What changed in this filing

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Item 7. Management’s Discussion and Analysis

2023-02-24 compared with 2022-02-15 · 71 added, 105 removed, 284 unchanged (38% of the section changed)

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• Optum Insight;

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

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

Further information on our business and reportable segments is presented in Part I, Item 1, “Business” and in Note 14 of the Notes to the Consolidated Financial Statements included in Part II, Item 8, “Financial Statements and Supplementary Data.”

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We expect overall spending on health care to continue to grow in the future, due to 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 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.

The rate of market growth may be affected by a variety of factors, including macroeconomic conditions, 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 relevant factors, such as product positioning, price competitiveness and environmental, competitive, legislative and regulatory considerations, including minimum MLR thresholds.

We will continue seeking to balance growth and profitability across all of these dimensions.

To price our health care benefits, products and services, we start with our view of expected future costs, including inflation and labor market dynamics.

We will continue seeking to balance growth and profitability across all these dimensions.

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

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Medicare Advantage funding continues to be pressured, as discussed below in “Regulatory Trends and Uncertainties.”

We expect Medicaid revenue growth due to anticipated changes in mix and pricing trends;

we also believe the payment rate environment creates the risk of continued downward pressure on Medicaid margin percentages.

In Medicaid, we believe the payment rate environment creates the risk of continued downward pressure on Medicaid margin percentages.

We continue to take a prudent, market-sustainable posture for both new business and maintenance of existing relationships.

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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 impacted medical cost trends in 2021 and may continue to do so in 2022 and subsequent 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.

Our medical cost trends primarily relate to changes in unit costs;

care activity;

and prescription drug costs.

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 continue to result in, increased variability to medical cost reserve development.

Medicaid Redeterminations.

In December 2022, Congress passed the 2023 Omnibus Appropriations bill that allows states to resume Medicaid redeterminations beginning in April 2023.

Redeterminations will result in a decline in people served through our Medicaid business and an expected increase in people served through our commercial and exchange-based offerings as we endeavor to ensure that people have continued access to benefits.

Delivery System and Payment Modernization.

The health care market continues to change based on demographic shifts, new regulations, political forces and both payer and patient expectations.

Health plans and care providers are being called upon to work together to close gaps in care and improve overall care quality, improve the health of populations and reduce costs.

We continue to see a greater number of people enrolled in plans with underlying performance-based care provider payment models rewarding high-quality, affordable care and foster collaboration.

We work together with clinicians to leverage our data and analytics to provide the necessary information to close gaps in care and improve overall health outcomes for patients.

Health plans and care providers are being called upon to work together to close gaps in care and improve overall care quality and patient experience, improve the health of populations and reduce costs.

We are working to accelerate this vision through the innovation and integration of our care delivery models including in clinic, in-home, behavioral and virtual care, and by using our data and analytics to provide clinicians with the necessary information in order to provide the best possible care in the most cost efficient setting.

We continue to see a greater number of people enrolled in fully accountable value-based plans rewarding high-quality, affordable care and fostering collaboration.

This trend is creating needs for health management services which can coordinate care around the primary care physician, including new primary care channels, and for investments in new clinical and administrative information and management systems, which we believe provide growth opportunities for our Optum business platform.

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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, creating continued pressure in the Medicare Advantage program.

The ongoing Medicare Advantage funding pressure places continued importance on effective medical management and ongoing improvements in administrative efficiency.

There are a number of adjustments we have made to partially offset these rate pressures and reductions.

In some years, these adjustments impact the majority of the seniors we serve through Medicare Advantage.

For example, we seek to intensify our medical and operating cost management, make changes to the size and composition of our care provider networks, adjust members' benefits and implement or increase the member premiums supplementing the monthly payments we receive from the government.

Medicare Advantage rate notices over the years have at times resulted in industry base rates well below industry forward medical trend.

For example, the February 2023 Advance Notice for 2024 rates would result in an industry base rate decrease, well short of what is an increasing industry forward medical cost trend, creating continued pressure in the Medicare Advantage program.

