(Source: Business Wire)
UnitedHealth Group (NYSE:UNH) reported third quarter results today,
including growth in revenues and net earnings and a continued strong
financial position. Stephen J. Hemsley, president and chief executive
officer of UnitedHealth Group, said, "We combined successful overall
cost containment and strong execution in our services businesses to
continue to perform during a difficult economic period. This reinforces
the value of our diversified business model. We continue to focus on
delivering value for customers and stakeholders through responsive, high
quality service and practical, innovative programs that improve health
care system performance and help people live healthier lives."
UnitedHealth Group earned $0.89 per share in the third quarter and
confirmed 2009 earnings of approximately $3.15 per share and cash flows
from operations of approximately $5 billion.
Quarterly Financial Performance
Three Months Ended
September 30,2009 September 30,2008 June 30,2009
Revenues $21.70 billion $20.16 billion $21.66 billion
Earnings From Operations $1.68 billion $1.56 billion(1) $1.44 billion
Operating Margin 7.7% 7.7%(1) 6.6%
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Management views year-over-year comparisons of results to generally be
more meaningful than sequential comparisons, given the seasonality of
revenues, medical expenses, operating costs and earnings from
operations, primarily in its health benefits product offerings.
UnitedHealth Group's consolidated third quarter revenues of $21.7
billion increased $1.5 billion or 8 percent year-over-year.
Third quarter earnings from operations were $1.676 billion and net
earnings were $1.035 billion. The operating margin of 7.7 percent was
stable year-over-year. Strong overall third quarter performance in
services businesses and continued operating cost management offset
employment-related membership losses at UnitedHealthcare and mix
changes driven by growth in lower margin government business at
AmeriChoice, Ovations and OptumHealth.
Effective operating cost control reduced the third quarter 2009
operating cost ratio by 50 basis points to 14.5 percent from 15.01
percent of revenues in the third quarter of 2008.
The consolidated medical care ratio of 82.0 percent remained within
the range of management expectations, increasing 30 basis points
year-over-year due to elevated medical costs related to the H1N1
influenza virus.
During the third quarter of 2009 the Company realized $90 million in
net favorable development in its estimates of medical costs incurred
in the first half of 2009 and $100 million related to prior years.
This compares to $130 million in total favorable development in the
third quarter of 2008, including $10 million related to prior years.
The third quarter 2009 income tax rate of 32.7 percent benefited from
the favorable resolution of historical state income tax items, which
added 3 cents in earnings per share to third quarter 2009 results.
The third quarter 2009 net margin was 4.8 percent, bringing the
year-to-date net margin to 4.4 percent. Third quarter 2009 net
earnings were $0.89 per share.
There were no realized net capital gains or losses in the third
quarter of 2009. UnitedHealth Group's cash and investment portfolio
had an unrealized net gain position of $556 million at September 30,
2009.
There were 8 days sales outstanding in accounts receivable at the end
of the third quarter of 2009, compared to 9 days outstanding at
September 30, 2008.
Consolidated medical costs days payable were 53 days and 54 days at
the end of the third quarters of 2009 and 2008, respectively.
Third quarter cash flows from operations of $2.7 billion brought
year-to-date cash flows to $4.3 billion.
The Company reduced its debt position by $1.6 billion year-over-year
to $11.2 billion at September 30, 2009 and lowered its debt to
debt-plus-equity ratio to 32.8 percent from 39.2 percent at September
30, 2008. UnitedHealth Group repurchased 66.4 million shares of stock
year-to-date through the third quarter of 2009, including 2.4 million
shares in the third quarter, and had approximately $950 million in
cash available for general corporate use at quarter end.
1 Adjusted numbers are non-GAAP financial measures. Further
explanation of these non-GAAP measures and reconciliations to the
comparable GAAP measures are included in the attached financial
schedules.
Business Description -- UnitedHealthcare, Ovations, AmeriChoice
The Company provides network-based health care benefits and related
services for a full spectrum of customers. UnitedHealthcare serves
employers ranging from sole proprietorships to large, multi-site and
national employers, as well as students and individuals. In the Public
and Senior Markets Group, Ovations delivers health and well-being
services to Americans over the age of 50, while AmeriChoice manages
health care services for state Medicaid and other publicly funded
programs and their beneficiaries.
Quarterly Financial Performance
Three Months Ended
September 30,2009 September 30,2008 June 30,2009
Revenues $20.19 billion $18.82 billion $20.28 billion
Earnings From Operations $1.24 billion $1.29 billion $1.07 billion
Operating Margin 6.2% 6.8% 5.3%
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Third quarter 2009 revenues for this group of businesses grew $1.4
billion or 7 percent year-over-year to $20.2 billion. Revenue growth
was driven by rates reflecting underlying medical cost increases and
year-to-date growth of 0.9 million individuals served across the
public and senior markets businesses, offset by a decrease of 1.6
million consumers served through commercial benefits.
