UnitedHealth(UNH) - 2022 Q4 - Annual Report

Part I Business UnitedHealth Group is a diversified healthcare company operating through Optum and UnitedHealthcare, organized into four segments and subject to extensive regulation Overview UnitedHealth Group operates through Optum and UnitedHealthcare platforms, structured into four reportable segments to improve health outcomes - The company operates through two distinct platforms: Optum (health services) and UnitedHealthcare (health benefits)[4] - There are four reportable segments: Optum Health, Optum Insight, Optum Rx, and UnitedHealthcare[4] Optum Optum provides information and technology-enabled health services through Optum Health, Optum Insight, and Optum Rx, serving diverse markets - Optum Health delivers care to 102 million consumers and serves over 100 health payer partners[7] - Optum Insight's order backlog grew to $30.0 billion as of December 31, 2022, up from $22.4 billion in 2021[10] - In 2022, Optum Rx managed $124 billion in pharmaceutical spending, including $52 billion in specialty pharmaceuticals[11] UnitedHealthcare UnitedHealthcare provides diverse health benefit products and services, serving millions across Employer & Individual, Medicare & Retirement, and Community & State segments UnitedHealthcare Members Served (as of Dec 31, 2022) | Segment | Members Served (in millions) | | :--- | :--- | | Employer & Individual (Domestic) | 26.7 | | Employer & Individual (Global) | 7.7 | | Medicare Advantage | 7.1 | | Medicare Part D (Total) | 9.6 | | Medicare Supplement | 4.4 | | Community & State (Medicaid) | 8.2 | - Premium revenues from CMS represented 38% of UnitedHealth Group's total consolidated revenues in 2022[18] - The HouseCalls program performed nearly 2.3 million in-home clinical visits in 2022 for Medicare Advantage members[16] Government Regulation The company's businesses are subject to comprehensive U.S. federal, state, and international laws, including CMS, HIPAA, ERISA, and specific regulations for pharmacy and banking operations - The company is subject to extensive federal and state laws, with significant oversight from CMS for Medicare and Medicaid programs[20][21] - Operations are subject to privacy and security regulations under HIPAA and HITECH for protected health information[21][22] - State laws regulate insurance subsidiaries, PBMs, and corporate practice of medicine, requiring licensure and minimum capital[23][24][25] - Optum Bank is regulated by the FDIC and Utah State Department of Financial Institutions, while international operations are subject to local laws and FCPA[27][29] Human Capital Resources As of December 31, 2022, UnitedHealth Group employed nearly 400,000 people, focusing on diversity, inclusion, and pay equity through data-driven talent management - The company employed nearly 400,000 people as of December 31, 2022, with over 140,000 clinical professionals[32] - The company's human capital approach is data-driven and leader-led, using scorecards for diversity and inclusion accountability[32] Executive Officers This section lists UnitedHealth Group's executive officers as of February 24, 2023, including their names, ages, positions, and business experience Executive Officers (as of Feb 24, 2023) | Name | Age | Position | | :--- | :--- | :--- | | Andrew Witty | 58 | Chief Executive Officer | | Dirk McMahon | 63 | President and Chief Operating Officer | | John Rex | 61 | Executive Vice President and Chief Financial Officer | | Rupert Bondy | 61 | Executive Vice President, Chief Legal Officer and Corporate Secretary | | Erin McSweeney | 58 | Executive Vice President and Chief People Officer | | Thomas Roos | 50 | Senior Vice President and Chief Accounting Officer | | Brian Thompson | 48 | Chief Executive Officer of UnitedHealthcare | Risk Factors This section details significant business and regulatory risks, including medical cost management, cybersecurity, competition, M&A integration, and evolving healthcare regulations - Failure to effectively manage medical costs for risk-based products, comprising nearly 80% of total consolidated revenues, could significantly harm profitability[36] - Cyber-attacks and data security incidents pose a significant threat, potentially leading to revenue loss, increased costs, liability, and reputational damage[38][39] - The business is subject to extensive and evolving government regulation, where changes could restrict revenue, increase costs, and expose the company to liability[56] - Participation in government programs like Medicare and Medicaid exposes the company to risks from funding changes, payment adjustments, and audits[58][59] Unresolved Staff Comments The company reports no unresolved staff comments from the SEC - None[64] Properties The company owns and leases global properties, deemed suitable and adequate for current and future business operations - The company owns and leases properties globally, considered suitable