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Item 2. Management’s Discussion and Analysis

2022-05-04 compared with 2021-11-03 · 108 added, 124 removed, 177 unchanged (57% of the section changed)

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.

The following discussion should be read together with the accompanying Condensed Consolidated Financial Statements and Notes and with our 2021 10-K, including the Consolidated Financial Statements and Notes in Part II, Item 8, “Financial Statements and Supplementary Data” in that report.

Unless the context indicates otherwise, references to the terms “UnitedHealth Group,” the “Company,” “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).

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EXECUTIVE OVERVIEW

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.

UnitedHealth Group Incorporated is a health care and well-being company with a mission to help people live healthier lives and help make the health system work better for everyone.

Our two distinct, yet complementary business platforms — Optum and UnitedHealthcare — are working to help build a modern, high-performing health system through improved access, affordability, outcomes and experiences 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;

• 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:

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.

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.

• Optum Health;

• Optum Insight;

• UnitedHealthcare, which includes UnitedHealthcare Employer & Individual, UnitedHealthcare Medicare & Retirement and UnitedHealthcare Community & State.

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 2021 10-K and additional information on our segments, including the realignment of our UnitedHealthcare operating segments to combine UnitedHealthcare Global and UnitedHealthcare Employer and Individual, can be found in this Item 2 and in Note 6 of Notes to the Condensed Consolidated Financial Statements included in Part I, Item 1 of this report.

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;

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.

Our businesses participate in the United States, South America 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 macroeconomic conditions, such as the economic impact of COVID-19, and regulatory changes, which could impact our results of operations, including our continued efforts to control health care costs.

Pricing Trends.

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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.

The commercial risk market remains highly competitive in the small group, large group and individual segments.

We expect broad-based competition to continue as the industry adapts to individual and employer needs.

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.

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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.

COVID-19 related care and testing 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.

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.

During the three months ended March 31, 2022, overall care was near normal baseline levels.

COVID-19 treatment and testing costs continue to be mitigated by the temporary deferral of care, both varying with COVID-19 incidence rates.

In future periods, care patterns may moderately exceed normal baselines as previously deferred care is obtained.

Though not yet experienced, acuity may temporarily rise due to missed regular care.

COVID-19 may continue to influence customer and consumer behavior, which could impact how and where care is delivered, benefit product designs, and the manner in which consumers wish to receive their prescription drugs or infusion services.

Disrupted care patterns, as a result of the pandemic, have affected 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, intensity and duration of the pandemic, the severity of new variants of the COVID-19 virus, the effectiveness and extent of administration of vaccination and treatments and general economic uncertainty.

SELECTED OPERATING PERFORMANCE AND OTHER SIGNIFICANT ITEMS

The following summarizes select third quarter 2021 year-over-year operating comparisons to third quarter 2020.

The following summarizes select first quarter 2022 year-over-year operating comparisons to first quarter 2021 and other financial results.

• Consolidated revenues grew 14%, UnitedHealthcare revenues grew 14% and Optum revenues grew 19%.

• 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.

• UnitedHealthcare served nearly 1.5 million more people, led by growth in community and senior programs.

• Consolidated earnings from operations of $7.0 billion compared to $6.7 billion last year, included growth of 20% at Optum, partially offset by a decrease of 8% at UnitedHealthcare.

• Diluted earnings per common share were $5.27.

• Cash flows from operations for the nine months ended September 30, 2021 were $19.1 billion.

• Cash flows from operations for the three months ended March 31, 2022 were $5.3 billion.

• Return on equity was 27.8%.

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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.

(in millions, except percentages and per share data) Three Months Ended March 31, Increase/(Decrease)

2022 2021 2022 vs.

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Investment and other income

367 452 (85) (19)

Total revenues 80,149 70,196 9,953 14

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Earnings attributable to noncontrolling interests

(121) (116) (5) 4

Net earnings attributable to UnitedHealth Group common shareholders

$ 5,027 $ 4,862 $ 165 3 %

Diluted earnings per share attributable to UnitedHealth Group common shareholders

$ 5.27 $ 5.08 $ 0.19 4 %

Medical care ratio (a) 82.0 % 80.9 % 1.1 %

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Consolidated Financial Results

The increases in revenue were primarily driven by the increase in the number of individuals served through Medicare Advantage, Medicaid and commercial offerings;

The increases in revenues were primarily driven by growth in the number of people 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.

and growth across the Optum businesses.

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.

Medical costs and MCR increased as a result of business mix and decreased favorable development.

Medical costs also increased due to growth in people served through Medicare Advantage, Medicaid and commercial offerings.

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.

The operating cost ratio decreased primarily due to COVID-19 related revenue effects, operating efficiency gains and business mix.

