UnitedHealth Group Incorporated (UNH)

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UnitedHealth Group Inc. (UNH)

Q3 2010 Earnings Call

October 19, 2010 08:45 am ET

Executives

Stephen Hemsley - President & CEO, UnitedHealth Group

Andy Slavitt - CEO, Ingenix

Gail Boudreaux - President, UnitedHealthcare and EVP, UnitedHealth Group

Mike Mikan - EVP & CFO, UnitedHealth Group

Dan Schumacher - CFO, UnitedHealthcare

Tom Paul - CEO, UnitedHealthcare Medicare Solutions

Dave Wichmann - EVP, UnitedHealth Group & President, UnitedHealth Group Operations

Dawn Owens - CEO, OptumHealth

Analysts

Christine Arnold - Cowen

Sheryl Skolnick - CRT

Kevin Fischbeck - Bank of America

Scott Fidel - Deutsche Bank

Peter Costa - Wells Fargo

Carl McDonald - Citigroup

Ana Gupte - Sanford Bernstein

Sarah James - Wedbush

Justin Lake - UBS

Charles Boorady - Credit Suisse

Josh Raskin - Barclays

Tom Carroll - Stifel Nicolaus

Matthew Borsch - Goldman Sachs

Dave Windley - Jefferies & Company

Joe France - Gleacher & Company

Doug Simpson - Morgan Stanley

Presentation

Operator

Good morning. I will be your conference facilitator today. At this time, I would like to welcome everyone to the UnitedHealth Group third quarter 2010 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 contains forward-looking statements under US Federal Securities Laws that 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 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 October 19, 2010, which maybe accessed from the Investors 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, Stephen Hemsley.

Stephen Hemsley

Good morning and thank you for joining us this morning. Today, we will review our third quarter and share some reflections about the business environment heading into 2011.

In the third quarter, we continued the positive theme to fundamental execution, innovation and the momentum from the first half of 2010. This year is shaping up as one of our most well rounded performances based on the breadth of advances and the level of new activities underway across the enterprises. And we believe the underpinnings of the study performance advancement are sustainable. They include ever stronger and more consistent execution in the fundamentals of our businesses, strengthening clinical their operating cost management disciplines, continuing practical innovation efforts market-by-market, broader business diversity and expansion efforts and steady capital discipline. We believe this aspects are differentiating us in the marketplace, it translate into value for our customers and into growth including stronger than expected revenue and earnings this quarter.

And $23.7 billion of third quarter revenues we earned $1.14 per share, third quarter cash flow from operations of $2.9 billion brought year-to-date cash flow $4.8 billion. We expect our full year 2010 revenue will be almost $94 billion. This is an increase of roughly $1 billion from our last update with you and up significantly from the forecast at the end of last year.

Despite the weak US economic environment, we are driving to a full year revenue increase of 8% and once again this quarter four of our businesses each had year-over-year revenue of about 10%. We expect 2010 full year net earnings in the range of $3.85, that’s $3.95 per share lead by this strong revenue growth and a resolute focus on cost management across the enterprise. Let’s break this quarter down along the lines of our distinct, health benefits and health services business groups. Health benefits reported the third quarter revenues of $22 billion, an increase of 8.8% year-over-year. Health benefit earnings from operations advanced to $1.8 billion. We are unifying the branding of our Health benefit businesses using the strong united healthcare brand. As we communicated to you previously and as you can see from this morning’s materials, the branding integration first and foremost is designed to simplify our overall relationships with the people we serve. We want them to know that UnitedHealthcare can meet their changing healthcare needs throughout their lives regardless of which life stage our market segments they may be in.

Importantly our four health benefit businesses continue to focus on and serve their unique markets as sovereign business units. Across these businesses, we are serving one million more people than we served 12 months ago, including growth of 210,000 people this quarter. For the quarter, the strongest growth came from the commercial risk and Medicaid offerings. Year-to-date the growth leaders are Medicaid, Medicare advantage, Part D and fee base commercial.

This broad base advance of one million people in the last year is driven by the diversity of our offerings including innovative, consumer oriented products at lower price points and by our focus on simple, highly responsive service for our customers and for care providers.

Looking at performance by product category, our Medicare Advantage program is leading the market with 270,000 new members this calendar year. Our benefits are very competitive in our distribution channel management; sales execution and member support are strong and consistent. Marketing for 2011 began on October 1st and the initial response in marketplace has been positive. Consistent with our approach in prior years we are emphasizing stable, predictable benefits at affordable prices, and we hope to grow share in Medicare Advantage again in 2011.

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