Further, proposed substantial revisions to the risk adjustment model, which serves to adjust rates to reflect a patient’s health status and care resource needs, would result in reduced funding and benefits for people, especially those with some of the greatest health and social challenges.

As a result of ongoing Medicare funding pressures, there are adjustments we can make to partially offset these rate pressures and reductions for a particular period.

For example, we can seek to intensify our medical and operating cost management, make changes to the size and composition of our care provider networks, adjust member benefits and implement or increase the member premiums supplementing the monthly payments we receive from the government.

Additionally, we decide annually on a county-by-county basis where we will offer Medicare Advantage plans.

Our Medicare Advantage rates are currently enhanced by CMS quality bonuses in certain counties based on our local plans’ Star ratings.

The level of Star ratings from CMS, based upon specified clinical and operational performance standards, will impact future quality bonuses.

ACA Tax (Health Insurance 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.

In 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 other revenue impacts 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 Optum Health value-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 Optum Insight and Optum Rx 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 continued expanded benefit coverage in areas such as COVID-19 related care and testing, telemedicine, and pharmacy;

we also continued to assist our customers, care providers, members and communities in addressing the COVID-19 crisis.

UnitedHealthcare’s 2021 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 eligibility redetermination requirements due to the COVID-19 public health emergency.

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 ITEMS

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• Consolidated revenues increased by 13%, UnitedHealthcare revenues increased 12% and Optum revenues grew 17%.

• UnitedHealthcare served 2.1 million more people domestically, primarily driven by growth in community and senior programs.

• Earnings from operations increased by 7%, including an increase of 19% at Optum, partially offset by a decrease of 3% at UnitedHealthcare.

• UnitedHealthcare served nearly 1.1 million more people, led by growth in community-based and senior offerings.

• Earnings from operations increased by 19%, including an increase of 20% at UnitedHealthcare and 17% at Optum.

• Diluted earnings per common share increased 17% to $21.18.

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Return on equity (c) 27.2 % 25.2 % 24.9 % 2.0 %

(a) Medical care ratio is calculated as medical costs divided by premium revenue.

(b) Net earnings margin attributable to UnitedHealth Group shareholders.

(a) Medical care ratio (MCR) is calculated as medical costs divided by premium revenue.

(b) Net earnings margin attributable to UnitedHealth Group common shareholders.

(c) Return on equity is calculated as net earnings attributable to UnitedHealth Group common shareholders divided by average shareholders’ equity.

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Consolidated Financial Results

The increases in revenues 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.

The increases in revenues were primarily driven by growth in the number of people served through Medicare Advantage and Medicaid, pricing trends 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 increased COVID-19 related care costs and the permanent repeal of the Health Insurance Tax, partially offset by increased temporary care deferrals.

Medical costs and the MCR were also impacted by increased prior year favorable reserve development.

Medical costs increased due to growth in people served.

The MCR decreased due to COVID-19 effects, partially offset by decreased prior years favorable development and business mix.

Operating Cost Ratio

The operating cost ratio decreased primarily due to the permanent repeal of the Health Insurance Tax, COVID-19 impacts on revenue and operating costs in the prior year and operating efficiency gains, partially offset by business mix.

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 productivity gains, partially offset by investments and business mix.

Reportable Segments

See Note 13 of Notes to the Consolidated Financial Statements included in Part II, Item 8, “Financial Statements and Supplement ary Data ” for more information on our segments.

See Note 14 of Notes to the Consolidated Financial Statements included in Part II, Item 8, “Financial Statements and Supplementary Data ” 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 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, including the mix of care delivered through accountable care models at Optum Health, 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 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:

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(in millions, except percentages) 2022 2021 2020 2022 vs.

