UNITEDHEALTH GROUP INC 10-Q

ITEM 1. FINANCIAL STATEMENTS UnitedHealth Group Condensed Consolidated Balance Sheets (Unaudited) (in millions, except per share data) June 30, 2021 December 31, 2020 Assets Current assets: Cash and cash equivalents $ 19,832 $ 16,921 Short-term investments 2,729 2,860 Accounts receivable, net 14,587 12,870 Other current receivables, net 12,630 12,534 Assets under management 4,198 4,076 Prepaid expenses and other current assets 4,940 4,457 Total current assets 58,916 53,718 Long-term investments 44,061 41,242 Property, equipment and capitalized software, net 8,735 8,626 Goodwill 75,827 71,337 Other intangible assets, net 10,806 10,856 Other assets 11,947 11,510 Total assets $ 210,292 $ 197,289 Liabilities, redeemable noncontrolling interests and equity Current liabilities: Medical costs payable $ 25,131 $ 21,872 Accounts payable and accrued liabilities 23,013 22,495 Short-term borrowings and current maturities of long-term debt 3,868 4,819 Unearned revenues 2,365 2,842 Other current liabilities 22,180 20,392 Total current liabilities 76,557 72,420 Long-term debt, less current maturities 44,348 38,648 Deferred income taxes 3,641 3,367 Other liabilities 12,425 12,315 Total liabilities 136,971 126,750 Commitments and contingencies (Note 7) Redeemable noncontrolling interests 1,299 2,211 Equity: Preferred stock, $ 0.001 par value - 10 shares authorized; no shares issued or outstanding — — Common stock, $ 0.01 par value - 3,000 shares authorized; 943 and 946 issued and outstanding 10 10 Additional paid-in capital — — Retained earnings 73,090 69,295 Accumulated other comprehensive loss ( 4,086 ) ( 3,814 ) Nonredeemable noncontrolling interests 3,008 2,837 Total equity 72,022 68,328 Total liabilities, redeemable noncontrolling interests and equity $ 210,292 $ 197,289 See Notes to the Condensed Consolidated Financial Statements 1 Table of Contents UnitedHealth Group Condensed Consolidated Statements of Operations (Unaudited) Three Months Ended June 30, Six Months Ended June 30, (in millions, except per share data) 2021 2020 2021 2020 Revenues: Premiums $ 56,233 $ 49,394 $ 111,719 $ 100,034 Products 8,433 8,247 16,773 16,678 Services 6,099 4,156 12,017 9,141 Investment and other income 556 341 1,008 706 Total revenues 71,321 62,138 141,517 126,559 Operating costs: Medical costs 46,546 34,678 91,450 75,678 Operating costs 10,359 10,001 20,582 20,016 Cost of products sold 7,660 7,501 15,232 15,188 Depreciation and amortization 778 717 1,536 1,440 Total operating costs 65,343 52,897 128,800 112,322 Earnings from operations 5,978 9,241 12,717 14,237 Interest expense ( 410 ) ( 430 ) ( 807 ) ( 867 ) Earnings before income taxes 5,568 8,811 11,910 13,370 Provision for income taxes ( 1,196 ) ( 2,115 ) ( 2,560 ) ( 3,209 ) Net earnings 4,372 6,696 9,350 10,161 Earnings attributable to noncontrolling interests ( 106 ) ( 59 ) ( 222 ) ( 142 ) Net earnings attributable to UnitedHealth Group common shareholders $ 4,266 $ 6,637 $ 9,128 $ 10,019 Earnings per share attributable to UnitedHealth Group common shareholders: Basic $ 4.52 $ 6.99 $ 9.66 $ 10.56 Diluted $ 4.46 $ 6.91 $ 9.55 $ 10.43 Basic weighted-average number of common shares outstanding 944 949 945 949 Dilutive effect of common share equivalents 12 11 11 12 Diluted weighted-average number of common shares outstanding 956 960 956 961 Anti-dilutive shares excluded from the calculation of dilutive effect of common share equivalents 1 11 2 11 See Notes to the Condensed Consolidated Financial Statements 2 Table of Contents UnitedHealth Group Condensed Consolidated Statements of Comprehensive Income (Unaudited) Three Months Ended June 30, Six Months Ended June 30, (in millions) 2021 2020 2021 2020 Net earnings $ 4,372 $ 6,696 $ 9,350 $ 10,161 Other comprehensive income (loss): Gross unrealized gains (losses) on investment securities during the period 251 1,120 ( 513 ) 771 Income tax effect ( 58 ) ( 257 ) 