UNITEDHEALTH GROUP INC | 2013 | FY | 3


Segment Financial Information
Factors used to determine the Company’s reportable segments include the nature of operating activities, economic characteristics, existence of separate senior management teams and the type of information presented to the Company’s chief operating decision maker to evaluate its results of operations. Reportable segments with similar economic characteristics are combined.
The following is a description of the types of products and services from which each of the Company’s four reportable segments derives its revenues:
UnitedHealthcare includes the combined results of operations of UnitedHealthcare Employer & Individual, UnitedHealthcare Medicare & Retirement, UnitedHealthcare Community & State and UnitedHealthcare International because they have similar economic characteristics, products and services, customers, distribution methods and operational processes and operate in a similar regulatory environment. The U.S. businesses also share significant common assets, including a contracted network of physicians, health care professionals, hospitals and other facilities, information technology infrastructure and other resources. UnitedHealthcare Employer & Individual offers an array of consumer-oriented health benefit plans and services for large national employers, public sector employers, mid-sized employers, small businesses and individuals nationwide and active and retired military and their families through the TRICARE program (West Region). UnitedHealthcare Medicare & Retirement provides health care coverage and health and well-being services to individuals age 50 and older, addressing their unique needs for preventive and acute health care services as well as services dealing with chronic disease and other specialized issues for older individuals. UnitedHealthcare Community & State’s primary customers oversee Medicaid plans, the Children’s Health Insurance Program, and other federal, state and community health care programs. UnitedHealthcare International is a diversified global health services business with a variety of offerings, including international commercial health and dental benefits.
OptumHealth serves the physical, emotional and financial needs of individuals, enabling consumer health management and integrated care delivery through programs offered by employers, payers, government entities and directly with the care delivery system. OptumHealth offers access to networks of care provider specialists, health management services, integrated care delivery services, consumer engagement and relationship management and sales distribution platform services and financial services.
OptumInsight is a health care information, technology, operational services and consulting company providing software and information products, advisory consulting services, and business process outsourcing services and support to participants in the health care industry. Hospitals, physicians, commercial health plans, government agencies, life sciences companies and other organizations that comprise the health care system use OptumInsight to reduce costs, meet compliance mandates, improve clinical performance and adapt to the changing health system landscape.
OptumRx offers pharmacy benefit management services and programs including retail pharmacy network management services, mail order and specialty pharmacy services, manufacturer rebate contracting and administration, benefit plan design and consultation, claims processing, and a variety of clinical programs such as formulary management and compliance, drug utilization review and disease and drug therapy management services.
The Company’s accounting policies for reportable segment operations are consistent with those described in the Summary of Significant Accounting Policies (see Note 2). Transactions between reportable segments principally consist of sales of pharmacy benefit products and services to UnitedHealthcare customers by OptumRx, certain product offerings and care management and integrated care delivery services sold to UnitedHealthcare by OptumHealth, and health information and technology solutions, consulting and other services sold to UnitedHealthcare by OptumInsight. These transactions are recorded at management’s estimate of fair value. Intersegment transactions are eliminated in consolidation. Assets and liabilities that are jointly used are assigned to each reportable segment using estimates of pro-rata usage. Cash and investments are assigned such that each reportable segment has working capital and/or at least minimum specified levels of regulatory capital.
As a percentage of the Company’s total consolidated revenues, premium revenues from CMS were 29%, 29%, and 28% for the years ended December 31, 2013, 2012 and 2011, respectively, most of which were generated by UnitedHealthcare Medicare & Retirement and included in the UnitedHealthcare segment. U.S. customer revenue represented approximately 95% and 99% of consolidated total revenues during the years ended December 31, 2013 and 2012, respectively. Substantially all revenue was U.S. generated revenue for the year ended December 31, 2011. Long-lived fixed assets located in the United States represented approximately 72% and 70% of the total long-lived fixed assets as of December 31, 2013 and 2012, respectively. The non-US revenues and fixed assets are primarily related to UnitedHealthcare International.
2014 Business Realignment
On January 1, 2014, the Company realigned certain of its businesses to respond to changes in the markets it serves and the opportunities that are emerging as the health system evolves. The Company’s Optum business platform took responsibility for certain technology operations and business processing activities with the intention of pursuing additional third-party commercial opportunities in addition to continuing to serve UnitedHealthcare. These activities, which were historically a corporate function, will be included in OptumInsight’s results of operations. The Company’s periodic filings with the SEC beginning with the first quarter 2014 Form 10-Q will include historical segment results restated to reflect the effect of this realignment and will continue to present the same four reportable segments (UnitedHealthcare, OptumHealth, OptumInsight and OptumRx).