Third quarter earnings from operations of $1.2 billion decreased $41
million year-over-year. The operating margin declined 60 basis points
year-over-year to 6.2 percent in the third quarter, due to continued
growth in lower margin public and senior markets businesses combined
with a decrease in commercial business.
UnitedHealthcare
UnitedHealthcare third quarter revenues of $10.1 billion decreased
$347 million year-over-year. During the third quarter UnitedHealthcare
had declines of 80,000 people served through fee-based programs and
195,000 people in risk-based health benefit plans. Reflecting the
challenging economic climate, employment attrition at continuing
clients was the most significant factor in these decreases, accounting
for more than 80 percent of the total third quarter decline.
The UnitedHealthcare medical care ratio of 84.6 percent was within the
range of management expectations, increasing by a net 80 basis points
year-over-year, largely due to elevated medical costs related to the
H1N1 virus and a higher proportion of participants receiving care
under unemployment-related benefit continuation programs.
Ovations
Ovations revenues were $7.9 billion in the third quarter, up $1.2
billion or 19 percent year-over-year.
For Medicare Advantage programs, Ovations reported third quarter
growth of 30,000 people and year-to-date growth of 275,000 people.
Market-responsive product designs and local market engagement have
driven steady, balanced growth in Medicare Advantage in 2009.
Growth in active Medicare Supplement products continued, with Ovations
increasing the number of seniors served in this product family by
35,000 in the third quarter and 120,000 year-to-date.
At September 30, 2009 approximately 4.3 million people participated in
the Company's stand-alone Part D prescription drug plans.
Including Part D plans, Ovations has brought services to 625,000
additional seniors across its businesses thus far in 2009.
During the third quarter, the Department of Defense awarded the
Company the TRICARE Managed Care Support South Region contract to
provide health care services for active duty and retired military
service members and their families. Health care operations are
expected to commence in late 2010.
AmeriChoice
AmeriChoice third quarter revenues of $2.1 billion grew $475 million
year-over-year, a 29 percent organic growth rate.
The Company served 2.8 million people in the Medicaid and state
program market at September 30, 2009, which included risk-based growth
of 620,000 people year-over-year.
Year-to-date 2009 results included growth of 460,000 people on a risk
basis at September 30, 2009; this product category grew by 60,000
people in the third quarter of 2009. All of AmeriChoice's membership
is now served through risk-based contracts.
Late in the second quarter, the Mississippi State& School Employees
Health Insurance Management Board awarded AmeriChoice the opportunity
to provide benefits and services to up to 65,000 children in
Mississippi's Children's Health Insurance Program, beginning in first
quarter 2010.
Business Description -- OptumHealth
OptumHealth is a national leader in health and wellness services.
Employers, payers and public sector organizations use OptumHealth
behavioral benefit solutions, clinical care management, financial
services and specialty benefits such as dental and vision. OptumHealth
helps consumers navigate the health care system, finance their health
care needs and achieve their health and well-being goals.
Quarterly Financial Performance
Three Months Ended
September 30,2009 September 30,2008 June 30,2009
Revenues $1.42 billion $1.29 billion $1.36 billion
Earnings From Operations $172 million $175 million $142 million
Operating Margin 12.2% 13.5% 10.5%
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Third quarter revenues of $1.4 billion grew $121 million or 9 percent
year-over-year for OptumHealth. Recent growth trends continued, with
year-over-year revenue growth from large scale public sector care and
behavioral health programs mitigating revenue losses associated with
the UnitedHealthcare commercial membership decline. During the third
quarter OptumHealth initiated services for approximately one-half
million people covered by public sector behavioral health programs.
OptumHealth's third quarter earnings from operations of $172 million
declined slightly year-over-year.
OptumHealth Financial Services, the Company's dedicated health banking
organization, ended the third quarter serving 1.8 million consumer
accounts, up 10 percent year-over-year.
OptumHealth Financial Services' connectivity network now represents
nearly 500,000 care providers, an increase of 125,000 providers
year-to-date. This business electronically transmitted $9.5 billion in
medical payments to physicians and care providers in the quarter, up
40 percent year-over-year.
OptumHealth continues to advance pioneering telehealth initiatives on
behalf of employers,states and other health care partners. Applying
Internet network technology, theseinnovative programs help connect
patients to care providers and care providers to one another in ways
that improve access to and effectiveness of health care. State-based
programs have been launched in Colorado, Minnesota and New Mexico.
Business Description -- Ingenix
Ingenix is a leader in the field of health care information, services
and consulting, serving physicians, hospitals and other health care
providers, large employers and governments, health insurers and other
benefits payers and pharmaceutical companies.
