UNITEDHEALTH GROUP INC 10-Q

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion should be read together with the accompanying Condensed Consolidated Financial Statements and Notes and with our 2020 10-K, including the Consolidated Financial Statements and Notes in Part II, Item 8, “Financial Statements” in that report. Unless the context indicates otherwise, references to the terms “UnitedHealth Group,” “we,” “our” or “us” used throughout this Management’s Discussion and Analysis of Financial Condition and Results of Operations refer to UnitedHealth Group Incorporated and its consolidated subsidiaries. Readers are cautioned that the statements, estimates, projections or outlook contained in this Management's Discussion and Analysis of Financial Condition and Results of Operations, including discussions regarding financial prospects, economic conditions, trends and uncertainties contained in this Item 2, may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 (PSLRA). These forward-looking statements involve risks and uncertainties that may cause our actual results to differ materially from the results discussed or implied in the forward-looking statements. A description of some of the risks and uncertainties is set forth in Part I, Item 1A, “Risk Factors” in our 2020 10-K and in the discussion below. EXECUTIVE OVERVIEW General UnitedHealth Group 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 businesses — 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. We have four reportable segments across our two business platforms, Optum and UnitedHealthcare: • OptumHealth; • OptumInsight; • OptumRx; and • UnitedHealthcare, which includes UnitedHealthcare Employer & Individual, UnitedHealthcare Medicare & Retirement, UnitedHealthcare Community & State and UnitedHealthcare Global. Further information on our business is presented in Part I, Item 1, “Business” and Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2020 10-K and additional information on our segments can be found in this Item 2 and in Note 8 of Notes to the Condensed Consolidated Financial Statements included in Part I, Item 1 of this report. COVID-19 Trends and Uncertainties The COVID-19 pandemic continues to evolve and the ultimate impact on our business, results of operations, financial condition and cash flows remains uncertain. In the quarter ended September 30, 2021, overall care activity continued to increase, including a mix of temporary deferral of care activity and COVID-19 related care costs. The temporary deferral of care was more than offset by COVID-19 related care and testing costs, rebate requirements, and general economic impacts. In future periods, care patterns may moderately exceed normal baselines as previously deferred care is obtained and acuity temporarily rises due to missed regular care. From time to time, health system capacity may be subject to possible increased volatility due to the pandemic. Specific trends and uncertainties related to our two business platforms are as follows: Optum. COVID-19 related care costs continued to impact our OptumHealth risk-based care delivery businesses, which were partially offset by the continued temporary deferral of care. The temporary deferral of care reduced fee-for-service care delivery volume, as well as OptumInsight and OptumRx volume-based business activity, although we expect the impact to continue decreasing as care returns to, and potentially exceeds, normal levels. We believe COVID-19 will continue to influence customer and consumer behavior, both during and after the pandemic, which could impact how and where care is delivered and the manner in which consumers wish to receive their prescription drugs or infusion services. As a result of the dynamic situation and broad-reaching impact to the health system, the ultimate impact of COVID-19 on our Optum businesses is uncertain. 