United Healthcare 2004 Annual Report Download - page 30

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28 UNITEDHEALTH GROUP
Operating Costs
The operating cost ratio for 2003 was 16.9%, down from 17.5% in 2002. This decrease was driven primarily
by revenue mix changes, with greater growth from premium revenues than from service revenues, and
productivity gains from technology deployment and other cost management initiatives. Our premium-
based products have lower operating cost ratios than our fee-based products. The impact of operating
cost efficiencies in 2003 was partially offset by the continued incremental costs associated with the
development, deployment, adoption and maintenance of new technology releases.
On an absolute dollar basis, operating costs for 2003 increased $488 million, or 11%, over 2002. This
increase was driven by a 6% increase in total individuals served by Health Care Services and Uniprise during
2003, increases in broker commissions and premium taxes due to increased revenues, general operating
cost inflation, and additional operating costs associated with change initiatives and acquired businesses.
Depreciation and Amortization
Depreciation and amortization in 2003 was $299 million, an increase of $44 million over 2002. This
increase was due to additional depreciation and amortization from higher levels of computer equipment
and capitalized software as a result of technology enhancements, business growth and businesses acquired
since the beginning of 2002.
Income Taxes
Our effective income tax rate was 35.7% in 2003, compared to 35.5% in 2002. The change from 2002 was
due to changes in business and income mix among states with differing income tax rates.
BUSINESS SEGMENTS
The following summarizes the operating results of our business segments for the years ended December 31
(in millions):
REVENUES
Percent
2003 2002 Change
Health Care Services $24,807 $21,552 15%
Uniprise 3,107 2,725 14%
Specialized Care Services 1,878 1,509 24%
Ingenix 574 491 17%
Corporate and Eliminations (1,543) (1,257) nm
Consolidated Revenues $28,823 $25,020 15%
EARNINGS FROM OPERATIONS
Percent
2003 2002 Change
Health Care Services $1,865 $1,328 40%
Uniprise 610 517 18%
Specialized Care Services 385 286 35%
Ingenix 75 55 36%
Consolidated Earnings From Operations $2,935 $2,186 34%
nm — not meaningful