United Healthcare 2002 Annual Report Download - page 22

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{ 21 }
UnitedHealth Group
Following is a discussion of 2002 consolidated revenue trends for each revenue component.
Premium Revenues Consolidated premium revenues in 2002 totaled $21.9 billion, an increase of $1.2 billion,
or 6%, compared with 2001.
Premium revenues from UnitedHealthcare’s commercial risk-based products increased by approximately
$1.2 billion, or 10%, to $12.9 billion in 2002. Average net premium rate increases exceeded 13% on
UnitedHealthcare’s renewing commercial risk-based business. This increase was partially offset by the effects
of targeted withdrawals from unprofitable risk-based arrangements with customers using multiple health
benefit carriers and a shift in product mix from risk-based to fee-based products. During 2002, the number of
individuals served by UnitedHealthcare commercial risk-based products decreased by 180,000, or 3%.
Premium revenues from state-sponsored Medicaid and federally sponsored Medicare+Choice programs
decreased by $400 million, or 11%, to $3.2 billion in 2002. Premium revenues from Medicare+Choice
programs decreased by $850 million to $1.6 billion because of planned withdrawals and benefit design
changes in certain markets, undertaken in response to insufficient Medicare program reimbursement rates.
Premium revenues from Medicaid programs increased by $450 million to $1.6 billion in 2002. More than half
of this increase, $240 million, related to the acquisition of AmeriChoice on September 30, 2002.
The balance of premium revenue growth in 2002 included a $240 million increase in Health Care
Services’ premium revenues driven by an increase in the number of individuals served by both Ovations’
Medicare supplement products provided to AARP members and by its Evercare business. In addition,
Specialized Care Services realized a $140 million increase in premium revenues in 2002.
Service Revenues Service revenues in 2002 totaled $2.9 billion, an increase of $404 million, or 16%, over
2001. The increase in service revenues was driven primarily by aggregate growth of 11% in individuals served
by Uniprise and UnitedHealthcare under fee-based arrangements. Uniprise and UnitedHealthcare service
revenues grew by an aggregate of $230 million during 2002. Additionally, revenues from Ovations’ Pharmacy
Services business, established in June 2001, increased by approximately $110 million as it was in operation
for the full year in 2002.
Investment and Other Income Investment and other income in 2002 totaled $220 million, a decrease of
$61 million, or 22%, from 2001. Interest income decreased by $32 million due to lower interest yields
on investments in 2002 compared with 2001, partially offset by the impact of increased levels of cash
and fixed-income investments. Net realized capital losses in 2002 were $18 million, compared to net
realized capital gains of $11 million in 2001. The 2002 net realized capital losses were mainly due to
sales of investments in debt securities of certain companies in the telecommunications industry and
impairments recorded on certain UnitedHealth Capital equity investments. The losses were partially
offset by capital gains on sales of investments in other debt securities.