Stephen Hemsley - Chief Executive Officer Larry Renfro - Vice Chairman, UnitedHealth Group and Chief Executive Officer, Optum David Wichmann - President and Chief Financial Officer Dan Schumacher - Chief Financial Officer, UnitedHealthcare Steve Nelson - Chief Executive Officer, UnitedHealthcare Medicine & Retirement Austin Pittman - Chief Executive Officer of UnitedHealthcare Community & State John Rex - Executive Vice President, Optum Jeff Alter - Chief Executive of UnitedHealthcare Employer & Individual Business John Prince - Executive Vice President and Chief of Operations, Optum

Matthew Borsch - Goldman Sachs Josh Raskin - Barclays Andy Schenker - Morgan Stanley Chris Ray - Susquehanna Financial Group A.J. Rice - UBS Kevin Fischbeck - Bank of America Peter Costa - Wells Fargo Gary Taylor - JPMorgan Christine Arnold - Cowen Sarah James - Wedbush Securities Sheryl Skolnick - Mizuho Securities U.S.A Scott Fidel - Credit Suisse Ralph Jacoby - Citi Group Ana Gupte - Leerink Partners

Good morning, I will be your conference operator today. Welcome to UnitedHealth Group Fourth Quarter and Full Year 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 reports that we file with the Securities and Exchange Commission, including the cautionary statements included in our current and periodic filings. This call will also reference non-GAAP amounts. A reconciliation of the non-GAAP to GAAP amounts is available on the financial reports and SEC Filing section of the Company's Investors page at www.unitedhealthgroup.com. Information presented on this call is contained in the earnings release we issued this morning and in our Form 8-K dated January 19, 2016, 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.

Good morning. Thank you for joining us today as we close on 2015 and look ahead to 2016. We finished 2015 in line with the guidance provided at our December Investor Conference with fourth adjusted earnings per share at $1.40 brining full year 2016 adjusted earnings per share to $6.45. Overall UnitedHealthcare had a positive year and finished with strong fourth quarter growth exceeding 300,000 members and growing across all its markets. Optum delivered an exceptionally strong fourth quarter with revenues up 70% and earnings up 46% over the prior year. Before we go into the business commentary, let me offer a brief recap of 2015. 2015 UnitedHealth Group revenue grew more than 20% to $157 billion with organic revenue growth of 10%. Our cash flows were exceptional at $9.7 billion, up 21% year-over-year. Our dividend increased 33% to an annual rate of $2 per share this year. United Healthcare grew to serve more than 1.7 million more people domestically as Optum grew its revenues by 42% and revenue backlog by more than 20%. Excluding the impact of individual exchange compliant products and reserves related to the initiation of a new Medicaid contract, UnitedHealth Group still grew revenues by 19% in 2015 and grew operating earnings 15% to $11.8 billion and that would have produced an adjusted earnings per share of $7, a 16% year-over-year increase again absent those items to give you an idea of the underlying strength of the enterprise. We know the individual exchanges are top of mind to you and Dave Wichmann will discuss these fully in his comments. As we said at the investor conference, the balance of our total business to well more than a 175 billion of it is driving considerably stronger and better position than this time last year. We are committed to delivering a strong 2016 performance year in growth, in financial results and in the quality of our services and net promoter score or NPS performance metrics. 2016 is off to a strong start considerably stronger than 2015. Our initial growth trends are very encouraging and our service performance for new January business is strong. Optum’s revenue backlog and pipelines have never been stronger. Medical cost in the fourth quarter trended slightly better than expected and we are confident, our benefit businesses have appropriately priced our products for 2016. Our operating business platforms drive these results, so I will ask Larry Renfro to review Optum’s performance for full year 2015 and Dave Wichmann to cover UnitedHealthcare and provide some UnitedHealth Group enterprise live comments. Larry?

