U.S. Markets closed

UnitedHealth Group Reports Second Quarter 2019 Results

NEW YORK--(BUSINESS WIRE)--

  • Total Revenues of $60.6 Billion Grew 8% Year-Over-Year
  • Earnings from Operations Increased 13% to $4.7 Billion
  • Net Earnings of $3.42 Per Share Grew 15% Year-Over-Year
  • Adjusted Net Earnings of $3.60 Per Share Grew 15% Year-Over-Year
  • Cash Flows from Operations were $5.9 Billion in the Quarter

UnitedHealth Group (UNH) reported second quarter 2019 results with continued well diversified strength in performance.

“Our results in the quarter reflect strong and balanced performance from both Optum and UnitedHealthcare and are driven by the 320,000 women and men of UnitedHealth Group who focus every day on creating value for those we serve,” said David S. Wichmann, chief executive officer of UnitedHealth Group.

Based on strong first half 2019 results and confidence in the remainder of the year, the Company increased its full year net earnings outlook to $13.95 to $14.15 per share, and adjusted net earnings to $14.70 to $14.90 per share.

Quarterly Financial Performance

 

Three Months Ended

 

 

June 30,

2019

June 30,

2018

March 31,

2019

 

 

Revenues

$60.6 billion

$56.1 billion

$60.3 billion

 

 

Earnings from Operations

$4.7 billion

$4.2 billion

$4.8 billion

 

 

Net Margin

5.4%

5.2%

5.7%

 

 

  • UnitedHealth Group’s second quarter 2019 revenues grew $4.5 billion or 8.0 percent year-over-year to $60.6 billion, led by double-digit percentage revenue growth at UnitedHealthcare Medicare & Retirement, OptumRx and OptumHealth.
  • Second quarter earnings from operations grew 12.8 percent or $540 million year-over-year to $4.7 billion. Adjusted net earnings of $3.60 per share advanced 14.6 percent.
  • Cash flows from operations were $5.9 billion in the quarter and $9.1 billion or 1.3x net income year to date.
  • Second quarter medical cost trends remained well managed, with the revenue effect from the deferral of the health insurance tax driving the 120 basis point increase in the consolidated medical care ratio year-over-year to 83.1 percent. Favorable medical reserve development was $270 million this quarter and days claims payable remained consistent at 49 days.
  • The second quarter operating cost ratio of 13.9 percent improved 110 basis points from the same period last year, reflecting the deferral of the health insurance tax and continued effects of productivity advances and operating cost management disciplines.
  • Higher investment and other income was driven by higher interest yields and investment balances, earnings from well-performing minority investments and a $100 million venture investment gain.
  • Second quarter dividend payments grew to $1.0 billion as the annual dividend rate was increased 20 percent to $4.32 per share in June 2019. In the second quarter, 6.4 million shares were repurchased for $1.5 billion, bringing year-to-date purchases to 18.2 million shares for $4.5 billion.
  • Return on equity of 25.1 percent in the period continued to reflect the Company’s strong and diverse earnings profile and efficient capital base.

UnitedHealthcare provides global health care benefits, serving individuals and employers, and Medicare and Medicaid beneficiaries. UnitedHealthcare is dedicated to improving the value health care consumers receive by reducing the total cost of care, enhancing the quality of care received, improving health and wellness and simplifying the health care experience.

Quarterly Financial Performance

 

Three Months Ended

 

 

June 30,

2019

June 30,

2018

March 31,

2019

 

 

 

Revenues

 

$48.6 billion

 

$45.8 billion

 

$48.9 billion

 

 

Earnings from Operations

$2.6 billion

$2.4 billion

$3.0 billion

 

 

Operating Margin

5.4%

5.1%

6.0%

 

 