UnitedHealthcare Employer & Individual

$ 60,023 $ 55,872 $ 56,945 $ 4,151 7 %

UnitedHealthcare Employer & Individual - Domestic $ 63,599 $ 60,023 $ 55,872 $ 3,576 6 %

UnitedHealthcare Employer & Individual - Global (a) 8,668 8,345 7,752 323 4

UnitedHealthcare Employer & Individual - Total (a) 72,267 68,368 63,624 3,899 6

UnitedHealthcare Medicare & Retirement

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63,803 53,979 46,487 9,824 18

UnitedHealthcare Global 8,345 7,752 9,855 593 8

Total UnitedHealthcare revenues $ 249,741 $ 222,899 $ 200,875 $ 26,842 12 %

(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 individuals served by our UnitedHealthcare businesses, by major market segment and funding arrangement:

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(in thousands, except percentages) 2022 2021 2020 2022 vs.

Commercial - domestic:

Risk-based 8,045 7,985 7,910 60 1 %

Fee-based 18,640 18,595 18,310 45 —

Total commercial 26,580 26,220 27,760 360 1

Total commercial - domestic 26,685 26,580 26,220 105 —

Medicare Advantage 7,105 6,490 5,710 615 9

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Total UnitedHealthcare - domestic medical 46,335 45,120 43,010 1,215 3

Global 5,510 5,425 5,720 85 2

Commercial - global 5,360 5,510 5,425 (150) (3)

Total UnitedHealthcare - medical 51,695 50,630 48,435 1,065 2 %

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Medicare Part D stand-alone 3,295 3,700 4,045 (405) (11) %

Commercial business increased primarily due to acquisitions in risk-based and fee-based offerings and organic growth in innovative products.

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 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, partially offset by the permanent repeal of the Health Insurance Tax and the impacts of COVID-19 on risk adjusted business.

Earnings from operations decreased due to increased 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.

The increase in people served through Medicaid was primarily driven by states continuing to ease redetermination requirements and growth in people served through Dual Special Needs Plans.

UnitedHealthcare’s revenues increased due to growth in the number of people served through Medicare Advantage and Medicaid.

Earnings from operations increased due to growth in people served and COVID-19 effects, partially offset by decreased prior years favorable development.

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

The results by segment were as follows:

Revenues at Optum Health increased primarily due to organic growth in value-based arrangements, 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 the factors impacting revenues as well as cost management initiatives and increased investment income.

COVID-19 related care costs and temporary care deferrals affected earnings from operations at our value-based and fee-based businesses in offsetting manners.

Revenues at Optum Health increased primarily due to organic growth in patients served under value-based care arrangements and business combinations.

Earnings from operations increased due to organic growth in the number of people served under value-based care arrangements, cost management initiatives, asset dispositions and COVID-19 effects.

Optum Health served approximately 102 million people as of December 31, 2022 compared to 100 million people as of December 31, 2021.

Optum Insight

Revenues and earnings from operations at Optum Insight increased due to growth in technology and managed services, including expanding relationships serving health systems.

Earnings from operations also increased due to productivity gains and cost management initiatives.

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.

Earnings from operations also increased as a result of continued supply chain and cost management initiatives.

Optum Rx fulfilled 1.4 billion and 1.3 billion adjusted scripts in 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.

Revenues and earnings from operations at Optum Insight increased due to growth in technology and managed services, with managed services revenue growth driven by business combinations 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 health, specialty and home delivery pharmacies.

Earnings from operations also increased as a result of continued supply chain management initiatives.

Optum Rx fulfilled 1,438 million and 1,368 million adjusted scripts in 2022 and 2021, respectively.

LIQUIDITY, FINANCIAL CONDITION AND CAPITAL RESOURCES

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5,548 622 1,677 4,926

Other — — 219 —

Cash received for dispositions 3,414 15 221 3,399

Total sources of cash 48,957 26,816 28,098

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2022 Cash Flows Compared to 2021 Cash Flows

Cash flows provided by operating activities were largely consistent, with higher net earnings being offset by changes in working capital accounts.