Thanks Steve . 2015 was without question an exceptional performance year for Optum in revenues and earnings growth. And then our preparations to setup 2016 to deliver well for the nearly 115 million people we serve. Optum’s businesses have strong momentum and are producing strong sustainable growth across the board. Since beginning the one Optum journey in 2011, we have compounded revenues at 23% per year and operating earnings at 34% per year. In 2015, Optum’s revenues of $67.6 billion grew 42%, including organic revenue growth of 13%. OptumRx revenues grew 51% this past year to $48 billion and even excluding the Catamaran combination posted solid double digit organic growth. OptumHealth and OptumInsight together grew revenues to more than $20 billion which is growth of 24% over 2014. Our full year operating margin of 6.3% reflects the increase mix of pharmacy care services revenues drive by OptumRx organic growth in five months of Catamaran business. Both OptumHealth and OptumInsight strong full year 2015 margins are sustainable and we project operating margin expansion for OptumRx in 2016. In 2015, we added to our strategic relationship portfolio which now numbers 10 and we’ve remained focused on developing more of those comprehensive large scale relationships. They leverage Optum’s unique end-to-end capabilities to help solve the broader challenges, customers and prospects are facing in a changing healthcare environment whether they are physicians or hospitals, health benefit sponsors, governments or consumers. To illustrate, consider our Optum360 revenue management relationship with Dignity Health where cash flows have already improved by $1.5 billion and accounts are being settled before eight days faster and where are documentation technology is helping Dignity Health physicians meet demanding ICD10 requirements even as they are realizing a 50% gain in productivity. Our consider OptumCare, our expanding care delivery business in which we are developing some of the most impactful and durable consumer relationships. Today, we serve seven million patients to more than a 150 payer relationships across our physician practices, our community based clinical services and our MedExpress neighborhood care centers. MedExpress operates at the conversions of healthcare and retail measuring success one patient at a time. MedExpress can provide as much as 90% of the care patients receive in the ER and for as little as 10% of the cost. MedExpress mitigates cost for both payers and consumers while providing high quality convenient care. We currently operate over a 160 neighborhood care centers with a goal of operating several multiples of that number five years from now. Today there are OptumCare clinics in more than 270 locations in 26 local markets having recently added pro health in the Connecticut market to that distinctive high performance practice portfolio. Our pipeline for growth is gaining momentum as well. The OptumCare approach, we expect local market norms and expectations and our doctors consistently deliver a high quality results for the communities they serve. We consistently outperform benchmarks around the acute care readmissions and skilled nursing facility stays. More than three quarters of private Medicare patients we care for are in health plans rates four starts or better and more than 96% of our patients would recommend our local care provider office to workers. For patients with complex medical conditions, our integrated care model has proven distinctive results. We deliver on average a 50% reduction in overall healthcare cost for medically complex patients with very high patient and family satisfaction. A number of OptumCare’s high performing practices have been nationally recognized for their performance and council care initiatives including Monarch in Southern California and ProHEALTH in New York metro area. And finally, our healthcare services continued to deliver clear and distinctive value for Medicare recipients and payers with 98% patient satisfaction and more than one million visits to patients in their homes delivered in 2015 and further growth in 2016. With the market momentum we have today and through these constantly advancing capabilities, we expect OptumCare will remain a high growth business for many years to come. As we care other examples in future quarters that reflect Optum’s growing diversification such as our military and veteran’s health services or our pharmacy care services or our technology support services, you should say with even more clarity a pattern immerging. The application of data, technology and services to bring better performance helping health systems work better for everyone. Today revenues from our top 25 customer relationships at Optum have quite rubbled over the last three years. In 2015, the average customer awards has doubled across OptumHealth and OptumInsight and we expect continued strong customer retention at OptumRx, we work to bring the powerful benefits of the OptumRx merger to these clients. Common health organizations continued to enquire about how our capabilities can help them, so we are exploring potentially large and interesting new strategic relationships. In many cases, these parings could further accelerate growth in the OptumInsight backlog which now exceeds $10.4 billion and grew by more than 20% year-over-year. Within the current portion of that backlog, we already cover more than 80% of OptumInsight’s full year projected 2016 revenues. We remain optimistic about the prospects for Optum in 2016, 2017 and beyond. For 2016, we are projecting revenues to well exceed $80 billion which would be growth in the area of 20% and for operating earnings to grow 30% to 34% to more than $5.55 billion. Optum is becoming an increasingly valuable business and now represents about 42% of UnitedHealth Group’s consolidated operating earnings outlook. Now let me turn it over to Dave.