116 ( 177 ) Total unrealized gains (losses), net of tax 193 863 ( 397 ) 594 Gross reclassification adjustment for net realized gains included in net earnings ( 9 ) ( 11 ) ( 16 ) ( 29 ) Income tax effect 2 3 4 7 Total reclassification adjustment, net of tax ( 7 ) ( 8 ) ( 12 ) ( 22 ) Total foreign currency translation gains (losses) 554 ( 45 ) 137 ( 1,544 ) Other comprehensive income (loss) 740 810 ( 272 ) ( 972 ) Comprehensive income 5,112 7,506 9,078 9,189 Comprehensive income attributable to noncontrolling interests ( 106 ) ( 59 ) ( 222 ) ( 142 ) Comprehensive income attributable to UnitedHealth Group common shareholders $ 5,006 $ 7,447 $ 8,856 $ 9,047 See Notes to the Condensed Consolidated Financial Statements 3 Table of Contents UnitedHealth Group Condensed Consolidated Statements of Changes in Equity (Unaudited) Common Stock Additional Paid-In Capital Retained Earnings Accumulated Other Comprehensive Income (Loss) Nonredeemable Noncontrolling Interests Total Equity Three months ended June 30, (in millions) Shares Amount Net Unrealized Gains on Investments Foreign Currency Translation (Losses) Gains Balance at March 31, 2021 944 $ 10 $ — $ 71,220 $ 741 $ ( 5,567 ) $ 2,909 $ 69,313 Net earnings 4,266 88 4,354 Other comprehensive income 186 554 740 Issuances of common stock, and related tax effects 2 — 292 292 Share-based compensation 158 158 Common share repurchases ( 3 ) — ( 221 ) ( 1,029 ) ( 1,250 ) Cash dividends paid on common shares ($ 1.45 per share) ( 1,367 ) ( 1,367 ) Redeemable noncontrolling interests fair value and other adjustments ( 229 ) — ( 229 ) Acquisition and other adjustments of nonredeemable noncontrolling interests 85 85 Distribution to nonredeemable noncontrolling interests ( 74 ) ( 74 ) Balance at June 30, 2021 943 $ 10 $ — $ 73,090 $ 927 $ ( 5,013 ) $ 3,008 $ 72,022 Balance at March 31, 2020 947 $ 10 $ — $ 62,327 $ 306 $ ( 5,666 ) $ 2,886 $ 59,863 Net earnings 6,637 38 6,675 Other comprehensive income (loss) 855 ( 45 ) 810 Issuances of common stock, and related tax effects 3 — 287 287 Share-based compensation 144 144 Common share repurchases — — — — — Cash dividends paid on common shares ($ 1.25 per share) ( 1,188 ) ( 1,188 ) Redeemable noncontrolling interests fair value and other adjustments ( 43 ) ( 43 ) Distribution to nonredeemable noncontrolling interests ( 33 ) ( 33 ) Balance at June 30, 2020 950 $ 10 $ 388 $ 67,776 $ 1,161 $ ( 5,711 ) $ 2,891 $ 66,515 See Notes to the Condensed Consolidated Financial Statements 4 Table of Contents UnitedHealth Group Condensed Consolidated Statements of Changes in Equity (Unaudited) Common Stock Additional Paid-In Capital Retained Earnings Accumulated Other Comprehensive Income (Loss) Nonredeemable Noncontrolling Interests Total Equity Six months ended June 30, (in millions) Shares Amount Net Unrealized Gains (Losses) on Investments Foreign Currency Translation (Losses) Gains Balance at January 1, 2021 946 $ 10 $ — $ 69,295 $ 1,336 $ ( 5,150 ) $ 2,837 $ 68,328 Net earnings 9,128 168 9,296 Other comprehensive (loss) income ( 409 ) 137 ( 272 ) Issuances of common stock, and related tax effects 5 — 548 548 Share-based compensation 400 400 Common share repurchases ( 8 ) — ( 221 ) ( 2,679 ) ( 2,900 ) Cash dividends paid on common shares ($ 2.70 per share) ( 2,548 ) ( 2,548 ) Redeemable noncontrolling interests fair value and other adjustments ( 727 ) ( 106 ) ( 833 ) Acquisition and other adjustments of nonredeemable noncontrolling interests 151 151 Distribution to nonredeemable noncontrolling interests ( 148 ) ( 148 ) Balance at June 30, 2021 943 $ 10 $ — $ 73,090 $ 927 $ ( 5,013 ) $ 3,008 $ 72,022 Balance at January 1, 2020 948 $ 9 $ 7 $ 61,178 $ 589 $ ( 4,167 ) $ 2,820 $ 60,436 Adjustment to Adopt ASU 2016-13 ( 28 ) ( 28 ) Net earnings 10,019 97 10,116 Other comprehensive income (loss) 572 ( 1,544 ) ( 972 ) Issuances of common stock, and related tax effects 8 1 607 608 Share-based compensation 378 