United Healthcare 2010 Annual Report Download - page 58

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LEGAL MATTERS
A description of our legal proceedings is included in Note 13 of Notes to the Consolidated Financial Statements
and is incorporated by reference in this report.
CONCENTRATIONS OF CREDIT RISK
Investments in financial instruments such as marketable securities and accounts receivable may subject us to
concentrations of credit risk. Our investments in marketable securities are managed under an investment policy
authorized by our Board of Directors. This policy limits the amounts that may be invested in any one issuer and
generally limits our investments to U.S. government and agency securities, state and municipal securities and
corporate debt obligations that are investment grade. Concentrations of credit risk with respect to accounts
receivable are limited due to the large number of employer groups that constitute our customer base. As of
December 31, 2010, we had an aggregate $2.0 billion reinsurance receivable resulting from the sale of our
Golden Rule Financial Corporation life and annuity business in 2005. We regularly evaluate the financial
condition of the reinsurer and only record the reinsurance receivable to the extent that the amounts are deemed
probable of recovery. Currently, the reinsurer is rated by A.M. Best as “A.” As of December 31, 2010, there were
no other significant concentrations of credit risk.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our primary market risks are exposures to (a) changes in interest rates that impact our investment income and
interest expense and the fair value of certain of our fixed-rate financial investments and debt and (b) changes in
equity prices that impact the value of our equity investments.
As of December 31, 2010, $9.1 billion of our financial investments was classified as cash and cash equivalents
on which interest rates received vary with market interest rates, which may materially impact our investment
income. Also, $7.1 billion of our debt as of December 31, 2010 was at interest rates that vary with market rates,
either directly or through the use of related interest rate swap contracts.
The fair value of certain of our fixed-rate financial investments and debt also varies with market interest rates. As
of December 31, 2010, $16.3 billion of our investments was fixed-rate debt securities and $4.0 billion of our debt
was fixed-rate term debt. An increase in market interest rates decreases the market value of fixed-rate
investments and fixed-rate debt. Conversely, a decrease in market interest rates increases the market value of
fixed-rate investments and fixed-rate debt.
We manage exposure to market interest rates by diversifying investments across different fixed income market
sectors and debt across maturities and interest rate indices, as well as endeavoring to match our floating rate
assets and liabilities over time, either directly or through the use of interest rate swap contracts. As part of our
risk management strategy, we enter into interest rate swap agreements with creditworthy financial institutions to
manage the impact of market interest rates on interest expense. Our swap agreements converted a portion of our
interest expense from fixed to variable rates to better match the impact of changes in market rates on our variable
rate cash equivalent investments. Additional information on our derivative financial instruments is included in
Note 8 of Notes to the Consolidated Financial Statements.
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