10-QPeriod: Q1 FY2018

UNITEDHEALTH GROUP INC Quarterly Report for Q1 Ended Mar 31, 2018

Filed May 7, 2018For Securities:UNH

Summary

UnitedHealth Group Inc. (UNH) reported a strong first quarter for 2018, demonstrating robust growth across its business segments. Total revenues increased by 13% year-over-year to $55.2 billion, driven by solid performance in both the UnitedHealthcare and Optum platforms. UnitedHealthcare saw a 13% revenue increase, fueled by growth in its Medicare Advantage and Medicaid offerings, alongside acquisitions. Optum revenues grew 11%, showcasing the strength of its diversified services, including OptumHealth, OptumInsight, and OptumRx. The company also reported significant improvements in profitability. Earnings from operations rose 19% to $4.1 billion, with OptumHealth and OptumInsight exhibiting particularly strong growth. Net earnings attributable to common shareholders surged by 31% to $2.8 billion, resulting in diluted earnings per share of $2.87, a 29% increase compared to the prior year. This performance was supported by a lower effective tax rate of 21.5% following the Tax Cuts and Jobs Act, though partially offset by the reinstatement of the Health Insurance Industry Tax.

Financial Highlights

55 data points
Beta

Revenue

$55.19B

88.8% Gross Margin

Net Income

$2.84B

5.1% Net Margin

EPS (Diluted)

$2.87

Total Assets

$155.57B

Cash & Equivalents

$18.24B

Free Cash Flow

$7.89B

Financial Statements
Beta
Revenue$55.19B
Cost of Revenue$6.18B
Gross Profit$49.00B
SG&A Expenses$8.51B
Operating Expenses$51.13B
Operating Income$4.05B
Interest Expense$329.00M
Net Income$2.84B
EPS (Basic)$2.94
EPS (Diluted)$2.87
Shares Outstanding (Basic)966.00M
Shares Outstanding (Diluted)987.00M

Key Highlights

  • 1Total revenues increased by 13% to $55.2 billion, driven by UnitedHealthcare and Optum segment growth.
  • 2Earnings from operations grew 19% to $4.1 billion, reflecting improved profitability across segments.
  • 3Net earnings attributable to common shareholders increased by 31% to $2.8 billion.
  • 4Diluted earnings per share rose by 29% to $2.87, demonstrating enhanced shareholder value.
  • 5The effective tax rate decreased to 21.5% due to the Tax Cuts and Jobs Act.
  • 6UnitedHealthcare served approximately 465,000 fewer people year-over-year, largely due to the completion of its TRICARE contract, but this was offset by acquisitions and organic growth.
  • 7Cash flows from operating activities were strong at $8.4 billion, indicating robust operational cash generation.

Frequently Asked Questions

Revenue growth was primarily driven by an increase in the number of individuals served through risk-based products across UnitedHealthcare's benefit businesses, favorable pricing trends (including the impact of the reinstated Health Insurance Industry Tax), and significant growth across the Optum business segments.

The Tax Cuts and Jobs Act, enacted in December 2017, significantly reduced the U.S. corporate income tax rate. This led to a substantial decrease in UnitedHealth Group's effective tax rate, which fell to 21.5% in the first quarter of 2018 from 30.0% in the prior year. This tax benefit partially offset the impact of the reinstatement of the Health Insurance Industry Tax.

The company noted continued pressure on Medicare Advantage funding. Final 2019 Medicare Advantage rates resulted in an industry base rate increase of approximately 3.4%, which is below the industry's forward medical cost trend. This shortfall is expected to affect plan benefit designs, pricing, growth prospects, and earnings expectations for Medicare Advantage plans.

UnitedHealthcare served approximately 465,000 fewer people compared to the prior year. This decrease is primarily attributed to the completion of its commitment to the TRICARE military health care program. However, this was substantially offset by the addition of 2 million people through acquisitions and organic growth in other areas.