UnitedHealth Group Reports Second Quarter Results

  UnitedHealth Group Reports Second Quarter Results

  *Quarterly Revenues Exceeded $30 Billion, Increasing 12% Year-Over-Year
  *UnitedHealthcare Grew to Serve 3 Million More People; Served 45 Million in
    the Second Quarter
  *Optum Revenues of $8.8 Billion Grew 21%; Optum Operating Earnings Grew 68%
  *UnitedHealth Group Net Earnings of $1.40 Per Share Increased 10%

Business Wire

MINNETONKA, Minn. -- July 18, 2013

UnitedHealth Group (NYSE: UNH) today reported second quarter results,
highlighted by consistent enrollment growth in each of UnitedHealthcare’s
benefits businesses combined with well-diversified revenue growth and margin
expansion at Optum. Overall results were strong across the enterprise.

The Company affirmed its projections for 2013 revenues of approximately $122
billion and cash flows from operations in a range of $7.2 billion to $7.6
billion, and tightened its outlook for full year 2013 net earnings to a range
of $5.35 to $5.50 per share.

“First half 2013 results reflect well-diversified growth and steadily
strengthening performance across both our health benefits and health services
businesses,” said Stephen J. Hemsley, president and chief executive officer of
UnitedHealth Group.

Quarterly Financial Performance
                           Three Months Ended
                           June 30,       June 30,       March 31,
                           2013            2012            2013
Revenues                   $30.4 billion   $27.3 billion   $30.3 billion
Earnings From Operations   $2.4 billion    $2.2 billion    $2.1 billion
Net Margin                4.7%           4.9%           4.1%

  *UnitedHealth Group’s consolidated second quarter 2013 revenues of $30.4
    billion increased $3.1 billion year-over-year, lifting the year-over-year
    revenue growth rate to 12 percent and the year-to-date rate to 11 percent.
    Optum’s revenue growth rates of 21 percent in the second quarter and 18
    percent year-to-date reflected double digit percentage growth rates at
    each of its three major businesses. UnitedHealthcare’s 2013 year-to-date
    10 percent organic enrollment growth – more than 4 million people – was
    driven by performance across all major market categories: commercial,
    Medicare, Medicaid and international.
  *Second quarter 2013 earnings from operations were $2.4 billion and net
    earnings were $1.4 billion or $1.40 per share, compared to $1.27 per share
    in second quarter 2012.
  *The consolidated medical care ratio increased 20 basis points
    year-over-year to 81.5 percent in the second quarter of 2013, reflecting
    the higher revenue growth rate in governmental benefit program offerings.
    Favorable reserve development was $310 million in the quarter, including
    $120 million related to 2012 medical costs, compared to a total of $210
    million in favorable development for the second quarter of 2012, which
    included $90 million related to previous years’ costs.
  *Unprecedented levels of fee-based membership growth and services business
    growth and a greater mix of international business produced a 90 basis
    point year-over-year increase in the operating cost ratio to 15.9 percent
    in the second quarter of 2013.
  *Second quarter 2013 cash flows from operations of nearly $1.5 billion
    increased $129 million from second quarter 2012 cash flows from operations
    of more than $1.3 billion^1, as adjusted to exclude out-of-period
    government payment receipts. These early payments did not recur in second
    quarter 2013.

  *The second quarter income tax rate of 35.5 percent was stable
    year-over-year. Second half 2013 income tax rates are estimated to be in
    the range of 36.5 percent to 36.75 percent.
  *Second quarter days claims payable of 49 days increased one day
    year-over-year. Days sales outstanding in accounts receivable of 11 days
    at June 30, 2013 reflected a two-day seasonal increase in government
  *UnitedHealth Group’s June 30, 2013 debt to debt-plus-equity ratio was 34.6
    percent, decreasing 160 basis points in the quarter and cash available for
    corporate use was approximately $1.2 billion at quarter end. Second
    quarter 2013 annualized return on equity was 18.2 percent.
  *UnitedHealth Group completed the last stages of its acquisition of Amil
    during the second quarter, including funding the public tender offer and
    the delisting from the Brazilian stock exchange.
  *During the second quarter the Board of Directors increased the Company’s
    quarterly dividend 32 percent to a rate of $1.12 per share annually, and
    renewed and expanded the share repurchase program with an authorization to
    repurchase up to 110 million shares over time. In the second quarter
    UnitedHealth Group repurchased nearly 13 million shares for $791 million
    and paid $281 million in dividends to shareholders, an increase of 29
    percent year-over-year.