15 Table of Contents UnitedHealthcare. In 2021, we have continued expanded benefit coverage in areas such as COVID-19 related care and testing, telemedicine, and pharmacy; continuing to assist our customers, care providers, members and communities in addressing the COVID-19 crisis. UnitedHealthcare’s results of operations were negatively impacted by COVID-19 related care and testing, rebate requirements and other revenue impacts, as well as broader economic impacts, partially offset by the continued deferral of care. The increase in people served through Medicaid was attributable in part to continuing action by states to ease redetermination requirements due to the COVID-19 public health emergency. Disrupted care patterns, as a result of the pandemic, have and may continue to temporarily affect the ability to obtain complete member health status information, impacting revenue in businesses utilizing risk adjustment methodologies. The ultimate overall impact is uncertain and dependent on the future pacing and intensity of the pandemic, the duration of policies and initiatives to address COVID-19, and general economic uncertainty. Business Trends Our businesses participate in the United States, South American and certain other international health markets. Overall spending on health care is impacted by inflation; utilization; medical technology and pharmaceutical advancement; regulatory requirements; demographic trends in the population; and national interest in health and well-being. The rate of market growth may be affected by a variety of factors, including macro-economic conditions, such as the impacts of COVID-19, and regulatory changes, which could impact our results of operations, including our continued efforts to control health care costs. Pricing Trends. To price our health care benefit products, we start with our view of expected future costs, including any potential impacts from COVID-19. We frequently evaluate and adjust our approach in each of the local markets we serve, considering all relevant factors, such as product positioning, price competitiveness and environmental, competitive, legislative and regulatory considerations, including minimum medical loss ratio (MLR) thresholds and similar revenue adjustments. We will continue seeking to balance growth and profitability across all these dimensions. The commercial risk market remains highly competitive in both the small group and large group segments. We expect broad-based competition to continue as the industry adapts to individual and employer needs amid reform changes. Government programs in the community and senior sector tend to receive lower rates of increase than the commercial market due to governmental budget pressures and lower cost trends. Medical Cost Trends. Our medical cost trends primarily relate to changes in unit costs, health system utilization and prescription drug costs. COVID-19 related care costs as well as the deferral of care have also impacted medical cost trends in the current year and may continue in future years. Future medical cost trends may be impacted by increased consumer demand for care, potentially even higher acuity care, due to the temporary deferral of care since the onset of the pandemic. We endeavor to mitigate those increases by engaging physicians and consumers with information and helping them make clinically sound choices, with the objective of helping them achieve high quality, affordable care. The continued uncertain impact of COVID-19 may impact our ability to estimate medical costs payable, which has resulted in, and could result in, increased variability to medical cost reserve development. Regulatory Trends and Uncertainties Following is a summary of management’s view of regulatory trends and uncertainties. For additional information regarding regulatory trends and uncertainties, see Part I, Item 1 “Business - Government Regulation,” Part 1, Item 1A, “Risk Factors,” Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2020 10-K. Medicare Advantage Rates. Final 2022 Medicare Advantage rates resulted in an increase in industry base rates of approximately 4.1%, short of the industry forward medical cost trend. We continue to manage costs through improving and expanding our coordinated care models, value-based care arrangements and various consumer engagement tools. Affordable Care Act (ACA) Tax. The Health Insurance Tax was permanently repealed by Congress, effective January 1, 2021. The permanent repeal of the tax impacts year-over-year comparability of our financial statements, including revenues, operating costs, medical care ratio (MCR), operating cost ratio, effective tax rate and cash flows from operations. 