378 Common share repurchases ( 6 ) — ( 510 ) ( 1,181 ) ( 1,691 ) Cash dividends paid on common shares ($ 2.33 per share) ( 2,212 ) ( 2,212 ) Redeemable noncontrolling interests fair value and other adjustments ( 94 ) ( 94 ) Acquisitions and other adjustments of nonredeemable noncontrolling interests 50 50 Distribution to nonredeemable noncontrolling interests ( 76 ) ( 76 ) Balance at June 30, 2020 950 $ 10 $ 388 $ 67,776 $ 1,161 $ ( 5,711 ) $ 2,891 $ 66,515 See Notes to the Condensed Consolidated Financial Statements 5 Table of Contents UnitedHealth Group Condensed Consolidated Statements of Cash Flows (Unaudited) Six Months Ended June 30, (in millions) 2021 2020 Operating activities Net earnings $ 9,350 $ 10,161 Noncash items: Depreciation and amortization 1,536 1,440 Deferred income taxes 327 114 Share-based compensation 426 388 Other, net ( 214 ) 124 Net change in other operating items, net of effects from acquisitions and changes in AARP balances: Accounts receivable ( 1,218 ) ( 439 ) Other assets ( 1,523 ) ( 3,784 ) Medical costs payable 3,086 ( 2,353 ) Accounts payable and other liabilities 298 7,591 Unearned revenues ( 523 ) ( 296 ) Cash flows from operating activities 11,545 12,946 Investing activities Purchases of investments ( 8,847 ) ( 6,412 ) Sales of investments 1,408 3,548 Maturities of investments 4,650 3,437 Cash paid for acquisitions, net of cash assumed ( 4,642 ) ( 3,952 ) Purchases of property, equipment and capitalized software ( 1,130 ) ( 920 ) Other, net ( 648 ) ( 186 ) Cash flows used for investing activities ( 9,209 ) ( 4,485 ) Financing activities Common share repurchases ( 2,900 ) ( 1,691 ) Cash dividends paid ( 2,548 ) ( 2,212 ) Proceeds from common stock issuances 764 870 Repayments of long-term debt ( 1,900 ) — (Repayments of) proceeds from short-term borrowings, net ( 176 ) 351 Proceeds from issuance of long-term debt 6,934 4,864 Customer funds administered 2,395 1,263 Purchases of redeemable noncontrolling interests ( 1,338 ) — Other, net ( 662 ) ( 421 ) Cash flows from financing activities 569 3,024 Effect of exchange rate changes on cash and cash equivalents 6 ( 143 ) Increase in cash and cash equivalents 2,911 11,342 Cash and cash equivalents, beginning of period 16,921 10,985 Cash and cash equivalents, end of period $ 19,832 $ 22,327 See Notes to the Condensed Consolidated Financial Statements 6 Table of Contents UnitedHealth Group Notes to the Condensed Consolidated Financial Statements (Unaudited) 1. Basis of Presentation UnitedHealth Group Incorporated (individually and together with its subsidiaries, “UnitedHealth Group” and “the Company”) is a diversified health care company with a mission to help people live healthier lives and help make the health system work better for everyone. Our two complementary business platforms — Optum and UnitedHealthcare — are driven by this unified mission and vision to improve health care access, affordability, experiences and outcomes for the individuals and organizations we are privileged to serve. The Company has prepared the Condensed Consolidated Financial Statements according to U.S. Generally Accepted Accounting Principles (GAAP) and has included the accounts of UnitedHealth Group and its subsidiaries. The year-end condensed consolidated balance sheet was derived from audited financial statements, but does not include all disclosures required by GAAP. In accordance with the rules and regulations of the U.S. Securities and Exchange Commission (SEC), the Company has omitted certain footnote disclosures that would substantially duplicate the disclosures contained in its annual audited Consolidated Financial Statements. Therefore, these Condensed Consolidated Financial Statements should be read together with the Consolidated Financial Statements and the Notes included in Part II, Item 8, “Financial Statements” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 as filed with the SEC (2020 10-K). The accompanying Condensed Consolidated Financial Statements include all normal recurring adjustments necessary to present the interim financial statements fairly. Use of Estimates These Condensed Consolidated Financial Statements include certain amounts based on the Company’s best estimates and judgments. The Company’s most significant estimates relate to estimates and judgments for medical costs payable and goodwill. Certain of these estimates require the application of complex assumptions and judgments, often because they involve matters that are inherently uncertain and will likely change in subsequent periods. The impact of any change in estimates is included in earnings in the period in which the estimate is adjusted. 7 Table of Contents 2. Investments A summary of debt securities by major security type is as follows: (in millions) Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value June 30, 2021 Debt securities - available-for-sale: U.S. government and agency obligations $ 3,526 $ 88 $ ( 17 ) $ 3,597 State and municipal obligations 7,044 386 ( 7 ) 7,423 Corporate obligations 21,116 628 ( 57 ) 21,687 U.S. agency mortgage-backed securities 6,596 167 ( 30 ) 6,733 Non-U.S. agency mortgage-backed securities 2,623 72 ( 10 ) 2,685 Total debt securities - available-for-sale 40,905 1,341 ( 121 ) 42,125 Debt securities - held-to-maturity: U.S. government and agency obligations 412 4 — 416 State and municipal obligations 30 2 — 32 Corporate obligations 148 — ( 1 ) 147 Total debt securities - held-to-maturity 590 6 ( 1 ) 595 Total debt securities $ 41,495 $ 1,347 $ ( 122 ) $ 42,720 December 31, 2020 Debt securities - available-for-sale: U.S. government and agency obligations $ 3,335 $ 133 $ ( 3 ) $ 3,465 State and municipal obligations 6,893 435 — 7,328 Corporate obligations 18,886 863 ( 12 ) 19,737 U.S. agency mortgage-backed securities 6,849 245 ( 3 ) 7,091 Non-U.S. agency mortgage-backed securities 2,116 95 ( 4 ) 2,207 Total debt securities - available-for-sale 38,079 1,771 ( 22 ) 39,828 Debt securities - held-to-maturity: U.S. government and agency obligations 420 6 — 426 State and municipal obligations 31 2 — 33 Corporate obligations 187 1 — 188 Total debt securities - held-to-maturity 638 9 — 647 Total debt securities $ 38,717 $ 1,780 $ ( 22 ) $ 40,475 The Company held $ 2.8 billion and $ 2.3 billion of equity securities as of June 30, 2021 and December 31, 2020, respectively. The Company’s investments in equity securities primarily consist of employee savings plan related investments, shares of Brazilian real denominated fixed-income funds with readily determinable fair values and other venture investments. Additionally, the Company’s investments included $ 1.3 billion of equity method investments in operating businesses in the health care sector as of June 30, 2021 and December 31, 2020. The allowance for credit losses on held-to-maturity securities at June 30, 2021 and December 31, 2020 was not material. 8 Table of Contents The amortized cost and fair value of debt securities as of June 30, 2021, by contractual maturity, were as follows: Available-for-Sale Held-to-Maturity (in millions) Amortized Cost Fair Value Amortized Cost Fair Value Due in one year or less $ 2,808 $ 2,822 $ 309 $ 310 Due after one year through five years 13,088 13,460 231 233 Due after five years through ten years 11,550 12,000 28 29 Due after ten years 4,240 4,425 22 23 U.S. agency mortgage-backed securities 6,596 6,733 — — Non-U.S. agency mortgage-backed securities 2,623 2,685 — — Total debt securities $ 40,905 $ 42,125 $ 590 $ 595 The fair value of available-for-sale debt securities with gross unrealized losses by major security type and length of time that individual securities have been in a continuous unrealized loss position were as follows: Less Than 12 Months 12 Months or Greater Total (in millions) Fair Value Gross Unrealized Losses Fair Value Gross Unrealized