Reportable Segments

See Note 6 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.

We utilize various metrics to evaluate and manage our reportable segments, including people served by UnitedHealthcare by major market segment and funding arrangement, people served by Optum Health and adjusted scripts for Optum Rx.

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.

The metrics also allow management and investors to evaluate and understand business mix, including the mix of care delivered through value-based care models at Optum Health, level and scope of services provided to people and pricing trends when comparing the metrics to revenue by segment.

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)

Three Months Ended March 31, Increase/(Decrease)

(in millions, except percentages) 2022 2021 2022 vs.

2020 2021 2020 2021 vs.

UnitedHealthcare $ 62,595 $ 55,114 $ 7,481 14 %

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 Health 16,682 12,403 4,279 34

Optum Insight 3,219 2,852 367 13

Optum Rx 23,911 21,604 2,307 11

Optum eliminations (553) (475) (78) 16

Optum 39,785 34,923 4,862 14 114,472 100,457 14,015 14

43,259 36,384 6,875 19

Eliminations (25,705) (21,302) (4,403) 21

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UnitedHealthcare $ 3,798 $ 4,108 $ (310) (8) %

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

Optum Health 1,366 962 404 42

Optum Insight 847 779 68 9

Optum Rx 939 890 49 6

3,152 2,631 521 20

Consolidated earnings from operations

$ 6,950 $ 6,739 $ 211 3 %

Operating margin

UnitedHealthcare 6.1 % 7.5 % (1.4) %

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

Optum Health 8.2 7.8 0.4

Optum Insight 26.3 27.3 (1.0)

Optum Rx 3.9 4.1 (0.2)

Consolidated operating margin 8.7 % 9.6 % (0.9) %

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The following table summarizes UnitedHealthcare revenues by business:

Three Months Ended September 30, Increase/(Decrease) Nine Months Ended September 30, Increase/(Decrease)

Three Months Ended March 31, Increase/(Decrease)

(in millions, except percentages) 2022 2021 2022 vs.

2020 2021 2020 2021 vs.

UnitedHealthcare Employer & Individual $ 15,094 $ 14,081 $ 1,013 7 % $ 44,668 $ 41,324 $ 3,344 8 %

UnitedHealthcare Employer & Individual - Domestic $ 15,822 $ 14,632 $ 1,190 8 %

UnitedHealthcare Employer & Individual - Global (a) 2,133 2,035 98 5 %

UnitedHealthcare Employer & Individual - Total (a) 17,955 16,667 1,288 8 %

UnitedHealthcare Medicare & Retirement

29,100 25,474 3,626 14

UnitedHealthcare Community & State

UnitedHealthcare Global 2,139 1,866 273 15 6,292 5,815 477 8

15,540 12,973 2,567 20

Total UnitedHealthcare revenues $ 62,595 $ 55,114 $ 7,481 14 %

The following table summarizes the number of individuals served by our UnitedHealthcare businesses, by major market segment and funding arrangement:

September 30, Increase/(Decrease)

(a) On January 1, 2022, we realigned our operating segments to combine UnitedHealthcare Global and UnitedHealthcare Employer & Individual.

The following table summarizes the number of people served by our UnitedHealthcare businesses, by major market segment and funding arrangement:

March 31, Increase/(Decrease)

(in thousands, except percentages) 2022 2021 2022 vs.

Commercial - domestic:

Risk-based 7,950 7,860 90 1 %

Fee-based 18,460 18,455 5 —

Total commercial 26,555 26,350 205 1

Total commercial - domestic 26,410 26,315 95 —

Medicare Advantage 6,890 6,335 555 9

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Total UnitedHealthcare - domestic medical 45,465 44,015 1,450 3

Global 5,490 5,285 205 4

Commercial - global 5,500 5,460 40 1

Total UnitedHealthcare - medical 50,965 49,475 1,490 3 %

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Medicare Part D stand-alone 3,360 3,795 (435) (11) %

Commercial business increased primarily due to acquisitions in risk-based and fee-based offerings.

Commercial business increased due to growth in risk-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.

UnitedHealthcare’s revenues 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.

Earnings from operations declined primarily due to decreased favorable development partially offset by the factors impacting revenue and COVID-19 impacts.

Total revenues and earnings from operations increased due to growth across the Optum businesses.

The results by segment were as follows:

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.

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.

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.

Revenues at Optum Health increased primarily due to organic growth in value-based care arrangements and acquisitions.

Earnings from operations increased due to organic growth in value-based care arrangements, COVID-19 effects and cost management initiatives.

Optum Health served approximately 100 million people as of March 31, 2022 compared to 99 million people as of March 31, 2021.