^1 Adjusted numbers are non-GAAP financial measures. GAAP cash flows from
operations of $2.2 billion for second quarter 2012 do not reflect the $2.5
billion monthly premium payment for April received in March from the Centers
for Medicare and Medicaid Services (CMS) and do include a $2.7 billion monthly
payment for July that was received in June. The June 2012 GAAP cash flows from
operations also included $0.6 billion in additional early government payment
receipts. Cash flows from operations have been adjusted to report CMS payments
in the quarter to which they relate.

UnitedHealthcare provides network-based health care benefits for a full
spectrum of customers and markets. UnitedHealthcare serves employers ranging
from sole proprietorships to large, multi-site and national and international
organizations; delivers health and well-being benefits to Medicare
beneficiaries and retirees; manages health care benefit programs on behalf of
state Medicaid and community programs and their participants and serves the
nation’s active and retired military and their families through the TRICARE

Quarterly Financial Performance
                           Three Months Ended
                           June 30,       June 30,       March 31,
                           2013            2012            2013
Revenues                   $28.3 billion   $25.5 billion   $28.3 billion
Earnings From Operations   $1.9 billion    $1.9 billion    $1.6 billion
Operating Margin          6.6%           7.5%           5.8%

  *UnitedHealthcare’s second quarter 2013 revenues of $28.3 billion increased
    $2.8 billion or 11 percent year-over-year. Revenue growth was driven by an
    increase of 9.1 million consumers with medical benefits, including 4.4
    million domestically and 4.7 million internationally. Second quarter 2013
    growth of 3.0 million people was led by the initiation of services to the
    TRICARE West Region and growth across both public and senior health
  *Earnings from operations for UnitedHealthcare for second quarter 2013 were
    consistent year-over-year at $1.9 billion and the second quarter 2013
    operating margin was 6.6 percent. As expected, operating margins were
    pressured year-over-year by funding reductions in the Medicare &
    Retirement business. Part D seasonality factors and effective ongoing
    medical cost performance contributed to margin improvement on a sequential
    basis in the second quarter of 2013.

UnitedHealthcare Employer & Individual

  *The number of consumers served by UnitedHealthcare Employer & Individual
    grew by 3.7 million over the past year, including 2.8 million people in
    second quarter 2013.
  *UnitedHealthcare Employer & Individual second quarter revenues of $11.2
    billion decreased $417 million year-over-year, reflecting a large
    customer’s conversion to fee-based services in first quarter 2013.
  *Market demands for choice and affordability have driven 18 percent
    year-over-year growth in UnitedHealthcare’s consumer-directed health care
    products. A total of 5.7 million consumers participated in these products
    at June 30, 2013.
  *UnitedHealthcare’s commercial medical care ratio decreased 10 basis points
    year-over-year to 80.7 percent in the second quarter.

UnitedHealthcare Medicare & Retirement

  *Second quarter Medicare & Retirement revenues of $11.1 billion grew $1.2
    billion or 13 percent year-over-year, driven by its growth in service to
    Medicare beneficiaries.

       *UnitedHealthcare served 415,000 more people in Medicare Advantage in
         the past year, a 17 percent increase, including growth of 55,000
         seniors in the second quarter of 2013.
       *Medicare Supplement grew strongly, with the number of people served
         increasing by 290,000 or 9 percent in the past year, including 40,000
         people in the second quarter.
       *UnitedHealthcare’s Medicare Part D drug plans delivered strong growth
         of 570,000 people year-over-year, including 90,000 in the second

UnitedHealthcare Community & State

  *Second quarter Community & State revenues of $4.5 billion increased $389
    million or 10 percent year-over-year. The Company expanded Medicaid
    services to an additional 110,000 people year-to-date, including 45,000
    people in the second quarter. The past year’s net growth of 65,000 people
    included overall growth of 300,000 people, offset by a first quarter 2013
    divestiture and a fourth quarter 2012 market exit. Second quarter new
    business highlights included two awards for future business in Washington

UnitedHealthcare International

  *UnitedHealthcare International second quarter 2013 revenues of $1.6
    billion included the second full quarter from Amil, the largest health
    care company in Brazil. Year-to-date, UnitedHealthcare International has
    grown the number of people served by 260,000 to 4.7 million.

