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UNITEDHEALTH GROUP INC - Quarter Report: 2019 June (Form 10-Q)

 
 
 
 
 
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

 
101

 
(443
)
 
31,898

Debt securities - held-to-maturity:
 
 
 
 
 
 
 
 
U.S. government and agency obligations
 
255

 
1

 
(2
)
 
254

State and municipal obligations
 
11

 
—

 
—

 
11

Corporate obligations
 
355

 
—

 
—

 
355

Total debt securities - held-to-maturity
 
621

 
1

 
(2
)
 
620

Total debt securities
 
$
32,861

 
$
102

 
$
(445
)
 
$
32,518


The Company held $2.2 billion and $2.0 billion of equity securities as of June 30, 2019 and December 31, 2018, respectively. The Company’s investments in equity securities primarily consist of employee savings plan related investments, shares of Brazilian real denominated fixed-income funds and dividend paying stocks with readily determinable fair values. Additionally, the Company’s investments included $1.5 billion of equity method investments in operating businesses in the health care sector as of both June 30, 2019 and December 31, 2018.

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Table of Contents

The amortized cost and fair value of debt securities as of June 30, 2019, 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
 
$
3,647

 
$
3,652

 
$
182

 
$
182

Due after one year through five years
 
12,150

 
12,298

 
283

 
285

Due after five years through ten years
 
8,084

 
8,394

 
136

 
136

Due after ten years
 
2,932

 
3,033

 
140

 
142

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

 
5,730

 
—

 
—

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

 
1,631

 
—

 
—

Total debt securities
 
$
34,068

 
$
34,738

 
$
741

 
$
745


The fair value of available-for-sale debt securities with gross unrealized losses by 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
June 30, 2019
 
 
 
 
 
 
 
 
 
 
 
 
Debt securities - available-for-sale:
 
 
 
 
 
 
 
 
 
 
 
 
U.S. government and agency obligations
 
$
—

 
$
—

 
$
655

 
$
(5
)
 
$
655

 
$
(5
)
State and municipal obligations
 
—

 
—

 
366

 
(1
)
 
366

 
(1
)
Corporate obligations
 
703

 
(3
)
 
2,352

 
(9
)
 
3,055

 
(12
)
U.S. agency mortgage-backed securities
 
—

 
—

 
1,562

 
(15
)
 
1,562

 
(15
)
Non-U.S. agency mortgage-backed securities
 
—

 
—

 
128

 
(1
)
 
128

 
(1
)
Total debt securities - available-for-sale
 
$
703

 
$
(3
)
 
$
5,063

 
$
(31
)
 
$
5,766

 
$
(34
)
December 31, 2018
 
 
 
 
 
 
 
 
 
 
 
 
Debt securities - available-for-sale:
 
 
 
 
 
 
 
 
 
 
 
 
U.S. government and agency obligations
 
$
998

 
$
(7
)
 
$
1,425

 
$
(35
)
 
$
2,423

 
$
(42
)
State and municipal obligations
 
1,334

 
(11
)
 
2,491

 
(46
)
 
3,825

 
(57
)
Corporate obligations
 
8,105

 
(109
)
 
4,239

 
(109
)
 
12,344

 
(218
)
U.S. agency mortgage-backed securities
 
1,296

 
(22
)
 
2,388

 
(84
)
 
3,684

 
(106
)
Non-U.S. agency mortgage-backed securities
 
622

 
(7
)
 
459

 
(13
)
 
1,081

 
(20
)
Total debt securities - available-for-sale
 
$
12,355

 
$
(156
)
 
$
11,002

 
$
(287
)
 
$
23,357

 
$
(443
)

The Company’s unrealized losses from debt securities as of June 30, 2019 were generated from 5,000 positions out of a total of 31,000 positions. The Company believes that it will collect the principal and interest due on its debt securities that have an amortized cost in excess of fair value. The unrealized losses were primarily caused by interest rate increases and not by unfavorable changes in the credit quality associated with these securities. At each reporting period, the Company evaluates securities for impairment when the fair value of the investment is less than its amortized cost. The Company evaluated the underlying credit quality and credit ratings of the issuers, noting no significant deterioration since purchase. As of June 30, 2019, the Company did not have the intent to sell any of the securities in an unrealized loss position. Therefore, the Company believes these losses to be temporary.

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Table of Contents

3.    Fair Value
Certain assets and liabilities are measured at fair value in the Condensed Consolidated Financial Statements or have fair values disclosed in the Notes to the Condensed Consolidated Financial Statements. These assets and liabilities are classified into one of three levels of a hierarchy defined by GAAP.
For a description of the methods and assumptions that are used to estimate the fair value and determine the fair value hierarchy classification of each class of financial instrument, see Note 4 of Notes to the Consolidated Financial Statements in Part II, Item 8, “Financial Statements and Supplementary Data” in the 2018 10-K.
The following table presents a summary of fair value measurements by level and carrying values for items measured at fair value on a recurring basis in the Condensed Consolidated Balance Sheets:
(in millions)
 
Quoted Prices
in Active
Markets
(Level 1)
 
Other
Observable
Inputs
(Level 2)
 
Unobservable
Inputs
(Level 3)
 
Total
Fair and Carrying
Value
June 30, 2019
 
 
 
 
 
 
 
 
Cash and cash equivalents
 
$
13,562

 
$
183

 
$
—

 
$
13,745

Debt securities - available-for-sale:
 
 
 
 
 
 
 
 
U.S. government and agency obligations
 
3,474

 
285

 
—

 
3,759

State and municipal obligations
 
—

 
6,768

 
—

 
6,768

Corporate obligations
 
65

 
16,583

 
202

 
16,850

U.S. agency mortgage-backed securities
 
—

 
5,730

 
—

 
5,730

Non-U.S. agency mortgage-backed securities
 
—

 
1,631

 
—

 
1,631

Total debt securities - available-for-sale
 
3,539

 
30,997

 
202

 
34,738

Equity securities
 
2,035

 
15

 
—

 
2,050

Assets under management
 
1,011

 
1,911

 
21

 
2,943

Total assets at fair value

$
20,147

 
$
33,106

 
$
223

 
$
53,476

Percentage of total assets at fair value
 
38
%
 
62
%
 
—
%
 
100
%
December 31, 2018
 
 
 
 
 
 
 
 
Cash and cash equivalents
 
$
10,757

 
$
109

 
$
—

 
$
10,866

Debt securities - available-for-sale:
 
 
 
 
 
 
 
 
U.S. government and agency obligations
 
3,060

 
345

 
—

 
3,405

State and municipal obligations
 
—

 
7,121

 
—

 
7,121

Corporate obligations
 
39

 
14,950

 
173

 
15,162

U.S. agency mortgage-backed securities
 
—

 
4,852

 
—

 
4,852

Non-U.S. agency mortgage-backed securities
 
—

 
1,358

 
—

 
1,358

Total debt securities - available-for-sale
 
3,099

 
28,626

 
173

 
31,898

Equity securities
 
1,832

 
13

 
—

 
1,845

Assets under management
 
1,086

 
1,938

 
8

 
3,032

Total assets at fair value
 
$
16,774

 
$
30,686

 
$
181

 
$
47,641

Percentage of total assets at fair value
 
35
%
 
65
%
 
—
%
 
100
%

There were no transfers in or out of Level 3 financial assets or liabilities during the six months ended June 30, 2019 or 2018.