and adequate for current and anticipated needs[65] Legal Proceedings Details on legal proceedings are incorporated by reference from Note 12 of the Consolidated Financial Statements - Details on legal proceedings are incorporated by reference from Note 12 of the financial statements[66] Mine Safety Disclosures This item is not applicable to the company - Not Applicable[67] Part II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The company's common stock trades on the NYSE under UNH, with increased dividends and share repurchases in 2022, outperforming key indices - The company's common stock is traded on the NYSE under the symbol UNH[68] - In June 2022, the Board increased the annual cash dividend rate to $6.60 per share from $5.80 per share[69] Issuer Purchases of Equity Securities (Q4 2022) | Month Ended | Total Shares Purchased (millions) | Average Price Paid Per Share | | :--- | :--- | :--- | | Oct 31, 2022 | 0.7 | $519.51 | | Nov 30, 2022 | 0.6 | $533.81 | | Dec 31, 2022 | 0.6 | $533.56 | | Total | 1.9 | $528.87 | Management's Discussion and Analysis of Financial Condition and Results of Operations In 2022, consolidated revenues grew 13% to $324.2 billion, with earnings from operations up 19% to $28.4 billion, driven by segment growth and strong liquidity Results of Operations In 2022, consolidated revenues increased 13% to $324.2 billion, with earnings from operations up 19% to $28.4 billion, driven by growth across all segments Consolidated Financial Highlights (2022 vs 2021) | Metric | 2022 | 2021 | % Change | | :--- | :--- | :--- | :--- | | Total Revenues | $324.2 B | $287.6 B | 13% | | Earnings from Operations | $28.4 B | $24.0 B | 19% | | Net Earnings | $20.1 B | $17.3 B | 16% | | Diluted EPS | $21.18 | $18.08 | 17% | | Medical Care Ratio (MCR) | 82.0% | 82.6% | (0.6)% | Segment Revenue and Earnings from Operations (2022) | Segment | Revenue (in billions) | Earnings from Ops (in billions) | | :--- | :--- | :--- | | UnitedHealthcare | $249.7 | $14.4 | | Optum Health | $71.2 | $6.0 | | Optum Insight | $14.6 | $3.6 | | Optum Rx | $99.8 | $4.4 | Liquidity, Financial Condition and Capital Resources The company generated $26.2 billion in cash from operations in 2022, maintaining strong liquidity and deploying capital for acquisitions, share repurchases, and dividends Summary of Cash Flows (in billions) | Cash Flow Activity | 2022 | 2021 | | :--- | :--- | :--- | | Cash from Operations | $26.2 | $22.3 | | Cash for Acquisitions | $(21.5) | $(4.8) | | Common Share Repurchases | $(7.0) | $(5.0) | | Cash Dividends Paid | $(6.0) | $(5.3) | | Net Increase in Cash | $2.0 | $4.5 | - Regulated U.S. subsidiaries paid $8.8 billion in dividends to the parent company in 2022[103] - The company's debt to debt-plus-shareholders' equity ratio was 38% as of December 31, 2022, well below the 60% covenant limit[107] Critical Accounting Estimates Critical accounting estimates include Medical Costs Payable, involving IBNR claims, and Goodwill, valued at $108 billion, tested annually for impairment - Medical costs payable is a critical estimate, where a hypothetical 1% difference would impact 2022 net earnings by approximately $215 million[110][112] - Goodwill and other intangible assets totaled $108 billion (44% of total assets) as of December 31, 2022, with no impairment recorded[53][114] Prior Year Medical Cost Development (in millions) | Year | Favorable Development (in millions) | | :--- | :--- | | 2022 | $410 | | 2021 | $1,700 | | 2020 | $880 | Quantitative and Qualitative Disclosures About Market Risk The company's primary market risks are interest rate and foreign currency exchange rate fluctuations, impacting investment income, interest expense, and asset fair values - Primary market risks are changes in interest rates and foreign currency exchange rates (primarily Brazilian real and Chilean peso)[117][121] Impact of a 1% Increase in Market Interest Rates (as of Dec 31, 2022) | Impact Area | Change (in millions) | | :--- | :--- | | Investment Income Per Annum | $314 | | Interest Expense Per Annum | $164 | | Fair Value of Financial Assets | $(1,746) | | Fair Value of Financial Liabilities | $(4,002) | Financial Statements and Supplementary Data This section contains the audited consolidated financial statements for 2022 and the independent auditor's unqualified report, identifying IBNR claim liability as a critical audit matter Report of Independent Registered Public Accounting Firm Deloitte & Touche LLP issued an unqualified opinion on the financial statements, identifying IBNR claim liability as a critical audit matter - The auditor, Deloitte & Touche LLP, issued an unqualified opinion on the financial statements[126] - The Incurred but not Reported (IBNR) claim liability was identified as a Critical Audit Matter due to complex and subjective judgments[128][129] Consolidated Financial Statements The consolidated financial statements show total assets of $245.7 