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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
(Amendment No. 1)
(Mark One)
ÈANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2008
OR
‘TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
Commission file number: 1-10864
UNITEDHEALTH GROUP INCORPORATED
(Exact name of registrant as specified in its charter)
MINNESOTA 41-1321939
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
UNITEDHEALTH GROUP CENTER
9900 BREN ROAD EAST
MINNETONKA, MINNESOTA 55343
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code: (952) 936-1300
Securities registered pursuant to Section 12(b) of the Act:
COMMON STOCK, $.01 PAR VALUE NEW YORK STOCK EXCHANGE, INC.
(Title of each class) (Name of each exchange on which registered)
Securities registered pursuant to Section 12(g) of the Act: NONE
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ÈNo ‘
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ‘No È
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days. Yes ÈNo ‘
Indicate by checkmark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. ‘
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting
company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act. (Check one):
Large accelerated filer ÈAccelerated filer ‘
Non-accelerated filer ‘Smaller reporting company ‘
(Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ‘No È
The aggregate market value of voting stock held by non-affiliates of the registrant as of June 30, 2008 was $31,658,322,386 (based on the
last reported sale price of $26.25 per share on June 30, 2008, on the New York Stock Exchange).*
As of February 4, 2009, there were 1,215,615,705 shares of the registrant’s Common Stock, $.01 par value per share, issued and
outstanding.
Note that in Part III of this report on Form 10-K, we incorporate by reference certain information from our Definitive Proxy Statement for
the Annual Meeting of Shareholders to be held on June 2, 2009. This document will be filed with the Securities and Exchange Commission
(SEC) within the time period permitted by the SEC. The SEC allows us to disclose important information by referring to it in that manner.
Please refer to such information.
* Only shares of voting stock held beneficially by directors, executive officers and subsidiaries of the Company have been excluded in
determining this number.

Table of contents

  • Page 1
    ... CENTER 9900 BREN ROAD EAST MINNETONKA, MINNESOTA (Address of principal executive offices) 55343 (Zip Code) Registrant's telephone number, including area code: (952) 936-1300 Securities registered pursuant to Section 12(b) of the Act: COMMON STOCK, $.01 PAR VALUE (Title of each class) NEW YORK...

  • Page 2

  • Page 3
    ... 2009 (the "Original Filing"), solely to correct a typographical error contained in Note (a) to the "Selected Financial Data" table regarding the Company's total 2008 revenue generated under the Medicare Part D drug insurance coverage program. The previously reported amount of revenue for 2008 under...

  • Page 4
    PART IV ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (a) 3. Exhibits 31.1 Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 2

  • Page 5
    ... the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Dated: February 18, 2009 UNITEDHEALTH GROUP INCORPORATED By /S/ ERIC S. RANGEN Eric S. Rangen Senior Vice President and Chief Accounting Officer...

  • Page 6
    EXHIBIT INDEX 31.1 Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 4

  • Page 7
    ... in this report. STEPHEN J. HEMSLEY Stephen J. Hemsley President and Chief Executive Officer /s/ 3. February 18, 2009 Certification of Principal Financial Officer I, George L. Mikan III, certify that: 1. 2. I have reviewed this Annual Report on Form 10-K/A of UnitedHealth Group Incorporated (the...

  • Page 8

  • Page 9
    ... CENTER 9900 BREN ROAD EAST MINNETONKA, MINNESOTA (Address of principal executive offices) 55343 (Zip Code) Registrant's telephone number, including area code: (952) 936-1300 Securities registered pursuant to Section 12(b) of the Act: COMMON STOCK, $.01 PAR VALUE (Title of each class) NEW YORK...

  • Page 10
    ... Statements and Supplementary Data ...Changes in and Disagreements with Accountants on Accounting and Financial Disclosure ...Other Information ...PART III Item 10. Item 11. Item 12. Item 13. Item 14. Directors, Executive Officers and Corporate Governance ...Executive Compensation ...Security...

  • Page 11
    ... AmeriChoice. Health services are provided by our Enterprise Services Markets Group, which includes OptumHealth, Ingenix and Prescription Solutions. Our revenues are derived from premium revenues on risk-based products; fees from management, administrative, technology and consulting services; sales...

  • Page 12
    ... similar economic characteristics, products and services, types of customers, distribution methods and operational processes, and regulatory environment. These businesses also share significant common assets, including our contracted networks of physicians, health care professionals, hospitals and...