16 Table of Contents SELECTED OPERATING PERFORMANCE AND OTHER SIGNIFICANT ITEMS The following summarizes select third quarter 2021 year-over-year operating comparisons to third quarter 2020. • Consolidated revenues grew 11%, UnitedHealthcare revenues grew 11% and Optum revenues grew 14%. • UnitedHealthcare served 2.0 million more people domestically, driven by growth in community and senior programs. • Earnings from operations increased at both UnitedHealthcare and Optum. • Diluted earnings per common share were $4.28. • Cash flows from operations for the nine months ended September 30, 2021 were $19.1 billion. • Return on equity was 23.5%. RESULTS SUMMARY The following table summarizes our consolidated results of operations and other financial information: (in millions, except percentages and per share data) Three Months Ended September 30, Increase/(Decrease) Nine Months Ended September 30, Increase/(Decrease) 2021 2020 2021 vs. 2020 2021 2020 2021 vs. 2020 Revenues: Premiums $ 56,967 $ 50,863 $ 6,104 12 % $ 168,686 $ 150,897 $ 17,789 12 % Products 8,703 8,777 (74) (1) 25,476 25,455 21 — Services 6,164 5,124 1,040 20 18,181 14,265 3,916 27 Investment and other income 503 351 152 43 1,511 1,057 454 43 Total revenues 72,337 65,115 7,222 11 213,854 191,674 22,180 12 Operating costs: Medical costs 47,302 41,636 5,666 14 138,752 117,314 21,438 18 Operating costs 10,725 10,174 551 5 31,307 30,190 1,117 4 Cost of products sold 7,802 7,935 (133) (2) 23,034 23,123 (89) — Depreciation and amortization 796 719 77 11 2,332 2,159 173 8 Total operating costs 66,625 60,464 6,161 10 195,425 172,786 22,639 13 Earnings from operations 5,712 4,651 1,061 23 18,429 18,888 (459) (2) Interest expense (422) (395) (27) 7 (1,229) (1,262) 33 (3) Earnings before income taxes 5,290 4,256 1,034 24 17,200 17,626 (426) (2) Provision for income taxes (1,099) (1,000) (99) 10 (3,659) (4,209) 550 (13) Net earnings 4,191 3,256 935 29 13,541 13,417 124 1 Earnings attributable to noncontrolling interests (105) (84) (21) 25 (327) (226) (101) 45 Net earnings attributable to UnitedHealth Group common shareholders $ 4,086 $ 3,172 $ 914 29 % $ 13,214 $ 13,191 $ 23 — % Diluted earnings per share attributable to UnitedHealth Group common shareholders $ 4.28 $ 3.30 $ 0.98 30 % $ 13.82 $ 13.73 $ 0.09 1 % Medical care ratio (a) 83.0 % 81.9 % 1.1 % 82.3 % 77.7 % 4.6 % Operating cost ratio 14.8 15.6 (0.8) 14.6 15.8 (1.2) Operating margin 7.9 7.1 0.8 8.6 9.9 (1.3) Tax rate 20.8 23.5 (2.7) 21.3 23.9 (2.6) Net earnings margin (b) 5.6 4.9 0.7 6.2 6.9 (0.7) Return on equity (c) 23.5 % 19.7 % 3.8 % 26.0 % 28.9 % (2.9) % (a) Medical care ratio is calculated as medical costs divided by premium revenue. (b) Net earnings margin attributable to UnitedHealth Group shareholders. (c) Return on equity is calculated as annualized net earnings attributable to UnitedHealth Group common shareholders divided by average shareholders’ equity. Average shareholders’ equity is calculated using the shareholders’ equity balance at the end of the preceding year and the shareholders’ equity balances at the end of each of the quarters in the year presented. 17 Table of Contents 2021 RESULTS OF OPERATIONS COMPARED TO 2020 RESULTS OF OPERATIONS Consolidated Financial Results Revenue The increases in revenue were primarily driven by the increase in the number of individuals served through Medicare Advantage, Medicaid and commercial offerings; pricing trends; and organic and acquisition growth across the Optum business, primarily due to expansion in care delivery and managed services. Medical Costs and MCR Medical costs increased as a result of growth in people served through Medicare Advantage, Medicaid and commercial offerings, as well as increased COVID-19 related care costs and medical cost trends, partially offset by higher temporary care deferrals. The MCR increased due to the permanent repeal of the Health Insurance Tax and increased COVID-19 related care costs, partially offset by increased deferral of care. For the nine months ended September 30, 2021, medical costs and the MCR were also impacted by increased prior year favorable reserve development. Operating Cost Ratio The operating cost ratio decreased primarily due to the permanent repeal of the Health Insurance Tax and operating efficiency gains, partially offset by business mix. For the nine months ended September 30, 2021, the operating cost ratio also decreased due to COVID-19 impacts on revenue and operating costs in the prior year. Income Tax Rate Our effective tax rate decreased primarily due to the permanent repeal of the nondeductible Health Insurance Tax. Reportable Segments See Note 8 of Notes to the Condensed Consolidated Financial Statements included in Part I, Item 1 of this report for more information on our segments. We utilize various metrics to evaluate and manage our reportable segments, including individuals served by UnitedHealthcare by major market segment and funding arrangement, people served by OptumHealth and adjusted scripts for OptumRx. These metrics are the main drivers of revenue, earnings and cash flows at each business. The metrics also allow management and investors to evaluate and understand business mix, customer penetration and pricing trends when comparing the metrics to revenue by segment. 