United Healthcare 2007 Annual Report Download - page 80

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 the Supplemental Health Insurance Program. We do not
guarantee any rates of investment return on these investments and, upon transfer of this AARP agreement 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 and, thus, 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 $108 million, $94 million and $90 million in 2007, 2006 and 2005, 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, 2007 and 2006, 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
Cost
Gross Unrealized
Gains
Gross Unrealized
Losses
Fair
Value
2007
Cash and Cash Equivalents ................. $ 441 $ — $ — $ 441
Debt Securities — Available for Sale:
U.S. Government and Agency
obligations ........................ 959 25 (2) 982
State and Municipal obligations ......... 25 — — 25
Corporate obligations .................. 731 5 (8) 728
Total Debt Securities — Available for Sale .... 1,715 30 (10) 1,735
Total Cash and Investments ................. $ 2,156 $ 30 $ (10) $ 2,176
2006
Cash and Cash Equivalents ................. $ 532 $ — $ — $ 532
Debt Securities — Available for Sale:
U.S. Government and Agency
obligations ........................ 804 2 (9) 797
State and Municipal obligations ......... 12 — — 12
Corporate obligations .................. 588 2 (7) 583
Total Debt Securities — Available for Sale .... 1,404 4 (16) 1,392
Total Cash and Investments ................. $ 1,936 $ 4 $ (16) $ 1,924
At December 31, 2007, the fair value of AARP assets under management had the following maturity dates:
(in millions) < 1 Year 1 to 5 Years 5 to 10 Years > 10 Years Total
Debt Securities ..................... $ 144 $ 519 $ 545 $ 527 $ 1,735
As of December 31, 2007, we had investments with an aggregate fair value of $151 million under the AARP
agreement in an unrealized loss position of $2 million for 12 months or greater. These investments are subject to
the same processes and reviews as the rest of our investment portfolio, including impairment analyses. As a
result of these reviews, as is further discussed in Note 5, we did not identify any other-than-temporary
impairments. Interest earnings and realized investment gains and losses on these assets accrue to the overall
benefit of the AARP policyholders through the RSF and are, therefore, not included in our earnings.
Under separate trademark license agreements with AARP, we sell AARP-branded Medicare Prescription Drug
benefit plans and Medicare Advantage plans. We pay AARP a license fee for the use of the trademark and
member data and assume all operational and underwriting risks.
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