  • UnitedHealthcare grew second quarter 2019 earnings from operations by 12.1 percent to $2.6 billion driven by revenue growth and strong cost disciplines. The business grew to serve 705,000 more people with medical benefits over the past year, including a greater mix of people with higher acuity needs, helping grow revenues by $2.7 billion, or 6.0 percent, to $48.6 billion in the quarter.
    • UnitedHealthcare Employer & Individual revenues in second quarter 2019 increased $324 million year-over-year to $14.0 billion, as UnitedHealthcare served 615,000 more people with commercial benefits in the past year.
    • UnitedHealthcare Medicare & Retirement second quarter 2019 revenues grew by $2.0 billion or 10.6 percent to $20.9 billion. Medicare Advantage products grew to serve 400,000 more individual and employer-sponsored seniors year-over-year. Including those dually eligible for Medicare and Medicaid and served through UnitedHealthcare Community & State, total year-over-year growth in Medicare Advantage was 540,000 people.
    • UnitedHealthcare Community & State revenues grew $440 million or 4.1 percent to $11.2 billion in second quarter 2019, driven by growth in people served with higher acuity needs. Second quarter membership declined 350,000 people year-over-year primarily due to states adding more carriers and managing eligibility and proactive market withdrawals.
    • UnitedHealthcare Global revenues in second quarter 2019 were stable year-over-year at $2.5 billion.

Optum is a health services business serving the global health care marketplace, including payers, care providers, employers, governments, life sciences companies and consumers. Using market-leading information, data analytics, technology and clinical insights, Optum helps improve overall health system performance: optimizing care quality, reducing health care costs and improving the consumer experience.

Quarterly Financial Performance

 

Three Months Ended

 

 

June 30,

2019

June 30,

2018

March 31,

2019

 

 

 

Revenues

 

$28.0 billion

 

$24.7 billion

 

$26.4 billion

 

 

Earnings from Operations

$2.1 billion

$1.8 billion

$1.9 billion

 

 

Operating Margin

7.5%

7.5%

7.1%

 

 

  • Optum revenues of $28.0 billion grew by 13.4 percent or $3.3 billion year-over-year in the second quarter of 2019. Optum’s second quarter 2019 earnings from operations advanced 13.8 percent to $2.1 billion due to strong revenue growth and stable, strong operating margin performance.
    • OptumHealth revenues advanced $1.2 billion or 20.3 percent year-over-year to $7.1 billion in second quarter 2019, with strength and diversity of growth across care delivery, behavioral health services and complex care management. OptumHealth served approximately 95 million people at June 30, 2019, and the average revenue per consumer increased 17 percent year-over-year, driven by growth in value-based care arrangements and continued strong demand for OptumHealth’s expanding service and product offerings.
    • OptumInsight revenues of $2.3 billion grew 7.0 percent year-over-year in the quarter, while revenue backlog grew over 20 percent year-over-year to $18.5 billion at quarter-end driven by health care operations and technology, revenue management, and payer and advisory services.
    • OptumRx revenues in second quarter 2019 increased 11.7 percent or $2.0 billion year-over-year to $18.9 billion, reflecting market share gains and continued diversification of services provided, including a higher mix of specialty pharmacy care services. OptumRx fulfilled 343 million adjusted scripts in second quarter 2019, growing 3.3 percent over the prior year.

About UnitedHealth Group

UnitedHealth Group (UNH) is a diversified health care company dedicated to helping people live healthier lives and helping make the health system work better for everyone. UnitedHealth Group offers a broad spectrum of products and services through two distinct platforms: UnitedHealthcare, which provides health care coverage and benefits services; and Optum, which provides information and technology-enabled health services. For more information, visit UnitedHealth Group at www.unitedhealthgroup.com or follow @UnitedHealthGrp on Twitter.

Earnings Conference Call

As previously announced, UnitedHealth Group will discuss the Company’s results, strategy and future outlook on a conference call with investors at 8:45 a.m. Eastern Time today. UnitedHealth Group will host a live webcast of this conference call from the Investors page of the Company’s website (www.unitedhealthgroup.com). Following the call, a webcast replay will be available on the same site through August 1, 2019. The conference call replay can also be accessed by dialing 1-800-695-0715. This earnings release and the Form 8-K dated July 18, 2019, can also be accessed from the Investors page of the Company’s website.

