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Item 2. Management’s Discussion and Analysis

2025-10-28 compared with 2025-08-11 · 61 added, 60 removed, 247 unchanged (33% of the section changed)

24 unchanged sentences

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

Continued increased medical costs may impact both future pricing and benefit design, including for our individual exchange products in markets we choose to remain, and result in shifts between product categories for our employer benefits.

Continued increased medical costs may impact both future pricing and benefit design, including for our individual exchange products in markets where we choose to remain, and result in shifts between product categories for our employer benefits.

These potential changes, along with certain regulatory impacts, may result in decreased membership in future periods.

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We have observed increased care patterns, more notably related to physician and outpatient care, and to a lesser extent inpatient and emergency room utilization, that are above what we expected and contemplated in our pricing and benefits design.

We have also observed an increase in health care unit costs and the intensity of services delivered, driven by increases in provider pricing and additional services bundled per visit.

Additionally, the member profile of newly added patients under value-based care arrangements, people served in Medicare Advantage in markets where other plans exited, and peopled served within our individual exchange business has contributed to increased medical costs.

We have also observed an increase in health care unit costs and in the intensity of services delivered, driven by increases in provider pricing and additional services bundled per visit.

Additionally, the member profile of newly added patients under value-based care arrangements, people served in Medicare Advantage in markets where other have plans exited, and people served within our individual exchange business have contributed to increased medical costs.

These trends may continue in future periods.

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Additionally, increased medical costs in 2025, which are significantly above initial cost trend estimates, adds to the compounding impact of the previous multi-year rate shortfalls creating sustained pressure on 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, have and will result in reduced funding and potentially benefits for people, especially those with some of the greatest health and social challenges.

Further, substantial revisions to the risk adjustment model, which serves to adjust rates to reflect a patient’s health status and care resource needs, have resulted and will continue to result in reduced funding and potentially 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.

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SELECTED OPERATING PERFORMANCE AND OTHER SIGNIFICANT ITEMS

The following summarizes select second quarter 2025 year-over-year operating comparisons to second quarter 2024 and other financial results.

The following summarizes select third quarter 2025 year-over-year operating comparisons to third quarter 2024 and other financial results.

• Consolidated revenues grew 12%, UnitedHealthcare revenues grew 16% and Optum revenues grew 8%.

• UnitedHealthcare served 1.0 million more people, driven by growth in Medicare Advantage and commercial offerings.

• UnitedHealthcare served 795,000 more people, primarily driven by growth in Medicare Advantage.

• Consolidated earnings from operations of $4.3 billion compared to $8.7 billion last year, with 2025 impacted by elevated medical cost trend and 2024 impacted by the Change Healthcare cyberattack.

• Diluted earnings per common share was $3.74.

• Cash flows from operations for the six months ended June 30, 2025 were $12.6 billion.

• Diluted earnings per common share were $2.59.

• Cash flows from operations for the nine months ended September 30, 2025 were $18.6 billion.

RESULTS SUMMARY

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(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/

2025 2024 2025 vs.

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Medical costs increased primarily due to the IRA-driven impacts on Medicare Part D plans, elevated medical cost trend and growth in people served through Medicare Advantage and those with higher acuity needs.

The MCR increased as a result of the revenue effects of the Medicare funding reductions;

elevated medical cost trend;

the member profile of newly added patients under value-based care arrangements;

and the impacts of market morbidity changes on our individual exchange offerings, including the acceleration of anticipated future losses related to the second half of 2025;

partially offset by the incremental medical costs for accommodations made to care providers as a results of the Change Healthcare cyberattack incurred in 2024.

For the three months ended June 30, 2025, the MCR also increased due to the seasonal impacts of the IRA on Medicare Part D.

The MCR increased as a result of the revenue effects of the Medicare funding reductions, elevated medical cost trend, the member profile of newly added patients under value-based care arrangements, the seasonal impacts of the IRA on Medicare Part D and the impacts of market morbidity changes on our individual exchange offerings.

For the nine months ended September 30, 2025, the MCR also increased due to decreased favorable reserve development, partially offset by the incremental medical costs for accommodations made to care providers in 2024 as a result of the Change Healthcare cyberattack.

The acceleration of anticipated future losses related to our individual exchange offerings recorded in the second quarter of 2025 decreased the MCR for the three months ended September 30, 2025 and increased the MCR for the nine months ended September 30, 2025.

Operating Cost Ratio

The operating cost ratio decreased primarily due to revenue impacts of government programs, including the IRA-driven impacts on Medicare Part D plans, operating cost management and our direct response efforts to the Change Healthcare cyberattack incurred in 2024, partially offset by investments to support future growth.

The effective income tax rate decreased due to tax benefits having significantly more impact due to lower pre-tax income in 2025, taxable earnings mix and the impact of the updated full year effective tax rate expectation.

For the six months ended June 30, 2025, the tax rate was also lower due to non-deductible losses on the sale of subsidiary and subsidiaries held for sale in 2024.

