United Healthcare 2003 Annual Report Download - page 23

UnitedHealth Group 21
Results of Operations
BUSINESS OVERVIEW
UnitedHealth Group is a leader in the health and well-being industry, serving approximately 52 million
Americans. Our primary focus is on improving the American health care system by simplifying the
administrative components of health care delivery, promoting evidence-based medicine as the standard
for care and providing relevant, actionable data that physicians, health care providers, consumers,
employers and other participants in health care can use to make better, more informed decisions.
Through our diversified family of businesses, we leverage core competencies in advanced
technology-based transactional capabilities; health care data, knowledge and informatics; and health
care resource organization and care facilitation to make health care work better. We provide individuals
with access to quality, cost-effective health care services and resources. We promote the delivery of care,
consistent with the best available evidence for effective health care. We provide employers with superb
value, service and support, and we deliver value to our shareholders by executing a business strategy
founded upon a commitment to balanced growth, profitability and capital discipline.
2003 FINANCIAL PERFORMANCE HIGHLIGHTS
UnitedHealth Group had a very strong year in 2003. The company continued to achieve diversified
growth across its business segments and generated net earnings of $1.8 billion and operating cash flows
of $3.0 billion, representing increases of 35% and 24%, respectively, over 2002. Other financial
performance highlights include:
>Diluted net earnings per common share of $2.96, representing an increase of 39% over 2002.
>Revenues of $28.8 billion, a 15% increase over 2002.
>Operating earnings of more than $2.9 billion, up 34% over 2002.
>Consolidated operating margin of 10.2%, up from 8.7% in 2002 driven primarily by improved margins on
risk-based products, a product mix shift from risk-based products to higher-margin, fee-based products, and
operational and productivity improvements.
>Return on shareholders’ equity of 39.0%, up from 33.0% in 2002.
2003 RESULTS COMPARED TO 2002 RESULTS
Consolidated Financial Results
Revenues
Revenues are comprised of premium revenues from risk-based products; service revenues, which
primarily include fees for management, administrative and consulting services; and investment and
other income.
Premium revenues are primarily derived from risk-based health insurance arrangements in which
the premium is fixed, typically for a one-year period, and we assume the economic risk of funding our
customers’ health care services and related administrative costs. Service revenues consist primarily of
fees derived from services performed for customers that self-insure the medical costs of their employees
and their dependents. For both premium risk-based and fee-based customer arrangements, we provide
coordination and facilitation of medical services, transaction processing, customer, consumer and care
provider services, and access to contracted networks of physicians, hospitals and other health care
professionals.
Consolidated revenues increased by $3.8 billion, or 15%, in 2003 to $28.8 billion. Consolidated
revenues increased by approximately 11% as a result of rate increases on premium and fee-based
services and growth across business segments, and 4% as a result of revenues from businesses acquired
since the beginning of 2002. Following is a discussion of 2003 consolidated revenue trends for each of
our three revenue components.