10
Table of Contents

The following table presents a summary of fair value measurements by level and carrying values for certain financial instruments not measured at fair value on a recurring basis in the Condensed Consolidated Balance Sheets:
(in millions)
 
Quoted Prices
in Active
Markets
(Level 1)
 
Other
Observable
Inputs
(Level 2)
 
Unobservable
Inputs
(Level 3)
 
Total
Fair
Value
 
Total Carrying Value
June 30, 2019
 
 
 
 
 
 
 
 
 
 
Debt securities - held-to-maturity
 
$
293

 
$
177

 
$
275

 
$
745

 
$
741

Long-term debt and other financing obligations
 
$
—

 
$
38,927

 
$
—

 
$
38,927

 
$
35,300

December 31, 2018
 
 
 
 
 
 
 
 
 
 
Debt securities - held-to-maturity
 
$
260

 
$
65

 
$
295

 
$
620

 
$
621

Long-term debt and other financing obligations
 
$
—

 
$
37,944

 
$
—

 
$
37,944

 
$
36,554


Nonfinancial assets and liabilities or financial assets and liabilities that are measured at fair value on a nonrecurring basis are subject to fair value adjustments only in certain circumstances, such as when the Company records an impairment. There were no significant fair value adjustments for these assets and liabilities recorded during either the six months ended June 30, 2019 or 2018.
4.    Medical Costs Payable
The following table shows the components of the change in medical costs payable for the six months ended June 30:
(in millions)
 
2019
 
2018
Medical costs payable, beginning of period
 
$
19,891

 
$
17,871

Acquisitions
 
522

 
261

Reported medical costs:
 
 
 
 
Current year
 
78,523

 
72,570

Prior years
 
(400
)
 
(280
)
Total reported medical costs
 
78,123

 
72,290

Medical payments:
 
 
 
 
Payments for current year
 
(60,707
)
 
(55,738
)
Payments for prior years
 
(16,922
)
 
(15,345
)
Total medical payments
 
(77,629
)
 
(71,083
)
Medical costs payable, end of period
 
$
20,907

 
$
19,339


For the six months ended June 30, 2019 and 2018, the medical cost reserve development included no individual factors that were significant. Medical costs payable included reserves for claims incurred by insured customers but not yet reported to the Company of $14.5 billion and $13.2 billion at June 30, 2019 and December 31, 2018, respectively.

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Table of Contents

5.    Commercial Paper and Long-Term Debt
Commercial paper and senior unsecured long-term debt consisted of the following:
 
 
June 30, 2019
 
December 31, 2018
(in millions, except percentages)
 
Par
Value
 
Carrying
Value
 
Fair
Value
 
Par
Value
 
Carrying
Value
 
Fair
Value
Commercial paper
 
$
6,984

 
$
6,973

 
$
6,973

 
$
—

 
$
—

 
$
—

1.700% notes due February 2019
 
—

 
—

 
—

 
750

 
750

 
749

1.625% notes due March 2019
 
—

 
—

 
—

 
500

 
500

 
499

2.300% notes due December 2019
 
500

 
498

 
500

 
500

 
494

 
497

2.700% notes due July 2020
 
1,500

 
1,498

 
1,506

 
1,500

 
1,498

 
1,494

Floating rate notes due October 2020
 
300

 
299

 
300

 
300

 
299

 
298

3.875% notes due October 2020
 
450

 
449

 
457

 
450

 
443

 
456

1.950% notes due October 2020
 
900

 
898

 
896

 
900

 
897

 
884

4.700% notes due February 2021
 
400

 
404

 
413

 
400

 
398

 
412

2.125% notes due March 2021
 
750

 
748

 
749

 
750

 
747

 
734

Floating rate notes due June 2021
 
350

 
349

 
350

 
350

 
349

 
347

3.150% notes due June 2021
 
400

 
399

 
407

 
400

 
399

 
400

3.375% notes due November 2021
 
500

 
500

 
512

 
500

 
489

 
503

2.875% notes due December 2021
 
750

 
752

 
761

 
750

 
735

 
748

2.875% notes due March 2022
 
1,100

 
1,082

 
1,117

 
1,100

 
1,051

 
1,091

3.350% notes due July 2022
 
1,000

 
997

 
1,034

 
1,000

 
997

 
1,005

2.375% notes due October 2022
 
900

 
895

 
903

 
900

 
894

 
872

0.000% notes due November 2022
 
15

 
13

 
13

 
15

 
12

 
13

2.750% notes due February 2023
 
625

 
622

 
633

 
625

 
602

 
611

2.875% notes due March 2023
 
750

 
772

 
764

 
750

 
750

 
739

3.500% notes due June 2023
 
750

 
747

 
782

 
750

 
746

 
756

3.500% notes due February 2024
 
750

 
745

 
786

 
750

 
745

 
755

3.750% notes due July 2025
 
2,000

 
1,990

 
2,136

 
2,000

 
1,989

 
2,025

3.700% notes due December 2025
 
300

 
298

 
320

 
300

 
298

 
303

3.100% notes due March 2026
 
1,000

 
996

 
1,030

 
1,000

 
995

 
965

3.450% notes due January 2027
 
750

 
746

 
789

 
750

 
746

 
742

3.375% notes due April 2027
 
625

 
619

 
653

 
625

 
619

 
611

2.950% notes due October 2027
 
950

 
939

 
966

 
950

 
938

 
898

3.850% notes due June 2028
 
1,150

 
1,142

 
1,246

 
1,150

 
1,142

 
1,163

3.875% notes due December 2028
 
850

 
843

 
927

 
850

 
842

 
861

4.625% notes due July 2035
 
1,000

 
992

 
1,149

 
1,000

 
992

 
1,060

5.800% notes due March 2036
 
850

 
838

 
1,090

 
850

 
838

 
1,003

6.500% notes due June 2037
 
500

 
492

 
693

 
500

 
492

 
638

6.625% notes due November 2037
 
650

 
641

 
915

 
650

 
641

 
841

6.875% notes due February 2038
 
1,100

 
1,076

 
1,591

 
1,100

 
1,076

 
1,437

5.700% notes due October 2040
 
300

 
296

 
385

 
300

 
296

 
355

5.950% notes due February 2041
 
350

 
345

 
462

 
350

 
345

 
426

4.625% notes due November 2041
 
600

 
588

 
684

 
600

 
588

 
627

4.375% notes due March 2042
 
502

 
484

 
556

 
502

 
484

 
503

3.950% notes due October 2042
 
625

 
607

 
655

 
625

 
607

 
596

4.250% notes due March 2043
 
750

 
735

 
820

 
750

 
734

 
744

4.750% notes due July 2045
 
2,000

 
1,973

 
2,369

 
2,000

 
1,973

 
2,116

4.200% notes due January 2047
 
750

 
738

 
820

 
750

 
738

 
745

4.250% notes due April 2047
 
725

 
717

 
797

 
725

 
717

 
719

3.750% notes due October 2047
 
950

 
933

 
974

 
950

 
933

 
869

4.250% notes due June 2048
 
1,350

 
1,329

 
1,500

 
1,350

 
1,329

 
1,349

4.450% notes due December 2048
 
1,100

 
1,088

 
1,267

 
1,100

 
1,087

 
1,132

Total commercial paper and long-term debt
 
$
41,401

 
$
41,085

 
$
44,650

 
$
35,667

 
$
35,234

 
$
36,591



12
Table of Contents

The Company’s long-term debt obligations included $1.2 billion and $1.3 billion of other financing obligations, of which $329 million and $229 million were classified as current as of June 30, 2019 and December 31, 2018, respectively.
Long-term Debt
In July 2019, the Company issued $5.5 billion of senior unsecured notes consisting of the following:
(in millions, except percentages)
 