Optum is a health services business serving the broad health care marketplace,
including payers, care providers, employers, governments, life sciences
companies and consumers. Using advanced data analytics and technology, Optum
helps improve overall health system performance: optimizing care quality,
reducing costs and improving the consumer experience and care provider

Quarterly Financial Performance
                           Three Months Ended
                           June 30,      June 30,      March 31,
                           2013           2012           2013
Total Revenues             $8.8 billion   $7.3 billion   $8.4 billion
Earnings From Operations   $536 million   $320 million   $495 million
Operating Margin          6.1%          4.4%          5.9%

  *Optum total revenues of $8.8 billion for the second quarter of 2013 grew
    $1.5 billion or 21 percent year-over-year, led by pharmacy growth from
    serving new clients and the insourcing of UnitedHealthcare commercial
    pharmacy customers. Revenues increased by double digit percentages
    year-over-year in each of Optum’s major businesses.

       *OptumHealth second quarter 2013 revenues of $2.4 billion grew 19
         percent year-over-year, driven by expansion of clinical services and
         organic growth.
       *OptumInsight second quarter revenues of $781 million grew 16 percent
         year-over-year, led by expansion in government services, payment
         integrity services and provider compliance offerings. OptumInsight’s
         quarter end revenue backlog was $4.6 billion.
       *OptumRx second quarter revenues of $5.6 billion grew 23 percent
         year-over-year, reflecting the expanded services for UnitedHealthcare
         and strong external client growth. Script volumes increased 24
         percent year-over-year in the second quarter and are expected to
         continue to accelerate, reaching an annual run rate of more than
         one-half billion adjusted scripts by year end.

  *Optum’s second quarter earnings from operations of $536 million increased
    68 percent year-over-year and the operating margin of 6.1 percent expanded
    sharply from 4.4 percent in the second quarter of 2012. These results
    again reflect progress on Optum’s plan to accelerate growth and improve
    margins and productivity by strengthening integration and business

       *OptumHealth second quarter 2013 earnings from operations of $225
         million grew by 83 percent year-over-year due to topline growth and
         productivity gains, which advanced operating margins 320 basis points
         to 9.3 percent.
       *OptumInsight’s second quarter 2013 earnings from operations of $157
         million increased 65 percent year-over-year. The nearly 6 percentage
         point improvement in second quarter operating margin to 20.1 percent
         was driven by revenue growth, product mix and continuing advances in
         business alignment and efficiency.
       *Strong growth, pricing disciplines and further improvements in
         generic mix drove a 51 percent year-over-year increase in OptumRx
         earnings from operations to $154 million and a 50 basis point
         improvement in operating margins to 2.7 percent.

About UnitedHealth Group

UnitedHealth Group (NYSE: UNH) is a diversified health and well-being company
dedicated to helping people live healthier lives and making health care work
better. With headquarters in Minnetonka, Minn., 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.
Through its businesses, UnitedHealth Group serves more than 85 million people
worldwide. For more information, visit UnitedHealth Group at

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). The webcast replay of the call will be available
on the same site through August 1, 2013, following the live call. The
conference call replay can also be accessed by dialing 1-800-283-4595. This
earnings release and the Form 8-K dated July 18, 2013, may also be accessed
from the Investors page of the Company’s website.