18 Table of Contents The following table presents a summary of the reportable segment financial information: Three Months Ended September 30, Increase/(Decrease) Nine Months Ended September 30, Increase/(Decrease) (in millions, except percentages) 2021 2020 2021 vs. 2020 2021 2020 2021 vs. 2020 Revenues UnitedHealthcare $ 55,927 $ 50,373 $ 5,554 11 % $ 166,515 $ 150,548 $ 15,967 11 % OptumHealth 13,812 10,499 3,313 32 39,515 28,830 10,685 37 OptumInsight 3,139 2,767 372 13 8,948 7,893 1,055 13 OptumRx 23,337 22,081 1,256 6 67,465 65,009 2,456 4 Optum eliminations (503) (424) (79) 19 (1,456) (1,275) (181) 14 Optum 39,785 34,923 4,862 14 114,472 100,457 14,015 14 Eliminations (23,375) (20,181) (3,194) 16 (67,133) (59,331) (7,802) 13 Consolidated revenues $ 72,337 $ 65,115 $ 7,222 11 % $ 213,854 $ 191,674 $ 22,180 12 % Earnings from operations UnitedHealthcare $ 2,651 $ 2,068 $ 583 28 % $ 9,854 $ 11,963 $ (2,109) (18) % OptumHealth 1,143 835 308 37 3,233 2,388 845 35 OptumInsight 906 785 121 15 2,447 1,882 565 30 OptumRx 1,012 963 49 5 2,895 2,655 240 9 Optum 3,061 2,583 478 19 8,575 6,925 1,650 24 Consolidated earnings from operations $ 5,712 $ 4,651 $ 1,061 23 % $ 18,429 $ 18,888 $ (459) (2) % Operating margin UnitedHealthcare 4.7 % 4.1 % 0.6 % 5.9 % 7.9 % (2.0) % OptumHealth 8.3 8.0 0.3 8.2 8.3 (0.1) OptumInsight 28.9 28.4 0.5 27.3 23.8 3.5 OptumRx 4.3 4.4 (0.1) 4.3 4.1 0.2 Optum 7.7 7.4 0.3 7.5 6.9 0.6 Consolidated operating margin 7.9 % 7.1 % 0.8 % 8.6 % 9.9 % (1.3) % UnitedHealthcare The following table summarizes UnitedHealthcare revenues by business: Three Months Ended September 30, Increase/(Decrease) Nine Months Ended September 30, Increase/(Decrease) (in millions, except percentages) 2021 2020 2021 vs. 2020 2021 2020 2021 vs. 2020 UnitedHealthcare Employer & Individual $ 15,094 $ 14,081 $ 1,013 7 % $ 44,668 $ 41,324 $ 3,344 8 % UnitedHealthcare Medicare & Retirement 24,931 22,606 2,325 10 75,709 68,613 7,096 10 UnitedHealthcare Community & State 13,763 11,820 1,943 16 39,846 34,796 5,050 15 UnitedHealthcare Global 2,139 1,866 273 15 6,292 5,815 477 8 Total UnitedHealthcare revenues $ 55,927 $ 50,373 $ 5,554 11 % $ 166,515 $ 150,548 $ 15,967 11 % 19 Table of Contents The following table summarizes the number of individuals served by our UnitedHealthcare businesses, by major market segment and funding arrangement: September 30, Increase/(Decrease) (in thousands, except percentages) 2021 2020 2021 vs. 2020 Commercial: Risk-based 7,960 7,950 10 — % Fee-based 18,595 18,400 195 1 Total commercial 26,555 26,350 205 1 Medicare Advantage 6,455 5,670 785 14 Medicaid 7,510 6,435 1,075 17 Medicare Supplement (Standardized) 4,405 4,450 (45) (1) Total community and senior 18,370 16,555 1,815 11 Total UnitedHealthcare - domestic medical 44,925 42,905 2,020 5 Global 5,490 5,285 205 4 Total UnitedHealthcare - medical 50,415 48,190 2,225 5 % Supplemental Data: Medicare Part D stand-alone 3,725 4,075 (350) (9) % Commercial business increased primarily due to acquisitions in risk-based and fee-based offerings. Medicare Advantage increased due to growth in people served through individual and group Medicare Advantage plans. The increase in people served through Medicaid was primarily driven by states continuing to ease redetermination requirements due to COVID-19, new state-based awards and growth in people served through Dual Special Needs Plans. UnitedHealthcare’s revenue increased due to growth in the number of individuals served through Medicare Advantage and Medicaid, including a greater mix of people with higher acuity needs, and an increase in the number of individuals served through commercial benefits, partially offset by the permanent repeal of the Health Insurance Tax and the impacts of COVID-19 