What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2024-11-04 compared with 2024-08-09 · 60 added, 51 removed, 253 unchanged (30% of the section changed)

18 unchanged sentences

health system and have restored the majority of the affected Change Healthcare services.

To support care providers, we accelerated funding and provided interest-free loans of more than $9 billion through June 30, 2024.

For the three and six months ended June 30, 2024, we incurred $776 million and $1.4 billion of direct response costs, respectively, 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 $334 million and $613 million for the three and six months ended June 30, 2024, respectively, 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.

To support care providers we provided interest-free loans of nearly $9 billion through September 30, 2024.

For the three and nine months ended September 30, 2024, we incurred $341 million and $1.7 billion of direct response costs, respectively;

including increased medical care expenditures, as we suspended some care management activities to help care providers with their workflow processes;

costs associated with providing interest-free loans;

notifications of impacted persons;

and network restoration.

Optum Insight also experienced estimated business disruption impacts of $134 million and $747 million for the three and nine months ended September 30, 2024, respectively, 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, which will continue at a lesser extent in 2025 as we work to bring transaction volumes back to pre-event levels and win new business.

Based upon our ongoing review of the impacted data, we have found files containing protected health information (PHI) or personally identifiable information (PII), which cover a substantial proportion of people in America.

In June 2024, Change Healthcare gave public notice of the breach under HIPAA and began notifying affected customer entities in June and individuals in late July.

In June 2024, Change Healthcare gave public notice of the breach under the Health Insurance Portability and Accountability Act (HIPAA) and began notifying affected customer entities in June and individuals in late July.

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.

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

12 unchanged sentences

As expected and contemplated in our benefits design, we have 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 third quarter, we also experienced higher medical costs due to a pronounced upshift in coding intensity by hospitals and an acceleration of the prescribing of certain high-cost specialty medications, primarily those used to treat cardiovascular disease, auto-immune disorders and cancer.

We endeavor to mitigate these increases by engaging hospitals, physicians and consumers with information and helping them make clinically sound choices, with the objective of helping them achieve quality, affordable care.

As a result of the Change Healthcare cyberattack, we incurred medical costs related to the impact of 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 resumed these activities.

For the three and six months June 30, 2024, medical costs related to the temporary suspension of some care management activities were $290 million and $630 million, respectively.

For the nine months ended September 30, 2024, medical costs related to the temporary suspension of some care management activities were $630 million.

Medicaid Redeterminations.

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.

Medicaid redeterminations 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 care.

The Medicaid redetermination process has also caused a timing mismatch between the current health status of people served through Medicaid and state rate updates, which remain well short of current care activity.

Regulatory Trends and Uncertainties

Medicare Advantage Rates.

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

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

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.

4 unchanged sentences

SELECTED OPERATING PERFORMANCE AND OTHER SIGNIFICANT ITEMS

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

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

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

• UnitedHealthcare served 2.0 million more people domestically, driven by growth in commercial offerings, partially offset by the impact of Medicaid redeterminations.

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

• Diluted earnings per common share was $4.54, impacted by the loss on our South American subsidiaries held for sale and the Change Healthcare cyberattack.

• Cash flows from operations for the six months ended June 30, 2024 were $7.9 billion.

• Consolidated earnings from operations of $8.7 billion compared to $8.5 billion last year.

• Diluted earnings per common share was $6.51.

• Cash flows from operations for the nine months ended September 30, 2024 were $21.8 billion.

RESULTS SUMMARY

1 unchanged sentence

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

June 30, Increase/

(Decrease) Six Months Ended

June 30, Increase/

September 30, Increase/

(Decrease) Nine Months Ended

September 30, Increase/

2024 2023 2024 vs.

36 unchanged sentences

Medical costs increased primarily due to growth in people served through Medicare Advantage, those with higher acuity needs 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, South American impacts and decreased favorable reserve development.

The MCR increased as a result of the revenue effects of the Medicare funding reductions, decreased favorable reserve development and member mix.

For the nine months ended September 30, 2024, the MCR also increased due to incremental medical costs for accommodations made to care providers as a result of the Change Healthcare cyberattack.

Operating Cost Ratio

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 and investments to support future growth.

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

Loss on Sale of Subsidiary and Subsidiaries Held for Sale

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

During the six months ended June 30, 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.

In the second quarter of 2024, the Company initiated a plan to sell its remaining South American operations, which were classified as held for sale as of June 30, 2024.

During the nine months ended September 30, 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.

In the second quarter of 2024, the Company initiated a plan to sell its remaining South American operations, which were classified as held for sale as of September 30, 2024.

As a result, the Company recorded a loss of $1.2 billion, of which $876 million related to the impact of cumulative foreign currency translation losses.

5 unchanged sentences

The following table presents a summary of the reportable segment financial information:

Three Months Ended

June 30, Increase/

(Decrease) Six Months Ended

June 30, Increase/

Three Months Ended September 30, Increase/

(Decrease) Nine Months Ended

September 30, Increase/

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

25 unchanged sentences

Three Months Ended

June 30, Increase/

(Decrease) Six Months Ended

June 30, Increase/

September 30, Increase/

(Decrease) Nine Months Ended

September 30, Increase/

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

13 unchanged sentences

UnitedHealthcare’s revenues increased due to growth in the number of people served through Medicare Advantage, domestic commercial offerings and those with higher acuity needs, 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.

Earnings from operations decreased due to Medicare Advantage funding reductions, the impacts of Medicaid redeterminations and decreased favorable reserve development, partially offset by the factors impacting revenue above.

For the nine months ended September 30, 2024, earnings from operations also decreased due to 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 Rx and Optum Health.

Earnings from operations increased for the three months ended June 30, 2024 and were consistent for the six months ended June 30, 2024, with growth at Optum Rx and Optum Health offset by the impacts of the Change Healthcare cyberattack.

Earnings from operations increased at Optum Health and Optum Rx, partially offset by 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.

Earnings from operations increased due to cost management initiatives, partially offset by costs associated with serving newly added patients under value-based care arrangements.

For the six months ended June 30, 2024, earnings from operations increases were also partially offset by 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 June 30, 2024 and June 30, 2023, respectively.

Earnings from operations increased due to cost management initiatives, business portfolio and asset dispositions and increased investment income, partially offset by Medicare Advantage funding reductions and costs associated with serving newly added patients under value-based care arrangements.

Optum Health served approximately 104 million people and 103 million people as of September 30, 2024 and September 30, 2023, respectively.

Optum Insight

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

Earnings from operations decreased primarily due to the business disruption impacts and direct response costs related to 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, partially offset by growth in business services.

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 399 million and 381 million adjusted scripts in the second quarters of 2024 and 2023, respectively.

Earnings from operations also increased due to operating cost efficiencies and supply chain initiatives.

Optum Rx fulfilled 407 million and 383 million adjusted scripts in the third quarters of 2024 and 2023, 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) 2024 2023 2024 vs.

4 unchanged sentences

Customer funds administered — 2,037 (2,037)

Sales and maturities of investments, net of purchases 1,852 — 1,852

Repayments of care provider loans - cyberattack 3,189 — 3,189

Total sources of cash 43,607 43,185 422

1 unchanged sentence

Common stock repurchases (4,028) (6,500) 2,472

Cash paid for acquisitions, net of cash assumed (3,031) (8,161) 5,130

Cash paid for acquisitions and other transactions, net of cash assumed (11,674) (8,389) (3,285)

Purchases of investments, net of sales and maturities — (2,850) 2,850

1 unchanged sentence

Cash dividends paid (5,601) (5,023) (578)

Loans to providers - cyberattack (8,100) — (8,100)

Loans to care providers - cyberattack (8,904) — (8,904)

Customer funds administered (1,059) — (1,059)

Other (2,497) (2,495) (2)

5 unchanged sentences

2024 Cash Flows Compared to 2023 Cash Flows

Decreased cash flows provided by operating activities were primarily driven by the receipt of the July CMS premium payment of $11.8 billion in June 2023 and Change Healthcare cyberattack response actions, including the acceleration of provider payments.

