[April 17, 2014]

UnitedHealth Group Reports First Quarter Results

UnitedHealth Group (NYSE: UNH) today reported first quarter results, highlighted by Optum's strong growth in revenues, operating earnings and revenue backlog and UnitedHealthcare's continued strong, diversified performance despite the negative impacts of newly effective ACA taxes and regulatory provisions and sequestration cuts to Medicare. Management continues to forecast five percent growth in consolidated revenues in 2014 - to a range of $128 billion to $129 billion - and net earnings in the range of $5.40 to $5.60 per share.

"We performed steadily in the first quarter, with continued momentum from our Optum health services platform and year-over-year growth across our UnitedHealthcare health benefits platform offset by headwinds from new ACA taxes and Medicare Advantage funding deficiencies. We continue to help enable a more effective, more modern health care system that better serves consumers and responds to a national imperative to improve the performance of health care and reduce its costs," said Stephen J. Hemsley, president and chief executive officer of UnitedHealth Group.

• UnitedHealth Group's consolidated first quarter 2014 revenues of $31.7 billion grew $1.4 billion or 5 percent year-over-year. Revenue growth was led by growth in people served in the public and senior markets at UnitedHealthcare and broad-based growth across Optum.
• First quarter earnings from operations were $2.1 billion and net earnings were $1.1 billion or $1.10 per share, compared to $1.16 per share in first quarter 2013, reflecting nearly $0.35 per share in health care reform and sequestration burden on first quarter 2014 results. The effects of the ACA and sequestration reduced first quarter 2014 net margin by about 110 basis points.
• First quarter 2014 cash flows from operations of $1.4 billion increased 34 percent year-over-year and were a multiple of 1.3 times net earnings.
• The consolidated medical care ratio decreased 20 basis points year-over-year to 82.5 percent in the first quarter of 2014. The care ratio benefitted 100 basis points in first quarter from billing ACA fees, with this impact expected to increase slightly over the course of 2014 as these tax billings continue. The underlying ACA fees increase operating costs and the income tax rate, as the majority of the fees are not tax deductible. Medical reserves developed favorably by $220 million, compared to $280 million in the first quarter of 2013.
• The first quarter 2014 operating cost ratio of 16.4 percent increased 120 basis points year-over-year, driven by approximately 140 basis points in ACA reinsurance fees and nondeductible health insurance taxes.
• As expected, the first quarter income tax rate of 42 percent increased more than 5 percentage points year-over-year solely due to provisions in the ACA described above.
• First quarter 2014 days sales outstanding of 12 days increased 2 days year-over-year, due to an increase in government receivables. Days claims payable were stable year-over-year at 47 days.
• The Company's balance sheet remained strong, with cash available for corporate use of $1 billion and the debt to total capital ratio at 34 percent at March 31, 2014, a strengthening of 2 percentage points year-over-year. UnitedHealth Group repurchased $911 million in stock in the first quarter, acquiring more than 12 million shares at an average price of approximately $75 per share, and distributed $276 million in dividends to shareholders, representing dividend growth of 28 percent year-over-year.

UnitedHealthcare provides network-based health care benefits for a full spectrum of customers and markets. UnitedHealthcare serves individuals and employers ranging from sole proprietorships to large, multi-site and national and international organizations; delivers health and well-being benefits to Medicare beneficiaries and retirees; manages health care benefit programs on behalf of state Medicaid and community programs and their participants and serves the nation's active and retired military and their families through the TRICARE program.

• UnitedHealthcare's first quarter 2014 revenues of $29.3 billion grew $1 billion or 4 percent year-over-year. The number of people served across all medical benefit markets increased by 2.7 million in the past 12 months but declined by 780,000 people in first quarter 2014, as decreases in both domestic and international commercial benefits more than offset growth in public and senior markets.
• Earnings from operations for UnitedHealthcare for first quarter 2014 were $1.4 billion and the operating margin was 4.8 percent. As expected, earnings from operations decreased year-over-year due to the effects of the ACA and Medicare sequestration and a lower overall level of reserve development compared to the prior year period. These factors combined to pressure operating margins by 140 basis points year-over-year.

