UnitedHealth Posts Robust Q2 Results On Solid Optum Performance

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UnitedHealth Group

UnitedHealth Group (NYSE:UNH), the largest health insurer in the U.S., announced its second quarter results on Tuesday. The company posted strong figures for the quarter ending June 30, with revenues growing 28% over the prior year quarter to $46.5 billion and operating income rising by 10.6% year over year to $3.2 billion, driven by solid performance of the company’s pharmacy services business, Optum. However, UnitedHealth’s overall margins declined by 110 basis points, owing to a loss of $200 million from Affordable Care Act (ACA) compliant products, reflected in the UnitedHealthCare division results.

Buoyed by the overall strong quarterly results, the company slightly raised its guidance for full year 2016 and now expects to generate adjusted earnings of $7.80 to $7.95. Its guidance for consolidated revenue in full year 2016 remains the same at $182 billion.

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Segment Performance

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The UnitedHealthCare division posted revenues of $37.6 billion for the quarter, an increase of 14% year over year (y-o-y). This was primarily driven by a 5% increase in the number of customers served to 48 million. In terms of the bottom line, the division’s operating margin declined by 4% y-o-y owing to full year ACA plan losses of $200 million in the quarter.

On the other hand, Optum again reported solid results. Segment revenues grew 52% year over year driven by growth across all three sub-segments – OptumHealth, OptumInsight and OptumRx.

Optum Segment Breakdown

 

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OptumHealth reported revenues of $4.1 billion, an increase of 18% on a y-o-y basis, primarily driven by a 6% increase in customers served. OptumInsight revenues were reported at $1.8 billion, an increase of 25% on a y-o-y basis. Meanwhile, the biggest source of growth during the quarter was OptumRx, UnitedHealth’s PBM business, with revenues growing at 69% over the prior year quarter to $15.1 billion. The increase in revenues was primarily driven by recent acquisitions Catamaran and Helios.

The percentage breakdown of revenues from all segments of Optum is shown below.

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