Executives: Stephen Hemsley - President and CEO Dave Wichmann - President and CFO Larry Renfro - Chief Executive, Vice Chairman UnitedHealth Group and CEO, Optum Dan Schumacher - CFO, UnitedHealthcare Timothy Wicks - CEO, OptumRx John Rex - EVP and CFO, Optum Jeff Alter - Chief Executive, UnitedHealthcare Employer and Individual Business Dirk McMahon - COO, Optum and CEO of OptumRx Austin Pittman - CEO, UnitedHealthcare Community & State Bill Miller - CEO,

OptumInsight
Analysts: Scott Fidel - Deutsche Bank Michael Baker - Raymond James David Windley - Jefferies Sarah James - Wedbush Securities Andy Schenker - Morgan Stanley Josh Raskin - Barclays Sheryl Skolnick - Mizuho A.J. Rice - UBS Kevin Fischbeck - Bank of America Christine Arnold - Cowen Ana Gupte - Leerink Partners Sean Wieland - Piper

Jaffray
Operator: Good morning. I will be your conference operator today. Welcome to the UnitedHealth Group First Quarter 2015 Earnings Conference Call. A question-and-answer session will follow UnitedHealth Group's prepared remarks.

As a reminder, this call is being recorded. Here is some important introductory information. This call contains forward-looking statements under U.S. federal securities laws. These statements are subject to risks and uncertainties that could cause actual results to differ materially from historical experience or present expectations.

A description of some of the risks and uncertainties can be found in the reports that we file with the Securities and Exchange Commission, including the cautionary statements included in our current and periodic filings. Information presented on this call is contained in the earnings release we issued this morning and in our Form 8-K dated April 16, 2015, which may be accessed from the Investors page of the Company's website. I would now like to turn the conference over to the Chief Executive Officer of UnitedHealth Group, Mr. Stephen Hemsley. Please go ahead.

Stephen Hemsley: Good morning and thank you for joining us today. This morning we are going to continue in our efforts to keep our formal remarks brief, allowing more time to respond to your questions. We are also going to freshen things up a little and share portion of today's formal commentary between Dave Wichmann, our President; and Larry Renfro, our Vice Chairman. I'll start out with the recap of the quarter. Net earnings in the quarter grew 33% to $1.46 per share on revenues of $35.8 billion.

What is important is what lies inside these results. Higher revenue growth, more consistent performance in operating discipline, and margins strength across UnitedHealth Group's broad , strategically diversified set of businesses. Operating cash flows were $2.3 billion for the quarter, 1.6x net income. Revenue and earnings performance from UnitedHealthcare were the biggest contributors to better than expected first quarter cash flow. This quarter builds on the second half 2014 momentum we discussed with you before.

We expect that momentum to continue with second quarter earnings per share growing nicely from this past quarter's results and being modestly above current consensus estimates. At this range, we see second and third quarter earnings being more even stronger in the second quarter and lighter in the third and current consensus would suggest this pattern would better fit our current business trends and outlook. We are advancing our 2015 full year outlook taking revenues to $143 billion, a $2 billion increase and a nearly 10% year-over-year growth pace. Net per share earnings advanced to a new tighter range of $6.15 to $6.30 per share, and an 11% year-over-year gain at the upper end, despite absorbing $0.10 per share and attributed to Catamaran transaction cost and the impact of reducing our level of share repurchase going forward. The increase in revenue and earnings modestly improves our outlook for cash flow from operations by $200 million on the lower end of the new range of $8.2 billion to $8.4 billion.

Now, I'll ask Larry to review Optum. Then ask Dave to pickup with UnitedHealthcare and some UnitedHealth Group better price items. Larry?

Larry Renfro: Thanks Dave. Optum's revenues grew 14.7% to $12.8 billion in the quarter, with operating margins stable year-over-year at 5.8% despite more than 30 basis points of acquisition costs. Optum's earnings from operations grew 14% to $742 million in the quarter with every reporting unit producing double-digit percentage earnings growth.

Catamaran acquisition costs reduced Optum's year-over-year earnings growth by seven percentage points in the quarter. Setting aside these transactions costs, Optum would have produced 21% earnings growth for the quarter. We expect Optum to post strong earnings growth in 2015 and after fully absorbing Catamaran acquisition costs, we continue to forecast operating earnings within the range of $3.75 billion to $3.85 billion. This will be growth of at least 50% over two years from a base of less than $2.5 billion in 2013. We continue to build our capabilities in important ways this quarter, particularly our relationships starting with Catamaran.

The proposed Catamaran combination brings obvious benefits to the markets and customers we serve. It will create a competitively scaled channel-agnostic PBM focused on growing and serving all prescription market segments. It will advance the next generation’s synchronized PBM where all clinical data points are connected and drug considerations are fully integrated with clinical care processes to produce better outcomes and better overall cost trends. This will be important as the age of specialty pharma emerges along with inevitable biosimilar counterparts. People will be served better, benefit and program sponsors will benefit from both the more progressive synchronized care offering as well as from sharing the meaningful savings achieved from combining these two enterprises.