Non-GAAP Financial Information

This news release presents non-GAAP financial information provided as a complement to the results provided in accordance with accounting principles generally accepted in the United States of America (“GAAP”). A reconciliation of the non-GAAP financial information to the most directly comparable GAAP financial measure is provided in the accompanying tables found at the end of this release.

Forward-Looking Statements

The statements, estimates, projections, guidance or outlook contained in this document include “forward-looking” statements within the meaning of the PSLRA. These statements are intended to take advantage of the “safe harbor” provisions of the PSLRA. Generally the words “believe,” “expect,” “intend,” “estimate,” “anticipate,” “forecast,” “outlook,” “plan,” “project,” “should” and similar expressions identify forward-looking statements, which generally are not historical in nature. These statements may contain information about financial prospects, economic conditions and trends and involve risks and uncertainties. We caution that actual results could differ materially from those that management expects, depending on the outcome of certain factors.

Some factors that could cause actual results to differ materially from results discussed or implied in the forward-looking statements include: our ability to effectively estimate, price for and manage our medical costs, including the impact of any new coverage requirements; new laws or regulations, or changes in existing laws or regulations, or their enforcement or application, including increases in medical, administrative, technology or other costs or decreases in enrollment resulting from U.S., South American and other jurisdictions’ regulations affecting the health care industry; the outcome of the DOJ’s legal action relating to the risk adjustment submission matter; our ability to maintain and achieve improvement in CMS star ratings and other quality scores that impact revenue; reductions in revenue or delays to cash flows received under Medicare, Medicaid and other government programs, including the effects of a prolonged U.S. government shutdown or debt ceiling constraints; changes in Medicare, including changes in payment methodology, the CMS star ratings program or the application of risk adjustment data validation audits; cyberattacks or other privacy or data security incidents; failure to comply with privacy and data security regulations; regulatory and other risks and uncertainties of the pharmacy benefits management industry; competitive pressures, which could affect our ability to maintain or increase our market share; changes in or challenges to our public sector contract awards; our ability to execute contracts on competitive terms with physicians, hospitals and other service providers; failure to achieve targeted operating cost productivity improvements, including savings resulting from technology enhancement and administrative modernization; increases in costs and other liabilities associated with increased litigation, government investigations, audits or reviews; failure to manage successfully our strategic alliances or complete or receive anticipated benefits of acquisitions and other strategic transactions; fluctuations in foreign currency exchange rates on our reported shareholders’ equity and results of operations; downgrades in our credit ratings; the performance of our investment portfolio; impairment of the value of our goodwill and intangible assets if estimated future results do not adequately support goodwill and intangible assets recorded for our existing businesses or the businesses that we acquire; failure to maintain effective and efficient information systems or if our technology products do not operate as intended; and our ability to obtain sufficient funds from our regulated subsidiaries or the debt or capital markets to fund our obligations, to maintain our debt to total capital ratio at targeted levels, to maintain our quarterly dividend payment cycle or to continue repurchasing shares of our common stock.

This list of important factors is not intended to be exhaustive. We discuss certain of these matters more fully, as well as certain risk factors that may affect our business operations, financial condition and results of operations, in our other periodic and current filings with the SEC, including our annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K. Any or all forward-looking statements we make may turn out to be wrong, and can be affected by inaccurate assumptions we might make or by known or unknown risks and uncertainties. By their nature, forward-looking statements are not guarantees of future performance or results and are subject to risks, uncertainties and assumptions that are difficult to predict or quantify. Actual future results may vary materially from expectations expressed or implied in this document or any of our prior communications. You should not place undue reliance on forward-looking statements, which speak only as of the date they are made. We do not undertake to update or revise any forward-looking statements, except as required by applicable securities laws.

