Growth Across Businesses Lifts UnitedHealth’s 2015 Results

UnitedHealth Group (NYSE:UNH) announced earnings for the fourth quarter and full year 2015 on Tuesday, January 19, reporting EPS of $6.45 for 2015 compared to $6.04 a year ago. ^[1] The company improved its top line, with consolidated revenues of $157 billion compared to $130 billion a year ago. Operating earnings also jumped by over 7% year-over-year to over $11 billion. This was despite a decline in operating margins as the company experienced losses at individual health insurance exchanges as well as the loss of a Medicaid contract, although growth in the pharmacy care business did ease some of that decline. The company’s medical care ratio (expenses to premiums) of 81.7% in 2015 was also affected by the individual insurance products on health insurance exchanges. Strong growth across divisions, Optum and Medicaid in particular, boosted UnitedHealth’s performance in 2015.

UnitedHealth is very bullish about its outlook for 2016. The company expects to cross $180 billion in consolidated revenue for the year, with the earnings per share growing to $7.60-7.80. ^[2]

We have a price estimate of $115 for UnitedHealth’s stock, which is slightly higher than the current market price.

See Full Analysis For UnitedHealth Group Here

Medicare And Retirement

Revenues from Medicare grew by 8% y-o-y to about $50 billion in 2015, growing 6% y-o-y during the fourth quarter. Under the Medicare Advantage product line, the company added around 230,000 new customers to cross the 3.5 million mark. This could have been better, had the company not lost around 105,000 customers in the Medicare Part D prescription drug plan.

Solid Growth In Medicaid

UnitedHealth ended the year further Medicaid growth, with the total number of people served by the division standing at around 5.3 million at the end of the year. Revenues from the division increased by 23% y-o-y to nearly $29 billion in 2015. This is similar to the growth UnitedHealth experienced in 2014. The fourth quarter was also strong, as revenues during the period increased 14% y-o-y.

Private Health Insurance

During 2015, UnitedHealth added around a million new individuals to its customer base, of which 200,000 came in the fourth quarter. This resulted in a 10% y-o-y growth in annual revenues of over $47 billion from the division. Going forward, growth in these numbers will be affected by the company’s decision to hold back its expansion on individual health insurance exchanges under the Affordable Care Act (ACA). We will be closely following developments on this front.

Optum’s Continues To Shine

The company’s Optum division has three subdivisions: OptumHealth, OptumInsight and OptumRx. The Optum division revenues grew 42% y-o-y to $68 billion in 2015, with fourth quarter revenues rising by 70% y-o-y (though much of this was driven by the Catamaran acquisition). The company’s organic growth was driven by growth in revenue management service businesses, as well as the expansion of health care delivery services under the OptumHealth segment.

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1. SEC 8-K Filing, January 19 2015 [↩]
2. UNITEDHEALTH GROUP REPORTS 2015 RESULTS HIGHLIGHTED BY CONTINUED STRONG AND DIVERSIFIED GROWTH, UnitedHealth Press Release [↩]