Integration disruption can be avoided, since the two companies already share a common technology. We believe this can quickly becomes the next generation, clinically-informed, clinically-anchored PBM. Looking forward, our Optum team is driving meaningful growth in customer pipeline for all Optum business segments. Optum's external revenue backlog grew 24% in the quarter to drive overall backlog to over $9 billion. Optum continues to develop broader relationships with more sophisticated clients who need end-to-end solutions to the complex challenges they face.

For example, Optum 360 has added sizeable and distinguished new partners, most notably North Shore-LIJ Health System and the Mayo Clinic. And in the U.K., Optum International became one of the very few organizations to be accredited to serve under the NHS lead provider framework as the NHS procures an expected $1 billion of commissioning support annually. Optum labs recently added Yale University as a partner and research from the lab has now been accepted for publication in the Journal of the American Medical Association and the British Medical Journal. Finally this quarter, we launched an important new brand campaign for Optum to help further build understanding of our services and innovation. Now let me turn it over to Dave.

Dave Wichmann: Thank you, Larry. Turning first to UnitedHealthcare, first quarter revenues grew 11.5% to $32.6 billion, net operating margin improved 100 basis points year-over-year to 5.8% reflecting strong performances in all businesses commercial, Medicaid, Medicare, and global. Each of the first quarter care ratios improved year-over-year and were better than our plans for the quarter. The combination of strong growth across of all diversified benefits business and even more effective medical and operating cost performance produced a 35% increase in UnitedHealthcare's quarterly earnings from operations to $1.9 billion. The headline for UnitedHealthcare in the quarter is growth, growing organically to serve 1 million more people in the United States in the first quarter alone and 1.6 million more people year-over-year with notable strength this quarter in the seniors and commercial businesses.

We are increasing our projections for organic growth and domestic medical benefits by about 600,000 people from our investor conference outlook to approximately 1.4 million people in 2015. The increased outlook is driven by stronger market response to our expanding commercial benefits product portfolio. In the first quarter, UnitedHealthcare's commercial business grew nicely serving 680,000 more people. Growth included 570,000 public exchange consumers well ahead of our expectations. In our earnings outlook and as we have said before, we do not expect meaningful financial contributions from these customers in 2015.

On the international side, UnitedHealthcare is underwriting and pricing to create both sustainable customer value and sustainable margins and is scaling to deliver results. Amil our Brazilian Healthcare Company produced improved financial results on a better mix of business with revenues growing 12% year-over-year on a local currency basis. Medicaid membership exceeded plan even with the expected decreases in Tennessee where the state introduced a third plan into the market. UnitedHealthcare grew its Medicare businesses in the first quarter by another 380,000 people split pretty evenly between Medicare Advantage and supplemental benefits. Two weeks ago CMS issued its final Medicare Advantage rate notice for 2016, while these rates will help provide some needed stability for seniors who continue to enroll in Medicare Advantage in record numbers, the rates simply did not keep up the pace of medical cost increases.

We will continue to make the case on behalf of the millions of seniors we served for sound and stable approaches to Medicare Advantage funding in the future. Before we sum up, let me run through a short punch list of non-financial highlights for the quarter for UnitedHealth Group as a whole. During the quarter we invested in brands and reputation broadly across UnitedHealth Group including the brand campaign Larry mentioned for Optum and the successful introduction of UnitedHealthcare's own fresh branding effort. Both have generated favorable responses and we will build on these throughout the year. We are getting scaled market traction on several innovation efforts, Rally our digital consumer health platform now reaches nearly 9 million Americans across the broad spectrum of employers, health plans and associations, and as improving consumer engagement we plan to expand to nearly 30 million people by this time next year including consumers in Brazil.

Link, the secured cloud based workspace for care providers now reaches nearly 425,000 care providers and expect to reach 600,000 or more by this time next year. We continue to advance higher quality, lower cost care with our delivery system partners on behalf of those we serve. Medical spending under value based arrangements grew nearly 30% year-over-year to nearly $40 billion annual run rate. This was an active quarter in terms of acquisition and capital deployment, we will fund these efforts from internal resources and debt and we had maintained our credit ratings. And lastly the UnitedHealth Foundation continues to engage in a focused manner with communities in need.

As example, the foundation recently announced substantial support for an innovative community care program in Maricopa County Arizona, pioneering medical education and services in the Rio Grande Valley of Texas, and a technology initiative in Tennessee that connects patients with care professionals through community health centers via telemedicine. And OptumRx crossed the $10 million milestone in prescription drugs donated to Community Health clinics in Kansas. Steve?

Stephen Hemsley: Thanks, David. So as we look forward I hope you sense an acceleration on a broad and disciplined set of initiatives. So as we look forward I hope you sense an acceleration on a broad and discipline set of initiatives in our consumer capabilities, brand and reputation for both UnitedHealthcare and Optum payment reform and progressive services to better support care providers, innovation and its more meaningful larger scale market deployment, strategic M&A, large, far-reaching next-generation strategic relationships, information driven research in social and philanthropic efforts aligned to the communities we serve.

