SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
Current Report Pursuant to
Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of report (Date of earliest event reported): January 20, 2005
UNITEDHEALTH GROUP INCORPORATED
(Exact name of registrant as specified in its charter)
Minnesota
0-10864
41-1321939
(State or other jurisdiction
of incorporation)
(Commission File Number)
(I.R.S. Employer
Identification No.)
UnitedHealth Group Center, 9900 Bren Road East, Minnetonka, Minnesota
55343
(Address of principal executive offices)
(Zip Code)
Registrant’s telephone number, including area code: (952) 936-1300
N/A
(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant
under any of the following provisions:
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 2.02. Results of Operations and Financial Condition
This Form 8-K/A amends the Form 8-K filed the morning of January 20, 2005 to replace exhibit 99 filed therewith.
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 hereunto duly authorized.
Date: January 20, 2005
UNITEDHEALTH GROUP INCORPORATED
By: /s/ David J. Lubben
David J. Lubben
General Counsel & Secretary
EXHIBITS
Number
99
Description
Press Release, dated January 20, 2005, issued by UnitedHealth Group
Exhibit 99
NEWS RELEASE
Contacts: John S. Penshorn
Senior Vice President
952-936-7214
Patrick J. Erlandson
Chief Financial Officer
952-936-5901
(For Immediate Release)
UNITEDHEALTH GROUP REPORTS RECORD
FOURTH QUARTER AND FULL YEAR 2004 EARNINGS OF $1.09 AND $3.94 PER SHARE
•
Fourth Quarter Revenues Up 40%
•
Full Year Revenues Up 29%
•
Fourth Quarter Operating Margin of 11.3%
•
Full Year Operating Margin of 11.0%
•
Fourth Quarter Cash Flows of $1.25 Billion
•
Full Year Cash Flows Above $4.1 Billion
•
Fourth Quarter Return on Equity of 27%
•
Full Year Return on Equity of 31%
•
Fourth Quarter EPS Grew 31%
•
Full Year EPS Grew 33%
MINNEAPOLIS (January 20, 2005) – UnitedHealth Group (NYSE: UNH) achieved record results in the fourth quarter and full year
ended December 31, 2004, reported Chairman and CEO William W. McGuire, M.D. today. Results were driven by balanced
contributions across the diversified family of UnitedHealth Group businesses, and included strong growth, as manifest by the
extension of services to more than 6 million net new consumers across all of the member-based businesses in 2004.
Quarterly and Annual Financial Performance
Three Months Ended
December 31,
2004
Revenues
Earnings From Operations
Operating Margin
$10.51 billion
$ 1.19 billion
11.3%
September 30,
2004
$9.86 billion
$1.09 billion
11.1%
Year Ended
December 31,
2003
$7.52 billion
$810 million
10.8%
December 31,
2004
$37.22 billion
$ 4.10 billion
11.0%
December 31,
2003
$28.82 billion
$ 2.94 billion
10.2%
UnitedHealth Group Highlights
•
Fourth quarter earnings per share of $1.09 increased 31 percent from $0.83 in the fourth quarter of 2003, and improved 5
cents or 5 percent from the third quarter of 2004.
•
Full year earnings per share of $3.94 increased 33 percent from $2.96 per share in 2003.
•
Fourth quarter consolidated net earnings increased to $739 million, up $232 million or 46 percent year-over-year and $41
million or 6 percent on a sequential quarter basis. Full year net earnings advanced to $2.6 billion, up $762 million or 42
percent over 2003 results.
•
Consolidated fourth quarter revenues increased $3 billion or 40 percent year-over-year and $652 million or 7 percent
sequentially, reaching $10.5 billion. Revenues for full year 2004 increased $8.4 billion or 29 percent to $37.2 billion, with
revenue advances in each of the Company’s multiple business segments.
•
Operating costs were 15.1 percent of revenues in the fourth quarter, an improvement of 160 basis points from the fourth
quarter of 2003 and were stable sequentially. The full year operating cost ratio of 15.4 percent also improved significantly
from 16.9 percent in 2003.
