<HTML> <HEAD> <TITLE> Prepared by MERRILL CORPORATION www.edgaradvantage.com </TITLE> </HEAD> <BODY BGCOLOR="#FFFFFF" LINK=BLUE VLINK=PURPLE> <FONT SIZE=3 ><A HREF="#00STP1615_1">QuickLinks</A></FONT> <font size=3> -- Click here to rapidly navigate through this document</font> <HR NOSHADE> <HR NOSHADE> <BR> <P ALIGN="CENTER"><FONT SIZE=5><B>UNITED STATES<BR></B></FONT><FONT SIZE=5><B>SECURITIES AND EXCHANGE COMMISSION<BR></B></FONT><FONT SIZE=2><B>Washington, D.C. 20549</B></FONT></P> <HR NOSHADE WIDTH="120"> <BR> <P ALIGN="CENTER"><FONT SIZE=5><B>FORM 10-Q</B></FONT></P> <!-- User-specified TAGGED TABLE --> <TABLE WIDTH="101%" BORDER=0 CELLSPACING=0 CELLPADDING=0> <TR VALIGN="TOP"> <TD WIDTH="9%" ALIGN="CENTER"><FONT SIZE=2> <BR></FONT> <FONT SIZE=3>/x/</FONT></TD> <TD WIDTH="91%"><FONT SIZE=3> <BR></FONT> <FONT SIZE=3><B>QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE<BR> SECURITIES EXCHANGE ACT OF 1934</B></FONT></TD> </TR> </TABLE> <!-- end of user-specified TAGGED TABLE --> <P ALIGN="CENTER"><FONT SIZE=2><B>FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000</B></FONT></P> <P ALIGN="CENTER"><FONT SIZE=2><B>OR</B></FONT></P> <!-- User-specified TAGGED TABLE --> <TABLE WIDTH="101%" BORDER=0 CELLSPACING=0 CELLPADDING=0> <TR VALIGN="TOP"> <TD WIDTH="9%" ALIGN="CENTER"><FONT SIZE=3>/ /</FONT></TD> <TD WIDTH="91%"><FONT SIZE=3><B>TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE<BR> SECURITIES EXCHANGE ACT OF 1934</B></FONT></TD> </TR> </TABLE> <!-- end of user-specified TAGGED TABLE --> <P ALIGN="CENTER"><FONT SIZE=2><B>FOR THE TRANSITION PERIOD FROM <U> </U> TO <U> </U></B></FONT></P> <P ALIGN="CENTER"><FONT SIZE=2><B>Commission file number: 1-10864</B></FONT></P> <HR NOSHADE WIDTH="120"> <BR> <P ALIGN="CENTER"><FONT SIZE=5><B>UNITEDHEALTH GROUP INCORPORATED<BR></B></FONT><FONT SIZE=2>(Exact name of registrant as specified in its charter)</FONT></P> <!-- User-specified TAGGED TABLE --> <CENTER><TABLE WIDTH="70%" BORDER=0 CELLSPACING=0 CELLPADDING=0> <TR VALIGN="TOP"> <TD WIDTH="49%" ALIGN="CENTER"><FONT SIZE=2><B>MINNESOTA</B></FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="49%" ALIGN="CENTER"><FONT SIZE=2><B>41-1321939</B></FONT></TD> </TR> <TR VALIGN="TOP"> <TD WIDTH="49%" ALIGN="CENTER"><FONT SIZE=2>(State or other jurisdiction of<BR> incorporation or organization)</FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="49%" ALIGN="CENTER"><FONT SIZE=2>(I.R.S. Employer Identification No.)</FONT></TD> </TR> <TR VALIGN="TOP"> <TD WIDTH="49%" ALIGN="CENTER"><FONT SIZE=2> <BR></FONT> <FONT SIZE=2><B>UNITEDHEALTH GROUP CENTER<BR> 9900 BREN ROAD EAST<BR> MINNETONKA, MINNESOTA<BR></B></FONT><FONT SIZE=2>(Address of principal executive offices)</FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> <BR> </FONT></TD> <TD WIDTH="49%" ALIGN="CENTER"><FONT SIZE=2> <BR></FONT> <FONT SIZE=2><B><BR> <BR> 55343<BR></B></FONT><FONT SIZE=2>(Zip Code)</FONT></TD> </TR> </TABLE></CENTER> <!-- end of user-specified TAGGED TABLE --> <P ALIGN="CENTER"><FONT SIZE=2>Registrant's telephone number, including area code: </FONT><FONT SIZE=2><B>(952) 936-1300</B></FONT></P> <HR NOSHADE WIDTH="120"> <BR> <P ALIGN="CENTER"><FONT SIZE=2>Securities registered pursuant to Section 12(b) of the Act:</FONT></P> <!-- User-specified TAGGED TABLE --> <CENTER><TABLE WIDTH="94%" BORDER=0 CELLSPACING=0 CELLPADDING=0> <TR VALIGN="TOP"> <TD WIDTH="49%" ALIGN="CENTER"><FONT SIZE=2><B>COMMON STOCK, $.01 PAR VALUE<BR></B></FONT><FONT SIZE=2>(Title of each class)</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="49%" ALIGN="CENTER"><FONT SIZE=2><B>NEW YORK STOCK EXCHANGE, INC.<BR></B></FONT><FONT SIZE=2>(Name of each exchange on which registered)</FONT></TD> </TR> </TABLE></CENTER> <!-- end of user-specified TAGGED TABLE --> <P ALIGN="CENTER"><FONT SIZE=2>Securities registered pursuant to Section 12(g) of the Act: </FONT><FONT SIZE=2><B>NONE</B></FONT></P> <P><FONT SIZE=2> Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES /x/ NO / /</FONT></P> <P><FONT SIZE=2> Indicate by checkmark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. / /</FONT></P> <P><FONT SIZE=2> As of May 12, 2000, 162,408,947 shares of the registrant's Common Stock, $.01 par value per share, were issued and outstanding.</FONT></P> <HR NOSHADE> <HR NOSHADE> <P><FONT SIZE=2><HR NOSHADE></FONT></P> <!-- ZEQ.=1,SEQ=1,EFW="2014632",CP="UNITEDHEALTH GROUP INCORPORATED",DN="1",CHK=292621,FOLIO=blank,FILE='DISK014:[00STP5.00STP1615]BA1615A.;12',USER='AGAETZ',CD='15-MAY-2000;11:33 --> <!-- Generated by Merrill Corporation (www.merrillcorp.com) --> <H2><FONT SIZE=2> </FONT></H2> <BR> <P ALIGN="CENTER"><FONT SIZE=2><B>UNITEDHEALTH GROUP</B></FONT></P> <P ALIGN="CENTER"><FONT SIZE=2><A NAME="bg1615_index"> </A></FONT> <FONT SIZE=2><B>INDEX </B></FONT></P> <!-- User-specified TAGGED TABLE --> <TABLE WIDTH="78%" BORDER=0 CELLSPACING=0 CELLPADDING=0> <TR VALIGN="BOTTOM"> <TH WIDTH="89%" ALIGN="LEFT"><FONT SIZE=2> </FONT><BR></TH> <TH WIDTH="2%"><FONT SIZE=1> </FONT></TH> <TH WIDTH="9%" ALIGN="CENTER"><FONT SIZE=1><B>Page<BR> Number</B></FONT><HR NOSHADE></TH> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM"> <TD WIDTH="89%"><FONT SIZE=2><B>Part I. Financial Information.</B></FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="BOTTOM"> <TD WIDTH="89%"><FONT SIZE=2><B>Item I. Financial Statements (Unaudited)</B></FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM"> <TD WIDTH="89%"><FONT SIZE=2>Condensed Consolidated Balance Sheets at March 31, 2000 and December 31, 1999</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>3</FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="BOTTOM"> <TD WIDTH="89%"><FONT SIZE=2>Condensed Consolidated Statements of Operations for the three month periods ended March 31, 2000 and 1999</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>4</FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM"> <TD WIDTH="89%"><FONT SIZE=2>Condensed Consolidated Statements of Cash Flows for the three month periods ended March 31, 2000 and 1999</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>5</FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="BOTTOM"> <TD WIDTH="89%"><FONT SIZE=2>Notes to Condensed Consolidated Financial Statements</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>6</FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM"> <TD WIDTH="89%"><FONT SIZE=2>Report of Independent Public Accountants</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>13</FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="BOTTOM"> <TD WIDTH="89%"><FONT SIZE=2><B>Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations</B></FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>14</FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM"> <TD WIDTH="89%"><FONT SIZE=2><B>Item 3. Quantitative and Qualitative Disclosures about Market Risk</B></FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>22</FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="BOTTOM"> <TD WIDTH="89%"><FONT SIZE=2><B>Part II. Other Information</B></FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM"> <TD WIDTH="89%"><FONT SIZE=2><B>Item 1. Legal Proceedings</B></FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>23</FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="BOTTOM"> <TD WIDTH="89%"><FONT SIZE=2><B>Item 6. Exhibits</B></FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>23</FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM"> <TD WIDTH="89%"><FONT SIZE=2>Signatures</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>24</FONT></TD> </TR> </TABLE> <!-- end of user-specified TAGGED TABLE --> <P ALIGN="CENTER"><FONT SIZE=2>2</FONT></P> <P><FONT SIZE=2><HR NOSHADE></FONT></P> <!-- ZEQ.=1,SEQ=2,EFW="2014632",CP="UNITEDHEALTH GROUP INCORPORATED",DN="1",CHK=414740,FOLIO=2,FILE='DISK014:[00STP5.00STP1615]BG1615A.;7',USER='MGUZA',CD='12-MAY-2000;12:25 --> <!-- Generated by Merrill Corporation (www.merrillcorp.com) --> <H2><FONT SIZE=2> </FONT></H2> <BR> <P ALIGN="CENTER"><FONT SIZE=2><A NAME="de1615_part_i._financial_information___par02578"> </A></FONT> <FONT SIZE=2><B>Part I. Financial Information<BR> Item I. Financial Statements (unaudited) </B></FONT></P> <P ALIGN="CENTER"><FONT SIZE=2><B>UNITEDHEALTH GROUP<BR> CONDENSED CONSOLIDATED BALANCE SHEETS<BR> (in millions, except share and per share data)<BR> (unaudited)</B></FONT></P> <!-- User-specified TAGGED TABLE --> <TABLE WIDTH="86%" BORDER=0 CELLSPACING=0 CELLPADDING=0> <TR VALIGN="BOTTOM"> <TH WIDTH="68%" ALIGN="LEFT"><FONT SIZE=2> </FONT><BR></TH> <TH WIDTH="2%"><FONT SIZE=1> </FONT></TH> <TH WIDTH="12%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>March 31,<BR> 2000</B></FONT><HR NOSHADE></TH> <TH WIDTH="2%"><FONT SIZE=1> </FONT></TH> <TH WIDTH="16%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>December 31,<BR> 1999</B></FONT><HR NOSHADE></TH> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM"> <TD WIDTH="100%" COLSPAN=7 ALIGN="CENTER"><FONT SIZE=2><B>ASSETS</B></FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="BOTTOM"> <TD WIDTH="68%"><FONT SIZE=2>Current Assets</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="13%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM"> <TD WIDTH="68%"><FONT SIZE=2>Cash and Cash Equivalents</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>1,276</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>1,605</FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="BOTTOM"> <TD WIDTH="68%"><FONT SIZE=2>Short-Term Investments</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>348</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>546</FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM"> <TD WIDTH="68%"><FONT SIZE=2>Accounts Receivable, net</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>919</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>912</FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="BOTTOM"> <TD WIDTH="68%"><FONT SIZE=2>Assets Under Management</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>1,371</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>1,328</FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM"> <TD WIDTH="68%"><FONT SIZE=2>Other Current Assets</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>248</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>177</FONT></TD> </TR> <TR VALIGN="TOP"> <TD WIDTH="68%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="12%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="16%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> </TR> <TR BGCOLOR="White" VALIGN="BOTTOM"> <TD WIDTH="68%"><FONT SIZE=2>Total Current Assets</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>4,162</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>4,568</FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM"> <TD WIDTH="68%"><FONT SIZE=2>Long-Term Investments</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>2,821</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>2,568</FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="BOTTOM"> <TD WIDTH="68%"><FONT SIZE=2>Property and Equipment, net</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>281</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>278</FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM"> <TD WIDTH="68%"><FONT SIZE=2>Goodwill and Other Intangible Assets, net</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>2,888</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>2,859</FONT></TD> </TR> <TR VALIGN="TOP"> <TD WIDTH="68%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="12%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="16%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> </TR> <TR BGCOLOR="White" VALIGN="BOTTOM"> <TD WIDTH="68%"><FONT SIZE=2><B>TOTAL ASSETS</B></FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>10,152</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>10,273</FONT></TD> </TR> <TR VALIGN="TOP"> <TD WIDTH="68%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="12%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="16%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM"> <TD WIDTH="100%" COLSPAN=7 ALIGN="CENTER"><FONT SIZE=2> <BR></FONT> <FONT SIZE=2><B>CURRENT LIABILITIES AND SHAREHOLDERS' EQUITY</B></FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="BOTTOM"> <TD WIDTH="68%"><FONT SIZE=2>Current Liabilities</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="13%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM"> <TD WIDTH="68%"><FONT SIZE=2>Medical Costs Payable</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>3,029</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>2,915</FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="BOTTOM"> <TD WIDTH="68%"><FONT SIZE=2>Other Policy Liabilities</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>1,004</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>910</FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM"> <TD WIDTH="68%"><FONT SIZE=2>Accounts Payable and Accrued Liabilities</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>967</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>1,003</FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="BOTTOM"> <TD WIDTH="68%"><FONT SIZE=2>Short-Term Debt</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>496</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>591</FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM"> <TD WIDTH="68%"><FONT SIZE=2>Unearned Premiums</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>472</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>473</FONT></TD> </TR> <TR