United Healthcare 2006 Annual Report Download - page 91

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We record liabilities related to integration activities in connection with business combinations when integration
plans are finalized and approved by management within one year of the acquisition date in accordance with the
requirements of the Emerging Issues Task Force (EITF) Issue No. 95-3, “Recognition of Liabilities in
Connection with a Purchase Business Combination.” Liabilities recorded relate to activities that have no future
economic benefit to the Company and represent contractual obligations. These liabilities result in an increase to
goodwill acquired. At each reporting date, we evaluate our liabilities associated with integration activities and
make adjustments as appropriate. Integration activities relate primarily to severance costs for certain workforce
reductions largely in the Health Care Services segment, costs of terminated or vacated leased facilities and other
contract termination costs. The following table illustrates the changes in employee termination benefit costs and
other integration costs related to the PacifiCare acquisition as of December 31, 2006 (in millions):
Employee
Termination
Benefit Costs
Other Integration
Activities Total
Accrued integration liabilities at December 31, 2005 .... $ 15 $ 30 $ 45
Additional integration costs accrued and estimate
adjustments .................................. 55 3 58
Payments made against liability .................... (43) (5) (48)
Accrued integration liabilities at December 31,2006 .... $ 27 $ 28 $ 55
On September 19, 2005, our Health Care Services business segment acquired Neighborhood Health Partnership
(NHP). NHP serves local employers primarily in South Florida. This acquisition strengthened our market
position in this region and provided expanded distribution opportunities for our other UnitedHealth Group
businesses. We paid approximately $185 million in cash in exchange for all of the outstanding equity of NHP.
The results of operations and financial condition of NHP have been included in our Consolidated Financial
Statements since the acquisition date. The pro forma effects of the NHP acquisition on our Consolidated
Financial Statements were not material.
In October 2005, we sold the life insurance and annuity business within Golden Rule to OneAmerica Financial
Partners, Inc. (OneAmerica) through an indemnity reinsurance arrangement. Under the arrangement,
OneAmerica assumes the risks associated with the future policy benefits for the life and annuity contracts. We
remain liable for claims if OneAmerica fails to meet its obligations to policy holders. Because we remain
primarily liable to the policy holders, the liabilities and obligations associated with the reinsured contracts remain
on our Consolidated Balance Sheets with a corresponding reinsurance receivable from OneAmerica, which is
classified in other current and noncurrent assets and totaled approximately $121 million and $1.9 billion,
respectively, as of December 31, 2006. We transferred approximately $1.3 billion of investments and $363
million in cash to OneAmerica in conjunction with the arrangement. We realized a small gain on the sale which
has been deferred and is being amortized over the estimated remaining life of the reinsured contracts.
For the years ended December 31, 2006, 2005 and 2004, aggregate consideration paid or issued for smaller
acquisitions accounted for under the purchase method was $276 million, $196 million and $158 million,
respectively. These acquisitions were not material to our Consolidated Financial Statements.
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