United Healthcare 2008 Annual Report Download - page 43

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RESULTS SUMMARY
The following summarizes the consolidated financial results for the years ended December 31:
(in millions, except percentages and per
share data)
Increase
(Decrease)
Increase
(Decrease)
2008 2007 2006 2008 vs. 2007 2007 vs. 2006
REVENUES
Premiums ...................$73,608 $68,781 $65,666 $ 4,827 7 % $3,115 5 %
Services .................... 5,152 4,608 4,268 544 12 % 340 8 %
Products .................... 1,655 898 737 757 84 % 161 22 %
Investment and Other Income . . . 771 1,144 871 (373) (33)% 273 31 %
Total Revenues ............ 81,186 75,431 71,542 5,755 8 % 3,889 5 %
OPERATING COSTS
Medical Costs ............... 60,359 55,435 53,308 4,924 9 % 2,127 4 %
Medical Cost Ratio ......... 82.0 % 80.6 % 81.2 % 1.4 % (0.6)%
Operating Costs .............. 13,103 10,583 9,981 2,520 24 % 602 6 %
Operating Cost Ratio ........ 16.1 % 14.0 % 14.0 % 2.1 % — %
Cost of Products Sold ......... 1,480 768 599 712 93 % 169 28 %
Depreciation and
Amortization .............. 981 796 670 185 23 % 126 19 %
Total Operating Costs ....... 75,923 67,582 64,558 8,341 12 % 3,024 5 %
EARNINGS FROM
OPERATIONS .............. 5,263 7,849 6,984 (2,586) (33)% 865 12 %
Operating Margin .......... 6.5 % 10.4 % 9.8 % (3.9)% 0.6 %
Interest Expense .............. (639) (544) (456) 95 17 % 88 19 %
EARNINGS BEFORE INCOME
TAXES .................... 4,624 7,305 6,528 (2,681) (37)% 777 12 %
Provision for Income Taxes ..... (1,647) (2,651) (2,369) (1,004) (38)% 282 12 %
Tax Rate .................. 35.6 % 36.3 % 36.3 % (0.7)% — %
NET EARNINGS ..............$ 2,977 $ 4,654 $ 4,159 $(1,677) (36)% $ 495 12 %
DILUTED NET EARNINGS PER
COMMON SHARE ..........$ 2.40 $ 3.42 $ 2.97 $ (1.02) (30)% $ 0.45 15 %
RETURN ON EQUITY ........ 14.9 % 22.4 % 22.2 % (7.5)% 0.2 %
TOTAL PEOPLE SERVED ..... 73 71 71 2 3 % — — %
ACQUISITIONS
Unison Health Plans. On May 30, 2008, we acquired all of the outstanding shares of Unison Health Plans
(Unison) for approximately $930 million in cash. Unison provides government-sponsored health plan coverage to
people in Pennsylvania, Ohio, Tennessee, Delaware, South Carolina and Washington, D.C. through a network of
independent health care professionals. This acquisition strengthened our resources and capabilities in these areas.
The results of operations and financial condition of Unison have been included in our consolidated results and the
results of our Health Care Services reporting segment since the acquisition date.
Sierra Health Services, Inc. On February 25, 2008, we acquired all of the outstanding shares of Sierra Health
Services, Inc. (Sierra), 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 approved
the acquisition conditioned upon the divestiture of our individual SecureHorizons Medicare Advantage HMO
plans in Clark and Nye Counties, Nevada, which represented approximately 30,000 members. The divestiture
was completed on April 30, 2008. We received proceeds of $185 million for this transaction which were recorded
as a reduction to Operating Costs. Group SecureHorizons Medicare Advantage plans offered through commercial
33