VALIGN="TOP"> <TD WIDTH="68%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="12%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="16%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> </TR> <TR BGCOLOR="White" VALIGN="BOTTOM"> <TD WIDTH="68%"><FONT SIZE=2>Total Current Liabilities</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>5,968</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>5,892</FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM"> <TD WIDTH="68%"><FONT SIZE=2>Long-Term Debt</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>400</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>400</FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="BOTTOM"> <TD WIDTH="68%"><FONT SIZE=2>Deferred Income Taxes and Other Liabilities</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>124</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>118</FONT></TD> </TR> <TR VALIGN="TOP"> <TD WIDTH="68%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="12%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="16%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM"> <TD WIDTH="68%"><FONT SIZE=2>Shareholders' Equity</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="13%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="BOTTOM"> <TD WIDTH="68%"><FONT SIZE=2>Common Stock, $.01 par value; 500,000,000 shares authorized; 162,311,000 and 167,470,000 issued and outstanding</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>2</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>2</FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM"> <TD WIDTH="68%"><FONT SIZE=2>Additional Paid-in Capital</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>—</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>249</FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="BOTTOM"> <TD WIDTH="68%"><FONT SIZE=2>Retained Earnings</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>3,562</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>3,447</FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM"> <TD WIDTH="68%"><FONT SIZE=2>Accumulated Other Comprehensive Income:</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="13%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="BOTTOM"> <TD WIDTH="68%"><FONT SIZE=2>Net Unrealized Holding Gains on Investments Available for Sale, net of income tax effects</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>96</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>165</FONT></TD> </TR> <TR VALIGN="TOP"> <TD WIDTH="68%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="12%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="16%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM"> <TD WIDTH="68%"><FONT SIZE=2>Total Shareholders' Equity</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>3,660</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>3,863</FONT></TD> </TR> <TR VALIGN="TOP"> <TD WIDTH="68%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="12%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="16%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> </TR> <TR BGCOLOR="White" VALIGN="BOTTOM"> <TD WIDTH="68%"><FONT SIZE=2><B>TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY</B></FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>10,152</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>10,273</FONT></TD> </TR> <TR VALIGN="TOP"> <TD WIDTH="68%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="12%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="16%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD> </TR> </TABLE> <!-- end of user-specified TAGGED TABLE --> <P ALIGN="CENTER"><FONT SIZE=2>See notes to condensed consolidated financial statements</FONT></P> <P ALIGN="CENTER"><FONT SIZE=2>3</FONT></P> <P><FONT SIZE=2><HR NOSHADE></FONT></P> <!-- ZEQ.=1,SEQ=3,EFW="2014632",CP="UNITEDHEALTH GROUP INCORPORATED",DN="1",CHK=64160,FOLIO=3,FILE='DISK014:[00STP5.00STP1615]DE1615A.;7',USER='KSEAMON',CD='12-MAY-2000;19:10 --> <BR> <P ALIGN="CENTER"><FONT SIZE=2><B>UNITEDHEALTH GROUP</B></FONT></P> <P ALIGN="CENTER"><FONT SIZE=2><B>CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS</B></FONT></P> <P ALIGN="CENTER"><FONT SIZE=2><B>(in millions, except per share data)<BR> (unaudited)</B></FONT></P> <!-- User-specified TAGGED TABLE --> <TABLE WIDTH="84%" BORDER=0 CELLSPACING=0 CELLPADDING=0> <TR VALIGN="BOTTOM"> <TH WIDTH="76%" ALIGN="LEFT"><FONT SIZE=2> </FONT><BR></TH> <TH WIDTH="2%"><FONT SIZE=1> </FONT></TH> <TH WIDTH="21%" COLSPAN=5 ALIGN="CENTER"><FONT SIZE=1><B>Three Months Ended March 31,</B></FONT><HR NOSHADE></TH> <TH WIDTH="1%"><FONT SIZE=1> </FONT></TH> </TR> <TR VALIGN="BOTTOM"> <TH WIDTH="76%" ALIGN="LEFT"><FONT SIZE=1> </FONT><BR></TH> <TH WIDTH="2%"><FONT SIZE=1> </FONT></TH> <TH WIDTH="9%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2000</B></FONT><HR NOSHADE></TH> <TH WIDTH="2%"><FONT SIZE=1> </FONT></TH> <TH WIDTH="9%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>1999</B></FONT><HR NOSHADE></TH> <TH WIDTH="1%"><FONT SIZE=1> </FONT></TH> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM"> <TD WIDTH="76%"><FONT SIZE=2><B>REVENUES</B></FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="BOTTOM"> <TD WIDTH="76%"><FONT SIZE=2>Premiums</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>4,571</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>4,318</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM"> <TD WIDTH="76%"><FONT SIZE=2>Management Services and Fees</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>471</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>434</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="BOTTOM"> <TD WIDTH="76%"><FONT SIZE=2>Investment and Other Income</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>57</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>57</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR VALIGN="TOP"> <TD WIDTH="76%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM"> <TD WIDTH="76%"><FONT SIZE=2>Total Revenues</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>5,099</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>4,809</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR VALIGN="TOP"> <TD WIDTH="76%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="BOTTOM"> <TD WIDTH="76%"><FONT SIZE=2><B>MEDICAL AND OPERATING COSTS</B></FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM"> <TD WIDTH="76%"><FONT SIZE=2>Medical Costs</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>3,903</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>3,720</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="BOTTOM"> <TD WIDTH="76%"><FONT SIZE=2>Operating Costs</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>861</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>813</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM"> <TD WIDTH="76%"><FONT SIZE=2>Depreciation and Amortization</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>62</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>55</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR VALIGN="TOP"> <TD WIDTH="76%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="BOTTOM"> <TD WIDTH="76%"><FONT SIZE=2>Total Medical and Operating Costs</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>4,826</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>4,588</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR VALIGN="TOP"> <TD WIDTH="76%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM"> <TD WIDTH="76%"><FONT SIZE=2><B>EARNINGS FROM OPERATIONS</B></FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>273</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>221</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="BOTTOM"> <TD WIDTH="76%"><FONT SIZE=2>Interest Expense</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>(17</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>(11</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD> </TR> <TR VALIGN="TOP"> <TD WIDTH="76%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM"> <TD WIDTH="76%"><FONT SIZE=2><B>EARNINGS BEFORE INCOME TAXES</B></FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>256</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>210</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="BOTTOM"> <TD WIDTH="76%"><FONT SIZE=2>Provision for Income Taxes</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>(82</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>(78</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD> </TR> <TR VALIGN="TOP"> <TD WIDTH="76%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM"> <TD WIDTH="76%"><FONT SIZE=2><B>NET EARNINGS</B></FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>174</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>132</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR VALIGN="TOP"> <TD WIDTH="76%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="BOTTOM"> <TD WIDTH="76%"><FONT SIZE=2><B>BASIC NET EARNINGS PER COMMON SHARE</B></FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>1.06</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>0.73</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR VALIGN="TOP"> <TD WIDTH="76%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM"> <TD WIDTH="76%"><FONT SIZE=2><B>DILUTED NET EARNINGS PER COMMON SHARE</B></FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>1.03</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>0.72</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR VALIGN="TOP"> <TD WIDTH="76%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="BOTTOM"> <TD WIDTH="76%"><FONT SIZE=2><B>WEIGHTED-AVERAGE NUMBER OF COMMON SHARES OUTSTANDING</B></FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>164.5</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>179.9</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM"> <TD WIDTH="76%"><FONT SIZE=2><B>DILUTIVE EFFECT OF OUTSTANDING STOCK OPTIONS</B></FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>4.1</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>2.8</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR VALIGN="TOP"> <TD WIDTH="76%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="BOTTOM"> <TD WIDTH="76%"><FONT SIZE=2><B>WEIGHTED-AVERAGE NUMBER OF COMMON SHARES OUTSTANDING, ASSUMING DILUTION</B></FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>168.6</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>182.7</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR VALIGN="TOP"> <TD WIDTH="76%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> </TABLE> <!-- end of user-specified TAGGED TABLE --> <P ALIGN="CENTER"><FONT SIZE=2>See notes to condensed consolidated financial statements</FONT></P> <P ALIGN="CENTER"><FONT SIZE=2>4</FONT></P> <P><FONT SIZE=2><HR NOSHADE></FONT></P> <!-- ZEQ.=2,SEQ=4,EFW="2014632",CP="UNITEDHEALTH GROUP INCORPORATED",DN="1",CHK=78182,FOLIO=4,FILE='DISK014:[00STP5.00STP1615]DE1615B.;5',USER='KSEAMON',CD='12-MAY-2000;19:10 --> <!-- Generated by Merrill Corporation (www.merrillcorp.com) --> <P ALIGN="CENTER"><FONT SIZE=2><B>UNITEDHEALTH GROUP</B></FONT></P> <P ALIGN="CENTER"><FONT SIZE=2><B>CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS</B></FONT></P> <P ALIGN="CENTER"><FONT SIZE=2><B>(in millions)<BR> (unaudited)</B></FONT></P> <!-- User-specified TAGGED TABLE --> <TABLE WIDTH="84%" BORDER=0 CELLSPACING=0 CELLPADDING=0> <TR VALIGN="BOTTOM"> <TH WIDTH="76%" ALIGN="LEFT"><FONT SIZE=2> </FONT><BR></TH> <TH WIDTH="2%"><FONT SIZE=1> </FONT></TH> <TH WIDTH="21%" COLSPAN=5 ALIGN="CENTER"><FONT SIZE=1><B>Three Months<BR> Ended March 31,</B></FONT><HR NOSHADE></TH> <TH WIDTH="1%"><FONT SIZE=1> </FONT></TH> </TR> <TR VALIGN="BOTTOM"> <TH WIDTH="76%" ALIGN="LEFT"><FONT SIZE=1> </FONT><BR></TH> <TH WIDTH="2%"><FONT SIZE=1> </FONT></TH> <TH WIDTH="9%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2000</B></FONT><HR NOSHADE></TH> <TH WIDTH="2%"><FONT SIZE=1> </FONT></TH> <TH WIDTH="9%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>1999</B></FONT><HR NOSHADE></TH> <TH WIDTH="1%"><FONT SIZE=1> </FONT></TH> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM"> <TD WIDTH="76%"><FONT SIZE=2><B>OPERATING ACTIVITIES</B></FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="BOTTOM"> <TD WIDTH="76%"><FONT SIZE=2>Net Earnings</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>174</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>132</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM"> <TD WIDTH="76%"><FONT SIZE=2>Noncash Items:</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="BOTTOM"> <TD WIDTH="76%"><FONT SIZE=2>Depreciation and Amortization</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>62</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>55</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM"> <TD WIDTH="76%"><FONT SIZE=2>Deferred Income Taxes and Other</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>44</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>(3</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="BOTTOM"> <TD WIDTH="76%"><FONT SIZE=2>Net Change in Other Operating Items, net of effects from acquisitions, sales of subsidiaries and changes in AARP balances:</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM"> <TD WIDTH="76%"><FONT SIZE=2>Accounts Receivable and Other Current Assets</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>(11</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>(30</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="BOTTOM"> <TD