unh-20200930

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 September 30, 2020


☐			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

__________________________________________________________

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)

_________________________________________________________

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

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 ☒

As of October 30, 2020, there were 948,820,710 shares of the registrant’s Common Stock, $.01 par value per share, issued and outstanding.

UNITEDHEALTH GROUP

Table of Contents


			Page

Part I. Financial Information
Item 1.	Financial Statements (unaudited)		1
	Condensed Consolidated Balance Sheets as of September 30, 2020 and December 31, 2019		1
	Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2020 and 2019		2
	Condensed Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2020 and 2019		3
	Condensed Consolidated Statements of Changes in Equity for the Three and Nine Months Ended Se ptember 30, 2020 and 2019		4
	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2020 and 2019		6
	Notes to the Condensed Consolidated Financial Statements		7
	1.	Basis of Presentation	7
	2.	Investments	8
	3.	Fair Value	10
	4.	Medical Costs Payable	11
	5.	Short-Term Borrowings and Long-Term Debt	12
	6.	Dividends	13
	7.	Commitments and Contingencies	13
	8.	Segment Financial Information	14
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		16
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		25
Item 4.	Controls and Procedures		25
Part II. Other Information
Item 1.	Legal Proceedings		25
Item 1A.	Risk Factors		26
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		26
Item 6.	Exhibits		27
Signatures			28

PART I

ITEM 1. FINANCIAL STATEMENTS

UnitedHealth Group

Condensed Consolidated Balance Sheets

(Unaudited)


(in millions, except per share data)	September 30, 2020		December 31, 2019
Assets
Current assets:
Cash and cash equivalents	$	17,550	$	10,985
Short-term investments	3,259		3,260
Accounts receivable, net	12,171		11,822
Other current receivables, net	13,231		9,640
Assets under management	3,788		3,076
Prepaid expenses and other current assets	4,822		3,851
Total current assets	54,821		42,634
Long-term investments	39,184		37,209
Property, equipment and capitalized software, net	8,151		8,704
Goodwill	68,088		65,659
Other intangible assets, net	10,373		10,349
Other assets	10,352		9,334
Total assets	$	190,969	$	173,889
Liabilities, redeemable noncontrolling interests and equity
Current liabilities:
Medical costs payable	$	21,167	$	21,690
Accounts payable and accrued liabilities	21,173		19,005
Short-term borrowings and current maturities of long-term debt	3,899		3,870
Unearned revenues	2,391		2,622
Other current liabilities	17,967		14,595
Total current liabilities	66,597		61,782
Long-term debt, less current maturities	39,895		36,808
Deferred income taxes	3,340		2,993
Other liabilities	11,186		10,144
Total liabilities	121,018		111,727
Commitments and contingencies (Note 7)
Redeemable noncontrolling interests	1,847		1,726
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; 949 and 948 issued and outstanding	10		9
Additional paid-in capital	—		7
Retained earnings	69,715		61,178
Accumulated other comprehensive loss	(4,494)		(3,578)
Nonredeemable noncontrolling interests	2,873		2,820
Total equity	68,104		60,436
Total liabilities, redeemable noncontrolling interests and equity	$	190,969	$	173,889

