2019
2018
2019
2018
Revenues Premiums
$
47,164
$
44,458
$
94,677
$
88,542
Products
8,353
7,004
16,425
13,706
Services
4,496
4,269
8,814
8,373
Investment and other income
582
355
987
653
Total revenues
60,595
56,086
120,903
111,274
Operating costs Medical costs
39,184
36,427
78,123
72,290
Operating costs
8,415
8,386
16,932
16,892
Cost of products sold
7,598
6,471
14,979
12,655
Depreciation and amortization
654
598
1,293
1,180
Total operating costs
55,851
51,882
111,327
103,017
Earnings from operations
4,744
4,204
9,576
8,257
Interest expense
(418
)
(344
)
(818
)
(673
)
Earnings before income taxes
4,326
3,860
8,758
7,584
Provision for income taxes
(941
)
(850
)
(1,816
)
(1,650
)
Net earnings
3,385
3,010
6,942
5,934
Earnings attributable to noncontrolling interests
(92
)
(88
)
(182
)
(176
)
Net earnings attributable to UnitedHealth Group common
shareholders
$
3,293
$
2,922
$
6,760
$
5,758
Diluted earnings per share attributable to UnitedHealth
Group common shareholders
$
3.42
$
2.98
$
6.97
$
5.85
Adjusted earnings per share attributable to UnitedHealth
Group common shareholders (a)
$
3.60
$
3.14
$
7.33
$
6.19
Diluted weighted-average common shares outstanding
964
982
970
984
(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,
2019
2018
Assets Cash and short-term investments
$
17,269
$
14,324
Accounts receivable, net
9,741
11,388
Other current assets
15,028
12,980
Total current assets
42,038
38,692
Long-term investments
35,696
32,510
Other long-term assets
89,466
81,019
Total assets
$
167,200
$
152,221
Liabilities, redeemable noncontrolling interests
and equity Medical costs payable
$
20,907
$
19,891
Commercial paper and current maturities of long-term debt
7,800
1,973
Other current liabilities
33,621
31,345
Total current liabilities
62,328
53,209
Long-term debt, less current maturities
34,473
34,581
Other long-term liabilities
12,343
8,204
Redeemable noncontrolling interests
2,202
1,908
Equity
55,854
54,319
Total liabilities, redeemable noncontrolling interests and
equity
$
167,200
$
152,221
UNITEDHEALTH GROUP CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS (in millions) (unaudited)
Six Months
EndedJune 30,
2019
2018
Operating Activities Net earnings
$
6,942
$
5,934
Noncash items: Depreciation and amortization
1,293
1,180
Deferred income taxes and other
68
(148
)
Share-based compensation
398
358
Net changes in operating assets and liabilities
407
5,052
Cash flows from operating activities
9,108
12,376
Investing Activities Purchases of investments, net of
sales and maturities
(1,654
)
(2,968
)
Purchases of property, equipment and capitalized software
(977
)
(960
)
Cash paid for acquisitions, net
(4,751
)
(2,636
)
Other, net
504
(134
)
Cash flows used for investing activities
(6,878
)
(6,698
)
Financing Activities Common share repurchases
(4,501
)
(3,150
)
Dividends paid
(1,884
)
(1,588
)
Net change in commercial paper and long-term debt
5,674
2,683
Other, net
1,354
2,842
Cash flows from financing activities
643
787
Effect of exchange rate changes on cash and cash equivalents
6
(78
)
Increase in cash and cash equivalents
2,879
6,387
Cash and cash equivalents, beginning of period
10,866
11,981
Cash and cash equivalents, end of period
$
13,745
$
18,368
UNITEDHEALTH GROUP SUPPLEMENTAL FINANCIAL INFORMATION -
BUSINESSES (in millions, except percentages) (unaudited)
Three Months EndedJune 30, Six Months EndedJune 30,
2019
2018
2019
2018
Revenues UnitedHealthcare
$
48,594
$
45,846
$
97,490
$
91,305
Optum
28,029
24,726
54,389
48,327
Eliminations
(16,028
)
(14,486
)
(30,976
)
(28,358
)
Total consolidated revenues
$
60,595
$
56,086
$
120,903
$
111,274
Earnings from Operations UnitedHealthcare
$
2,642
$
2,357
$
5,596
$
4,757
Optum (a)
2,102
1,847
3,980
3,500
Total consolidated earnings from operations
$
4,744
$
4,204
$
9,576
$
8,257
Operating Margin UnitedHealthcare
5.4
%
5.1
%
5.7
%
5.2
%
Optum
7.5
%
7.5
%
7.3
%
7.2
%
Consolidated operating margin
7.8
%
7.5
%
7.9
%
7.4
%
Revenues UnitedHealthcare Employer &
Individual
$
14,032
$
13,708
$
28,116
$
27,122
UnitedHealthcare Medicare & Retirement
20,855
18,859
41,951
37,784
UnitedHealthcare Community & State
11,186
10,746
22,368
21,417
UnitedHealthcare Global
2,521
2,533
5,055
4,982
OptumHealth
$
7,148
$
5,941
$
13,861
$
11,700
OptumInsight
2,339
2,185
4,528
4,254
OptumRx
18,923
16,941
36,740
33,047
Optum eliminations
(381
)
(341
)
(740
)
(674
)
(a)
Earnings from operations for Optum for the three and six months
ended June 30, 2019 included $688 and $1,314 for OptumHealth; $525
and $957 for OptumInsight; and $889 and $1,709 for OptumRx,
respectively. 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.
