UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________________________________________________ 
Form 10-Q
__________________________________________________________ 
[X]QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 20192020
or
[ ]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _______ TO _______
Commission File Number: 1-10864
__________________________________________________________ 
uhglogoa05.jpg
UnitedHealth Group Incorporated
(Exact name of registrant as specified in its charter)
 __________________________________________________________ 
Delaware 41-1321939
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
UnitedHealth Group Center 55343
9900 Bren Road East 
UnitedHealth Group Center
9900 Bren Road East
Minnetonka,
Minnesota 55343
(Address of principal executive offices) (Zip Code)
(952) (952) 936-1300
(Registrant’s telephone number, including area code)
_________________________________________________________  
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $.01 par valueUNHNYSE
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes [X] No [ ]
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes [X] No [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act
Large accelerated filer[X] Accelerated filer[ ] Non-accelerated filer[ ]
Smaller reporting company[ ]    Emerging growth company[ ]
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes [ ]No [X]
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $.01 par valueUNHNew York Stock Exchange, Inc.
As of April 30, 2019,2020, there were 950,343,113948,379,502 shares of the registrant’s Common Stock, $.01 par value per share, issued and outstanding.
     




UNITEDHEALTH GROUP
Table of Contents
 
   Page   Page
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  






PART I
ITEM 1.    FINANCIAL STATEMENTS
UnitedHealth Group
Condensed Consolidated Balance Sheets
(Unaudited)
(in millions, except per share data) March 31,
2019
 December 31,
2018
 March 31,
2020
 December 31,
2019
Assets        
Current assets:        
Cash and cash equivalents $12,407
 $10,866
 $21,569
 $10,985
Short-term investments 3,303
 3,458
 2,876
 3,260
Accounts receivable, net 12,826
 11,388
 14,613
 11,822
Other current receivables, net 7,631
 6,862
 10,275
 9,640
Assets under management 2,951
 3,032
 2,866
 3,076
Prepaid expenses and other current assets 3,697
 3,086
 6,608
 3,851
Total current assets 42,815
 38,692
 58,807
 42,634
Long-term investments 33,553
 32,510
 36,578
 37,209
Property, equipment and capitalized software, net 8,230
 8,458
 8,173
 8,704
Goodwill 59,379
 58,910
 65,302
 65,659
Other intangible assets, net 9,245
 9,325
 10,199
 10,349
Other assets 7,975
 4,326
 10,008
 9,334
Total assets $161,197
 $152,221
 $189,067
 $173,889
Liabilities, redeemable noncontrolling interests and equity        
Current liabilities:        
Medical costs payable $21,139
 $19,891
 $22,772
 $21,690
Accounts payable and accrued liabilities 16,900
 16,705
 22,845
 19,005
Commercial paper and current maturities of long-term debt 3,919
 1,973
Short-term borrowings and current maturities of long-term debt 15,828
 3,870
Unearned revenues 2,530
 2,396
 2,509
 2,622
Other current liabilities 14,445
 12,244
 14,652
 14,595
Total current liabilities 58,933
 53,209
 78,606
 61,782
Long-term debt, less current maturities 34,419
 34,581
 35,779
 36,808
Deferred income taxes 2,786
 2,474
 3,030
 2,993
Other liabilities 8,554
 5,730
 10,048
 10,144
Total liabilities 104,692
 95,994
 127,463
 111,727
Commitments and contingencies (Note 6) 

 

 


 


Redeemable noncontrolling interests 2,054
 1,908
 1,741
 1,726
Equity:        
Preferred stock, $0.001 par value - 10 shares authorized; no shares issued or outstanding 
 
 
 
Common stock, $0.01 par value - 3,000 shares authorized; 953 and 960 issued and outstanding 10
 10
Common stock, $0.01 par value - 3,000 shares authorized; 947 and 948 issued and outstanding 10
 9
Additional paid-in capital 
 7
Retained earnings 55,472
 55,846
 62,327
 61,178
Accumulated other comprehensive loss (3,758) (4,160) (5,360) (3,578)
Nonredeemable noncontrolling interests 2,727
 2,623
 2,886
 2,820
Total equity 54,451
 54,319
 59,863
 60,436
Total liabilities, redeemable noncontrolling interests and equity $161,197
 $152,221
 $189,067
 $173,889


See Notes to the Condensed Consolidated Financial Statements

UnitedHealth Group
Condensed Consolidated Statements of Operations
(Unaudited)
 Three Months Ended March 31, Three Months Ended March 31,
(in millions, except per share data) 2019 2018 2020 2019
Revenues:        
Premiums $47,513
 $44,084
 $50,640
 $47,513
Products 8,072
 6,702
 8,431
 8,072
Services 4,318
 4,104
 4,985
 4,318
Investment and other income 405
 298
 365
 405
Total revenues 60,308
 55,188
 64,421
 60,308
Operating costs:        
Medical costs 38,939
 35,863
 41,000
 38,939
Operating costs 8,517
 8,506
 10,015
 8,517
Cost of products sold 7,381
 6,184
 7,687
 7,381
Depreciation and amortization 639
 582
 723
 639
Total operating costs 55,476
 51,135
 59,425
 55,476
Earnings from operations 4,832
 4,053
 4,996
 4,832
Interest expense (400) (329) (437) (400)
Earnings before income taxes 4,432
 3,724
 4,559
 4,432
Provision for income taxes (875) (800) (1,094) (875)
Net earnings 3,557
 2,924
 3,465
 3,557
Earnings attributable to noncontrolling interests (90) (88) (83) (90)
Net earnings attributable to UnitedHealth Group common shareholders $3,467
 $2,836
 $3,382
 $3,467
Earnings per share attributable to UnitedHealth Group common shareholders:        
Basic $3.62
 $2.94
 $3.56
 $3.62
Diluted $3.56
 $2.87
 $3.52
 $3.56
Basic weighted-average number of common shares outstanding 958
 966
 949
 958
Dilutive effect of common share equivalents 17
 21
 13
 17
Diluted weighted-average number of common shares outstanding 975
 987
 962
 975
Anti-dilutive shares excluded from the calculation of dilutive effect of common share equivalents 8
 7
 10
 8


See Notes to the Condensed Consolidated Financial Statements

 
UnitedHealth Group
Condensed Consolidated Statements of Comprehensive Income
(Unaudited)



 Three Months Ended March 31, Three Months Ended March 31,
(in millions) 2019 2018 2020 2019
Net earnings $3,557
 $2,924
 $3,465
 $3,557
Other comprehensive income (loss):    
Gross unrealized gains (losses) on investment securities during the period 520
 (378)
Other comprehensive (loss) income:    
Gross unrealized (losses) gains on investment securities during the period (349) 520
Income tax effect (119) 86
 80
 (119)
Total unrealized gains (losses), net of tax 401
 (292)
Gross reclassification adjustment for net realized losses (gains) included in net earnings 4
 (19)
Total unrealized (losses) gains, net of tax (269) 401
Gross reclassification adjustment for net realized (gains) losses included in net earnings (18) 4
Income tax effect (1) 4
 4
 (1)
Total reclassification adjustment, net of tax 3
 (15) (14) 3
Total foreign currency translation losses (2) (1) (1,499) (2)
Other comprehensive income (loss) 402
 (308)
Other comprehensive (loss) income (1,782) 402
Comprehensive income 3,959
 2,616
 1,683
 3,959
Comprehensive income attributable to noncontrolling interests (90) (88) (83) (90)
Comprehensive income attributable to UnitedHealth Group common shareholders $3,869
 $2,528
 $1,600
 $3,869


See Notes to the Condensed Consolidated Financial Statements

UnitedHealth Group
Condensed Consolidated Statements of Changes in Equity
(Unaudited)
 Common Stock Additional Paid-In Capital Retained Earnings 
Accumulated Other Comprehensive (Loss)
Income
 Nonredeemable Noncontrolling Interests 
Total
Equity
 Common Stock Additional Paid-In Capital Retained Earnings 
Accumulated Other Comprehensive
Income (Loss)
 Nonredeemable Noncontrolling Interests 
Total
Equity
(in millions) Shares Amount Net Unrealized (Losses) Gains on Investments Foreign Currency Translation Losses 
 Shares Amount Additional Paid-In Capital Retained Earnings Net Unrealized Gains (Losses) on Investments Foreign Currency Translation Losses Nonredeemable Noncontrolling Interests 
Total
Equity
Balance at January 1, 2020 948
 $9
 $589
 $(4,167) 
Adjustment to adopt ASU 2016-13       (28)       (28)
Net earnings       3,382
     59
 3,441
Other comprehensive (loss) income         (283) (1,499)   (1,782)
Issuances of common stock,
and related tax effects
 5
 1
 320
         321
Share-based compensation     234
         234
Common share repurchases (6) 
 (510) (1,181)       (1,691)
Cash dividends paid on common shares ($1.08 per share)       (1,024)       (1,024)
Redeemable noncontrolling interests fair value and other adjustments     (51)         (51)
Acquisition and other adjustments of nonredeemable noncontrolling interests             50
 50
Distribution to nonredeemable noncontrolling interests             (43) (43)
Balance at March 31, 2020 947
 $10
 $
 $62,327
 $306
 $(5,666) $2,886
 $59,863
                
Balance at January 1, 2019 960
 $10
 $
 $55,846
 $(264) $(3,896) $2,623
 $54,319
 960
 $10
 $
 $55,846
 $(264) $(3,896) $2,623
 $54,319
Adjustment to adopt ASU 2016-02       (13)     (5) (18)       (13)     (5) (18)
Net earnings       3,467
     60
 3,527
       3,467
     60
 3,527
Other comprehensive income (loss)         404
 (2)   402
         404
 (2)   402
Issuances of common stock,
and related tax effects
 5
 
 56
         56
 5
 
 56
         56
Share-based compensation     239
         239
     239
         239
Common share repurchases (12) 
 (34) (2,968)       (3,002) (12) 
 (34) (2,968)       (3,002)
Cash dividends paid on common shares ($0.90 per share)       (860)       (860)       (860)       (860)
Redeemable noncontrolling interests fair value and other adjustments     (152)         (152)     (152)         (152)
Acquisition and other adjustments of nonredeemable noncontrolling interests     (109)       132
 23
     (109)       132
 23
Distribution to nonredeemable noncontrolling interests             (83) (83)             (83) (83)
Balance at March 31, 2019 953
 $10
 $
 $55,472
 $140
 $(3,898) $2,727
 $54,451
 953
 $10
 $
 $55,472
 $140
 $(3,898) $2,727
 $54,451
                
Balance at January 1, 2018 969
 $10
 $1,703
 $48,730
 $(13) $(2,654) $2,057
 $49,833
Adjustment to adopt ASU 2016-01       (24) 24
     
Net earnings       2,836
     53
 2,889
Other comprehensive loss         (307) (1)   (308)
Issuances of common stock, and related tax effects 5
 
 415
         415
Share-based compensation     206
         206
Common share repurchases (12) 
 (2,324) (326)       (2,650)
Cash dividends paid on common shares ($0.75 per share)       (722)       (722)
Acquisition of nonredeemable noncontrolling interests             423
 423
Distribution to nonredeemable noncontrolling interests             (50) (50)
Balance at March 31, 2018 962
 $10
 $
 $50,494
 $(296) $(2,655) $2,483
 $50,036