See Notes to the Condensed Consolidated Financial Statements

Table of Contents

UnitedHealth Group

Condensed Consolidated Statements of Operations

(Unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
(in millions, except per share data)	2020		2019		2020		2019
Revenues:
Premiums	$	50,863	$	47,397	$	150,897	$	142,074
Products	8,777		7,546		25,455		23,971
Services	5,124		4,942		14,265		13,756
Investment and other income	351		466		1,057		1,453
Total revenues	65,115		60,351		191,674		181,254
Operating costs:
Medical costs	41,636		39,041		117,314		117,164
Operating costs	10,174		8,960		30,190		25,892
Cost of products sold	7,935		6,627		23,123		21,606
Depreciation and amortization	719		709		2,159		2,002
Total operating costs	60,464		55,337		172,786		166,664
Earnings from operations	4,651		5,014		18,888		14,590
Interest expense	(395)		(449)		(1,262)		(1,267)
Earnings before income taxes	4,256		4,565		17,626		13,323
Provision for income taxes	(1,000)		(936)		(4,209)		(2,752)
Net earnings	3,256		3,629		13,417		10,571
Earnings attributable to noncontrolling interests	(84)		(91)		(226)		(273)
Net earnings attributable to UnitedHealth Group common shareholders	$	3,172	$	3,538	$	13,191	$	10,298
Earnings per share attributable to UnitedHealth Group common shareholders:
Basic	$	3.34	$	3.73	$	13.90	$	10.82
Diluted	$	3.30	$	3.67	$	13.73	$	10.65
Basic weighted-average number of common shares outstanding	950		949		949		952
Dilutive effect of common share equivalents	12		14		12		15
Diluted weighted-average number of common shares outstanding	962		963		961		967
Anti-dilutive shares excluded from the calculation of dilutive effect of common share equivalents	6		12		9		10

See Notes to the Condensed Consolidated Financial Statements

Table of Contents

UnitedHealth Group

Condensed Consolidated Statements of Comprehensive Income

(Unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
(in millions)	2020		2019		2020		2019
Net earnings	$	3,256	$	3,629	$	13,417	$	10,571
Other comprehensive income (loss):
Gross unrealized gains on investment securities during the period	148		230		919		1,243
Income tax effect	(37)		(53)		(214)		(285)
Total unrealized gains, net of tax	111		177		705		958
Gross reclassification adjustment for net realized gains included in net earnings	(21)		(69)		(50)		(70)
Income tax effect	5		16		12		16
Total reclassification adjustment, net of tax	(16)		(53)		(38)		(54)
Total foreign currency translation losses	(39)		(560)		(1,583)		(453)
Other comprehensive income (loss)	56		(436)		(916)		451
Comprehensive income	3,312		3,193		12,501		11,022
Comprehensive income attributable to noncontrolling interests	(84)		(91)		(226)		(273)
Comprehensive income attributable to UnitedHealth Group common shareholders	$	3,228	$	3,102	$	12,275	$	10,749

See Notes to the Condensed Consolidated Financial Statements

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 September 30, (in millions)	Shares	Amount						Net Unrealized Gains on Investments		Foreign Currency Translation Losses
Balance at June 30, 2020	950	$	10	$	388	$	67,776	$	1,161	$	(5,711)	$	2,891	$	66,515
Net earnings						3,172						62		3,234
Other comprehensive income (loss)								95		(39)				56
Issuances of common stock, and related tax effects	2	—		321										321
Share-based compensation				131										131
Common share repurchases	(3)	—		(805)		(45)								(850)
Cash dividends paid on common shares ($1.25 per share)						(1,188)								(1,188)
Redeemable noncontrolling interests fair value and other adjustments				(35)										(35)
Acquisition and other adjustments of nonredeemable noncontrolling interests												(8)		(8)
Distribution to nonredeemable noncontrolling interests												(72)		(72)
Balance at September 30, 2020	949	$	10	$	—	$	69,715	$	1,256	$	(5,750)	$	2,873	$	68,104

Balance at June 30, 2019	948	$	9	$	—	$	56,367	$	516	$	(3,789)	$	2,751	$	55,854
Net earnings						3,538						82		3,620
Other comprehensive income (loss)								124		(560)				(436)
Issuances of common stock, and related tax effects	2	—		277										277
Share-based compensation				130										130
Common share repurchases	(3)	—		(415)		(185)								(600)
Cash dividends paid on common shares ($1.08 per share)						(1,024)								(1,024)
Redeemable noncontrolling interests fair value and other adjustments				8										8
Acquisition and other adjustments of nonredeemable noncontrolling interests												(7)		(7)
Distribution to nonredeemable noncontrolling interests												(66)		(66)
Balance at September 30, 2019	947	$	9	$	—	$	58,696	$	640	$	(4,349)	$	2,760	$	57,756