And all these funds and more we intend to pick up our pace with thoughtful urgency and improve performance and consistency. So as we grow we become a more effective enabler of a better healthcare system and serve more people with better outcomes to the prudent use of society’s healthcare resources. And now to recap, our 2015 outlook for $143 billion in revenues accelerates our revenue growth rate to nearly 10% this year, with improvements coming from both UnitedHealthcare and Optum. Our earnings outlook of $6.15 to $6.30 per share includes $0.03 per share of transaction cost this quarter from Catamaran and an additional $0.07 per share of pressure over the balance of this year principally due to repurchasing less than half of the UnitedHealth Group shares we had targeted before this combination. For 2016 we continue to project core earnings growth and that the Catamaran combination will be $0.30 per share accretive to those earnings, even while carrying $0.20 per share in amortization expenses.

Savings and accretion are expected to grow further in 2017 and 2018 improving value for customers and earnings visibility for shareholders for a multi year period. Today, we continue to have strong access to capital in both the equity and debt markets. We believe we can continue to participate positively and fully as both the health benefits and health services markets continue to evolve both domestically and internationally. And we remained focused on developing and expanding our capabilities and businesses both for UnitedHealthcare and Optum as market opportunities present themselves. We expect to maintain our approach to advancing our dividend to more market based levels exactly as we have discussed this area of capital allocation with you previously, no changes are contemplated in that respect.

With that, I thank you and we will now open up for your questions.

Operator: [Operator Instructions] And we can take our first question from Scott Fidel with Deutsche Bank. Please go ahead.

Scott Fidel: Thanks, good morning. Just interested if you could give us some perspectives on what you are seeing in terms of PMPM Healthcare utilization in the quarter, which seemed with MLRs improving across the segment that it remains well controlled, but it’s clear there’s been some conflicting data points out there showing that there maybe has been some broader market increases to utilization, HCA pre-announcing yesterday for example with strong admission volumes.

So, just interested in your perspectives on what you are seeing with utilization and how to sync across some of those different data points we're seeing?

Stephen Hemsley: Sure Scott. I think Dan Schumacher can best respond to that.

Dan Schumacher: Good morning Scott, thanks for the question. I guess I wouldn't comment specifically on PMPMs, but I would say that in the quarter we were very pleased with our medical cost performance. As we talked about at the Investor Conference, as we formulated our forward trend outlook and we thought about how we priced and positioned our benefits for 2015, we assume that we thought it made sense to assume a moderate increase in underlying utilization.

And I’ll tell you in the first quarter there has not been any acceleration in underlying utilization. I think we've done well as an organization through our focused medical cost management initiatives, and also I think we're seeing benefits from greater consumer responsibility as well as, as we continue to drive greater concentrations as Dave mentioned in value based reimbursements. So as we look at the balance of the year, we expect our full year commercial medical cost trend to be in the range of 6% plus or minus 50 basis points, and I would orient you towards the lower half of that range.

Stephen Hemsley: And I think we have pretty good visibility on that, we have daily census, so I think maybe some of things that are coming forward might have something to do with fact that 18 more million people have coverage and are using the system in a more structured way than the past, and I think that maybe a factor in what you’re seeing Scott. Next question please?

Operator: And we can take the next question from Michael Baker with Raymond James.

Please go ahead.

Michael Baker: Yes thanks a lot. Given the pending purchase of Catamaran, I was wondering if you could give us a better sense or more color around your approach to differentiate on specialty pharmacy management and then any willingness by the PBM consultant community to change their approach to scoring vendors given the change from pharmacy benefit management to drug benefit management?

Stephen Hemsley: Sure I think that's a great question, and I will have Larry pick it up, but particularly the strength of OptumRx’s synchronization efforts to really able to connect data, target individuals, engage them particularly as specialty pharma emerges, it really is a tremendous opportunity for us to distinguish ourselves, and the cost of that category is such that it would be hard for us to believe that the customer community as well as the consultant community will not be sensitized to that category of cost. Larry?

Larry Renfro: Hi Mike, it's Larry Renfro, and I'm going to start and I’m going to turn it over to Tim Wicks, who is currently the CEO of OptumRx soon to be the President of the new OptumRx, and I will have him comment on specialty, but maybe I can start by giving you a little bit of our thought process as we put the two companies together. We really looked at I know where the value was going to be and we really had five categories, number one would be scale, number two would be enhanced technology, three would be distinctive capability such as specialty and synchronization and we’ll comment on specialty as you ask.

Number four would be our - we end up with a well-rounded management team from both a - what I'll call relationship sales as well as operations, customer service, and then the complementary businesses that kind of line up all together. So that’s kind of how we went at this . Obviously specialty is a very, very important aspect of going forward in the future as we talked about earlier in the script. So I’m going to hand this off to Tim now and he will give you some thoughts.

Timothy Wicks: Great, thank you.