Thank you, Larry. UnitedHealthcare continues to differentiate itself from competitors on a foundation of distinctive service, product innovation and integrated clinical and network value and the result is strong, sustainable growth. UnitedHealthcare new serves 46.4 million medical members and we have leading market positions in all private health insurance segments of North and South America. Over the past five years, we have grown by nearly 13.5 million people or 40% well diversified across commercial, government programs and international offerings. This reflects the delivery of diversification and consisting competiveness of our offerings globally. UnitedHealthcare continued to strength in 2015 growing to serve 1.75 million more people domestically as they continue to improve its market share. UnitedHealthcare’s full year revenues grew nearly 10% to $131.3 billion. The full year operating margins of 5.1% decreased as expected declining 70 basis points year-over-year due to the effects of public insurance exchange products. Full year commercial medical cost trends of 5.5% came in at a low end of our initial outlook one year ago. Our cost trends reflect a positive, sustainable impact of higher consumer engagement, strong alignment of incentives with care professionals grew value based relationships and improving data collection and application. We are equally pleased with immerging innovation trends in our business focused on advancing the consumer movement in healthcare. Today 25 million consumers are served through our Advocate4Me service model. People served by this innovative approach are more engaged in their health and are more effective in their healthcare decision making and are more satisfied. Today over 23 million consumers have joined our Rally Digital Health applications and we are seeing steady advances in daily active use of these services. Including importantly engagement around selecting primary care physicians better used of urging care over emergency care, screenings and higher adoption of personal health and condition management programs. And today, our Real Appeal digital medical service designed to help manage weight and reduce the onset of diabetes has been deployed to accounts representing one million people in just the last half of 2015 and with an additional half million committed for the first half of 2016. The initial results are encouraging with 46% of participants achieving a meaningful reduction of 5% or more of their body weight within 16 weeks. 5% weight loss reduces the conversion to diabetes by nearly 60% according to studies conducted by the Nation Institutive Health. Give these exceptional results, we plan to make available digitally a broader set of preventative medical services to engage people to live healthier lives to the fullest. Across UnitedHealthcare, we intend to continue to positively impact the quality of social services, condition management, cost and quality transparency, convenient care, wellness and the overall quality of life of the consumers we serve by giving them the tools like these to engage them in their health. Our work is improving the quality of patient care. In Medicare, we help close 9 million gaps in care for the seniors we serve. We will serve 1.7 million members in health plans with higher star ratings in 2017 as we expect at least 63% of our members to be in a four star plan and we will further improve that percentage in 2018 to 80% or more. It is not a coincidence we are off to our strongest growth start for Medicare Advantage in company history. We expect to close first quarter with growth of around 300,000 seniors and Medicare Advantage and we are tracking well against our full year outlook of 325,000 to 400,000 people in that growth. In commercial benefits, we combine cheered networks, our clinical strategies, an innovative product designs in ways to align to a wider rate of affordable price points for employers and consumers. Today one third of our commercial customers are served through one of these more affordable plan offerings. That’s double the number from five years ago. And we expect that percentage to more than double again over the next five years aiding to our exceptional growth. In Medicaid, over the past two years, we are secured new contract awards totaling more than 2 million people. Manage Medicaid continues to immerge as the ultimate long terms sustaining solution for states and we believe UnitedHealthcare offers our state customers the most distinctive and comprehensive set of capabilities. Like in Medicare and commercial, we are well positioned for 2016 growth in community and state. Turning to exchanges, we expect to start the year at around 700,000 or fewer public exchange members and expect these numbers will steadily decline over the course of the year. We are not pursuing membership growth and have taken a comprehensive set of actions to contain membership and sharpen performance over the balance of 2016. We have withdrawn platinum products, increased prices, eliminated marketing and commissions, intensified clinical engagement and medical management with this membership group and reduced operating cost as appropriate. As a matter of prudence, we have increased our premium deficiency reserve by $65 million above our Investor Conference estimates, bringing the total fourth quarter charge to $340 million. 245 million of that charge addresses 2016’s exchange compliant product exposure. This is an addition to the unreserved losses including in our 2016 outlook combined more than $1.5 billion set aside for 2016. We believe we are fully captured 2016 exposure, now based on our actual starting enrollment. And by mid-2016, we will determine to what extend if any, we will continue to offer products in the exchange market in 2017. In Medicaid, the start of the new program in Hawaii has been deferred while the state has also increased the assigned enrollment for each contracted plans which increases our estimate of revenues. We are in constructive discussions with the state concerning elements of an effective and sustainable managed Medicaid program to serve that market. As we look into 2016 and 2017, we believe UnitedHealthcare will continue to grow at a strong pace and profitably improve its market share. Fundamentally UnitedHealthcare is emerging across the spectrum of consumer driven products, service, wellness, transparency and most important care engagement and clinical quality particularly in government programs. We have room to improve but we sharp focused on NPS and the quality of the work we do in a cultured centered around helping others, we have an opportunity to offer even greater value to consumers, providers and customers are like in the coming years. Before Steve sums up, let me touch on the outlook for UnitedHealth Group as a whole. We are committed to strong performance in 2016 across UnitedHealthcare and Optum in service, in operations, in growth, in earnings generating and in cash flow production. We foresee cash flow is approaching $10 billion and adjusted net earnings of $7.60 to $7.80 per share. Again adjusted net earnings for us is GAAP EPS plus after tax intangible amortization. We encourage everyone to move to adjusted net earnings to enable better comparability among companies and among the analysts community. We expect about 46% to 47% of full year earnings in the first half of the year with Optum at approximately 40% of its full year plan in the first half exactly as you saw it last year and in the past. We expect the rate of our earnings growth to strengthen during 2016. Current consensus street estimates for first quarter adjusted earnings per share might be slightly strong compared to our expectations at the moment. All in, we have a strong view of 2016 and look forward to this year. Steve?

Thank you, Dave. At our investor conference, we offered a sense of the growing innovation and entrepreneurial activity in our company and the restless drive, our team has to grow and improve performance. On the customer side, we are committed to further elevating satisfaction for consumers, care providers and all our stakeholders to levels more often seen outside our industries to better meet the increasing expectations people and society have for healthcare. When our net promoters scores reflect people being staunch advocates for our products and businesses because of the way we make their simpler and the value we provide as they define and experience it as consumers and customers will be on the path creating truly distinctive and substantial growth and brand equity. We believe a differentiated brand and reputation will drive accelerated growth in market share for our businesses for years to come. Our goal for serving you as investors in 2016 is simple. We are committed to delivering clean, strong results this year back by a growing pipeline of opportunities for 2017 and beyond. We expect distinguish revenue growth, earnings and cash flow in 2016 that continued to reflect the diversity, breath and overall strength of our enterprise and the valuable businesses we are building. Thank you for your interest today. And operator, can we take some question this morning. One per analyst, please. Thank you.

[Operator Instructions] And we can take our first question from Matthew Borsch with Goldman Sachs. Please go ahead.