See Notes to the Condensed Consolidated Financial Statements

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
Nine months ended September 30, (in millions)	Shares	Amount						Net Unrealized Gains (Losses) on Investments		Foreign Currency Translation Losses
Balance at January 1, 2020	948	$	9	$	7	$	61,178	$	589	$	(4,167)	$	2,820	$	60,436
Adjustment to adopt ASU 2016-13						(28)								(28)
Net earnings						13,191						159		13,350
Other comprehensive income (loss)								667		(1,583)				(916)
Issuances of common stock, and related tax effects	10	1		928										929
Share-based compensation				509										509
Common share repurchases	(9)	—		(1,315)		(1,226)								(2,541)
Cash dividends paid on common shares ($3.58 per share)						(3,400)								(3,400)
Redeemable noncontrolling interests fair value and other adjustments				(129)										(129)
Acquisition and other adjustments of nonredeemable noncontrolling interests												42		42
Distribution to nonredeemable noncontrolling interests												(148)		(148)
Balance at September 30, 2020	949	$	10	$	—	$	69,715	$	1,256	$	(5,750)	$	2,873	$	68,104

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						10,298						196		10,494
Other comprehensive income (loss)								904		(453)				451
Issuances of common stock, and related tax effects	8	—		438										438
Share-based compensation				521										521
Common share repurchases	(21)	(1)		(573)		(4,527)								(5,101)
Cash dividends paid on common shares ($3.06 per share)						(2,908)								(2,908)
Redeemable noncontrolling interests fair value and other adjustments				(277)										(277)
Acquisition and other adjustments of nonredeemable noncontrolling interests				(109)								157		48
Distribution to nonredeemable noncontrolling interests												(211)		(211)
Balance at September 30, 2019	947	$	9	$	—	$	58,696	$	640	$	(4,349)	$	2,760	$	57,756

See Notes to the Condensed Consolidated Financial Statements

Table of Contents

UnitedHealth Group

Condensed Consolidated Statements of Cash Flows

(Unaudited)


	Nine Months Ended September 30,
(in millions)	2020		2019
Operating activities
Net earnings	$	13,417	$	10,571
Noncash items:
Depreciation and amortization	2,159		2,002
Deferred income taxes	119		177
Share-based compensation	527		525
Other, net	48		(181)
Net change in other operating items, net of effects from acquisitions and changes in AARP balances:
Accounts receivable	(194)		957
Other assets	(2,697)		(2,181)
Medical costs payable	(615)		223
Accounts payable and other liabilities	3,441		105
Unearned revenues	(132)		60
Cash flows from operating activities	16,073		12,258
Investing activities
Purchases of investments	(11,570)		(13,386)
Sales of investments	4,887		6,198
Maturities of investments	5,297		5,160
Cash paid for acquisitions, net of cash assumed	(4,326)		(8,200)
Purchases of property, equipment and capitalized software	(1,477)		(1,421)
Other, net	(165)		338
Cash flows used for investing activities	(7,354)		(11,311)
Financing activities
Common share repurchases	(2,541)		(5,101)
Cash dividends paid	(3,400)		(2,908)
Proceeds from common stock issuances	1,206		740
Repayments of long-term debt	(1,500)		(1,250)
(Repayments of) proceeds from short-term borrowings, net	(423)		3,998
Proceeds from issuance of long-term debt	4,864		5,444
Customer funds administered	249		420
Other, net	(449)		(756)
Cash flows (used for) from financing activities	(1,994)		587
Effect of exchange rate changes on cash and cash equivalents	(160)		(37)
Increase in cash and cash equivalents	6,565		1,497
Cash and cash equivalents, beginning of period	10,985		10,866
Cash and cash equivalents, end of period	$	17,550	$	12,363

See Notes to the Condensed Consolidated Financial Statements

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, 2019 as filed with the SEC (2019 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.

Revenue from Products

For the three and nine months ended September 30, 2020, the Company recognized revenue and cost of products sold for retail pharmacy co-payments related to its OptumRx business. Revenue recognized in prior periods related to retail pharmacy transactions excludes the member’s applicable co-payment. There was no impact on earnings from operations, net earnings, earnings per share or total equity.