Other significant changes in sources or uses of cash year-over-year included decreased customer funds administered and increased purchases of redeemable noncontrolling interests, share repurchases and cash dividends paid, partially offset by decreased cash paid for acquisitions and net purchases of investments.

Increased cash flows provided by operating activities were primarily driven by changes in working capital accounts and increased net earnings.

Other significant changes in sources or uses of cash year-over-year included increased net issuances of long-term debt, customer funds administered, primarily driven by Medicare Part D timing and increased HSA deposits, cash received for dispositions and decreased purchases of redeemable noncontrolling interests, partially offset by increased cash paid for acquisitions, net purchases of investments and common stock repurchases.

Financial Condition

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See Note 2 of the Notes to the Consolidated Financial Statements included in Part II, Item 8, “Financial Statements and Supplementary Data ” for further detail.

We do not have any material required redemptions in the next twelve months.

We do not have any material expected redemptions in the next twelve months.

We expect the cash required to meet our long-term obligations to be primarily generated through future cash flows from operations.

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Ratings Outlook Ratings Outlook Ratings Outlook Ratings Outlook

Senior unsecured debt A3 Stable A+ Stable A Stable A Stable

Senior unsecured debt A3 Positive 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.

As of December 31, 2021, we had Board authorization to purchase up to 45 million shares of our common stock.

For more information on our share repurchase program, see Note 10 of the Notes to the Consolidated Financial Statements included in Part II, Item 8, “Financial Statements.

and Supplementary Data .

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.

For more information on our dividend, see Note 10 of the Notes to the Consolidated Financial Statements included in Part II, Item 8, “Financial Statements.

and Supplementary Data .

As of December 31, 2022, we had Board of Directors’ authorization to purchase up to 31 million shares of our common stock.

For more information on our share repurchase program, see Note 10 of the Notes to the Consolidated Financial Statements included in Part II, Item 8, “Financial Statements and Supplementary Data.”

In June 2022, the Company’s Board of Directors increased the Company’s quarterly cash dividend to shareholders to an annual rate of $6.60 compared to $5.80 per share.

For more information on our dividend, see Note 10 of the Notes to the Consolidated Financial Statements included in Part II, Item 8, “Financial Statements and Supplementary Data.”

Pending Acquisitions.

In 2021, we entered into agreements to acquire multiple companies in the health care sector, most notably, Change Healthcare (NASDAQ:

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

Additionally, in January 2022, we entered into agreements to acquire multiple companies in the health care sector, subject to regulatory approval and other customary closing conditions.

As of December 31, 2022, we have entered into agreements to acquire companies in the health care sector, most notably, LHC Group, Inc.

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

The total anticipated capital required for these acquisitions, excluding the payoff of acquired indebtedness, is approximately $9 billion.

We completed the acquisition of LHC Group, Inc.

on February 22, 2023.

We do not have other significant contractual obligations or commitments requiring cash resources.

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Depending on the health care professional and type of service, the typical billing lag for services can be up to 90 days from the date of service.

Approximately 90% of claims related to medical care services are known and settled within 90 days from the date of service and substantially all within twelve months.

As of December 31, 2021, our days outstanding in medical payables was 47 days, calculated as total medical payables divided by total medical costs times the number of days in the period.

Approximately 90% of claims related to medical care services are known and settled within 90 days from the date of service.

In each reporting period, our operating results include the effects of more completely developed medical costs payable estimates associated with previously reported periods.

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If the revised estimate of prior period medical costs is more than the previous estimate, we will increase reported medical costs in the current period (unfavorable development).

Medical costs in 2021, 2020 and 2019 included favorable medical cost development related to prior years of $1.7 billion, $880 million and $580 million, respectively.

Medical costs in 2022, 2021 and 2020 included favorable medical cost development related to prior years of $410 million, $1.7 billion and $880 million, respectively.

In developing our medical costs payable estimates, we apply different estimation methods depending on the month for which incurred claims are being estimated.

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Completion factors are the most significant factors we use in developing our medical costs payable estimates for periods prior to the most recent two months.

