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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________________________________________________ 
Form 10-Q
__________________________________________________________ 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2019
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _______ TO _______
Commission File Number: 1-10864
__________________________________________________________ 
    uhglogo1a01a01a24.jpg
UnitedHealth Group Incorporated
(Exact name of registrant as specified in its charter)
 __________________________________________________________ 
Delaware
 
41-1321939
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
UnitedHealth Group Center
 
55343
9900 Bren Road East
 
Minnetonka,
Minnesota
 
(Address of principal executive offices)
 
(Zip Code)
(952) 936-1300
(Registrant’s telephone number, including area code)
_________________________________________________________  
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act
Large Accelerated Filer
 
Accelerated filer
 
Non-accelerated filer
Smaller reporting company
 
 
 
 
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes No 
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
 
Trading Symbol(s)
 
Name of each exchange on which registered
Common Stock, $.01 par value
 
UNH
 
NYSE
As of July 31, 2019, there were 947,680,609 shares of the registrant’s Common Stock, $.01 par value per share, issued and outstanding.
 
 
 
 
 

UNITEDHEALTH GROUP
Table of Contents
 
 
 
 
 
Page
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 




PART I
ITEM 1.    FINANCIAL STATEMENTS
UnitedHealth Group
Condensed Consolidated Balance Sheets
(Unaudited)
(in millions, except per share data)
 
June 30,
2019
 
December 31,
2018
Assets
 
 
 
 
Current assets:
 
 
 
 
Cash and cash equivalents
 
$
13,745

 
$
10,866

Short-term investments
 
3,524

 
3,458

Accounts receivable, net
 
9,741

 
11,388

Other current receivables, net
 
8,434

 
6,862

Assets under management
 
2,943

 
3,032

Prepaid expenses and other current assets
 
3,651

 
3,086

Total current assets
 
42,038

 
38,692

Long-term investments
 
35,696

 
32,510

Property, equipment and capitalized software, net
 
8,681

 
8,458

Goodwill
 
62,000

 
58,910

Other intangible assets, net
 
9,999

 
9,325

Other assets
 
8,786

 
4,326

Total assets
 
$
167,200

 
$
152,221

Liabilities, redeemable noncontrolling interests and equity
 
 
 
 
Current liabilities:
 
 
 
 
Medical costs payable
 
$
20,907

 
$
19,891

Accounts payable and accrued liabilities
 
17,128

 
16,705

Commercial paper and current maturities of long-term debt
 
7,800

 
1,973

Unearned revenues
 
2,019

 
2,396

Other current liabilities
 
14,474

 
12,244

Total current liabilities
 
62,328

 
53,209

Long-term debt, less current maturities
 
34,473

 
34,581

Deferred income taxes
 
2,908

 
2,474

Other liabilities
 
9,435

 
5,730

Total liabilities
 
109,144

 
95,994

Commitments and contingencies (Note 7)
 


 


Redeemable noncontrolling interests
 
2,202

 
1,908

Equity:
 
 
 
 
Preferred stock, $0.001 par value - 10 shares authorized; no shares issued or outstanding
 

 

Common stock, $0.01 par value - 3,000 shares authorized; 948 and 960 issued and outstanding
 
9

 
10

Retained earnings
 
56,367

 
55,846

Accumulated other comprehensive loss
 
(3,273
)
 
(4,160
)
Nonredeemable noncontrolling interests
 
2,751

 
2,623

Total equity
 
55,854

 
54,319

Total liabilities, redeemable noncontrolling interests and equity
 
$
167,200

 
$
152,221


See Notes to the Condensed Consolidated Financial Statements

1

Table of Contents

UnitedHealth Group
Condensed Consolidated Statements of Operations
(Unaudited)
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
(in millions, except per share data)
 
2019
 
2018
 
2019
 
2018
Revenues:
 
 
 
 
 
 
 
 
Premiums
 
$
47,164

 
$
44,458

 
$
94,677

 
$
88,542

Products
 
8,353

 
7,004

 
16,425

 
13,706

Services
 
4,496

 
4,269

 
8,814

 
8,373

Investment and other income
 
582

 
355

 
987

 
653

Total revenues
 
60,595

 
56,086

 
120,903

 
111,274

Operating costs:
 
 
 
 
 
 
 
 
Medical costs
 
39,184

 
36,427

 
78,123

 
72,290

Operating costs
 
8,415

 
8,386

 
16,932

 
16,892

Cost of products sold
 
7,598

 
6,471

 
14,979

 
12,655

Depreciation and amortization
 
654

 
598

 
1,293

 
1,180

Total operating costs
 
55,851

 
51,882

 
111,327

 
103,017

Earnings from operations
 
4,744

 
4,204

 
9,576

 
8,257

Interest expense
 
(418
)
 