Par Value
2.375% notes due August 2024
 
$
750

2.875% notes due August 2029
 
1,000

3.500% notes due August 2039
 
1,250

3.700% notes due August 2049
 
1,250

3.875% notes due August 2059
 
1,250


Commercial Paper and Bank Credit Facilities
Commercial paper consists of short-duration, senior unsecured debt privately placed on a discount basis through broker-dealers. As of June 30, 2019, the Company’s outstanding commercial paper had a weighted average annual interest rate of 2.6%.
The Company has $3.5 billion five-year, $3.5 billion three-year and $3.0 billion 364-day revolving bank credit facilities with 26 banks, which mature in December 2023, December 2021 and December 2019, respectively. The Company additionally has a $2.5 billion 364-day revolving bank credit facility with 6 banks that matures in May 2020. These facilities provide liquidity support for the Company’s commercial paper program and are available for general corporate purposes. As of June 30, 2019, no amounts had been drawn on any of the bank credit facilities. The annual interest rates, which are variable based on term, are calculated based on the London Interbank Offered Rate (LIBOR) plus a credit spread based on the Company’s senior unsecured credit ratings. If amounts had been drawn on the bank credit facilities as of June 30, 2019, annual interest rates would have ranged from 2.9% to 3.1%.
Debt Covenants
The Company’s bank credit facilities contain various covenants, including covenants requiring the Company to maintain a defined debt to debt-plus-shareholders’ equity ratio of not more than 60%. The Company was in compliance with its debt covenants as of June 30, 2019.
6.    Dividends
In June 2019, the Company’s Board of Directors increased the Company’s annual dividend rate to shareholders to $4.32 compared to $3.60 per share, which the Company had paid since June 2018. Declaration and payment of future quarterly dividends is at the discretion of the Board and may be adjusted as business needs or market conditions change.
The following table provides details of the Company’s 2019 dividend payments:
Payment Date
 
Amount per Share
 
Total Amount Paid
 
 
 
 
(in millions)
March 19
 
$
0.90

 
$
860

June 25
 
1.08

 
1,024


7.    Commitments and Contingencies
Leases
Operating lease costs were $247 million and $485 million for the three and six months ended June 30, 2019, respectively, and included immaterial variable and short-term lease costs. Cash payments made on the Company’s operating lease liabilities were $363 million for the six months ended June 30, 2019, which were classified within operating activities in the Condensed Consolidated Statements of Cash Flows. As of June 30, 2019, the Company’s weighted-average remaining lease term and weighted-average discount rate for its operating leases were 8.8 years and 4.0%, respectively.

13
Table of Contents

As of June 30, 2019, future minimum annual lease payments under all non-cancelable operating leases were as follows:
(in millions)
 
Future Operating Lease Payments
2019
 
$
396

2020
 
760

2021
 
666

2022
 
562

2023
 
463

Thereafter
 
1,977

Total future minimum lease payments
 
4,824

Less imputed interest
 
(806
)
Total
 
$
4,018


Legal Matters
Because of the nature of its businesses, the Company is frequently made party to a variety of legal actions and regulatory inquiries, including class actions and suits brought by members, care providers, consumer advocacy organizations, customers and regulators, relating to the Company’s businesses, including management and administration of health benefit plans and other services. These matters include medical malpractice, employment, intellectual property, antitrust, privacy and contract claims and claims related to health care benefits coverage and other business practices.
The Company records liabilities for its estimates of probable costs resulting from these matters where appropriate. Estimates of costs resulting from legal and regulatory matters involving the Company are inherently difficult to predict, particularly where the matters: involve indeterminate claims for monetary damages or may involve fines, penalties or punitive damages; present novel legal theories or represent a shift in regulatory policy; involve a large number of claimants or regulatory bodies; are in the early stages of the proceedings; or could result in a change in business practices. Accordingly, the Company is often unable to estimate the losses or ranges of losses for those matters where there is a reasonable possibility or it is probable that a loss may be incurred.
Government Investigations, Audits and Reviews
The Company has been involved or is currently involved in various governmental investigations, audits and reviews. These include routine, regular and special investigations, audits and reviews by the Centers for Medicare and Medicaid Services (CMS), state insurance and health and welfare departments, the Brazilian national regulatory agency for private health insurance and plans (the Agência Nacional de Saúde Suplementar), state attorneys general, the Office of the Inspector General, the Office of Personnel Management, the Office of Civil Rights, the Government Accountability Office, the Federal Trade Commission, U.S. Congressional committees, the U.S. Department of Justice, the SEC, the Internal Revenue Service, the U.S. Drug Enforcement Administration, the Brazilian federal revenue service (the Secretaria da Receita Federal), the U.S. Department of Labor, the Federal Deposit Insurance Corporation, the Defense Contract Audit Agency and other governmental authorities. Certain of the Company’s businesses have been reviewed or are currently under review, including for, among other matters, compliance with coding and other requirements under the Medicare risk-adjustment model. CMS has selected certain of the Company’s local plans for risk adjustment data validation (RADV) audits to validate the coding practices of and supporting documentation maintained by health care providers and such audits may result in retrospective adjustments to payments made to the Company’s health plans.
On February 14, 2017, the Department of Justice (DOJ) announced its decision to pursue certain claims within a lawsuit initially asserted against the Company and filed under seal by a whistleblower in 2011. The whistleblower’s complaint, which was unsealed on February 15, 2017, alleges that the Company made improper risk adjustment submissions and violated the False Claims Act. On February 12, 2018, the court granted in part and denied in part the Company’s motion to dismiss. In May 2018, DOJ moved to dismiss the Company’s counterclaims, which were filed in March 2018, and moved for partial summary judgment. In March 2019, the court denied the government’s motion for partial summary judgment and dismissed the Company’s counterclaims without prejudice. The Company cannot reasonably estimate the outcome that may result from this matter given its procedural status.