UnitedHealthcare Employer & Individual

• UnitedHealthcare Employer & Individual served 1.8 million more people year-over-year, driven by growth in services to the TRICARE program. First quarter 2014 revenues of $11 billion decreased $103 million year-over-year due to the decrease in people served with risk-based products. The Company served 345,000 fewer people through these products in first quarter 2014, due to its disciplined focus on pricing in a continued competitive environment. Fee-based business decreased by 705,000 people in the quarter, principally due to the loss of a large state employer account.
• Increasing market demands for consumer choice and engagement drove 7 percent year-over-year growth in UnitedHealthcare's consumer-directed health care products in first quarter 2014 to a total of 6 million consumers, or 21 percent of the consumers participating in its commercial benefit plans.
• UnitedHealthcare's first quarter 2014 commercial medical care ratio of 77.3 percent decreased 100 basis points year-over-year due to the impact of ACA fees for fully insured customers, partially offset by accelerated spending on specialty medications to treat hepatitis.

UnitedHealthcare Medicare & Retirement

• First quarter 2014 UnitedHealthcare Medicare & Retirement revenues of $11.5 billion grew $322 million or 3 percent year-over-year.
  • In Medicare Advantage, UnitedHealthcare grew to serve 120,000 more seniors, a 4 percent year-over-year increase. Significant ACA and sequestration funding cuts for seniors using Medicare Advantage products resulted in the Company exiting markets, reducing product offerings, adjusting networks and reducing benefits for 2014. Despite these actions, first quarter 2014 senior participation was basically stable with year end 2013, with just under 3 million seniors served.
  • Medicare Supplement products grew 9 percent, serving 300,000 more people year-over-year, including 170,000 people in first quarter.
  • UnitedHealthcare's stand-alone Medicare Part D drug plans delivered strong growth of 435,000 people or 9 percent year-over-year, including 195,000 people in the first quarter.

UnitedHealthcare Community & State

• First quarter 2014 UnitedHealthcare Community & State revenues of $5.2 billion grew 17 percent year-over-year, due to strong growth in people served through state sponsored benefit programs and an increasing mix of members in higher acuity categories, such as state long-term care programs.
• UnitedHealthcare grew its Medicaid services by 10 percent or 395,000 more people in the past year, including 255,000 people in the first quarter.

UnitedHealthcare International

• UnitedHealthcare International first quarter 2014 revenues of $1.6 billion were consistent year-over-year. The number of people served grew by 25,000 in the past 12 months, but decreased 150,000 in the first quarter due to strengthened pricing in Brazil in response to regulatory requirements that are causing health care costs and utilization to rise.

Optum is a health services business serving the broad health care marketplace, including payers, care providers, employers, governments, life sciences companies and consumers. Using advanced data analytics and technology, Optum helps improve overall health system performance: optimizing care quality, reducing costs and improving the consumer experience and care provider performance.

• Optum revenues for the first quarter of 2014 grew 29 percent or $2.5 billion year-over-year to $11.2 billion and Optum's first quarter 2014 earnings from operations of $650 million grew 20 percent or $109 million year-over-year.
  • OptumHealth revenues of $2.6 billion grew 6 percent year-over-year due to expansions in consumer services, partially offset by slightly lower behavioral health revenues.
  • OptumInsight revenues grew to $1.2 billion in the first quarter of 2014, advancing 8 percent year-over-year and driven by strength in Optum360 revenue management and growth in government services, as OptumInsight's revenue backlog grew 18 percent year-over-year to $7.2 billion at March 31, 2014. The large, diversified, growing backlog is a key indicator of Optum's overall success in growing services to customers and provides a measure of visibility on future financial performance.
  • OptumRx revenues grew 44 percent year-over-year as first quarter script volumes increased 38 percent year-over-year to 140 million adjusted scripts.
• Consistent with management expectations, Optum's first quarter operating margin was 5.8 percent and reflected the increased mix of pharmacy service revenues in Optum's overall business. First quarter 2014 results included meaningful investments to develop future growth opportunities, particularly at OptumHealth and OptumInsight.

About UnitedHealth Group

UnitedHealth Group (NYSE: UNH) is a diversified health and well-being company dedicated to helping people live healthier lives and making health care work better. With headquarters in Minnetonka, Minn., UnitedHealth Group offers a broad spectrum of products and services through two distinct platforms: UnitedHealthcare, which provides health care coverage and benefits services; and Optum, which provides information and technology-enabled health services. Through its businesses, UnitedHealth Group serves more than 85 million people worldwide. For more information, visit UnitedHealth Group at www.unitedhealthgroup.com.