  • Page 13
    ... to contract for cost-effective access to a large number of conveniently located care professionals. Directly or through UnitedHealth Group's family of companies, UnitedHealthcare offers: • • A comprehensive range of benefit plans integrating medical, ancillary and alternative care products so...

  • Page 14
    ... provider organization (PPO) plans, Special Needs Plans, Point-of-Service (POS) plans, and Private-Fee-for-Service plans. Under the Medicare Advantage programs, SecureHorizons provides health insurance coverage to eligible Medicare beneficiaries in exchange for a fixed monthly premium per member...

  • Page 15
    ...its insurance company affiliates to approximately 3.8 million AARP members. Additional Ovations services include a nurse healthline service, a lower cost standardized Medicare supplement offering that provides consumers with a national hospital network, 24-hour access to health care information, and...

  • Page 16
    ... designs can be easily integrated to meet varying health plan, employer, payer, public sector and consumer needs at a wide range of price points. OptumHealth offers its products on an administrative fee basis where it manages and administers benefit claims for self-insured customers in exchange...

  • Page 17
    ... 2008, Financial Services electronically transmitted $26 billion in medical payments to physicians and other health care providers. Ingenix Ingenix offers database and data management services, software products, publications, consulting and actuarial services, business process outsourcing services...

  • Page 18
    ... health care utilization reporting and analytics, physician clinical performance benchmarking, clinical data warehousing, analysis and management responses for medical cost trend management, physician practice revenue cycle management, including integrated electronic medical record systems, revenue...

  • Page 19
    ...), apply to both the group and individual health insurance markets, including self-funded employee benefit plans. HIPAA requires guaranteed health care coverage for small employers and certain eligible individuals. It also requires guaranteed renewability for employers and individuals and limits...

  • Page 20
    ... our business units may do business with employers who sponsor employee benefit health plans, particularly those that maintain self-funded plans. Regulations established by the U.S. Department of Labor provide additional rules for claims payment and member appeals under health care plans governed by...

  • Page 21
    ..., contracting, product and rate, and financial and reporting requirements. There are laws and regulations that set specific standards for delivery of services, payment of claims, adequacy of health care professional networks, fraud prevention, protection of consumer health information, pricing and...

  • Page 22
    ...outsourcing companies, health care professionals that have formed networks to directly contract with employers or with CMS, specialty benefit providers, government entities, disease management companies, and various health information and consulting companies. For our Health Care Services businesses...

  • Page 23
    ... the Board of Directors since February 2000. Mr. Hemsley served as President and Chief Operating Officer from 2004 to November 2006. He joined UnitedHealth Group in 1997 and held various executive positions with the Company from 1997 to 2004. Mr. Mikan is Executive Vice President and Chief Financial...

  • Page 24
    ...December 2006, Mr. Wichmann served as President and Chief Operating Officer of UnitedHeathcare. In 2004, Mr. Wichmann served as Chief Executive Officer of Specialized Care Services (now OptumHealth). Mr. Wichmann joined UnitedHealth Group in 1998 and held various executive positions with the Company...

  • Page 25
    ...total consolidated revenues. We generally use approximately 80% to 85% of our premium revenues to pay the costs of health care services delivered to these customers. The profitability of our risk-based products depends in large part on our ability to predict, price for, and effectively manage health...

  • Page 26
    ... of our business, including contracting with physicians, hospitals and/or other health care professionals; physician reimbursement methods and payment rates; coverage determinations; mandated benefits; minimum medical expenditures; claim payments and processing; drug utilization and patient safety...

  • Page 27
    ... rates with these parties and increase our medical costs. During a prolonged economic downturn, state and federal budgets could be adversely affected, resulting in reduced reimbursements or payments in our federal and state government health care coverage programs, including Medicare, Medicaid...

  • Page 28
    ...not-for-profit organizations operating under licenses from the Blue Cross Blue Shield Association and other enterprises that serve more limited geographic areas or market segments such as Medicare specialty services. For our Prescription Solutions business, competitors include Medco Health Solutions...

  • Page 29
    ... funding, enrollments, payment adjustments and audits that could adversely affect our revenues, cash flows and financial results. We participate in various federal, state and local government health care coverage programs, including as a payer in Medicare Advantage, Medicare Part D, various Medicaid...