Optum Insight

Revenues and earnings from operations at Optum Insight increased due to growth in managed services and technology, with managed services growth driven by higher payer volumes and new health system partnerships.

Revenues and earnings from operations at Optum Rx increased due to higher script volumes from growth in people served, increased utilization and organic growth in pharmacy care services, including community-behavioral, specialty pharmacy and e-commerce services.

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.

Optum Rx fulfilled 352 million and 329 million adjusted scripts in the first quarters of 2022 and 2021, respectively.

LIQUIDITY, FINANCIAL CONDITION AND CAPITAL RESOURCES

Summary of our Major Sources and Uses of Cash and Cash Equivalents

Nine Months Ended September 30, Increase/(Decrease)

Three Months Ended March 31, Increase/(Decrease)

(in millions) 2022 2021 2022 vs.

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Issuances of short-term borrowings and long-term debt, net of repayments

2,048 2,907 (859)

Proceeds from common stock issuances 551 436 115

Customer funds administered

5,120 2,131 2,989

Total sources of cash 13,038 11,479

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Cash paid for acquisitions, net of cash assumed

(1,231) (1,193) (38)

Purchases of investments, net of sales and maturities (1,632) (1,714) 82

Purchases of property, equipment and capitalized software

(555) (568) 13

Cash dividends paid

Purchases of redeemable noncontrolling interests (1,338) — (1,338)

(1,363) (1,181) (182)

Other (1,807) (2,088) 281

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2022 Cash Flows Compared to 2021 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.

Decreased 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 customer funds administered, partially offset by increased share repurchases and decreased net issuances of short-term borrowings and long-term debt.

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.

As of March 31, 2022, our cash, cash equivalent, available-for-sale debt securities and equity securities balances of $68.8 billion included approximately $25.5 billion of cash and cash equivalents (of which $2.5 billion was available for general corporate use), $39.8 billion of debt securities and $3.5 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.

Our available-for-sale debt securities portfolio had a weighted-average duration of 4.1 years and a weighted-average credit rating of “Double A” as of March 31, 2022.

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.

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A summary of our cash requirements as of December 31, 2021 was disclosed in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2021 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.

During the three months ended March 31, 2022, 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.

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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.

For more information on our commercial paper and bank credit facilities, see Note 8 of Notes to the Consolidated Financial Statements in Part II, Item 8, “Financial Statements and Supplementary Data” in our 2021 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%.

As of March 31, 2022, our debt to debt-plus-shareholders’ equity ratio, as defined and calculated under the credit facilities, was approximately 37%.

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.

For more information on our long-term debt, see Note 8 of Notes to the Consolidated Financial Statements in Part II, Item 8, “Financial Statements and Supplementary Data” in our 2021 10-K.

Credit Ratings.

Our credit ratings as of September 30, 2021 were as follows:

Our credit ratings as of March 31, 2022 were as follows:

Moody’s S&P Global Fitch A.M.

Ratings Outlook Ratings Outlook Ratings Outlook Ratings Outlook

Senior unsecured debt A3 Stable A+ Stable A Stable A- Positive

Senior unsecured debt

A3 Stable A+ Stable A Stable A Stable

Commercial paper P-2 n/a A-1 n/a F1 n/a AMB-1+ n/a

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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.

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.

During the three months ended March 31, 2022, we repurchased approximately 5 million shares at an average price of $485.12 per share.

As of March 31, 2022, we had Board authorization to purchase up to 40 million shares of our common stock.

Our quarterly cash dividend to shareholders reflects an annual dividend rate of $5.80 per share.

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.

As of March 31, 2022, we have entered into agreements to acquire companies in the health care sector, most notably Change Healthcare (NASDAQ:

CHNG) and LHC Group, Inc.

LHCG), subject to regulatory approval and other customary closing conditions.

The total anticipated capital required for these acquisitions, excluding associated disposition proceeds and the payoff of acquired indebtedness, is approximately $15 billion.

For additional liquidity discussion, see Note 10 of Notes to the Consolidated Financial Statements in Part II, Item 8, “Financial Statements and Supplementary Data” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 in our 2021 10-K.

RECENTLY ISSUED ACCOUNTING STANDARDS

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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 2021 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.

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 and Supplementary Data” in our 2021 10-K.

FORWARD-LOOKING STATEMENTS

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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;

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;

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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;

failure to protect proprietary rights to our databases, software and related products;

risks and uncertainties associated with our businesses providing pharmacy care services;

competitive pressures, including our ability to develop and deliver innovative products to health care payers and expand access to virtual care;

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 develop and maintain satisfactory relationships with health care payers, physicians, hospitals and other service providers;

failure to attract, develop, retain, and manage the succession of key employees and executives;

16 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis