United Healthcare 2002 Annual Report Download - page 34

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UnitedHealth Group
Under our board of directors’ authorization, we maintain a common stock repurchase program.
Repurchases may be made from time to time at prevailing prices, subject to certain restrictions on volume,
pricing and timing. During 2002, we repurchased 22.3 million shares at an aggregate cost of approximately
$1.8 billion. As of December 31, 2002, we had board of directors’ authorization to purchase up to an
additional 16.5 million shares of our common stock.
As a limited part of our share repurchase activities, we had entered into purchase agreements with an
independent third party to purchase shares of our common stock at various times and prices. In May 2002,
the share purchase agreements were terminated, and we elected to receive shares of our common stock
from the third party as settlement consideration. The favorable settlement amount was not material and
was recorded through additional paid-in capital. We currently have no outstanding purchase agreements
with respect to our common stock.
On February 11, 2003, the board of directors approved an annual dividend for 2003 of $0.03 per share.
The dividend will be paid on April 17, 2003, to shareholders of record at the close of business on April 1, 2003.
CONTRACTUAL OBLIGATIONS AND COMMITMENTS
The following table summarizes future obligations due by period as of December 31, 2002, under our debt
agreements, lease obligations and other commercial commitments (in millions):
2003 2004 to 2005 2006 to 2007 Thereafter Total
Debt and Commercial Paper
1
$811 $550 $400 $–$1,761
Operating Leases 109 179 142 190 620
Unconditional Purchase Obligations
2
40 44 17 –101
Total Contractual Obligations $960 $773 $559 $190 $2,482
1Debt payments could be accelerated upon violation of debt covenants. We believe the likelihood of a debt covenant violation is remote.
2Amounts represent minimum purchase commitments under existing service agreements.
Currently, we do not have any other material definitive commitments that require cash resources; however,
we continually evaluate opportunities to expand our operations. This includes internal development of
new products, programs and technology applications and may include acquisitions.
AARP
In January 1998, we initiated a 10-year contract to provide insurance products and services to members of AARP.
Under the terms of the contract, we are compensated for transaction processing and other services as well as for
assuming underwriting risk. We are also engaged in product development activities to complement the
insurance offerings under this program. Premium revenues from our portion of the AARP insurance offerings
were approximately $3.7 billion in 2002, $3.6 billion in 2001 and $3.5 billion in 2000.
The underwriting gains or losses related to the AARP business are recorded as an increase or decrease
to a rate stabilization fund (RSF), which is reported in Other Policy Liabilities in the accompanying
Consolidated Balance Sheets. The company is at risk for underwriting losses to the extent cumulative net
losses exceed the balance in the RSF. We may recover RSF deficits, if any, from gains in future contract
periods. To date, we have not been required to fund any underwriting deficits. We believe the RSF balance
is sufficient to cover potential future underwriting or other risks associated with the contract.
The effects of changes in balance sheet amounts associated with the AARP program accrue to AARP
policyholders through the RSF balance. Accordingly, we do not include the effect of such changes in our
Consolidated Statements of Cash Flows.