See Notes to the Condensed Consolidated Financial Statements

UnitedHealth Group
Condensed Consolidated Statements of Cash Flows
(Unaudited)
 Three Months Ended March 31, Three Months Ended March 31,
(in millions) 2019 2018 2020 2019
Operating activities        
Net earnings $3,557
 $2,924
 $3,465
 $3,557
Noncash items:        
Depreciation and amortization 639
 582
 723
 639
Deferred income taxes 134
 (74) 202
 134
Share-based compensation 243
 208
 231
 243
Other, net 42
 27
 45
 42
Net change in other operating items, net of effects from acquisitions and changes in AARP balances:        
Accounts receivable (1,421) (1,579) (2,652) (1,421)
Other assets (1,495) (3,232) (4,249) (1,495)
Medical costs payable 1,125
 1,313
 1,120
 1,125
Accounts payable and other liabilities 318
 2,821
 4,137
 318
Unearned revenues 92
 5,379
 (79) 92
Cash flows from operating activities 3,234
 8,369
 2,943

3,234
Investing activities        
Purchases of investments (3,540) (3,891) (3,866) (3,540)
Sales of investments 1,510
 1,002
 2,170
 1,510
Maturities of investments 1,711
 1,504
 1,726
 1,711
Cash paid for acquisitions, net of cash assumed (689) (2,583) (929) (689)
Purchases of property, equipment and capitalized software (562) (477) (469) (562)
Other, net 154
 (72) (165) 154
Cash flows used for investing activities (1,416) (4,517) (1,533) (1,416)
Financing activities        
Common share repurchases (3,002) (2,650) (1,691) (3,002)
Cash dividends paid (860) (722) (1,024) (860)
Proceeds from common stock issuances 323
 295
 557
 323
Repayments of long-term debt (1,250) (1,100) 
 (1,250)
Proceeds from commercial paper, net 3,101
 4,259
Proceeds from short-term borrowings, net 10,797
 3,101
Customer funds administered 1,784
 2,962
 1,062
 1,784
Other, net (368) (622) (398) (368)
Cash flows (used for) from financing activities (272) 2,422
Cash flows from (used for) financing activities 9,303
 (272)
Effect of exchange rate changes on cash and cash equivalents (5) (12) (129) (5)
Increase in cash and cash equivalents 1,541
 6,262
 10,584
 1,541
Cash and cash equivalents, beginning of period 10,866
 11,981
 10,985
 10,866
Cash and cash equivalents, end of period $12,407
 $18,243
 $21,569
 $12,407
        


See Notes to the Condensed Consolidated Financial Statements

UnitedHealth Group
Notes to the Condensed Consolidated Financial Statements
(Unaudited)
1.    Basis of Presentation
UnitedHealth Group Incorporated (individually and together with its subsidiaries, “UnitedHealth Group” and the “Company”“the Company”) is a diversified health care company dedicated to helping people live healthier lives and helping make the health system work better for everyone.
Through its diversified family of businesses, the Company leverages core competencies in data and health information; advanced technology; and clinical expertise. These core competencies are deployed within two distinct, but strategically aligned, business platforms: health benefits operating under UnitedHealthcare and health services operating under Optum.
The Company has prepared the Condensed Consolidated Financial Statements according to U.S. Generally Accepted Accounting Principles (GAAP) and has included the accounts of UnitedHealth Group and its subsidiaries. The year-end condensed consolidated balance sheet was derived from audited financial statements, but does not include all disclosures required by GAAP. In accordance with the rules and regulations of the U.S. Securities and Exchange Commission (SEC), the Company has omitted certain footnote disclosures that would substantially duplicate the disclosures contained in its annual audited Consolidated Financial Statements. Therefore, these Condensed Consolidated Financial Statements should be read together with the Consolidated Financial Statements and the Notes included in Part II, Item 8, “Financial Statements and Supplementary Data” in the Company’s Annual Report on Form 10-K for the year ended December 31, 20182019 as filed with the SEC (2018(2019 10-K). The accompanying Condensed Consolidated Financial Statements include all normal recurring adjustments necessary to present the interim financial statements fairly.
Use of Estimates
These Condensed Consolidated Financial Statements include certain amounts based on the Company’s best estimates and judgments. The Company’s most significant estimates include medical costs payable and goodwill. Certain of these estimates require the application of complex assumptions and judgments, often because they involve matters that are inherently uncertain and will likely change in subsequent periods. The impact of any change in estimates is included in earnings in the period in which the estimate is adjusted.
Revenue from Products
For the quarter ended March 31, 2020, the Company recognized revenue and cost of products sold for retail pharmacy co-payments related to its OptumRx business. Revenue recognized in prior periods related to retail pharmacy transactions excludes the member’s applicable co-payment. There was no impact on earnings from operations, net earnings, earnings per share or total equity.
Recently Adopted Accounting Standards
In FebruaryJune 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standard Update (ASU) No. 2016-02, “Leases2016-13, “Financial Instruments - Credit Losses (Topic 842)326)as modified by ASUs 2018-01, 2018-10, 2018-11, 2018-20(ASU 2016-13). ASU 2016-13 requires the use of the current expected credit loss impairment model to develop an estimate of expected credit losses for certain financial assets. ASU 2016-13 also requires expected credit losses on available-for-sale debt securities to be recognized through an allowance for credit losses and 2019-01 (collectively, ASU 2016-02). Under ASU 2016-02, an entity is required to recognize assets and liabilities for the rights and obligations created by leases on the entity’s balance sheet for both finance and operating leases.revises certain disclosure requirements. The Company adopted ASU 2016-022016-13 on January 1, 2020 using a cumulative-effectcumulative effect upon adoption approach as of January 1, 2019. Upon adoption, the Company recognized $3.3 billion of lease right-of-use (ROU) assets and liabilities for operating leases on its Condensed Consolidated Balance Sheet, of which, $668 million were classified as current liabilities.approach. The adoption of ASU 2016-022016-13 was immaterial to the Company’s consolidated balance sheet, results of operations, equity and cash flows. The
Under the current expected credit loss impairment model, the Company has included the disclosures requiredevaluates an available-for-sale debt security for credit-related impairment by ASU 2016-02 below and in Note 6, “Commitments and Contingencies”.
The Company leases facilities and equipment under long-term operating leases that are non-cancelable and expire on various dates. At the lease commencement date, lease ROU assets and lease liabilities are recognized based onconsidering the present value of expected cash flows relative to a security’s amortized cost, the future minimum lease payments overextent to which fair value is less than amortized cost, the lease term, which includes all fixed obligations arising fromfinancial condition and near-term prospects of the lease contract.issuer and specific events or circumstances that may influence the operations of the issuer. Credit-related impairments are recorded as an allowance, with an offset to investment and other income. Non-credit related impairments are recorded through other comprehensive income. If an interest rate is not implicit in a lease, the Company utilizes its incremental borrowing rate forintends to sell an impaired security, or will likely be required to sell a period that closely matchessecurity before recovery of the lease term.
The Company’s ROU assets areentire amortized cost, the entire impairment is included in other assets, and lease liabilities are included in other current liabilities and other liabilities in the Company’s Condensed Consolidated Balance Sheet.net earnings.
The Company has determined that there have been no other recently adopted or issued accounting standards that had, or will have, a material impact on its Condensed Consolidated Financial Statements.

2.    Investments
A summary of debt securities by major security type is as follows:
(in millions) 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
March 31, 2020        
Debt securities - available-for-sale:        
U.S. government and agency obligations $3,146
 $183
 $(1) $3,328
State and municipal obligations 5,724
 214
 (20) 5,918
Corporate obligations 17,923
 182
 (411) 17,694
U.S. agency mortgage-backed securities 6,508
 260
 
 6,768
Non-U.S. agency mortgage-backed securities 1,932
 28
 (36) 1,924
Total debt securities - available-for-sale 35,233
 867
 (468) 35,632
Debt securities - held-to-maturity:        
U.S. government and agency obligations 410
 9
 
 419
State and municipal obligations 31
 2
 
 33
Corporate obligations 284
 
 (1) 283
Total debt securities - held-to-maturity 725
 11
 (1) 735
Total debt securities $35,958
 $878
 $(469) $36,367
December 31, 2019        
Debt securities - available-for-sale:        
U.S. government and agency obligations $3,502
 $55
 $(4) $3,553
State and municipal obligations 5,680
 251
 (5) 5,926
Corporate obligations 17,910
 343
 (11) 18,242
U.S. agency mortgage-backed securities 6,425
 109
 (6) 6,528
Non-U.S. agency mortgage-backed securities 1,811
 37
 (3) 1,845
Total debt securities - available-for-sale 35,328
 795
 (29) 36,094
Debt securities - held-to-maturity:        
U.S. government and agency obligations 402
 2
 
 404
State and municipal obligations 32
 2
 
 34
Corporate obligations 538
 
 (1) 537
Total debt securities - held-to-maturity 972
 4
 (1) 975
Total debt securities $36,300
 $799
 $(30) $37,069
(in millions) 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
March 31, 2019        
Debt securities - available-for-sale:        
U.S. government and agency obligations $3,610
 $30
 $(19) $3,621
State and municipal obligations 6,566
 150
 (9) 6,707
Corporate obligations 15,589
 95
 (58) 15,626
U.S. agency mortgage-backed securities 5,212
 37
 (51) 5,198
Non-U.S. agency mortgage-backed securities 1,471
 13
 (6) 1,478
Total debt securities - available-for-sale 32,448
 325
 (143) 32,630
Debt securities - held-to-maturity:        
U.S. government and agency obligations 265
 
 (1) 264
State and municipal obligations 31
 1
 
 32
Corporate obligations 428
 1
 
 429
Total debt securities - held-to-maturity 724
 2
 (1) 725
Total debt securities $33,172
 $327
 $(144) $33,355
December 31, 2018        
Debt securities - available-for-sale:        
U.S. government and agency obligations $3,434
 $13
 $(42) $3,405
State and municipal obligations 7,117
 61
 (57) 7,121
Corporate obligations 15,366
 14
 (218) 15,162
U.S. agency mortgage-backed securities 4,947
 11
 (106) 4,852
Non-U.S. agency mortgage-backed securities 1,376
 2
 (20) 1,358
Total debt securities - available-for-sale 32,240
 101
 (443) 31,898
Debt securities - held-to-maturity:        
U.S. government and agency obligations 255
 1
 (2) 254
State and municipal obligations 11
 
 
 11
Corporate obligations 355
 
 
 355
Total debt securities - held-to-maturity 621
 1
 (2) 620
Total debt securities $32,861
 $102
 $(445) $32,518

The Company held $1.7 billion and $2.0 billion of equity securities as of March 31, 20192020 and December 31, 2018.2019, respectively. The Company’s investments in equity securities primarily consist of employee savings plan related investments and shares of Brazilian real denominated fixed-income funds and dividend paying stocks with readily determinable fair values. Additionally, the Company’s investments included $1.5$1.4 billion of equity method investments in operating businesses in the health care sector as of March 31, 20192020 and December 31, 2018.2019. The allowance for credit losses on held-to-maturity securities at March 31, 2020 was not material.