Yes, hi, good morning. Could you just talk about what the factors were that caused you take increase your booking for anticipated losses in 2016. I guess maybe, I think it was 45 million higher on the exchange side and 20 million higher on the Medicaid contract, if I got that right?

Yes, you do. And it’s really just purely updating and I think Dan Schumacher can take you through that.

Good morning, Matt.

Good morning.

So, you are right. We did increase our loss expectations for 2016. And when it came to really as we closed out the year, we took - we took a prudent past year on the ‘15 impact and then we carried that through to 2016 outlook and then we adjusted further for a little higher enrollment expectation for 2016, so those are the elements that played into the increase in both the ‘15 impact and the assumed losses for ‘16 in the individual exchange compliant plan offerings. And then with regard to the Medicaid potion, that’s simple, just a function of a higher enrollment expectation as the number of carries was reduced from four down to three. But when you put that all together in total as we close the year, it was about a $100 million of impact beyond what our guidance had assumed from December and -

Okay.

So our base business, the vast majority of our business performed exceptionally well and we delivered fully in line with the expectations as we closed out ‘15. And then as we look to ‘16, we’ve incorporated that again fully into our outlook as we reaffirm out guidance for ‘16.

And if I could just one related question, in the four quarter on individual enrollment, I think your total book is about 1.2 million, how did that change as a result of the maybe in - at the end of the year and then coming into this year as a result of the coop insolvencies and related instability in the individual market?

So, and I think the last time we talked, we talked about our individual exchange compliant being about 700,000 of that 1.2 million you’ve referenced. As we closed out the year, that came in at about 650,000 lines and then we’ll expect that to grow as we step into January and then it will start to shrink again over the course of the year as some of those enrollment, and will these trade out.

Okay, thank you.

And that we just say is kind of an overarching flats and our goal is in this area is to be careful conservative and to make sure that we really capture all this, so that we really do have the rest ‘16. Next question please.

And we’ll take our next question from Josh Raskin with Barclays.

Hi thanks, good morning. I want to talk a little about Medicare Advantage another CMS data is relatively preliminary but certainly seems like you guys are well on page to beat the 400,000 for the full year at the high end. So just curious, you know doesn’t sound you got much star improvement this year, so what made your products more attractive, is it more retention, is it you know more agents or coming from other plans, just any color on where this is - where the growth is coming from?

Sure. It is good growth as Dave indicated, but Steve Nelson can really respond to that and it is a very positive story.

Thanks Steve. Hi Josh, it’s Steve Nelson. Yes, very positive about the growth that we are seeing coming through the AP and it’s little inside into that growth. First, it’s important to remember that it comes as a result of and after a couple year of really hard work as we repositioned this product to some of that change in Medicare Advantage program introduced premiums, created a more aligned engaged network and relationships with our providers and meaningful improvement in stars as you mentioned. And you know second, we really like where the growth is coming from and so I think Dave mentioned in his comments about 300,000 or so as a result of AP, about third of that comes from Group, so really inside into that pricing in that membership. And then within the individual business, meaningful improvement in our retention also has added to this growth. And this is membership that you know we’ve been engaged with and they’ve been involved in our clinical programs. And it’s very evenly spread across geography and products, but the stability of our products, the evolution of our portfolio is really resonating in the market. And so that’s all contributes to the growth and we expect this as a Medicare Advantage product to continue to grow as we look to 2017 and beyond.

And Steve just a quick follow-up on that, do you have a percentage of how many are coming from previously not in MA whether that’s agents or tradition people service versus how many are coming from other plans competing plans?

It’s a little early to give that kind of color but I would say in general in terms of how we look at the membership, it’s very much in line with our expectations.

Okay, thanks.

Next question, please.

And our next question comes from Andy Schenker with Morgan Stanley.

Hey, thanks. Maybe just going back to the exchange enrollment real quickly, just a few on the membership, maybe if you could talk a little bit about how your positioning or membership growth compared to the existing states versus the 11 new states you entered and then relates that obviously still a little over week left in enrollment, just how your - you know what kind of forecast you are expecting for total enrollment, I assume you are trying to - you assume there is a big jump in the last week or two but just how we should think about that you know 700,000 related to expectation last two weeks? Thank you.

Dan?

Sure, good morning, Andy. So on the exchange enrollment specifically, the 700,000 as Dave mentioned beginning January, we ended the year with just about 500,000 so that jumped up to about 700,000 as of one-one. We’d expect that over the balance of the open enrollment period to grow something underneath about - to about 800,000, something a little sound of that. And then we would expect that to where off as you pace through the year as those members trade out. In terms of the where it’s coming from, I would tell you that the net growth in coming with a greater orientation toward those new states as well as expansion areas but a little bit of mix of both.

Thanks.

Okay, next question, please.

Our next question comes from Chris Ray with Susquehanna. Please go ahead.

Good morning. Thanks. Just on the last question, I got a little confused with the numbers, Dan just on the 800,000 versus 700,000, 500,000 ending the year and 650ish thousand now, can you just confirm, did you end the year 650,000 or was it 500,000? And then my real question with regard to all of this, do you know how many the people that have currently signed up were enrolled with you guys last year versus new membership? Thanks a lot.