Thank you, Larry. Michael first of all we welcome scoring related to drug costs as opposed to simply straight up pharmacy discount rates, and what differentiates us in the specialty pharmacy area and why we’re competitive first of all relates to trend management and work that we do around trend management and it really gets to all of the levers around synchronization and what we do to integrate medical, clinical, and lab data with pharmacy data and to be able to bring that to bear to surround the consumer with all of those capabilities that help them make better decisions, help them be adherent to their drug regimen, and to be able to engage and program to help them improve their health. We also think that the approach that we take to site of care and being agnostic as to whether the specialty drug is managed in the medical benefit or the pharmacy benefit is very important and then we also take advantage of site-of-care management so that we are agnostic to that as well and we drive it to the best place of care for the consumer.

Michael Baker: Thanks for the update.

Dave Wichmann: Thank you.

Next question?

Operator: Our next question comes from David Windley with Jefferies. Please go ahead.

David Windley: Hi, maybe a follow-up on the Catamaran thought process, so Larry your 8% margin goal for next year, there is I think you and John have talked about there maybe some variance in how you progress towards that goal depending on the mix of business, obviously Catamaran brings in a pretty significant shift in the mix of that business. Could you talk about how that affects your thoughts and your trajectory toward that 8% margin goal?

Larry Renfro: Sure that's good point. I’m going to ask John to speak to this as well.

We had this goal of 8/16 and there were some various factors or components that we needed to really make as part of that overall goal. First thing was what you are coming on is 8% by 2016. We also said that we would double 2013 earnings of $2.5 billion by 2018, we said we would have 8 to 10 large more complex relationships and that we would have double-digit top and bottom line growth through 2016. So I’m going to define that as kind of core business, kind of pre-Catamaran and I would tell you that everything from a financial standpoint is in line or ahead of expectations. So we’re going to continue to track our core business that way as far as the 8/16 goal that we set now.

As you know the blend has changed with what we’ve done in this transaction, so we’re going to be handling a lot more pharmaceutical business, so that’s going to change the mix and I’m going to let John talk about that.

John Rex: David this is John. So as Larry stated our 2015 performance to-date which show us solidly tracking to that 8/16 goal and we are very much committed to that 8/16 goal we put up as we think about our base businesses and how that configures. When we plan as an organization, we plan for organic growth and that is how we got to configure our objectives and how we point the organization. So clearly that 8/16 is very much focused on our core businesses organic growth, we are tracking to that and we are still completely committed to that.

Certainly your point is well taken adding an excess of $20 billion of pharmacy care services revenue changes the mix and I would expect that to change the mix as we think about kind of a 16 and where that lands. But we as an organization are completely committed to 8/16 on the core businesses and that's where we will be tracking on the core base ex the impact of the additional pharmacy care services revenue. And then the merger will dilute that down but you will stay on track for your core commitments on the core business.

David Windley: Okay great.

Larry Renfro: So thanks for that question, next one please.

Operator: Our next question will come from Sarah James with Wedbush Securities. Please go ahead.

Sarah James: Thank you. I was impressed with the guidance particularly after observing the Catamaran cost and I think it's the first time United boosted guidance early in the year since 2012, can you talk about the level of confidence you have heading into the year as it is maybe greater or there is less unknowns than the last few years that led you to in earlier guidance boost and any headwinds or tailwinds that you could light up for us that would be helpful. Thank you.

Larry Renfro: I’m so more confused, I don’t think we are doing anything differently in terms of this, we - I think kind of update our outlook every quarter, we have seen enough strength and growth in the businesses across the board to improve that guidance slightly and to absorb the costs associated with Catamaran and the adjustment to our share repurchase given that transaction. So we thought that that was appropriate to include in the update and beyond that I don’t think we are changing anything else along those lines. We typically if we see that consensus estimates don't necessarily line up with exactly with way we are seeing our quarter-by-quarter roll out, we typically comment on that and if again done that this quarter. So, I don’t think we’ve done anything differently this quarter along those lines. So, and if we did - if you're picking up anything we didn’t intend anything behalf of what we said.

So can you help me with what you think has changed.

Sarah James: I just saw the EPS increase was bigger this year than first quarter of the last few years, but maybe if you could just spike out the headwinds and tailwinds as we see them for 2015?

Stephen Hemsley: Well I think that in terms of our business I think our outlook is actually pretty positive I think that we’re seeing growth across our businesses, I think we had nice momentum as we came out of 2014 and of kind of carry that into 2015. When we take a look at strength of the businesses, I think our Medicare offerings are stronger this year. And we've had I think what we expected to be in terms of first quarter growth there. The Medicaid business continues to be very strong maybe a little stronger than what we have thought in the beginning we knew we were going to lose portion of the state of tendency but our other growth kind of pulled that to virtually even strong growth in the commercial business.

So we had nice growth across UnitedHealthcare and we’ve had continued strong growth across Optum Amil as showing some initial signs of strengthening and recovering, they've done a nice job down there and they have really done I think an exceptional job of embracing some of the best breed of what both the organizations do. So, along those lines I think we have mostly a positives. We continue to - we had hoped for stronger MA rates and funding I think that will be a consistent thing. We continue to work on our improving our business and our business disciplines, but I do think we’re making very good progress on medical cost management, operating cost. So across the Board as I go through the inventory, I think we're - I believe in a stronger place than we have been in sometime and the first quarter results pulled that through and so we’ve updated an outlook and I wouldn’t suggest it’s anything more than that.