Quarterly Financial Performance
Three Months Ended
September 30,2009 September 30,2008 June 30,2009
Revenues $481 million $383 million $421 million
Earnings From Operations $64 million $57 million $59 million
Operating Margin 13.3% 14.9% 14.0%
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Ingenix revenues of $481 million increased $98 million or 26 percent
year-over-year in the third quarter of 2009.
The Ingenix contract revenue backlog increased 15 percent on a
year-over-year basis to $2.1 billion at September 30, 2009. Continued
growth in payer and governmental client business across many product
categories more than offset a year-over-year decline in pharmaceutical
research services backlog.
Ingenix third quarter operating earnings increased $7 million or 12
percent year-over-year to $64 million while operating margin decreased
160 basis points year-over-year to 13.3 percent. Third quarter margins
were impacted in part by investments in new product development for
international markets.
Business Description -- Prescription Solutions
Prescription Solutions offers a comprehensive array of pharmacy benefit
management and specialty pharmacy management services to employer
groups, union trusts, seniors and commercial health plans.
Quarterly Financial Performance
Three Months Ended
September 30,2009 September 30,2008 June 30,2009
Revenues $3.58 billion $3.07 billion $3.56 billion
Earnings From Operations $196 million $91 million $166 million
Operating Margin 5.5% 3.0% 4.7%
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Prescription Solutions third quarter revenues of $3.6 billion
increased $504 million or 16 percent year-over-year, driven by strong
growth in consumers served.
Third quarter earnings from operations grew $105 million
year-over-year to $196 million. First half 2009 earnings trends
continued in the third quarter, with increased earnings driven by
script volume growth, improved drug purchasing, steady gains in mail
service drug fulfillment, and a continuing favorable mix shift to
generic pharmaceuticals, which exceeded 69 percent of total volume in
the quarter. These factors lifted Prescription Solutions third quarter
operating margin to 5.5 percent.
During the third quarter Prescription Solutions was recognized for
service and value. J.D. Power and Associates awarded Prescription
Solutions the highest rankings for customer service and cost
competitiveness among mail order pharmacies in their 2009 National
Pharmacy StudySM.
About UnitedHealth Group
UnitedHealth Group is a diversified health and well-being company
dedicated to making health care work better. Headquartered in
Minneapolis, Minn., UnitedHealth Group offers a broad spectrum of
products and services through six operating businesses:
UnitedHealthcare, Ovations, AmeriChoice, OptumHealth, Ingenix and
Prescription Solutions. Through its family of businesses, UnitedHealth
Group serves more than 70 million individuals nationwide. Visit www.unitedhealthgroup.com
for more information.
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
Web site (www.unitedhealthgroup.com).
The webcast replay of the call will be available on the same site
through November 3 following the live call. The conference call replay
can also be accessed by dialing 1-800-642-1687, conference ID #70594384.
This earnings release and the Form 8-K dated October 20, 2009, which may
also be accessed from the Investors page of the Company's web site,
include a reconciliation of non-GAAP financial measures.
Forward-Looking Statements
This press release may contain statements, estimates, projections,
guidance or outlook that constitute "forward-looking" statements as
defined under U.S. federal securities laws. Generally the words
"believe," "expect," "intend," "estimate," "anticipate," "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, trends and uncertainties 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 health care costs; our ability to
respond quickly and appropriately to health care reforms; failure to
comply with federal and state regulations affecting the health care
industry; the potential impact of the adverse conditions in the global
economy and extreme disruption of financial markets on our revenues,
sources of liquidity, investment portfolio, and our results of
operations; regulatory and other risks associated with the pharmacy
benefits management industry; competitive pressures, which could affect
our ability to maintain or increase our market share; uncertainties
regarding changes in Medicare; potential reductions in revenue received
from Medicare and Medicaid programs, including as a result of reduced
payments to private plans offering Medicare Advantage; our ability to
execute contracts on competitive terms with physicians, hospitals and
other service professionals; our ability to attract, retain and provide
support to a network of independent third party brokers, consultants and
agents; failure to comply with restrictions on patient privacy and
information security; events that may negatively affect our contracts
with AARP; increases in costs and other liabilities associated with
increased litigation; the potential consequences of various governmental
reviews and litigation matters related to our historical stock option
practices; possible impairment of the value of our intangible assets if
future results do not adequately support goodwill and intangible assets
recorded for businesses that we acquire; increases in health care costs
resulting from large-scale medical emergencies; failure to maintain
effective and efficient information systems; misappropriation of our
proprietary technology; our ability to obtain sufficient funds from our
regulated subsidiaries to fund our obligations; failure to complete or
receive anticipated benefits of acquisitions; and potential downgrades
in our debt ratings.
This list of important factors is not intended to be exhaustive. A
further list and description of some of these risks and uncertainties
can be found in our reports filed with the Securities and Exchange
Commission from time to time, including the cautionary statements in our
annual reports on Form 10-K, quarterly reports on Form 10-Q and current
reports on Form 8-K.