Sure. So just to be clear, we ended - we ended the year with 650,000 lives in individual exchange compliant offerings, inside of that 500,000 of them were on exchange. So the balance 150,000 was off exchange. And then as we step into January that exchange component which ended the year about 500 grows to about 700 and then as you move towards the end of the open enrollment period, it grows further up towards 800,000 something sound of that and then works it straight down over the year. The off exchange is more level than what we experience in the on exchange. And then to your last question about mix of enrollment, more than half of the enrollment is new to us and a little less than half of the enrollment is existing enrollment base.

Right, thanks a lot.

Thank you, next please.

And we’ll go next to A.J. Rice with UBS. Please go ahead. A.J. Rice: Hi everybody. Just might ask, focus my question on Medicaid, both, do you update your membership with one player dropping out and eye was had enough move the needle, I guess we’ve had some companies comment on concern about profitability in Medicaid year-to-year, can you give us a play over there? And then finally on that the health insure the question for 2017, if you got an clarity from CMS where as it relates to either Medicaid or Medicare and how they are going to treat that, those dates I guess?

That is quite an impressive single question A.J. so we’ll break that up into pieces and we’ll start with Austin on Medicaid.

Sure. So hey, A.J. this is Austin, how are you? A.J. Rice: Good.

Right, so first of all, I think you’re asking about Iowa. We did increase our membership outlook and assumptions for Iowa as the state moves from four players to three. As far as the sustainability, the program, I think first of all as we state of four, we are really honored to been selected to serve the people of Iowa. We continued to be - feel good about the relationship that we develop at the state. We’re in very productive conversation with them about really tried in true methods to ensure long term stability. And so we feel good about where that’s headed and it will become a long term and very durable part of our portfolio. And with regard to the rates overall, as you know states are always pressured, there is nothing new in that. I think we are very pleased with our business, most pleased with the value that we’ve been able bring the customers into the consumer over the years. We’ve got a very strong management team, very locally deployed, enable to manage these populations and really help people in very vulnerable situations and then deliver value for the long term. So I think we feel good about pressured but stable rate environment and the growth in this market. A.J. Rice: And that’s been really distinctive in terms of the rate environments, the same pressures that exist every year.

Absolutely, yeah. Dan?

Sure. A.J. it’s Dan Schumacher. On the health insurers tax, you know, we miss if I didn’t mention that, from our perspective obviously the tax just increases the underlying cost of healthcare and as a result makes healthcare less affordable. So as we look at the elimination of it for 2017, we are certainly encouraged by that and frankly we’ve been long support, you know that’s permanent repeal. Now with that said, I’ll tell you in terms of the impact, in Medicaid, we expected to be no impact. In the commercial business because that’s prices on a policy year basis and the tax is living on a calendar year basis. There is no impact over three years but there are some differences by year and we expect it actually be a drag on our 2016 earnings. We’ve estimated that impact to be about a $100 million pretax or about $0.06 earnings per share. And then lastly the Medicare of business, the tax has not been part of the rate setting process previously, so we wouldn’t expect it to be for 2017 either. A.J. Rice: Okay.

That pressure is covered in our guidance. We basically observe that in our guidance given the strength of the start of the year. Next question, please.

We’ll go next to Kevin Fischbeck with Bank of America.

Great, thanks. Just go back to the exchanges. I guess if we shift the premium does it from 2015 as of 2016, are you saying that you expect to lose more money on exchanges in 2016 than either in 2015 and if so why would that be the case I guess you had a chance to price up the core business?

Well, I’ll have Dan answer this, but I think as a matter of prudence, what we are doing is making sure that we have covered ourselves appropriately in ‘16, so that means we set aside more money between the reserve that have set aside and what we have covered it within our guidance that it’s clearly out purpose. We are really focused on making sure that this item is really covered at ‘16 and so I think that’s what you should read through in terms of our activity. Dan?

Sure. Good morning, Kevin. So if you move the premium deficiency reserve and reset the years and look at it, you know on the individual exchange compliant plans within ‘15, we launched about $475 million on the ‘15 policy year. And the ‘16 policy year as Dave Wichmann had mentioned, we’ll lose more than $500 million. So, and we’ve got about a 10% increase in the loss assumption balance against about a 25% to 30% growth assumption in the underlying enrollment base. And the reason that we’re able to do that is to the points that you mentioned, obviously we came in with very strong pricing, you know that mid-double-digits. And further we’ve made some strong refinements to our product portfolio, those are the largest contributors. But beyond that, we’re also working every single data, the tuner operating environment as well as focus our clinical interventions in our network orientation around this population.

I guess you are saying is the loss of be in - and then you mentioned like path that goes to be new states and new geographies, is that - is that why that the losses, is that why have loss is really at all going up or do you think that the core business is actually getting get worse as well?

No, I think it’s going up because we got enrollment growth and then balanced against that is our pricing, our product positioning, our clinical interventions, our operating environment and then improvements we’re making there.

And I might point out that, this is what we are providing, we are being careful in terms of making sure that we’ve covered this off. These are not losses that we are sustaining these are but we have protected ourselves against in terms of ‘16.