WIDTH="76%"><FONT SIZE=2>Medical Costs Payable</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>95</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>110</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM"> <TD WIDTH="76%"><FONT SIZE=2>Accounts Payable and Accrued Liabilities</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>5</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>76</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="BOTTOM"> <TD WIDTH="76%"><FONT SIZE=2>Unearned Premiums</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>(3</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>) </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>(218</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD> </TR> <TR VALIGN="TOP"> <TD WIDTH="76%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM"> <TD WIDTH="76%"><FONT SIZE=2>Cash Flows From Operating Activities</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>366</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>122</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR VALIGN="TOP"> <TD WIDTH="76%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="BOTTOM"> <TD WIDTH="76%"><FONT SIZE=2><B>INVESTING ACTIVITIES</B></FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM"> <TD WIDTH="76%"><FONT SIZE=2>Cash Paid for Acquisitions, net of cash assumed and other effects</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>(68</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>(21</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="BOTTOM"> <TD WIDTH="76%"><FONT SIZE=2>Purchases of Property and Equipment and Capitalized Software, net</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>(49</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>(47</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM"> <TD WIDTH="76%"><FONT SIZE=2>Purchases of Investments</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>(621</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>(491</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="BOTTOM"> <TD WIDTH="76%"><FONT SIZE=2>Maturities/Sales of Investments</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>452</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>569</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR VALIGN="TOP"> <TD WIDTH="76%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM"> <TD WIDTH="76%"><FONT SIZE=2>Cash Flows (Used For) From Investing Activities</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>(286</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>10</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR VALIGN="TOP"> <TD WIDTH="76%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="BOTTOM"> <TD WIDTH="76%"><FONT SIZE=2><B>FINANCING ACTIVITIES</B></FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM"> <TD WIDTH="76%"><FONT SIZE=2>Proceeds from Stock Option Exercises</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>33</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>21</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="BOTTOM"> <TD WIDTH="76%"><FONT SIZE=2>Common Stock Repurchases</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>(347</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>(369</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM"> <TD WIDTH="76%"><FONT SIZE=2>Payments of Short-term Borrowings, net of proceeds</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>(95</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>(59</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD> </TR> <TR VALIGN="TOP"> <TD WIDTH="76%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="BOTTOM"> <TD WIDTH="76%"><FONT SIZE=2>Cash Flows Used For Financing Activities</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>(409</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>(407</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD> </TR> <TR VALIGN="TOP"> <TD WIDTH="76%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM"> <TD WIDTH="76%"><FONT SIZE=2><B>DECREASE IN CASH AND CASH EQUIVALENTS</B></FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>(329</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>(275</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="BOTTOM"> <TD WIDTH="76%"><FONT SIZE=2><B>CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD</B></FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>1,605</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>1,644</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR VALIGN="TOP"> <TD WIDTH="76%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM"> <TD WIDTH="76%"><FONT SIZE=2><B>CASH AND CASH EQUIVALENTS, END OF PERIOD</B></FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>1,276</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>1,369</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR VALIGN="TOP"> <TD WIDTH="76%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> </TABLE> <!-- end of user-specified TAGGED TABLE --> <P ALIGN="CENTER"><FONT SIZE=2>See notes to condensed consolidated financial statements</FONT></P> <P ALIGN="CENTER"><FONT SIZE=2>5</FONT></P> <P><FONT SIZE=2><HR NOSHADE></FONT></P> <!-- ZEQ.=1,SEQ=5,EFW="2014632",CP="UNITEDHEALTH GROUP INCORPORATED",DN="1",CHK=523904,FOLIO=5,FILE='DISK014:[00STP5.00STP1615]DG1615A.;4',USER='MGUZA',CD='12-MAY-2000;12:26 --> <!-- Generated by Merrill Corporation (www.merrillcorp.com) --> <P ALIGN="CENTER"><FONT SIZE=2><B>UNITEDHEALTH GROUP</B></FONT></P> <P ALIGN="CENTER"><FONT SIZE=2><B>NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS</B></FONT></P> <P ALIGN="CENTER"><FONT SIZE=2><B>(unaudited)</B></FONT></P> <P><FONT SIZE=2><B>1. Basis of Presentation</B></FONT></P> <P><FONT SIZE=2> Unless the context otherwise requires, the use of the terms the "Company," "we," "us," and "our" in the following refers to UnitedHealth Group Incorporated and its subsidiaries.</FONT></P> <P><FONT SIZE=2> The accompanying unaudited condensed consolidated financial statements reflect all adjustments, consisting solely of normal recurring adjustments, needed to present the financial results for these interim periods fairly. These financial statements include certain amounts that are based on our best estimates and judgments. The most significant estimates relate to medical costs, medical costs payable and other policy liabilities, intangible asset valuations and integration reserves relating to acquisitions, and liabilities and asset impairments relating to our operational realignment activities. These estimates may be adjusted as more current information becomes available, and any adjustment could be significant.</FONT></P> <P><FONT SIZE=2> Following the rules and regulations of the Securities and Exchange Commission, we have omitted footnote disclosures that would substantially duplicate the disclosures contained in our annual audited financial statements. Read together with the disclosures below, we believe the interim financial statements are presented fairly. However, these unaudited condensed consolidated financial statements should be read together with the consolidated financial statements and the notes included in our Annual Report on Form 10-K for the year ended December 31, 1999.</FONT></P> <P><FONT SIZE=2><B>2. Reclassifications</B></FONT></P> <P><FONT SIZE=2> Certain 1999 amounts in the condensed consolidated financial statements have been reclassified to conform to the 2000 presentation. These reclassifications have no effect on net earnings or shareholders' equity as previously reported.</FONT></P> <P><FONT SIZE=2><B>3. Operational Realignment and Other Charges</B></FONT></P> <P><FONT SIZE=2> In conjunction with our operational realignment initiatives, we developed and, in the second quarter of 1998, approved a comprehensive plan (the "Plan") to implement our operational realignment. We recognized corresponding charges to operations of $725 million in the second quarter of 1998, which reflected the estimated costs to be incurred under the Plan. The charges included costs associated with asset impairments; employee terminations; disposing of or discontinuing business units, product lines, and contracts; and consolidating and eliminating certain claims processing operations and associated real estate obligations. Activities associated with the Plan will result in the reduction of approximately 5,200 positions, affecting approximately 6,400 people in various locations. Through March 31, 2000, we have eliminated approximately 4,300 positions, affecting approximately 4,000 people, pursuant to the Plan. The remaining positions are expected to be eliminated by December 31, 2000.</FONT></P> <P><FONT SIZE=2> Remaining markets where we plan to curtail or make changes to our operating presence include two health plan markets that are in non-strategic markets. In Puerto Rico, we have substantially transitioned out of this market and expect to complete the sale of our remaining assets by September 30, 2000. In the Pacific Coast region, we will be exiting our operations related to small and mid-sized customer groups with anticipated completion in 2000. We believe the balances accrued in our operational realignment and other charges will be sufficient to cover expenses incurred in the sale and exit of these markets.</FONT></P> <P ALIGN="CENTER"><FONT SIZE=2>6</FONT></P> <P><FONT SIZE=2><HR NOSHADE></FONT></P> <!-- ZEQ.=1,SEQ=6,EFW="2014632",CP="UNITEDHEALTH GROUP INCORPORATED",DN="1",CHK=927615,FOLIO=6,FILE='DISK014:[00STP5.00STP1615]DI1615A.;15',USER='AGAETZ',CD='15-MAY-2000;15:11 --> <P><FONT SIZE=2> Our accompanying financial statements include the operating results of businesses and markets disposed of or discontinued, and markets we plan to exit in connection with the operational realignment. The carrying value of the net assets held for sale or disposal is approximately $12 million as of March 31, 2000. Our accompanying Consolidated Statements of Operations include revenues and operating losses from businesses disposed of and markets we plan to exit for the three months ending March 31 as follows (in millions):</FONT></P> <!-- User-specified TAGGED TABLE --> <CENTER><TABLE WIDTH="70%" BORDER=0 CELLSPACING=0 CELLPADDING=0> <TR VALIGN="BOTTOM"> <TH WIDTH="74%" ALIGN="LEFT"><FONT SIZE=2> </FONT><BR></TH> <TH WIDTH="2%"><FONT SIZE=1> </FONT></TH> <TH WIDTH="9%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2000</B></FONT><HR NOSHADE></TH> <TH WIDTH="2%"><FONT SIZE=1> </FONT></TH> <TH WIDTH="9%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>1999</B></FONT><HR NOSHADE></TH> <TH WIDTH="2%"><FONT SIZE=1> </FONT></TH> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="TOP"> <TD WIDTH="74%"><FONT SIZE=2>Revenues</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>104</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>233</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="TOP"> <TD WIDTH="74%"><FONT SIZE=2>Loss from operations</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>—</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>(15</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD> </TR> </TABLE></CENTER> <!-- end of user-specified TAGGED TABLE --> <P><FONT SIZE=2> The table above does not include operating results from the counties where we withdrew our Medicare product offerings, effective January 1, 2000. Annual revenues for 1999 from the Medicare counties we exited in January 2000 were approximately $230 million.</FONT></P> <P><FONT SIZE=2> The operational realignment and other charges do not cover certain aspects of the Plan, including new information systems, data conversions, process re-engineering, and employee relocation and training. These costs are charged to expense as incurred or capitalized, as appropriate. During the three month periods ended March 31, 2000 and 1999, we incurred expenses of approximately $9 million and $15 million, respectively, related to these activities.</FONT></P> <P><FONT SIZE=2> The Plan provided for substantial completion in 1999. However, some initiatives, including the consolidation of certain claims and administrative processing functions and certain divestitures and market realignment activities are requiring additional time in order to complete them in the most effective manner and will extend through 2000. Based on current facts and circumstances, we believe the remaining realignment reserve is adequate to cover the costs to be incurred in executing the remainder of the Plan. However, as we proceed with the execution of the Plan and more current information becomes available, it may be necessary to adjust our estimates for severance, lease obligations on exited facilities, and losses on disposition of businesses.</FONT></P> <P ALIGN="CENTER"><FONT SIZE=2>7</FONT></P> <P><FONT SIZE=2><HR NOSHADE></FONT></P> <!-- ZEQ.=2,SEQ=7,EFW="2014632",CP="UNITEDHEALTH GROUP INCORPORATED",DN="1",CHK=59652,FOLIO=7,FILE='DISK014:[00STP5.00STP1615]DI1615A.;15',USER='AGAETZ',CD='15-MAY-2000;15:11 --> <P><FONT SIZE=2> The following is a roll-forward of accrued operational realignment and other charges, which are included in accounts payable and accrued liabilities in the accompanying balance sheets, through March 31, 2000 (in millions):</FONT></P> <!