10-QPeriod: Q3 FY2017

UNITEDHEALTH GROUP INC Quarterly Report for Q3 Ended Sep 30, 2017

Filed November 7, 2017For Securities:UNH

Summary

UnitedHealth Group Inc. (UNH) reported strong third-quarter 2017 financial results, demonstrating robust growth across its diversified businesses. Total revenues increased by 9% year-over-year, driven by significant contributions from both the UnitedHealthcare and Optum segments. The company saw substantial growth in its Medicare Advantage and Medicaid offerings, alongside continued expansion within its Optum services. Profitability also improved, with earnings from operations up 14% and net earnings attributable to common shareholders rising 30%. This performance was bolstered by operational efficiencies, favorable medical cost trends, and a lower effective tax rate, partly due to the moratorium on the Health Insurance Industry Tax. The company also highlighted strong cash flow generation from operations, enabling continued investment in the business, share repurchases, and dividend increases, reinforcing its commitment to shareholder returns.

Financial Highlights

55 data points
Beta

Revenue

$50.32B

87.9% Gross Margin

Net Income

$2.48B

4.9% Net Margin

EPS (Diluted)

$2.51

Total Assets

$140.43B

Cash & Equivalents

$16.27B

Free Cash Flow

$7.08B

Financial Statements
Beta
Revenue$50.32B
Cost of Revenue$6.07B
Gross Profit$44.25B
SG&A Expenses$7.39B
Operating Expenses$46.23B
Operating Income$4.09B
Interest Expense$294.00M
Net Income$2.48B
EPS (Basic)$2.57
EPS (Diluted)$2.51
Shares Outstanding (Basic)968.00M
Shares Outstanding (Diluted)989.00M

Key Highlights

  • 1Total revenues grew 9% to $50.3 billion for the quarter and 10% for the nine-month period, reaching $149.1 billion, driven by growth in UnitedHealthcare and Optum segments.
  • 2Earnings from operations increased by 14% year-over-year for the quarter, indicating strong operational performance across segments.
  • 3Net earnings attributable to UnitedHealth Group common shareholders saw a significant 30% increase for the nine months ended September 30, 2017, reaching $6.9 billion.
  • 4UnitedHealthcare experienced robust growth, with revenues up 10% driven by significant increases in Medicare Advantage and Medicaid membership.
  • 5Optum segment revenues grew 8% for the quarter, supported by expansion in OptumHealth, OptumInsight, and OptumRx services.
  • 6The company reported strong cash flow from operations of $16.2 billion for the nine months ended September 30, 2017, up from $11.2 billion in the prior year.
  • 7Diluted earnings per share increased by 24% for the quarter and 28% for the nine-month period, reflecting improved profitability.

Frequently Asked Questions

Revenue growth was primarily driven by the organic expansion in the number of individuals served across UnitedHealthcare's benefits businesses and continued growth across all of Optum's businesses. Specifically, UnitedHealthcare saw strong performance in its Medicare Advantage and Medicaid segments, while Optum benefited from growth in care delivery, revenue management, and pharmacy services.

The one-year moratorium on the Health Insurance Industry Tax for 2017 resulted in a lower effective income tax rate compared to 2016. This tax benefit contributed to the reported increase in net earnings and earnings per share.

The company noted that final 2018 Medicare Advantage rates resulted in a modest increase in industry base rates (approximately 0.45%), which is below the estimated medical cost trend. This creates continued pressure on the program, though the impact is partially mitigated by other factors. The company continues to focus on quality bonuses derived from Star ratings to enhance revenue and supplemental benefits.

Medical costs increased due to membership growth and underlying cost trends. UnitedHealth Group employs medical management strategies to mitigate these increases, including managing costs across various health care categories and specialty pharmacy spending. The company also noted favorable medical cost reserve development and lower than expected health system utilization as contributing factors to a stable medical care ratio.