Okay, thanks.

And we’ll take the next question from Peter Costa with Wells Fargo.

Thanks for the question. Previously you said that you are expecting $0.13 to $0.15 or 200 to 225 million of additional losses from the exchange business in 2016, it seems like that grew a little bit, and you talked about over half a billion now in losses including the $245 million PDR. But my question gets to you know if that’s the right number, the $0.13 to $0.15 and maybe correct me if I am wrong, that would be you know say $0.14 at the midpoint added to your the midpoint of your 760 to 780 guidance, so let’s call that $7.84 of potential earnings, that’s only 12% growth from the $7 number that you have excluding those the individual business item, yet last year you grew 16% to get to that $7 in terms of earnings, which of your core businesses is the one responsible for the slowdown from 16% to 12%?

Well you know Peter, those are projected numbers. We would think that we could perform even more strongly. So I think that by just isolating that against a beginning of the year range may not be a fair comparison in comparing your 16 to 12. Actually as we take a look across our spectrum of businesses, we really don’t see any of these businesses in a position that they are actually, I would say they are all stronger than they were as we - compared to this time last year as we entered clearly across the board in Optum. The strength of the portfolio from one end to the other has advanced. And in terms of UnitedHealthcare, I think all those businesses have strengthen the - and I think are positioning on the exchange has strengthen. So I think my view on this is that is a pretty positive outlook.

The 15%, you are telling, the difference between the 16% and the 12% then it’s PPD but perhaps is that what you would say?

No, I am not sure you can, it might be - take that one element and then project against estimated earnings range as we go out, we could be even stronger than that.

Okay.

Next question, please.

We’ll take our next question from Gary Taylor with JPMorgan.

Hi good morning. This is question for Larry I think. When we look at Optum inside, operating income was up a $200 million sequentially, same case last year was up about a $100 million sequentially in the four quarter. Can you just remind us the source of the seasonality in the operating income for OptumInsight, please?

Sure. I think we’ll Larry kind of give you some sense of the growth of momentum there and then respond to that specific question.

Garry, it’s Larry. I think that you’ve seen over the last few years that the fourth quarter is obviously a dominant quarter for us that will stay that way. If I had to break it down, I’ll give you three areas to think about. Lot of time since beginning of the year, we’re making investments and those investments payoff in the fourth quarter and you see a little bit of that happening, we’re also in implementation mode they are in the year and those implementation then installations also come true in the four quarter and that enables us to obviously have a stronger position at that point. When you look at the products and services, there are specific products like obviously distribution that goes along with open enrolment but also our pay for performance and incentives will also hit in the fourth quarter. So we don’t see that changing, we see that being the pattern that Optum in general will be experiencing.

Okay, thank you.

Next question, please.

We’ll go next to Christine Arnold with Cowen.

Thank you. Impressive increase in backlog for OptumInsight, can you remind us if you gave us some parameters Investor Day, how to translate that into expected revenue overtime? Thanks.

Sure. Christine, it’s John Rex, good morning. Yeah, when you thing about the backlog $10.4 billion backlog you’ve seen inside some of the guidance points that we provided on that. You should expect about 60% of that to be recognized in the 2016 revenues so that equates about 80% of the full year revenue outlook. Another way to look at that is that the average duration of the backlog runs about 20 months. And these are being fairly consistent numbers and I expect that could be fairly consistent as you look ahead also.

So Christine, it’s Larry. One think I would add to what John said is that as of now about 90% of our 2016 revenue is locked in, obviously that’s part of the backlog.

Okay, perfect, thank you.

We’ll take our next question from Sarah James with Wedbush Securities.

Thank you. I just have one quick follow-up here before my question is, so you’d mentioned earlier that there are conversations with States Medicaid rates are tried in true methods that insurance stability, is that mean, I am wondering this is referencing changes in the risk adjustment methodology that can redo some premium get backs or are you talking about our aspects of tried in two methods?

So, this is Austin. Really I was talking about a whole portfolio of method, so you can think about care coordination, network management, the level of transparency that we address, the rates and immerging experience overtime with States. And so you could narrow it down any one, we get a very long term history of 20 and 30 year relationship, so a lot of success in how we work with States and so that’s what let us to feel so confident and comfortable with where we do with Iowa and really with our whole portfolio States.

Got it. And just I know some of your peers are trying to get those risk adjustment seems back, is that was an indication that United where those well but it sounds like based on other aspects that you are negotiating right?

Yeah, I wouldn’t comment any further in - any further detail about the specifics of any conversation with any State.

Got it. Then in the past you’ve talked about opportunities for growth on Medicaid outside RFP cycle like States assigning our PSS or covering in other products, do you still see that as a possibility and is there anything near term?