14
Table of Contents

8.    Segment Financial Information
The Company’s four reportable segments are UnitedHealthcare, OptumHealth, OptumInsight and OptumRx. For more information on the Company’s segments see Part I, Item I, “Business” and Note 13 of Notes to the Consolidated Financial Statements in Part II, Item 8, “Financial Statements and Supplementary Data” in the 2018 10-K. Total assets at OptumHealth increased to $38.8 billion as of June 30, 2019 compared to $29.8 billion as of December 31, 2018, primarily due to goodwill and other intangibles assets from a second quarter 2019 acquisition and the recognition of ROU assets from ASU 2016-02.
The following tables present reportable segment financial information:
 
 
 
 
Optum
 
 
 
 
(in millions)
 
UnitedHealthcare
 
OptumHealth
 
OptumInsight
 
OptumRx
 
Optum Eliminations
 
Optum
 
Corporate and
Eliminations
 
Consolidated
Three Months Ended June 30, 2019
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenues - unaffiliated customers:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Premiums
 
$
46,030

 
$
1,134

 
$
—

 
$
—

 
$
—

 
$
1,134

 
$
—

 
$
47,164

Products
 
—

 
9

 
22

 
8,322

 
—

 
8,353

 
—

 
8,353

Services
 
2,188

 
1,370

 
790

 
148

 
—

 
2,308

 
—

 
4,496

Total revenues - unaffiliated customers
 
48,218

 
2,513

 
812

 
8,470

 
—

 
11,795

 
—

 
60,013

Total revenues - affiliated customers
 
—

 
4,449

 
1,521

 
10,439

 
(381
)
 
16,028

 
(16,028
)
 
—

Investment and other income
 
376

 
186

 
6

 
14

 
—

 
206

 
—

 
582

Total revenues
 
$
48,594

 
$
7,148

 
$
2,339

 
$
18,923

 
$
(381
)
 
$
28,029

 
$
(16,028
)
 
$
60,595

Earnings from operations
 
$
2,642

 
$
688

 
$
525

 
$
889

 
$
—

 
$
2,102

 
$
—

 
$
4,744

Interest expense
 
—

 
—

 
—

 
—

 
—

 
—

 
(418
)
 
(418
)
Earnings before income taxes
 
$
2,642

 
$
688

 
$
525

 
$
889

 
$
—

 
$
2,102

 
$
(418
)
 
$
4,326

Three Months Ended June 30, 2018
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenues - unaffiliated customers:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Premiums
 
$
43,496

 
$
962

 
$
—

 
$
—

 
$
—

 
$
962

 
$
—

 
$
44,458

Products
 
—

 
12

 
20

 
6,972

 
—

 
7,004

 
—

 
7,004

Services
 
2,142

 
1,203

 
776

 
148

 
—

 
2,127

 
—

 
4,269

Total revenues - unaffiliated customers
 
45,638

 
2,177

 
796

 
7,120

 
—

 
10,093

 
—

 
55,731

Total revenues - affiliated customers
 
—

 
3,640

 
1,380

 
9,807

 
(341
)
 
14,486

 
(14,486
)
 
—

Investment and other income
 
208

 
124

 
9

 
14

 
—

 
147

 
—

 
355

Total revenues
 
$
45,846

 
$
5,941

 
$
2,185

 
$
16,941

 
$
(341
)
 
$
24,726

 
$
(14,486
)
 
$
56,086

Earnings from operations
 
$
2,357

 
$
570

 
$
453

 
$
824

 
$
—

 
$
1,847

 
$
—

 
$
4,204

Interest expense
 
—

 
—

 
—

 
—

 
—

 
—

 
(344
)
 
(344
)
Earnings before income taxes
 
$
2,357

 
$
570

 
$
453

 
$
824

 
$
—

 
$
1,847

 
$
(344
)
 
$
3,860


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Optum
 
 
 
 
(in millions)
 
UnitedHealthcare
 
OptumHealth
 
OptumInsight
 
OptumRx
 
Optum Eliminations
 
Optum
 
Corporate and
Eliminations
 
Consolidated
Six Months Ended June 30, 2019
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenues - unaffiliated customers:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Premiums
 
$
92,531

 
$
2,146

 
$
—

 
$
—

 
$
—

 
$
2,146

 
$
—

 
$
94,677

Products
 
—

 
17

 
45

 
16,363

 
—

 
16,425

 
—

 
16,425

Services
 
4,329

 
2,644

 
1,544

 
297

 
—

 
4,485

 
—

 
8,814

Total revenues - unaffiliated customers
 
96,860

 
4,807

 
1,589

 
16,660

 
—

 
23,056

 
—

 
119,916

Total revenues - affiliated customers
 
—

 
8,736

 
2,928

 
20,052

 
(740
)
 
30,976

 
(30,976
)
 
—

Investment and other income
 
630

 
318

 
11

 
28

 
—

 
357

 
—

 
987

Total revenues
 
$
97,490

 
$
13,861

 
$
4,528

 
$
36,740

 
$
(740
)
 
$
54,389

 
$
(30,976
)
 
$
120,903

Earnings from operations
 
$
5,596

 
$
1,314

 
$
957

 
$
1,709

 
$
—

 
$
3,980

 
$
—

 
$
9,576

Interest expense
 
—

 
—

 
—

 
—

 
—

 
—

 
(818
)
 
(818
)
Earnings before income taxes
 
$
5,596

 
$
1,314

 
$
957

 
$
1,709

 
$
—

 
$
3,980

 
$
(818
)
 
$
8,758

Six Months Ended June 30, 2018
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenues - unaffiliated customers:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Premiums
 
$
86,733

 
$
1,809

 
$
—

 
$
—

 
$
—

 
$
1,809

 
$
—

 
$
88,542

Products
 
—

 
24

 
43

 
13,639

 
—

 
13,706

 
—

 
13,706

Services
 
4,181

 
2,391

 
1,516

 
285

 
—

 
4,192

 
—

 
8,373

Total revenues - unaffiliated customers
 
90,914

 
4,224

 
1,559

 
13,924

 
—

 
19,707

 
—

 
110,621

Total revenues - affiliated customers
 
—

 
7,246

 
2,684

 
19,102

 
(674
)
 
28,358

 
(28,358
)
 
—

Investment and other income
 
391

 
230

 
11

 
21

 
—

 
262

 
—

 
653

Total revenues
 
$
91,305

 
$
11,700

 
$
4,254

 
$
33,047

 
$
(674
)
 
$
48,327

 
$
(28,358
)
 
$
111,274

Earnings from operations
 
$
4,757

 
$
1,058

 
$
848

 
$
1,594

 
$
—

 
$
3,500

 
$
—

 
$
8,257

Interest expense
 
—

 
—

 
—

 
—

 
—

 
—

 
(673
)
 
(673
)
Earnings before income taxes
 
$
4,757

 
$
1,058

 
$
848

 
$
1,594

 
$
—

 
$
3,500

 
$
(673
)
 
$
7,584



ITEM 2.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read together with the accompanying Condensed Consolidated Financial Statements and Notes and with our 2018 10-K, including the Consolidated Financial Statements and Notes in Part II, Item 8, “Financial Statements and Supplementary Data” in that report. Unless the context indicates otherwise, references to the terms “UnitedHealth Group,” “we,” “our” or “us” used throughout this Management’s Discussion and Analysis of Financial Condition and Results of Operations refer to UnitedHealth Group Incorporated and its consolidated subsidiaries.
Readers are cautioned that the statements, estimates, projections or outlook contained in this Management's Discussion and Analysis of Financial Condition and Results of Operations, including discussions regarding financial prospects, economic conditions, trends and uncertainties contained in this Item 2, may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 (PSLRA). These forward-looking statements involve risks and uncertainties that may cause our actual results to differ materially from the results discussed or implied in the forward-looking statements. A description of some of the risks and uncertainties is set forth in Part I, Item 1A, “Risk Factors” in our 2018 10-K and in the discussion below.
EXECUTIVE OVERVIEW
General
UnitedHealth Group is a diversified health care company dedicated to helping people live healthier lives and helping make the health system work better for everyone. Through our diversified family of businesses, we leverage core competencies in data and health information; advanced technology; and clinical expertise. These core competencies are deployed within two distinct,

