What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2024-05-09 compared with 2023-11-06 · 77 added, 61 removed, 212 unchanged (39% of the section changed)

7 unchanged sentences

UnitedHealth Group 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.

Our two distinct, yet complementary businesses — 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:

3 unchanged sentences

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 2023 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.

Change Healthcare Cyberattack

As previously announced, on February 21, 2024, we identified that cybercrime threat actors had gained access to certain Change Healthcare information technology systems.

Upon detection of this outside threat, we isolated the impacted systems to protect our partners and customers.

We have made substantial progress in mitigating the impact to consumers and care providers of the unprecedented cyberattack on the U.S.

health system and certain Change Healthcare services.

To support care providers, we accelerated funding and provided interest-free loans of approximately $3.9 billion through March 31, 2024, which has increased to over $6.5 billion through April 30, 2024.

For the three months ended March 31, 2024, we incurred $593 million of direct response costs, including network restoration and increased medical care expenditures, as we suspended some care management activities to help care providers with their workflow processes.

Optum Insight also experienced estimated business disruption impacts of $279 million for the three months ended March 31, 2024, reflecting lost revenue while maintaining full readiness of the affected Change Healthcare services.

We expect to continue to incur direct response costs and experience business disruption impacts over the remainder of the year, including costs to continue to restore Change Healthcare’s services and the impact of suspended care management activities.

In April 2024, we also announced that based on initial targeted data sampling to date, we have found files containing protected health information (PHI) or personally identifiable information (PII), which could cover a substantial proportion of people in America.

The investigation of impacted data is ongoing.

It is possible that future risks and uncertainties resulting from the Change Healthcare cyberattack, including risks related to impacted data, litigation, reputational harm, and regulatory actions could adversely affect our financial condition or results of operations.

Business Trends

Our businesses participate in the United States, South America and certain other international health markets.

Our businesses participate in the United States and certain other international health markets.

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.

9 unchanged sentences

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

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.

As expected and contemplated in our benefits design, during the first quarter we continued to observe increased care patterns, primarily related to outpatient procedures for seniors, 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.

In the first quarter 2024, as a result of the Change Healthcare cyberattack, we incurred $340 million of medical costs related to the temporary suspension of some care management activities, impacting our UnitedHealthcare and Optum Health businesses, to help care providers with their workflow processes.

Early in the second quarter we have resumed these activities.

Additionally, the business disruption impacted claims receipt timing for payer customers, including UnitedHealthcare, which could potentially result in increased variability to our medical cost reserve development in future periods.

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.

Medicaid redeterminations have continued to impact 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 care.

Regulatory Trends and Uncertainties

1 unchanged sentence

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

For example, the Final Notice for 2024 rates resulted 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.

For example, the Final Notices for 2024 and 2025 rates resulted in an industry base rate decrease, both well short of an increasing industry forward medical cost trend, creating continued pressure in the Medicare Advantage program.

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

3 unchanged sentences

SELECTED OPERATING PERFORMANCE AND OTHER SIGNIFICANT ITEMS

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

The following summarizes select first quarter 2024 year-over-year operating comparisons to first quarter 2023 and other financial results.

• Consolidated revenues grew 9%, UnitedHealthcare revenues grew 7% and Optum revenues grew 13%.

• 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 nine months ended September 30, 2023 were $34.3 billion.

• Return on equity was 28.0%.

• UnitedHealthcare served 1.6 million more people domestically, driven by growth in commercial and Medicare offerings.

• Consolidated earnings from operations of $7.9 billion compared to $8.1 billion last year, impacted by the Change Healthcare cyberattack.

• Diluted loss per common share was $1.53, impacted by the loss on the sale of our Brazil operations and the Change Healthcare cyberattack.

• Cash flows from operations for the three months ended March 31, 2024 were $1.1 billion.

RESULTS SUMMARY

1 unchanged sentence

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

September 30, Increase/(Decrease) Nine Months Ended

September 30, Increase/(Decrease)

2023 2022 2023 vs.

March 31, Increase/(Decrease)

2024 2023 2024 vs.

