What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-11-06 compared with 2023-08-02 · 34 added, 33 removed, 239 unchanged (22% of the section changed)

26 unchanged sentences

Our medical cost trends primarily relate to changes in unit costs, care activity and prescription drug costs.

During the second quarter, we observed increased care patterns, primarily related to outpatient procedures for seniors, which may continue in future periods.

During the third quarter we continued to observe increased care patterns, primarily related to outpatient procedures for seniors, consistent with the levels observed in the second quarter, and which may continue in future periods.

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 quality, affordable care.

Medicaid Redeterminations.

The majority of states have resumed Medicaid redeterminations, which have impacted the number of people served through our Medicaid offerings, partially offset by an increase in consumers served through our commercial offerings as we endeavor to ensure that people and families have continued access to benefits.

Regulatory Trends and Uncertainties

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SELECTED OPERATING PERFORMANCE AND OTHER SIGNIFICANT ITEMS

The following summarizes select second quarter 2023 year-over-year operating comparisons to second quarter 2022 and other financial results.

The following summarizes select third quarter 2023 year-over-year operating comparisons to third quarter 2022 and other financial results.

• Consolidated revenues grew 14%, UnitedHealthcare revenues grew 13% and Optum revenues grew 22%.

• UnitedHealthcare served 1.6 million more people, driven by growth across our U.S.

• Consolidated earnings from operations of $8.1 billion compared to $7.1 billion last year, included growth of 13% at both UnitedHealthcare and Optum.

• UnitedHealthcare served 1.5 million more people, driven by growth across each of our businesses.

• Consolidated earnings from operations of $8.5 billion compared to $7.5 billion last year, including growth of 21% at UnitedHealthcare and 7% at Optum.

• Diluted earnings per common share were $6.24.

• Cash flows from operations for the six months ended June 30, 2023 were $27.4 billion.

• Cash flows from operations for the nine months ended September 30, 2023 were $34.3 billion.

• Return on equity was 28.0%.

2 unchanged sentences

(in millions, except percentages and per share data) Three Months Ended

June 30, Increase/(Decrease) Six Months Ended

June 30, Increase/(Decrease)

September 30, Increase/(Decrease) Nine Months Ended

September 30, Increase/(Decrease)

2023 2022 2023 vs.

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The MCR increased as a result of elevated care activity, primarily relating to outpatient care for seniors, and business mix.

For the three months ended June 30, 2023, the MCR also increased due to decreased favorable reserve development.

Operating Cost Ratio

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Three Months Ended

June 30, Increase/

(Decrease) Six Months Ended

June 30, Increase/(Decrease)

September 30, Increase/

(Decrease) Nine Months Ended

September 30, Increase/

(in millions, except percentages) 2023 2022 2023 vs.

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The following table summarizes UnitedHealthcare revenues by business:

Three Months Ended June 30, Increase/(Decrease) Six Months Ended June 30, Increase/(Decrease)

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

(in millions, except percentages) 2023 2022 2023 vs.

7 unchanged sentences

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

June 30, Increase/(Decrease)

September 30, Increase/(Decrease)

(in thousands, except percentages) 2023 2022 2023 vs.

13 unchanged sentences

UnitedHealthcare’s revenues increased due to growth in the number of people served through individual and group Medicare Advantage plans;

growth in existing Medicaid markets, including a greater mix of people with higher acuity needs;

growth in people served with higher acuity needs partially offset by Medicaid redeterminations;

and an increase in the number of people served through commercial offerings.

3 unchanged sentences

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 increased investment income and cost management initiatives, partially offset by higher senior outpatient and behavioral health care activity and costs associated with serving newly added patients under value-based care arrangements.

Optum Health served approximately 103 million people as of June 30, 2023 compared to 101 million people as of June 30, 2022.

For the nine months ended September 30, 2023, earnings from operations increased, while remaining consistent for the three months ended September 30, 2023, due to cost management initiatives and increased investment income, offset by higher senior outpatient and behavioral health care activity, costs associated with serving newly added patients under value-based care arrangements and decreased asset dispositions.

Optum Health served approximately 103 million people as of September 30, 2023 compared to 101 million people as of September 30, 2022.

Optum Insight

Revenues and earnings from operations at Optum Insight increased due to growth in business services as a result of business combinations and growth in technology services.

Revenues and earnings from operations at Optum Rx increased due to growth in specialty pharmacy offerings and higher script volumes from growth in people served.