The operating cost ratio for the three months ended September 30, 2025, increased primarily due to decreased gains related to business portfolio refinement, business mix and investments to support future growth;

partially offset by the revenue impacts of government programs, including the IRA-driven impacts on Medicare Part D plans and operating cost management.

For the nine months ended September 30, 2025 the operating cost ratio decreased due to the revenue impacts of government programs, including the IRA-driven impacts on Medicare Part D plans;

operating cost management and our direct response efforts to the Change Healthcare cyberattack in 2024;

partially offset by business mix, investments to support future growth and decreased gains related to business portfolio refinement.

The effective income tax rate decreased for the nine months ended September 30, 2025 due to non-deductible losses on the sale of subsidiary and subsidiaries held for sale in 2024.

Reportable Segments

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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) 2025 2024 2025 vs.

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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) 2025 2024 2025 vs.

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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) 2025 2024 2025 vs.

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South American businesses held for sale 1,160 1,335 (175) (13) %

UnitedHealthcare’s revenues increased due to the IRA-driven impacts on Medicare Part D plans and growth in the number of people served through Medicare Advantage, fee-based commercial offerings and those with higher acuity needs, partially offset by decreased people served through risk-based commercial offerings.

Earnings from operations decreased primarily due to the impacts of Medicare Advantage funding reductions, elevated medical cost trend, the impacts of market morbidity changes on our individual exchange offerings, including the acceleration of anticipated future losses related to the second half of 2025 and other write-offs and settlements, partially offset by the incremental medical costs for accommodations to support care providers as a result of the Change Healthcare cyberattack incurred in 2024.

For the six months ended June 30, 2025, decreased earnings from operations was also partially offset by the seasonal impact of the IRA on Medicare Part D.

Total revenues increased primarily due to growth at Optum Rx, partially offset by Optum Health.

Earnings from operations decreased due to Optum Health, partially offset by the impacts of the Change Healthcare cyberattack incurred in 2024 and Optum Rx.

For the three months ended September 30, 2025, decreased earnings from operations was also due to the seasonal impact of the IRA on Medicare Part D.

For the nine months ended September 30, 2025, decreased earnings from operations was partially offset by the seasonal impact of the IRA on Medicare Part D and the incremental medical costs for accommodations to support care providers in 2024 as a result of the Change Healthcare cyberattack.

The acceleration of anticipated future losses related to our individual exchange offerings recorded in the second quarter of 2025 increased earnings from operations for the three months ended September 30, 2025 and decreased operating earnings for the nine months ended September 30, 2025.

Total revenues increased primarily due to growth at Optum Rx.

For the nine months ended September 30, 2025, increased revenues were partially offset by Optum Health.

Earnings from operations decreased due to Optum Health, partially offset by the impacts of the Change Healthcare cyberattack in 2024.

The results by segment were as follows:

Revenues at Optum Health decreased primarily due to the conversion of risk-based contracts, Medicare Advantage funding reductions and the profile of members served, partially offset by growth in patients served under value-based arrangements.

Earnings from operations decreased due to Medicare Advantage funding reductions, the member profile of newly added patients under value-based care arrangements, elevated medical cost trends and contractual settlements, partially offset by cost management initiatives.

For the six months ended June 30, 2025, decreased earnings from operations was also partially offset by the incremental medical costs for accommodations to support care providers as a result of the Change Healthcare cyberattack incurred in 2024.

Optum Health served approximately 98 million people and 104 million people as of June 30, 2025 and June 30, 2024, respectively.

Earnings from operations decreased due to Medicare Advantage funding reductions, the member profile of newly added patients under value-based care arrangements, elevated medical cost trends and decreased gains related to business portfolio refinement, partially offset by cost management initiatives.

For the three months ended September 30, 2025 decreased earnings from operations was also due to lower investment income, partially offset by decreased contractual settlements.

For the nine months ended September 30, 2025, decreased earnings from operations was also partially offset by the incremental medical costs for accommodations to support care providers in 2024 as a result of the Change Healthcare cyberattack.

Optum Health served approximately 96 million people and 104 million people as of September 30, 2025 and September 30, 2024, respectively.

Optum Insight

Revenues at Optum Insight increased due to decreased business disruption impacts related to the Change Healthcare cyberattack.

Earnings from operations at Optum Insight increased due to decreased 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.

Earnings from operations also increased due to operating cost efficiencies.

Optum Rx fulfilled 414 million and 399 million adjusted scripts in the second quarters of 2025 and 2024, respectively.

Revenues and earnings from operations at Optum Insight decreased for the three months ended September 30, 2025 due to lower volumes within business services, partially offset by growth in technology services and decreased impacts related to the Change Healthcare cyberattack.

Revenues and earnings from operations increased for the nine months ended September 30, 2025 due to decreased impacts related to the Change Healthcare cyberattack and growth in technology services, partially offset by lower volumes within business services.

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

Earnings from operations increased due to the factors impacting revenue and operating cost efficiencies, partially offset by decreased investment income.

Optum Rx fulfilled 414 million and 407 million adjusted scripts in the third quarters of 2025 and 2024, 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) 2025 2024 2025 vs.