16
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but strategically aligned, business platforms: health benefits operating under UnitedHealthcare and health services operating under Optum.
Further information on our business is presented in Part I, Item 1, “Business” and Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2018 10-K and additional information on our segments can be found in this Item 2 and in Note 8 of Notes to the Condensed Consolidated Financial Statements included in Part I, Item 1 of this report.
Business Trends
Our businesses participate in the United States, South American and certain other international health markets. In the United States, health care spending has grown consistently for many years and comprises approximately 18% of gross domestic product. Overall spending on health care is impacted by inflation; medical technology and pharmaceutical advancement; regulatory requirements; demographic trends in the population and national interest in health and well-being, mitigated by our continued efforts to control health care costs. The rate of market growth may be affected by a variety of factors, including macro-economic conditions and regulatory changes, which could impact our results of operations.
Pricing Trends. To price our health care benefit products, we start with our view of expected future costs, including any impact from the Health Insurance Industry Tax. We frequently evaluate and adjust our approach in each of the local markets we serve, considering all relevant factors, such as product positioning, price competitiveness and environmental, competitive, legislative and regulatory considerations, including minimum medical loss ratio (MLR) thresholds. We will continue seeking to balance growth and profitability across all of these dimensions.
The commercial risk market remains highly competitive in both the small group and large group segments. We expect broad-based competition to continue as the industry adapts to individual and employer needs amid reform changes. Pricing for contracts that cover some portion of calendar year 2020 will reflect the return of the Health Insurance Industry Tax after a moratorium in 2019.
Government programs in the public and senior sector tend to receive lower rates of increase than the commercial market due to governmental budget pressures and lower cost trends.
Medical Cost Trends. Our medical cost trends primarily relate to changes in unit costs, health system utilization and prescription drug costs. 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 high quality, affordable care.
Regulatory Trends and Uncertainties
Following is a summary of management’s view of regulatory trends and uncertainties. For additional information regarding regulatory trends and uncertainties, see Part I, Item 1 “Business - Government Regulation,” Part 1, Item 1A, “Risk Factors” and Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2018 10-K.
Medicare Advantage Rates. Final 2020 Medicare Advantage rates resulted in an increase in industry base rates of approximately 2.5%, short of the industry forward medical cost trend, including the return of the Health Insurance Industry Tax, creating continued pressure in the Medicare Advantage program.
Health Insurance Industry Tax. There is a one year moratorium on the Health Insurance Industry Tax in 2019. This moratorium impacts year-over-year comparability of our financial statements, including revenues, operating costs, medical care ratio (MCR), operating cost ratio, effective tax rate and cash flows from operations.
SELECTED OPERATING PERFORMANCE AND OTHER SIGNIFICANT ITEMS
The following summarizes select second quarter 2019 year-over-year operating comparisons to second quarter 2018.
•
Consolidated revenues grew 8%, UnitedHealthcare revenues grew 6% and Optum revenues grew 13%.
•
UnitedHealthcare served 705,000 additional people primarily as a result of acquisitions and growth in services to self-funded employers and seniors.
•
Earnings from operations increased 13%, including increases of 12% at UnitedHealthcare and 14% at Optum.
•
Diluted earnings per common share increased 15%.
•
Cash flows from operations for the six months ended June 30, 2019 were $9.1 billion.
•
Return on equity was 25.1%.

17
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RESULTS SUMMARY
The following table summarizes our consolidated results of operations and other financial information:
(in millions, except percentages and per share data)
 
Three Months Ended June 30,
 
Increase/(Decrease)
 
Six Months Ended June 30,
 
Increase/(Decrease)
 
2019
 
2018
 
2019 vs. 2018
 
2019
 
2018
 
2019 vs. 2018
Revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Premiums
 
$
47,164

 
$
44,458

 
$
2,706

 
6
%
 
$
94,677

 
$
88,542

 
$
6,135

 
7
%
Products
 
8,353

 
7,004

 
1,349

 
19

 
16,425

 
13,706

 
2,719

 
20

Services
 
4,496

 
4,269

 
227

 
5

 
8,814

 
8,373

 
441

 
5

Investment and other income
 
582

 
355

 
227

 
64

 
987

 
653

 
334

 
51

Total revenues
 
60,595

 
56,086

 
4,509

 
8

 
120,903

 
111,274

 
9,629

 
9

Operating costs:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Medical costs
 
39,184

 
36,427

 
2,757

 
8

 
78,123

 
72,290

 
5,833

 
8

Operating costs
 
8,415

 
8,386

 
29

 
—

 
16,932

 
16,892

 
40

 
—

Cost of products sold
 
7,598

 
6,471

 
1,127

 
17

 
14,979

 
12,655

 
2,324

 
18

Depreciation and amortization
 
654

 
598

 
56

 
9

 
1,293

 
1,180

 
113

 
10

Total operating costs
 
55,851

 
51,882

 
3,969

 
8

 
111,327

 
103,017

 
8,310

 
8

Earnings from operations
 
4,744

 
4,204

 
540

 
13

 
9,576

 
8,257

 
1,319

 
16

Interest expense
 
(418
)
 
(344
)
 
(74
)
 
22

 
(818
)
 
(673
)
 
(145
)
 
22

Earnings before income taxes
 
4,326

 
3,860

 
466

 
12

 
8,758

 
7,584

 
1,174

 
15

Provision for income taxes
 
(941
)
 
(850
)
 
(91
)
 
11

 
(1,816
)
 
(1,650
)
 
(166
)
 
10

Net earnings
 
3,385

 
3,010

 
375

 
12

 
6,942

 
5,934

 
1,008

 
17

Earnings attributable to noncontrolling interests
 
(92
)
 
(88
)
 
(4
)
 
5

 
(182
)
 
(176
)
 
(6
)
 
3

Net earnings attributable to UnitedHealth Group common shareholders
 
$
3,293

 
$
2,922

 
$
371

 
13
%
 
$
6,760

 
$
5,758

 
$
1,002

 
17
%
Diluted earnings per share attributable to UnitedHealth Group common shareholders
 
$
3.42

 
$
2.98

 
$
0.44

 
15
%
 
$
6.97

 
$
5.85

 
$
1.12

 
19
%
Medical care ratio (a)
 
83.1
%
 
81.9
%
 
1.2
 %
 
 
 
82.5
%
 
81.6
%
 
0.9
 %
 
 
Operating cost ratio
 
13.9

 
15.0

 
(1.1
)
 
 
 
14.0

 
15.2

 
(1.2
)
 
 
Operating margin
 
7.8

 
7.5

 
0.3

 
 
 
7.9

 
7.4

 
0.5

 
 
Tax rate
 
21.8

 
22.0

 
(0.2
)
 
 
 
20.7

 
21.8

 
(1.1
)
 
 
Net earnings margin (b)
 
5.4

 
5.2

 
0.2

 
 
 
5.6

 
5.2

 
0.4

 
 
Return on equity (c)
 
25.1
%
 
24.4
%
 
0.7
 %
 
 
 
25.9
%
 
24.1
%
 
1.8
 %
 
 
                   
(a)
Medical care ratio is calculated as medical costs divided by premium revenue.
(b)
Net earnings margin attributable to UnitedHealth Group shareholders.
(c)
Return on equity is calculated as annualized net earnings attributable to UnitedHealth Group common shareholders divided by average shareholders’ equity. Average shareholders’ equity is calculated using the shareholders’ equity balance at the end of the preceding year and the shareholders’ equity balances at the end of each of the quarters in the year presented.
2019 RESULTS OF OPERATIONS COMPARED TO 2018 RESULTS OF OPERATIONS
Consolidated Financial Results
Revenue
The increases in revenue were primarily driven by the increase in the number of individuals served through various Medicare products; pricing trends; and growth across the Optum business, primarily due to expansion in pharmacy care services and care delivery; partially offset by the moratorium of the Health Insurance Industry Tax in 2019.
Medical Costs and MCR
Medical costs increased due to growth in people served through Medicare products and medical cost trends, partially offset by increased prior year favorable medical cost development. The MCR increased due to the revenue effects of the Health Insurance Industry Tax moratorium.
Operating Cost Ratio
The operating cost ratio decreased due to the impact of the Health Insurance Industry Tax moratorium and effective operating cost management.