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

Optum Rx fulfilled 381 million and 357 million adjusted scripts in the second quarters of 2023 and 2022, respectively.

Revenues and earnings from operations at Optum Rx increased due to growth in pharmacy offerings and higher script volumes from both new clients and growth in existing clients.

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

Optum Rx fulfilled 383 million and 359 million adjusted scripts in the third quarters of 2023 and 2022, respectively.

LIQUIDITY, FINANCIAL CONDITION AND CAPITAL RESOURCES

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

Six Months Ended June 30, Increase/(Decrease)

Nine Months Ended September 30, Increase/(Decrease)

(in millions) 2023 2022 2023 vs.

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Customer funds administered 2,037 7,028 (4,991)

Other — 50 (50)

Total sources of cash 43,185 42,707

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2023 Cash Flows Compared to 2022 Cash Flows

Increased cash flows provided by operating activities were primarily driven by an increase in unearned revenue due to the June receipt of our July CMS premium payment of $11.8 billion and changes in working capital accounts.

Other significant changes in sources or uses of cash year-over-year included increased net issuances of short-term borrowings and long-term debt and decreased net purchases of investments, partially offset by decreased customer funds administered and increased cash paid for acquisitions.

Increased cash flows provided by operating activities were primarily driven by increased net earnings and the receipt of our October CMS premium payment of $11.9 billion and $9.8 billion in September 2023 and 2022, respectively.

Financial Condition

As of June 30, 2023, our cash, cash equivalent, available-for-sale debt securities and equity securities balances of $90.1 billion included approximately $41.8 billion of cash and cash equivalents (of which $1.2 billion was available for general corporate use), $44.1 billion of debt securities and $4.2 billion of investments in equity securities.

As of September 30, 2023, our cash, cash equivalent, available-for-sale debt securities and equity securities balances of $87.5 billion included approximately $38.9 billion of cash and cash equivalents (of which $1.5 billion was available for general corporate use), $44.4 billion of debt securities and $4.2 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 3.9 years and a weighted-average credit rating of “Double A” as of June 30, 2023.

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, 2023.

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.

3 unchanged sentences

A summary of our cash requirements as of December 31, 2022 was disclosed in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2022 10-K.

During the six months ended June 30, 2023, there were no material changes to this previously disclosed information outside the ordinary course of business.

During the nine months ended September 30, 2023, 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 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 June 30, 2023, our debt to debt-plus-shareholders’ equity ratio, as defined and calculated under the credit facilities, was approximately 40%.

As of September 30, 2023, our debt to debt-plus-shareholders’ equity ratio, as defined and calculated under the credit facilities, was approximately 38%.

Long-Term Debt.

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Credit Ratings.

Our credit ratings as of June 30, 2023 were as follows:

Moody’s (a) S&P Global Fitch A.M.

Our credit ratings as of September 30, 2023 were as follows:

Moody’s S&P Global Fitch A.M.

Ratings Outlook Ratings Outlook Ratings Outlook Ratings Outlook

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

Senior unsecured debt A2 Stable A+ Stable A Stable A Stable

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

(a) On July 27, 2023, Moody’s upgraded the credit rating on our senior unsecured debt to A2 with an outlook of Stable and the credit rating on our commercial paper to P-1.

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.

1 unchanged sentence

Share Repurchase Program.

During the six months ended June 30, 2023, we repurchased approximately 10 million shares at an average price of $483.78 per share.

As of June 30, 2023, we had Board of Directors’ authorization to purchase up to 21 million shares of our common stock.

During the nine months ended September 30, 2023, we repurchased approximately 13 million shares at an average price of $485.10 per share.

As of September 30, 2023, we had Board of Directors’ authorization to purchase up to 18 million shares of our common stock.

In June 2023, the Company’s Board of Directors increased our quarterly cash dividend to shareholders to an annual rate of $7.52 compared to $6.60 per share.

1 unchanged sentence

Pending Acquisitions.

As of June 30, 2023, we have entered into agreements to acquire companies in the health care sector, subject to regulatory approval and other customary closing conditions.

As of September 30, 2023, we have entered into agreements to acquire companies in the health care sector, subject to regulatory approval and other customary closing conditions.

The total anticipated consideration required for these acquisitions, excluding the payoff of acquired indebtedness, is approximately $5 billion.

46 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