UNITEDHEALTH GROUP
SUPPLEMENTAL FINANCIAL INFORMATION - BUSINESS METRICS
UNITEDHEALTHCARE CUSTOMER PROFILE (in thousands)
People Served June 30,2019 March 31,2019
December 31,2018 June 30,2018 Commercial: Risk-based
8,325
8,340
8,495
8,385
Fee-based
19,090
19,175
18,420
18,415
Total Commercial
27,415
27,515
26,915
26,800
Medicare Advantage
5,190
5,165
4,945
4,790
Medicaid
6,360
6,425
6,450
6,710
Medicare Supplement (Standardized)
4,495
4,500
4,545
4,505
Total Public and Senior
16,045
16,090
15,940
16,005
Total UnitedHealthcare - Domestic Medical
43,460
43,605
42,855
42,805
International
6,070
6,125
6,220
6,020
Total UnitedHealthcare - Medical
49,530
49,730
49,075
48,825
Supplemental Data Medicare Part D stand-alone
4,430
4,480
4,710
4,730
OPTUM PERFORMANCE METRICS June 30,2019
March 31,2019 December 31,2018 June 30,2018
OptumHealth Consumers Served (in millions)
95
93
93
92
OptumInsight Contract Backlog (in billions)
$
18.5
$
17.4
$
17.0
$
15.4
OptumRx Quarterly Adjusted Scripts (in millions)
343
339
348
332
Note: UnitedHealth Group served 143 million unique individuals
across all businesses at June 30, 2019.
UNITEDHEALTH GROUP
Reconciliation of Non-GAAP Financial Measure -
Adjusted Net Earnings per Share
Use of Non-GAAP Financial
Measures
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. Management
believes the exclusion of these items provides a more useful
comparison of the Company's underlying business performance from
period to period.
UNITEDHEALTH GROUP RECONCILIATION OF NON-GAAP FINANCIAL
MEASURE (in millions, except per share data) (unaudited)
ADJUSTED NET EARNINGS PER SHARE Three Months
EndedJune 30, Six Months EndedJune 30, ProjectedYear
EndedDecember 31,
2019
2018
2019
2018
2019
GAAP net earnings attributable to UnitedHealth Group common
shareholders
$
3,293
$
2,922
$
6,760
$
5,758
$13,500 - $13,750 Intangible amortization
240
220
467
440
~960 Tax effect of intangible amortization
(60
)
(56
)
(116
)
(111
)
~(240) Adjusted net earnings attributable to UnitedHealth Group
common shareholders
$
3,473
$
3,086
$
7,111
$
6,087
$14,220 - $14,470 GAAP diluted earnings per share
$
3.42
$
2.98
$
6.97
$
5.85
$13.95 - $14.15 Intangible amortization per share
0.24
0.22
0.48
0.45
~1.00 Tax effect per share of intangible amortization
(0.06
)
(0.06
)
(0.12
)
(0.11
)
~(0.25) Adjusted diluted earnings per share
$
3.60
$
3.14
$
7.33
$
6.19
$14.70 - $14.90
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