-- User-specified TAGGED TABLE --> <TABLE WIDTH="93%" BORDER=0 CELLSPACING=0 CELLPADDING=0> <TR VALIGN="BOTTOM"> <TH WIDTH="29%" ALIGN="LEFT"><FONT SIZE=2> </FONT><BR></TH> <TH WIDTH="2%"><FONT SIZE=1> </FONT></TH> <TH WIDTH="13%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Asset Impairments</B></FONT><HR NOSHADE></TH> <TH WIDTH="2%"><FONT SIZE=1> </FONT></TH> <TH WIDTH="14%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Severance and Outplacement Costs</B></FONT><HR NOSHADE></TH> <TH WIDTH="2%"><FONT SIZE=1> </FONT></TH> <TH WIDTH="14%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Noncancelable Lease Obligations</B></FONT><HR NOSHADE></TH> <TH WIDTH="2%"><FONT SIZE=1> </FONT></TH> <TH WIDTH="12%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Disposition of Businesses and Other Costs</B></FONT><HR NOSHADE></TH> <TH WIDTH="2%"><FONT SIZE=1> </FONT></TH> <TH WIDTH="7%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Total</B></FONT><HR NOSHADE></TH> <TH WIDTH="1%"><FONT SIZE=1> </FONT></TH> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM"> <TD WIDTH="29%"><FONT SIZE=2>Balance at December 31, 1997</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>—</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>—</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>—</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>—</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>—</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="BOTTOM"> <TD WIDTH="29%"><FONT SIZE=2>Provision for Operational Realignment and Other Charges</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>430</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>142</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>82</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>71</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>725</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM"> <TD WIDTH="29%"><FONT SIZE=2>Additional Charges (Credits)</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>21</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>(20</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>(9</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>) </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>8</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>—</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="BOTTOM"> <TD WIDTH="29%"><FONT SIZE=2>Cash Payments</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>—</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>(19</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>(6</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>) </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(13</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>(38</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM"> <TD WIDTH="29%"><FONT SIZE=2>Noncash Charges</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(451</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>—</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>—</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>—</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>(451</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD> </TR> <TR VALIGN="TOP"> <TD WIDTH="29%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="14%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="14%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="12%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="BOTTOM"> <TD WIDTH="29%"><FONT SIZE=2>Balance at December 31, 1998</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>—</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>103</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>67</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>66</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>236</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM"> <TD WIDTH="29%"><FONT SIZE=2>Additional Charges (Credits)</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>—</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>(22</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>13</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>9</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>—</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="BOTTOM"> <TD WIDTH="29%"><FONT SIZE=2>Cash Payments</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>—</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>(46</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>(18</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(45</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>(109</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD> </TR> <TR VALIGN="TOP"> <TD WIDTH="29%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="14%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="14%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="12%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM"> <TD WIDTH="29%"><FONT SIZE=2>Balance at December 31, 1999</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>—</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>35</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>62</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>30</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>127</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="BOTTOM"> <TD WIDTH="29%"><FONT SIZE=2>Cash Payments</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>—</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>(6</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>) </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>(3</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>) </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(5</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>) </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>(14</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD> </TR> <TR VALIGN="TOP"> <TD WIDTH="29%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="14%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="14%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="12%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM"> <TD WIDTH="29%"><FONT SIZE=2>Balance at March 31, 2000</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>—</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>29</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>59</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>25</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>113</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR VALIGN="TOP"> <TD WIDTH="29%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="14%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="14%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="12%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> </TABLE> <!-- end of user-specified TAGGED TABLE --> <P><FONT SIZE=2><B>4. Cash and Investments</B></FONT></P> <P><FONT SIZE=2> As of March 31, 2000, the amortized cost, gross unrealized holding gains and losses and fair value of cash and investments were as follows (in millions):</FONT></P> <!-- User-specified TAGGED TABLE --> <TABLE WIDTH="84%" BORDER=0 CELLSPACING=0 CELLPADDING=0> <TR VALIGN="BOTTOM"> <TH WIDTH="46%" ALIGN="LEFT"><FONT SIZE=2> </FONT><BR></TH> <TH WIDTH="2%"><FONT SIZE=1> </FONT></TH> <TH WIDTH="12%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Amortized Cost</B></FONT><HR NOSHADE></TH> <TH WIDTH="2%"><FONT SIZE=1> </FONT></TH> <TH WIDTH="12%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Gross Unrealized Holding Gains</B></FONT><HR NOSHADE></TH> <TH WIDTH="2%"><FONT SIZE=1> </FONT></TH> <TH WIDTH="12%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Gross Unrealized Holding Losses</B></FONT><HR NOSHADE></TH> <TH WIDTH="2%"><FONT SIZE=1> </FONT></TH> <TH WIDTH="9%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Fair Value</B></FONT><HR NOSHADE></TH> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="TOP"> <TD WIDTH="46%"><FONT SIZE=2>Cash and Cash Equivalents</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>1,276</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>—</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>—</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>1,276</FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="TOP"> <TD WIDTH="46%"><FONT SIZE=2>Debt Securities—Available for Sale</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>2,784</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>9</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(47</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>2,746</FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="TOP"> <TD WIDTH="46%"><FONT SIZE=2>Equity Securities—Available for Sale</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>152</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>191</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>—</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>343</FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="TOP"> <TD WIDTH="46%"><FONT SIZE=2>Debt Securities—Held to Maturity</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>80</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>—</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>—</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>80</FONT></TD> </TR> <TR VALIGN="TOP"> <TD WIDTH="46%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="12%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="12%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="12%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="TOP"> <TD WIDTH="46%"><FONT SIZE=2>Total Cash and Investments</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>4,292</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>200</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(47</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>4,445</FONT></TD> </TR> <TR VALIGN="TOP"> <TD WIDTH="46%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="12%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="12%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="12%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD> </TR> </TABLE> <!-- end of user-specified TAGGED TABLE --> <P><FONT SIZE=2> Gross realized gains of $4 million and $4 million, and gross realized losses of $8 million and $3 million were recognized for the three month periods ended March 31, 2000 and 1999, respectively, and are included in investment and other income in the accompanying Condensed Consolidated Statements of Operations.</FONT></P> <P><FONT SIZE=2> During the first quarter of 2000, we contributed approximately 700,000 shares of Healtheon/WebMD Corporation common stock valued at approximately $52 million to the UnitedHealth Foundation. The difference between the realized gain of approximately $51 million on the stock transfer and the related contribution expense of $52 million was $1 million. The net effect of this transaction is included in Investment and Other Income in the accompanying Condensed Consolidated Statement of Operations.</FONT></P> <P ALIGN="CENTER"><FONT SIZE=2>8</FONT></P> <P><FONT SIZE=2><HR NOSHADE></FONT></P> <!-- ZEQ.=3,SEQ=8,EFW="2014632",CP="UNITEDHEALTH GROUP INCORPORATED",DN="1",CHK=125858,FOLIO=8,FILE='DISK014:[00STP5.00STP1615]DI1615A.;15',USER='AGAETZ',CD='15-MAY-2000;15:11 --> <P><FONT SIZE=2><B>5. Debt</B></FONT></P> <P><FONT SIZE=2> Debt consists of the following (in millions):</FONT></P> <!-- User-specified TAGGED TABLE --> <CENTER><TABLE WIDTH="73%" BORDER=0 CELLSPACING=0 CELLPADDING=0> <TR VALIGN="BOTTOM"> <TH WIDTH="45%" ALIGN="LEFT"><FONT SIZE=2> </FONT><BR></TH> <TH WIDTH="2%"><FONT SIZE=1> </FONT></TH> <TH WIDTH="24%" COLSPAN=5 ALIGN="CENTER"><FONT SIZE=1><B>March 31, 2000</B></FONT><HR NOSHADE></TH> <TH WIDTH="2%"><FONT SIZE=1> </FONT></TH> <TH WIDTH="24%" COLSPAN=5 ALIGN="CENTER"><FONT SIZE=1><B>December 31, 1999</B></FONT><HR NOSHADE></TH> <TH WIDTH="2%"><FONT SIZE=1> </FONT></TH> </TR> <TR VALIGN="BOTTOM"> <TH WIDTH="45%" ALIGN="LEFT"><FONT SIZE=1> </FONT><BR></TH> <TH WIDTH="2%"><FONT SIZE=1> </FONT></TH> <TH WIDTH="13%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Carrying Value</B></FONT><HR NOSHADE></TH> <TH WIDTH="2%"><FONT SIZE=1> </FONT></TH> <TH WIDTH="9%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Fair Value</B></FONT><HR NOSHADE></TH> <TH WIDTH="2%"><FONT SIZE=1> </FONT></TH> <TH WIDTH="13%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Carrying Value</B></FONT><HR NOSHADE></TH> <TH WIDTH="2%"><FONT SIZE=1> </FONT></TH> <TH WIDTH="9%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Fair Value</B></FONT><HR NOSHADE></TH> <TH WIDTH="2%"><FONT SIZE=1> </FONT></TH> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM"> <TD WIDTH="45%"><FONT SIZE=2>Commercial Paper</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>496</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>496</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>591</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>591</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="BOTTOM"> <TD WIDTH="45%"><FONT SIZE=2>Floating Rate Note, due November 2001</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>150</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>150</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>150</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>150</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM"> <TD WIDTH="45%"><FONT SIZE=2>6.60% Senior Unsecured Note due December 2003</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>250</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>233</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>250</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>238</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> </TR> <TR VALIGN="TOP"> <TD WIDTH="45%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="BOTTOM"> <TD WIDTH="45%"><FONT SIZE=2>Total Debt</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>896</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>879</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>991</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>979</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM"> <TD WIDTH="45%"><FONT SIZE=2>Less Current Portion</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(496</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>(496</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(591</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>(591</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD> </TR> <TR VALIGN="TOP"> <TD WIDTH="45%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="BOTTOM"> <TD WIDTH="45%"><FONT SIZE=2>Total Long-Term Debt</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>400</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>383</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>400</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>388</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> </TR> <TR VALIGN="TOP"> <TD WIDTH="45%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> </TR> </TABLE></CENTER> <!