  • Page 30
    ... anticipated, either as a result of unforeseen changes to the Medicare program or otherwise, our financial results could be materially affected. If we fail to develop and maintain satisfactory relationships with physicians, hospitals, and other health care providers, our business could be adversely...

  • Page 31
    ...that would apply to our business. Compliance with new privacy and security laws, requirements, and new regulations may result in cost increases due to necessary systems changes, new limitations or constraints on our business models, the development of new administrative processes, and the effects of...

  • Page 32
    ... physicians, hospitals and other health care professionals), medical malpractice actions, contract disputes and claims related to disclosure of certain business practices. We are also party to certain class action lawsuits brought by health care professional groups. We are largely self-insured...

  • Page 33
    completed their review of the Company's historical stock option practices and reported the findings to the non-management directors of the Company. As a result of our historical stock option practices, we restated our previously filed financial statements, we incurred certain cash and non-cash ...

  • Page 34
    ...provide effective service to our customers in an efficient and uninterrupted fashion, and to accurately report our financial results depends on the integrity of the data in our information systems. As a result of technology initiatives, changes in our system platforms and integration of new business...

  • Page 35
    ... the competitive position of insurance companies. Ratings information is broadly disseminated and generally used throughout the industry. We believe our claims paying ability and financial strength ratings are important factors in marketing our products to certain of our customers. Our debt...

  • Page 36
    ... AND ISSUER PURCHASES OF EQUITY SECURITIES MARKET PRICES Our common stock is traded on the New York Stock Exchange (NYSE) under the symbol UNH. On February 4, 2009, there were 14,183 registered holders of record of our common stock. The per share high and low common stock sales prices reported by...

  • Page 37
    ... five-year total return to shareholders on UnitedHealth Group's common stock relative to the cumulative total returns of the S&P 500 index and a customized peer group (the "Fortune 50 Group"), an index of certain Fortune 50 companies for the five-year period ended December 31, 2008. The second...

  • Page 38
    ... industry, like UnitedHealth Group, all of these companies are large multi-segment companies using a well-defined operating model in one or more broad sectors of the economy. COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN Among UnitedHealth Group, The S&P 500 Index And The Fortune 50 Group $250 $200...

  • Page 39
    ... The companies included in our peer group are Aetna Inc., Cigna Corporation, Coventry Health Care, Inc., Humana Inc. and WellPoint, Inc. We believe that this peer group reflects our peers in the health care industry. COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN Among UnitedHealth Group, The S&P 500...

  • Page 40
    ... and Results of Operations and Consolidated Financial Statements and Notes to the Consolidated Financial Statements. (a) On January 1, 2006, we began serving as a plan sponsor offering Medicare Part D drug insurance coverage under a contract with CMS. Total revenues generated under this program were...

  • Page 41
    ..., cost-effective health care services and resources. We provide employers and consumers with excellent 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. BUSINESS...

  • Page 42
    ... to intensify our medical and operating cost management. Any payment reductions may be phased in over a number of years. If industry-wide Medicare Advantage membership reduces, there is likely to be increased demand for Medicare Supplemental insurance and Part D prescription drug coverage, and in...

  • Page 43
    ...), a diversified health care services company based in Las Vegas, Nevada, for approximately $2.6 billion in cash, representing a price of $43.50 per share of Sierra common stock. This acquisition strengthened our position in the southwest region of the United States. The U.S. Department of Justice...

  • Page 44
    ... that self-insure the medical costs of their employees and their dependants. For both premium risk-based and fee-based customer arrangements, we provide coordination and facilitation of medical services; transaction processing; health care professional services; and access to contracted networks of...

  • Page 45
    ... and a change in business mix towards service revenues from fee-based businesses. Operating costs for 2008 include $882 million for the proposed settlements of two class action lawsuits related to our historical stock option practices and related legal costs, net of expected insurance proceeds, and...

  • Page 46
    ... between reporting segments principally consist of sales of pharmacy benefit products and services to Health Care Services customers by Prescription Solutions, certain product offerings sold to Health Care Services customers by OptumHealth, and medical benefits cost, quality and utilization data and...

  • Page 47
    ... number of individuals served by Medicaid plans, premium rate increases and the acquisition of Unison in the second quarter of 2008. The decrease in Health Care Services earnings from operations was primarily due to pressure on enrollment and gross margins in the UnitedHealthcare risk-based business...

