United Healthcare 2005 Annual Report Download - page 62

deficit we fund could be recovered by underwriting gains in future periods of the contract. To date, we have not
been required to fund any underwriting deficits. The RSF balance is reported in Other Policy Liabilities in the
accompanying Consolidated Balance Sheets. We believe the RSF balance is sufficient to cover potential future
underwriting or other risks associated with the contract.
The following AARP program-related assets and liabilities are included in our Consolidated Balance Sheets:
Balance as of
December
(in millions) 2005 2004
Accounts Receivable ................................................. $ 414 $ 389
Assets Under Management ............................................ $1,792 $1,883
Medical Costs Payable ............................................... $1,001 $ 899
Other Policy Liabilities ............................................... $ 939 $1,162
Other Current Liabilities .............................................. $ 266 $ 211
The effects of changes in balance sheet amounts associated with the AARP program accrue to the overall benefit
of the AARP policyholders through the RSF balance. Accordingly, we do not include the effect of such changes
in our Consolidated Statements of Cash Flows.
Pursuant to our agreement, AARP assets under management are managed separately from our general investment
portfolio and are used to pay costs associated with the AARP program. These assets are invested at our
discretion, within investment guidelines approved by AARP. We do not guarantee any rates of investment return
on these investments and, upon transfer of the AARP contract to another entity, we would transfer cash equal in
amount to the fair value of these investments at the date of transfer to that entity. Interest earnings and realized
investment gains and losses on these assets accrue to the overall benefit of the AARP policyholders through the
RSF. As such, they are not included in our earnings. Interest income and realized gains and losses related to
assets under management are recorded as an increase to the AARP RSF and were $90 million, $103 million and
$101 million in 2005, 2004 and 2003, respectively. Assets under management are reported at their fair market
value, and unrealized gains and losses are included directly in the RSF associated with the AARP program. As of
December 31, 2005 and 2004, the amortized cost, gross unrealized gains and losses, and fair value of cash, cash
equivalents and investments associated with the AARP insurance program, included in Assets Under
Management, were as follows (in millions):
Amortized
Cost
Gross Unrealized
Gains
Gross Unrealized
Losses
Fair
Value
2005
Cash and Cash Equivalents ....................... $ 409 $ — $ — 409
Debt Securities — Available for Sale ............... 1,390 6 (13) 1,383
Total Cash and Investments .................. $1,799 $ 6 $ (13) $1,792
2004
Cash and Cash Equivalents ........................ $ 184 $ — $ — $ 184
Debt Securities — Available for Sale ................ 1,664 37 (2) 1,699
Total Cash and Investments .................... $1,848 $ 37 $ (2) $1,883
As of December 31, 2005 and 2004, respectively, debt securities consisted of $779 million and $809 million in
U.S. Government and Agency obligations, $19 million and $20 million in state and municipal obligations and
$585 million and $870 million in corporate obligations. At December 31, 2005, the AARP assets under
management included debt securities of $149 million with maturities of less than one year, $459 million with
maturities of one to five years, $435 million with maturities of five to 10 years and $340 million with maturities
of more than 10 years. As of December 31, 2005, we had no investments under the AARP agreement in a
continuous unrealized loss position for 12 months or greater.
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