12 unchanged sentences

Interest expense (844) (754) (90) 12

Earnings before income taxes 7,692 6,946 746 11 22,253 20,128 2,125 11

Loss on sale of subsidiary (7,086) — (7,086) nm

Earnings before income taxes 1 7,332 (7,331) nm

Provision for income taxes (1,222) (1,558) 336 (22)

Net earnings 6,038 5,384 654 12 17,469 15,731 1,738 11

Net (loss) earnings (1,221) 5,774 (6,995) nm

Earnings attributable to noncontrolling interests (188) (163) (25) 15

Net earnings attributable to UnitedHealth Group common shareholders $ 5,841 $ 5,262 $ 579 11 % $ 16,926 $ 15,359 $ 1,567 10 %

Diluted earnings per share attributable to UnitedHealth Group common shareholders $ 6.24 $ 5.55 $ 0.69 $ 18.01 $ 16.15 $ 1.86

Net (loss) earnings attributable to UnitedHealth Group common shareholders $ (1,409) $ 5,611 $ (7,020) nm

Diluted (loss) earnings per share attributable to UnitedHealth Group common shareholders $ (1.53) $ 5.95 $ (7.48)

Medical care ratio (a) 84.3 % 82.2 % 2.1 %

1 unchanged sentence

Operating margin 7.9 8.8 (0.9)

Tax rate 21.5 22.5 (1.0) 21.5 21.8 (0.3)

Tax rate nm 21.2 nm

Net earnings margin (b) (1.4) 6.1 (7.5)

Return on equity (c) 28.0 % 28.5 % (0.5) % 27.7 % 28.1 % (0.4) %

Return on equity (c) nm 28.2 % nm

nm = not meaningful

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

4 unchanged sentences

Consolidated Financial Results

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.

Revenues also increased due to increased investment income, primarily driven by increased interest rates.

The increases in revenues were primarily driven by growth in the number of people served through Medicare Advantage and domestic commercial offerings, pricing trends and growth in Optum Health and Optum Rx.

Medical Costs and MCR

Medical costs increased primarily due to growth in people served through Medicare Advantage and Medicaid.

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

Medical costs increased primarily due to growth in people served through Medicare Advantage and domestic commercial offerings.

The MCR increased as a result of the revenue effects of the Medicare funding reductions, incremental medical costs for accommodations made to care providers as a result of the Change Healthcare cyberattack and decreased favorable reserve development.

Operating Cost Ratio

The operating cost ratio increased primarily due to business mix and investments to support future growth, partially offset by continued productivity advances.

The operating cost ratio decreased primarily due to operating cost management, partially offset by the impact of our direct response efforts to the Change Healthcare cyberattack, business mix and investments to support future growth.

Loss on Sale of Subsidiary

On February 6, 2024, the Company completed the sale of its Brazil operations.

During the three months ended March 31, 2024, we recorded a loss of $7.1 billion, of which $4.1 billion related to the impact of cumulative foreign currency translation losses previously included in accumulated other comprehensive loss.

As a result of the loss, which was non-deductible for income tax purposes, the income tax rate and return on equity were not meaningful for the three months ended March 31, 2024.

Reportable Segments

5 unchanged sentences

Three Months Ended

September 30, Increase/

(Decrease) Nine Months Ended

September 30, Increase/

March 31, Increase/

(in millions, except percentages) 2024 2023 2024 vs.

2022 2023 2022 2023 vs.

UnitedHealthcare $ 75,357 $ 70,468 $ 4,889 7 %

22 unchanged sentences

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/

(in millions, except percentages) 2024 2023 2024 vs.

2022 2023 2022 2023 vs.

UnitedHealthcare Employer & Individual - Domestic $ 17,839 $ 16,544 $ 1,295 8 %

5 unchanged sentences

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

September 30, Increase/(Decrease)

March 31, Increase/(Decrease)

(in thousands, except percentages) 2024 2023 2024 vs.

12 unchanged sentences

Medicare Part D stand-alone 3,085 3,380 (295) (9) %

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

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.

Earnings from operations increased due to increased investment income and the factors impacting revenue, partially offset by elevated care activity, primarily relating to outpatient care for seniors.