UNITEDHEALTH GROUP
Earnings Release Schedules and Supplementary Information
Quarter Ended June 30, 2019
 
- Condensed Consolidated Statements of Operations
- Condensed Consolidated Balance Sheets
- Condensed Consolidated Statements of Cash Flows
- Supplemental Financial Information - Businesses
- Supplemental Financial Information - Business Metrics
- Reconciliation of Non-GAAP Financial Measure
UNITEDHEALTH GROUP
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except per share data)
(unaudited)
 
Three Months Ended
June 30,
Six Months Ended
June 30,

2019

 

2018

 

2019

 

2018

Revenues
Premiums

$

47,164

 

$

44,458

 

$

94,677

 

$

88,542

 

Products

 

8,353

 

 

7,004

 

 

16,425

 

 

13,706

 

Services

 

4,496

 

 

4,269

 

 

8,814

 

 

8,373

 

Investment and other income

 

582

 

 

355

 

 

987

 

 

653

 

 
Total revenues

 

60,595

 

 

56,086

 

 

120,903

 

 

111,274

 

 
Operating costs
Medical costs

 

39,184

 

 

36,427

 

 

78,123

 

 

72,290

 

Operating costs

 

8,415

 

 

8,386

 

 

16,932

 

 

16,892

 

Cost of products sold

 

7,598

 

 

6,471

 

 

14,979

 

 

12,655

 

Depreciation and amortization

 

654

 

 

598

 

 

1,293

 

 

1,180

 

 

Total operating costs

 

55,851

 

 

51,882

 

 

111,327

 

 

103,017

 

 
Earnings from operations

 

4,744

 

 

4,204

 

 

9,576

 

 

8,257

 

 
Interest expense

 

(418

)

 

(344

)

 

(818

)

 

(673

)

 
Earnings before income taxes

 

4,326

 

 

3,860

 

 

8,758

 

 

7,584

 

 
Provision for income taxes

 

(941

)

 

(850

)

 

(1,816

)

 

(1,650

)

 
Net earnings

 

3,385

 

 

3,010

 

 

6,942

 

 

5,934

 

 
Earnings attributable to noncontrolling interests

 

(92

)

 

(88

)

 

(182

)

 

(176

)

 
Net earnings attributable to UnitedHealth Group common shareholders

$

3,293

 

$

2,922

 

$

6,760

 

$

5,758

 

 
Diluted earnings per share attributable to UnitedHealth Group common shareholders

$

3.42

 

$

2.98

 

$

6.97

 

$

5.85

 

 
Adjusted earnings per share attributable to UnitedHealth Group common shareholders (a)

$

3.60

 

$

3.14

 

$

7.33

 

$

6.19

 

 
Diluted weighted-average common shares outstanding

 

964

 

 

982

 

 

970

 

 

984

 

(a)

See page 6 for a reconciliation of the non-GAAP measure
UNITEDHEALTH GROUP
CONDENSED CONSOLIDATED BALANCE SHEETS
(in millions)
(unaudited)
 

June 30,

 

December 31,

2019

 

2018

Assets
Cash and short-term investments

$

17,269

$

14,324

Accounts receivable, net

 

9,741

 

11,388

Other current assets

 

15,028

 

12,980

 
Total current assets

 

42,038

 

38,692

 
Long-term investments

 

35,696

 

32,510

Other long-term assets

 

89,466

 

81,019

 
Total assets

$

167,200

$

152,221

 
 
Liabilities, redeemable noncontrolling interests and equity
Medical costs payable

$

20,907

$

19,891

Commercial paper and current maturities of long-term debt

 

7,800

 

1,973

Other current liabilities

 

33,621

 

31,345

 
Total current liabilities

 

62,328

 

53,209

 
Long-term debt, less current maturities

 

34,473

 

34,581

Other long-term liabilities

 

12,343

 

8,204

Redeemable noncontrolling interests

 

2,202

 

1,908

Equity

 

55,854

 

54,319

 
Total liabilities, redeemable noncontrolling interests and equity

$

167,200

$

152,221

UNITEDHEALTH GROUP
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
(unaudited)
 
Six Months Ended
June 30,

2019

2018

Operating Activities
Net earnings

$

6,942

 

$

5,934

 

Noncash items:
Depreciation and amortization

 

1,293

 

 

1,180

 

Deferred income taxes and other

 

68

 

 

(148

)

Share-based compensation

 

398

 

 

358

 

Net changes in operating assets and liabilities

 