So, let me comment on the pipeline overall which I think is very strong. You know States continue to move and look to managed care as solutions for their healthcare needs and that movement continues as States have really embraced this. I think that activity, in fact I think we expect to respond to over 20 RFPs this year that will be implemented in ‘16, ‘17 and on into ‘18. So again when I say the pipeline is strong, it’s very strong. That’s heavily weighted towards more complex population, so that’s really what you are talking about when you speak to LTSS and the movement of those complex populations from fee for service and to managed Medicaid, we’ve got one of the largest books business, in that space we’ve got a very long history at dealing with these very vulnerable people and delivering real value to those individual, so - as well as value to the States. So I think we feel and Dave mentioned it in the opening comments, I think uniquely positioned between UnitedHealthcare and Optum to really serve these populations and help them live healthier lives year-over-year and deliver value back to the States and the process. So I think our outlook for that continued movement even within States where we’re already providing traditional tenant population managed care to continue grew into those complex populations.

Thank you.

Thank you. Next question, please.

We’ll go next to Sheryl Skolnick with Mizuho U.S.A.

Thanks so much. First let me step back, I mean against the backdrop of a somewhat challenging situation that exchanges, let me in this stand fall complement everyone from UHC to Optum to senior management the way you performed and handled during 2015. I am impressed by especially the fact that somewhere I sit that privacy made with the cost structure as well as positioning the business. I remember United having a better cost structure, better positioning going into a growth year in a very long time if ever than you’ve go now. So let me ask a question about one of those things that interesting to me that you performed well on which is the cash flow. It’s I guess multi, part one, why the strength; two, does this change in anyway your thoughts around share repurchases versus deleveraging versus investments in the business for 2016; and three, you know if you are going to - it seems like 2016 guidance is perhaps a little bit more conservative, it’s not a little modest on the cash flow, and I was just wondering what you think might change?

Dave will touch on beginning of that and then we’ll get into the share buyback, invest, et cetera as part two.

Thank you, Sheryl. First thank you for the recognition of the hard work this team has done this year particularly in the last half of the year to get this cost structures aligned and to really position its business for growth in 2016 and beyond. Our cash flows were exceptionally strong I think you know from past calls and discussions that we’ve had, we’re very, very, very focused on cash flows and in particular managing balance sheet elements of our business and the strength of the cash flows are the departure from what our original expectations where really around collecting receivables more quickly and paying claims more in line with what our contractual requirements are as opposed to paying it early. So just better working capital management and really contributed to that. As it relates to within what our priorities are for that is around share repurchases, deleveraging and investment, we are going to continue to maintain a very balance posture with respect to those things. Obviously it’s important that we continue to deliver the business as we had indicated that we would over the course of 18 months following the Catamaran transaction and we continue to be committed to doing so. Part of that is that our expectations that will continue to curtail our share repurchases at least for 2016, you know less extreme circumstances arise but for 2016 to about $1.2 billion to $1.5 billion in cash use. And as you can probably suspect by the activity that’s underway in our business, we continue to be a strong investor and new capabilities organically in our business but also through quested means. As it relates to 2016 and the cash flow, it’s certain jumping off about $9.7 billion cash flow year with stronger earnings expectations for 2016, you would expect would achieve higher cash flows. And as a result, we used language of $9.5 to $10 billion in cash flows are now taking closer to $10 billion. And we’ll take a hard look at that over the course of the first quarter and reassess whether not we can push that number forward. But clearly the business is operating well from the balance sheet management perspective, we’ll do all we can do to move that the cash flow number forward.

Excellent, thank you so much.

Next question, please.

We’ll go next to Scott Fidel with Credit Suisse.

Thanks. I just had a one follow-up first on the exchanges. At the Investor Day, I know you talked about assuming around negative a 15% margin in the exchanges, just as you work through sort of the updated math is, is that still how we should be thinking about that or sort of different relative to that number? And then just a follow-up question, just interested outside of the exchange just on the membership front, how membership ended up developing for the rest of the commercial risk business for the 2016 enrollment period most notably in the small group segment? Thanks.

Sure. We’ll let Dan comment on the first on the first and then Jeff also kind of speak to the business in ‘16.

Good morning, Scott. So where we landed on a policy year basis as we closed our 2014, our policy year losses on the exchanges were in that mid-double-digit rate, mid-teens range that we talked about in the Investor Conference, so 15%, 16%. And if you look at 2016 on a policy year basis, we expect that to moderate some, we’d be into the low-double digits from a margin percentage basis with higher enrollment base, lower percentage margin losses again on those things that I talked about earlier, so the strength of our pricing, the repositioning of our product portfolio and then our management efforts underneath that. So hopefully that provide the sense for what you are looking for and then Jeff on the enrollment.

Sure. Good morning, Scott. This is Jeff Alter. So we closed out ‘15 with very strong growth across both our fully insured and sub-funded product. I would say driving a good part of that was increase retention of our existing clients in certain markets we saw the market come back to our pricing particularly in small group. We also had the opportunity to win back a very large part of the health republic small group block in New York in our rates. And as you recall, from early ‘14 one of our headwinds was that health republic pricing against our small group block in New York, so we were in position to win that back during the four quarter of ‘15, which is good. We also couple with very strong specialty sales, our vision in dental products are selling really well. And I think it plays to sort of our value in the market place, our strong brand, our consisting pricing and the ability for the folks to take advantage of our you know increasing innovation in the market place, the service that we deliver and our efforts to make the healthcare system a little simple for our members. So we’re encouraged by the growth that we had over the last 18 months, we see that momentum continuing as we paced into ‘16 and feel good about what that will deliver in ‘16 and ‘16 and beyond for our shareholders and our members.