-- end of user-specified TAGGED TABLE --> <P><FONT SIZE=2> As of March 31, 2000 we had $496 million of commercial paper outstanding, with interest rates ranging from 5.9% to 6.4%. In November 1999, we issued a $150 million two-year floating rate note. The interest rate is adjusted quarterly to the three month LIBOR (London Interbank Offered Rate) plus 0.5%. As of March 31, 2000, the applicable rate on the note was 6.60%.</FONT></P> <P><FONT SIZE=2> In August 1999, we increased our commercial paper program and supporting credit arrangements with a group of banks to an aggregate of $900 million. The supporting credit arrangements are comprised of a $300 million revolving credit facility, expiring in December 2003, and a $600 million 364-day facility, expiring in August 2000. We also have the capacity to issue approximately $180 million of extendible commercial notes ("ECNs") under our ECN program. At March 31, 2000, we had no amounts outstanding under our credit facilities or ECN program.</FONT></P> <P><FONT SIZE=2> Our debt agreements and credit facilities contain various covenants; the most restrictive of which place limitations on secured and unsecured borrowings and require the Company to exceed minimum interest coverage levels. We are in compliance with the requirements of all debt covenants.</FONT></P> <P><FONT SIZE=2><B>6. American Association of Retired Persons Contract</B></FONT></P> <P><FONT SIZE=2> On January 1, 1998, we entered into a ten-year contract to provide insurance products and services to members of the American Association of Retired Persons (the "AARP"). Under the terms of the contract, we are compensated for claims administration and other services as well as for assuming underwriting risk. We are also engaged in product development activities to complement the insurance offerings under this program. The AARP has also contracted with certain other vendors to provide other member and marketing services. We report premium revenues associated with the AARP program net of the administrative fees paid to these vendors and an administrative allowance we pay to the AARP.</FONT></P> <P><FONT SIZE=2> The underwriting results related to the AARP business are recorded as an increase or decrease to a rate stabilization fund (RSF). The primary components of our underwriting results are premium revenue, medical costs, investment income, administrative expenses, member service expenses, marketing expenses and premium taxes. To the extent underwriting losses exceed the balance in the RSF, we would be required to fund the deficit. Any deficit we fund could be recovered by underwriting gains in future periods of the contract. The RSF balance is included in Other Policy Liabilities in the accompanying Condensed</FONT></P> <P ALIGN="CENTER"><FONT SIZE=2>9</FONT></P> <P><FONT SIZE=2><HR NOSHADE></FONT></P> <!-- ZEQ.=4,SEQ=9,EFW="2014632",CP="UNITEDHEALTH GROUP INCORPORATED",DN="1",CHK=82177,FOLIO=9,FILE='DISK014:[00STP5.00STP1615]DI1615B.;16',USER='AGAETZ',CD='15-MAY-2000;15:11 --> <P><FONT SIZE=2>Consolidated Balance Sheets. We believe the RSF balance is sufficient to cover any potential future underwriting or other risks associated with the contract.</FONT></P> <P><FONT SIZE=2> We assumed the policy and other policy liabilities related to the AARP program and received cash and premiums receivables from the previous insurance carrier equal to the carrying value of the liabilities assumed as of January 1, 1998. The following AARP program-related assets and liabilities are included in our Condensed Consolidated Balance Sheets (in millions):</FONT></P> <!-- User-specified TAGGED TABLE --> <CENTER><TABLE WIDTH="63%" BORDER=0 CELLSPACING=0 CELLPADDING=0> <TR VALIGN="BOTTOM"> <TH WIDTH="62%" ALIGN="LEFT"><FONT SIZE=2> </FONT><BR></TH> <TH WIDTH="3%"><FONT SIZE=1> </FONT></TH> <TH WIDTH="35%" COLSPAN=5 ALIGN="CENTER"><FONT SIZE=1><B>Balance as of</B></FONT><HR NOSHADE></TH> </TR> <TR VALIGN="BOTTOM"> <TH WIDTH="62%" ALIGN="LEFT"><FONT SIZE=1> </FONT><BR></TH> <TH WIDTH="3%"><FONT SIZE=1> </FONT></TH> <TH WIDTH="15%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>March 31, 2000</B></FONT><HR NOSHADE></TH> <TH WIDTH="3%"><FONT SIZE=1> </FONT></TH> <TH WIDTH="18%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>December 31, 1999</B></FONT><HR NOSHADE></TH> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="TOP"> <TD WIDTH="62%"><FONT SIZE=2>Assets Under Management</FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>1,353</FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>1,307</FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="TOP"> <TD WIDTH="62%"><FONT SIZE=2>Accounts Receivable</FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>289</FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>276</FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="TOP"> <TD WIDTH="62%"><FONT SIZE=2>Medical Costs Payable</FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>811</FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>791</FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="TOP"> <TD WIDTH="62%"><FONT SIZE=2>Other Policy Liabilities</FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>725</FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>713</FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="TOP"> <TD WIDTH="62%"><FONT SIZE=2>Accounts Payable and Accrued Liabilities</FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>106</FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>79</FONT></TD> </TR> </TABLE></CENTER> <!-- end of user-specified TAGGED TABLE --> <P><FONT SIZE=2> The effects of changes in balance sheet amounts associated with the AARP program accrue to the AARP policyholders through the RSF balance. Accordingly, we do not include the effect of such changes in our Condensed Consolidated Statements of Cash Flows.</FONT></P> <P><FONT SIZE=2><B>7. Stock Repurchase Program</B></FONT></P> <P><FONT SIZE=2> Under the board of directors' authorization, we are operating a common stock repurchase program. Repurchases may be made from time to time at prevailing prices, subject to certain restrictions on volume, pricing and timing. During the first quarter of 2000, we repurchased 6.0 million shares at an aggregate cost of $339 million. Through March 2000, we have repurchased 37.0 million shares for an aggregate of $1.8 billion since the inception of the program in November 1997. In December 1998, we also repurchased $500 million of preferred stock that was convertible into 10.1 million shares of common stock. As of March 31, 2000, we have board of directors' authorization to purchase up to an additional 8.2 million shares of our common stock.</FONT></P> <P><FONT SIZE=2><B>8. Comprehensive Income</B></FONT></P> <P><FONT SIZE=2> The table below presents comprehensive income, defined as changes in the equity of our business excluding changes resulting from investments by and distributions to our shareholders, for the three month periods ended March 31 (in millions):</FONT></P> <!-- User-specified TAGGED TABLE --> <CENTER><TABLE WIDTH="69%" BORDER=0 CELLSPACING=0 CELLPADDING=0> <TR VALIGN="BOTTOM"> <TH WIDTH="76%" ALIGN="LEFT"><FONT SIZE=2> </FONT><BR></TH> <TH WIDTH="3%"><FONT SIZE=1> </FONT></TH> <TH WIDTH="10%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2000</B></FONT><HR NOSHADE></TH> <TH WIDTH="3%"><FONT SIZE=1> </FONT></TH> <TH WIDTH="10%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>1999</B></FONT><HR NOSHADE></TH> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM"> <TD WIDTH="76%"><FONT SIZE=2>Net Earnings</FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>174</FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>132</FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="BOTTOM"> <TD WIDTH="76%"><FONT SIZE=2>Change in Net Unrealized Holding Gains on Investments Available for Sale, net of income tax effects</FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>(69</FONT></TD> <TD WIDTH="3%"><FONT SIZE=2>)</FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>123</FONT></TD> </TR> <TR VALIGN="TOP"> <TD WIDTH="76%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM"> <TD WIDTH="76%"><FONT SIZE=2>Comprehensive Income</FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>105</FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>255</FONT></TD> </TR> <TR VALIGN="TOP"> <TD WIDTH="76%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD> </TR> </TABLE></CENTER> <!-- end of user-specified TAGGED TABLE --> <P ALIGN="CENTER"><FONT SIZE=2>10</FONT></P> <P><FONT SIZE=2><HR NOSHADE></FONT></P> <!-- ZEQ.=5,SEQ=10,EFW="2014632",CP="UNITEDHEALTH GROUP INCORPORATED",DN="1",CHK=12582,FOLIO=10,FILE='DISK014:[00STP5.00STP1615]DI1615B.;16',USER='AGAETZ',CD='15-MAY-2000;15:11 --> <P><FONT SIZE=2><B>9. Segment Financial Information</B></FONT></P> <P><FONT SIZE=2> Our reportable operating segments are organized and defined by a combination of economic characteristics, including the types of products and services offered and customer segments served by each segment. The following is a description of the types of products and services from which each of our business segments derives its revenues:</FONT></P> <UL> <DL compact> <DT><FONT SIZE=2>•</FONT></DT><DD><FONT SIZE=2><B>Health Care Services</B></FONT><FONT SIZE=2> consists of the UnitedHealthcare and Ovations businesses. UnitedHealthcare designs and operates network-based health and well-being services, including commercial, Medicare and Medicaid products for locally based employers and individuals in six broad regional markets. Ovations, which administers Medicare Supplement benefits on behalf of AARP, offers health and well-being services for Americans age 50 and older.</FONT></DD><DT><FONT SIZE=2>•</FONT></DT><DD><FONT SIZE=2><B>Uniprise</B></FONT><FONT SIZE=2> provides network and non-network based health and well-being services, business-to-business transactional infrastructure services, consumer connectivity and service, and technology support for large employers and health plans.</FONT></DD><DT><FONT SIZE=2>•</FONT></DT><DD><FONT SIZE=2><B>Specialized Care Services</B></FONT><FONT SIZE=2> is an expanding portfolio of health and well-being companies, each serving a specialized market need with a unique blend of benefits, provider networks, services and resources. <BR><BR></FONT></DD><DT><FONT SIZE=2>•</FONT></DT><DD><FONT SIZE=2><B>Ingenix</B></FONT><FONT SIZE=2> is a leading health care information and research company that offers a comprehensive line of health care knowledge and information products and services to pharmaceutical companies, health insurers and payers, care providers, large employers and governments.</FONT></DD></DL> </UL> <BR><BR> <P><FONT SIZE=2> Transactions between business segments are recorded at their estimated fair value, as if they were purchased from or sold to third parties. All intersegment transactions are eliminated in consolidation. Assets and liabilities that are jointly used are assigned to each segment using estimates of pro-rata usage. Cash and investments are assigned such that each segment has minimum specified levels of regulatory capital and working capital. The "Corporate and Eliminations" column includes unassigned cash and investments, investment income derived from these unassigned assets, and eliminations of intersegment transactions and balances.</FONT></P> <P ALIGN="CENTER"><FONT SIZE=2>11</FONT></P> <P><FONT SIZE=2><HR NOSHADE></FONT></P> <!-- ZEQ.=6,SEQ=11,EFW="2014632",CP="UNITEDHEALTH GROUP INCORPORATED",DN="1",CHK=6775,FOLIO=11,FILE='DISK014:[00STP5.00STP1615]DI1615B.;16',USER='AGAETZ',CD='15-MAY-2000;15:11 --> <P><FONT SIZE=2> The following tables present segment financial information for the three-month periods ended March 31, 2000 and 1999 (in millions):</FONT></P> <!