Losses Fair Value Gross Unrealized Losses June 30, 2021 Debt securities - available-for-sale: U.S. government and agency obligations $ 1,201 $ ( 17 ) $ — $ — $ 1,201 $ ( 17 ) State and municipal obligations 777 ( 7 ) — — 777 ( 7 ) Corporate obligations 4,679 ( 56 ) 229 ( 1 ) 4,908 ( 57 ) U.S. agency mortgage-backed securities 2,668 ( 30 ) — — 2,668 ( 30 ) Non-U.S. agency mortgage-backed securities 713 ( 8 ) 42 ( 2 ) 755 ( 10 ) Total debt securities - available-for-sale $ 10,038 $ ( 118 ) $ 271 $ ( 3 ) $ 10,309 $ ( 121 ) December 31, 2020 Debt securities - available-for-sale: U.S. government and agency obligations $ 346 $ ( 3 ) $ — $ — $ 346 $ ( 3 ) Corporate obligations 1,273 ( 9 ) 456 ( 3 ) 1,729 ( 12 ) U.S. agency mortgage-backed securities 601 ( 3 ) — — 601 ( 3 ) Non-U.S. agency mortgage-backed securities 195 ( 1 ) 93 ( 3 ) 288 ( 4 ) Total debt securities - available-for-sale $ 2,415 $ ( 16 ) $ 549 $ ( 6 ) $ 2,964 $ ( 22 ) The Company’s unrealized losses from debt securities as of June 30, 2021 were generated from approximately 6,500 positions out of a total of 38,000 positions. The Company believes that it will collect the timely principal and interest due on its debt securities that have an amortized cost in excess of fair value. The unrealized losses were primarily caused by interest rate increases and not by unfavorable changes in the credit quality associated with these securities that impacted our assessment on collectability of principal and interest. At each reporting period, the Company evaluates available-for-sale debt securities for any credit-related impairment when the fair value of the investment is less than its amortized cost. The Company evaluated the expected cash flows, the underlying credit quality and credit ratings of the issuers noting no significant credit deterioration since purchase. As of June 30, 2021, the Company did not have the intent to sell any of the available-for-sale debt securities in an unrealized loss position. Therefore, the Company believes these losses to be temporary. The allowance for credit losses on available-for-sale debt securities at June 30, 2021 and December 31, 2020 was not material. 9 Table of Contents 3. Fair Value Certain assets and liabilities are measured at fair value in the Condensed Consolidated Financial Statements or have fair values disclosed in the Notes to the Condensed Consolidated Financial Statements. These assets and liabilities are classified into one of three levels of a hierarchy defined by GAAP. For a description of the methods and assumptions that are used to estimate the fair value and determine the fair value hierarchy classification of each class of financial instrument, see Note 4 of Notes to the Consolidated Financial Statements in Part II, Item 8, “Financial Statements” in the 2020 10-K. The following table presents a summary of fair value measurements by level and carrying values for items measured at fair value on a recurring basis in the Condensed Consolidated Balance Sheets: (in millions) Quoted Prices in Active Markets (Level 1) Other Observable Inputs (Level 2) Unobservable Inputs (Level 3) Total Fair and Carrying Value June 30, 2021 Cash and cash equivalents $ 19,703 $ 129 $ — $ 19,832 Debt securities - available-for-sale: U.S. government and agency obligations 3,379 218 — 3,597 State and municipal obligations — 7,423 — 7,423 Corporate obligations 40 21,416 231 21,687 U.S. agency mortgage-backed securities — 6,733 — 6,733 Non-U.S. agency mortgage-backed securities — 2,685 — 2,685 Total debt securities - available-for-sale 3,419 38,475 231 42,125 Equity securities 1,917 20 — 1,937 Assets under management 1,803 2,292 103 4,198 Total assets at fair value $ 26,842 $ 40,916 $ 334 $ 68,092 Percentage of total assets at fair value 39 % 60 % 1 % 100 % December 31, 2020 Cash and cash equivalents $ 16,841 $ 80 $ — $ 16,921 Debt securities - available-for-sale: U.S. government and