United Healthcare 2004 Annual Report Download - page 59

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UNITEDHEALTH GROUP 57
Pursuant to our agreement, AARP assets under management are managed separately from our general
investment portfolio and are used to pay costs associated with the AARP program. These assets are invested at
our discretion, within investment guidelines approved by AARP. We do not guarantee any rates of investment
return on these investments and, upon transfer of the AARP contract to another entity, we would transfer
cash equal in amount to the fair value of these investments at the date of transfer to that entity. Interest
earnings and realized investment gains and losses on these assets accrue to the overall benefit of the AARP
policyholders through the RSF. As such, they are not included in our earnings. Interest income and realized
gains and losses related to assets under management are recorded as an increase to the AARP RSF and were
$103 million, $101 million and $102 million in 2004, 2003 and 2002, respectively. Assets under management
are reported at their fair market value, and unrealized gains and losses are included directly in the RSF
associated with the AARP program. As of December 31, 2004 and 2003, the amortized cost, gross unrealized
gains and losses, and fair value of cash, cash equivalents and investments associated with the AARP insurance
program, included in Assets Under Management, were as follows (in millions):
Amortized Gross Unrealized Gross Unrealized Fair
2004 Cost Gains Losses Value
Cash and Cash Equivalents $ 184 $ – $ – $ 184
Debt Securities — Available for Sale 1,664 37 (2) 1,699
Total Cash and Investments $1,848 $ 37 $ (2) $ 1,883
2003
Cash and Cash Equivalents $218 $–$–$218
Debt Securities — Available for Sale 1,655 86 – 1,741
Total Cash and Investments $1,873 $86 $–$1,959
As of December 31, 2004 and 2003, respectively, debt securities consisted of $809 million and $711 million
in U.S. Government and Agency obligations, $20 million and $16 million in state and municipal obligations
and $870 million and $1,014 million in corporate obligations. At December 31, 2004, the AARP assets under
management included debt securities of $99 million with maturities of less than one year, $813 million with
maturities of one to five years, $464 million with maturities of five to 10 years and $323 million with
maturities of more than 10 years.