UnitedHealth Group (NYSE: UNH) reported Q3 EPS of $1.63, $0.10 better than the analyst estimate of $1.53. Revenue for the quarter came in at $32.8 billion versus the consensus estimate of $32.7 billion.

“Our continued focus on fundamental execution in service to our customers is strengthening performance and momentum across our enterprise, and we are committed to accelerating that effort,” said Stephen J. Hemsley, president and chief executive officer of UnitedHealth Group.

Highlights:

• Third quarter 2014 cash flows from operations of $3.2 billion were double the level of third quarter net income and decreased $196 million from third quarter 2013 due to the remittance of $1.3 billion in ACA taxes to the U.S. Treasury in third quarter 2014. The Company projects full year 2014 cash flows from operations in the area of $8.0 billion.
• The consolidated medical care ratio decreased 90 basis points year-over-year to 79.7 percent in third quarter 2014 due to the premium impact of ACA fees. Medical reserves developed favorably by $270 million, including $120 million related to 2013 medical costs, compared to $290 million in third quarter 2013, which included $180 million related to the previous year’s costs. Medical utilization remained restrained, reflecting the Company’s on-going medical management and consumer and physician engagement efforts.
• The third quarter 2014 operating cost ratio of 16.6 percent increased 70 basis points year-over-year, driven by 120 basis points of increase from ACA reinsurance fees and nondeductible health insurance taxes and 15 basis points from business mix, which more than offset 65 basis points of continuing productivity and operating performance gains.
• The third quarter 2014 income tax rate of 41.8 percent increased 580 basis points year-over-year, primarily due to ACA taxes.
• Third quarter 2014 days sales outstanding of 11 days increased 2 days year-over-year due to growth in federal and state government program receivables. Days claims payable were stable year-over-year at 49 days.
• The Company’s balance sheet remained strong, with cash available for corporate use of $1 billion and the debt to total capital ratio at 35 percent at September 30, 2014.
• Through September 30, 2014, dividend distributions to shareholders grew 29 percent year-over-year to $1.0 billion. Year-to-date more than 38 million shares have been repurchased for $3 billion, at an average price of $79 per share.

Outlook:

UnitedHealth Group expects 2014 revenues of approximately $130 billion and net earnings in a range of $5.60 to $5.65 per share, up from the previous estimate of $5.50 to $5.60 per share. The Street sees FY14 revs of $130.1 billion and EPS of $5.58.

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