(344
)
 
(818
)
 
(673
)
Earnings before income taxes
 
4,326

 
3,860

 
8,758

 
7,584

Provision for income taxes
 
(941
)
 
(850
)
 
(1,816
)
 
(1,650
)
Net earnings
 
3,385

 
3,010

 
6,942

 
5,934

Earnings attributable to noncontrolling interests
 
(92
)
 
(88
)
 
(182
)
 
(176
)
Net earnings attributable to UnitedHealth Group common shareholders
 
$
3,293

 
$
2,922

 
$
6,760

 
$
5,758

Earnings per share attributable to UnitedHealth Group common shareholders:
 
 
 
 
 
 
 
 
Basic
 
$
3.47

 
$
3.04

 
$
7.09

 
$
5.98

Diluted
 
$
3.42

 
$
2.98

 
$
6.97

 
$
5.85

Basic weighted-average number of common shares outstanding
 
950

 
961

 
954

 
963

Dilutive effect of common share equivalents
 
14

 
21

 
16

 
21

Diluted weighted-average number of common shares outstanding
 
964

 
982

 
970

 
984

Anti-dilutive shares excluded from the calculation of dilutive effect of common share equivalents
 
11

 
6

 
9

 
7


See Notes to the Condensed Consolidated Financial Statements

2

Table of Contents

 
UnitedHealth Group
Condensed Consolidated Statements of Comprehensive Income
(Unaudited)

 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
(in millions)
 
2019
 
2018
 
2019
 
2018
Net earnings
 
$
3,385

 
$
3,010

 
$
6,942

 
$
5,934

Other comprehensive income (loss):
 
 
 
 
 
 
 
 
Gross unrealized gains (losses) on investment securities during the period
 
493

 
(43
)
 
1,013

 
(421
)
Income tax effect
 
(113
)
 
10

 
(232
)
 
96

Total unrealized gains (losses), net of tax
 
380

 
(33
)
 
781

 
(325
)
Gross reclassification adjustment for net realized gains included in net earnings
 
(5
)
 
(36
)
 
(1
)
 
(55
)
Income tax effect
 
1

 
9

 

 
13

Total reclassification adjustment, net of tax
 
(4
)
 
(27
)
 
(1
)
 
(42
)
Total foreign currency translation gains (losses)
 
109

 
(1,069
)
 
107

 
(1,070
)
Other comprehensive income (loss)
 
485

 
(1,129
)
 
887

 
(1,437
)
Comprehensive income
 
3,870

 
1,881

 
7,829

 
4,497

Comprehensive income attributable to noncontrolling interests
 
(92
)
 
(88
)
 
(182
)
 
(176
)
Comprehensive income attributable to UnitedHealth Group common shareholders
 
$
3,778

 
$
1,793

 
$
7,647

 
$
4,321


See Notes to the Condensed Consolidated Financial Statements

3

Table of Contents

UnitedHealth Group
Condensed Consolidated Statements of Changes in Equity
(Unaudited)
 
 
Common Stock
 
Additional Paid-In Capital
 
Retained Earnings
 
Accumulated Other Comprehensive
Income (Loss)
 
Nonredeemable Noncontrolling Interests
 
Total
Equity
Three months ended June 30,
(in millions)
 
Shares
 
Amount
 
 
 
Net Unrealized Gains (Losses) on Investments
 
Foreign Currency Translation (Losses)
Gains
 
 
Balance at March 31, 2019
 
953

 
$
10

 
$

 
$
55,472

 
$
140

 
$
(3,898
)
 
$
2,727

 
$
54,451

Net earnings
 
 
 
 
 
 
 
3,293

 
 
 
 
 
54

 
3,347

Other comprehensive income
 
 
 
 
 
 
 
 
 
376

 
109

 
 
 
485

Issuances of common stock,
and related tax effects
 
1

 

 
105

 
 
 
 
 
 
 
 
 
105

Share-based compensation
 
 
 
 
 
152

 
 
 
 
 
 
 
 
 
152

Common share repurchases
 
(6
)
 
(1
)
 
(124
)
 
(1,374
)
 
 
 
 
 
 
 
(1,499
)
Cash dividends paid on common shares ($1.08 per share)
 
 
 
 
 
 
 
(1,024
)
 
 
 
 
 
 
 
(1,024
)
Redeemable noncontrolling interests fair value and other adjustments
 
 
 
 
 
(133
)
 