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

UnitedHealthcare’s revenues increased due to growth in the number of people served through Medicare Advantage, those with higher acuity needs and domestic commercial offerings, partially offset by decreased people served globally due to the sale of our Brazil operations and Medicaid offerings due to continued redeterminations.

Earnings from operations increased due to the factors impacting revenue, partially offset by Medicare Advantage funding reductions and incremental medical costs for accommodations to support care providers as a result of the Change Healthcare cyberattack.

Total revenues increased due to growth at Optum Health and Optum Rx.

Earnings from operations decreased due to the impacts of the Change Healthcare cyberattack.

The results by segment were as follows:

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

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.

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

Earnings from operations increased due to cost management initiatives, partially offset by costs associated with serving newly added patients under value-based care arrangements and incremental medical costs for accommodations to support care providers as a result of the Change Healthcare cyberattack.

Optum Health served approximately 104 million people and 103 million people as of March 31, 2024 and March 31, 2023, respectively.

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 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.

Revenues at Optum Insight were consistent due to growth in technology services, offset by the business disruption impacts from the Change Healthcare cyberattack.

Earnings from operations decreased primarily due to the business disruption impacts and direct response costs related to the Change Healthcare cyberattack.

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

Optum Rx fulfilled 395 million and 378 million adjusted scripts in the first quarters of 2024 and 2023, 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) 2024 2023 2024 vs.

4 unchanged sentences

Customer funds administered 1,745 5,012 (3,267)

Other — 50 (50)

Sales and maturities of investments, net of purchases 492 — 492

Total sources of cash 15,231 34,058

10 unchanged sentences

2024 Cash Flows Compared to 2023 Cash Flows

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.

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, primarily driven by Medicare Part D timing, and increased cash paid for acquisitions.

Decreased cash flows provided by operating activities were primarily driven by the receipt of the April CMS premium payment of $11.2 billion in March 2023 and Change Healthcare cyberattack response actions, including the acceleration of provider payments and the timing of public-sector cash receipts.

Other significant changes in sources or uses of cash year-over-year included decreased cash paid for acquisitions and net purchases of investments;

offset by decreased customer funds administered;

loans to care providers in response to the Change Healthcare cyberattack, included in other uses of cash;

increased common stock repurchases and decreased net issuances of short-term borrowings and long-term debt.

Financial Condition

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.

As of March 31, 2024, our cash, cash equivalent, available-for-sale debt securities and equity securities balances of $76.7 billion included approximately $28.4 billion of cash and cash equivalents (of which $2.1 billion was available for general corporate use), $44.1 billion of debt securities and $4.1 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, 2023.

Our available-for-sale debt securities portfolio had a weighted-average duration of 4.0 years and a weighted-average credit rating of “Double A” as of March 31, 2024.

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, 2023 was disclosed in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2023 10-K.

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

During the three months ended March 31, 2024, 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.

4 unchanged sentences

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

As of March 31, 2024, our debt to debt-plus-shareholders’ equity ratio, as defined and calculated under the credit facilities, was approximately 43%.

Long-Term Debt.

2 unchanged sentences

Credit Ratings.

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

Our credit ratings as of March 31, 2024 were as follows:

Moody’s S&P Global Fitch A.M.

5 unchanged sentences

Share Repurchase Program.

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.

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, 2024, we repurchased approximately 6 million shares at an average price of $505.46 per share.

As of March 31, 2024, we had Board of Directors’ authorization to purchase up to 9 million shares of our common stock.

The Board of Directors from time to time may further amend the share repurchase program in order to increase the authorized number of shares which may be repurchased under the program.

Our quarterly cash dividend to shareholders reflects an annual rate of $7.52.

Pending Acquisitions.

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.

As of March 31, 2024, 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 $4 billion.

12 unchanged sentences

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.

3 unchanged sentences

new or changes in existing health care laws or regulations, or their enforcement or application;

cyberattacks, other privacy/data security incidents, or our failure to comply with related regulations;

reductions in revenue or delays to cash flows received under government programs;

3 unchanged sentences

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 our businesses providing pharmacy care services;

12 unchanged sentences

downgrades in our credit ratings;

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.

and our ability to obtain sufficient funds from our regulated subsidiaries or from external financings to fund our obligations, reinvest in our business, 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.

5 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