10-QPeriod: Q3 FY2018

UNITEDHEALTH GROUP INC Quarterly Report for Q3 Ended Sep 30, 2018

Filed November 8, 2018For Securities:UNH

Summary

UnitedHealth Group (UNH) reported strong financial performance for the nine months ended September 30, 2018, with total revenues increasing by 13% to $167.8 billion. Net earnings attributable to common shareholders grew by an impressive 29% to $8.9 billion, translating to diluted earnings per share of $9.09. This growth was driven by solid performance across both the UnitedHealthcare and Optum segments. The company experienced revenue growth in UnitedHealthcare, up 13% primarily due to increases in Medicare Advantage and Medicaid membership, alongside positive pricing trends. The Optum segment also saw robust revenue growth of 10%, fueled by expansion in care delivery, pharmacy services, and data analytics. The reported financial results reflect the positive impact of the Tax Cuts and Jobs Act enacted in late 2017, which lowered the corporate tax rate, though this was partially offset by the reinstatement of the Health Insurance Industry Tax in 2018.

Financial Highlights

55 data points
Beta

Revenue

$56.56B

88.1% Gross Margin

Net Income

$3.19B

5.6% Net Margin

EPS (Diluted)

$3.24

Total Assets

$151.09B

Cash & Equivalents

$10.26B

Free Cash Flow

$396.00M

Financial Statements
Beta
Revenue$56.56B
Cost of Revenue$6.72B
Gross Profit$49.84B
SG&A Expenses$8.48B
Operating Expenses$51.97B
Operating Income$4.59B
Interest Expense$353.00M
Net Income$3.19B
EPS (Basic)$3.31
EPS (Diluted)$3.24
Shares Outstanding (Basic)962.00M
Shares Outstanding (Diluted)983.00M

Key Highlights

  • 1Total revenues increased by 13% to $167.8 billion for the nine months ended September 30, 2018.
  • 2Net earnings attributable to common shareholders rose by 29% to $8.9 billion, with diluted EPS reaching $9.09.
  • 3UnitedHealthcare revenues grew 13%, driven by growth in Medicare Advantage, Medicaid, and positive pricing trends.
  • 4Optum segment revenues increased by 10%, with strong contributions from care delivery, pharmacy services, and data analytics.
  • 5Operating cash flows for the nine months were $13.3 billion, demonstrating strong operational cash generation.
  • 6The company repurchased $3.65 billion in common stock and increased its quarterly cash dividend to an annual rate of $3.60 per share, indicating a commitment to returning capital to shareholders.
  • 7Effective tax rate decreased to 22.0% for the nine months due to the Tax Cuts and Jobs Act, partially offset by the Health Insurance Industry Tax.

Frequently Asked Questions

Revenue growth was primarily driven by an increase in the number of individuals served across UnitedHealthcare's risk-based products, favorable pricing trends (including the impact of the Health Insurance Industry Tax reinstatement), and significant growth across the Optum businesses, particularly in care delivery, pharmacy services, and outsourcing and advisory services.

The Tax Cuts and Jobs Act enacted in December 2017 reduced the U.S. corporate income tax rate, leading to a significant decrease in UnitedHealth Group's effective income tax rate to 22.0% for the first nine months of 2018, compared to 31.4% in the prior year. This tax reform provided a positive impact on net earnings.

The final 2019 Medicare Advantage rates resulted in an industry base rate increase of approximately 3.4%. This increase is noted as being short of the industry's forward medical cost trend, suggesting continued pressure on the Medicare Advantage program. However, UnitedHealthcare's Medicare Advantage membership grew by 12% year-over-year.

UnitedHealth Group demonstrated a strong commitment to capital return through its share repurchase program, buying back $3.65 billion of common stock during the nine months ended September 30, 2018, and increasing its quarterly dividend to an annualized rate of $3.60 per share. The company also maintains significant liquidity through its cash reserves and credit facilities.