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Income Tax Rate
Our effective tax rate decreased due to the impact of the moratorium of the nondeductible Health Insurance Industry Tax.
Reportable Segments
See Note 8 of Notes to the Condensed Consolidated Financial Statements included in Part I, Item 1 of this report for more information on our segments. 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/(Decrease)
(in millions, except percentages)
 
2019
 
2018
 
2019 vs. 2018
 
2019
 
2018
 
2019 vs. 2018
Revenues
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
UnitedHealthcare
 
$
48,594

 
$
45,846

 
$
2,748

 
6
%
 
$
97,490

 
$
91,305

 
$
6,185

 
7
%
OptumHealth
 
7,148

 
5,941

 
1,207

 
20

 
13,861

 
11,700

 
2,161

 
18

OptumInsight
 
2,339

 
2,185

 
154

 
7

 
4,528

 
4,254

 
274

 
6

OptumRx
 
18,923

 
16,941

 
1,982

 
12

 
36,740

 
33,047

 
3,693

 
11

Optum eliminations
 
(381
)
 
(341
)
 
(40
)
 
12

 
(740
)
 
(674
)
 
(66
)
 
10

Optum
 
28,029

 
24,726

 
3,303

 
13

 
54,389

 
48,327

 
6,062

 
13

Eliminations
 
(16,028
)
 
(14,486
)
 
(1,542
)
 
11

 
(30,976
)
 
(28,358
)
 
(2,618
)
 
9

Consolidated revenues
 
$
60,595

 
$
56,086

 
$
4,509

 
8
%
 
$
120,903

 
$
111,274

 
$
9,629

 
9
%
Earnings from operations
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
UnitedHealthcare
 
$
2,642

 
$
2,357

 
$
285

 
12
%
 
$
5,596

 
$
4,757

 
$
839

 
18
%
OptumHealth
 
688

 
570

 
118

 
21

 
1,314

 
1,058

 
256

 
24

OptumInsight
 
525

 
453

 
72

 
16

 
957

 
848

 
109

 
13

OptumRx
 
889

 
824

 
65

 
8

 
1,709

 
1,594

 
115

 
7

Optum
 
2,102

 
1,847

 
255

 
14

 
3,980

 
3,500

 
480

 
14

Consolidated earnings from operations
 
$
4,744

 
$
4,204

 
$
540

 
13
%
 
$
9,576

 
$
8,257

 
$
1,319

 
16
%
Operating margin
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
UnitedHealthcare
 
5.4
%
 
5.1
%
 
0.3
 %
 
 
 
5.7
%
 
5.2
%
 
0.5
 %
 
 
OptumHealth
 
9.6

 
9.6

 
—

 
 
 
9.5

 
9.0

 
0.5

 
 
OptumInsight
 
22.4

 
20.7

 
1.7

 
 
 
21.1

 
19.9

 
1.2

 
 
OptumRx
 
4.7

 
4.9

 
(0.2
)
 
 
 
4.7

 
4.8

 
(0.1
)
 
 
Optum
 
7.5

 
7.5

 
—

 
 
 
7.3

 
7.2

 
0.1

 
 
Consolidated operating margin
 
7.8
%
 
7.5
%
 
0.3
 %
 
 
 
7.9
%
 
7.4
%
 
0.5
 %
 
 
UnitedHealthcare
The following table summarizes UnitedHealthcare revenues by business:
 
 
Three Months Ended June 30,
 
Increase/(Decrease)
 
Six Months Ended June 30,
 
Increase/(Decrease)
(in millions, except percentages)
 
2019
 
2018
 
2019 vs. 2018
 
2019
 
2018
 
2019 vs. 2018
UnitedHealthcare Employer & Individual
 
$
14,032

 
$
13,708

 
$
324

 
2
 %
 
$
28,116

 
$
27,122

 
$
994

 
4
%
UnitedHealthcare Medicare & Retirement
 
20,855

 
18,859

 
1,996

 
11

 
41,951

 
37,784

 
4,167

 
11

UnitedHealthcare Community & State
 
11,186

 
10,746

 
440

 
4

 
22,368

 
21,417

 
951

 
4

UnitedHealthcare Global
 
2,521

 
2,533

 
(12
)
 
—

 
5,055

 
4,982

 
73

 
1

Total UnitedHealthcare revenues
 
$
48,594

 
$
45,846

 
$
2,748

 
6
 %
 
$
97,490

 
$
91,305

 
$
6,185

 
7
%

19
Table of Contents

The following table summarizes the number of individuals served by our UnitedHealthcare businesses, by major market segment and funding arrangement:
 
 
June 30,
 
Increase/(Decrease)
(in thousands, except percentages)
 
2019
 
2018
 
2019 vs. 2018
Commercial:
 
 
 
 
 
 
 
 
Risk-based
 
8,325

 
8,385

 
(60
)
 
(1
)%
Fee-based
 
19,090

 
18,415

 
675

 
4

Total commercial
 
27,415

 
26,800

 
615

 
2

Medicare Advantage
 
5,190

 
4,790

 
400

 
8

Medicaid
 
6,360

 
6,710

 
(350
)
 
(5
)
Medicare Supplement (Standardized)
 
4,495

 
4,505

 
(10
)
 
—

Total public and senior
 
16,045

 
16,005

 
40

 
—

Total UnitedHealthcare - domestic medical
 
43,460

 
42,805

 
655

 
2

International
 
6,070

 
6,020

 
50

 
1

Total UnitedHealthcare - medical
 
49,530

 
48,825

 
705

 
1
 %
Supplemental Data:
 
 
 
 
 
 
 
 
Medicare Part D stand-alone
 
4,430

 
4,730

 
(300
)
 
(6
)%
Fee-based commercial group business increased primarily due to an acquisition. Medicare Advantage increased due to growth in people served through individual and employer-sponsored group Medicare Advantage plans. The decrease in people served through Medicaid was primarily driven by states adding new carriers to existing programs, reduced enrollment from state efforts to manage eligibility status and the sale of our New Mexico Medicaid plan in 2018, partially offset by increases in Dual Special Needs Plans.
UnitedHealthcare’s revenue and earnings from operations increased due to growth in the number of individuals served through several Medicare products, a higher revenue membership mix and rate increases for underlying medical cost trends. Revenue increases were partially offset by the moratorium on the Health Insurance Industry Tax in 2019. Earnings from operations were also favorably impacted by operating cost management.
Optum
Total revenues and earnings from operations increased as each segment reported increased revenues and earnings from operations as a result of productivity and overall cost management initiatives in addition to the factors discussed below.
The results by segment were as follows:
OptumHealth
Revenue increased at OptumHealth primarily due to organic growth and acquisitions in care delivery, increased care services and organic growth in behavioral health. Increased operating earnings were primarily due to care delivery and care services. OptumHealth served approximately 95 million people as of June 30, 2019 compared to 92 million people as of June 30, 2018.
OptumInsight
Revenue and earnings from operations at OptumInsight increased primarily due to organic growth in managed services.
OptumRx
Revenue and earnings from operations at OptumRx increased primarily due to acquisitions and organic growth in specialty pharmacy, home delivery services and overall prescription growth. OptumRx fulfilled 343 million and 332 million adjusted scripts in the second quarters of 2019 and 2018, respectively.

