UnitedHealth Finishes 2016 On A High Driven By Solid Performance Across Divisions

UnitedHealth Group (NYSE:UNH), the largest health insurer in the U.S., announced its fourth quarter results on Tuesday. As expected, the company posted strong figures for the quarter ending December 31, with revenues growing 9% over the prior year quarter to $47.5 billion and operating income rising over 43% year over year (y-o-y) to $3.5 billion, driven by solid performance across divisions. Robust performance by both the company’s pharmacy services business, Optum, as well as the health care benefits division, UnitedHealthCare, helped improve UnitedHealth’s operating margin by 170 basis points and net margin by 110 basis points over the prior year quarter. The company’s net earnings increased 56% y-o-y to $1.96 per share.

For the full year 2016, UnitedHealth’s revenues grew 18% to $185 billion and operating income increased 21% to $13.3 billion. Buoyed by the overall strong results in 2016, the company reaffirmed its guidance for full year 2017 and expects to generate revenue of $197 billion to $199 billion and adjusted earnings of $9.30 – $9.60. 

Segment Performance

UnitedHealthCare: The UnitedHealthCare division posted revenues of $37.9 billion for the quarter, an increase of 15.6% y-o-y. This was primarily driven by a 5% increase in the number of customers served to 48.6 million. In terms of the bottom line, the division’s operating income grew a whopping 84% to $1.8 billion and operating margin improved 170 basis points to 4.6% owing to a favorable base effect of lower segment earnings related to the individual Affordable Care Act market in Q4 2015. Optum: Optum again reported solid results. Segment revenues were largely flat y-o-y but operating income grew about 18% driven by growth across all three sub-segments – OptumHealth, OptumInsight, and OptumRx.

OptumHealth reported revenues of $4.5 billion, an increase of about 23% y-o-y, owing to a 6% increase in customers served (83 million) and 14% increase in revenue per customer ($54.2 per quarter). This was primarily driven by growth in health care delivery businesses, as well as the expansion of behavioral services into new Medicaid markets.

OptumInsight reported revenues of $2.1 billion, an increase of 15% on a y-o-y basis, driven by revenue management, business process outsourcing and technology services, and payer service offerings.

OptumRx, UnitedHealth’s PBM business, reported revenue decline of 5% y-o-y to $15.9 billion, driven by known Catamaran customer losses incurred prior to its acquisition by Optum.

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