United Healthcare 2006 Annual Report Download - page 94
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The above amounts reflect fourth quarter 2006 goodwill adjustments related to the finalization and review of the
PacifiCare valuation analysis resulting in a decrease of $247 million in Health Care Services goodwill and an
increase of $252 million in Specialized Care Services goodwill, each representing less than 4% of total goodwill
resulting from the PacifiCare acquisition.
The weighted-average useful life, gross carrying value, accumulated amortization and net carrying value of other
intangible assets as of December 31, 2006 and 2005 were as follows:
December 31, 2006 December 31, 2005
(in millions)
Weighted-
Average
Useful Life
Gross
Carrying
Value
Accumulated
Amortization
Net
Carrying
Value
Gross
Carrying
Value
Accumulated
Amortization
Net
Carrying
Value
Customer Contracts and
Membership Lists ...... 15years $1,871 $(246) $1,625 $1,830 $(106) $1,724
Patents, Trademarks and
Technology ........... 13years 303 (89) 214 221 (62) 159
Other .................. 12years 103 (38) 65 161 (24) 137
Total ............... 14years $2,277 $(373) $1,904 $2,212 $(192) $2,020
Amortization expense relating to intangible assets was $181 million in 2006, $94 million in 2005 and $62 million
in 2004. Estimated future amortization expense relating to intangible assets for the years ending December 31 is
as follows: $178 million in 2007, $173 million in 2008, $155 million in 2009, $147 million in 2010, and $142
million in 2011.
8. Medical Costs and Medical Costs Payable
Medical costs and medical costs payable include estimates of our obligations for medical care services that have
been rendered on behalf of insured consumers but for which we have either not yet received or processed claims,
and for liabilities for physician, hospital and other medical cost disputes. We develop estimates for medical costs
incurred but not reported using an actuarial process that is consistently applied, centrally controlled and
automated. The actuarial models consider factors such as time from date of service to claim receipt, claim
backlogs, care provider contract rate changes, medical care consumption and other medical cost trends. We
estimate liabilities for physician, hospital and other medical cost disputes based upon an analysis of potential
outcomes, assuming a combination of litigation and settlement strategies. Each period, we re-examine previously
established medical costs payable estimates based on actual claim submissions and other changes in facts and
circumstances. As the liability estimates recorded in prior periods become more exact, we adjust the amount of
the estimates, and include the changes in estimates in medical costs in the period in which the change is
identified. For example, in every reporting period our operating results include the effects of more completely
developed medical costs payable estimates associated with previously reported periods.
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