Forward-Looking Statements

The statements, estimates, projections, guidance or outlook contained in this
press release include “forward-looking” statements within the meaning of the
Private Securities Litigation Reform Act of 1995 (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,” “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 results to differ materially from 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; the potential impact that new laws or regulations, or changes in
existing laws or regulations, or their enforcement or application could have
on our results of operations, financial position and cash flows, including as
a result of increases in medical, administrative, technology or other costs or
decreases in enrollment resulting from U.S., Brazilian and other
jurisdictions' regulations affecting the health care industry; the impact of
any potential assessments for insolvent payers under state guaranty fund laws;
the ultimate impact of the Patient Protection and Affordable Care Act, which
could materially and adversely affect our results of operations, financial
position and cash flows through reduced revenues, increased costs, new taxes
and expanded liability, or require changes to the ways in which we conduct
business or put us at risk for loss of business; potential reductions in
revenue received from Medicare and Medicaid programs, including sequestration;
uncertainties regarding changes in Medicare, including potential changes in
risk adjustment data validation audit and payment adjustment methodology;
failure to comply with patient privacy and data security regulations;
regulatory and other risks and uncertainties associated with the pharmacy
benefits management industry and our ability to successfully repatriate our
pharmacy benefits management business; competitive pressures, which could
affect our ability to maintain or increase our market share; the impact of
challenges to our public sector contract awards; our ability to execute
contracts on competitive terms with physicians, hospitals and other service
professionals; increases in costs and other liabilities associated with
increased litigation, government investigations, audits or reviews; failure to
complete or receive anticipated benefits of acquisitions and other strategic
transactions, including the Amil acquisition; our ability to attract, retain
and provide support to a network of independent producers (i.e., brokers and
agents) and consultants; events that may adversely affect our relationship
with AARP; the potential impact of adverse economic conditions on our revenues
(including decreases in enrollment resulting from increases in the
unemployment rate and commercial attrition) and results of operations; the
performance of our investment portfolio; possible impairment of the value of
our goodwill and intangible assets in connection with dispositions or if
estimated future results do not adequately support goodwill and intangible
assets recorded for our existing businesses or the businesses that we acquire;
increases in health care costs resulting from large-scale medical emergencies;
failure to maintain effective and efficient information systems or if our
technology products otherwise do not operate as intended; misappropriation of
our proprietary technology; 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; the impact of fluctuations in foreign currency exchange rates on
our reported shareholders' equity and results of operations; potential
downgrades in our credit ratings; and failure to achieve targeted operating
cost productivity improvements, including savings resulting from technology
enhancement and administrative modernization.

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 Securities and Exchange
Commission, 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 in this press release 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.

Earnings Release Schedules and Supplementary Information
Three and Six Months Ended June 30, 2013

- Condensed Consolidated Statements of Operations
- Condensed Consolidated Balance Sheets
- Condensed Consolidated Statements of Cash Flows
- Supplemental Financial Information
- UnitedHealthcare Customer Profile

(in millions, except per share data)
                     Three Months Ended June 30,     Six Months Ended June 30,
                     2013             2012           2013           2012
Premiums             $  27,220        $ 24,609       $ 54,494       $ 49,240
Services                2,244           1,800          4,356          3,591
Products                749             678            1,500          1,366
Investment and         195           178          398          350    
other income
Total revenues         30,408        27,265       60,748       54,547 
Operating Costs
Medical costs           22,173          20,013         44,742         39,952
Operating costs         4,825           4,080          9,439          8,176
Cost of products        669             620            1,351          1,254
Depreciation and       340           326          676          622    
Total operating        28,007        25,039       56,208       50,004 
Earnings from           2,401           2,226          4,540          4,543
Interest expense       (176    )      (153   )      (354   )      (301   )
Earnings Before         2,225           2,073          4,186          4,242
Income Taxes
Provision for          (789    )      (736   )      (1,510 )      (1,517 )
income taxes
Net Earnings            1,436           1,337          2,676          2,725
Less: earnings
attributable to        -             -            (48    )      -      
Net earnings
attributable to
UnitedHealth Group   $  1,436        $ 1,337       $ 2,628       $ 2,725  
Diluted earnings
per share
attributable to      $  1.40         $ 1.27        $ 2.56        $ 2.59   
UnitedHealth Group
weighted-average       1,026         1,049        1,027        1,054  
common shares

(in millions)
                                                     June 30,     December 31,
                                                     2013         2012
Cash and short-term investments                      $ 10,097     $   11,437
Accounts receivable, net                               3,674          2,709
Other current assets                                  6,847         6,906
Total current assets                                   20,618         21,052
Long-term investments                                  17,976         17,711
Other long-term assets                                41,607        42,122
Total assets                                         $ 80,201     $   80,885
Liabilities and Shareholders' Equity
Medical costs payable                                $ 11,855     $   11,004
Commercial paper and current maturities of             1,086          2,713
long-term debt
Other current liabilities                             13,464        13,399
Total current liabilities                              26,405         27,116
Long-term debt, less current maturities                15,543         14,041
Future policy benefits                                 2,451          2,444
Deferred income taxes and other liabilities            3,652          3,985
Redeemable noncontrolling interest                     769            2,121
Shareholders' equity                                  31,381        31,178
Total liabilities and shareholders' equity           $ 80,201     $   80,885