The amortized cost and fair value of debt securities as of March 31, 2019,2020, by contractual maturity, were as follows:
  Available-for-Sale Held-to-Maturity
(in millions) 
Amortized
Cost
 
Fair
Value
 Amortized
Cost
 Fair
Value
Due in one year or less $3,010
 $3,011
 $319
 $320
Due after one year through five years 11,565
 11,604
 352
 359
Due after five years through ten years 8,563
 8,669
 28
 28
Due after ten years 3,655
 3,656
 26
 28
U.S. agency mortgage-backed securities 6,508
 6,768
 
 
Non-U.S. agency mortgage-backed securities 1,932
 1,924
 
 
Total debt securities $35,233
 $35,632
 $725
 $735

  Available-for-Sale Held-to-Maturity
(in millions) 
Amortized
Cost
 
Fair
Value
 Amortized
Cost
 Fair
Value
Due in one year or less $3,457
 $3,455
 $132
 $132
Due after one year through five years 12,283
 12,304
 318
 318
Due after five years through ten years 7,314
 7,430
 131
 131
Due after ten years 2,711
 2,765
 143
 144
U.S. agency mortgage-backed securities 5,212
 5,198
 
 
Non-U.S. agency mortgage-backed securities 1,471
 1,478
 
 
Total debt securities $32,448
 $32,630
 $724
 $725
The fair value of available-for-sale debt securities with gross unrealized losses by major security type and length of time that individual securities have been in a continuous unrealized loss position were as follows:
  Less Than 12 Months 12 Months or Greater  Total
(in millions) 
Fair
Value
 
Gross
Unrealized
Losses
 
Fair
Value
 Gross
Unrealized
Losses
 
Fair
Value
 Gross
Unrealized
Losses
March 31, 2020            
Debt securities - available-for-sale:            
U.S. government and agency obligations $56
 $(1) $
 $
 $56
 $(1)
State and municipal obligations 810
 (20) 
 
 810
 (20)
Corporate obligations 9,294
 (382) 391
 (29) 9,685
 (411)
Non-U.S. agency mortgage-backed securities 841
 (33) 30
 (3) 871
 (36)
Total debt securities - available-for-sale $11,001
 $(436) $421
 $(32) $11,422
 $(468)
December 31, 2019            
Debt securities - available-for-sale:            
U.S. government and agency obligations $616
 $(4) $
 $
 $616
 $(4)
State and municipal obligations 440
 (5) 
 
 440
 (5)
Corporate obligations 1,903
 (7) 740
 (4) 2,643
 (11)
U.S. agency mortgage-backed securities 657
 (3) 333
 (3) 990
 (6)
Non-U.S. agency mortgage-backed securities 406
 (3) 
 
 406
 (3)
Total debt securities - available-for-sale $4,022
 $(22) $1,073
 $(7) $5,095
 $(29)
  Less Than 12 Months 12 Months or Greater  Total
(in millions) 
Fair
Value
 
Gross
Unrealized
Losses
 
Fair
Value
 Gross
Unrealized
Losses
 
Fair
Value
 Gross
Unrealized
Losses
March 31, 2019            
Debt securities - available-for-sale:            
U.S. government and agency obligations $
 $
 $1,329
 $(19) $1,329
 $(19)
State and municipal obligations 
 
 1,274
 (9) 1,274
 (9)
Corporate obligations 1,461
 (7) 5,479
 (51) 6,940
 (58)
U.S. agency mortgage-backed securities 
 
 2,979
 (51) 2,979
 (51)
Non-U.S. agency mortgage-backed securities 
 
 546
 (6) 546
 (6)
Total debt securities - available-for-sale $1,461
 $(7) $11,607
 $(136) $13,068
 $(143)
December 31, 2018            
Debt securities - available-for-sale:            
U.S. government and agency obligations $998
 $(7) $1,425
 $(35) $2,423
 $(42)
State and municipal obligations 1,334
 (11) 2,491
 (46) 3,825
 (57)
Corporate obligations 8,105
 (109) 4,239
 (109) 12,344
 (218)
U.S. agency mortgage-backed securities 1,296
 (22) 2,388
 (84) 3,684
 (106)
Non-U.S. agency mortgage-backed securities 622
 (7) 459
 (13) 1,081
 (20)
Total debt securities - available-for-sale $12,355
 $(156) $11,002
 $(287) $23,357
 $(443)

The Company’s unrealized losses from debt securities as of March 31, 20192020 were generated from 11,000approximately 10,000 positions out of a total of 30,00032,000 positions. The Company believes that it will collect the timely principal and interest due on its debt securities that have an amortized cost in excess of fair value. The unrealized losses were primarily caused by interest rate increases and not by unfavorable changes in the credit quality associated with these securities.securities that impacted our assessment on collectability of principal and interest. At each reporting period, the Company evaluates available-for-sale debt securities for any credit-related impairment when the fair value of the investment is less than its amortized cost. The Company evaluated the expected cash flows, the underlying credit quality and credit ratings of the issuers, and the potential economic impacts of COVID-19 on the issuers, noting no significant credit deterioration since purchase. As of March 31, 2019,2020, the Company did not have the intent to sell any of the available-for-sale debt securities in an unrealized loss position. Therefore, the Company believes these losses to be temporary. The allowance for credit losses on available-for-sale debt securities at March 31, 2020 was not material.

3.    Fair Value
Certain assets and liabilities are measured at fair value in the Condensed Consolidated Financial Statements or have fair values disclosed in the Notes to the Condensed Consolidated Financial Statements. These assets and liabilities are classified into one of three levels of a hierarchy defined by GAAP.

For a description of the methods and assumptions that are used to estimate the fair value and determine the fair value hierarchy classification of each class of financial instrument, see Note 4 of Notes to the Consolidated Financial Statements in Part II, Item 8, “Financial Statements and Supplementary Data” in the 20182019 10-K.
The following table presents a summary of fair value measurements by level and carrying values for items measured at fair value on a recurring basis in the Condensed Consolidated Balance Sheets:
(in millions) 
Quoted Prices
in Active
Markets
(Level 1)
 
Other
Observable
Inputs
(Level 2)
 
Unobservable
Inputs
(Level 3)
 
Total
Fair and Carrying
Value
March 31, 2020        
Cash and cash equivalents $21,450
 $119
 $
 $21,569
Debt securities - available-for-sale:        
U.S. government and agency obligations 3,143
 185
 
 3,328
State and municipal obligations 
 5,918
 
 5,918
Corporate obligations 59
 17,385
 250
 17,694
U.S. agency mortgage-backed securities 
 6,768
 
 6,768
Non-U.S. agency mortgage-backed securities 
 1,924
 
 1,924
Total debt securities - available-for-sale 3,202
 32,180
 250
 35,632
Equity securities 1,394
 19
 
 1,413
Assets under management 937
 1,890
 39
 2,866
Total assets at fair value
$26,983
 $34,208
 $289
 $61,480
Percentage of total assets at fair value 44% 56% % 100%
December 31, 2019        
Cash and cash equivalents $10,837
 $148
 $
 $10,985
Debt securities - available-for-sale:        
U.S. government and agency obligations 3,369
 184
 
 3,553
State and municipal obligations 
 5,926
 
 5,926
Corporate obligations 70
 17,923
 249
 18,242
U.S. agency mortgage-backed securities 
 6,528
 
 6,528
Non-U.S. agency mortgage-backed securities 
 1,845
 
 1,845
Total debt securities - available-for-sale 3,439
 32,406
 249
 36,094
Equity securities 1,734
 22
 
 1,756
Assets under management 1,123
 1,918
 35
 3,076
Total assets at fair value $17,133
 $34,494
 $284
 $51,911
Percentage of total assets at fair value 33% 66% 1% 100%
(in millions) 
Quoted Prices
in Active
Markets
(Level 1)
 
Other
Observable
Inputs
(Level 2)
 
Unobservable
Inputs
(Level 3)
 
Total
Fair and Carrying
Value
March 31, 2019        
Cash and cash equivalents $12,283
 $124
 $
 $12,407
Debt securities - available-for-sale:        
U.S. government and agency obligations 3,319
 302
 
 3,621
State and municipal obligations 
 6,707
 
 6,707
Corporate obligations 17
 15,424
 185
 15,626
U.S. agency mortgage-backed securities 
 5,198
 
 5,198
Non-U.S. agency mortgage-backed securities 
 1,478
 
 1,478
Total debt securities - available-for-sale 3,336
 29,109
 185
 32,630
Equity securities 1,827
 12
 
 1,839
Assets under management 896
 2,043
 12
 2,951
Total assets at fair value
$18,342
 $31,288
 $197
 $49,827
Percentage of total assets at fair value 37% 63% % 100%
December 31, 2018        
Cash and cash equivalents $10,757
 $109
 $
 $10,866
Debt securities - available-for-sale:        
U.S. government and agency obligations 3,060
 345
 
 3,405
State and municipal obligations 
 7,121
 
 7,121
Corporate obligations 39
 14,950
 173
 15,162
U.S. agency mortgage-backed securities 
 4,852
 
 4,852
Non-U.S. agency mortgage-backed securities 
 1,358
 
 1,358
Total debt securities - available-for-sale 3,099
 28,626
 173
 31,898
Equity securities 1,832
 13
 
 1,845
Assets under management 1,086
 1,938
 8
 3,032
Total assets at fair value $16,774
 $30,686
 $181
 $47,641
Percentage of total assets at fair value 35% 65% % 100%

There were no transfers in or out of Level 3 financial assets or liabilities during the three months ended March 31, 20192020 or 2018.2019.

The following table presents a summary of fair value measurements by level and carrying values for certain financial instruments not measured at fair value on a recurring basis in the Condensed Consolidated Balance Sheets:
(in millions) 
Quoted Prices
in Active
Markets
(Level 1)
 
Other
Observable
Inputs
(Level 2)
 
Unobservable
Inputs
(Level 3)
 
Total
Fair
Value
 Total Carrying Value
March 31, 2020          
Debt securities - held-to-maturity $556
 $91
 $88
 $735
 $725
Long-term debt and other financing obligations $
 $45,272
 $
 $45,272
 $40,394
December 31, 2019          
Debt securities - held-to-maturity $541
 $181
 $253
 $975
 $972
Long-term debt and other financing obligations $
 $45,078
 $
 $45,078
 $40,278

(in millions) 
Quoted Prices
in Active
Markets
(Level 1)
 
Other
Observable
Inputs
(Level 2)
 
Unobservable
Inputs
(Level 3)
 
Total
Fair
Value
 Total Carrying Value
March 31, 2019          
Debt securities - held-to-maturity $273
 $172
 $280
 $725
 $724
Long-term debt and other financing obligations 
 37,790
 
 37,790
 35,221
December 31, 2018          
Debt securities - held-to-maturity $260
 $65
 $295
 $620
 $621
Long-term debt and other financing obligations $
 $37,944
 $
 $37,944
 $36,554

Nonfinancial assets and liabilities or financial assets and liabilities that are measured at fair value on a nonrecurring basis are subject to fair value adjustments only in certain circumstances, such as when the Company records an impairment. There were no significant fair value adjustments for these assets and liabilities recorded during either the three months ended March 31, 20192020 or 20182019.
4.    Medical Costs Payable
The following table shows the components of the change in medical costs payable for the three months ended March 31:
(in millions) 2020 2019
Medical costs payable, beginning of period $21,690
 $19,891
Acquisitions 
 35
Reported medical costs:    
Current year 41,580
 39,239
Prior years (580) (300)
Total reported medical costs 41,000
 38,939
Medical payments:    
Payments for current year (23,471) (22,973)
Payments for prior years (16,447) (14,753)
Total medical payments (39,918) (37,726)
Medical costs payable, end of period $22,772
 $21,139
(in millions) 2019 2018
Medical costs payable, beginning of period $19,891
 $17,871
Acquisitions 35
 211
Reported medical costs:    
Current year 39,239
 36,153
Prior years (300) (290)
Total reported medical costs 38,939
 35,863
Medical payments:    
Payments for current year (22,973) (21,237)
Payments for prior years (14,753) (13,119)
Total medical payments (37,726) (34,356)
Medical costs payable, end of period $21,139
 $19,589

For the three months ended March 31, 2020, prior years medical cost reserve development was primarily driven by lower than expected health system utilization. For the three months ended March 31, 2019, and 2018, the prior years medical cost reserve development included no individual factors that were significant. Medical costs payable included reserves for claims incurred by insured customers but not yet reported to the Company of $14.3 billion and $13.2$13.8 billion at March 31, 20192020 and December 31, 2018,2019, respectively.