Completion factors include judgments in relation to claim submissions such as the time from date of service

to claim receipt, claim levels and processing cycles, as well as other factors.

Our judgments also consider the impacts of COVID-19 on these factors.

If actual claims submission rates from providers (which can be influenced by a number of factors, including provider mix and electronic versus manual submissions) or our claim processing patterns are different than estimated, our reserve estimates may be significantly impacted.

Completion factors include judgments in relation to claim submissions such as the time from date of service to claim receipt, claim levels and processing cycles, as well as other factors.

If actual claims submission rates from providers (which can be influenced by a number of factors, including provider mix and electronic versus manual submissions), actual care activity incurred (which can be influenced by pandemics or seasonal illnesses, such as influenza), or our claim processing patterns are different than estimated, our reserve estimates may be significantly impacted.

The following table illustrates the sensitivity of these factors and the estimated potential impact on our medical costs payable estimates for those periods as of December 31, 2022:

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Medical cost PMPM trend factors are significant factors we use in developing our medical costs payable estimates for the most recent two months.

Medical cost trend factors are developed through a comprehensive analysis of claims incurred in prior months, provider contracting and expected unit costs, benefit design and a review of a broad set of health care utilization indicators, which included consideration of COVID-19.

These factors include but are not limited to pharmacy utilization trends, inpatient hospital authorization data and influenza incidence data from the National Centers for Disease Control.

These factors include but are not limited to pharmacy utilization trends, inpatient hospital authorization data and seasonal and other incidence data from the National Centers for Disease Control.

We also consider macroeconomic variables such as GDP growth, employment and disposable income.

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changes in medical practices;

and catastrophes, epidemics and pandemics, such as COVID-19.

and catastrophes, epidemics and pandemics.

The following table illustrates the sensitivity of these factors and the estimated potential impact on our medical costs payable estimates for the most recent two months as of December 31, 2022:

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macroeconomic, industry and market factors;

cost factors;

changes in overall financial performance;

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We may also elect to skip the qualitative testing and proceed directly to the quantitative testing.

For reporting units where a quantitative analysis is performed, we perform a test measuring the fair values of the reporting units and comparing them to their aggregate carrying values, including goodwill.

For reporting units where a quantitative analysis is performed, we perform a test measuring the fair values of the reporting units and comparing them to their carrying values, including goodwill.

If the fair value is less than the carrying value of the reporting unit, an impairment is recognized for the difference, up to the carrying amount of goodwill.

We estimate the fair values of our reporting units using a discounted cash flow method or a weighted combination of discounted cash flows and a market-based method.

The discounted cash flow method includes assumptions about a wide variety of internal and external factors.

We estimate the fair values of our reporting units using a discounted cash flow method which includes assumptions about a wide variety of internal and external factors.

Significant assumptions used in the discounted cash flow method include financial projections of free cash flow, including revenue trends, medical costs trends, operating productivity, income taxes and capital levels;

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and discount rates.

For each reporting unit, comparative market multiples are used to corroborate the results of our discounted cash flow test.

Financial projections and long-term growth rates used for our reporting units are consistent with, and use inputs from, our internal long-term business plan and strategies.

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The passage of time and the availability of additional information regarding areas of uncertainty with respect to the reporting units’ operations could cause these assumptions to change in the future.

Additionally, as part of our quantitative impairment testing, we perform various sensitivity analyses on certain key assumptions, such as discount rates, cash flow projections and peer company multiples to analyze the potential for a material impact.

The market-based method requires determination of an appropriate peer group whose securities are traded on an active market.

The peer group is used to derive market multiples to estimate fair value.

Additionally, as part of our quantitative impairment testing, we perform various sensitivity analyses on certain key assumptions, such as discount rates and cash flow projections to analyze the potential for a material impact.

As of October 1, 2022, we completed our annual impairment tests for goodwill with all of our reporting units having fair values substantially in excess of their carrying values.

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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-K

Item 7. Management’s Discussion and Analysis