  • Page 48
    ... vs. 2007 Increase (Decrease) 2007 vs. 2006 (in thousands) 2008 2007 2006 Commercial Risk-based ...Commercial Fee-based ...Total Commercial ...Medicare Advantage ...Medicaid ...Standardized Medicare Supplement ...Total Public and Senior ...Total Health Care Services Medical Benefits ... 10,360...

  • Page 49
    ... 2007, as well as annual rate increases. Product Revenues. The 2007 increase in consolidated product revenues was driven by pharmacy sales growth at Prescription Solutions primarily due to providing prescription drug benefit services to an additional four million Ovations Medicare Advantage and Part...

  • Page 50
    ... above. Cost of Products Sold Cost of products sold increased in 2007 primarily due to costs associated with increased pharmacy sales at Prescription Solutions as a result of providing prescription drug benefit services to an additional four million Ovations Medicare Advantage and Part D members in...

  • Page 51
    ... by business growth and operating cost management described above. Prescription Solutions The Prescription Solutions revenues increase in 2007 was primarily driven by providing prescription drug benefit services to an additional four million Ovations Medicare Advantage and stand-alone Part D members...

  • Page 52
    Intersegment revenues were eliminated in consolidation and amounted to $12.4 billion and $3.4 billion for 2007 and 2006, respectively. Prescription Solutions earnings from operations increased largely due to the expansion of services to Medicare Part D members discussed above. The operating margin ...

  • Page 53
    ...the settlement of two class action lawsuits related to our historical stock option practices. For detail on these settlements, see Note 15 of Notes to the Consolidated Financial Statements. As of December 31, 2008, our cash, cash equivalent and available-for-sale investment balances of $21.4 billion...

  • Page 54
    ... requirements and economic and market conditions. For example, a significant downgrade in our credit ratings or conditions in the capital markets may increase the cost of borrowing for us or limit our access to capital. We have therefore adopted strategies and actions toward maintaining financial...

  • Page 55
    ... by state regulatory authorities, is limited based on the entity's level of statutory net income and statutory capital and surplus. An inability of our regulated subsidiaries to pay dividends to their parent companies could impact the scale to which we could reinvest in our business through capital...

  • Page 56
    ... they are unable to pay. We have recorded a corresponding reinsurance receivable from OneAmerica in our Consolidated Financial Statements. (e) Unrecognized tax benefits relate to the provisions of Financial Accounting Standards Board (FASB) Interpretation No. 48 (FIN 48). Since the timing of future...

  • Page 57
    ..., health care professional contract rate changes, medical care utilization and other medical cost trends, membership volume and demographics, benefit plan changes, and business mix changes related to products, customers and geography. Depending on the health care professional and type of service...

  • Page 58
    ... to the current year. (b) Represents reported amounts adjusted to reflect the net impact of medical cost development. (c) Not yet determinable as the amount of prior period development recorded in 2009 will change as our December 31, 2008 medical costs payable estimate develops throughout 2009. 48

  • Page 59
    ... costs payable and actual medical costs payable, excluding AARP Medicare Supplement Insurance, 2008 net earnings would increase or decrease by $48 million and diluted net earnings per common share would increase or decrease by $0.04 per share. The current national health care cost inflation rate...

  • Page 60
    ...recovery and record any resulting impairment charges at that time. We manage our investment portfolio to limit our exposure to any one issuer or market sector, and largely limit our investments to U.S. Government and Agency securities, state and municipal securities, asset-backed, and corporate debt...

  • Page 61
    ... of equity securities and venture capital funds, a portion of which were held in various public and non-public companies concentrated in the areas of health care delivery and related information technologies. Market conditions that affect the value of health care or technology stocks will likewise...

  • Page 62
    ... 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA UnitedHealth Group Consolidated Balance Sheets (in millions, except per share data) December 31, 2008 2007 ASSETS Current Assets Cash and Cash Equivalents ...Short-Term Investments ...Accounts Receivable, net of allowances of $148 and $121 ...Assets...

  • Page 63
    ... share data) For the Year Ended December 31, 2008 2007 2006 REVENUES Premiums ...Services ...Products ...Investment and Other Income ...Total Revenues ...OPERATING COSTS Medical Costs ...Operating Costs ...Cost of Products Sold ...Depreciation and Amortization ...Total Operating Costs ...EARNINGS...

