10-QPeriod: Q1 FY2017

UNITEDHEALTH GROUP INC Quarterly Report for Q1 Ended Mar 31, 2017

Filed May 8, 2017For Securities:UNH

Summary

UnitedHealth Group (UNH) reported strong first-quarter 2017 results, demonstrating robust growth across its core business segments. Total revenues increased by 9% year-over-year, driven by a 12% increase in UnitedHealthcare revenues and an 8% increase in Optum revenues. This growth was fueled by an expanding member base in Medicare Advantage and Medicaid, alongside continued strength in Optum's health services. Net earnings attributable to common shareholders saw a significant surge of 35%, resulting in diluted earnings per share of $2.23, a 34% increase from the prior year. The company's financial position remains solid, with substantial cash flows from operations and well-managed debt levels, all while navigating a dynamic healthcare landscape.

Financial Highlights

56 data points
Beta

Revenue

$48.72B

88.4% Gross Margin

Net Income

$2.17B

4.5% Net Margin

EPS (Diluted)

$2.23

Total Assets

$137.16B

Cash & Equivalents

$16.14B

Free Cash Flow

$5.95B

Financial Statements
Beta
Revenue$48.72B
Cost of Revenue$5.68B
Gross Profit$43.05B
SG&A Expenses$7.02B
Operating Expenses$45.31B
Operating Income$3.41B
Interest Expense$283.00M
Net Income$2.17B
EPS (Basic)$2.28
EPS (Diluted)$2.23
Shares Outstanding (Basic)954.00M
Shares Outstanding (Diluted)975.00M

Key Highlights

  • 1Total revenues grew 9% to $48.7 billion, driven by strong performance in both UnitedHealthcare and Optum segments.
  • 2Net earnings attributable to common shareholders increased by 35% to $2.17 billion, with diluted EPS rising 34% to $2.23.
  • 3UnitedHealthcare revenues grew 12% to $40.1 billion, primarily due to significant membership growth in Medicare Advantage (up 22%) and Medicaid (up 14%).
  • 4Optum revenues increased 8% to $21.2 billion, with all sub-segments (OptumHealth, OptumInsight, OptumRx) contributing to the growth.
  • 5Operating earnings increased 15% year-over-year, reflecting improved operational efficiency and growth across segments.
  • 6Cash flows from operating activities were exceptionally strong at $6.5 billion, boosted by significant unearned revenue related to CMS premium payments.
  • 7The effective income tax rate decreased significantly to 30.0% due to the moratorium on the Health Insurance Industry Tax.

Frequently Asked Questions

Revenue growth was primarily driven by organic increases in the number of individuals served across UnitedHealthcare's benefits businesses, particularly in Medicare Advantage and Medicaid. Optum's businesses also contributed significantly to revenue growth.

The moratorium on the Health Insurance Industry Tax for 2017 led to a substantial decrease in the company's effective income tax rate, contributing to higher net earnings. It also influenced pricing considerations and contributed to lower medical costs compared to what they might have been with the tax in place.

The company noted that final Medicare Advantage rates for 2018 resulted in a smaller-than-anticipated increase in industry base rates, creating continued pressure on the program. However, this is partially mitigated by quality bonuses based on Star ratings, where UNH has a strong performance, with approximately 80% of its members in plans rated four stars or higher.

The company maintains a strong liquidity position with $16.1 billion in cash and cash equivalents and $25.7 billion in debt securities as of March 31, 2017. Cash flows from operations were robust. UNH also utilizes commercial paper and revolving credit facilities for liquidity and has a share repurchase program and pays quarterly dividends.