billion, liabilities of $159.4 billion, and equity of $81.5 billion as of December 31, 2022 Consolidated Balance Sheet Highlights (as of Dec 31, 2022) | Account | Amount (in billions) | | :--- | :--- | | Total Assets | $245.7 | | Goodwill | $93.4 | | Total Liabilities | $159.4 | | Medical Costs Payable | $29.1 | | Long-Term Debt | $54.5 | | Total Equity | $81.5 | Consolidated Statement of Operations (Year Ended Dec 31, 2022) | Account | Amount (in billions) | | :--- | :--- | | Total Revenues | $324.2 | | Medical Costs | $210.8 | | Earnings from Operations | $28.4 | | Net Earnings Attributable to UNH | $20.1 | Notes to the Consolidated Financial Statements The notes provide detailed disclosures on accounting policies and financial data, including the $13.9 billion acquisition of Change Healthcare Inc - The company acquired Change Healthcare Inc. on October 3, 2022, for $13.9 billion in cash, adding $8.5 billion in goodwill[214][217] - Medical costs payable included an estimated $20.0 billion for Incurred But Not Reported (IBNR) claims as of December 31, 2022[179] - As of December 31, 2022, the company had total short-term borrowings and long-term debt of $57.6 billion[183][184] Controls and Procedures Management concluded disclosure controls and internal control over financial reporting were effective as of December 31, 2022, with an unqualified auditor's opinion - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of December 31, 2022[224] - Management's assessment, based on the COSO framework, concluded that the company maintained effective internal control over financial reporting[227] - The independent auditor, Deloitte & Touche LLP, issued an unqualified opinion on the company's internal control over financial reporting[230] Part III Directors, Executive Officers and Corporate Governance Information on directors, executive officers, and corporate governance is largely incorporated by reference from the 2023 Annual Meeting of Shareholders proxy statement - Most information required by this item is incorporated by reference from the company's definitive proxy statement for its 2023 Annual Meeting of Shareholders[235] Executive Compensation Information on executive and director compensation is incorporated by reference from the company's 2023 proxy statement - All information required by this item is incorporated by reference from the company's 2023 proxy statement[236] Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters This section provides information on equity compensation plans, with 77 million securities available for future issuance, and incorporates security ownership details by reference Equity Compensation Plan Information (as of Dec 31, 2022) | Plan Category | Securities to be Issued Upon Exercise (millions) | Weighted-Average Exercise Price | Securities Remaining for Future Issuance (millions) | | :--- | :--- | :--- | :--- | | Approved by Shareholders | 23 | $279 | 77 | | Not Approved by Shareholders | — | — | — | Certain Relationships and Related Transactions, and Director Independence Information on related party transactions and director independence is incorporated by reference from the company's 2023 proxy statement - All information required by this item is incorporated by reference from the company's 2023 proxy statement[241] Principal Accountant Fees and Services Information on principal accountant fees and services is incorporated by reference from the company's 2023 proxy statement - All information required by this item is incorporated by reference from the company's 2023 proxy statement[242] Part IV Exhibit and Financial Statement Schedules This section lists all financial statements, schedules, and exhibits filed with the Form 10-K, including Schedule I - Condensed Financial Information of Registrant (Parent Company Only) - This section lists all financial statements, schedules, and exhibits filed with the report[244] - Includes Schedule I - Condensed Financial Information of Registrant (Parent Company Only)[244][249] Schedule I - Condensed Financial Information of Registrant (Parent Company Only) This schedule presents condensed parent-company-only financial statements, with primary assets in subsidiaries and liabilities in long-term debt, driven by subsidiary dividends Parent Company Condensed Balance Sheet (as of Dec 31, 2022) | Account | Amount (in billions) | | :--- | :--- | | Total Assets | $144.3 | | Equity in net assets of subsidiaries | $136.6 | | Total Liabilities | $66.5 | | Long-term debt, less current maturities | $53.8 | | Total Shareholders' Equity | $77.8 | - The parent company received cash dividends from its subsidiaries totaling $15.6 billion in 2022, $10.8 billion in 2021, and $10.0 billion in 2020[264] Form 10-K Summary The company reports no Form 10-K summary - None[267] Signatures The report is duly signed by the company's Chief Executive Officer and other principal officers and directors as of February 24, 2023