agency obligations 3,241 224 — 3,465 State and municipal obligations — 7,328 — 7,328 Corporate obligations 25 19,424 288 19,737 U.S. agency mortgage-backed securities — 7,091 — 7,091 Non-U.S. agency mortgage-backed securities — 2,207 — 2,207 Total debt securities - available-for-sale 3,266 36,274 288 39,828 Equity securities 1,795 33 — 1,828 Assets under management 1,774 2,250 52 4,076 Total assets at fair value $ 23,676 $ 38,637 $ 340 $ 62,653 Percentage of total assets at fair value 38 % 61 % 1 % 100 % There were no transfers in or out of Level 3 financial assets or liabilities during the six months ended June 30, 2021 or 2020. 10 Table of Contents The following table presents a summary of fair value measurements by level and carrying values for certain financial instruments not measured at fair value on a recurring basis in the Condensed Consolidated Balance Sheets: (in millions) Quoted Prices in Active Markets (Level 1) Other Observable Inputs (Level 2) Unobservable Inputs (Level 3) Total Fair Value Total Carrying Value June 30, 2021 Debt securities - held-to-maturity $ 494 $ 93 $ 8 $ 595 $ 590 Long-term debt and other financing obligations $ — $ 54,023 $ — $ 54,023 $ 47,091 December 31, 2020 Debt securities - held-to-maturity $ 466 $ 108 $ 73 $ 647 $ 638 Long-term debt and other financing obligations $ — $ 51,254 $ — $ 51,254 $ 42,171 Nonfinancial assets and liabilities or financial assets and liabilities that are measured at fair value on a nonrecurring basis are subject to fair value adjustments only in certain circumstances, such as when the Company records an impairment. There were no significant fair value adjustments for these assets and liabilities recorded during either the six months ended June 30, 2021 or 2020. 4. Medical Costs Payable The following table shows the components of the change in medical costs payable for the six months ended June 30: (in millions) 2021 2020 Medical costs payable, beginning of period $ 21,872 $ 21,690 Acquisitions 46 41 Reported medical costs: Current year 92,570 76,338 Prior years ( 1,120 ) ( 660 ) Total reported medical costs 91,450 75,678 Medical payments: Payments for current year ( 69,808 ) ( 59,482 ) Payments for prior years ( 18,429 ) ( 18,727 ) Total medical payments ( 88,237 ) ( 78,209 ) Medical costs payable, end of period $ 25,131 $ 19,200 For the six months ended June 30, 2021 and June 30, 2020, prior years medical cost reserve development was primarily driven by lower than expected health system utilization. Medical costs payable included reserves for claims incurred by insured customers but not yet reported to the Company of $ 16.9 billion and $ 14.8 billion at June 30, 2021 and December 31, 2020, respectively. 5. Short-Term Borrowings and Long-Term Debt In May 2021, the Company issued $ 7.0 billion of senior unsecured notes consisting of the following: (in millions, except percentages) Par Value 0.550 % notes due May 2024 $ 1,000 1.150 % notes due May 2026 1,000 2.300 % notes due May 2031 1,500 3.050 % notes due May 2041 1,500 3.250 % notes due May 2051 2,000 For more information on the Company’s short-term borrowings, debt covenants and long-term debt see Note 8 of Notes to the Consolidated Financial Statements in Part II, Item 8, “Financial Statements” in the 2020 10-K. 11 Table of Contents 6. Dividends In June 2021, the Company’s Board of Directors increased the Company’s quarterly cash dividend to shareholders to an annual rate of $5.80 compared to $5.00 per share, which the Company had paid since June 2020. Declaration and payment of future quarterly dividends is at the discretion of the Board and may be adjusted as business needs or market conditions change. The following table provides details of the Company’s 2021 dividend payments: Payment Date Amount per Share Total Amount Paid (in millions) March 23 $ 1.25 $ 1,181 June 29 $ 1.45 $ 1,367 7. Commitments and Contingencies Pending Acquisitions