Thank you. Next question?

Operator: And our next question comes from Andy Schenker with Morgan Stanley. Please go ahead.

Andy Schenker: Thanks, good morning. So you clearly saw a good success and exchange enrollment beyond your initial expectations.

Maybe you could just discuss the factors around pricing and product design in your minds that led the enrollment success. And also maybe any early reads on those exchange lines versus your expectations. Thanks.

Stephen Hemsley: Sure it's still early, but I have Jeff Alter, maybe comment on that. Thanks.

Jeff Alter: Good morning Andy, it’s Jeff Alter. As we kind took you through our plans starting back in 2013 of how we were going to view the exchanges and look at 2014 as the year of learning and build kind of quickly rapidly as the market developed, I think the results that we saw in that in our initial enrollment year of 2015, one of result of kind of that longer term strategic plan and we - as we mentioned during our Investor Conference really looked hard at how people bought what they were buying, what was successful and designs, product and networks that could create price points that were sustainable over the long-term. And I think as you look at where we got our membership, it tie very nicely to where we said we thought we would get on membership and maybe we just got slightly more in those markets. So I think it was result of long-term strategic plan around this emerging market and the results of a lot of hard work to create the product and the networks that could support price points that people were looking to buy at. So that's something that drove first quarter.

I'd also say that what also drove our first quarter results were stronger performance in our key account block particularly around persistency or retaining existing clients as we went through our fourth quarter and into our first quarter. We retained more clients than we had in the past and then we've also expanded our product portfolio around some of the work that we did for exchanges, we also did stretch that into newer well priced product offerings for our small business and some of our 51 to 99 business. And we saw those results begin to emerge in the fourth quarter of 2014 and strengthen into 2015.

Stephen Hemsley: So, I think the balance performance overall and in the exchange right products in the right market is pretty much as we expected and we knew back in January that the market was responding positively so it's played out nicely. Next question please.

Operator: We'll take our next question from Josh Raskin with Barclays. Please go ahead.

Josh Raskin: Thanks, good morning, I appreciate the call. Could you guys talk a little about $0.20 of guidance was sort of exclude the $0.10 of cost that you guys were absorbing, but the $0.20 of core earnings. And what the drivers are of that increase how much of that is the benefits business versus Optum and I guess within that how much of that is commercial versus government.

And I guess further within that how much of that is MLR related and what you guys were seeing in both segment?

Dave Wichmann: Hi Josh, it’s Dave. Thank you for your questions and it's very good one. So we’ve increased our guidance by 10% on average and then we’re including an additional $0.10 of cost associated with the transaction with Catamaran and then also the impacted, reduced share repurchase. I'd say the number one contributor to our performance improvement expectations here is growth and I think it shows through pretty strongly across all of the benefits businesses with the particular emphasis on the over performance in commercial. But what you probably don’t see in that is you see the lived on the insurance exchange what you probably don’t see is the over performance on the off exchange business, which has been very strong as well.

Jeff and his team has done a very nice job there. So I kind of edge that more towards a commercial. And then in terms of other profit contributors would be our performance on MLR and we expected to improve our MLR during this year as we said forth both in both the Investor Conference as well as on the fourth quarter call. But we have clearly outperformed that this year as well. And I’d say that that’s due to the strength of the performance on several fronts mark clinical engagement strategies and our ability to manage medical cost the trend components that Dan, referred earlier as well with respect to our performing on impatient management overall is a I think was a key factor as well.

And then you can also see in Larry’s prepared remarks that Optum prepares to or expects to over perform as well absorbing the cost of the Catamaran transaction and still hitting the expected range of performance that laid out in the conference as well in the fourth quarter call. So, I think overall you’re seeing a strong performance and it’s coming from multiple different front supporting the 20%, the $0.20 improvement in our overall guidance.

Josh Raskin: Is it fair to say then Dave, maybe two-thirds of the improvement is the benefits business and then the third is Optum?

Dave Wichmann: Yeah, I’d say that there’s some it’s there plus or minus overall, but yeah I think that’s fair.

Stephen Hemsley: Two-third 64 we couldn’t calibrate it, but what’s great is it is balanced then I think that’s the strength of the kind of the diversified model, but so all the businesses are contributing to that advance. And if we continue to execute appropriately we’re hoping to do better so.

Next question please.

Operator: And we’ll take our next question from Sheryl Skolnick with Mizuho. Please go ahead.

Sheryl Skolnick: Good morning. Congratulations to everybody by my count this has been right rather an extraordinary quarter with double-digit revenue growth and strong operating income growth across all of the business units.

But we’ve been kind of talking about them separately with really key important factors that I’d like to focus on being the retention the cost management, and that you have mentioned and you have talked about. As well as the synergies of synchronization of the business the opportunity do that on the Optum side and what I’m getting at is that there was the change in the company back in November there’s been change building over the last several years. Now we’re seeing results I don’t think that was an accident I think those things are to very clearly related issues. I’m sensing you are at scale, I’m sensing the business is transforming, and my question therefore is can you talk about what changed in the way you manage this business to get all of these many parts and pieces that are so strong to work together now better perhaps and also in the future and does that means that this sort of performance should be more sustainable.