•
Earnings from operations increased to $1.2 billion in the fourth quarter, up $378 million or 47 percent over the prior year,
and up $96 million or 9 percent sequentially. Full year earnings from operations of $4.1 billion advanced 40 percent over
2003 results.
•
Consolidated fourth quarter operating margin improved to 11.3 percent from 10.8 percent in the fourth quarter of 2003.
Full year operating margin of 11.0 percent improved 80 basis points from 10.2 percent in 2003.
UnitedHealth Group Highlights – Continued
•
Cash flows from operations were $1.25 billion for the fourth quarter, bringing full year cash flows from operations to more
than $4.1 billion, up 38 percent year-over-year.
•
Medical costs payable, excluding the AARP division of Ovations, increased $1.4 billion or 42 percent year-over-year,
standing at $4.6 billion at December 31, 2004. Medical costs days payable, excluding the effects of the operations of the
Oxford and MAMSI platforms, were 67 days for the quarter. Reported medical costs days payable were 64 days for the
fourth quarter, reflecting the historically lower medical costs days payable of Oxford and MAMSI.
•
During the fourth quarter, the Company realized favorable development of $10 million in its estimates of medical costs
incurred in 2003, bringing the full year effect of changes in estimates to $210 million, or less than 1 percent of medical
costs. The Company also realized $80 million in favorable development related to estimates of medical costs incurred in
the first nine months of 2004, comparable to the $70 million of in-year development realized in the fourth quarter of 2003,
with no effect on full year results.
•
During the fourth quarter the Company completed its acquisition of Definity Health Corporation, the national market
leader in consumer directed health benefit programs.
•
The Company repurchased 17.7 million shares in the fourth quarter, bringing the full year repurchase total to 51.4 million
shares.
•
Fourth quarter 2004 annualized return on equity was 27 percent, with full year return on equity exceeding 31 percent.
Closing Comment
“Results for 2004 were excellent, and we enter 2005 in an outstanding position. The growth performance of our businesses is
accelerating, our customers are increasingly well served by capabilities facilitated by investments made over the past few years, and
we have a new generation of initiatives under way,” said Dr. McGuire. “Given this momentum, our challenge remains the realization
of the full potential embedded in our businesses, through more fully addressing the breadth of needs in the health care services market
and those of the individual consumer.
“In that regard, we have made significant investments to directly address the strong demand expressed by employers and consumers
for different solutions that enable affordable health care access,” Dr. McGuire continued. “Not including the more traditional accountbased products like flexible spending vehicles, by the end of the first quarter of 2005 we expect to serve a total of 1.25 million people
through the latest generation of offerings, including 880,000 using new consumer directed account-based health benefits products.
Furthermore, new products will provide 3 million current customers with improved access for non-covered services. We expect a
continuing expansion of these programs, and in the number of people they serve, during 2005 and 2006.”
The Company noted that its near term financial performance outlook has strengthened, even as it pursues these broader goals.
Earnings per share for 2005 are now expected in the range of $4.75 to $4.80, an increase of 5 cents per share over the Company’s
most recent view and representing a 21 percent to 22 percent earnings advance over the $3.94 per share earned in 2004.
Business Description – Health Care Services
The Health Care Services segment consists of the UnitedHealthcare, AmeriChoice and Ovations business units. UnitedHealthcare
coordinates network-based health and well-being services on behalf of local employers and consumers. AmeriChoice facilitates and
manages health care services for state Medicaid programs and their beneficiaries. Ovations delivers health and well-being services to
Americans over the age of 50.
Quarterly and Annual Financial Performance
Three Months Ended
December 31,
2004
Revenues
Earnings From Operations
Operating Margin
$9.32 billion
$834 million
8.9%
September 30,
2004
$8.71 billion
$763 million
8.8%
Year Ended
December 31,
2003
$6.46 billion
$523 million
8.1%
December 31,
2004
$32.67 billion
$ 2.81 billion
8.6%
December 31,
2003
$24.81 billion
$ 1.87 billion
7.5%
Key Developments for Health Care Services
•
Fourth quarter 2004 Health Care Services revenues grew $2.9 billion or 44 percent year-over-year to $9.3 billion. Full year
revenues increased $7.9 billion or 32 percent to $32.7 billion.