The Company has entered into agreements to purchase companies in the health care sector, most notably Change Healthcare (NASDAQ: CHNG), subject to regulatory approvals and other customary closing conditions. The total anticipated capital required for these acquisitions, excluding the payoff of acquired indebtedness, is approximately $ 9 billion. Legal Matters Because of the nature of its businesses, the Company is frequently made party to a variety of legal actions and regulatory inquiries, including class actions and suits brought by members, care providers, consumer advocacy organizations, customers and regulators, relating to the Company’s businesses, including management and administration of health benefit plans and other services. These matters include medical malpractice, employment, intellectual property, antitrust, privacy and contract claims and claims related to health care benefits coverage and other business practices. The Company records liabilities for its estimates of probable costs resulting from these matters where appropriate. Estimates of costs resulting from legal and regulatory matters involving the Company are inherently difficult to predict, particularly where the matters: involve indeterminate claims for monetary damages or may involve fines, penalties or punitive damages; present novel legal theories or represent a shift in regulatory policy; involve a large number of claimants or regulatory bodies; are in the early stages of the proceedings; or could result in a change in business practices. Accordingly, the Company is often unable to estimate the losses or ranges of losses for those matters where there is a reasonable possibility or it is probable that a loss may be incurred. Government Investigations, Audits and Reviews The Company has been involved or is currently involved in various governmental investigations, audits and reviews. These include routine, regular and special investigations, audits and reviews by the Centers for Medicare and Medicaid Services (CMS), state insurance and health and welfare departments, state attorneys general, the Office of the Inspector General, the Office of Personnel Management, the Office of Civil Rights, the Government Accountability Office, the Federal Trade Commission, U.S. Congressional committees, the U.S. Department of Justice, the SEC, the Internal Revenue Service, the U.S. Drug Enforcement Administration, the U.S. Department of Labor, the Federal Deposit Insurance Corporation, the Defense Contract Audit Agency and other governmental authorities. Similarly, our international businesses are also subject to investigations, audits and reviews by applicable foreign governments, including South American and other non-U.S. governmental authorities. Certain of the Company’s businesses have been reviewed or are currently under review, including for, among other matters, compliance with coding and other requirements under the Medicare risk-adjustment model. CMS has selected certain of the Company’s local plans for risk adjustment data validation (RADV) audits to validate the coding practices of and supporting documentation maintained by health care providers and such audits may result in retrospective adjustments to payments made to the Company’s health plans. On February 14, 2017, the Department of Justice (DOJ) announced its decision to pursue certain claims within a lawsuit initially asserted against the Company and filed under seal by a whistleblower in 2011. The whistleblower’s complaint, which was unsealed on February 15, 2017, alleges that the Company made improper risk adjustment submissions and violated the False Claims Act. On February 12, 2018, the court granted in part and denied in part the Company’s motion to dismiss. In May 2018, DOJ moved to dismiss the Company’s counterclaims, which were filed in March 2018, and moved for partial summary judgment. In March 2019, the court denied the government’s motion for partial summary judgment and dismissed the Company’s counterclaims without prejudice. The Company cannot reasonably estimate the outcome that may result from this matter given its procedural status. 