20
Table of Contents

LIQUIDITY, FINANCIAL CONDITION AND CAPITAL RESOURCES
Liquidity
Summary of our Major Sources and Uses of Cash and Cash Equivalents
 
 
Six Months Ended June 30,
 
Increase/(Decrease)
(in millions)
 
2019
 
2018
 
2019 vs. 2018
Sources of cash:
 
 
 
 
 
 
Cash provided by operating activities
 
$
9,108

 
$
12,376

 
$
(3,268
)
Issuances of commercial paper and long-term debt, net of repayments
 
5,674

 
2,683

 
2,991

Proceeds from common stock issuances
 
448

 
478

 
(30
)
Customer funds administered
 
1,435

 
3,082

 
(1,647
)
Other
 
504

 
—

 
504

Total sources of cash
 
17,169

 
18,619

 
 
Uses of cash:
 
 
 
 
 
 
Common stock repurchases
 
(4,501
)
 
(3,150
)
 
(1,351
)
Cash paid for acquisitions, net of cash assumed
 
(4,751
)
 
(2,636
)
 
(2,115
)
Purchases of investments, net of sales and maturities
 
(1,654
)
 
(2,968
)
 
1,314

Purchases of property, equipment and capitalized software
 
(977
)
 
(960
)
 
(17
)
Cash dividends paid
 
(1,884
)
 
(1,588
)
 
(296
)
Other
 
(529
)
 
(852
)
 
323

Total uses of cash
 
(14,296
)
 
(12,154
)
 
 
Effect of exchange rate changes on cash and cash equivalents
 
6

 
(78
)
 
84

Net increase in cash and cash equivalents
 
$
2,879

 
$
6,387

 
$
(3,508
)
2019 Cash Flows Compared to 2018 Cash Flows
Decreased cash flows provided by operating activities were primarily driven by the increase in unearned revenues in 2018 due to the June 2018 early receipt of our July CMS premium payment of $5.2 billion and the year-over-year impact of the Health Insurance Industry Tax moratorium, partially offset by higher net earnings and changes in working capital accounts.
Other significant changes in sources or uses of cash year-over-year included increased cash paid for acquisitions; common stock repurchases; and issuances of commercial paper and decreased purchases of investments and customer funds administered, due to the early receipt of our CMS payment in 2018 described above.
Financial Condition
As of June 30, 2019, our cash, cash equivalent, available-for-sale debt securities and equity securities balances of $50.7 billion included approximately $13.7 billion of cash and cash equivalents (of which $900 million was available for general corporate use), $34.7 billion of debt securities and $2.2 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 portfolio had a weighted-average duration of 3.3 years and a weighted-average credit rating of “Double A” as of June 30, 2019. 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.
Capital Resources and Uses of Liquidity
In addition to cash flows from operations and cash and cash equivalent balances available for general corporate use, our capital resources and uses of liquidity are as follows:
Commercial Paper and Bank Credit Facilities. Our revolving bank credit facilities provide liquidity support for our commercial paper borrowing program, which facilitates the private placement of unsecured debt through third-party broker-dealers, and are available for general corporate purposes. For more information on our commercial paper and bank credit facilities, see Note 5 of Notes to the Condensed Consolidated Financial Statements included in Part I, Item 1 of this report.

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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, 2019, our debt to debt-plus-shareholders’ equity ratio, as defined and calculated under the credit facilities, was approximately 41%.
Long-Term Debt. In July 2019, we issued $5.5 billion in senior unsecured notes. We intend to use the net proceeds from this offering for general corporate purposes, including refinancing commercial paper borrowings, or redeeming, repurchasing or repaying outstanding securities. For more information on our long-term debt, see Note 5 of Notes to the Condensed Consolidated Financial Statements included in Part I, Item 1 of this report.
Credit Ratings. Our credit ratings as of June 30, 2019 were as follows:
  
Moody’s
 
S&P Global
 
Fitch
 
A.M. Best
 
Ratings
 
Outlook
 
Ratings
 
Outlook
 
Ratings
 
Outlook
 
Ratings
 
Outlook
Senior unsecured debt
A3
 
Stable
 
A+
 
Stable
 
A-
 
Stable
 
A-
 
Stable
Commercial paper
P-2
 
n/a
 
A-1
 
n/a
 
F1
 
n/a
 
AMB-1
 
n/a
The availability of financing in the form of debt or equity is influenced by many factors, including our profitability, operating cash flows, debt levels, credit ratings, debt covenants and other contractual restrictions, regulatory requirements and economic and market conditions. For example, a significant downgrade in our credit ratings or adverse conditions in the capital markets may increase the cost of borrowing for us or limit our access to capital.
Share Repurchase Program. During the six months ended June 30, 2019, we repurchased 18 million shares at an average price of $246.84 per share. As of June 30, 2019, we had Board authorization to purchase up to 76 million shares of our common stock.
Dividends. In June 2019, our Board increased our quarterly cash dividend to shareholders to an annual dividend rate of $4.32 per share. 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.
For additional liquidity discussion, see Note 10 of Notes to the Consolidated Financial Statements in Part II, Item 8, “Financial Statements and Supplementary Data” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 in our 2018 10-K.
CONTRACTUAL OBLIGATIONS AND COMMITMENTS
A summary of future obligations under our various contractual obligations and commitments as of December 31, 2018 was disclosed in our 2018 10-K. During the six months ended June 30, 2019, there were no material changes to this previously disclosed information outside the ordinary course of business. However, we continually evaluate opportunities to expand our operations, including through internal development of new products, programs and technology applications and acquisitions.
RECENTLY ISSUED ACCOUNTING STANDARDS
See Note 1 of Notes to the Condensed Consolidated Financial Statements in Part I, Item 1 of this report for a discussion of new accounting pronouncements that affect us.
CRITICAL ACCOUNTING ESTIMATES
In preparing our Condensed Consolidated Financial Statements, we are required to make judgments, assumptions and estimates, which we believe are reasonable and prudent based on the available facts and circumstances. These judgments, assumptions and estimates affect certain of our revenues and expenses and their related balance sheet accounts and disclosure of our contingent liabilities. We base our assumptions and estimates primarily on historical experience and consider known and projected trends. On an ongoing basis, we re-evaluate our selection of assumptions and the method of calculating our estimates. Actual results, however, may materially differ from our calculated estimates, and this difference would be reported in our current operations.
Our critical accounting estimates include medical costs payable and goodwill. For a detailed description of our critical accounting estimates, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 in our 2018 10-K. For a detailed discussion of our significant accounting policies, see Note 2 of Notes to the Consolidated Financial Statements in Part II, Item 8, “Financial Statements and Supplementary Data” in our 2018 10-K.