  • Page 64
    ...Share-Based Compensation, and related tax benefits ...Common Stock Dividend ...Balance at December 31, 2006 ...Net Earnings ...Unrealized Holding Gains on Investment Securities During the Period, net of tax expense of $60 ...Reclassification Adjustment for Net Realized Gains Included in Net Earnings...

  • Page 65
    ... ...Share-Based Compensation ...Other ...Net Change in Other Operating Items, net of effects from acquisitions and changes in AARP balances: Accounts Receivable ...Other Assets ...Medical Costs Payable ...Accounts Payable and Other Accrued Liabilities ...Other Policy Liabilities ...Unearned Premiums...

  • Page 66
    ... assumes the economic risk of funding its customers' health care services and related administrative costs. The Company recognizes premium revenues in the period in which eligible individuals are entitled to receive health care services. The Company records health care premium payments received from...

  • Page 67
    ... premium risk-based and fee-based customer arrangements, the Company provides coordination and facilitation of medical services; transaction processing; customer, consumer and care professional services; and access to contracted networks of physicians, hospitals and other health care professionals...

  • Page 68
    UNITEDHEALTH GROUP NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued) reporting period, the Company's operating results include the effects of more completely developed medical costs payable estimates associated with previously reported periods. Cash, Cash Equivalents and Investments Cash ...

  • Page 69
    ...drug insurance coverage under contracts with the Centers for Medicare and Medicaid Services (CMS). Under the Medicare Part D program, there are six separate elements of payment received by the Company during the plan year. These payment elements are as follows CMS Premium - CMS pays a fixed monthly...

  • Page 70
    .... As a result of the Medicare Part D product benefit design, the Company incurs a disproportionate amount of pharmacy benefit costs early in the contract year. While the Company is responsible for approximately 67% of a Medicare Part D beneficiary's drug costs up to the initial coverage limit, the...

  • Page 71
    UNITEDHEALTH GROUP NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued) coverage limit. The uneven timing of Medicare Part D pharmacy benefit claims results in losses in the first half of the year that, if they continued at that pace for the rest of the year, would entitle the Company to risk-...

  • Page 72
    ...insurance products and the current portion of future policy benefits. Customer balances represent excess customer payments and deposit accounts under experience-rated contracts. At the customer's option, these balances may be refunded or used to pay future premiums or claims under eligible contracts...

  • Page 73
    UNITEDHEALTH GROUP NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued) Company had an aggregate $2.0 billion reinsurance receivable, of which $154 million was recorded in Other Current Receivables and $1.9 billion was recorded in Other Assets in the Consolidated Balance Sheets. As of December...

  • Page 74
    ...Assets Under Management on the Consolidated Balance Sheet at that date. The impact of adoption of FAS 159 was not material to the Company. For a discussion of the instruments for which the fair value option was applied, see Note 13 of Notes to the Consolidated Financial Statements. In September 2006...

  • Page 75
    ...Sierra's Medicare Advantage HMO plans in Nevada. The results of operations and financial condition of Sierra have been included in the Company's consolidated results and the results of the Health Care Services, OptumHealth and Prescription Solutions reporting segments since the acquisition date. The...

  • Page 76
    ... within the Company's Health Care Services reporting segment. The Company paid approximately $515 million in cash in exchange for all of the outstanding equity of JDHC. The purchase price and costs associated with the acquisition exceeded the fair value of the net tangible assets acquired by...

  • Page 77
    ...Value (in millions) 2008 Cash and Cash Equivalents ...Debt Securities - Available-for-Sale: U.S. Government and Direct Agency obligations ...State and Municipal obligations ...Corporate obligations ...Mortgage-backed securities (a) ...Total Debt Securities - Available-for-Sale ...Equity Securities...

  • Page 78
    UNITEDHEALTH GROUP NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued) The amortized cost and fair value of debt securities available-for-sale as of December 31, 2008, by contractual maturity, are as follows: (in millions) Amortized Cost Fair Value Due in one year or less ...Due after one ...

  • Page 79
    ... in equity securities and venture capital funds consists of investments held in various public and nonpublic companies concentrated in the areas of health care delivery and related information technologies. Market conditions that affect the value of health care and related technology stocks will...

  • Page 80
    ... by observable market data. Fair values of available-for-sale debt and equity securities are based on quoted market prices, where available. The Company obtains one price for each security primarily from a third party pricing service (pricing service), which generally uses Level 1 or Level 2 inputs...