•
Fourth quarter Health Care Services operating earnings of $834 million increased $311 million or 59 percent year-over-year and
$71 million or 9 percent sequentially.
•
Fourth quarter operating margin of 8.9 percent expanded 80 basis points year-over-year and 10 basis points sequentially. The
full year operating margin of 8.6 percent increased 110 basis points year-over-year.
Key Developments for Health Care Services – Continued
•
Fourth quarter revenues of $6.4 billion for UnitedHealthcare increased more than $2.3 billion or 57 percent year-over-year.
•
The UnitedHealthcare commercial business brought services to 125,000 more people during the fourth quarter, with strong
sales to customers purchasing fee-based benefit administration services. For the year, UnitedHealthcare added 245,000
consumers through internal growth and brought its services to an additional 2.4 million people through geographically
focused acquisitions.
•
The full year UnitedHealthcare medical care ratio of 79.0 percent improved 1 percent in 2004 as medical cost trends
continued to moderate, due to effective health care facilitation and cost management, efficient benefit designs and the
general economic climate.
•
AmeriChoice fourth quarter revenues of $825 million increased $106 million or 15 percent year-over-year and $30 million
or 4 percent sequentially. Full year AmeriChoice revenues of $3.1 billion increased 17 percent year-over-year.
•
AmeriChoice grew enrollment by 20,000 in the fourth quarter of 2004, bringing the full year increase to 155,000
individuals or 14 percent. This business now serves nearly 1.3 million people.
•
Ovations fourth quarter revenues of $2.1 billion grew $407 million or 25 percent year-over year. Full year Ovations
revenues of $7.6 billion increased more than $1 billion or 16 percent over 2003 results.
•
Evercare’s nursing home program has now been designated a Special Needs Plan under the Medicare Modernization Act
by the federal government, converting its demonstration project status into a permanent role in caring for the frail elderly.
•
Ovations, in partnership with the Visiting Nurse Service of New York, was awarded a Chronic Care Improvement Program
pilot serving two boroughs of New York City. This care management program will specifically address the needs of select
seniors with diabetes and/or congestive heart failure.
•
Full year earnings from operations for Ovations increased by approximately 25 percent in 2004 due to overall revenue
growth and operating margin expansion.
Business Description
Uniprise delivers network-based health and well-being services, business-to-business transaction processing services, consumer
connectivity, and technology support services to large employers and health plans, and provides health-related consumer and financial
transaction products and services.
Quarterly and Annual Financial Performance
Three Months Ended
December 31,
2004
Revenues
Earnings From Operations
Operating Margin
$845 million
$169 million
20.0%
September 30,
2004
$842 million
$171 million
20.3%
Year Ended
December 31,
2003
$785 million
$151 million
19.2%
December 31,
2004
$3.37 billion
$677 million
20.1%
December 31,
2003
$3.11 billion
$610 million
19.6%
Key Developments
•
Uniprise revenues increased $60 million or 8 percent over fourth quarter 2003 and $258 million or 8 percent for full year 2004,
reaching $845 million and $3.4 billion for the respective periods.
•
Uniprise serves approximately 9.9 million people in the national multilocation employer segment, including consumers served
by Definity Health, representing a year-over-year increase of 815,000 people as of December 31, 2004. Uniprise estimates it
added 650,000 new consumers in early 2005, consistent with its long-standing goal of increasing market share by at least 1
percentage point per year.
•
The Uniprise fourth quarter operating margin of 20.0 percent increased 80 basis points year-over-year and declined 30 basis
points sequentially, as operating earnings grew $18 million year-over-year. Earnings from operations decreased $2 million from
third quarter 2004 as a result of seasonal fourth quarter enrollment costs and high levels of plan changes related to 2005
enrollment activities.
•
Full year earnings from operations of $677 million increased $67 million or 11 percent over 2003 results.
Business Description
Specialized Care Services offers a comprehensive array of specialized benefits, networks, services and resources to help consumers
improve their health and well-being.