Recently Adopted Accounting Standards

In June 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standard Update (ASU) No. 2016-13, “Financial Instruments - Credit Losses (Topic 326)” (ASU 2016-13). ASU 2016-13 requires the use of the current expected credit loss impairment model to develop an estimate of expected credit losses for certain financial assets. ASU 2016-13 also requires expected credit losses on available-for-sale debt securities to be recognized through an allowance for credit losses and revises certain disclosure requirements. The Company adopted ASU 2016-13 on January 1, 2020 using a cumulative effect upon adoption approach. The adoption of ASU 2016-13 was immaterial to the Company’s consolidated balance sheet, results of operations, equity and cash flows.

Under the current expected credit loss impairment model, the Company evaluates an available-for-sale debt security for credit-related impairment by considering the present value of expected cash flows relative to a security’s amortized cost, the extent to which fair value is less than amortized cost, the financial condition and near-term prospects of the issuer and specific events or circumstances that may influence the operations of the issuer. Credit-related impairments are recorded as an allowance, with an offset to investment and other income. Non-credit related impairments are recorded through other comprehensive income. If the Company intends to sell an impaired security, or will likely be required to sell a security before recovery of the entire amortized cost, the entire impairment is included in net earnings.

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.

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
September 30, 2020
Debt securities - available-for-sale:
U.S. government and agency obligations	$	3,374	$	160	$	—	$	3,534
State and municipal obligations	6,311		377		(4)		6,684
Corporate obligations	18,461		778		(35)		19,204
U.S. agency mortgage-backed securities	6,523		270		(3)		6,790
Non-U.S. agency mortgage-backed securities	2,033		98		(6)		2,125
Total debt securities - available-for-sale	36,702		1,683		(48)		38,337
Debt securities - held-to-maturity:
U.S. government and agency obligations	422		7		—		429
State and municipal obligations	31		2		—		33
Corporate obligations	245		1		—		246
Total debt securities - held-to-maturity	698		10		—		708
Total debt securities	$	37,400	$	1,693	$	(48)	$	39,045
December 31, 2019
Debt securities - available-for-sale:
U.S. government and agency obligations	$	3,502	$	55	$	(4)	$	3,553
State and municipal obligations	5,680		251		(5)		5,926
Corporate obligations	17,910		343		(11)		18,242
U.S. agency mortgage-backed securities	6,425		109		(6)		6,528
Non-U.S. agency mortgage-backed securities	1,811		37		(3)		1,845
Total debt securities - available-for-sale	35,328		795		(29)		36,094
Debt securities - held-to-maturity:
U.S. government and agency obligations	402		2		—		404
State and municipal obligations	32		2		—		34
Corporate obligations	538		—		(1)		537
Total debt securities - held-to-maturity	972		4		(1)		975
Total debt securities	$	36,300	$	799	$	(30)	$	37,069

The Company held $2.1 billion and $2.0 billion of equity securities as of September 30, 2020 and December 31, 2019, respectively. The Company’s investments in equity securities primarily consist of employee savings plan related investments and shares of Brazilian real denominated fixed-income funds with readily determinable fair values. Additionally, the Company’s investments included $1.3 billion and $1.4 billion of equity method investments in operating businesses in the health care sector as of September 30, 2020 and December 31, 2019, respectively. The allowance for credit losses on held-to-maturity securities at September 30, 2020 was not material.

Table of Contents

The amortized cost and fair value of debt securities as of September 30, 2020, by contractual maturity, were as follows:


	Available-for-Sale				Held-to-Maturity
(in millions)	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Due in one year or less	$	3,388	$	3,407	$	400	$	401
Due after one year through five years	11,253		11,678		246		252
Due after five years through ten years	9,179		9,826		30		31
Due after ten years	4,326		4,511		22		24
U.S. agency mortgage-backed securities	6,523		6,790		—		—
Non-U.S. agency mortgage-backed securities	2,033		2,125		—		—
Total debt securities	$	36,702	$	38,337	$	698	$	708

The fair value of available-for-sale debt securities with gross unrealized losses by major security type and length of time that individual securities have been in a continuous unrealized loss position were as follows:


	Less Than 12 Months				12 Months or Greater				Total
(in millions)	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
September 30, 2020
Debt securities - available-for-sale:

State and municipal obligations	$	366	$	(4)	$	—	$	—	$	366	$	(4)
Corporate obligations	2,314		(30)		400		(5)