407

 

 

5,052

 

 
Cash flows from operating activities

 

9,108

 

 

12,376

 

 
Investing Activities
Purchases of investments, net of sales and maturities

 

(1,654

)

 

(2,968

)

Purchases of property, equipment and capitalized software

 

(977

)

 

(960

)

Cash paid for acquisitions, net

 

(4,751

)

 

(2,636

)

Other, net

 

504

 

 

(134

)

 
Cash flows used for investing activities

 

(6,878

)

 

(6,698

)

 
Financing Activities
Common share repurchases

 

(4,501

)

 

(3,150

)

Dividends paid

 

(1,884

)

 

(1,588

)

Net change in commercial paper and long-term debt

 

5,674

 

 

2,683

 

Other, net

 

1,354

 

 

2,842

 

 
Cash flows from financing activities

 

643

 

 

787

 

 
Effect of exchange rate changes on cash and cash equivalents

 

6

 

 

(78

)

 
Increase in cash and cash equivalents

 

2,879

 

 

6,387

 

 
Cash and cash equivalents, beginning of period

 

10,866

 

 

11,981

 

 
Cash and cash equivalents, end of period

$

13,745

 

$

18,368

 

UNITEDHEALTH GROUP
SUPPLEMENTAL FINANCIAL INFORMATION - BUSINESSES
(in millions, except percentages)
(unaudited)
 
Three Months Ended
June 30,
Six Months Ended
June 30,

2019

 

2018

 

2019

 

2018

Revenues
UnitedHealthcare

$

48,594

 

$

45,846

 

$

97,490

 

$

91,305

 

Optum

 

28,029

 

 

24,726

 

 

54,389

 

 

48,327

 

Eliminations

 

(16,028

)

 

(14,486

)

 

(30,976

)

 

(28,358

)

 
Total consolidated revenues

$

60,595

 

$

56,086

 

$

120,903

 

$

111,274

 

 
Earnings from Operations
UnitedHealthcare

$

2,642

 

$

2,357

 

$

5,596

 

$

4,757

 

Optum (a)

 

2,102

 

 

1,847

 

 

3,980

 

 

3,500

 

 
Total consolidated earnings from operations

$

4,744

 

$

4,204

 

$

9,576

 

$

8,257

 

 
Operating Margin
UnitedHealthcare

 

5.4

%

 

5.1

%

 

5.7

%

 

5.2

%

Optum

 

7.5

%

 

7.5

%

 

7.3

%

 

7.2

%

Consolidated operating margin

 

7.8

%

 

7.5

%

 

7.9

%

 

7.4

%

 
 
Revenues
UnitedHealthcare Employer & Individual

$

14,032

 

$

13,708

 

$

28,116

 

$

27,122

 

UnitedHealthcare Medicare & Retirement

 

20,855

 

 

18,859

 

 

41,951

 

 

37,784

 

UnitedHealthcare Community & State

 

11,186

 

 

10,746

 

 

22,368

 

 

21,417

 

UnitedHealthcare Global

 

2,521

 

 

2,533

 

 

5,055

 

 

4,982

 

 
OptumHealth

$

7,148

 

$

5,941

 

$

13,861

 

$

11,700

 

OptumInsight

 

2,339

 

 

2,185

 

 

4,528

 

 

4,254

 

OptumRx

 

18,923

 

 

16,941

 

 

36,740

 

 

33,047

 

Optum eliminations

 

(381

)

 

(341

)

 

(740

)

 

(674

)

(a)

Earnings from operations for Optum for the three and six months ended June 30, 2019 included $688 and $1,314 for OptumHealth; $525 and $957 for OptumInsight; and $889 and $1,709 for OptumRx, respectively. Earnings from operations for Optum for the three and six months ended June 30, 2018 included $570 and $1,058 for OptumHealth; $453 and $848 for OptumInsight; and $824 and $1,594 for OptumRx, respectively.
UNITEDHEALTH GROUP
SUPPLEMENTAL FINANCIAL INFORMATION - BUSINESS METRICS
 
