UnitedHealth Group's consolidated first quarter revenues increase 7% to $27.3B

UnitedHealth Group (NYSE: UNH) today reported first quarter results, highlighted by strong enrollment and revenue growth in each of UnitedHealthcare's benefits businesses and well-diversified revenue growth at Optum. First quarter 2012 net earnings were $1.31 per share, with continued performance on key financial and operational measures.    

Stephen J. Hemsley, president and chief executive officer of UnitedHealth Group, said, "We continue to serve customers with high-quality, innovative products and services that consistently deliver the most affordable care and make the best use of our health care system resources for everyone."

The Company increased its outlook for 2012 net earnings to a range of $4.80 to $4.95 per share and cash flows from operations to a range of $6.2 billion to $6.5 billion on revenues of $109 billion to $110 billion.

• UnitedHealth Group's consolidated first quarter 2012 revenues of $27.3 billion increased $1.9 billion or 7 percent year-over-year. Significant new business awards in both health care benefits and health care services to be implemented over the course of 2012 reflect the Company's business diversity and growth momentum.
• First quarter earnings from operations were $2.3 billion and net earnings were $1.4 billion or $1.31 per share, an increase of more than 7 percent or nine cents per share from the first quarter 2011 results.
• First quarter 2012 adjusted cash flows from operations of $1.1 billion were substantially in line with the first quarter of 2011 and Company expectations.
• The first quarter 2012 consolidated medical care ratio of 81.0 percent decreased 40 basis points year-over-year. Favorable reserve development of $530 million in first quarter 2012 was comparable with $440 million in first quarter 2011 and $490 million in first quarter 2010 - each representing less than 1 percent of their respective prior year's medical costs. First quarter 2012 financial results also included a $130 million benefit from updating estimates and regulatory clarifications regarding the calculations of 2011 premium rebates payable.
• The first quarter operating cost ratio of 15.0 percent increased 80 basis points year-over-year, primarily due to higher relative growth in revenues from fee-based services and fee-based benefits, which carry comparatively higher operating costs, as well as planned investments in the pharmacy management services business.
• The first quarter income tax rate of 36.0 percent was consistent year-over-year.
• First quarter days sales outstanding in accounts receivable of 9 days were stable year-over-year. First quarter 2012 days claims payable increased one day year-over-year to 47 days at March 31, 2012.
• UnitedHealth Group's March 31, 2012 debt to debt-plus-equity ratio was 31 percent.
• UnitedHealth Group repurchased 18.5 million shares for $1 billion in the first quarter and paid $168 million in shareholder dividends, an increase of 24 percent year-over-year. The company ended the quarter with $1.1 billion in cash available for general corporate use.

UnitedHealthcare provides network-based health care benefits for a full spectrum of customers in the health benefits market. UnitedHealthcare serves employers ranging from sole proprietorships to large, multi-site and national employers, as well as students and individuals; delivers health and well-being benefits to Medicare beneficiaries and retirees; and manages health care benefit programs on behalf of state Medicaid and community programs and their participants.

• UnitedHealthcare's first quarter 2012 revenues of $25.5 billion increased $1.7 billion or 7 percent year-over-year. Revenue growth was driven by an increase of 1.6 million consumers served in the past 12 months, including 1 million new people in the first quarter of 2012. Membership growth was balanced and diversified, with just over one-half in the commercial markets and the remainder in the public and senior markets.
• Based on first quarter's strong growth performance and recent business awards, UnitedHealthcare is increasing its outlook for full year 2012 membership growth to a range of 1.7 million to 1.9 million people, an improvement of more than 750,000 people from the previous forecast.
• UnitedHealthcare was honored to receive a five-year TRICARE award beginning in mid-2013 to serve the Department of Defense and nearly 3 million people who are active duty or retired military service members, or members of their families, and are located in the West Region of the United States.
• Earnings from operations for UnitedHealthcare for the first quarter of 2012 increased $166 million or 9 percent year-over-year to $2.1 billion. The first quarter 2012 operating margin of 8.1 percent was essentially stable year-over-year.

UnitedHealthcare Employer & Individual

• UnitedHealthcare Employer & Individual first quarter revenues of $11.7 billion grew $535 million or 5 percent over first quarter 2011 results. Over the past year, fee-based offerings grew to serve 955,000 more consumers while risk-based commercial products decreased by 110,000 people. Within the first quarter of 2012 the business grew to serve 575,000 more consumers, with strong fee-based growth of 765,000 consumers offset by a decrease of 190,000 consumers with risk-based benefit products.
• Nearly 5 million consumers participated in UnitedHealthcare's innovative consumer-directed health care products by the end of the first quarter of 2012.
• UnitedHealthcare's commercial medical care ratio increased 10 basis points year-over-year to 78.7 percent. Medical cost trend estimates for 2012 remain consistent with the Company's previous outlook.

