United Healthcare 2009 Annual Report Download - page 72

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UNITEDHEALTH GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The unrealized losses as of December 31, 2009 were generated from approximately 1,500 positions out of a total
of approximately 12,000 positions. The Company believes that it will collect all principal and interest due on all
investments that have an amortized cost in excess of fair value. The unrealized losses on investments in U.S.
government and agency obligations, state and municipal obligations and corporate obligations as of
December 31, 2009 were primarily caused by interest rate increases and not by unfavorable changes in the credit
ratings associated with these securities. The Company evaluates impairment at each reporting period for
securities where the fair value of the investment is less than its amortized cost. The contractual cash flows of the
U.S. government and agency obligations are guaranteed by either the U.S. government or an agency of the U.S.
government. The Company expects that the securities would not be settled at a price less than the amortized cost
of the Company’s investment. The Company evaluated the underlying credit quality of the issuers and the credit
ratings of the state and municipal obligations and the corporate obligations, noting neither a significant
deterioration since purchase nor other factors leading to an other-than-temporary impairment (OTTI). The
unrealized losses on mortgage-backed securities as of December 31, 2009 were primarily caused by higher
interest rates in the marketplace, reflecting the higher perceived risk assigned by fixed-income investors to
commercial mortgage-backed securities (CMBS). These unrealized losses represented less than 1% of the total
amortized cost of the Company’s mortgage-backed security holdings as of December 31, 2009. The Company
believes these losses to be temporary. Approximately 94% of the Company’s mortgage-backed securities in an
unrealized loss position as of December 31, 2009 were rated “AAA” with no known deterioration or other factors
leading to an OTTI. As of December 31, 2009, the Company did not have the intent to sell any of the securities in
an unrealized loss position.
As of December 31, 2009, the Company’s holdings of non-U.S. agency mortgage-backed securities included $10
million of commercial mortgage loans in default. These investments were acquired in the first quarter of 2008
pursuant to an acquisition and were recorded at fair value. They represented less than 1% of the Company’s total
mortgage-backed security holdings as of December 31, 2009.
A portion of the Company’s investments in equity securities and venture capital funds consists of investments
held in various public and nonpublic companies concentrated in the areas of health care delivery and related
information technologies. Market conditions that affect the value of health care and related technology stocks
will likewise impact the value of the Company’s equity portfolio. The equity securities and venture capital funds
were evaluated for severity and duration of unrealized loss, overall market volatility and other market factors.
Net realized gains, before taxes, were from the following sources:
Year Ended December 31,
(in millions) 2009 2008 2007
Total OTTI ............................................................ $(64) $(121) $ (6)
Portion of loss recognized in other comprehensive income ...................... — n/a n/a
Net OTTI recognized in earnings ........................................... (64) (121) (6)
Gross realized losses from sales ............................................ (41) (50) (13)
Gross realized gains from sales ............................................ 116 165 57
Net realized gains (losses) ................................................ $ 11 $ (6) $38
For 2009, all of the recorded OTTI resulted from the Company’s intent to sell certain impaired securities.
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