on risk adjusted business. Earnings from operations for the three months ended September 30, 2021 increased primarily due to the higher temporary deferral of care and growth in people served across our domestic businesses, partially offset by COVID-19 related care costs and other economic factors. For the nine months ended September 30, 2021, earnings from operations decreased due to COVID-19 related care costs and the impacts of COVID-19 on risk adjusted business, partially offset by higher temporary deferral of care and growth in people served across our domestic businesses. Optum Total revenues and earnings from operations increased due to growth across the Optum businesses. The results by segment were as follows: OptumHealth Revenue at OptumHealth increased primarily due to organic growth and acquisitions in care delivery and the impact of COVID-19 at our fee-based businesses as consumers resumed elective care. Earnings from operations increased due to organic growth and acquisitions and cost management initiatives. COVID-19 related care costs and temporary care deferrals affected earnings from operations at our risk-based and fee-based businesses in offsetting manners. OptumHealth served approximately 99 million people as of September 30, 2021 compared to 98 million people as of September 30, 2020. OptumInsight Revenue and earnings from operations at OptumInsight increased due to growth in technology and managed services and increased activity levels in our volume-based services as a result of care activity normalizing for payer and care provider clients. Earnings from operations also increased due to productivity gains and cost management initiatives. OptumRx Revenue and earnings from operations at OptumRx increased due to higher script volumes from growth in people served, increased utilization and organic growth in pharmacy care services. Revenue for the nine months ended September 30, 2021 also increased due to acquisitions. Earnings from operations also increased as a result of continued supply chain management initiatives. OptumRx fulfilled 344 million and 325 million adjusted scripts in the third quarters of 2021 and 2020, respectively. In addition to the factors contributing to revenue growth, adjusted scripts also increased due to the dispensing of COVID-19 vaccines. 20 Table of Contents LIQUIDITY, FINANCIAL CONDITION AND CAPITAL RESOURCES Liquidity Summary of our Major Sources and Uses of Cash and Cash Equivalents Nine Months Ended September 30, Increase/(Decrease) (in millions) 2021 2020 2021 vs. 2020 Sources of cash: Cash provided by operating activities $ 19,125 $ 16,073 $ 3,052 Issuances of short-term borrowings and long-term debt, net of repayments 3,733 2,941 792 Proceeds from common stock issuances 1,077 1,206 (129) Customer funds administered 1,402 249 1,153 Total sources of cash 25,337 20,469 Uses of cash: Common stock repurchases (3,950) (2,541) (1,409) Cash paid for acquisitions, net of cash assumed (4,727) (4,326) (401) Purchases of investments, net of sales and maturities (3,702) (1,386) (2,316) Purchases of property, equipment and capitalized software (1,759) (1,477) (282) Cash dividends paid (3,915) (3,400) (515) Purchases of redeemable noncontrolling interests (1,338) — (1,338) Other (1,737) (614) (1,123) Total uses of cash (21,128) (13,744) Effect of exchange rate changes on cash and cash equivalents (45) (160) 115 Net increase in cash and cash equivalents $ 4,164 $ 6,565 $ (2,401) 2021 Cash Flows Compared to 2020 Cash Flows Increased cash flows provided by operating activities were primarily driven by changes in working capital accounts. Other significant changes in sources or uses of cash year-over-year included increased net purchases of investments, increased share repurchases and purchases of redeemable noncontrolling interests, partially offset by increased customer funds administered. Financial Condition As of September 30, 2021, our cash, cash equivalent, available-for-sale debt securities and equity securities balances of $66.8 billion included approximately $21.1 billion of cash and cash equivalents (of which $3.7 billion was available for general corporate use), $42.8 billion of debt securities and $2.9 billion of investments in equity securities. Given the significant portion of our portfolio held in cash and cash equivalents, we do not anticipate fluctuations in the aggregate fair value of