  • Page 81
    ...Statements for further detail on AARP. Quoted Prices in Active Markets (Level 1) Other Observable Inputs (Level 2) Unobservable Inputs (Level 3) (in millions) Total Fair Value Cash and Cash Equivalents ...Debt Securities - Available for Sale: U.S. Government and Direct Agency obligations ...State...

  • Page 82
    ..., by reporting segment, during the years ended December 31, 2008 and 2007, were as follows: (in millions) Health Care Services OptumHealth Ingenix Prescription Solutions Consolidated Balance at December 31, 2006 ...Acquisitions ...Subsequent Payments and Adjustments, net ...Balance at December...

  • Page 83
    ... Company develops estimates for medical costs incurred but not reported using an actuarial process that is consistently applied, centrally controlled and automated. The actuarial models consider factors such as time from date of service to claim receipt, claim backlogs, care provider contract rate...

  • Page 84
    UNITEDHEALTH GROUP NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued) 9. Commercial Paper and Long-Term Debt Commercial paper and long-term debt consisted of the following: December 31, 2008 December 31, 2007 Carrying Fair Carrying Fair Value (a) Value (b) Value (a) Value (b) (in millions)...

  • Page 85
    ... GROUP NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued) (b) Estimated based on third-party quoted market prices for the same or similar issues. (c) As of December 31, 2007, the fair value of the interest rate swaps was classified within debt in the Company's Consolidated Balance Sheets...

  • Page 86
    ... Balance Sheets with the carrying value of the debt adjusted by an offsetting amount, with no changes in market value recognized through the Company's Consolidated Statements of Operations. In January 2009 the Company terminated $4.9 billion notional of interest rate swap contracts with financial...

  • Page 87
    ...in millions) 2008 2007 Deferred Income Tax Assets Accrued Expenses and Allowances ...Unearned Premiums ...Medical Costs Payable and Other Policy Liabilities ...Long Term Liabilities ...Net Operating Loss Carryforwards ...Share-Based Compensation ...Unrecognized Tax Benefits ...Net Unrealized Losses...

  • Page 88
    ... of unrecognized tax benefits that, if recognized, would affect the effective tax rate was $193 million. The Company currently files income tax returns in the U.S. federal jurisdiction, various states, and foreign jurisdictions. The U.S. Internal Revenue Service (IRS) has completed exams on the...

  • Page 89
    ... price of approximately $37 per share and an aggregate cost of approximately $2.7 billion. At December 31, 2008, the Company had Board of Directors' authorization to purchase up to an additional 103 million shares of its common stock. 12. Share-Based Compensation and Other Employee Benefit Plans...

  • Page 90
    ...of estimating the fair value of the Company's employee stock option and SAR grants, the Company uses a binomial model. The principal assumptions the Company used in applying the option-pricing models were as follows: 2008 2007 2006 Risk Free Interest Rate ...Expected Volatility ...Expected Dividend...

  • Page 91
    ... within Operating Costs in the Company's Consolidated Statements of Operations. Share compensation expense for 2006 included $31 million associated with the cash settlement of stock options expiring or forfeiting during the period. At December 31, 2008, there was $518 million of total unrecognized...

  • Page 92
    ... price of unexercised stock options granted to nonexecutive officer employees and the related cash payments. These amounts have been recorded in the corporate segment. As further discussed in Note 11 of Notes to the Consolidated Financial Statements, the Company maintains a share repurchase program...

  • Page 93
    ... related to the AARP Medicare Supplement Insurance business are directly recorded as an increase or decrease to the RSF. The primary components of the underwriting results are premium revenue, medical costs, investment income, administrative expenses, member service expenses, marketing expenses and...

  • Page 94
    ... FINANCIAL STATEMENTS-(Continued) The following AARP Program-related assets and liabilities were included in the Company's Consolidated Balance Sheets at December 31: (in millions) 2008 2007 Accounts Receivable ...Assets Under Management ...Other Assets ...Medical Costs Payable ...Accounts Payable...

  • Page 95
    ...such values are recognized in the Consolidated Balance Sheets. Management obtains quoted market prices for these disclosures. The carrying amounts reported in the Consolidated Balance Sheets for cash and cash equivalents, premium and other current receivables, unearned premiums, accounts payable and...

  • Page 96
    ... funding. The Company contracts on an administrative services only (ASO) basis with customers who fund their own claims. The Company charges these customers administrative fees based on the expected cost of administering their self-funded programs. In some cases, the Company provides performance...