(in millions)
                                                     Six Months Ended June 30,
                                                     2013           2012
Operating Activities
Net earnings                                         $ 2,676        $ 2,725
Noncash Items:
Depreciation and amortization                          676            622
Deferred income taxes and other                        14             (55    )
Share-based compensation                               176            242
Net changes in operating assets and liabilities       (1,015 )      2,237  
Cash flows from operating activities                  2,527        5,771  
Investing Activities
Cash paid for acquisitions, net                        (239   )       (2,404 )
Purchases of property, equipment and capitalized       (479   )       (465   )
software, net
Net purchases and maturities of investments           (300   )      (534   )
Cash flows used for investing activities              (1,018 )      (3,403 )
Financing Activities
Common stock repurchases                               (1,334 )       (1,809 )
Acquisition of noncontrolling interest shares          (1,474 )       -
Customer funds administered                            855            1,108
Dividends paid                                         (497   )       (386   )
Net change in commercial paper and long-term debt      (13    )       995
Other, net                                            296          (127   )
Cash flows used for financing activities              (2,167 )      (219   )
Effect of exchange rate changes on cash and cash       (94    )       -
(Decrease) increase in cash and cash equivalents       (752   )       2,149
Cash and cash equivalents, beginning of period        8,406        9,429  
Cash and cash equivalents, end of period             $ 7,654       $ 11,578 

(in millions)
                     Three Months Ended June        Six Months Ended June 30,
                     2013           2012            2013            2012
UnitedHealthcare     $ 28,332       $ 25,516        $ 56,611        $ 51,049
Optum                  8,839          7,301           17,250          14,632
Eliminations          (6,763 )      (5,552 )       (13,113 )      (11,134 )
      consolidated   $ 30,408      $ 27,265       $ 60,748       $ 54,547  
Earnings from
UnitedHealthcare     $ 1,865        $ 1,906         $ 3,509         $ 3,971
Optum (a)             536          320           1,031         572     
      earnings       $ 2,401       $ 2,226        $ 4,540        $ 4,543   
Operating Margin
UnitedHealthcare       6.6      %     7.5      %      6.2       %     7.8       %
Optum                  6.1      %     4.4      %      6.0       %     3.9       %
      operating        7.9      %     8.2      %      7.5       %     8.3       %
Employer &           $ 11,161       $ 11,578        $ 22,250        $ 23,224
Medicare &             11,053         9,807           22,233          19,723
UnitedHealthcare       4,482          4,093           8,920           8,033
Community & State
UnitedHealthcare       1,636          38              3,208           69
OptumHealth            2,411          2,025           4,853           3,964
OptumInsight           781            671             1,554           1,342
OptumRx                5,647          4,605           10,843          9,326
      Earnings from operations for Optum for the three and six months ended June
      30, 2013 were $225 and $451 for OptumHealth; $157 and $306 for
(a)   OptumInsight; and $154 and $274 for OptumRx, respectively. Earnings from
      operations for Optum for the three and six months ended June 30, 2012 were
      $123 and $215 for OptumHealth; $95 and $184 for OptumInsight; and $102 and
      $173 for OptumRx, respectively.

(in thousands)
                        June       March      December     June       December
                        30,        31,        31,          30,        31,
People Served           2013       2013       2012         2012       2011
Commercial              8,130      8,135      9,340        9,345      9,550
risk-based (a)
Commercial              19,030     19,165     17,585       17,075     16,320
fee-based (a)
Commercial              2,930      -          -            -          -
fee-based TRICARE
Total Commercial        30,090     27,300     26,925       26,420     25,870
Medicare Advantage      2,920      2,865      2,565        2,505      2,165
Medicaid                3,940      3,895      3,830        3,875      3,600
Medicare Supplement     3,365      3,325      3,180        3,075      2,935
Total Public and        10,225     10,085     9,575        9,455      8,700
International           4,685      4,630      4,425        -          -
UnitedHealthcare -      45,000     42,015     40,925       35,875     34,570
Supplemental Data
Medicare Part D         4,800      4,710      4,225        4,230      4,855
                 UnitedHealth Group served 89.2 million individuals across all
Note:            businesses at June 30, 2013, 86.0 million at March 31, 2013,
                 83.7 million at December 31, 2012, 76.6 million at June 30,
                 2012, and 78.1 million at December 31, 2011.
                 2013 totals include the effect of a conversion of 1.1 million
(a)              risk-based members of a public sector customer to a fee-based

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UnitedHealth Group
Brett Manderfeld, 952-936-7216
Vice President
John Penshorn, 952-936-7214
Senior Vice President
Don Nathan, 952-936-1885
Senior Vice President
Tyler Mason, 714-299-5730
Vice President
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