UNITEDHEALTHCARE CUSTOMER PROFILE
(in thousands)
 
People Served June 30,
2019
March 31,
2019
December 31,
2018
June 30,
2018
Commercial:
Risk-based

 

8,325

 

8,340

 

8,495

 

8,385

Fee-based

 

19,090

 

19,175

 

18,420

 

18,415

Total Commercial

 

27,415

 

27,515

 

26,915

 

26,800

Medicare Advantage

 

5,190

 

5,165

 

4,945

 

4,790

Medicaid

 

6,360

 

6,425

 

6,450

 

6,710

Medicare Supplement (Standardized)

 

4,495

 

4,500

 

4,545

 

4,505

Total Public and Senior

 

16,045

 

16,090

 

15,940

 

16,005

Total UnitedHealthcare - Domestic Medical

 

43,460

 

43,605

 

42,855

 

42,805

International

 

6,070

 

6,125

 

6,220

 

6,020

Total UnitedHealthcare - Medical

 

49,530

 

49,730

 

49,075

 

48,825

 
Supplemental Data
Medicare Part D stand-alone

 

4,430

 

4,480

 

4,710

 

4,730

 
OPTUM PERFORMANCE METRICS
 
June 30,
2019
March 31,
2019
December 31,
2018
June 30,
2018
 
OptumHealth Consumers Served (in millions)

 

95

 

93

 

93

 

92

OptumInsight Contract Backlog (in billions)

$

18.5

$

17.4

$

17.0

$

15.4

OptumRx Quarterly Adjusted Scripts (in millions)

 

343

 

339

 

348

 

332

Note: UnitedHealth Group served 143 million unique individuals across all businesses at June 30, 2019.
UNITEDHEALTH GROUP
Reconciliation of Non-GAAP Financial Measure
 
- Adjusted Net Earnings per Share
 
Use of Non-GAAP Financial Measures

Adjusted net earnings per share is a non-GAAP financial measure. Non-GAAP financial measures should be considered in addition to, but not as a substitute for, or superior to, financial measures prepared in accordance with GAAP.


Adjusted net earnings per share excludes from the relevant GAAP metric, as applicable, intangible amortization and other items, if any, that do not relate to the Company's underlying business performance. Management believes that the use of adjusted net earnings per share provides investors and management useful information about the earnings impact of acquisition-related intangible asset amortization. Management believes the exclusion of these items provides a more useful comparison of the Company's underlying business performance from period to period.

UNITEDHEALTH GROUP
RECONCILIATION OF NON-GAAP FINANCIAL MEASURE
(in millions, except per share data)
(unaudited)
 
ADJUSTED NET EARNINGS PER SHARE
 
Three Months Ended
June 30,
Six Months Ended
June 30,
Projected
Year Ended
December 31,

2019

 

2018

 

2019

 

2018

 

2019

GAAP net earnings attributable to UnitedHealth Group common shareholders

$

3,293

 

$

2,922

 

$

6,760

 

$

5,758

 

$13,500 - $13,750
Intangible amortization

 

240

 

 

220

 

 

467

 

 

440

 

~960
Tax effect of intangible amortization

 

(60

)

 

(56

)

 

(116

)

 

(111

)

~(240)
Adjusted net earnings attributable to UnitedHealth Group common shareholders

$

3,473

 

$

3,086

 

$

7,111

 

$

6,087

 

$14,220 - $14,470
 
GAAP diluted earnings per share

$

3.42

 

$

2.98

 

$

6.97

 

$

5.85

 

$13.95 - $14.15
Intangible amortization per share

 

0.24

 

 

0.22

 

 

0.48

 

 

0.45

 

~1.00
Tax effect per share of intangible amortization

 

(0.06

)

 

(0.06

)

 

(0.12

)

 

(0.11

)

~(0.25)
Adjusted diluted earnings per share

$

3.60

 

$

3.14

 

$

7.33

 

$

6.19

 

$14.70 - $14.90

Click here to subscribe to Mobile Alerts for UnitedHealth Group.

View source version on businesswire.com: https://www.businesswire.com/news/home/20190718005232/en/