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 Investors page of the Company's website (www.unitedhealthgroup.com). The webcast replay of the call will be available on the same site through May 1, 2014, following the live call. The conference call replay can also be accessed by dialing 1-800-283-4605. This earnings release and the Form 8-K dated April 17, 2014 may also be accessed from the Investors page of the Company's website.

Forward-Looking Statements

The statements, estimates, projections, guidance or outlook contained in this press release include "forward-looking" statements within the meaning of the Private Securities Litigation Reform Act of 1995 (PSLRA). These statements are intended to take advantage of the "safe harbor" provisions of the PSLRA. Generally the words "believe," "expect," "intend," "estimate," "anticipate," "forecast," "plan," "project," "should" and similar expressions identify forward-looking statements, which generally are not historical in nature. These statements may contain information about financial prospects, economic conditions and trends and involve risks and uncertainties. We caution that actual results could differ materially from those that management expects, depending on the outcome of certain factors.

Some factors that could cause results to differ materially from results discussed or implied in the forward-looking statements include: our ability to effectively estimate, price for and manage our medical costs, including the impact of any new coverage requirements; the potential impact that new laws or regulations, or changes in existing laws or regulations, or their enforcement or application could have on our results of operations, financial position and cash flows, including as a result of increases in medical, administrative, technology or other costs or decreases in enrollment resulting from U.S., Brazilian and other jurisdictions' regulations affecting the health care industry; the impact of any potential assessments for insolvent payers under state guaranty fund laws; the impact of the Patient Protection and Affordable Care Act, which could materially and adversely affect our results of operations, financial position and cash flows through reduced revenues, increased costs, new taxes and expanded liability, or require changes to the ways in which we conduct business or put us at risk for loss of business; potential reductions in revenue or delays to cash flows received under Medicare, Medicaid and TRICARE programs, including sequestration and potential effects of a prolonged U.S. government shut-down or debt ceiling constraints; uncertainties regarding changes in Medicare, including potential changes in risk adjustment data validation audit and payment adjustment methodology; failure to comply with patient privacy and data security regulations; regulatory and other risks and uncertainties associated with the pharmacy benefits management industry; competitive pressures, which could affect our ability to maintain or increase our market share; the impact of challenges to our public sector contract awards; our ability to execute contracts on competitive terms with physicians, hospitals and other service professionals; increases in costs and other liabilities associated with increased litigation, government investigations, audits or reviews; failure to manage successfully our strategic alliances or complete or receive anticipated benefits of acquisitions and other strategic transactions, including the Amil acquisition; the impact of fluctuations in foreign currency exchange rates on our reported shareholders' equity and results of operations; potential downgrades in our credit ratings; our ability to attract, retain and provide support to a network of independent producers (i.e., brokers and agents) and consultants; the potential impact of adverse economic conditions on our revenues (including decreases in enrollment resulting from increases in the unemployment rate and commercial attrition) and results of operations; the performance of our investment portfolio; possible impairment of the value of our goodwill and intangible assets in connection with dispositions or if estimated future results do not adequately support goodwill and intangible assets recorded for our existing businesses or the businesses that we acquire; increases in health care costs resulting from large-scale medical emergencies; failure to maintain effective and efficient information systems or if our technology products otherwise do not operate as intended; misappropriation of our proprietary technology; failure to protect against cyber-attacks or other privacy or data security incidents; our ability to obtain sufficient funds from our regulated subsidiaries or the debt or capital markets to fund our obligations, to maintain our debt to total capital ratio at targeted levels, to maintain our quarterly dividend payment cycle or to continue repurchasing shares of our common stock; and failure to achieve targeted operating cost productivity improvements, including savings resulting from technology enhancement and administrative modernization.

This list of important factors is not intended to be exhaustive. We discuss certain of these matters more fully, as well as certain risk factors that may affect our business operations, financial condition and results of operations, in our other periodic and current filings with the Securities and Exchange Commission, including our annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K. Any or all forward-looking statements we make may turn out to be wrong, and can be affected by inaccurate assumptions we might make or by known or unknown risks and uncertainties. By their nature, forward-looking statements are not guarantees of future performance or results and are subject to risks, uncertainties and assumptions that are difficult to predict or quantify. Actual future results may vary materially from expectations expressed or implied in this press release or any of our prior communications. You should not place undue reliance on forward-looking statements, which speak only as of the date they are made. We do not undertake to update or revise any forward-looking statements, except as required by applicable securities laws.

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