Okay, thanks.

Pretty positive and so many we’ll just take two more questions and then as you know John and Brett will available through the course of the day for the - for questions and any other areas of interest. So maybe two more questions, please.

And we can take our first question from Ralph Jacoby with Citi Group. Please go ahead.

Thanks, good morning. Just want to go back to cash flow, again seemed even stronger than usual. Are you holding back claims at all with ICD10 implementation and maybe just generally speaking, are you seeing any impact at this point from sort of coding in a QD perspective relative to your expectations? Thanks.

Not at all, but I’ll let Dave handle that and others who want to comment on coding. But that - those are not issues at all. Dave?

I am sure what to add to that. Not at all, those are not issues at all. No, this is just purely really more refined cash flow management principals across the company. The enterprise is doing well and really managing cash flows. Obviously the performance of the business stands, exchanges is strong and then we coupled out with the balance sheet management. We are not holding claims or doing anything other than paying them in accordance with contractual terms, it’s part of the value that comes from more integrated UnitedHealth Group then what we’ve experienced in the past with more fragmented healthcare platforms or claims education platforms as we continue to move towards a common set of technologies, working more closely with Optum and UnitedHealthcare, we’re seeing the benefits of strong cash flow.

And on in terms of ICD10, maybe we’ll go real quick to UnitedHealthcare as it relates to them and then flip to Optum and talk about more broadly the industry and what we are seeing.

Sure. Ralph, it’s Dan Schumacher. From an ICD10 standpoint, there is really nothing to update from the Investor Conference and my comments there, the reality is we are paying tens of millions of claims in the ICD10 that code set. And as you look inbound volumes, rejection rates, auto adjudication rates, throughputs, ending inventory all the way through that process stream, I would tell you all of that is in line. And so there is nothing getting hung up, nothing getting slow down. In today’s point really around the cash flow, it really comes down to just managing better to contract terms as well have more of our business on common platforms which allows us to do those kinds of offsets.

In terms of OptumInsight, sure, I always - we believe we have an extremely strong product line that were offering that’s increasing productivity and results and I’ll ask John Prince to comment on that.

I think Ralph in terms of ICD10, we’ve been backed within that and preparing ICD10 for years. In terms of working for our customers, we’ve actually had great results. One of the products that have the results of that compares to the coding, we’ve actually had a very distinctive product in the market and the customers have used have actually have seen a significant increase in production versus traditional products to the market.

Thanks you, so one last question, please.

And we’ll take that question from Ana Gupte with Leerink Partners.

Yes, thanks, good morning. I wanted to follow-up on Peter’s question and your response around. What I thought, I heard this was upside to your guidance for 2016 and I am just looking at although the things that have developed we’ve got a week through season, you pull forward even more losses from exchange in Medicaid, pricing looks pretty good, your reason stays stable have gone year-over-year by three days, your star membership rebalancing looks good as well and special enrolment period is maybe a tailwind, are there any headwinds are missing or should we think that there could be a upside to your consolidated carry show in your margins, that’s your projecting to ‘16?

Well that is an excellent list, I am not sure I could have done better myself. You know I just think it is the 19th of January, I think we should be careful in terms of how we discussing our results, we have to truly work through the balance of our exchange, we do think we have reserve for it and consider that appropriately into our ‘16 numbers. And as I said it’s the 19th of January and I think that we should you know more forward thoughtfully and prudently in our business. So I think those are the factors. In terms of headwinds, I think we said before we have less than before but we clearly have to play out the year and that’s what we intend to do. I think our focus is to really deliver a very clean, strong financial year to the market place to continue advance our business, continue to innovate, you know continue diversify across both the platform of UnitedHealthcare and Optum and kind of that’s our focus. I think we are always endower to try to perform better, but I think our guidance right now is very appropriate range and I am assuming you’ve taken some of the input in terms of how the quarters might play out from our commentary in our teleconference. So I think we’ll end up with that. And once again I’ll thank you joining us today and I’ll leave with few closing thoughts kind of as businesses, Optum and UnitedHealthcare, we think really advanced their capabilities significantly in 2015 and UnitedHealth Group’s revenues and operating earnings grew significantly as cash flows increased as we talked about over 20% and our dividend has increased and we will certainly address that in the middle of the year as our custom. UnitedHealthcare served more than 1.7 million people domestically growing virtually in every market that we serve and Optum grew its revenues by 42% and its backlog by more than 20%. In 2016, we expect to continue and accelerate this grow trend and carried into 2017 and beyond. We intend to further differentiate our products, our services by focusing on consistently high quality in everything we do and creating real value for customers and consumers on their terms. We remained committed to delivering clean, strong financial result as I said for our shareholders this year with a growing pipeline of future opportunities. So we appreciate your interest today. This concludes our call and as I said John and Brett will be available through the course of the day. We thank you for your attention. Thank you.

Ladies and gentlemen, this does conclude today’s program. Thank you for your participation. You may now disconnect. Have a great day.