 
 
 
 
 
 
 
 
(133
)
Acquisition and other adjustments of nonredeemable noncontrolling interests
 
 
 
 
 
 
 
 
 
 
 
 
 
32

 
32

Distribution to nonredeemable noncontrolling interests
 
 
 
 
 
 
 
 
 
 
 
 
 
(62
)
 
(62
)
Balance at June 30, 2019
 
948

 
$
9

 
$

 
$
56,367

 
$
516

 
$
(3,789
)
 
$
2,751

 
$
55,854

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at March 31, 2018
 
962

 
$
10

 
$

 
$
50,494

 
$
(296
)
 
$
(2,655
)
 
$
2,483

 
$
50,036

Net earnings
 
 
 
 
 
 
 
2,922

 
 
 
 
 
59

 
2,981

Other comprehensive loss
 
 
 
 
 
 
 
 
 
(60
)
 
(1,069
)
 
 
 
(1,129
)
Issuances of common stock, and related tax effects
 
2

 

 
107

 
 
 
 
 
 
 
 
 
107

Share-based compensation
 
 
 
 
 
141

 
 
 
 
 
 
 
 
 
141

Common share repurchases
 
(2
)
 

 
(313
)
 
(187
)
 
 
 
 
 
 
 
(500
)
Cash dividends paid on common shares ($0.90 per share)
 
 
 
 
 
 
 
(866
)
 
 
 
 
 
 
 
(866
)
Redeemable noncontrolling interests fair value and other adjustments
 
 
 
 
 
65

 
 
 
 
 
 
 
 
 
65

Acquisition and other adjustments of nonredeemable noncontrolling interests
 
 
 
 
 
 
 
 
 
 
 
 
 
(7
)
 
(7
)
Distribution to nonredeemable noncontrolling interests
 
 
 
 
 
 
 
 
 
 
 
 
 
(45
)
 
(45
)
Balance at June 30, 2018
 
962

 
$
10

 
$

 
$
52,363

 
$
(356
)
 
$
(3,724
)
 
$
2,490

 
$
50,783


See Notes to the Condensed Consolidated Financial Statements

4

Table of Contents

UnitedHealth Group
Condensed Consolidated Statements of Changes in Equity
(Unaudited)
 
 
Common Stock
 
Additional Paid-In Capital
 
Retained Earnings
 
Accumulated Other Comprehensive (Loss)
Income
 
Nonredeemable Noncontrolling Interests
 
Total
Equity
Six months ended June 30,
(in millions)
 
Shares
 
Amount
 
 
 
Net Unrealized (Losses) Gains on Investments
 
Foreign Currency Translation (Losses)
Gains
 
 
Balance at January 1, 2019
 
960

 
$
10

 
$

 
$
55,846

 
$
(264
)
 
$
(3,896
)
 
$
2,623

 
$
54,319

Adjustment to adopt ASU 2016-02
 
 
 
 
 
 
 
(13
)
 
 
 
 
 
(5
)
 
(18
)
Net earnings
 
 
 
 
 
 
 
6,760

 
 
 
 
 
114

 
6,874

Other comprehensive income
 
 
 
 
 
 
 
 
 
780

 
107

 
 
 
887

Issuances of common stock,
and related tax effects
 
6

 

 
161

 
 
 
 
 
 
 
 
 
161

Share-based compensation
 
 
 
 
 
391

 
 
 
 
 
 
 
 
 
391

Common share repurchases
 
(18
)
 
(1
)
 
(158
)
 
(4,342
)
 
 
 
 
 
 
 
(4,501
)
Cash dividends paid on common shares ($1.98 per share)
 
 
 
 
 
 
 
(1,884
)
 
 
 
 
 
 
 
(1,884
)
Redeemable noncontrolling interests fair value and other adjustments
 
 
 
 
 
(285
)
 
 
 
 
 
 
 
 
 
(285
)
Acquisition and other adjustments of nonredeemable noncontrolling interests
 
 
 
 
 
(109
)
 
 
 
 
 
 
 
164

 
55

Distribution to nonredeemable noncontrolling interests
 
 
 
 
 
 
 
 
 
 
 
 
 
(145
)
 
(145
)
Balance at June 30, 2019
 
948

 
$
9

 
$

 
$
56,367

 
$
516

 
$
(3,789
)
 
$
2,751

 
$
55,854

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at January 1, 2018
 
969

 
$
10

 
$
1,703

 
$
48,730

 
$
(13
)
 
$
(2,654
)
 
$
2,057

 
$
49,833

Adjustment to adopt ASU 2016-01
 
 
 