Stephen Hemsley: Well, I'll start and so my colleagues can join in on this but I would kind of say dramatically that we have been endeavoring to perform at these levels and interest level of consistency for sometime.

It is not just a factor of internal average efforts, I think there are market, external market factors that putting pressures to bear as well. So, we bear some of the responsibility for - if we so optimize our performance and some of it is due to kind of external market dynamics and pressures. But I think that for the last couple years, we have been endeavoring to really make the business work together on a more optimal level across the enterprise. It has been the function of trying to drive a better culture, it has been a function of trying to achieve a strong chemistry among senior managements and kind of effort where we are working together and, helping each other with both their challenges and opportunities. And I do think this is a very strong group of people who are committed to working together and to optimizing the performance that are really focused on serving customers, consumers, care providers really focused outside and making sure that we are delivering on the promise of enabling the better healthcare system and really helping people live healthy alive and get access and services to facilitate that.

And I just think that has come together and it is an effort so it is not sustaining as making sure that we keep doing this. And I do think that there is a stronger chemistry among the teem today and emerging, maturing leadership group across the board and I say its board based, I would say its not three or four people, I would say its 75 or 100 people across the Board. And I think that - I think people make a difference and I think that’s been part of it. I think we’ve also been focused on that culture to make sure that we are collaborating effectively and focusing on serving the markets. So I think those things have played into it and we'll look around – Dirk McMahon would like to try add to this.

Dirk McMahon: So Sheryl, its Dirk, how’re you doing. A good example is the advocate for me call model, that was a joint effort plus Optum and UHC with Optum handling the clinical pieces. If you look at what we are doing with our service offerings making sure our digital offerings get consistent, making sure all of our customer communications are clear and cognized and simple, those things coordinate across the enterprise – that's a good example in the case we’re managing across.

Stephen Hemsley: And I think the decisions, the way we go about making decisions and how we choose leaders in the organization are really built on more focused on collaborating and being ambitious to make sure the enterprise performs for those who we serve and so I take a lot of factors that are may be intangible to have contributed to that and I think you just have seen some of the effort start to emerge and I think we can do better. So I’m hoping this is the - you’re seeing that the beginning of what we can do going forward but we have to keep working on it.

Thanks for the question. Next please?

Operator: We’ll take our next question from A.J. Rice with UBS. Please go ahead. A.J.

Rice: Hello everybody. I'm going to follow up with another Catamaran consolidation question. I guess the $0.30 an EPS accretion that we’re looking for next year, I assume that’s after as plowing back some of the opportunity for the underlying customer base, so assume that the overall opportunity from putting the two together is more than what we've reflected in the $0.30. Can you give us some flavor of what might be ploughed back to combine entities clients. And then one of the issues that’s been raised and I want you just have you comment on it, is the Catamaran has a lot of health plan members or clients and I know in Optum like OptumInsight has a lot of business with other health plans, you just comment on how that relationship works, I know there seems to be some concern that people may view as competitor but how has your experience been in Optum working with other health plans?

Stephen Hemsley: Sure, well there is several in there, I might, it is premature for us to get specific about elements related to transaction that is still really subject to approval and so forth but kind of somatically I would offer that the accretion is really more a function of the transaction itself.

The capital we deployed relative to the cost of that capital against the earnings stream of Catamaran as it is, we are clearly focused on driving the overwhelming majority of the benefits and synergies that arise from this back to customers, improving the value proposition, improving and progressing a PBM model that is distinctive in the marketplace. And we are really focused on the customers benefiting principally from that of which UnitedHealthcare is a customer as well but also as you point out very important customers that are other payors in the marketplace, very, very good companies and those relationships are clearly important and vital to this model going forward. And we are committed delivering on all commitments related to that and really developing and delivering a supporting capability to their PBM strategies so that we produce for them, a distinctive capability and advantage into the marketplace and to meet their specifications as they see it and become a very trusted partner in this category. I think we are a trusted partner in this category - for a variety of payors and care providers across the spectrum in Optum and our business has continued to grow and evolve there and Larry, I don’t know if you want to comment on that.

Larry Renfro: Hi, A.J, it’s Larry.

So good point that you made and good question and we live this everyday and I will kind of reiterate almost everything Steve just said but obviously, I have spoken to quite a few of the customers but may be what you want to think back a little bit is frame what we do today. If you look at OptumHealth and you look at OptumInsight you would plan that if we have internal and external customers that’s pretty balanced between the internal and external breakdown. If you look at what’s really happening with the Catamaran transaction, it will get very close to being balanced as well but some of the things that we heard as we talked to the existing clients and so forth that this is what Steve said is that, the reason we bought and entered into this combination with Catamaran was because we needed to scale. We needed enhanced technology, we needed specialty and synchronization programs, we needed well grounded management team and as a result complementary business that same reasons that people want to do business with us, they have those same interest and that’s why we believe we really marry up really, really well with this new model. Now some of the things that we’re going to have to do is we’re going to have to execute.