-- User-specified TAGGED TABLE --> <TABLE WIDTH="95%" BORDER=0 CELLSPACING=0 CELLPADDING=0> <TR VALIGN="BOTTOM"> <TH WIDTH="31%" ALIGN="LEFT"><FONT SIZE=1><B>First Quarter 2000<BR></B></FONT><HR NOSHADE></TH> <TH WIDTH="1%"><FONT SIZE=1> </FONT></TH> <TH WIDTH="9%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Health Care Services</B></FONT><HR NOSHADE></TH> <TH WIDTH="1%"><FONT SIZE=1> </FONT></TH> <TH WIDTH="9%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Uniprise</B></FONT><HR NOSHADE></TH> <TH WIDTH="1%"><FONT SIZE=1> </FONT></TH> <TH WIDTH="11%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Specialized Care Services</B></FONT><HR NOSHADE></TH> <TH WIDTH="1%"><FONT SIZE=1> </FONT></TH> <TH WIDTH="9%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Ingenix</B></FONT><HR NOSHADE></TH> <TH WIDTH="1%"><FONT SIZE=1> </FONT></TH> <TH WIDTH="13%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Corporate and Eliminations</B></FONT><HR NOSHADE></TH> <TH WIDTH="1%"><FONT SIZE=1> </FONT></TH> <TH WIDTH="13%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Consolidated</B></FONT><HR NOSHADE></TH> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="TOP"> <TD WIDTH="31%"><FONT SIZE=2>Revenues—External Customers</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>4,481</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>389</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>112</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>60</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>—</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>5,042</FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="TOP"> <TD WIDTH="31%"><FONT SIZE=2>Revenues—Intersegment</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>—</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>122</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>114</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>20</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(256</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>—</FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="TOP"> <TD WIDTH="31%"><FONT SIZE=2>Investment and Other Income</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>48</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>5</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>1</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>—</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>3</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>57</FONT></TD> </TR> <TR VALIGN="TOP"> <TD WIDTH="31%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="11%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> </TR> <TR BGCOLOR="White" VALIGN="TOP"> <TD WIDTH="31%"><FONT SIZE=2>Total Revenues</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>4,529</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>516</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>227</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>80</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(253</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>5,099</FONT></TD> </TR> <TR VALIGN="TOP"> <TD WIDTH="31%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="11%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="TOP"> <TD WIDTH="31%"><FONT SIZE=2>Earnings (loss) from Operations</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>172</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>66</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>38</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>3</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(6</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>273</FONT></TD> </TR> <TR VALIGN="TOP"> <TD WIDTH="31%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="11%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD> </TR> </TABLE> <!-- end of user-specified TAGGED TABLE --> <BR><BR> <!-- User-specified TAGGED TABLE --> <TABLE WIDTH="95%" BORDER=0 CELLSPACING=0 CELLPADDING=0> <TR VALIGN="BOTTOM"> <TH WIDTH="31%" ALIGN="LEFT"><FONT SIZE=1><B>First Quarter 1999<BR></B></FONT><HR NOSHADE></TH> <TH WIDTH="1%"><FONT SIZE=1> </FONT></TH> <TH WIDTH="9%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Health Care Services</B></FONT><HR NOSHADE></TH> <TH WIDTH="1%"><FONT SIZE=1> </FONT></TH> <TH WIDTH="9%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Uniprise</B></FONT><HR NOSHADE></TH> <TH WIDTH="1%"><FONT SIZE=1> </FONT></TH> <TH WIDTH="11%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Specialized Care Services</B></FONT><HR NOSHADE></TH> <TH WIDTH="1%"><FONT SIZE=1> </FONT></TH> <TH WIDTH="9%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Ingenix</B></FONT><HR NOSHADE></TH> <TH WIDTH="1%"><FONT SIZE=1> </FONT></TH> <TH WIDTH="13%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Corporate and Eliminations</B></FONT><HR NOSHADE></TH> <TH WIDTH="1%"><FONT SIZE=1> </FONT></TH> <TH WIDTH="13%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Consolidated</B></FONT><HR NOSHADE></TH> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="TOP"> <TD WIDTH="31%"><FONT SIZE=2>Revenues—External Customers</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>4,306</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>335</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>72</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>39</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>—</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>4,752</FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="TOP"> <TD WIDTH="31%"><FONT SIZE=2>Revenues—Intersegment</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>—</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>109</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>91</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>14</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(214</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>—</FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="TOP"> <TD WIDTH="31%"><FONT SIZE=2>Investment and Other Income</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>42</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>6</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>1</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>—</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>8</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>57</FONT></TD> </TR> <TR VALIGN="TOP"> <TD WIDTH="31%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="11%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> </TR> <TR BGCOLOR="White" VALIGN="TOP"> <TD WIDTH="31%"><FONT SIZE=2>Total Revenues</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>4,348</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>450</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>164</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>53</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(206</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>4,809</FONT></TD> </TR> <TR VALIGN="TOP"> <TD WIDTH="31%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="11%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="TOP"> <TD WIDTH="31%"><FONT SIZE=2>Earnings from Operations</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>140</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>46</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>29</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>2</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>4</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>221</FONT></TD> </TR> <TR VALIGN="TOP"> <TD WIDTH="31%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="11%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD> </TR> </TABLE> <!-- end of user-specified TAGGED TABLE --> <P><FONT SIZE=2><B>10. Commitments and Contingencies</B></FONT></P> <P><FONT SIZE=2><I>Governmental Regulation</I></FONT></P> <P><FONT SIZE=2> Our business is heavily regulated on federal, state, and local levels. The laws and rules governing our business and interpretations of those laws and rules are subject to ongoing change. Broad latitude is given to the agencies administering those regulations. Existing or future laws and rules could force us to change how we do business, restrict revenue and enrollment growth, increase our health care and administrative costs and capital requirements, and increase our liability for medical malpractice or other actions. We must obtain and maintain regulatory approvals to market many of our products.</FONT></P> <P><FONT SIZE=2> State legislatures and Congress continue to focus on health care issues. In Congress, managed health care has been the subject of proposed legislation. Any such legislation could expand health plan liability and could also have an impact on the costs and revenues of our health plans. Other proposed federal bills and regulations may impact certain aspects of our business, including provider contracting, claims payments, confidentiality, treatment of medical data and goverment-funded programs.</FONT></P> <P><FONT SIZE=2> We are also subject to various governmental reviews, audits and investigations. Such oversight could result in the loss of license or the right to participate in certain programs, or the imposition of civil or criminal fines, penalties and other sanctions. We do not believe the results of any current audits, individually or in the aggregate, will have a material adverse effect on our financial position or results of operations.</FONT></P> <P><FONT SIZE=2><I>Concentrations of Credit Risk</I></FONT></P> <P><FONT SIZE=2> Investments in financial instruments such as marketable securities and commercial premiums receivable may subject UnitedHealth Group to concentrations of credit risk. Our investments in marketable securities are managed under an investment policy authorized by the board of directors. This policy limits the amounts that may be invested in any one issuer. Concentrations of credit risk with respect to commercial premiums receivable are limited to the large number of employer groups that comprise our customer base. As of March 31, 2000, there were no significant concentrations of credit risk.</FONT></P> <P ALIGN="CENTER"><FONT SIZE=2>12</FONT></P> <P><FONT SIZE=2><HR NOSHADE></FONT></P> <!-- ZEQ.=7,SEQ=12,EFW="2014632",CP="UNITEDHEALTH GROUP INCORPORATED",DN="1",CHK=57952,FOLIO=12,FILE='DISK014:[00STP5.00STP1615]DI1615B.;16',USER='AGAETZ',CD='15-MAY-2000;15:11 --> <!-- Generated by Merrill Corporation (www.merrillcorp.com) --> <BR> <P ALIGN="CENTER"><FONT SIZE=2><B>REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS</B></FONT></P> <P><FONT SIZE=2> To the Shareholders and Directors of UnitedHealth Group Incorporated:</FONT></P> <P><FONT SIZE=2> We have reviewed the accompanying condensed consolidated balance sheet of UnitedHealth Group Incorporated (a Minnesota corporation) and Subsidiaries as of March 31, 2000 and the related condensed consolidated statements of operations and cash flows for the three month periods ended March 31, 2000 and 1999. These financial statements are the responsibility of the Company's management.</FONT></P> <P><FONT SIZE=2> We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with auditing standards generally accepted in the United States, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.</FONT></P> <P><FONT SIZE=2> Based on our review, we are not aware of any material modifications that should be made to the financial statements referred to above for them to be in conformity with accounting principles generally accepted in the United States.</FONT></P> <P><FONT SIZE=2> We have previously audited, in accordance with auditing standards generally accepted in the United States, the consolidated financial statements of UnitedHealth Group Incorporated and Subsidiaries as of and for the year-ended December 31, 1999 (not presented herein), and, in our report dated February 10, 2000, we expressed an unqualified opinion on those statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 1999, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.</FONT></P> <UL> <UL> <UL> <UL> <UL> <UL> <UL> <UL> <UL> <UL> <UL> <P><FONT SIZE=2>/s/ Arthur Andersen LLP</FONT></P> </UL> </UL> </UL> </UL> </UL> </UL> </UL> </UL> </UL> </UL> </UL> <P><FONT SIZE=2>Minneapolis, Minnesota,<BR> May 4, 2000</FONT></P> <P ALIGN="CENTER"><FONT SIZE=2>13</FONT></P> <P><FONT SIZE=2><HR NOSHADE></FONT></P> <!-- ZEQ.=1,SEQ=13,EFW="2014632",CP="UNITEDHEALTH GROUP INCORPORATED",DN="1",CHK=65279,FOLIO=13,FILE='DISK014:[00STP5.00STP1615]DM1615A.;7',USER='MGUZA',CD='12-MAY-2000;12:26 --> <!-- Generated by Merrill Corporation (www.merrillcorp.com) --> <H2><FONT SIZE=2> </FONT></H2> <BR> <P ALIGN="CENTER"><FONT SIZE=2><A NAME="do1615_item_2._management_s_discussio__ite03663"> </A></FONT> <FONT SIZE=2><B>Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS </B></FONT></P> <P><FONT SIZE=2> The following discussion should be read together with the accompanying condensed consolidated financial statements and notes. In addition, the following discussion should be considered in light of a number of factors that affect the Company, the industry in which we operate, and business generally. These factors are described in Exhibit 99 to this Quarterly Report.