Quarterly and Annual Financial Performance
Three Months Ended
December 31,
2004
Revenues
Earnings From Operations
Operating Margin
$588 million
$129 million
21.9%
September 30,
2004
$580 million
$124 million
21.4%
Year Ended
December 31,
2003
$485 million
$104 million
21.4%
December 31,
2004
$2.30 billion
$485 million
21.1%
December 31,
2003
$1.88 billion
$385 million
20.5%
Key Developments
•
Fourth quarter revenues rose to $588 million, up $103 million or 21 percent year-over-year and $8 million or 1 percent
from the third quarter of 2004. Full year revenues of $2.3 billion increased $417 million or 22 percent, reflecting
exceptional growth for the 10 businesses within this segment.
•
The Specialized Care Services fourth quarter operating margin of 21.9 percent expanded 50 basis points both sequentially
and year-over-year. Similarly, full year operating margin increased 60 basis points to 21.1 percent, as Six Sigma quality
and efficiency gains continued to more than offset the business mix shift toward comparatively higher revenue, lower
margin service lines.
•
Fourth quarter operating earnings of $129 million increased $25 million or 24 percent year-over-year and $5 million or 4
percent sequentially. Full year earnings grew 26 percent year-over-year to $485 million.
Business Description
Ingenix is an international leader in the field of health care data, analysis and application. Ingenix serves multiple health care market
segments on a business-to-business basis, including pharmaceutical companies, health insurers and other payers, physicians and other
health care providers, large employers and governments.
Quarterly and Annual Financial Performance
Three Months Ended
December 31,
2004
Revenues
Earnings From Operations
Operating Margin
$214 million
$ 56 million
26.2%
September 30,
2004
$170 million
$ 34 million
20.0%
Year Ended
December 31,
2003
$179 million
$ 32 million
17.9%
December 31,
2004
$670 million
$129 million
19.3%
December 31,
2003
$574 million
$ 75 million
13.1%
Key Developments
•
Ingenix fourth quarter revenues increased $35 million or 20 percent year-over-year and $44 million or 26 percent
sequentially, to $214 million in the fourth quarter of 2004. Advances were driven by the seasonal pick-up for Ingenix
syndicated content products and software and a year-over-year increase in pharmaceutical services revenues.
•
Insurance companies, employers and other benefits payers executed significant fourth quarter purchases of proprietary
Ingenix technology, including major orders for Symmetry analytic software for disease and condition identification,
significant purchases of PowerTrak medical bill adjudication automation software, and strong orders for advanced claims
editing systems. Ingenix also had strong sales for its ClaimsManager software packages that enable health delivery systems
to optimize their billing efficiency.
•
On a full year basis, Ingenix grew revenues by $96 million or 17 percent over 2003 results, led by strong broad-based
growth in its health informatics offerings.
•
Ingenix operating earnings increased $24 million or 75 percent year-over-year and $22 million or 65 percent on a
sequential quarter basis. Full year operating earnings increased $54 million or 72 percent as operating margin expanded
more than 6 percentage points to 19.3 percent. Exceptional earnings leverage from both improving performance on
pharmaceutical services and strong contributions from data, software and informatics products provided the year-over-year
and sequential earnings gains.
About UnitedHealth Group
UnitedHealth Group (www.unitedhealthgroup.com) is a diversified health and well-being company that provides a broad spectrum of
resources and services to help people improve their health and well-being through all stages of life. Consolidated UnitedHealth Group
operating results include the operating performance of the Company’s four reportable business segments – Health Care Services
(which includes the results of UnitedHealthcare, AmeriChoice and Ovations), Uniprise, Specialized Care Services and Ingenix.