Other significant changes in sources or uses of cash year-over-year included decreased cash paid for acquisitions, increased net issuances of short-term borrowings and long-term debt, decreased share repurchases and net purchases of investments, offset by loans to care providers in response to the Change Healthcare cyberattack and decreased customer funds administered.

Decreased cash flows provided by operating activities were primarily driven by the receipt of the October CMS premium payment of $11.9 billion in September 2023 and Change Healthcare cyberattack response actions.

Other significant changes in sources or uses of cash year-over-year included increased net issuances of short-term borrowings and long-term debt, net sales and maturities of investments and decreased share repurchases, offset by loans to care providers in response to the Change Healthcare cyberattack, increased cash paid for acquisitions and other transactions and decreased customer funds administered.

Financial Condition

As of June 30, 2024, our cash, cash equivalent, available-for-sale debt securities and equity securities balances of $75.2 billion included approximately $26.3 billion of cash and cash equivalents (of which $4.1 billion was available for general corporate use), $44.7 billion of debt securities and $4.2 billion of investments in equity securities.

As of September 30, 2024, our cash, cash equivalent, available-for-sale debt securities and equity securities balances of $83.5 billion included approximately $32.4 billion of cash and cash equivalents (of which $5.2 billion was available for general corporate use), $46.3 billion of debt securities and $4.9 billion of investments in equity securities.

Given the significant portion of our portfolio held in cash and cash equivalents, we do not anticipate fluctuations in the aggregate fair value of our financial assets to have a material impact on our liquidity or capital position.

Our available-for-sale debt securities portfolio had a weighted-average duration of 4.0 years and a weighted-average credit rating of “Double A” as of June 30, 2024.

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 September 30, 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 six months ended June 30, 2024, there were no material changes to this previously disclosed information outside the ordinary course of business.

During the nine months ended September 30, 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 June 30, 2024, our debt to debt-plus-shareholders’ equity ratio, as defined and calculated under the credit facilities, was approximately 43%.

As of September 30, 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 June 30, 2024 were as follows:

Our credit ratings as of September 30, 2024 were as follows:

Moody’s S&P Global Fitch A.M.

5 unchanged sentences

Share Repurchase Program.

During the six months ended June 30, 2024, we repurchased approximately 6 million shares at an average price of $505.46 per share.

During the nine months ended September 30, 2024, we repurchased approximately 7.7 million shares at an average price of $521.21 per share.

In June 2024, our Board of Directors amended our share repurchase program to authorize the repurchase of up to 35 million shares of Common Stock, in addition to all remaining shares authorized to be repurchased under the Board’s 2018 renewal of the program.

As of June 30, 2024, we had Board of Directors’ authorization to purchase up to 44 million shares of our common stock.

As of September 30, 2024, we had Board of Directors’ authorization to purchase up to 42 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.

In June 2024, our Board of Directors increased our quarterly cash dividend to an annual rate of $8.40 compared to $7.52 per share, which we had paid since June 2023.

For more information on our dividend, see Note 6 of Not es to the Condensed Consolidated Fina ncial Stateme nts included in Part I, Item 1 of this report.

For more information on our dividend, see Note 7 of Notes to the Condensed Consolidated Financial Statements included in Part I, Item 1 of this report.

Pending Transactions.

As of June 30, 2024, the Company had entered into transaction agreements in the health care sector, subject to regulatory approval and/or other customary closing conditions.

As of September 30, 2024, the Company had entered into transaction agreements in the health care sector, subject to regulatory approval and/or other customary closing conditions.

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

In July, 2024, the Company completed transactions in the health care sector for total consideration of approximately $10 billion.

For additional liquidity discussion, see Note 10 of Notes to the Consolidated Financial Statements included in Part II, Item 8, “Financial Statements and Supplementary Data” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in Part II, Item 7 in our 2023 10-K.

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