10-QPeriod: Q1 FY2015

UNITEDHEALTH GROUP INC Quarterly Report for Q1 Ended Mar 31, 2015

Filed May 6, 2015For Securities:UNH

Summary

UnitedHealth Group Inc. reported strong financial performance for the first quarter ended March 31, 2015, demonstrating robust revenue growth and increased earnings. Total revenues climbed 13% year-over-year, driven by solid performance across both its UnitedHealthcare and Optum segments, with UnitedHealthcare seeing a 12% increase and Optum a 15% increase. This top-line growth translated into a significant 29% increase in earnings from operations and a 33% rise in diluted earnings per share, reaching $1.46. The company also highlighted substantial growth in membership, particularly within its UnitedHealthcare segment, which added 1.6 million individuals domestically, driven by strong participation in individual public exchange products and employer group segments. Optum's various sub-segments also experienced double-digit revenue growth. Furthermore, cash flows from operations saw a substantial increase of 61%, indicating healthy operational cash generation. Management also announced a significant pending acquisition of Catamaran Corporation for $12.8 billion, signaling a strategic move to expand its pharmacy benefits management capabilities.

Financial Highlights

54 data points
Beta

Revenue

$35.76B

96.9% Gross Margin

Net Income

$1.41B

4.0% Net Margin

EPS (Diluted)

$1.46

Total Assets

$89.72B

Cash & Equivalents

$8.65B

Free Cash Flow

$1.90B

Financial Statements
Beta
Revenue$35.76B
Cost of Revenue$1.11B
Gross Profit$34.64B
SG&A Expenses$5.83B
Operating Expenses$33.12B
Operating Income$2.64B
Interest Expense$150.00M
Net Income$1.41B
EPS (Basic)$1.48
EPS (Diluted)$1.46
Shares Outstanding (Basic)954.00M
Shares Outstanding (Diluted)969.00M

Key Highlights

  • 1Total revenues increased by 13% to $35.76 billion compared to the prior year's first quarter, indicating strong top-line performance.
  • 2Diluted earnings per share saw a significant increase of 33% to $1.46, reflecting improved profitability.
  • 3UnitedHealthcare's membership grew by 1.6 million individuals domestically, driven by commercial and public sector programs.
  • 4Optum's revenues grew by 15%, showcasing continued strength and expansion in its health services and technology offerings.
  • 5Cash flows from operating activities increased by 61% to $2.27 billion, demonstrating strong cash generation capabilities.
  • 6The company announced a definitive agreement to acquire Catamaran Corporation for $12.8 billion in cash, a significant strategic move in the PBM space.
  • 7Medical costs increased by 11%, but the medical care ratio improved due to premium adjustments and cost management, indicating effective cost control relative to revenue.

Frequently Asked Questions

Revenue growth was primarily driven by an increase in the number of individuals served across UnitedHealth Group's benefit businesses and growth across all of Optum's businesses. UnitedHealthcare saw increased enrollment in commercial risk-based products and public sector programs like Medicare Advantage and Medicaid.

The pending acquisition of Catamaran Corporation was announced in March 2015. While the transaction is expected to close in the fourth quarter of 2015 and no amounts have been drawn on related credit facilities, the company expects 'moderated share repurchase activity' for the remainder of 2015 due to the acquisition. Transaction costs related to Catamaran were also noted as impacting OptumRx earnings.

The company continued its share repurchase program, buying back 8 million shares in the first quarter of 2015. The Board had authorized the repurchase of up to 100 million shares and had 63 million shares remaining under authorization as of March 31, 2015. The quarterly cash dividend was also noted, with future declarations subject to the Board's discretion.

As of March 31, 2015, the company held $29.3 billion in cash, cash equivalents, and available-for-sale investments. The debt securities portfolio had a weighted-average duration of 3.3 years and an average credit rating of 'AA'. The company stated that significant portion of its portfolio held in cash equivalents meant fluctuations in fair value were not expected to materially impact liquidity or capital position. Unrealized losses on investments were primarily attributed to interest rate increases rather than credit quality issues.