our financial assets to have a material impact on our liquidity or capital position. Our available-for-sale debt securities portfolio had a weighted-average duration of 3.8 years and a weighted-average credit rating of “Double A” as of September 30, 2021. When multiple credit ratings are available for an individual security, the average of the available ratings is used to determine the weighted-average credit rating. Capital Resources and Uses of Liquidity In addition to cash flows from operations and cash and cash equivalent balances available for general corporate use, our capital resources and uses of liquidity are as follows: Cash Requirements. A summary of our cash requirements as of December 31, 2020 was disclosed in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2020 10-K. During the nine months ended September 30, 2021, there were no material changes to this previously disclosed information outside the ordinary course of business. We believe our capital resources are sufficient to meet future, short-term and long-term, liquidity needs. We continually evaluate opportunities to expand our operations, including through internal development of new products, programs and technology applications and acquisitions. 21 Table of Contents Short-Term Borrowings. Our revolving bank credit facilities provide liquidity support for our commercial paper borrowing program, which facilitates the private placement of unsecured debt through independent broker-dealers, and are available for general corporate purposes. For more information on our commercial paper and bank credit facilities, see Note 8 of Notes to the Consolidated Financial Statements included in Part II, Item 8, “Financial Statements” in our 2020 10-K. Our revolving bank credit facilities contain various covenants, including covenants requiring us to maintain a defined debt to debt-plus-shareholders’ equity ratio of not more than 60%. As of September 30, 2021, our debt to debt-plus-shareholders’ equity ratio, as defined and calculated under the credit facilities, was approximately 38%. Long-Term Debt. Periodically, we access capital markets and issue long-term debt for general corporate purposes, such as, to meet our working capital requirements, to refinance debt, to finance acquisitions or for share repurchases. For more information on our long-term debt, see Note 5 of Notes to the Condensed Consolidated Financial Statements included in Part I, Item 1 of this report and Note 8 of Notes to the Consolidated Financial Statements included in Part II, Item 8, “Financial Statements” in our 2020 10-K. Credit Ratings. Our credit ratings as of September 30, 2021 were as follows: Moody’s S&P Global Fitch A.M. Best Ratings Outlook Ratings Outlook Ratings Outlook Ratings Outlook Senior unsecured debt A3 Stable A+ Stable A Stable A- Positive Commercial paper P-2 n/a A-1 n/a F1 n/a AMB-1 n/a The availability of financing in the form of debt or equity is influenced by many factors, including our profitability, operating cash flows, debt levels, credit ratings, debt covenants and other contractual restrictions, regulatory requirements and economic and market conditions. A significant downgrade in our credit ratings or adverse conditions in the capital markets may increase the cost of borrowing for us or limit our access to capital. Share Repurchase Program. During the nine months ended September 30, 2021, we repurchased approximately 10 million shares at an average price of $376.93 per share. As of September 30, 2021, we had Board authorization to purchase up to 48 million shares of our common stock. Dividends. In June 2021, the Company’s Board of Directors increased our quarterly cash dividend to shareholders to an annual rate of $5.80 compared to $5.00 per share. For more information on our dividend, see Note 6 of Notes to the Condensed Consolidated Financial Statements included in Part I, Item 1 of this report. Pending Acquisitions. We have 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. For additional liquidity discussion, see Note 10 of Notes to the Consolidated Financial Statements in Part II, Item 8, “Financial Statements” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 in our 2020 10-K. RECENTLY ISSUED ACCOUNTING STANDARDS There are no recently issued accounting standards that are expected to have a material impact on our Condensed Consolidated Financial Statements. CRITICAL