3 unchanged sentences

Proceeds from common stock issuances 803 1,611 (808)

Customer funds administered — 990 (990)

Repayments of care provider loans - cyberattack 1,293 604 689

Sales and maturities of investments, net of purchases 1,657 1,852 (195)

Repayments of care provider loans - cyberattack 1,543 3,189 (1,646)

Total sources of cash 25,030 43,607 (18,577)

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Cash paid for acquisitions and other transactions, net of cash assumed (4,436) (11,674) 7,238

Purchases of investments, net of sales of maturities — (221) 221

Purchases of property, equipment and capitalized software (2,674) (2,587) (87)

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2025 Cash Flows Compared to 2024 Cash Flows

Increased cash flows provided by operating activities were driven by changes in working capital accounts, the seasonal impact of the IRA on Medicare Part D and the impacts of the Change Healthcare cyberattack incurred in 2024.

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

Decreased cash flows provided by operating activities were driven by decreased net earnings, partially offset by changes in working capital accounts and the impacts of the Change Healthcare cyberattack in 2024.

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

Financial Condition

As of June 30, 2025, our cash, cash equivalent, available-for-sale debt securities and marketable equity securities balances of $77.3 billion included approximately $28.6 billion of cash and cash equivalents (of which $3.3 billion was available for general corporate use), $46.6 billion of debt securities and $2.1 billion of investments in marketable equity securities.

As of September 30, 2025, our cash, cash equivalent, available-for-sale debt securities and marketable equity securities balances of $76.3 billion included approximately $27.2 billion of cash and cash equivalents (of which $1.2 billion was available for general corporate use), $46.8 billion of debt securities and $2.2 billion of investments in marketable 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 4.3 years and a weighted-average credit rating of “Double A” as of June 30, 2025.

Our available-for-sale debt securities portfolio had a weighted-average duration of 4.3 years and a weighted-average credit rating of “Double A” as of September 30, 2025.

When multiple credit ratings are available for an individual security, the average of the available ratings is used to determine the weighted-average credit rating.

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A summary of our cash requirements as of December 31, 2024 was disclosed in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2024 10-K.

During the six months ended June 30, 2025, there were no material changes to this previously disclosed information outside the ordinary course of business.

During the nine months ended September 30, 2025, there were no material changes to this previously disclosed information outside the ordinary course of business.

We believe our capital resources are sufficient to meet future, short-term and long-term, liquidity needs.

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Our revolving bank credit facilities provide liquidity support for our commercial paper borrowing program, which facilitates the private placement of unsecured debt through independent broker-dealers, and are available for general corporate purposes.

For more information on our commercial paper and bank credit facilities, see Note 8 of Notes to the Consolidated Financial Statements included in Part II, Item 8, “Financial Statements and Supplementary Data” in our 2024 10-K.

As of June 30, 2025, we were in compliance with the various covenants under our bank credit facilities.

For more information on our commercial paper and bank credit facilities, see Note 5 of the Notes to the Condensed Consolidated Financial Statements included in Part I, Item 1 of this report and Note 8 of Notes to the Consolidated Financial Statements included in Part II, Item 8, “Financial Statements and Supplementary Data” in our 2024 10-K.

As of September 30, 2025, we were in compliance with the various covenants under our bank credit facilities.

Long-Term Debt.

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Credit Ratings.

Our credit ratings as of June 30, 2025 were as follows:

Our credit ratings as of September 30, 2025 were as follows:

Moody’s S&P Global Fitch A.M.

Ratings Outlook Ratings Outlook Ratings Outlook Ratings Outlook

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

Senior unsecured debt A2 Negative A+ Negative A Negative A- Stable

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

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As a result of an increased MCR impacting our regulated insurance and HMO subsidiaries, the specified levels of required statutory capital required to be maintained are expected to increase.

While we continue to maintain significant levels of excess statutory capital in our subsidiaries, the amount of dividends our subsidiaries are able to pay to their parent companies during the remainder of 2025 may be impacted.

During the six months ended June 30, 2025, our domestic insurance and HMO subsidiaries paid their parent companies dividends of $1.9 billion.

We entered into various agreements with reinsurers that could limit our risk of loss under certain circumstances, thus reducing our capital and surplus requirements.

These agreements do not qualify for reinsurance accounting and are therefore accounted for under deposit accounting.

During the nine months ended September 30, 2025, our domestic insurance and HMO subsidiaries paid their parent companies dividends, net of capital infusions, of $841 million.

Share Repurchase Program.

During the six months ended June 30, 2025, we repurchased approximately 12.1 million shares at an average price of $454.82 per share.

As of June 30, 2025, we had Board of Directors’ authorization to purchase up to 21.0 million shares of our common stock.

During the nine months ended September 30, 2025, we repurchased approximately 12.1 million shares of common stock at an average price of $454.82 per share.

As of September 30, 2025, we had Board of Directors’ authorization to purchase up to 21.0 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.

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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.

Pending Acquisitions.

As of June 30, 2025, 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, was approximately $4 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 2024 10-K.

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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-Q

Item 2. Management’s Discussion and Analysis