United Healthcare 2009 Annual Report Download - page 37

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 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 Medicare Advantage plans offered through commercial contracts were excluded from
the divestiture. Also, we retained Sierra’s Medicare Advantage HMO plans in Nevada. The results of operations
and financial condition of Sierra have been included in our consolidated results and the results of the Health
Benefits, OptumHealth and Prescription Solutions reporting segments since the acquisition date.
Fiserv Health, Inc. On January 10, 2008, we acquired all of the outstanding shares of Fiserv Health, Inc. (Fiserv
Health), a subsidiary of Fiserv, Inc., for approximately $740 million in cash. Fiserv Health is a leading
administrator of medical benefits and also provides care facilitation services, specialty health solutions and
pharmacy benefit management (PBM) services. This transaction allows us to expand the capacity of our existing
benefits administration businesses and enables existing and new customers to leverage our full range of assets,
including ancillary services, our national network and technology tools. The results of operations and financial
condition of Fiserv Health have been included in our consolidated results and the results of the Health Benefits,
OptumHealth, Ingenix and Prescription Solutions reporting segments since the acquisition date.
For the years ended December 31, 2009, 2008 and 2007, aggregate consideration paid, net of cash assumed for
smaller acquisitions was $95 million, $94 million and $262 million, respectively. These acquisitions were not
material to our results of operations.
2009 RESULTS OF OPERATIONS COMPARED TO 2008 RESULTS
Consolidated Financial Results
Revenues
Consolidated revenues for 2009 increased primarily due to the increase in premium revenues in the Health
Benefits reporting segment. The increase in premium revenues was primarily due to strong organic growth in
risk-based offerings in our public and senior markets businesses and premium rate increases in response to
growth in underlying medical costs, partially offset by a decline in the number of people served in the
commercial market. The effect of 2008 Health Benefits acquisitions also contributed to the increase in premium
revenues during 2009.
Medical Costs
Medical costs for 2009 increased primarily due to growth in public and senior markets risk-based businesses, elevated
medical costs due to the H1N1 influenza virus, unemployment-related benefit continuation programs due to an
increased level of national unemployment, medical cost inflation and increased utilization of medical services.
For each period, our operating results include the effects of revisions in medical cost estimates related to all prior
periods. Changes in medical cost estimates related to prior periods, resulting from more complete claim
information identified in the current period, are included in total medical costs reported for the current period.
For 2009 and 2008, medical costs included $310 million and $230 million, respectively, of net favorable medical
cost development related to prior fiscal years.
Operating Costs
Operating costs for 2009 decreased due to certain expenses incurred in 2008 as discussed below and disciplined
operating cost management, which were partially offset by increased costs due to acquired and organic business
growth and from an increase in state insurance assessments levied against premiums, a portion of which was in
lieu of state income taxes in one of the states in which we operate.
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