We’re going to have to execute day one as we get involved with new customers. We’re going to have to live up to commitments that have been made and we know that and we’re pretty good at that. This going to have to be total transparency, today we do business with 300 health plans, we do business with 4,500 hospitals. So we’re used to really working with a lot of people and having to have transparency and this is just going to be another aspect of it. Obviously privacy and security around information and data and we’re going to have to come up with the way that we believe this is going to be pretty easy with no disruption because we are on the same technology platform and we’ve been on that platform for about 10 years.

So overall we feel pretty good about this transaction but I think if you went back and you looked at what we do in OptumHealth, you would find that lot of these clients already clients of ours and they already work with us in various intervention and prevention and wellness programs. You would find the same with OptumInsight. So overall, we kind of know this model and I would say as long as we execute and as long as we execute and as long as we execute we should be fine. A.J. Rice: All right, great thanks.

Stephen Hemsley: Thank you. Next question please.

Operator: We’ll take our next question from Kevin Fischbeck with Bank of America. Please go ahead.

Kevin Fischbeck: Great, may be if I can ask similar question in a little bit different way, when we think about the accretion of $0.30, my understanding is that it’s versus not deploying the capital else but you’ve already kind of talked about a $0.07 headwind so far this year from cutting back on share repurchase and I guess that you can do that again next year to bring leverage back down.

How do you think about kind of the net accretion versus, if you had continued your previous capital deployment plan in 2016 and then I understand the concept of returning the overwhelming majority of the benefits back to the customers but usually we don’t think of year one as being the high watermark from an accretion perspective, I mean where does that $0.30 number go to in year two and year three?

Stephen Hemsley: Well, first of all we’re not providing that level of guidance in particularly at this early stage but we think that, this deployment of capital is compelling relative to the market opportunities. And I think the capabilities we can bring to the marketplace, so we think that this business will continue to grow, we think that will become a more effective serving customers and it will become more affected as a business and particularly in the market dynamics that we see ahead as specialty pharma continues to emerge in the marketplace whether it’s going to require greater information, greater clinical engagement. So we think this is a very good use of capital that will be a important business broadly for the marketplace, serving all sectors of the markets that where prescriptions are engaged. And we expect this to grow, so we don’t expect this accretion to flatten out or trend, we expect the business to actually improve year-by-year and so we would expect that contribution to grow and would grow we think much more than would be a share buyback if that’s what you’re using it as an example. Our orientation to deploying capital is to find growth opportunities aligned with our strategic capabilities and that is our priority in terms of deploying capital, paying dividends and share buyback is really, when we really have excess capital if you will to bear.

So we are very pleased with this and we can - we’ll continue to look for investment opportunities not only in this area but in our other Optum services and in our benefits businesses where we think there would may be opportunities down the road. I don’t know if that gets to your Larry.

Larry Renfro: Sure, Kevin I’ll get little more granular and may be this is not were, you were going but I’m can’t been held responsible here for that $0.30 in 2016 and the way that I look at it, you’ve got some factors that we have to pay attention to very, very carefully right now such as client retention, such as sales, such as our operating leverage, our customer service and our management. All of these things that we really have control of inside of Optum and how we manage the business and with the combination of Catamaran, who has the strong management team, who has strong experience, strong relationships, this is a very, very strong management team and so we feel confident on lot of levers that we can use and pull to go towards that $0.30. Now I’m not even talking about network discounts and I’m not talking about drugs – at this point of time because as we talked about some of these categories will go back to others and our clients as we work with them.

So we’re confident from what I call operating plan standpoint, what we have to do by 2016.

Stephen Hemsley: Thanks for the question and next question please.

Operator: We will take our next question from Christine Arnold with Cowen. Please go ahead.

Christine Arnold: Hi.

At your Investor Day you indicated you expect to achieve your long-term earnings growth target of 13% to 16% in 2016 recognizing now that the 2015 EPS is going to be higher than your expected. Is that objective still on track and as you look into 2016, you mentioned that rates are keeping up with cost trends in Medicare, could you comment on your other lines of business how you see headwinds, tailwinds? Thanks.

Stephen Hemsley: Sure. The other lines of business I’ll ask Jeff, Austin, and Steve maybe to respond in terms of our overall, we are not changing our outlook with respect to our long-term growth trends or with no intention of suggesting that. We still feel confident that in the long-term our businesses are capable of producing growth in that range and we are hopefully seeing our performance start to recover back into that range.

So as it relates to the individual businesses maybe I’ll start with Steve Nelson.

Steve Nelson: Thanks Steve. Hi Christine, it’s Steve Nelson. With respect to the Medicare business, it’s really well positioned for 2000 now and will even increasingly improve for 2016 to serve more seniors which is really our objective provide not just better benefits but great health outcomes and a better healthcare experience. And I’ll just tell you how kind of we think about that as we are in - as you know in the midst of our 2016 benefit planning period.

We have now shaped our networks in a really meaningful way, we have added premiums under half of our total membership as premium which was an important transition and something that we needed to do and executed that this year making great progress on starts, we have really strong clinical programs and customer service innovations and improvement that not only as I said provide benefits but create a better healthcare experience for our members. And we have great market share and brand position, so when you couple this with the growth of the population and increased propensity to choose Medicare advantage over fee-for-service it is really strong position and very positive outlook. Jeff?