  • Page 97
    ... Company's 2006 Annual Report on Form 10-K, the Company believed that compensation expense related to prior exercises of certain stock options by certain of the Company's executive officers would no longer qualify as deductible performance-based compensation in accordance with Internal Revenue Code...

  • Page 98
    ... the actions into a single action. The action is captioned In re UnitedHealth Group Incorporated PSLRA Litigation. The action was brought by lead plaintiff California Public Employees Retirement System (CalPERS) against the Company and certain of its current and former officers and directors. The...

  • Page 99
    ...provided to class members, and a final settlement approval hearing is scheduled for March 16, 2009. On June 6, 2006, a purported class action captioned Zilhaver v. UnitedHealth Group Incorporated was filed against the Company and certain of its current and former officers and directors in the United...

  • Page 100
    ...to the design and management of its service offerings. The Company records liabilities for its estimates of probable costs resulting from these matters. These matters include, but are not limited to, claims relating to health care benefits coverage, medical malpractice actions, contract disputes and...

  • Page 101
    ... change how the Company does business, restrict revenue and enrollment growth, increase the Company's health care and administrative costs and capital requirements, and increase the Company's liability in federal and state courts for coverage determinations, contract interpretation and other actions...

  • Page 102
    ... similar products and services, types of customers, distribution methods and operational processes, and operate in a similar regulatory environment. These businesses also share significant common assets, including the Company's contracted networks of physicians, health care professionals, hospitals...

  • Page 103
    ... reporting segment financial information as of and for the years ended December 31: Health Care Services Prescription Solutions Corporate and Intersegment Eliminations (in millions) 2008 Revenues - External Customers Premiums ...Services ...Products ...Total Revenues - External Customers ...Total...

  • Page 104
    ... quarterly financial information for all quarters of 2008 and 2007. (in millions, except per share data) March 31 For the Quarter Ended June 30 September 30 December 31 2008 Revenues ...Operating Costs ...Earnings From Operations ...Net Earnings ...Basic Net Earnings per Common Share ...Diluted Net...

  • Page 105
    ... conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An...

  • Page 106
    Report of Independent Registered Public Accounting Firm To the Board of Directors and Stockholders of UnitedHealth Group Incorporated and subsidiaries: We have audited the consolidated financial statements of UnitedHealth Group Incorporated and subsidiaries (the "Company") as of December 31, 2008 ...

  • Page 107
    ... it files or submits under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in SEC rules and forms; and (ii) accumulated and communicated to the Company's management, including its principal executive officer and principal financial officer, as...

  • Page 108
    ...-15(f) under the Securities Exchange Act of 1934. The Company's internal control system is designed to provide reasonable assurance to our management and board of directors regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes...

  • Page 109
    ... Senior Vice President and Chief Accounting Officer February 11, 2009 New York Stock Exchange Certification Pursuant to Section 303A.12(a) of the NYSE listed company manual, the Company submitted an unqualified certification of its Chief Executive Officer to the NYSE in 2008. We have also filed, as...

  • Page 110
    ...control over financial reporting is a process designed by, or under the supervision of, the company's principal executive and principal financial officers, or persons performing similar functions, and effected by the company's board of directors, management, and other personnel to provide reasonable...

  • Page 111
    ... have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements as of and for the year ended December 31, 2008 of the Company and our report dated February 11, 2009 expressed an unqualified opinion on those...

  • Page 112
    ... UnitedHealth Group 1993 Employee Stock Purchase Plan, as amended. Includes 17,909,861 options to acquire shares of common stock that were originally issued under the United HealthCare Corporation 1998 Broad-Based Stock Incentive Plan, as amended, which was not approved by the Company's shareholders...

  • Page 113
    ..." and "Corporate Governance" in our definitive proxy statement for the Annual Meeting of Shareholders to be held June 2, 2009, and such required information is incorporated herein by reference. ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES The information required by Item 9(e) of Schedule 14A will...

  • Page 114
    ... and Restated Bylaws of UnitedHealth Group Incorporated (incorporated by reference to Exhibit 3.2 to the Company's Current Report on Form 8-K dated May 29, 2007) Senior Indenture, dated as of November 15, 1998, between United HealthCare Corporation and The Bank of New York (incorporated by reference...