5.    Commercial PaperShort-Term Borrowings and Long-Term Debt
Commercial paperShort-term borrowings and senior unsecured long-term debt consisted of the following:
  March 31, 2020 December 31, 2019
(in millions, except percentages) Par Value Carrying Value Fair Value Par Value Carrying Value Fair Value
Commercial paper $1,214
 $1,213
 $1,213
 $400
 $400
 $400
Bank credit facilities 10,000
 10,000
 10,000
 
 
 
2.700% notes due July 2020 1,500
 1,500
 1,500
 1,500
 1,499
 1,506
Floating rate notes due October 2020 300
 300
 296
 300
 300
 300
3.875% notes due October 2020 450
 452
 452
 450
 450
 455
1.950% notes due October 2020 900
 899
 900
 900
 899
 900
4.700% notes due February 2021 400
 406
 407
 400
 403
 410
2.125% notes due March 2021 750
 749
 750
 750
 749
 753
Floating rate notes due June 2021 350
 349
 347
 350
 349
 350
3.150% notes due June 2021 400
 399
 406
 400
 399
 407
3.375% notes due November 2021 500
 510
 512
 500
 501
 512
2.875% notes due December 2021 750
 768
 764
 750
 753
 765
2.875% notes due March 2022 1,100
 1,114
 1,130
 1,100
 1,087
 1,121
3.350% notes due July 2022 1,000
 998
 1,034
 1,000
 998
 1,036
2.375% notes due October 2022 900
 896
 912
 900
 896
 911
0.000% notes due November 2022 15
 13
 14
 15
 13
 14
2.750% notes due February 2023 625
 646
 640
 625
 624
 638
2.875% notes due March 2023 750
 797
 777
 750
 770
 770
3.500% notes due June 2023 750
 747
 788
 750
 747
 786
3.500% notes due February 2024 750
 746
 794
 750
 746
 792
2.375% notes due August 2024 750
 747
 767
 750
 747
 760
3.750% notes due July 2025 2,000
 1,991
 2,161
 2,000
 1,990
 2,161
3.700% notes due December 2025 300
 298
 323
 300
 298
 325
3.100% notes due March 2026 1,000
 996
 1,056
 1,000
 996
 1,048
3.450% notes due January 2027 750
 746
 804
 750
 746
 804
3.375% notes due April 2027 625
 620
 668
 625
 620
 667
2.950% notes due October 2027 950
 939
 992
 950
 939
 988
3.850% notes due June 2028 1,150
 1,143
 1,281
 1,150
 1,142
 1,269
3.875% notes due December 2028 850
 843
 953
 850
 843
 941
2.875% notes due August 2029 1,000
 1,104
 1,047
 1,000
 993
 1,029
4.625% notes due July 2035 1,000
 992
 1,190
 1,000
 992
 1,215
5.800% notes due March 2036 850
 838
 1,107
 850
 838
 1,129
6.500% notes due June 2037 500
 492
 691
 500
 492
 712
6.625% notes due November 2037 650
 641
 910
 650
 641
 940
6.875% notes due February 2038 1,100
 1,077
 1,613
 1,100
 1,076
 1,631
3.500% notes due August 2039 1,250
 1,241
 1,348
 1,250
 1,241
 1,313
5.700% notes due October 2040 300
 296
 405
 300
 296
 396
5.950% notes due February 2041 350
 345
 484
 350
 345
 475
4.625% notes due November 2041 600
 589
 742
 600
 589
 716
4.375% notes due March 2042 502
 484
 601
 502
 484
 580
3.950% notes due October 2042 625
 608
 711
 625
 607
 688
4.250% notes due March 2043 750
 735
 885
 750
 735
 856
4.750% notes due July 2045 2,000
 1,973
 2,547
 2,000
 1,973
 2,463
4.200% notes due January 2047 750
 738
 881
 750
 738
 861
4.250% notes due April 2047 725
 717
 853
 725
 717
 839
3.750% notes due October 2047 950
 934
 1,050
 950
 934
 1,023
4.250% notes due June 2048 1,350
 1,330
 1,592
 1,350
 1,330
 1,569
4.450% notes due December 2048 1,100
 1,086
 1,333
 1,100
 1,086
 1,316
3.700% notes due August 2049 1,250
 1,235
 1,385
 1,250
 1,235
 1,344
3.875% notes due August 2059 1,250
 1,229
 1,372
 1,250
 1,228
 1,350
Total short-term borrowings and long-term debt $50,631
 $50,509
 $55,388
 $39,817
 $39,474
 $44,234
  March 31, 2019 December 31, 2018
(in millions, except percentages) 
Par
Value
 
Carrying
Value
 
Fair
Value
 
Par
Value
 
Carrying
Value
 
Fair
Value
Commercial paper $3,134
 $3,117
 $3,117
 $
 $
 $
1.700% notes due February 2019 
 
 
 750
 750
 749
1.625% notes due March 2019 
 
 
 500
 500
 499
2.300% notes due December 2019 500
 496
 499
 500
 494
 497
2.700% notes due July 2020 1,500
 1,498
 1,503
 1,500
 1,498
 1,494
Floating rate notes due October 2020 300
 299
 300
 300
 299
 298
3.875% notes due October 2020 450
 445
 457
 450
 443
 456
1.950% notes due October 2020 900
 897
 890
 900
 897
 884
4.700% notes due February 2021 400
 400
 413
 400
 398
 412
2.125% notes due March 2021 750
 748
 744
 750
 747
 734
Floating rate notes due June 2021 350
 349
 350
 350
 349
 347
3.150% notes due June 2021 400
 399
 404
 400
 399
 400
3.375% notes due November 2021 500
 493
 508
 500
 489
 503
2.875% notes due December 2021 750
 742
 754
 750
 735
 748
2.875% notes due March 2022 1,100
 1,063
 1,107
 1,100
 1,051
 1,091
3.350% notes due July 2022 1,000
 997
 1,022
 1,000
 997
 1,005
2.375% notes due October 2022 900
 895
 891
 900
 894
 872
0.000% notes due November 2022 15
 12
 13
 15
 12
 13
2.750% notes due February 2023 625
 610
 625
 625
 602
 611
2.875% notes due March 2023 750
 758
 754
 750
 750
 739
3.500% notes due June 2023 750
 747
 773
 750
 746
 756
3.500% notes due February 2024 750
 745
 772
 750
 745
 755
3.750% notes due July 2025 2,000
 1,989
 2,088
 2,000
 1,989
 2,025
3.700% notes due December 2025 300
 298
 312
 300
 298
 303
3.100% notes due March 2026 1,000
 996
 999
 1,000
 995
 965
3.450% notes due January 2027 750
 746
 763
 750
 746
 742
3.375% notes due April 2027 625
 619
 633
 625
 619
 611
2.950% notes due October 2027 950
 938
 933
 950
 938
 898
3.850% notes due June 2028 1,150
 1,142
 1,204
 1,150
 1,142
 1,163
3.875% notes due December 2028 850
 842
 890
 850
 842
 861
4.625% notes due July 2035 1,000
 992
 1,121
 1,000
 992
 1,060
5.800% notes due March 2036 850
 838
 1,045
 850
 838
 1,003
6.500% notes due June 2037 500
 492
 661
 500
 492
 638
6.625% notes due November 2037 650
 641
 874
 650
 641
 841
6.875% notes due February 2038 1,100
 1,076
 1,514
 1,100
 1,076
 1,437
5.700% notes due October 2040 300
 296
 370
 300
 296
 355
5.950% notes due February 2041 350
 345
 446
 350
 345
 426
4.625% notes due November 2041 600
 588
 657
 600
 588
 627
4.375% notes due March 2042 502
 484
 534
 502
 484
 503
3.950% notes due October 2042 625
 607
 631
 625
 607
 596
4.250% notes due March 2043 750
 735
 787
 750
 734
 744
4.750% notes due July 2045 2,000
 1,973
 2,260
 2,000
 1,973
 2,116
4.200% notes due January 2047 750
 738
 777
 750
 738
 745
4.250% notes due April 2047 725
 717
 759
 725
 717
 719
3.750% notes due October 2047 950
 933
 923
 950
 933
 869
4.250% notes due June 2048 1,350
 1,329
 1,420
 1,350
 1,329
 1,349
4.450% notes due December 2048 1,100
 1,087
 1,191
 1,100
 1,087
 1,132
Total commercial paper and long-term debt $37,551
 $37,151
 $39,688
 $35,667
 $35,234
 $36,591


The Company’s long-term debt obligations also included $1.2$1.1 billion and $1.3$1.2 billion of other financing obligations, of which $306$309 million and $229$322 million were classified as current as of March 31, 20192020 and December 31, 2018,2019, respectively.
Commercial Paper and Bank Credit Facilities
Commercial paper consists of short-duration, senior unsecured debt privately placed on a discount basis through broker-dealers. As of March 31, 2019,2020, the Company’s outstanding commercial paper had a weighted average annual interest rate of 2.7%2.4%.
The Company has $3.5$4.4 billion five-year, $3.5$4.4 billion three-year and $3.0$3.8 billion 364-day revolving bank credit facilities with 2625 banks, which mature in December 2023,2024, December 20212022 and December 2019,2020, respectively. These facilities provide liquidity support for the Company’s commercial paper program and are available for general corporate purposes. As of March 31, 2019, no amounts had been drawn on any of the bank credit facilities. The annual interest rates, which are variable based on term, are calculated based on the London Interbank Offered Rate (LIBOR) plus a credit spread based on the Company’s senior unsecured credit ratings. If amountsAs of March 31, 2020, the Company had been drawn $1.8 billion, $4.4 billion and $3.8 billion at annual interest rates of 1.6%, 1.6% and 1.7% on theits $4.4 billion five-year, $4.4 billion three-year and $3.8 billion 364-day revolving bank credit facilities, as of March 31, 2019, annual interest rates would have ranged from 3.2% to 3.4%.respectively.
Debt Covenants
The Company’s bank credit facilities contain various covenants, including covenants requiring the Company to maintain adefined debt to debt-plus-shareholders’ equity ratio of not more than 60%. The Company was in compliance with its debt covenants as of March 31, 2019.2020.
6.    Commitments and Contingencies
Leases
Operating lease costs were $238 million for the three months ended March 31, 2019 and included immaterial variable and short-term lease costs. Cash payments made on the Company’s operating lease liabilities were $181 million for the three months ended March 31, 2019, which were classified within operating activities in the Condensed Consolidated Statements of Cash Flows. As of March 31, 2019, the Company’s weighted-average remaining lease term and weighted-average discount rate for its operating leases were 8.5 years and 4.2%, respectively.
As of March 31, 2019, future minimum annual lease payments under all non-cancelable operating leases were as follows:
(in millions) Future Operating Lease Payments
2019 480
2020 667
2021 578
2022 481
2023 393
Thereafter 1,553
Total future minimum lease payments 4,152
Less imputed interest (731)
Total 3,421
Legal Matters
Because of the nature of its businesses, the Company is frequently made party to a variety of legal actions and regulatory inquiries, including class actions and suits brought by members, care providers, consumer advocacy organizations, customers and regulators, relating to the Company’s businesses, including management and administration of health benefit plans and other services. These matters include medical malpractice, employment, intellectual property, antitrust, privacy and contract claims and claims related to health care benefits coverage and other business practices.
The Company records liabilities for its estimates of probable costs resulting from these matters where appropriate. Estimates of costs resulting from legal and regulatory matters involving the Company are inherently difficult to predict, particularly where the matters: involve indeterminate claims for monetary damages or may involve fines, penalties or punitive damages; present novel legal theories or represent a shift in regulatory policy; involve a large number of claimants or regulatory bodies; are in the early stages of the proceedings; or could result in a change in business practices. Accordingly, the Company is often unable to

