10-QPeriod: Q1 FY2016

UNITEDHEALTH GROUP INC Quarterly Report for Q1 Ended Mar 31, 2016

Filed May 4, 2016For Securities:UNH

Summary

UnitedHealth Group reported strong financial performance for the first quarter of 2016, with total revenues increasing by a significant 25% year-over-year to $44.5 billion. This growth was primarily driven by the acquisition of Catamaran Corporation and robust organic expansion across both the UnitedHealthcare and Optum segments. Net earnings attributable to common shareholders rose 14% to $1.61 billion, or $1.67 per diluted share, indicating effective operational management and growth strategies. The company demonstrated solid operational execution, with earnings from operations up 12% to $2.96 billion. UnitedHealthcare saw a 10% revenue increase, serving an additional 2 million people domestically, although its operating margin saw a slight decrease. The Optum segment was a key growth driver, with revenues up 54% and operating earnings up 49%, propelled by strong performance across its health delivery, technology, and pharmacy care services businesses, bolstered significantly by the Catamaran acquisition. The company also maintained a strong liquidity position with $2.3 billion in cash flows from operations.

Financial Highlights

56 data points
Beta

Revenue

$44.53B

86.8% Gross Margin

Net Income

$1.61B

3.6% Net Margin

EPS (Diluted)

$1.67

Total Assets

$117.86B

Cash & Equivalents

$10.60B

Free Cash Flow

$1.89B

Financial Statements
Beta
Revenue$44.53B
Cost of Revenue$5.88B
Gross Profit$38.65B
SG&A Expenses$6.76B
Operating Expenses$41.57B
Operating Income$2.96B
Interest Expense$259.00M
Net Income$1.61B
EPS (Basic)$1.69
EPS (Diluted)$1.67
Shares Outstanding (Basic)953.00M
Shares Outstanding (Diluted)967.00M

Key Highlights

  • 1Consolidated revenues surged 25% to $44.5 billion, driven by acquisitions and organic growth.
  • 2Net earnings attributable to common shareholders increased 14% to $1.61 billion, with diluted EPS rising to $1.67.
  • 3UnitedHealthcare revenue grew 10%, serving an additional 2 million domestic members.
  • 4Optum segment revenue grew 54% to $19.7 billion, with earnings from operations up 49%, reflecting strong contributions from Catamaran acquisition and organic growth.
  • 5Cash flows from operating activities remained strong at $2.3 billion.
  • 6The company maintained a healthy debt-to-equity ratio of approximately 47%, well within its covenant limits.
  • 7UnitedHealth Group is actively managing its portfolio, with reduced participation in individual public exchanges for 2017.

Frequently Asked Questions

The significant 25% year-over-year increase in consolidated revenues was primarily driven by the acquisition of Catamaran Corporation in the third quarter of 2015 and strong organic growth across both the UnitedHealthcare and Optum segments. UnitedHealthcare benefited from serving an additional 2.0 million people domestically, while Optum saw substantial growth from its various businesses.

The acquisition of Catamaran Corporation had a material positive impact on UnitedHealth Group's financial results, particularly in the Optum segment. It significantly boosted Optum's revenues (up 54%) and earnings from operations (up 49%) and also contributed to a decrease in the overall operating cost ratio for the consolidated company.

UnitedHealth Group faces continued pressure in Medicare Advantage due to lower-than-expected rate increases. However, the company is enhancing its Medicare Advantage offerings through quality bonuses and aims for higher star ratings. For individual public exchanges, the company is reducing its participation in 2017, having recorded a premium deficiency reserve for estimated 2016 losses.

The company maintained strong liquidity with $2.3 billion in cash flows from operations and $10.6 billion in cash and cash equivalents. Its debt-to-debt-plus-shareholders' equity ratio was approximately 47%, well within the 55% covenant limit of its credit facilities. The company also has significant revolving bank credit facilities to support its commercial paper program and general corporate purposes.