Forward-Looking Statements
This news release may contain statements, estimates or projections that constitute “forward-looking” statements as defined under U.S.
federal securities laws. Generally the words “believe,” “expect,” “intend,” “estimate,” “anticipate,” “project,” “will” and similar
expressions identify forward-looking statements, which generally are not historical in nature. By their nature, forward-looking
statements are subject to risks and uncertainties that could cause actual results to differ materially from our historical experience and
our present expectations or projections. A list and description of some of the risks and uncertainties can be found in our reports filed
with the Securities and Exchange Commission from time to time, including our annual reports on Form 10-K, quarterly reports on
Form 10-Q and current reports on Form 8-K. You should not place undue reliance on forward-looking statements, which speak only
as of the date they are made. Except to the extent otherwise required by federal securities laws, we do not undertake to publicly
update or revise any forward-looking statements.
Earnings Conference Call
As previously announced, UnitedHealth Group will discuss the Company’s results, strategy and future outlook on a conference call
with investors at 8:45 a.m. Eastern time today. UnitedHealth Group will host a live webcast of this conference call from the Investor
Information page of the Company’s Web site (www.unitedhealthgroup.com). The webcast replay of the call will be available on the
same site for one week following the live call. The conference call replay can also be accessed by dialing 1-800-642-1687, conference
ID # 2952732. This earnings release and the Form 8-K dated January 20, 2005, which may also be accessed in the Investor
Information section of the Company’s Web site, include a reconciliation of non-GAAP financial measures.
###
UNITEDHEALTH GROUP
•
Earnings Release Schedules and Supplementary Information
Quarter Ended December 31, 2004
Consolidated Statements of Operations
•
Condensed Consolidated Balance Sheets
•
Condensed Consolidated Statements of Cash Flows
•
Segment Financial Information
•
Customer Profile Summary
UNITEDHEALTH GROUP
CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except per share data)
(unaudited)
Three Months Ended December 31,
2003
2004
2003
6,657
789
77
$ 33,495
3,335
388
$ 25,448
3,118
257
10,511
7,523
37,218
28,823
7,625
1,592
106
5,381
1,255
77
27,000
5,743
374
20,714
4,875
299
9,323
6,713
33,117
25,888
2004
REVENUES
Premiums
Services
Investment and Other Income
Year Ended December 31,
$
Total Revenues
COSTS
Medical Costs
Operating Costs
Depreciation and Amortization
Total Costs
9,510
891
110
$
EARNINGS FROM OPERATIONS
Interest Expense
1,188
(42)
810
(24)
4,101
(128)
2,935
(95)
EARNINGS BEFORE INCOME TAXES
Provision for Income Taxes
1,146
(407)
786
(279)
3,973
(1,386)
2,840
(1,015)
NET EARNINGS
$
739
$
507
$
2,587
$
1,825
BASIC NET EARNINGS PER COMMON SHARE
$
1.14
$
0.87
$
4.13
$
3.10
DILUTED NET EARNINGS PER COMMON SHARE
$
1.09
$
0.83
$
3.94
$
2.96
Diluted Weighted-Average Common Shares Outstanding
679
609
656
617
UNITEDHEALTH GROUP
CONDENSED CONSOLIDATED BALANCE SHEETS
(in millions)
(unaudited)
December 31, 2004
ASSETS
Cash and Short-Term Investments
Accounts Receivable, net
Other Current Assets
December 31, 2003
$
$
Total Current Assets
LIABILITIES AND SHAREHOLDERS’ EQUITY
Medical Costs Payable
Commercial Paper and Current Maturities of Long-Term Debt
Other Current Liabilities
6,120
7,748
11,890
6,729
4,785
$
27,879
$
17,634
$
5,540
673
5,116
$
4,152
229
4,387
Total Current Liabilities
11,329
$
8,768
3,350
1,669
814
10,717
Long-Term Debt, less current maturities
Future Policy Benefits for Life and Annuity Contracts
Deferred Income Taxes and Other Liabilities
Shareholders’ Equity
Total Liabilities and Shareholders’ Equity
2,748
745
2,627
8,241
Long-Term Investments
Other Long-Term Assets
Total Assets
4,505
906
2,830
1,750
1,517
471
5,128
27,879
$
17,634
The table below summarizes certain balance sheet data excluding AARP related amounts.