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FORWARD-LOOKING STATEMENTS
The statements, estimates, projections, guidance or outlook contained in this document include “forward-looking” statements within the meaning of the PSLRA. These statements are intended to take advantage of the “safe harbor” provisions of the PSLRA. Generally the words “believe,” “expect,” “intend,” “estimate,” “anticipate,” “forecast,” “outlook,” “plan,” “project,” “should” and similar expressions identify forward-looking statements, which generally are not historical in nature. These statements may contain information about financial prospects, economic conditions and trends and involve risks and uncertainties. We caution that actual results could differ materially from those that management expects, depending on the outcome of certain factors.
Some factors that could cause actual results to differ materially from results discussed or implied in the forward-looking statements include: our ability to effectively estimate, price for and manage our medical costs, including the impact of any new coverage requirements; new laws or regulations, or changes in existing laws or regulations, or their enforcement or application, including increases in medical, administrative, technology or other costs or decreases in enrollment resulting from U.S., South American and other jurisdictions’ regulations affecting the health care industry; the outcome of the DOJ’s legal action relating to the risk adjustment submission matter; our ability to maintain and achieve improvement in CMS star ratings and other quality scores that impact revenue; reductions in revenue or delays to cash flows received under Medicare, Medicaid and other government programs, including the effects of a prolonged U.S. government shutdown or debt ceiling constraints; changes in Medicare, including changes in payment methodology, the CMS star ratings program or the application of risk adjustment data validation audits; cyber-attacks or other privacy or data security incidents; failure to comply with privacy and data security regulations; regulatory and other risks and uncertainties of the pharmacy benefits management industry; competitive pressures, which could affect our ability to maintain or increase our market share; changes in or challenges to our public sector contract awards; our ability to execute contracts on competitive terms with physicians, hospitals and other service providers; failure to achieve targeted operating cost productivity improvements, including savings resulting from technology enhancement and administrative modernization; increases in costs and other liabilities associated with increased litigation, government investigations, audits or reviews; failure to manage successfully our strategic alliances or complete or receive anticipated benefits of acquisitions and other strategic transactions, fluctuations in foreign currency exchange rates on our reported shareholders’ equity and results of operations; downgrades in our credit ratings; the performance of our investment portfolio; impairment of the value of our goodwill and intangible assets if estimated future results do not adequately support goodwill and intangible assets recorded for our existing businesses or the businesses that we acquire; failure to maintain effective and efficient information systems or if our technology products do not operate as intended; and our ability to obtain sufficient funds from our regulated subsidiaries or the debt or capital markets to fund our obligations, to maintain our debt to total capital ratio at targeted levels, to maintain our quarterly dividend payment cycle or to continue repurchasing shares of our common stock.
This list of important factors is not intended to be exhaustive. We discuss certain of these matters more fully, as well as certain risk factors that may affect our business operations, financial condition and results of operations, in our other periodic and current filings with the SEC, including our annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K. Any or all forward-looking statements we make may turn out to be wrong, and can be affected by inaccurate assumptions we might make or by known or unknown risks and uncertainties. By their nature, forward-looking statements are not guarantees of future performance or results and are subject to risks, uncertainties and assumptions that are difficult to predict or quantify. Actual future results may vary materially from expectations expressed or implied in this document or any of our prior communications. You should not place undue reliance on forward-looking statements, which speak only as of the date they are made. We do not undertake to update or revise any forward-looking statements, except as required by applicable securities laws.
ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We manage exposure to market interest rates by diversifying investments across different fixed-income market sectors and debt across maturities, as well as by endeavoring to match our floating-rate assets and liabilities over time, either directly or through the use of interest rate swap contracts. Unrealized gains and losses on investments in available-for-sale debt securities are reported in comprehensive income.

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The following table summarizes the impact of hypothetical changes in market interest rates across the entire yield curve by 1% point or 2% points as of June 30, 2019 on our investment income and interest expense per annum, and the fair value of our investments and debt (in millions, except percentages):
 
 
June 30, 2019
Increase (Decrease) in Market Interest Rate
 
Investment
Income Per
Annum
 
Interest
Expense Per
Annum
 
Fair Value of
Financial Assets
 
Fair Value of
Financial Liabilities
2 %
 
$
337

 
$
305

 
$
(2,456
)
 
$
(5,466
)
1
 
169

 
152

 
(1,233
)
 
(2,964
)
(1)
 
(169
)
 
(152
)
 
1,177

 
3,491

(2)
 
(337
)
 
(305
)
 
2,034

 
7,581


ITEM 4.    CONTROLS AND PROCEDURES
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
We maintain disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (Exchange Act) that are designed to provide reasonable assurance that information required to be disclosed by us in reports that we file or submit under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in SEC rules and forms; and (ii) accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
In connection with the filing of this quarterly report on Form 10-Q, management evaluated, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, the effectiveness of the design and operation of our disclosure controls and procedures as of June 30, 2019. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of June 30, 2019.
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
There have been no changes in our internal control over financial reporting during the quarter ended June 30, 2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II. OTHER INFORMATION
ITEM 1.
LEGAL PROCEEDINGS
A description of our legal proceedings is included in and incorporated by reference to Note 7 of Notes to the Condensed Consolidated Financial Statements contained in Part I, Item 1 of this report.
ITEM 1A.    RISK FACTORS
In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, Item 1A, “Risk Factors” of our 2018 10-K, which could materially affect our business, financial condition or future results. The risks described in our 2018 10-K are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or future results.
There have been no material changes to the risk factors disclosed in our 2018 10-K.
ITEM 2.
UNREGISTERED SALE OF EQUITY SECURITIES AND USE OF PROCEEDS
In November 1997, our Board of Directors adopted a share repurchase program, which the Board evaluates periodically. There is no established expiration date for the program. During the second quarter 2019, we repurchased approximately 6 million shares at an average price of $235.77 per share. As of June 30, 2019, we had Board authorization to purchase up to 76 million shares of our common stock.

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ITEM 6.
EXHIBITS*
The following exhibits are filed or incorporated by reference herein in response to Item 601 of Regulation S-K. The Company files Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K pursuant to the Securities Exchange Act of 1934 under Commission File No. 1-10864.
 
 
 
 
 
 
 
 
 
101.INS
 
XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH
 
XBRL Taxonomy Extension Schema Document.
101.CAL
 
XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF
 
XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB
 
XBRL Taxonomy Extension Label Linkbase Document.
101.PRE
 
XBRL Taxonomy Extension Presentation Linkbase Document.
 ________________
*
 
Pursuant to Item 601(b)(4)(iii) of Regulation S-K, copies of instruments defining the rights of certain holders of long-term debt are not filed. The Company will furnish copies thereof to the SEC upon request.


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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
UNITEDHEALTH GROUP INCORPORATED
 
/s/ DAVID S. WICHMANN
 
Chief Executive Officer
(principal executive officer)
Dated:
August 6, 2019
David S. Wichmann
 
  
 
 
 
 
/s/ JOHN F. REX
 
Executive Vice President and
Chief Financial Officer
(principal financial officer)
Dated:
August 6, 2019
John F. Rex
 
  
 
 
 
 
/s/    THOMAS E. ROOS
 
Senior Vice President and
Chief Accounting Officer
(principal accounting officer)
Dated:
August 6, 2019
Thomas E. Roos
 
  
 


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