 
 
 
 
(24
)
 
24

 
 
 
 
 

Net earnings
 
 
 
 
 
 
 
5,758

 
 
 
 
 
112

 
5,870

Other comprehensive loss
 
 
 
 
 
 
 
 
 
(367
)
 
(1,070
)
 
 
 
(1,437
)
Issuances of common stock, and related tax effects
 
7

 

 
522

 
 
 
 
 
 
 
 
 
522

Share-based compensation
 
 
 
 
 
347

 
 
 
 
 
 
 
 
 
347

Common share repurchases
 
(14
)
 

 
(2,637
)
 
(513
)
 
 
 
 
 
 
 
(3,150
)
Cash dividends paid on common shares ($1.65 per share)
 
 
 
 
 
 
 
(1,588
)
 
 
 
 
 
 
 
(1,588
)
Redeemable noncontrolling interests fair value and other adjustments
 
 
 
 
 
65

 
 
 
 
 
 
 
 
 
65

Acquisition and other adjustments of nonredeemable noncontrolling interests
 
 
 
 
 
 
 
 
 
 
 
 
 
416

 
416

Distribution to nonredeemable noncontrolling interests
 
 
 
 
 
 
 
 
 
 
 
 
 
(95
)
 
(95
)
Balance at June 30, 2018
 
962

 
$
10

 
$

 
$
52,363

 
$
(356
)
 
$
(3,724
)
 
$
2,490

 
$
50,783


See Notes to the Condensed Consolidated Financial Statements

5

Table of Contents

UnitedHealth Group
Condensed Consolidated Statements of Cash Flows
(Unaudited)
 
 
Six Months Ended June 30,
(in millions)
 
2019
 
2018
Operating activities
 
 
 
 
Net earnings
 
$
6,942

 
$
5,934

Noncash items:
 
 
 
 
Depreciation and amortization
 
1,293

 
1,180

Deferred income taxes
 
195

 
(158
)
Share-based compensation
 
398

 
358

Other, net
 
(127
)
 
10

Net change in other operating items, net of effects from acquisitions and changes in AARP balances:
 
 
 
 
Accounts receivable
 
2,196

 
(1,021
)
Other assets
 
(1,774
)
 
(2,369
)
Medical costs payable
 
447

 
1,263

Accounts payable and other liabilities
 
(33
)
 
2,233

Unearned revenues
 
(429
)
 
4,946

Cash flows from operating activities
 
9,108


12,376

Investing activities
 
 
 
 
Purchases of investments
 
(7,649
)
 
(8,182
)
Sales of investments
 
2,680

 
2,003

Maturities of investments
 
3,315

 
3,211

Cash paid for acquisitions, net of cash assumed
 
(4,751
)
 
(2,636
)
Purchases of property, equipment and capitalized software
 
(977
)
 
(960
)
Other, net
 
504

 
(134
)
Cash flows used for investing activities
 
(6,878
)
 
(6,698
)
Financing activities
 
 
 
 
Common share repurchases
 
(4,501
)
 
(3,150
)
Cash dividends paid
 
(1,884
)
 
(1,588
)
Proceeds from common stock issuances
 
448

 
478

Repayments of long-term debt
 
(1,250
)
 
(1,100
)
Proceeds from (repayments of) commercial paper, net
 
6,924

 
(181
)
Proceeds from issuance of long-term debt
 

 
3,964

Customer funds administered
 
1,435

 
3,082

Other, net
 
(529
)
 
(718
)
Cash flows from financing activities
 
643

 
787

Effect of exchange rate changes on cash and cash equivalents
 
6

 
(78
)
Increase in cash and cash equivalents
 
2,879

 
6,387

Cash and cash equivalents, beginning of period
 
10,866

 
11,981

Cash and cash equivalents, end of period
 
$
13,745

 
$
18,368

 
 
 
 
 