12 Table of Contents 8. Segment Financial Information The Company’s four reportable segments are UnitedHealthcare, OptumHealth, OptumInsight and OptumRx. For more information on the Company’s segments see Part I, Item I, “Business” and Note 14 of Notes to the Consolidated Financial Statements in Part II, Item 8, “Financial Statements” in the 2020 10-K. The following tables present reportable segment financial information: Optum (in millions) UnitedHealthcare OptumHealth OptumInsight OptumRx Optum Eliminations Optum Corporate and Eliminations Consolidated Three Months Ended June 30, 2021 Revenues - unaffiliated customers: Premiums $ 52,858 $ 3,375 $ — $ — $ — $ 3,375 $ — $ 56,233 Products — 9 33 8,391 — 8,433 — 8,433 Services 2,440 2,461 930 268 — 3,659 — 6,099 Total revenues - unaffiliated customers 55,298 5,845 963 8,659 — 15,467 — 70,765 Total revenues - affiliated customers — 7,221 1,921 13,792 ( 478 ) 22,456 ( 22,456 ) — Investment and other income 176 234 73 73 — 380 — 556 Total revenues $ 55,474 $ 13,300 $ 2,957 $ 22,524 $ ( 478 ) $ 38,303 $ ( 22,456 ) $ 71,321 Earnings from operations $ 3,095 $ 1,128 $ 762 $ 993 $ — $ 2,883 $ — $ 5,978 Interest expense — — — — — — ( 410 ) ( 410 ) Earnings before income taxes $ 3,095 $ 1,128 $ 762 $ 993 $ — $ 2,883 $ ( 410 ) $ 5,568 Three Months Ended June 30, 2020 Revenues - unaffiliated customers: Premiums $ 47,039 $ 2,355 $ — $ — $ — $ 2,355 $ — $ 49,394 Products — 7 27 8,213 — 8,247 — 8,247 Services 1,895 1,225 764 272 — 2,261 — 4,156 Total revenues - unaffiliated customers 48,934 3,587 791 8,485 — 12,863 — 61,797 Total revenues - affiliated customers — 5,423 1,823 12,865 ( 447 ) 19,664 ( 19,664 ) — Investment and other income 173 129 18 21 — 168 — 341 Total revenues $ 49,107 $ 9,139 $ 2,632 $ 21,371 $ ( 447 ) $ 32,695 $ ( 19,664 ) $ 62,138 Earnings from operations $ 7,007 $ 841 $ 561 $ 832 $ — $ 2,234 $ — $ 9,241 Interest expense — — — — — — ( 430 ) ( 430 ) Earnings before income taxes $ 7,007 $ 841 $ 561 $ 832 $ — $ 2,234 $ ( 430 ) $ 8,811 13 Table of Contents Optum (in millions) UnitedHealthcare OptumHealth OptumInsight OptumRx Optum Eliminations Optum Corporate and Eliminations Consolidated Six Months Ended June 30, 2021 Revenues - unaffiliated customers: Premiums $ 105,416 $ 6,303 $ — $ — $ — $ 6,303 $ — $ 111,719 Products — 17 70 16,686 — 16,773 — 16,773 Services 4,790 4,797 1,891 539 — 7,227 — 12,017 Total revenues - unaffiliated customers 110,206 11,117 1,961 17,225 — 30,303 — 140,509 Total revenues - affiliated customers — 14,173 3,742 26,796 ( 953 ) 43,758 ( 43,758 ) — Investment and other income 382 413 106 107 — 626 — 1,008 Total revenues $ 110,588 $ 25,703 $ 5,809 $ 44,128 $ ( 953 ) $ 74,687 $ ( 43,758 ) $ 141,517 Earnings from operations $ 7,203 $ 2,090 $ 1,541 $ 1,883 $ — $ 5,514 $ — $ 12,717 Interest expense — — — — — — ( 807 ) ( 807 ) Earnings before income taxes $ 7,203 $ 2,090 $ 1,541 $ 1,883 $ — $ 5,514 $ ( 807 ) $ 11,910 Six Months Ended June 30, 2020 Revenues - unaffiliated customers: Premiums $ 95,632 $ 4,402 $ — $ — $ — $ 4,402 $ — $ 100,034 Products — 16 56 16,606 — 16,678 — 16,678 Services 4,173 2,773 1,655 540 — 4,968 — 9,141 Total revenues - unaffiliated customers 99,805 7,191 1,711 17,146 — 26,048 — 125,853 Total revenues - affiliated customers — 10,875 3,385 25,741 ( 851 ) 39,150 ( 39,150 ) — Investment and other income 370 265 30 41 — 336 — 706 Total revenues $ 100,175 $ 18,331 $ 5,126 $ 42,928 $ ( 851 ) $ 65,534 $ ( 39,150 ) $ 126,559 Earnings from operations $ 9,895 $ 1,553 $ 1,097 $ 1,692 $ — $ 4,342 $ — $ 14,237 Interest expense — — — — — — ( 867 ) ( 867 ) Earnings before income taxes $ 9,895 $ 1,553 $ 1,097 $ 1,692 $ — $ 4,342 $ ( 867 ) $ 13,370 14 Table of Contents