Jeff Alter: Good morning Christine, it's Jeff Alter. I think the commercial business shares very positive view of the future, we've been through a tough couple of years with lot of headwinds, lot of disruptions from the ACA which tend to - I think our ability to manage trend better than some others. And I think as we go into 2015, 2016 and beyond kind of the combined power of Optum healthcare working together to keep trends lower, keep our pricing lower.

I think you should expect the growth that we’ve had over the last six months or so to really be what distinguishes us going forward and that’s delivering more and more value to the marketplace through different product designs but more important over the long run better management of cost and delivering that better management back through lower pricing and growth to the marketplace.

Austin Pittman: Good morning, this is Austin. Strong momentum continues in our Medicaid business, we are very honored to continue to see strong growth, we look for that growth to continue throughout the year and into the future. Really built on very strong relationships with our state partners, strong clinical programs focused on getting better outcomes, high quality outcomes for the constituents and overall I think we’ve been able to demonstrate over time and partnership with those states value. And that sustained value we think is what really continues to create that momentum moving forward.

Stephen Hemsley: So I think pretty solid across the board in terms of and the Optum business continues to be strong, the backlog pipeline and Optum continues to grow and revenue backlog continues to grow actually at a faster pace than what we’re actually showing in our reported results, so pretty positive in that regard. We’ll take maybe two more questions, so the next one please.

Operator: We’ll take our next question from Ana Gupte with Leerink Partners. Please go ahead.

Ana Gupte: Yes, thanks good morning.

I was wondering on this Optum UHC better together is that strengthened or less strong if you will post to Catamaran transaction. And how would that be informed by your 2016, 2017 selling season and are there any other milestones that might inform one decision versus the other?

Stephen Hemsley: I would say just in broadly that kind of coming back to an earlier question that I think the chemistry and the operating dynamics across the businesses continue to mature and get better I think we have a very strong generation of leaders here and they’re working together. In terms of this particular transaction, a lot of work done at the corporate level in terms of the actual developing and execution of a transaction of this caliber and then working with the Optum team and the OptumRx team that has been probably the orientation at this point in time. So I would say that as it relates to that transaction, I think it was our - I think we’ve really good capabilities at our corporate development, organization are - treasury organization and so forth and then they take the business expertise from the Optum team really where our PBM resides. So that is probably in - that flavor was probably played out more in that.

But I would tell you that the better together dynamic across our businesses has never play –actually been better and as I said earlier, I think and certainly it’s our intent that this is just the beginning. Next question please.

Operator: We’ll take the next question from Sean Wieland with Piper Jaffray. Please go ahead.

Sean Wieland: Thank you.

Long time listener, first time caller, thanks for taking my question. So this week you said the Optum360 and Mayo is getting together. Mayo as you know is also embarking on their implementation of APAC. So that’s a lot of cooks in the kitchen. Can you comment on the value proposition to Mayo given their simultaneous rollout of APAC and how you’re going to manage this? And also can you tell us what the organic growth wise in the OptumHealth business.

Thanks.

Stephen Hemsley: Well welcome Sean, and maybe Bill Miller can touch on Mayo and John perhaps your last question.

Bill Miller: Yes Sean, this is Bill, I’ll answer the implementation work going on down at APAC. It's a very insightful question, because that is a lot of things going on. And it was instrumental and part of the discussion as we arrived at our relationship with Mayo, because what we'll do is working concert with them with respect to their rollout of APAC.

But if they evaluated that, and they looked at our tools, the combination of our tools working with their existing systems and the systems that they’re going to install, they felt like they wanted to move ahead, because they were independent and the best in the market as they saw them. And there were other things that we're going to work on collectively that I think enhance Mayo's position around patient engagement and some other things that they want to sort with from a consumer perspective, which we’re going to work with them particularly in the context of revenue management. So, they’re comfortable with the so called cooks in the kitchen. We’ll collaborate in that context and there is not that much overlap and where there is we’ve accounted forward in the project plan. So we feel very comfortable about going forward.

John Rex: Yes Sean, this is John Rex. So OptumHealth did have a very good top line growth in the quarter that you noted 27% top line growth. I would say all the businesses contributing if I would have call out certain businesses in terms of where we saw particular strength that I want to note on the call and call at the OptumCare businesses. So those are the care delivery businesses certainly one of the big five drivers that we talked about extensively at the Investor Day back in December in terms of where our focus was over the next five years. Driving that growth it was really a growth in patients served in our existing markets.

It was also de novo expansion new market expansion really heavily along those areas in terms of driving the vast majority of growth with OptumHealth for the quarter.

Stephen Hemsley: So to just to sum up the quarter, the story is really again about growth, growth in revenues, earnings based on more consistent performance for customers, growth in the number of people we partner with and serve across the healthcare system. And growth in the scope and diversity of our businesses. So we thank you and we’ll see you next quarter. Thank you.

Operator: This concludes today's program and we thank you for your participation. You may now disconnect and have a great day.