UnitedHealth Group Incorporated (UNH)

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UnitedHealth Group Incorporated (UNH)

Q4 2009 Earnings Call Transcript

January 21, 2009 08:45 am ET


Stephen Hemsley – President & CEO

Gail Boudreaux – EVP, President of UnitedHealthcare

Mike Mikan – EVP & CFO

Rick Jelinek – CEO of AmeriChoice

Dawn Owens – CEO of OptumHealth


Scott Fidel – Deutsche Bank

Christine Arnold – Cowen & Co.

Carl McDonald – Oppenheimer

Kevin Fischbeck – Banc of America/Merrill Lynch

Matthew Borsch – Goldman Sachs

Justin Lake – UBS

Charles Boorady – Citi

John Rex – JP Morgan

Ana Gupte – Sanford C. Bernstein

Doug Simpson – Morgan Stanley

Brian Wright – Colin Stewart



Good morning. I will be your conference facilitator today. At this time, I would like to welcome everyone to the UnitedHealth Group fourth quarter and full-year 2009 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer period. (Operator instructions) As a reminder, this conference is being recorded.

This call and its contents are the property of UnitedHealth Group. Any use, copying, or distribution without written permission from UnitedHealth Group is strictly prohibited. Here is some important introductory information. This call will reference non-GAAP amounts. A reconciliation of non-GAAP to GAAP amounts if available on the financial reports and SEC filings section of the company's investor page at www.unitedhealthgroup.com.

This call contains forward looking statements under the US Federal Securities laws. Such statements are subject to risks and uncertainties that could cause actual results to differ materially from historical experience or present expectations. A description of some of the risks and uncertainties can be found in the reports that we’ve filed with the Securities and Exchange Commission from time to time, including the cautionary statements included in our current and periodic filings.

Information presented on this call is contained in the earnings release we issued this morning, and in our Form 8-K, dated January 21, 2010, which may be accessed from the investor page of the company’s website at www.unitedhealthgroup.com.

I would now like to turn the conference over to the President and Chief Executive Officer of UnitedHealth Group, Mr. Stephen Hemsley.

Stephen Hemsley

Good morning and thank you for joining us. Today, we will focus our commentary in three key areas, 2009 financial performance and our early 2010 outlook, our progress against some key market facing themes discussed with you over the last two years, and lastly some thought about market needs and requirements going forward.

The results from Massachusetts on Tuesday may have affected the legislative outlook, and we're not going to comment on the outcome of health reform today. Whatever the result, we continue to believe that the heart of the issue is a need to thoughtfully stage comprehensive efforts around controlling costs, and modernizing the health systems in order to expand and sustain access to affordable health.

We will do our best to make whatever changes, which may be enacted successful, to appropriately control costs, modernize and simplify the system and to improve access to affordable quality care in this country. As you read in our release this morning, the performance momentum that steadily progressed over 2009 continued in the fourth quarter. We reported solid fourth-quarter results with earnings per share of $0.81 and operating cash flows of $1.3 billion.

All key performance metrics for the quarter were in line or improved, relative to our expectations. Full year 2009 results included just over $87 billion in revenues or 7% year-over-year growth. Earnings of $3.24 per share and cash flows from operations of $5.6 billion improved year-over-year by 10% and 16% respectively.

Cash flows were 1.5 times net earnings. We managed through many unforeseen obstacles to achieve these results, including significantly higher unemployment trends, anemic short-term investment yields, the H1N1 outbreak, slower buying behaviors in the market for health services, COBRA benefit extensions, and unexpected state actions on insurance premiums and more.

The performance drivers in the quarter were consistent with those throughout the year, discipline in commercial pricing supported by better product positioning market to market, steady and effective management of medical and operating costs, strong membership growth and market share gains across public and senior products in markets, and double-digit percentage revenue growth in our services businesses.

We see many of these performance drivers carrying forward into 2010. While we are pleased to have exceeded our financial commitments in 2009, we are equally encouraged by our advances throughout 2009 in key areas, where we are demonstrating our ability to better serve people, which enhances our potential for growth in 2010 and beyond. In 2009, the satisfaction levels improved meaningfully for every key constituency, consumers, physicians and care providers, employers and benefit sponsors, brokers and consultants.

Our proactive engagement with regulators, medical societies, and elected officials also had a meaningful and positive impact in 2009. Service and response metrics, processing and response accuracy all improved steadily each quarter. Integration efforts advanced. Some 93% of our total commercial, public and senior membership now resides on end-state operating platforms. That percentage should be 95% by the end of 2010.

These are impactful advances and we’ll continue to be unrelenting in our dedication to service and fundamental execution discipline. Our commitment to practical innovation over the past year and more resulted in the introduction of the Diabetes Health Plan, The Consumer Activation Index, the Personalized Health Score, and integrated eSync personalized care platform, and our Connected Care Telehealth Program.

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