Corporate and intersegment elimination amounts are presented to reconcile the reportable segment results to the consolidated results. The following table presents the reportable segment financial information:
 
 
 
 
Optum
 
 
 
 
(in millions)
 
UnitedHealthcare
 
OptumHealth
 
OptumInsight
 
OptumRx
 
Total Optum
 
Corporate and
Intersegment
Eliminations
 
Consolidated
2013
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenues - external customers:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Premiums
 
$
107,024

 
$
2,533

 
$

 
$

 
$
2,533

 
$

 
$
109,557

Services
 
6,180

 
819

 
1,902

 
96

 
2,817

 

 
8,997

Products
 
8

 
19

 
92

 
3,071

 
3,182

 

 
3,190

Total revenues - external customers
 
113,212

 
3,371

 
1,994

 
3,167

 
8,532

 

 
121,744

Total revenues - intersegment
 

 
6,357

 
1,179

 
20,839

 
28,375

 
(28,375
)
 

Investment and other income
 
617

 
127

 
1

 

 
128

 

 
745

Total revenues
 
$
113,829

 
$
9,855

 
$
3,174

 
$
24,006

 
$
37,035

 
$
(28,375
)
 
$
122,489

Earnings from operations
 
$
7,309

 
$
976

 
$
603

 
$
735

 
$
2,314

 
$

 
$
9,623

Interest expense
 

 

 

 

 

 
(708
)
 
(708
)
Earnings before income taxes
 
$
7,309

 
$
976

 
$
603

 
$
735

 
$
2,314

 
$
(708
)
 
$
8,915

Total assets
 
$
62,545

 
$
9,329

 
$
5,971

 
$
4,525

 
$
19,825

 
$
(488
)
 
$
81,882

Purchases of property, equipment and capitalized software
 
824

 
234

 
171

 
78

 
483

 

 
1,307

Depreciation and amortization
 
869

 
178

 
221

 
107

 
506

 

 
1,375

2012
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenues - external customers:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Premiums
 
$
97,985

 
$
1,743

 
$

 
$

 
$
1,743

 
$

 
$
99,728

Services
 
4,867

 
767

 
1,720

 
83

 
2,570

 

 
7,437

Products
 

 
21

 
87

 
2,665

 
2,773

 

 
2,773

Total revenues - external customers
 
102,852

 
2,531

 
1,807

 
2,748

 
7,086

 

 
109,938

Total revenues - intersegment
 

 
5,503

 
1,075

 
15,611

 
22,189

 
(22,189
)
 

Investment and other income
 
567

 
113

 

 

 
113

 

 
680

Total revenues
 
$
103,419

 
$
8,147

 
$
2,882

 
$
18,359

 
$
29,388

 
$
(22,189
)
 
$
110,618

Earnings from operations
 
$
7,815

 
$
561

 
$
485

 
$
393

 
$
1,439

 
$

 
$
9,254

Interest expense
 

 

 

 

 

 
(632
)
 
(632
)
Earnings before income taxes
 
$
7,815

 
$
561

 
$
485

 
$
393

 
$
1,439

 
$
(632
)
 
$
8,622

Total assets
 
$
63,591

 
$
8,274

 
$
5,463

 
$
3,466

 
$
17,203

 
$
91

 
$
80,885

Purchases of property, equipment and capitalized software
 
585

 
184

 
165

 
136

 
485

 

 
1,070

Depreciation and amortization
 
794

 
193

 
210

 
112

 
515

 

 
1,309

 
 
 
 
Optum
 
 
 
 
(in millions)
 
UnitedHealthcare
 
OptumHealth
 
OptumInsight
 
OptumRx
 
Total Optum
 
Corporate and
Intersegment
Eliminations
 
Consolidated
2011
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenues - external customers:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Premiums
 
$
90,487

 
$
1,496

 
$

 
$

 
$
1,496

 
$

 
$
91,983

Services
 
4,291

 
628

 
1,616

 
78

 
2,322

 

 
6,613

Products
 

 
24

 
96

 
2,492

 
2,612

 

 
2,612

Total revenues - external customers
 
94,778

 
2,148

 
1,712

 
2,570

 
6,430

 

 
101,208

Total revenues - intersegment
 

 
4,461

 
958

 
16,708

 
22,127

 
(22,127
)
 

Investment and other income
 
558

 
95

 
1

 

 
96

 

 
654

Total revenues
 
$
95,336

 
$
6,704

 
$
2,671

 
$
19,278

 
$
28,653

 
$
(22,127
)
 
$
101,862

Earnings from operations
 
$
7,203

 
$
423

 
$
381

 
$
457

 
$
1,261

 
$

 
$
8,464

Interest expense
 

 

 

 

 

 
(505
)
 
(505
)
Earnings before income taxes
 
$
7,203

 
$
423

 
$
381

 
$
457

 
$
1,261

 
$
(505
)
 
$
7,959

Total assets
 
$
52,618

 
$
6,756

 
$
5,308

 
$
3,503

 
$
15,567

 
$
(296
)
 
$
67,889

Purchases of property, equipment and capitalized software
 
635

 
168

 
175

 
89

 
432

 

 
1,067

Depreciation and amortization
 
680

 
154

 
195

 
95

 
444

 

 
1,124


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