estimate the losses or ranges of losses for those matters where there is a reasonable possibility or it is probable that a loss may be incurred.
Government Investigations, Audits and Reviews
The Company has been involved or is currently involved in various governmental investigations, audits and reviews. These include routine, regular and special investigations, audits and reviews by the Centers for Medicare and Medicaid Services (CMS), state insurance and health and welfare departments, the Brazilian national regulatory agency for private health insurance and plans (the Agência Nacional de Saúde Suplementar), state attorneys general, the Office of the Inspector General, the Office of Personnel Management, the Office of Civil Rights, the Government Accountability Office, the Federal Trade Commission, U.S. Congressional committees, the U.S. Department of Justice, the SEC, the Internal Revenue Service, the U.S. Drug Enforcement Administration, the Brazilian federal revenue service (the Secretaria da Receita Federal), the U.S. Department of Labor, the Federal Deposit Insurance Corporation, the Defense Contract Audit Agency and other governmental authorities. Similarly, our international businesses are also subject to investigations, audits and reviews by applicable foreign governments, including South American and other non-U.S. governmental authorities. Certain of the Company’s businesses have been reviewed or are currently under review, including for, among other matters, compliance with coding and other requirements under the Medicare risk-adjustment model. CMS has selected certain of the Company’s local plans for risk adjustment data validation (RADV) audits to validate the coding practices of and supporting documentation maintained by health care providers and such audits may result in retrospective adjustments to payments made to the Company’s health plans.
On February 14, 2017, the Department of Justice (DOJ) announced its decision to pursue certain claims within a lawsuit initially asserted against the Company and filed under seal by a whistleblower in 2011. The whistleblower’s complaint, which was unsealed on February 15, 2017, alleges that the Company made improper risk adjustment submissions and violated the False Claims Act. On February 12, 2018, the court granted in part and denied in part the Company’s motion to dismiss. In May 2018, DOJ moved to dismiss the Company’s counterclaims, which were filed in March 2018, and moved for partial summary judgment. In March 2019, the court denied the government’s motion for partial summary judgment and dismissed the

Company’s counterclaims without prejudice. The Company cannot reasonably estimate the outcome that may result from this matter given its procedural status.

7.    Segment Financial Information
The Company’s four4 reportable segments are UnitedHealthcare, OptumHealth, OptumInsight and OptumRx. For more information on the Company’s segments see Part I, Item I, “Business” and Note 1314 of Notes to the Consolidated Financial Statements in Part II, Item 8, “Financial Statements and Supplementary Data” in the 20182019 10-K.

The following tables present reportable segment financial information:
   Optum       Optum    
(in millions) UnitedHealthcare OptumHealth OptumInsight OptumRx Optum Eliminations Optum 
Corporate and
Eliminations
 Consolidated UnitedHealthcare OptumHealth OptumInsight OptumRx Optum Eliminations Optum Corporate and
Eliminations
 Consolidated
Three Months Ended March 31, 2020                
Revenues - unaffiliated customers:                
Premiums $48,593
 $2,047
 $
 $
 $
 $2,047
 $
 $50,640
Products 
 9
 29
 8,393
 
 8,431
 
 8,431
Services 2,278
 1,548
 891
 268
 
 2,707
 
 4,985
Total revenues - unaffiliated customers 50,871
 3,604
 920
 8,661
 
 13,185
 
 64,056
Total revenues - affiliated customers 
 5,452
 1,562
 12,876
 (404) 19,486
 (19,486) 
Investment and other income 197
 136
 12
 20
 
 168
 
 365
Total revenues $51,068
 $9,192
 $2,494
 $21,557
 $(404) $32,839
 $(19,486) $64,421
Earnings from operations $2,888
 $712
 $536
 $860
 $
 $2,108
 $
 $4,996
Interest expense 
 
 
 
 
 
 (437) (437)
Earnings before income taxes $2,888
 $712
 $536
 $860
 $
 $2,108
 $(437) $4,559
Three Months Ended March 31, 2019                                
Revenues - unaffiliated customers:                                
Premiums $46,501
 $1,012
 $
 $
 $
 $1,012
 $
 $47,513
 $46,501
 $1,012
 $
 $
 $
 $1,012
 $
 $47,513
Products 
 8
 23
 8,041
 
 8,072
 
 8,072
 
 8
 23
 8,041
 
 8,072
 
 8,072
Services 2,141
 1,274
 754
 149
 
 2,177
 
 4,318
 2,141
 1,274
 754
 149
 
 2,177
 
 4,318
Total revenues - unaffiliated customers 48,642
 2,294
 777
 8,190
 
 11,261
 
 59,903
 48,642
 2,294
 777
 8,190
 
 11,261
 
 59,903
Total revenues - affiliated customers 
 4,287
 1,407
 9,613
 (359) 14,948
 (14,948) 
 
 4,287
 1,407
 9,613
 (359) 14,948
 (14,948) 
Investment and other income 254
 132
 5
 14
 
 151
 
 405
 254
 132
 5
 14
 
 151
 
 405
Total revenues $48,896
 $6,713
 $2,189
 $17,817
 $(359) $26,360
 $(14,948) $60,308
 $48,896
 $6,713
 $2,189
 $17,817
 $(359) $26,360
 $(14,948) $60,308
Earnings from operations $2,954
 $626
 $432
 $820
 $
 $1,878
 $
 $4,832
 $2,954
 $626
 $432
 $820
 $
 $1,878
 $
 $4,832
Interest expense 
 
 
 
 
 
 (400) (400) 
 
 
 
 
 
 (400) (400)
Earnings before income taxes $2,954
 $626
 $432
 $820
 $
 $1,878
 $(400) $4,432
 $2,954
 $626
 $432
 $820
 $
 $1,878
 $(400) $4,432
Three Months Ended March 31, 2018                
Revenues - unaffiliated customers:                
Premiums $43,237
 $847
 $
 $
 $
 $847
 $
 $44,084
Products 
 12
 23
 6,667
 
 6,702
 
 6,702
Services 2,039
 1,188
 740
 137
 
 2,065
 
 4,104
Total revenues - unaffiliated customers 45,276
 2,047
 763
 6,804
 
 9,614
 
 54,890
Total revenues - affiliated customers 
 3,606
 1,304
 9,295
 (333) 13,872
 (13,872) 
Investment and other income 183
 106
 2
 7
 
 115
 
 298
Total revenues $45,459
 $5,759
 $2,069
 $16,106
 $(333) $23,601
 $(13,872) $55,188
Earnings from operations $2,400
 $488
 $395
 $770
 $
 $1,653
 $
 $4,053
Interest expense 
 
 
 
 
 
 (329) (329)
Earnings before income taxes $2,400
 $488
 $395
 $770
 $
 $1,653
 $(329) $3,724



ITEM 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read together with the accompanying Condensed Consolidated Financial Statements and Notes and with our 20182019 10-K, including the Consolidated Financial Statements and Notes in Part II, Item 8, “Financial Statements and Supplementary Data” in that report. Unless the context indicates otherwise, references to the terms “UnitedHealth Group,” “we,” “our” or “us” used throughout this Management’s Discussion and Analysis of Financial Condition and Results of Operations refer to UnitedHealth Group Incorporated and its consolidated subsidiaries.
Readers are cautioned that the statements, estimates, projections or outlook contained in this Management's Discussion and Analysis of Financial Condition and Results of Operations, including discussions regarding financial prospects, economic conditions, trends and uncertainties contained in this Item 2, may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 (PSLRA). These forward-looking statements involve risks and uncertainties that may cause our actual results to differ materially from the results discussed or implied in the forward-looking statements. A description of some of the risks and uncertainties is set forth in Part I, Item 1A, “Risk Factors” in our 20182019 10-K and in the discussion below.
EXECUTIVE OVERVIEW
General
UnitedHealth Group is a diversified health care company dedicated to helping people live healthier lives and helping make the health system work better for everyone. Through our diversified family of businesses, we leverage core competencies in data and health information;information, advanced technology;technology, and clinical expertise.expertise, focused on improving health outcomes, lowering health care costs and creating a better experience for patients, their caregivers and physicians. These core competencies are deployed within our two

distinct, but strategically aligned, business platforms: health benefits operating under UnitedHealthcare and health services operating under Optum.
Further information on our business is presented in Part I, Item 1, “Business” and Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 20182019 10-K and additional information on our segments can be found in this Item 2 and in Note 7 of Notes to the Condensed Consolidated Financial Statements included in Part I, Item 1 of this report.
COVID-19 Trends and Uncertainties
The COVID-19 pandemic is rapidly evolving and the ultimate impact on our business, results of operations, financial condition and cash flows is uncertain and difficult to predict. For additional information regarding risks and uncertainties relating to COVID-19, seeRisk Factors” in Part II, Item 1A of this report. Specific trends and uncertainties related to our two business platforms are as follows:
UnitedHealthcare.We have expanded benefit coverage in areas such as COVID-19 testing and treatment, telemedicine, and pharmacy benefits; offered additional enrollment opportunities to those who previously declined employer-sponsored offerings; extended certain premium payment terms for customers experiencing financial hardship; simplified administrative practices; and began accelerating payments to care providers, all with the aim of assisting our customers, providers and members in addressing the COVID-19 crisis. Potential economic costs, including cost of care and loss of commercial membership due to higher rates of unemployment, may initially be more than offset by temporary deferrals of elective care and increased membership in Medicaid and individual programs. Following the crisis, consumer demand for care is expected to return, resulting in potentially increased future medical costs. Depending on the pacing and intensity of the virus, as well as the duration of policies and initiatives to address COVID-19, such as stay-at-home and social distancing guidelines,the ultimate impact is uncertain.
Optum. The reduction of elective and routine procedures also impacts the Optum business. For example, most traditional procedure work at our ambulatory surgery centers has been postponed, while our capitated care delivery businesses have experienced lower care demand. COVID-19 will also continue to influence customer and consumer behavior, both during and after the pandemic, which could impact how care is delivered and the manner in which consumers wish to receive their prescription drugs or infusion services. The impact of COVID-19 on our care provider and payer clients could impact the volume and types of services that Optum provides, as well as the pacing of potential new business opportunities. As a result of the dynamic situation and broad-reaching impact to the health system, the ultimate impact of COVID-19 is uncertain.

