10-QPeriod: Q2 FY2019

UNITEDHEALTH GROUP INC Quarterly Report for Q2 Ended Jun 30, 2019

Filed August 7, 2019For Securities:UNH

Summary

UnitedHealth Group reported strong financial performance for the six months ended June 30, 2019, with total revenues increasing by 9% to $120.9 billion and net earnings attributable to common shareholders growing by 17% to $6.76 billion. This growth was driven by solid performance across both the UnitedHealthcare and Optum segments, with revenues up 7% and 13% respectively. The company also saw a significant increase in earnings from operations, up 16% year-over-year. The balance sheet remains robust, with total assets growing to $167.2 billion from $152.2 billion at the end of 2018, bolstered by increases in goodwill and long-term investments. Cash flows from operations were strong, though lower than the prior year due to a significant one-time receipt in 2018. The company demonstrated a commitment to returning capital to shareholders through increased dividends and substantial share repurchases. Key operational highlights include a 7% increase in UnitedHealthcare revenues, largely driven by growth in Medicare Advantage plans and an increase in fee-based commercial membership, despite a decrease in Medicaid enrollment. The Optum segment continued its impressive growth trajectory, with OptumRx showing a 11% revenue increase and OptumHealth experiencing a 18% revenue jump. The company is actively managing its capital, as evidenced by the issuance of $5.5 billion in senior unsecured notes in July 2019 and a continued share repurchase program. The company also noted the impact of the Health Insurance Industry Tax moratorium in 2019, which affected year-over-year comparability for certain financial metrics.

Financial Highlights

54 data points
Beta

Revenue

$60.59B

87.5% Gross Margin

Net Income

$3.29B

5.4% Net Margin

EPS (Diluted)

$3.42

Total Assets

$167.20B

Cash & Equivalents

$13.74B

Free Cash Flow

$5.46B

Financial Statements
Beta
Revenue$60.59B
Cost of Revenue$7.60B
Gross Profit$53.00B
SG&A Expenses$8.41B
Operating Expenses$55.85B
Operating Income$4.74B
Interest Expense$418.00M
Net Income$3.29B
EPS (Basic)$3.47
EPS (Diluted)$3.42
Shares Outstanding (Basic)950.00M
Shares Outstanding (Diluted)964.00M

Key Highlights

  • 1Total revenues increased by 9% to $120.9 billion for the first six months of 2019, indicating robust top-line growth.
  • 2Net earnings attributable to common shareholders grew by 17% to $6.76 billion for the first six months of 2019, demonstrating strong profitability.
  • 3UnitedHealthcare revenues grew by 7%, driven by increased enrollment in Medicare Advantage and fee-based commercial plans.
  • 4Optum segment revenues rose by 13%, highlighting the continued success and expansion of its health services businesses.
  • 5Earnings from operations increased by 16% to $9.58 billion for the first six months of 2019, reflecting operational efficiency and strong performance across segments.
  • 6The company returned significant capital to shareholders, increasing its quarterly dividend and repurchasing shares worth $4.5 billion in the first six months of 2019.
  • 7The company issued $5.5 billion in senior unsecured notes in July 2019, strengthening its liquidity and financial flexibility.

Frequently Asked Questions

Revenue growth was primarily driven by an increase in the number of individuals served across various Medicare products, positive pricing trends, and continued expansion within the Optum business, particularly in pharmacy care services and care delivery. The UnitedHealthcare segment saw growth from Medicare Advantage and fee-based commercial plans, while Optum's various sub-segments also contributed significantly.

The one-year moratorium on the Health Insurance Industry Tax in 2019 created a favorable year-over-year impact on certain financial metrics. It led to an increase in revenues, a decrease in medical costs as a percentage of premiums (lower Medical Care Ratio), a decrease in the operating cost ratio, and a lower effective tax rate compared to 2018. However, it also affects the comparability of financial statements between the two periods.

UnitedHealth Group demonstrated a commitment to returning capital to shareholders. During the first six months of 2019, they repurchased approximately $4.5 billion of common stock and paid dividends totaling $1.88 billion. In June 2019, the company's Board of Directors also increased the annual dividend rate to $4.32 per share, signaling confidence in future profitability and cash flows.

The company highlighted several risks including the potential impact of regulatory changes, government investigations and audits (such as the DOJ lawsuit regarding risk adjustment submissions), competitive pressures, cyber-attacks or data security incidents, changes in Medicare Advantage rates, and the successful integration and performance of acquisitions. The company also noted that its forward-looking statements are subject to these and other uncertainties.