ACCOUNTING ESTIMATES In preparing our Condensed Consolidated Financial Statements, we are required to make judgments, assumptions and estimates, which we believe are reasonable and prudent based on the available facts and circumstances. These judgments, assumptions and estimates affect certain of our revenues and expenses and their related balance sheet accounts and disclosure of our contingent liabilities. We base our assumptions and estimates primarily on historical experience and consider known and projected trends. On an ongoing basis, we re-evaluate our selection of assumptions and the method of calculating our estimates. Actual results, however, may materially differ from our calculated estimates, and this difference would be reported in our current operations. Our critical accounting estimates include medical costs payable and goodwill. For a detailed description of our critical accounting estimates, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 in our 2020 10-K. For a detailed discussion of our significant accounting policies, see Note 2 of Notes to the Consolidated Financial Statements in Part II, Item 8, “Financial Statements” in our 2020 10-K. 22 Table of Contents FORWARD-LOOKING STATEMENTS The statements, estimates, projections, guidance or outlook contained in this document include “forward-looking” statements which are intended to take advantage of the “safe harbor” provisions of the federal securities law. The words “believe,” “expect,” “intend,” “estimate,” “anticipate,” “forecast,” “outlook,” “plan,” “project,” “should” and similar expressions identify forward-looking statements. These statements may contain information about financial prospects, economic conditions and trends and involve risks and uncertainties. Actual results could differ materially from those that management expects, depending on the outcome of certain factors including: risks associated with public health crises, large-scale medical emergencies and pandemics, such as the COVID-19 pandemic; our ability to effectively estimate, price for and manage medical costs; new or changes in existing health care laws or regulations, or their enforcement or application; the DOJ’s legal action relating to the risk adjustment submission matter; our ability to maintain and achieve improvement in quality scores impacting revenue; reductions in revenue or delays to cash flows received under government programs; changes in Medicare, the CMS star ratings program or the application of risk adjustment data validation audits; failure to maintain effective and efficient information systems or if our technology products do not operate as intended; cyberattacks, other privacy/data security incidents, or our failure to comply with related regulations; risks and uncertainties associated with the pharmacy benefits management industry; competitive pressures; changes in or challenges to our public sector contract awards; our ability to contract on competitive terms with physicians, hospitals and other service providers; failure to attract, develop, retain, and manage the succession of key employees and executives; the impact of potential changes in tax laws and regulations (including any increase in the U.S. income tax rate applicable to corporations); failure to achieve targeted operating cost productivity improvements; increases in costs and other liabilities associated with litigation, government investigations, audits or reviews; failure to manage successfully our strategic alliances or complete or receive anticipated benefits of strategic transactions; fluctuations in foreign currency exchange rates; downgrades in our credit ratings; our investment portfolio performance; impairment of our goodwill and intangible assets; and our ability to obtain sufficient funds from our regulated subsidiaries or from external financings to fund our obligations, maintain our debt to total capital ratio at targeted levels, maintain our quarterly dividend payment cycle, or continue repurchasing shares of our common stock. This above list is not exhaustive. We discuss these matters, and certain risks that may affect our business operations, financial condition and results of operations more fully in our filings with the SEC, including our reports on Forms 10-K, 10-Q and 8-K. 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 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 law.