Business Trends
Our businesses participate in the United States, South American and certain other international health markets. In the United States, health care spending has grown consistently for many years and comprises approximately 18% of gross domestic product. We expect overallOverall spending on health care to continue to grow in the future due to inflation,is impacted by inflation; utilization; medical technology and pharmaceutical advancement,advancement; regulatory requirements,requirements; demographic trends in the population and national interest in health and well-being. The rate of market growth may be affected by a variety of factors, including macro-economic conditions, such as the economic impact of COVID-19, and regulatory changes, which have impacted and could further impact our results of operations.operations, including our continued efforts to control health care costs.
Pricing Trends. To price our health care benefit products, we start with our view of expected future costs, including any impact from the Health Insurance Industry Tax. We frequently evaluate and adjust our approach in each of the local markets we serve, considering all relevant factors, such as product positioning, price competitiveness and environmental, competitive, legislative and regulatory considerations, including minimum medical loss ratio (MLR) thresholds. We will continue seeking to balance growth and profitability across all of these dimensions.
The commercial risk market remains highly competitive in both the small group and large group segments. We expect broad-based competition to continue as the industry adapts to individual and employer needs amid reform changes. Pricing for contracts that cover some portion of calendar year 20202021 will reflect the returnpermanent repeal of the Health Insurance Industry Tax after a moratorium in 2019.Tax.
Government programs in the public and senior sector tend to receive lower rates of increase than the commercial market due to governmental budget pressures and lower cost trends.
Medical Cost Trends. Our medical cost trends primarily relate to changes in unit costs, health system utilization and prescription drug costs. We endeavor to mitigate those increases by engaging physicians and consumers with information and helping them make clinically sound choices, with the objective of helping them achieve high quality, affordable care. The uncertain impact of COVID-19 may impact our ability to estimate medical costs payable, which could result in increased variability to medical cost reserve development in future periods.
Regulatory Trends and Uncertainties
Following is a summary of management’s view of regulatory trends and uncertainties. For additional information regarding regulatory trends and uncertainties, see Part I, Item 1 “Business - Government Regulation,” Part 1, Item 1A, “Risk Factors” andFactors,” Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2018 10-K.2019 10-K and “Risk Factors” in Part II, Item 1A of this report.
Medicare Advantage Rates. Final 20202021 Medicare Advantage rates resulted in an increase in industry base rates of approximately 2.5%1.7%, short of the industry forward medical cost trend, including the return of the Health Insurance Industry Tax, creating continued pressure in the Medicare Advantage program.
Health Insurance IndustryAffordable Care Act (ACA) Tax. There isAfter a one year moratorium onin 2019, the industry-wide amount of the Health Insurance Industry Tax in 2019. This moratoriumfor 2020, which is primarily borne by customers, is $15.5 billion, with our portion being approximately $3.0 billion. The return of the tax impacts year-over-year comparability of our financial statements, including revenues, operating costs, medical care ratio (MCR), operating cost ratio, effective tax rate and cash flows from operations. The ACA Tax was permanently repealed by Congress, effective January 1, 2021.
SELECTED OPERATING PERFORMANCE AND OTHER SIGNIFICANT ITEMS
The following summarizes select first quarter 20192020 year-over-year operating comparisons to first quarter 2018.2019.
Consolidated revenues grew 9%7%, UnitedHealthcare revenues grew 8%4% and Optum revenues grew 12%25%.
UnitedHealthcare served 880,000 additional670,000 fewer people domestically primarily asdue to expected attrition in commercial group and the proactive withdrawal from a result of business combinations and growth in services to self-funded employers and seniors.Medicaid market.
EarningsConsolidated earnings from operations increased 19%3%, including increasesa decrease of 23%2% at UnitedHealthcare and 14%an increase of 12% at Optum.
Diluted earnings per common share increased 24%.decreased 1% to $3.52.
Cash flows from operations for the three months ended March 31, 2020 were $3.2$2.9 billion.
Return on Equityequity was 26.8%23.6%.

RESULTS SUMMARY
The following table summarizes our consolidated results of operations and other financial information:
(in millions, except percentages and per share data) Three Months Ended March 31, Increase/(Decrease)
 2020 2019 2020 vs. 2019
Revenues:        
Premiums $50,640
 $47,513
 $3,127
 7 %
Products 8,431
 8,072
 359
 4
Services 4,985
 4,318
 667
 15
Investment and other income 365
 405
 (40) (10)
Total revenues 64,421
 60,308
 4,113
 7
Operating costs:     

 

Medical costs 41,000
 38,939
 2,061
 5
Operating costs 10,015
 8,517
 1,498
 18
Cost of products sold 7,687
 7,381
 306
 4
Depreciation and amortization 723
 639
 84
 13
Total operating costs 59,425
 55,476
 3,949
 7
Earnings from operations 4,996
 4,832
 164
 3
Interest expense (437) (400) (37) 9
Earnings before income taxes 4,559
 4,432
 127
 3
Provision for income taxes (1,094) (875) (219) 25
Net earnings 3,465
 3,557
 (92) (3)
Earnings attributable to noncontrolling interests (83) (90) 7
 (8)
Net earnings attributable to UnitedHealth Group common shareholders $3,382
 $3,467
 $(85) (2)%
Diluted earnings per share attributable to UnitedHealth Group common shareholders $3.52
 $3.56
 $(0.04) (1)%
Medical care ratio (a) 81.0% 82.0% (1.0)% 

Operating cost ratio 15.5
 14.1
 1.4
 

Operating margin 7.8
 8.0
 (0.2) 

Tax rate 24.0
 19.7
 4.3
 

Net earnings margin (b) 5.2
 5.7
 (0.5) 

Return on equity (c) 23.6% 26.8% (3.2)% 

(in millions, except percentages and per share data) Three Months Ended March 31, Increase/(Decrease)
 2019 2018 2019 vs. 2018
Revenues:        
Premiums $47,513
 $44,084
 $3,429
 8%
Products 8,072
 6,702
 1,370
 20
Services 4,318
 4,104
 214
 5
Investment and other income 405
 298
 107
 36
Total revenues 60,308
 55,188
 5,120
 9
Operating costs:        
Medical costs 38,939
 35,863
 3,076
 9
Operating costs 8,517
 8,506
 11
 
Cost of products sold 7,381
 6,184
 1,197
 19
Depreciation and amortization 639
 582
 57
 10
Total operating costs 55,476
 51,135
 4,341
 8
Earnings from operations 4,832
 4,053
 779
 19
Interest expense (400) (329) (71) 22
Earnings before income taxes 4,432
 3,724
 708
 19
Provision for income taxes (875) (800) (75) 9
Net earnings 3,557
 2,924
 633
 22
Earnings attributable to noncontrolling interests (90) (88) (2) 2
Net earnings attributable to UnitedHealth Group common shareholders $3,467
 $2,836
 $631
 22%
Diluted earnings per share attributable to UnitedHealth Group common shareholders $3.56
 $2.87
 $0.69
 24%
Medical care ratio (a) 82.0% 81.4% 0.6 %  
Operating cost ratio 14.1
 15.4
 (1.3)  
Operating margin 8.0
 7.3
 0.7
  
Tax rate 19.7
 21.5
 (1.8)  
Net earnings margin (b) 5.7
 5.1
 0.6
  
Return on equity (c) 26.8% 23.8% 3.0 %  
                   
(a)Medical care ratio is calculated as medical costs divided by premium revenue.
(b)Net earnings margin attributable to UnitedHealth Group shareholders.
(c)Return on equity is calculated as annualized net earnings attributable to UnitedHealth Group common shareholders divided by average shareholders’ equity. Average shareholders’ equity is calculated using the shareholders’ equity balance at the end of the preceding year and the shareholders’ equity balances at the end of each of the quarters in the year presented.
20192020 RESULTS OF OPERATIONS COMPARED TO 20182019 RESULTS OF OPERATIONS
Consolidated Financial Results
Revenue
The increaseincreases in revenue waswere primarily driven by the increase in the number of individuals served through various Medicare products;Advantage; pricing trends; and acquisition and organic growth across the Optum business, primarily due to expansion in pharmacy care services and care delivery; partially offset by the moratorium of the Health Insurance Industry Tax in 2019.delivery.
Medical Costs and MCR
Medical costs increased due to growth in people served through Medicare products andAdvantage, medical cost trends.trends and calendar day impacts, partially offset by decreased people served in Medicaid due to a proactive market withdrawal and increased prior year favorable medical cost development. The MCR increaseddecreased primarily due to the revenue effects of the return of the Health Insurance Industry Tax, moratorium.partially offset by calendar day impacts.
Operating Cost Ratio
The operating cost ratio decreasedincreased primarily due to the impact of the return of the Health Insurance Industry Tax moratorium and changes in business mix, partially offset by effective operating cost management.

Income Tax Rate
Our effective tax rate decreasedincreased primarily due to the impact of the moratoriumreturn of the nondeductible Health Insurance Industry Tax.
Reportable Segments
See Note 7 of Notes to the Condensed Consolidated Financial Statements included in Part I, Item 1 of this report for more information on our segments. We utilize various metrics to evaluate and manage our reportable segments, including individuals served by UnitedHealthcare by major market segment and funding arrangement, people served by OptumHealth and adjusted scripts for OptumRx. These metrics are the main drivers of revenue, earnings and cash flows at each business. The metrics also allow management and investors to evaluate and understand business mix, customer penetration and pricing trends when comparing the metrics to revenue by segment.
The following table presents a summary of the reportable segment financial information:
 Three Months Ended March 31, Increase/(Decrease) Three Months Ended March 31, Increase/(Decrease)
(in millions, except percentages) 2019 2018 2019 vs. 2018 2020 2019 2020 vs. 2019
Revenues                
UnitedHealthcare $48,896
 $45,459
 $3,437
 8% $51,068
 $48,896
 $2,172
 4 %
OptumHealth 6,713
 5,759
 954
 17
 9,192
 6,713
 2,479
 37
OptumInsight 2,189
 2,069
 120
 6
 2,494
 2,189
 305
 14
OptumRx 17,817
 16,106
 1,711
 11
 21,557
 17,817
 3,740
 21
Optum eliminations (359) (333) (26) 8
 (404) (359) (45) 13
Optum 26,360
 23,601
 2,759
 12
 32,839
 26,360
 6,479
 25
Eliminations (14,948) (13,872) (1,076) 8
 (19,486) (14,948) (4,538) 30
Consolidated revenues $60,308
 $55,188
 $5,120
 9% $64,421
 $60,308
 $4,113
 7 %
Earnings from operations                
UnitedHealthcare $2,954
 $2,400
 $554
 23% $2,888
 $2,954
 $(66) (2)%
OptumHealth 626
 488
 138
 28
 712
 626
 86
 14
OptumInsight 432
 395
 37
 9
 536
 432
 104
 24
OptumRx 820
 770
 50
 6
 860
 820
 40
 5
Optum 1,878
 1,653
 225
 14
 2,108
 1,878
 230
 12
Consolidated earnings from operations $4,832
 $4,053
 $779
 19% $4,996
 $4,832
 $164
 3 %
Operating margin                
UnitedHealthcare 6.0% 5.3% 0.7 %   5.7% 6.0% (0.3)%  
OptumHealth 9.3
 8.5
 0.8
   7.7
 9.3
 (1.6)  
OptumInsight 19.7
 19.1
 0.6
   21.5
 19.7
 1.8
  