</FONT></P> <P><FONT SIZE=2><B>First Quarter 2000 Financial Performance Highlights</B></FONT></P> <P><FONT SIZE=2>Summary highlights of our first quarter 2000 results include:</FONT></P> <UL> <DL compact> <DT><FONT SIZE=2>•</FONT></DT><DD><FONT SIZE=2>Earnings per share reached $0.95<SUP>(1)</SUP>, an increase of 32% from $0.72 per share reported in the first quarter of 1999 and up $0.07 per share, or 8%, sequentially over the fourth quarter of 1999. <BR><BR></FONT></DD><DT><FONT SIZE=2>•</FONT></DT><DD><FONT SIZE=2>Segment operating earnings increased to $279 million in the first quarter, up $62 million or 29% over the prior year, and up $18 million, or 7%, sequentially over the fourth quarter of 1999. <BR><BR></FONT></DD><DT><FONT SIZE=2>•</FONT></DT><DD><FONT SIZE=2>Cash flows from operations were $366 million, up 10% year-over-year after adjusting first quarter 1999 results for Medicare payment receipt timing differences. <BR><BR></FONT></DD><DT><FONT SIZE=2>•</FONT></DT><DD><FONT SIZE=2>Consolidated revenues increased 6% over the first quarter of 1999 to $5.1 billion, reflecting strong and balanced growth across the Company, partially offset by targeted pullbacks in certain geographic and product market segments. <BR><BR></FONT></DD><DT><FONT SIZE=2>•</FONT></DT><DD><FONT SIZE=2>The operating cost ratio<SUP>(2)</SUP> decreased to 16.9% of revenue from 17.3% in the fourth quarter of 1999, and remained stable year-over-year. <BR><BR></FONT></DD><DT><FONT SIZE=2>•</FONT></DT><DD><FONT SIZE=2>We repurchased more than 6.0 million shares of our common stock during the first quarter. Since the inception of our stock repurchase activities in November 1997, we have repurchased 37.0 million shares of common stock and preferred stock that was convertible into 10.1 million common shares. <BR><BR></FONT></DD><DT><FONT SIZE=2>•</FONT></DT><DD><FONT SIZE=2>Annualized return on equity reached 17.0% in the first quarter of 2000, up from 13.2% in the first quarter of 1999.</FONT></DD></DL> </UL> <BR> <P><FONT SIZE=2><B>Summary Operating Information</B></FONT></P> <!-- User-specified TAGGED TABLE --> <TABLE WIDTH="85%" BORDER=0 CELLSPACING=0 CELLPADDING=0> <TR VALIGN="BOTTOM"> <TH WIDTH="67%" ALIGN="LEFT"><FONT SIZE=2> </FONT><BR></TH> <TH WIDTH="2%" ROWSPAN=2><FONT SIZE=1> </FONT></TH> <TH WIDTH="20%" COLSPAN=5 ROWSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Three Months<BR> Ended March 31,</B></FONT><HR NOSHADE></TH> <TH WIDTH="2%"><FONT SIZE=1> </FONT></TH> <TH WIDTH="7%" ALIGN="LEFT"><FONT SIZE=1> </FONT><BR></TH> <TH WIDTH="2%"><FONT SIZE=1> </FONT></TH> </TR> <TR VALIGN="BOTTOM"> <TH WIDTH="67%" ROWSPAN=2 ALIGN="LEFT"><FONT SIZE=1><B>Operating Results (in millions, except per share data)<BR></B></FONT><HR NOSHADE></TH> <TH WIDTH="2%" ROWSPAN=2><FONT SIZE=1> </FONT></TH> <TH WIDTH="7%" ROWSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Percent Change</B></FONT><HR NOSHADE></TH> <TH WIDTH="2%"><FONT SIZE=1> </FONT></TH> </TR> <TR VALIGN="BOTTOM"> <TH WIDTH="2%"><FONT SIZE=1> </FONT></TH> <TH WIDTH="9%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2000</B></FONT><HR NOSHADE></TH> <TH WIDTH="2%"><FONT SIZE=1> </FONT></TH> <TH WIDTH="9%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>1999</B></FONT><HR NOSHADE></TH> <TH WIDTH="2%"><FONT SIZE=1> </FONT></TH> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="TOP"> <TD WIDTH="67%"><FONT SIZE=2>Total Revenues</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>5,099</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>4,809</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>6</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="TOP"> <TD WIDTH="67%"><FONT SIZE=2>Earnings from Operations</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>273</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>221</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>24</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="TOP"> <TD WIDTH="67%"><FONT SIZE=2>Net Earnings</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>174</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>132</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>32</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="TOP"> <TD WIDTH="67%"><FONT SIZE=2>Diluted Net Earnings Per Common Share</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>1.03</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>0.72</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>43</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="TOP"> <TD WIDTH="67%"><FONT SIZE=2>Diluted Net Earnings Per Common Share—Adjusted(1)</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>0.95</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>n/a</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="TOP"> <TD WIDTH="67%"><FONT SIZE=2>Medical Costs to Premium Revenues</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>85.4</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>86.2</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD> <TD WIDTH="7%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="TOP"> <TD WIDTH="67%"><FONT SIZE=2>Medical Costs to Premium Revenues, Excluding AARP</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>84.0</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>84.5</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD> <TD WIDTH="7%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="TOP"> <TD WIDTH="67%"><FONT SIZE=2>Operating Cost Ratio</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>16.9</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>16.9</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD> <TD WIDTH="7%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> </TR> </TABLE> <!-- end of user-specified TAGGED TABLE --> <HR NOSHADE ALIGN=LEFT WIDTH="120"> <DL compact> <DT><FONT SIZE=2>(1)</FONT></DT><DD><FONT SIZE=2>Adjusted to exclude a net permanent tax benefit of $14 million, or $0.08 per share, primarily attributable to the contribution of Healtheon/WebMD Corporation common stock to the UnitedHealth Foundation. <BR><BR></FONT></DD><DT><FONT SIZE=2>(2)</FONT></DT><DD><FONT SIZE=2>Calculated as operating costs divided by total revenues.</FONT></DD></DL> <P ALIGN="CENTER"><FONT SIZE=2>14</FONT></P> <P><FONT SIZE=2><HR NOSHADE></FONT></P> <!-- ZEQ.=1,SEQ=14,EFW="2014632",CP="UNITEDHEALTH GROUP INCORPORATED",DN="1",CHK=779375,FOLIO=14,FILE='DISK014:[00STP5.00STP1615]DO1615A.;19',USER='AGAETZ',CD='15-MAY-2000;15:14 --> <UL> </UL> <P><FONT SIZE=2><B>Results of Operations</B></FONT></P> <P><FONT SIZE=2><B>Consolidated Financial Results</B></FONT></P> <P><FONT SIZE=2>Revenues</FONT></P> <P><FONT SIZE=2> Revenues are comprised of premium revenues associated with risk-based products (those where we assume financial responsibility for health care costs); management services and fees associated with administrative services, managed health plans, and our Specialized Care Services and Ingenix businesses; and investment and other income.</FONT></P> <P><FONT SIZE=2> Consolidated revenues increased 6% in the first quarter of 2000 to $5.1 billion, reflecting balanced growth across all business segments. Following is a discussion of first quarter consolidated revenue trends for each of our three revenue components.</FONT></P> <UL> <P><FONT SIZE=2><I>Premium Revenues</I></FONT></P> </UL> <P><FONT SIZE=2> Consolidated premium revenues increased to $4.6 billion in the first quarter of 2000, an increase of $253 million, or 6%, compared to 1999. This increase was primarily driven by average premium yield increases above 9% on UnitedHealthcare's first quarter commercial customer renewals, partially offset by targeted pullbacks in certain geographic and Medicare markets.</FONT></P> <UL> <P><FONT SIZE=2><I>Management Services and Fee Revenues</I></FONT></P> </UL> <P><FONT SIZE=2> Management services and fee revenues during the three months ended March 31, 2000 totaled $471 million representing an increase of $37 million, or 9%, over the same period in 1999. The overall increase in management services and fee revenues is primarily the result of strong growth in Uniprise's multi-site customer base, price increases in fee business, and acquisitions and growth from our Ingenix business.</FONT></P> <UL> <P><FONT SIZE=2><I>Investment and Other Income</I></FONT></P> </UL> <P><FONT SIZE=2> Investment and other income during the three months ended March 31, 2000 totaled $57 million, consistent with 1999 levels. The effect of higher interest yields on investments in the first quarter of 2000 compared with 1999 was largely offset by $4 million of net capital losses in first quarter 2000 versus a $1 million net capital gain in the first quarter of 1999.</FONT></P> <P><FONT SIZE=2>Medical Costs</FONT></P> <P><FONT SIZE=2> The combination of our pricing and care coordination efforts is reflected in the medical care ratio (medical costs as a percentage of premium revenues).</FONT></P> <P><FONT SIZE=2> Our consolidated medical care ratio decreased from 86.2% in the first quarter of 1999 to 85.4% in the first quarter of 2000. Excluding the AARP business, on a year-over-year basis, the medical care ratio decreased 50 basis points to 84.0% and was 10 basis points below the fourth quarter of 1999 level.</FONT></P> <P><FONT SIZE=2> On an absolute dollar basis, the year-over-year increase of $183 million, or 5%, in medical costs is driven by a combination of growth in individuals served with risk-based products, medical cost inflation, benefit changes and product mix changes.</FONT></P> <P><FONT SIZE=2>Operating Costs</FONT></P> <P><FONT SIZE=2> Operating costs as a percentage of total revenues (the operating cost ratio) was 16.9% in the first quarter of 2000, consistent with the comparable period in 1999. On an absolute dollar basis, operating costs increased by $48 million, or 6%, over 1999. This increase reflects the additional costs to support the corresponding $290 million, or 6%, increase in first quarter 2000 consolidated revenues over the comparable 1999 period.</FONT></P> <P ALIGN="CENTER"><FONT SIZE=2>15</FONT></P> <P><FONT SIZE=2><HR NOSHADE></FONT></P> <!-- ZEQ.=2,SEQ=15,EFW="2014632",CP="UNITEDHEALTH GROUP INCORPORATED",DN="1",CHK=899800,FOLIO=15,FILE='DISK014:[00STP5.00STP1615]DO1615A.;19',USER='AGAETZ',CD='15-MAY-2000;15:14 --> <BR><BR> <P><FONT SIZE=2>Depreciation and Amortization</FONT></P> <P><FONT SIZE=2> Depreciation and amortization was $62 million in the first quarter of 2000 compared to $55 million in the first quarter of 1999. This increase resulted from a combination of increased levels of capital expenditures in 1998 and 1999 to support business growth and technology enhancements and amortization of goodwill and other intangible assets related to acquisitions.</FONT></P> <P><FONT SIZE=2><B>Business Segments</B></FONT></P> <P><FONT SIZE=2> The following summarizes the operating results of our business segments for three-month periods ended March 31 (in millions):</FONT></P> <P ALIGN="CENTER"><FONT SIZE=2><B>Revenues</B></FONT></P> <!-- User-specified TAGGED TABLE --> <CENTER><TABLE WIDTH="70%" BORDER=0 CELLSPACING=0 CELLPADDING=0> <TR VALIGN="BOTTOM"> <TH WIDTH="62%" ALIGN="LEFT"><FONT SIZE=2> </FONT><BR></TH> <TH WIDTH="2%"><FONT SIZE=1> </FONT></TH> <TH WIDTH="36%" COLSPAN=7 ALIGN="CENTER"><FONT SIZE=1><B>Three Months Ended<BR> March 31,</B></FONT><HR NOSHADE></TH> </TR> <TR VALIGN="BOTTOM"> <TH WIDTH="62%" ALIGN="LEFT"><FONT SIZE=1> </FONT><BR></TH> <TH WIDTH="2%"><FONT SIZE=1> </FONT></TH> <TH WIDTH="11%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2000</B></FONT><HR NOSHADE></TH> <TH WIDTH="2%"><FONT SIZE=1> </FONT></TH> <TH WIDTH="11%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>1999</B></FONT><HR NOSHADE></TH> <TH WIDTH="2%"><FONT SIZE=1> </FONT></TH> <TH WIDTH="9%" ALIGN="CENTER"><FONT SIZE=1><B>Percent Change</B></FONT><HR NOSHADE></TH> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="TOP"> <TD WIDTH="62%"><FONT SIZE=2>Health Care Services</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>4,529</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>4,348</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>4%</FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="TOP"> <TD WIDTH="62%"><FONT SIZE=2>Uniprise</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>516</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>450</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>15%</FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="TOP"> <TD WIDTH="62%"><FONT SIZE=2>Specialized Care Services</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>227</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>164</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>38%</FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="TOP"> <TD WIDTH="62%"><FONT SIZE=2>Ingenix</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>80</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>53</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>51%</FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="TOP"> <TD WIDTH="62%"><FONT SIZE=2>Corporate and Eliminations</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(253</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(206</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD> <TD WIDTH="9%"><FONT SIZE=2>n/a</FONT></TD> </TR> <TR VALIGN="TOP"> <TD WIDTH="62%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="11%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="11%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><HR NOSHADE></TD> </TR> <TR BGCOLOR="White" VALIGN="TOP"> <TD WIDTH="62%"><FONT SIZE=2>Consolidated Revenues</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>5,099</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>4,809</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>6%</FONT></TD> </TR> <TR VALIGN="TOP"> <TD WIDTH="62%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="11%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="11%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD> </TR> </TABLE></CENTER> <!-- end of user-specified TAGGED TABLE --> <P ALIGN="CENTER"><FONT SIZE=2><B>Earnings (loss) from Operations</B></FONT></P> <!