  • Page 115
    ... Company's Annual Report on Form 10-K for the year ended December 31, 2007) Third Amendment to UnitedHealth Group Executive Savings Plan (2004 Statement) UnitedHealth Group Directors' Compensation Deferral Plan (2009 Statement) Employment Agreement, dated as of November 7, 2006, between UnitedHealth...

  • Page 116
    ...Exhibit A to Exhibit 10.1 to the Company's Current Report on Form 8-K dated November 7, 2006) Amendment to Employment Agreement and Agreement for Supplemental Executive Retirement Pay, effective as of December 31, 2008, between United HealthCare Services, Inc. and Stephen J. Hemsley Letter Agreement...

  • Page 117
    ... of the class members, UnitedHealth Group Incorporated and certain individual defendants. Settlement Agreement, dated as of January 14, 2009, by and among United HealthCare Corporation, n/k/a UnitedHealth Group, UnitedHealthcare Insurance Company, UnitedHealthcare Insurance Company of New York, Inc...

  • Page 118
    ... Financial Information of Registrant (Parent Company Only) UnitedHealth Group Condensed Balance Sheets (in millions, except per share data) December 31, 2008 2007 ASSETS Current Assets Cash and Cash Equivalents ...Deferred Income Taxes ...Prepaid Expenses and Other Current Assets ...Total Current...

  • Page 119
    Schedule I Condensed Financial Information of Registrant (Parent Company Only) UnitedHealth Group Condensed Statements of Operations (in millions) For the Year Ended December 31, 2008 2007 2006 REVENUES Investment and Other Income ...Total Revenues ...OPERATING COSTS Operating Costs ...Interest ...

  • Page 120
    Schedule I Condensed Financial Information of Registrant (Parent Company Only) UnitedHealth Group Condensed Statements of Cash Flows For the Year Ended December 31, 2008 2007 2006 (in millions) OPERATING ACTIVITIES Cash Flows From Operating Activities ...INVESTING ACTIVITIES Capital Contributions ...

  • Page 121
    ...the Consolidated Financial Statements. 4. Commitments and Contingencies Operating costs for 2008 include $882 million for the proposed settlements of two class action lawsuits related to the Company's historical stock option practices and related legal costs, net of expected insurance proceeds, and...

  • Page 122
    ... duly authorized. Dated: February 11, 2009 UNITEDHEALTH GROUP INCORPORATED By STEPHEN J. HEMSLEY Stephen J. Hemsley President and Chief Executive Officer /S/ Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf...

  • Page 123
    ... and Restated Bylaws of UnitedHealth Group Incorporated (incorporated by reference to Exhibit 3.2 to the Company's Current Report on Form 8-K dated May 29, 2007) Senior Indenture, dated as of November 15, 1998, between United HealthCare Corporation and The Bank of New York (incorporated by reference...

  • Page 124
    ... Company's Annual Report on Form 10-K for the year ended December 31, 2007) Third Amendment to UnitedHealth Group Executive Savings Plan (2004 Statement) UnitedHealth Group Directors' Compensation Deferral Plan (2009 Statement) Employment Agreement, dated as of November 7, 2006, between UnitedHealth...

  • Page 125
    ...10.1 to the Company's Current Report on Form 8-K dated December 15, 2006) Amendment to Employment Agreement, effective as of December 31, 2008, between United HealthCare Services, Inc. and Eric S. Rangen Employment Agreement, effective as of May 28, 2007, between United HealthCare Services, Inc. and...

  • Page 126
    ... of the class members, UnitedHealth Group Incorporated and certain individual defendants. Settlement Agreement, dated as of January 14, 2009, by and among United HealthCare Corporation, n/k/a UnitedHealth Group, UnitedHealthcare Insurance Company, UnitedHealthcare Insurance Company of New York, Inc...

  • Page 127
    ... information; and Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. /s/ STEPHEN J. HEMSLEY b) February 11, 2009 Stephen J. Hemsley President and Chief Executive Officer

  • Page 128
    ... financial information; and Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. /s/ GEORGE L. MIKAN III George L. Mikan III Executive Vice President and Chief Financial Officer...

  • Page 129
    ...Hemsley President and Chief Executive Officer /s/ Certification of Principal Financial Officer In connection with the Annual Report of UnitedHealth Group Incorporated (the "Company") on Form 10-K for the period ended December 31, 2008 as filed with the Securities and Exchange Commission on the date...

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