OptumRx 4.6
 4.8
 (0.2)   4.0
 4.6
 (0.6)  
Optum 7.1
 7.0
 0.1
   6.4
 7.1
 (0.7)  
Consolidated operating margin 8.0% 7.3% 0.7 %   7.8% 8.0% (0.2)%  
UnitedHealthcare
The following table summarizes UnitedHealthcare revenues by business:
 Three Months Ended March 31, Increase/(Decrease) Three Months Ended March 31, Increase/(Decrease)
(in millions, except percentages) 2019 2018 2019 vs. 2018 2020 2019 2020 vs. 2019
UnitedHealthcare Employer & Individual $14,084
 $13,414
 $670
 5% $14,280
 $14,084
 $196
 1 %
UnitedHealthcare Medicare & Retirement 21,096
 18,925
 2,171
 11
 23,152
 21,096
 2,056
 10
UnitedHealthcare Community & State 11,182
 10,671
 511
 5
 11,453
 11,182
 271
 2
UnitedHealthcare Global 2,534
 2,449
 85
 3
 2,183
 2,534
 (351) (14)
Total UnitedHealthcare revenues $48,896
 $45,459
 $3,437
 8% $51,068
 $48,896
 $2,172
 4 %

The following table summarizes the number of individuals served by our UnitedHealthcare businesses, by major market segment and funding arrangement:
 March 31, Increase/(Decrease) March 31, Increase/(Decrease)
(in thousands, except percentages) 2019 2018 2019 vs. 2018 2020 2019 2020 vs. 2019
Commercial:                
Risk-based 8,340
 8,335
 5
  % 8,215
 8,340
 (125) (1)%
Fee-based 19,175
 18,475
 700
 4
 18,825
 19,175
 (350) (2)
Total commercial 27,515
 26,810
 705
 3
 27,040
 27,515
 (475) (2)
Medicare Advantage 5,165
 4,760
 405
 9
 5,575
 5,165
 410
 8
Medicaid 6,425
 6,695
 (270) (4) 5,880
 6,425
 (545) (8)
Medicare Supplement (Standardized) 4,500
 4,490
 10
 
 4,440
 4,500
 (60) (1)
Total public and senior 16,090
 15,945
 145
 1
 15,895
 16,090
 (195) (1)
Total UnitedHealthcare - domestic medical 43,605
 42,755
 850
 2
 42,935
 43,605
 (670) (2)
International 6,125
 6,095
 30
 
 5,605
 6,125
 (520) (8)
Total UnitedHealthcare - medical 49,730
 48,850
 880
 2 % 48,540
 49,730
 (1,190) (2)%
Supplemental Data:                
Medicare Part D stand-alone 4,480
 4,770
 (290) (6)% 4,150
 4,480
 (330) (7)%
Fee-based and risk-based commercial group business increaseddecreased primarily due to a business combination.expected attrition. Medicare Advantage increased due to growth in people served through individual and employer-sponsored group Medicare Advantage plans. The decrease in people served through Medicaid was primarily driven by the proactive withdrawal from a market as well as by states adding new carriers to existing programs, reduced enrollment from state efforts to managemanaging eligibility, status and the salepartially offset by increases in Dual Special Needs Plans. The decrease in people served internationally is a result of our New Mexico Medicaid plan in 2018.continued affordability efforts and underwriting discipline.
UnitedHealthcare’s revenue and earnings from operations increased due to growth in the number of individuals served through several Medicare products,Advantage, a greater mix of people with higher revenue membership mixacuity needs and rate increases for underlying medical cost trends. Revenue increases werethe return of the Health Insurance Tax, partially offset by a decrease in the number of individuals served through the commercial and Medicaid businesses. Earnings from operations decreased primarily due to the return of the Health Insurance Tax and calendar day impacts, partially offset by the moratorium on the Health Insurance Industry Tax in 2019.factors impacting revenue.
Optum
Total revenues and earnings from operations increased as each segment reported increased revenues and earnings from operations as a result of productivity and overall cost management initiatives in addition to the factors discussed below.
The results by segment were as follows:
OptumHealth
Revenue and earnings from operations increased at OptumHealth primarily due to organic growth and business combinations in care deliveryacquisitions and organic growth in behavioral health.care delivery. OptumHealth served approximately 96 million people as of March 31, 2020 compared to 93 million people as of March 31, 2019.
OptumInsight
Revenue and earnings from operations at OptumInsight increased primarily due to organic growth and acquisitions in managed services.
OptumRx
Revenue at OptumRx and earningsthe corresponding eliminations increased due to the inclusion of retail pharmacy co-payments. See Note 1 of Notes to the Condensed Consolidated Financial Statements included in Part I, Item 1 of this report for further detail. Revenue at OptumRx also increased due to organic and acquisition growth in specialty pharmacy and new client wins, partially offset by an expected large client transition. Earnings from operations at OptumRx increased primarily due to business combinations and organic growth in specialty pharmacy, home delivery services and overall prescription growth.improved supply chain management. OptumRx fulfilled 339 million and 332 million adjusted scripts in the first quartersquarter of 2020 and 2019, and 2018, respectively.with organic growth in adjusted scripts being offset by the expected large client transition.

LIQUIDITY, FINANCIAL CONDITION AND CAPITAL RESOURCES
Liquidity
Summary of our Major Sources and Uses of Cash and Cash Equivalents
 Three Months Ended March 31, Increase/(Decrease) Three Months Ended March 31, Increase/(Decrease)
(in millions) 2019 2018 2019 vs. 2018 2020 2019 2020 vs. 2019
Sources of cash:            
Cash provided by operating activities $3,234
 $8,369
 $(5,135) $2,943
 $3,234
 $(291)
Issuances of commercial paper and long-term debt, net of repayments 1,851
 3,159
 (1,308)
Issuances of short-term borrowings and long-term debt, net of repayments 10,797
 1,851
 8,946
Proceeds from common stock issuances 323
 295
 28
 557
 323
 234
Customer funds administered 1,784
 2,962
 (1,178) 1,062
 1,784
 (722)
Sales and maturities of investments, net of purchases 30
 
 30
Total sources of cash 7,192
 14,785
   15,389
 7,192
  
Uses of cash:            
Common stock repurchases (3,002) (2,650) (352) (1,691) (3,002) 1,311
Cash paid for acquisitions, net of cash assumed (689) (2,583) 1,894
 (929) (689) (240)
Purchases of investments, net of sales and maturities (319) (1,385) 1,066
 
 (319) 319
Purchases of property, equipment and capitalized software (562) (477) (85) (469) (562) 93
Cash dividends paid (860) (722) (138) (1,024) (860) (164)
Other (214) (694) 480
 (563) (214) (349)
Total uses of cash (5,646) (8,511)   (4,676) (5,646)  
Effect of exchange rate changes on cash and cash equivalents (5) (12) 7
 (129) (5) (124)
Net increase in cash and cash equivalents $1,541
 $6,262
 $(4,721) $10,584
 $1,541
 $9,043
20192020 Cash Flows Compared to 20182019 Cash Flows
Decreased cash flows provided by operating activities were primarily driven by the increasechanges in unearned revenues in 2018 due to the March 2018 early receipt of our April CMS premium payment of $5.1 billion and the year-over-year impact of the Health Insurance Industry Tax moratorium, partially offset by higher net earnings.
working capital accounts. Other significant changes in sources or uses of cash year-over-year included a decrease in cash paid for acquisitions, increased salesshort-term borrowings and maturities of investments, decreased issuances of commercial paper andcommon stock repurchases, partially offset by a decrease in customer funds administered due to the early receipt of our CMS payment in 2018 described above.administered.
Financial Condition
As of March 31, 2019,2020, our cash, cash equivalent, available-for-sale debt securities and equity securities balances of $47.0$58.9 billion included approximately $12.4$21.6 billion of cash and cash equivalents (of which $800 million$10.9 billion was available for general corporate use), $32.6$35.6 billion of debt securities and $2.0$1.7 billion of investments in equity securities. Cash available for general corporate use was intentionally higher than previous periods as a prudent response to more volatile financial markets. Given the significant portion of our portfolio held in cash and cash equivalents, we do not anticipate fluctuations in the aggregate fair value of our financial assets to have a material impact on our liquidity or capital position. Our available-for-sale debt portfolio had a weighted-average duration of 3.5 years and a weighted-average credit rating of “Double A” as of March 31, 2019.2020. When multiple credit ratings are available for an individual security, the average of the available ratings is used to determine the weighted-average credit rating.
Capital Resources and Uses of Liquidity
In addition to cash flows from operations and cash and cash equivalent balances available for general corporate use, our capital resources and uses of liquidity are as follows:
Commercial Paper and Bank Credit Facilities. Our revolving bank credit facilities provide liquidity support for our commercial paper borrowing program, which facilitates the private placement of unsecured debt through third-partyindependent broker-dealers, and are available for general corporate purposes. For more information on our commercial paper and bank credit facilities, see Note 5 of Notes to the Condensed Consolidated Financial Statements included in Part I, Item 1 of this report.

Our revolving bank credit facilities contain various covenants, including covenants requiring us to maintain a defined debt to debt-plus-shareholders’ equity ratio of not more than 60%. As of March 31, 2019,2020, our debt to debt-plus-shareholders’ equity ratio, as defined and calculated under the credit facilities, was approximately 40%44%.

Long-Term Debt.Periodically, we access capital markets and issue long-term debt for general corporate purposes, such as, to meet our working capital requirements, to refinance debt, to finance acquisitions or for share repurchases. For more information on our long-term debt, see Note 5 of Notes to the Condensed Consolidated Financial Statements included in Part I, Item 1 of this report.
Credit Ratings. Our credit ratings as of March 31, 20192020 were as follows:
Moody’s S&P Global Fitch A.M. Best
 Ratings Outlook Ratings Outlook Ratings Outlook Ratings Outlook
Senior unsecured debtA3 Stable A+ Stable A-A Stable A- StablePositive
Commercial paperP-2 n/a A-1 n/a F1 n/a AMB-1 n/a
The availability of financing in the form of debt or equity is influenced by many factors, including our profitability, operating cash flows, debt levels, credit ratings, debt covenants and other contractual restrictions, regulatory requirements and economic and market conditions. For example, aconditions, including the impacts of COVID-19 and related governmental market stabilization programs. A significant downgrade in our credit ratings or adverse conditions in the capital markets may increase the cost of borrowing for us or limit our access to capital.
Share Repurchase Program. During the three months ended March 31, 2019,2020, we repurchased 126 million shares at an average price of $252.76$271.32 per share. As of March 31, 2019,2020, we had Board authorization to purchase up to 8366 million shares of our common stock.
Dividends. Our quarterly cash dividend to shareholders reflects an annual dividend rate of $3.60$4.32 per share.
For additional liquidity discussion, see Note 10 of Notes to the Consolidated Financial Statements in Part II, Item 8, “Financial Statements and Supplementary Data” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 in our 20182019 10-K.
CONTRACTUAL OBLIGATIONS AND COMMITMENTS
A summary of future obligations under our various contractual obligations and commitments as of December 31, 20182019 was disclosed in our 20182019 10-K. During the three months ended March 31, 2019,2020, there were no material changes to this previously disclosed information outside the ordinary course of business. However, we continually evaluate opportunities to expand our operations, including through internal development of new products, programs and technology applications and acquisitions.
RECENTLY ISSUED ACCOUNTING STANDARDS
See Note 1 of Notes to the Condensed Consolidated Financial Statements in Part I, Item 1 of this report for a discussion of new accounting pronouncements that affect us.
CRITICAL ACCOUNTING ESTIMATES
In preparing our Condensed Consolidated Financial Statements, we are required to make judgments, assumptions and estimates, which we believe are reasonable and prudent based on the available facts and circumstances. These judgments, assumptions and estimates affect certain of our revenues and expenses and their related balance sheet accounts and disclosure of our contingent liabilities. We base our assumptions and estimates primarily on historical experience and consider known and projected trends. On an ongoing basis, we re-evaluate our selection of assumptions and the method of calculating our estimates. Actual results, however, may materially differ from our calculated estimates, and this difference would be reported in our current operations.
Our critical accounting estimates include medical costs payable and goodwill. For a detailed description of our critical accounting estimates, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 in our 20182019 10-K. For a detailed discussion of our significant accounting policies, see Note 2 of Notes to the Consolidated Financial Statements in Part II, Item 8, “Financial Statements and Supplementary Data” in our 20182019 10-K.