See Notes to the Condensed Consolidated Financial Statements

6

Table of Contents

UnitedHealth Group
Notes to the Condensed Consolidated Financial Statements
(Unaudited)
1.    Basis of Presentation
UnitedHealth Group Incorporated (individually and together with its subsidiaries, “UnitedHealth Group” and the “Company”) is a diversified health care company dedicated to helping people live healthier lives and helping make the health system work better for everyone.
Through its diversified family of businesses, the Company leverages core competencies in data and health information; advanced technology; and clinical expertise. These core competencies are deployed within two distinct, but strategically aligned, business platforms: health benefits operating under UnitedHealthcare and health services operating under Optum.
The Company has prepared the Condensed Consolidated Financial Statements according to U.S. Generally Accepted Accounting Principles (GAAP) and has included the accounts of UnitedHealth Group and its subsidiaries. The year-end condensed consolidated balance sheet was derived from audited financial statements, but does not include all disclosures required by GAAP. In accordance with the rules and regulations of the U.S. Securities and Exchange Commission (SEC), the Company has omitted certain footnote disclosures that would substantially duplicate the disclosures contained in its annual audited Consolidated Financial Statements. Therefore, these Condensed Consolidated Financial Statements should be read together with the Consolidated Financial Statements and the Notes included in Part II, Item 8, “Financial Statements and Supplementary Data” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018 as filed with the SEC (2018 10-K). The accompanying Condensed Consolidated Financial Statements include all normal recurring adjustments necessary to present the interim financial statements fairly.
Use of Estimates
These Condensed Consolidated Financial Statements include certain amounts based on the Company’s best estimates and judgments. The Company’s most significant estimates include medical costs payable and goodwill. Certain of these estimates require the application of complex assumptions and judgments, often because they involve matters that are inherently uncertain and will likely change in subsequent periods. The impact of any change in estimates is included in earnings in the period in which the estimate is adjusted.
Recently Adopted Accounting Standards
In February 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standard Update (ASU) No. 2016-02, “Leases (Topic 842)” as modified by ASUs 2018-01, 2018-10, 2018-11, 2018-20 and 2019-01 (collectively, ASU 2016-02). Under ASU 2016-02, an entity is required to recognize assets and liabilities for the rights and obligations created by leases on the entity’s balance sheet for both finance and operating leases. The Company adopted ASU 2016-02 using a cumulative-effect upon adoption approach as of January 1, 2019. Upon adoption, the Company recognized $3.3 billion of lease right-of-use (ROU) assets and liabilities for operating leases on its Condensed Consolidated Balance Sheet, of which, $668 million were classified as current liabilities. The adoption of ASU 2016-02 was immaterial to the Company’s consolidated results of operations, equity and cash flows. The Company has included the disclosures required by ASU 2016-02 below and in Note 7, “Commitments and Contingencies.”
The Company leases facilities and equipment under long-term operating leases that are non-cancelable and expire on various dates. At the lease commencement date, lease ROU assets and lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term, which includes all fixed obligations arising from the lease contract. If an interest rate is not implicit in a lease, the Company utilizes its incremental borrowing rate for a period that closely matches the lease term.
The Company’s ROU assets are included in other assets, and lease liabilities are included in other current liabilities and other liabilities in the Company’s Condensed Consolidated Balance Sheet.
The Company has determined that there have been no other recently adopted or issued accounting standards that had, or will have, a material impact on its Condensed Consolidated Financial Statements.

7

Table of Contents

2.    Investments
A summary of debt securities by major security type is as follows:
(in millions)
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
June 30, 2019
 
 
 
 
 
 
 
 
Debt securities - available-for-sale:
 
 
 
 
 
 
 
 
U.S. government and agency obligations
 
$
3,684

 
$
80

 
$
(5
)
 
$
3,759

State and municipal obligations
 
6,532

 
237

 
(1
)
 
6,768

Corporate obligations
 
16,597

 
265

 
(12
)
 
16,850

U.S. agency mortgage-backed securities
 
5,662

 
83

 
(15
)
 
5,730

Non-U.S. agency mortgage-backed securities
 
1,593

 
39

 
(1
)
 
1,631

Total debt securities - available-for-sale
 
34,068

 
704

 
(34
)
 
34,738

Debt securities - held-to-maturity:
 
 
 
 
 
 
 
 
U.S. government and agency obligations
 
275

 
2

 

 
277

State and municipal obligations
 
31

 
1

 

 
32

Corporate obligations
 
435

 
1

 

 
436

Total debt securities - held-to-maturity
 
741

 
4

 

 
745

Total debt securities
 
$
34,809

 
$
708

 
$
(34
)
 
$
35,483

December 31, 2018
 
 
 
 
 
 
 
 
Debt securities - available-for-sale:
 
 
 
 
 
 
 
 
U.S. government and agency obligations
 
$
3,434

 
$
13

 
$
(42
)
 
$
3,405

State and municipal obligations
 
7,117

 
61

 
(57
)
 
7,121

Corporate obligations
 
15,366

 
14

 
(218
)
 
15,162

U.S. agency mortgage-backed securities
 
4,947

 
11

 
(106
)
 
4,852

Non-U.S. agency mortgage-backed securities
 
1,376

 
2

 
(20
)
 
1,358

Total debt securities - available-for-sale
 
32,240