UnitedHealthcare Medicare & Retirement

• First quarter Medicare & Retirement revenues of $10.2 billion grew $801 million or 9 percent year-over-year.
  • In Medicare Advantage, UnitedHealthcare served 330,000 more people in the past year, a 15 percent increase, including 255,000 seniors and other beneficiaries in the first quarter.
  • Growth in active Medicare Supplement products continued, with the number of people served increasing by 200,000 or 7 percent in the past year, including 105,000 people in first quarter 2012.
  • At March 31, 2012, 4.2 million seniors and other beneficiaries participated in the Company's stand-alone Part D prescription drug plans. Participation in this product set decreased by 615,000 people in the first quarter, primarily due to pricing benchmarks for the government-subsidized low income Part D market coming in below the Company's bids in a number of regions.

UnitedHealthcare Community & State

• First quarter Community & State revenues of $3.6 billion increased $323 million or 10 percent year-over-year. During the past 12 months, the Company expanded its Medicaid services to 200,000 more beneficiaries, including 65,000 people in the first quarter. Recent awards in Hawaii, Washington and Ohio are expected to add to the Company's membership over the next year.

Optum is a technology-enabled health services business serving the broad health care marketplace, including payers, care providers, employers, government, life sciences companies and consumers. By helping connect and align health system participants and providing them actionable information at the points of decision-making, Optum helps improve overall health system performance: optimizing care quality, reducing costs and improving the consumer experience and care provider performance.

• Total Optum revenues for the first quarter of 2012 of $7.3 billion increased $521 million or 8 percent.
• Optum's first quarter earnings from operations of $252 million were in line with management expectations and consistent with the Company's full year 2012 operating plan. The operating margin of 3.4 percent decreased from 3.7 percent in the fourth quarter of 2011 and 4.7 percent in the first quarter of 2011. The primary contributors to the $27 million sequential and $70 million year-over-year decreases in operating earnings and margins were planned investments in scaling pharmacy management services and in resources to fully leverage the health care services business units and develop Optum as a high performance business platform, as well as the reduction in Medicare Part D pharmacy membership and related prescription volumes.

OptumHealth

• OptumHealth first quarter 2012 revenues of $1.9 billion increased $432 million or 29 percent year-over-year. The revenue increase was driven by 2011 market expansions in clinical care and services for payers and the military, and strong organic growth in care services and carve-out specialty risk offerings.
• OptumHealth first quarter 2012 earnings from operations of $92 million and operating margin of 4.7 percent were in line with management expectations, increasing $28 million and 120 basis points, respectively, from fourth quarter 2011 and decreasing $17 million from the first quarter of 2011. Similar to the fourth quarter of 2011, margins were impacted by business mix and operational investments to expand and develop the OptumHealth business.
• OptumHealth Financial Services assets under management grew 32 percent year-over-year to $1.7 billion. OptumHealth Financial Services grew the electronic transmission of medical payments over its connectivity network by 25 percent year-over-year to nearly $15 billion in the quarter.

OptumInsight

• OptumInsight first quarter revenues of $671 million were flat year-over-year; on an organic basis, revenues grew 18 percent.
• First quarter sales bookings, adjusted to reflect the divestiture of the clinical trial services business, increased 18 percent year-over-year, driven by strength in products supporting provider compliance and integrated care and health information service and infrastructure offerings. The OptumInsight contract revenue backlog, as adjusted, increased 25 percent year-over-year to $4.1 billion.
• OptumInsight's first quarter 2012 earnings from operations of $89 million increased 7 percent year-over-year. The nearly 1 percentage point improvement in first quarter operating margin to 13.3 percent was driven by an improved mix of services.

OptumRx

• OptumRx first quarter revenues of $4.7 billion grew 2 percent or $89 million year-over-year, driven by net growth in consumers served despite the reduction in UnitedHealthcare Part D plan participants.
• OptumRx earnings from operations of $71 million decreased $59 million year-over-year. Investments to support growth initiatives and the in-sourcing of UnitedHealthcare commercial pharmacy benefits and the decreased prescription volume in the Medicare Part D business offset the earnings contribution from greater use of generic medications.