FORWARD-LOOKING STATEMENTS
The statements, estimates, projections, guidance or outlook contained in this document include “forward-looking” statements within the meaning of the PSLRA. These statementswhich are intended to take advantage of the “safe harbor” provisions of the

PSLRA. Generally the federal securities law. The words “believe,” “expect,” “intend,” “estimate,” “anticipate,” “forecast,” “outlook,” “plan,” “project,” “should” and similar expressions identify forward-looking statements, which generally are not historical in nature.statements. These statements may contain information about financial prospects, economic conditions and trends and involve risks and uncertainties. We caution that actualActual results could differ materially from those that management expects, depending on the outcome of certain factors.
Some factors that could cause actual results to differ materially from results discussed or implied inincluding: risks associated with public health crises, large-scale medical emergencies and pandemics, such as the forward-looking statements include:COVID-19 pandemic; our ability to effectively estimate, price for and manage our medical costs, including the impact of anycosts; new coverage requirements; new laws or regulations, or changes in existing health care laws or regulations, or their enforcement or application, including increases in medical, administrative, technology or other costs or decreases in enrollment resulting from U.S., South American and other jurisdictions’ regulations affecting the health care industry; the outcome ofapplication; the DOJ’s legal action relating to the risk adjustment submission matter; our ability to maintain and achieve improvement in CMS star ratings and other quality scores that impactimpacting revenue; reductions in revenue or delays to cash flows received under Medicare, Medicaid and other government programs, including the effects of a prolonged U.S. government shutdown or debt ceiling constraints;programs; changes in Medicare, including changes in payment methodology, the CMS star ratings program or the application of risk adjustment data validation audits; failure to maintain effective and efficient information systems or if our technology products do not operate as intended; cyber-attacks, or other privacy or privacy/data security incidents;incidents, or our failure to comply with privacy and data securityrelated regulations; regulatory and other risks and uncertainties ofassociated with the pharmacy benefits management industry; competitive pressures, which could affect our ability to maintain or increase our market share;pressures; changes in or challenges to our public sector contract awards; our ability to execute contractscontract on competitive terms with physicians, hospitals and other service providers; failure to achieve targeted operating cost productivity improvements, including savings resulting from technology enhancement and administrative modernization;improvements; 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,transactions; fluctuations in foreign currency exchange rates on our reported shareholders’ equity and results of operations;rates; downgrades in our credit ratings; the performance of our investment portfolio;portfolio performance; impairment of the value of our goodwill and intangible assets if estimated future results do not adequately support goodwill and intangible assets recorded for our existing businesses or the businesses that we acquire; failure to maintain effective and efficient information systems or if our technology products do not operate as intended;assets; and our ability to obtain sufficient funds from our regulated subsidiaries or the debt or capital marketsfrom external financings 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.
This above list of important factors is not intended to be exhaustive. We discuss certain of these matters, more fully, as well asand certain risk factorsrisks that may affect our business operations, financial condition and results of operations more fully in our other periodic and current filings with the SEC, including our annual reports on FormForms 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 document 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.law.
ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We manage exposure to market interest rates by diversifying investments across different fixed-income market sectors and debt across maturities, as well as by endeavoring to match our floating-rate assets and liabilities over time, either directly or through the use of interest rate swap contracts. Unrealized gains and losses on investments in available-for-sale debt securities are reported in comprehensive income.
The following table summarizes the impact of hypothetical changes in market interest rates across the entire yield curve by 1% point or 2% points as of March 31, 20192020 on our investment income and interest expense per annum, and the fair value of our investments and debt (in millions, except percentages):
 March 31, 2019 March 31, 2020
Increase (Decrease) in Market Interest Rate 
Investment
Income Per
Annum
 
Interest
Expense Per
Annum
 Fair Value of
Financial Assets
 
Fair Value of
Financial Liabilities
 
Investment
Income Per
Annum (a)
 
Interest
Expense Per
Annum (a)
 Fair Value of
Financial Assets (b)
 
Fair Value of
Financial Liabilities
2 % $306
 $260
 $(2,294) $(5,249) $491
 $404
 $(2,514) $(6,673)
1 153
 130
 (1,159) (2,849) 246
 202
 (1,250) (3,628)
(1) (153) (130) 1,115
 3,327
 (160) (202) 784
 3,735
(2) (306) (260) 2,088
 7,327
 (160) (267) 877
 4,694

(a)Given the low absolute level of short-term market rates on our floating-rate assets and liabilities as of March 31, 2020, the assumed hypothetical change in interest rates does not reflect the full 100 and 200 basis point reduction in interest income or the full 200 basis point reduction in interest expense, as the rate cannot fall below zero.

(b)As of March 31, 2020, some of our investments had interest rates below 2% so the assumed hypothetical change in the fair value of investments does not reflect the full 100 and 200 basis point reduction.


ITEM 4.    CONTROLS AND PROCEDURES
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
We maintain disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (Exchange Act) that are designed to provide reasonable assurance that information required to be disclosed by us in reports that we file or submit under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in SEC rules and forms; and (ii) accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
In connection with the filing of this quarterly report on Form 10-Q, management evaluated, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, the effectiveness of the design and operation of our disclosure controls and procedures as of March 31, 2019.2020. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of March 31, 2019.2020.
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
There have been no changes in our internal control over financial reporting during the quarter ended March 31, 20192020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II. OTHER INFORMATION
ITEM 1.LEGAL PROCEEDINGS
A description of our legal proceedings is included in and incorporated by reference to Note 6 of Notes to the Condensed Consolidated Financial Statements contained in Part I, Item 1 of this report.
ITEM 1A.    RISK FACTORS
In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, Item 1A, “Risk Factors” of our 20182019 10-K, which could materially affect our business, financial condition or future results. The risks described in our 20182019 10-K and in this Item 1A, are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or future results.
There have been no other material changes to the risk factors disclosed in our 2018 10-K.2019 10-K except that we have added the following risk factor to provide details on our risks associated with COVID-19:
We are subject to risks associated with public health crises, large-scale medical emergencies and pandemics, such as the COVID-19 pandemic, which could have a material adverse effect on our business, results of operations, financial condition and financial performance.
The rapidly developing COVID-19 global health crisis is having major impacts on health systems, businesses, governments and customer and consumer activities. UnitedHealth Group continues to mobilize the full strength of its resources to deliver the best care for patients, support for its members and care provider partners, and deliver innovative solutions and support for the communities we serve and the entire health system. The impact to our business is primarily dependent upon the ultimate pacing, intensity and duration of the crisis, factors which we cannot predict at this time. These factors will drive the related treatment, testing, coverage and other services we provide for the people we serve. The health system has recently experienced deferrals of elective care, which impacts both the UnitedHealthcare and Optum businesses through decreased utilization of health care services. As the crisis abates, we may experience an increase in medical care costs as people seek care which was deferred during the pandemic and individuals with chronic conditions may require additional care needs resulting from missed treatments. There can be no assurance that the premiums and fees we charge will be sufficient to cover the medical and administrative costs associated with COVID-19. In addition, we may experience reduced demand for certain services Optum provides to care providers and health plans as a result of reduced clinical and claims activity and changes in business priorities resulting from COVID-19. We cannot at this time measure the impact or duration of changing customer, consumer and member behavior to our overall business.
Governmental policies and initiatives to address COVID-19 have resulted in our customers having to close or severely curtail their operations. Among other impacts, we may experience loss of commercial membership due to customer reductions in workforce and an adverse impact on the timing and collectability of premium payments. In addition, governments have modified, and may continue to modify, regulatory standards around various aspects of health care in response to COVID-19,

and these rapidly changing standards may create challenges for us to ensure timely compliance and meet various contractual obligations.
Disruptions in public and private infrastructure, including supply chains providing medical supplies and pharmaceutical products, could adversely disrupt our business operations. Additionally, the enactment of emergency powers by governments could disrupt our business operations, including restricting pharmaceuticals or other supplies, and could increase the risk of shortages of necessary items.
We have transitioned a significant number of our team members to at-home work environments in an effort to mitigate the spread of COVID-19. This transition may increase our operating costs and effectiveness, including our ability to maintain service levels and ratings, and exacerbate certain risks to our business, including demand for information technology resources, increased vulnerabilities to cybersecurity attacks, and increased risk of unauthorized dissemination of sensitive personal information or proprietary or confidential information about us, our customers or our members.
The COVID-19 crisis has also adversely impacted global access to capital and caused significant volatility in financial markets. Significant deterioration of the U.S. and global economies could have a significant adverse impact on our investment income, the value of our investments, or future liquidity needs.
Because of the unknown pacing, intensity and duration of this pandemic, we cannot predict the impact of its ultimate disruption to business activities, its employment and economic effects, its near and long-term impacts on the patterns of care and services across the healthcare system, or the ultimate resulting impact on our business, results of operations, financial position or cash flows.
ITEM 2.UNREGISTERED SALE OF EQUITY SECURITIES AND USE OF PROCEEDS
In November 1997, our Board of Directors adopted a share repurchase program, which the Board evaluates periodically. There is no established expiration date for the program. During the first quarter 2019,2020, we repurchased approximately 126 million shares at an average price of $252.76$271.32 per share. As of March 31, 2019,2020, we had Board authorization to purchase up to 8366 million shares of our common stock.

ITEM 6.EXHIBITS*
The following exhibits are filed or incorporated by reference herein in response to Item 601 of Regulation S-K. The Company files Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K pursuant to the Securities Exchange Act of 1934 under Commission File No. 1-10864.


 


 


 


 


 


 


 


 
101101.INS

 The following materials from UnitedHealth Group Incorporated’s Quarterly Report on Form 10-Q forXBRL Instance Document - the quarter ended March 31, 2019 filed on May 7, 2019, formattedinstance document does not appear in the Interactive Data File because its XBRL (eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Operations, (iii) Condensed Consolidated Statements of Comprehensive Income, (iv) Condensed Consolidated Statements of Changes in Equity, (v) Condensed Consolidated Statements of Cash Flows,tags are embedded within the Inline XBRL document.
101.SCH
Inline XBRL Taxonomy Extension Schema Document.
101.CAL
Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF
Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB
Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE
Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104
Cover Page Interactive Data File (formatted as Inline XBRL and (vi) Notes to the Condensed Consolidated Financial Statements.embedded within Exhibit 101).
 ________________
* Pursuant to Item 601(b)(4)(iii) of Regulation S-K, copies of instruments defining the rights of certain holders of long-term debt are not filed. The Company will furnish copies thereof to the SEC upon request.



SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
UNITEDHEALTH GROUP INCORPORATED
 
/s/ DAVID S. WICHMANN
 Chief Executive Officer

(principal executive officer)
Dated:May 7, 20196, 2020
David S. Wichmann    
   
/s/ JOHN F. REX
 
Executive Vice President and
Chief Financial Officer

(principal financial officer)
Dated:May 7, 20196, 2020
John F. Rex    
   
/s/THOMAS E. ROOS
 
Senior Vice President and
Chief Accounting Officer

(principal accounting officer)
Dated:May 7, 20196, 2020
Thomas E. Roos    




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