United Healthcare 2005 Annual Report Download - page 20

Download and view the complete annual report

Please find page 20 of the 2005 United Healthcare annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 83

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Business Overview
UnitedHealth Group is a diversified health and well-being company, serving approximately 65 million
Americans. Our focus is on improving the American health care system by simplifying the administrative
components of health care delivery; promoting evidence-based medicine as the standard for care; and providing
relevant, actionable data that physicians, health care providers, consumers, employers and other participants in
health care can use to make better, more informed decisions.
Through our diversified family of businesses, we leverage core competencies in advanced technology-based
transactional capabilities; health care data, knowledge and informatics; and health care resource organization and
care facilitation to make health care work better. We provide individuals with access to quality, cost-effective
health care services and resources. We promote the delivery of care, consistent with the best available evidence
for effective health care. We provide employers and consumers with superb value, service, and support, and we
deliver value to our shareholders by executing a business strategy founded upon a commitment to balanced
growth, profitability and capital discipline.
2005 Financial Performance Highlights
UnitedHealth Group had a very strong year in 2005. The company achieved diversified growth across its
business segments and generated net earnings of $3.3 billion, representing an increase of 28% over 2004. Other
financial performance highlights include:
• Diluted net earnings per common share of $2.48, an increase of 26% over 2004.
• Revenues of $45.4 billion, a 22% increase over 2004. Excluding the impact of acquisitions, revenues
increased 11% over 2004.
• Earnings from operations of $5.4 billion, up 31% over 2004.
• Operating margin of 11.8%, up from 11.0% in 2004.
UnitedHealth Group acquired PacifiCare Health Plans, Inc. (PacifiCare) in December 2005 for total
consideration of approximately $8.8 billion, Oxford Health Plans, Inc. (Oxford) in July 2004 for total
consideration of approximately $5.0 billion and Mid Atlantic Medical Services, Inc. (MAMSI) in February 2004
for total consideration of approximately $2.7 billion. The results of operations and financial condition of
PacifiCare, Oxford and MAMSI have been included in UnitedHealth Group’s consolidated financial statements
since the respective acquisition dates.
2005 Results Compared to 2004 Results
Consolidated Financial Results
Revenues
Revenues consist of premium revenues from risk-based products; service revenues, which primarily include fees
for management, administrative and consulting services; and investment and other income.
Premium revenues are primarily derived from risk-based health insurance arrangements in which the premium is
fixed, typically for a one-year period, and we assume the economic risk of funding our customers’ health care
services and related administrative costs. Service revenues consist primarily of fees derived from services
performed for customers that self-insure the medical costs of their employees and their dependents. For both
18