December 31, 2004
Accounts Receivable, net
Other Current Assets
Other Current Liabilities
Medical Costs Payable
Days Medical Costs in Medical Costs Payable
(a)
December 31, 2003
$
$
$
$
$
$
$
$
517
947
3,743
4,641
67 (a)
393
668
2,950
3,278
68
For comparability purposes, amount excludes the impact of Oxford Health Plans, Inc. which was acquired on July 29, 2004, and
Mid-Atlantic Medical Services, Inc. which was acquired on February 10, 2004.
UNITEDHEALTH GROUP
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
(unaudited)
Year Ended December 31,
2003
2004
Operating Activities
Net Earnings
Noncash Items:
Depreciation and amortization
Deferred income taxes and other
Net changes in operating assets and liabilities
$
2,587
$
1,825
374
125
1,049
4,135
Cash Flows From Operating Activities
299
91
788
3,003
Investing Activities
Cash paid for acquisitions, net of cash assumed
Purchases of property, equipment and capitalized software
Net sales and maturities/(purchases) of investments
(2,225)
(350)
776
(590)
(352)
197
Cash Flows Used For Investing Activities
(1,799)
(745)
(3,446)
2,044
640
(1,607)
218
263
(762)
(1,126)
Financing Activities
Common stock repurchases
Net change in commercial paper and debt
Other, net
Cash Flows Used For Financing Activities
Increase in cash and cash equivalents
Cash and cash equivalents, beginning of period
1,574
2,262
1,132
1,130
Cash and cash equivalents, end of period
$
3,836
$
2,262
Supplemental Schedule of Noncash Investing Activities:
Common Stock Issued for Acquisitions
$
5,557
$
—
UNITEDHEALTH GROUP
SEGMENT FINANCIAL INFORMATION
(in millions)
(unaudited)
REVENUES
Three Months Ended December 31,
2003
2004
UnitedHealthcare
Ovations
AmeriChoice
$
Health Care Services
Uniprise
Specialized Care Services
Ingenix
Corporate and eliminations
Total Consolidated
6,431
2,067
825
$
9,323
845
588
214
(459)
$
Year Ended December 31,
10,511
2004
4,084
1,660
719
2003
$ 21,950
7,602
3,121
$ 15,585
6,548
2,674
6,463
785
485
179
(389)
$
7,523
32,673
3,365
2,295
670
(1,785)
$ 37,218
24,807
3,107
1,878
574
(1,543)
$ 28,823
EARNINGS FROM OPERATIONS
Year Ended December 31,
Three Months Ended December 31,
2004
Health Care Services
Uniprise
Specialized Care Services
Ingenix
Total Consolidated
2003
2004
2003
$
834
169
129
56
$
523
151
104
32
$
2,810
677
485
129
$
1,865
610
385
75
$
1,188
$
810
$
4,101
$
2,935
UNITEDHEALTH GROUP
CUSTOMER PROFILE SUMMARY
(in thousands)
(unaudited)
Customer Profile
Commercial Businesses
Risk-based
Fee-based
Governments
Federal
State and municipal
Consumers
Business-to-Business Partners
Grand Total
(a)
September
2004
June
2004
December
2003
10,820
15,525
10,595
15,265
9,345
15,120
8,360
14,110
1,420
5,615
1,455
19,005
1,380(a)
5,510
1,450
19,025
4,140
5,385
1,200
19,260
4,325
5,035
1,190
17,440
53,840
53,225
54,450
50,460
Department of Defense (DOD) contract for Optum Nurseline Services involving 2.8 million members and $11 million in annual
revenue is now managed directly by the DOD.
Supplemental Segment Profile - Health Care Services and Uniprise
Health Care Services:
Risk-based commercial
Fee-based commercial
Medicare
Medicaid
Total Health Care Services
Uniprise
(a)
December
2004
December
2004
September
2004
7,655
3,305
330
1,260
7,635
3,200
315
1,240
6,225
3,060
240
1,230
5,400
2,895
230
1,105
12,550
12,390
10,755
9,630
9,565
9,520
9,060
9,875(a)
June
2004
Includes 315,000 individuals served in connection with the December 2004 acquisition of Definity Health Corporation.
December
2003