-- User-specified TAGGED TABLE --> <CENTER><TABLE WIDTH="71%" BORDER=0 CELLSPACING=0 CELLPADDING=0> <TR VALIGN="BOTTOM"> <TH WIDTH="65%" ALIGN="LEFT"><FONT SIZE=2> </FONT><BR></TH> <TH WIDTH="2%"><FONT SIZE=1> </FONT></TH> <TH WIDTH="33%" COLSPAN=7 ALIGN="CENTER"><FONT SIZE=1><B>Three Months Ended March 31,</B></FONT><HR NOSHADE></TH> </TR> <TR VALIGN="BOTTOM"> <TH WIDTH="65%" ALIGN="LEFT"><FONT SIZE=1> </FONT><BR></TH> <TH WIDTH="2%"><FONT SIZE=1> </FONT></TH> <TH WIDTH="9%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2000</B></FONT><HR NOSHADE></TH> <TH WIDTH="2%"><FONT SIZE=1> </FONT></TH> <TH WIDTH="9%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>1999</B></FONT><HR NOSHADE></TH> <TH WIDTH="2%"><FONT SIZE=1> </FONT></TH> <TH WIDTH="9%" ALIGN="CENTER"><FONT SIZE=1><B>Percent Change</B></FONT><HR NOSHADE></TH> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="TOP"> <TD WIDTH="65%"><FONT SIZE=2>Health Care Services</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>172</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>140</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>23%</FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="TOP"> <TD WIDTH="65%"><FONT SIZE=2>Uniprise</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>66</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>46</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>43%</FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="TOP"> <TD WIDTH="65%"><FONT SIZE=2>Specialized Care Services</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>38</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>29</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>31%</FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="TOP"> <TD WIDTH="65%"><FONT SIZE=2>Ingenix</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>3</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>2</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>50%</FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="TOP"> <TD WIDTH="65%"><FONT SIZE=2>Corporate and Eliminations</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>(6</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>4</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%"><FONT SIZE=2>n/a</FONT></TD> </TR> <TR VALIGN="TOP"> <TD WIDTH="65%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><HR NOSHADE></TD> </TR> <TR BGCOLOR="White" VALIGN="TOP"> <TD WIDTH="65%"><FONT SIZE=2>Consolidated Earnings from Operations</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>273</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>221</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>24%</FONT></TD> </TR> <TR VALIGN="TOP"> <TD WIDTH="65%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD> </TR> </TABLE></CENTER> <!-- end of user-specified TAGGED TABLE --> <P><FONT SIZE=2>Health Care Services</FONT></P> <P><FONT SIZE=2> The Health Care Services segment posted first quarter revenues of $4,529 million, representing a year-over-year increase of $181 million, or 4%, over 1999. This increase is primarily attributable to UnitedHealthcare's average net premium yield increases above 9% on renewing commercial business, partially offset by targeted pullbacks in certain geographic and Medicare markets.</FONT></P> <P><FONT SIZE=2> The Health Care Services segment contributed first quarter earnings from operations of $172 million in 2000, an increase of $32 million, or 23%, over 1999. The increase is primarily due to improved margins on UnitedHealthcare's commercial business and reduced operating costs as a percentage of revenues driven by our realignment process improvement initiatives.</FONT></P> <P ALIGN="CENTER"><FONT SIZE=2>16</FONT></P> <P><FONT SIZE=2><HR NOSHADE></FONT></P> <!-- ZEQ.=3,SEQ=16,EFW="2014632",CP="UNITEDHEALTH GROUP INCORPORATED",DN="1",CHK=982441,FOLIO=16,FILE='DISK014:[00STP5.00STP1615]DO1615B.;14',USER='AGAETZ',CD='15-MAY-2000;15:14 --> <P><FONT SIZE=2> The following table summarizes UnitedHealthcare's medical care ratios by product line for the three months ending March 31:</FONT></P> <!-- User-specified TAGGED TABLE --> <CENTER><TABLE WIDTH="67%" BORDER=0 CELLSPACING=0 CELLPADDING=0> <TR VALIGN="BOTTOM"> <TH WIDTH="76%" ALIGN="LEFT"><FONT SIZE=2> </FONT><BR></TH> <TH WIDTH="3%"><FONT SIZE=1> </FONT></TH> <TH WIDTH="7%" ALIGN="CENTER"><FONT SIZE=1><B>2000</B></FONT><HR NOSHADE></TH> <TH WIDTH="6%"><FONT SIZE=1> </FONT></TH> <TH WIDTH="7%" ALIGN="CENTER"><FONT SIZE=1><B>1999</B></FONT><HR NOSHADE></TH> <TH WIDTH="2%"><FONT SIZE=1> </FONT></TH> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="TOP"> <TD WIDTH="76%"><FONT SIZE=2>Commercial</FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>84.2</FONT></TD> <TD WIDTH="6%"><FONT SIZE=2>%</FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>84.7</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="TOP"> <TD WIDTH="76%"><FONT SIZE=2>Medicare</FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>89.8</FONT></TD> <TD WIDTH="6%"><FONT SIZE=2>%</FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>88.9</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="TOP"> <TD WIDTH="76%"><FONT SIZE=2>Medicaid</FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>88.5</FONT></TD> <TD WIDTH="6%"><FONT SIZE=2>%</FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>86.3</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD> </TR> </TABLE></CENTER> <!-- end of user-specified TAGGED TABLE --> <P><FONT SIZE=2> UnitedHealthcare's commercial medical care ratio improved on a year-over-year basis, driven by net premium yield increases in excess of underlying medical costs. Commercial health plan premium rates are established based on anticipated benefit costs. Net average premium yield increases on renewing business were above 9% in the first quarter of 2000, which reflects our expectation that our total cost of benefits, including the effects of medical cost inflation, benefit changes and product mix, will increase at a rate of approximately 8.0% to 8.5% during 2000.</FONT></P> <P><FONT SIZE=2> UnitedHealthcare's Medicare medical care ratio increased year-over-year. We continue to evaluate Medicare markets and alter benefit designs to further improve our Medicare product margins. Our year-over-year Medicare enrollment decreased 9% as a result of actions taken to better position this program for long-term success. Effective January 1, 2000, we withdrew our Medicare+Choice product program in 49 counties affecting 40,000 existing members, and also filed significant benefit adjustments. Annual revenues for 1999 from the Medicare markets we exited effective January 1, 2000, were approximately $230 million. These actions are expected to further reduce Medicare enrollment, but better position this program in the long term in terms of profitability relative to its cost of capital and required resource management. We will continue to evaluate the markets we serve and, where necessary, take actions that may result in further withdrawals of Medicare product offerings or reductions in membership, when and as permitted by our contracts with the Health Care Financing Administration ("HCFA").</FONT></P> <P><FONT SIZE=2> The following table summarizes individuals served<SUP>(1)</SUP> by UnitedHealthcare, by product and funding arrangement, as of March 31 (in thousands):</FONT></P> <!-- User-specified TAGGED TABLE --> <CENTER><TABLE WIDTH="67%" BORDER=0 CELLSPACING=0 CELLPADDING=0> <TR VALIGN="BOTTOM"> <TH WIDTH="77%" ALIGN="LEFT"><FONT SIZE=2> </FONT><BR></TH> <TH WIDTH="3%"><FONT SIZE=1> </FONT></TH> <TH WIDTH="9%" ALIGN="CENTER"><FONT SIZE=1><B>2000</B></FONT><HR NOSHADE></TH> <TH WIDTH="3%"><FONT SIZE=1> </FONT></TH> <TH WIDTH="9%" ALIGN="CENTER"><FONT SIZE=1><B>1999</B></FONT><HR NOSHADE></TH> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="TOP"> <TD WIDTH="77%"><FONT SIZE=2>Commercial</FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="TOP"> <TD WIDTH="77%"><FONT SIZE=2>Risk-based</FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>5,243</FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>5,193</FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="TOP"> <TD WIDTH="77%"><FONT SIZE=2>Fee-based</FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>1,836</FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>1,623</FONT></TD> </TR> <TR VALIGN="TOP"> <TD WIDTH="77%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><HR NOSHADE></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><HR NOSHADE></TD> </TR> <TR BGCOLOR="White" VALIGN="TOP"> <TD WIDTH="77%"><FONT SIZE=2>Total Commercial</FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>7,079</FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>6,816</FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="TOP"> <TD WIDTH="77%"><FONT SIZE=2>Medicare</FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>403</FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>441</FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="TOP"> <TD WIDTH="77%"><FONT SIZE=2>Medicaid</FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>493</FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>441</FONT></TD> </TR> <TR VALIGN="TOP"> <TD WIDTH="77%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><HR NOSHADE></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><HR NOSHADE></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="TOP"> <TD WIDTH="77%"><FONT SIZE=2>Total UnitedHealthcare</FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>7,975</FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>7,698</FONT></TD> </TR> <TR VALIGN="TOP"> <TD WIDTH="77%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD> <TD WIDTH="3%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="9%" ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD> </TR> </TABLE></CENTER> <!-- end of user-specified TAGGED TABLE --> <HR NOSHADE ALIGN=LEFT WIDTH="120"> <DL compact> <DT><FONT SIZE=2>(1)</FONT></DT><DD><FONT SIZE=2>Excludes individuals served through UnitedHealthcare platforms located in Puerto Rico and Pacific Coast regions. The Company is transitioning these markets.</FONT></DD></DL> <BR> <P><FONT SIZE=2>Uniprise</FONT></P> <P><FONT SIZE=2> Uniprise's revenues increased by $66 million, or 15%, over the first quarter of 1999 driven primarily by growth in its multi-site customer base, changes in funding arrangements selected by certain customers and modest price increases on fee-based business. Uniprise served approximately 6.4 million and 5.8 million individuals as of March 31, 2000 and 1999, respectively.</FONT></P> <P><FONT SIZE=2> Uniprise's earnings from operations grew by $20 million, or 43%, over the first quarter of 1999 as a result of the increased revenues and reduced operating costs as a percentage of revenues. Uniprise's operating margin improved from 10.2% in the first quarter of 1999 to 12.8% in the first quarter of 2000.</FONT></P> <P ALIGN="CENTER"><FONT SIZE=2>17</FONT></P> <P><FONT SIZE=2><HR NOSHADE></FONT></P> <!-- ZEQ.=4,SEQ=17,EFW="2014632",CP="UNITEDHEALTH GROUP INCORPORATED",DN="1",CHK=255373,FOLIO=17,FILE='DISK014:[00STP5.00STP1615]DO1615B.;14',USER='AGAETZ',CD='15-MAY-2000;15:14 --> <P><FONT SIZE=2>As revenues have increased, Uniprise has improved operating margins by improving productivity through core process improvement initiatives and by further leveraging the fixed cost components of its infrastructure.</FONT></P> <P><FONT SIZE=2>Specialized Care Services</FONT></P> <P><FONT SIZE=2> Specialized Care Services revenues increased by $63 million, or 38%, over the first quarter of 1999. This increase was the result of an increase in the number of individuals served by United Behavioral Health, our mental health and substance abuse business, and the acquisitions of Dental Benefit Providers, Inc. in June 1999 and National Benefit Resources, Inc. in January 2000. Earnings from operations of $38 million increased $9 million, or 31%, compared with the first quarter of 1999. Operating margin decreased from 17.7% in the first quarter of 1999 to 16.7% in 2000 due to changes in business mix within the segment, such as the development of dental and vision care businesses.</FONT></P> <P><FONT SIZE=2>Ingenix</FONT></P> <P><FONT SIZE=2> Revenues increased by $27 million, or 51%, over the comparable prior year period as a result of both new business and acquisitions during the second half of 1999. Earnings from operations increased by $1 million, or 50%, from the prior year, commensurate with revenue growth. Ingenix generates higher contributions in the second half of the year due to seasonally strong demand for higher margin software and information content products.</FONT></P> <P><FONT SIZE=2>Corporate and Eliminations</FONT></P> <P><FONT SIZE=2> Corporate includes investment income derived from cash and investments not assigned to operating segments and the company-wide costs associated with core process improvement initiatives. The year-over-year decrease of $10 million in the first quarter of 2000 earnings is attributable to the decline in the level of unassigned cash and investments and associated investment income, primarily resulting from share repurchases and business acquisitions.</FONT></P> <P><FONT SIZE=2><B>Operational Realignment and Other Charges</B></FONT></P> <P><FONT SIZE=2> In conjunction with our operational realignment initiatives, we developed and, in the second quarter of 1998, approved a comprehensive plan (the "Plan") to implement our operational realignment. We recognized corresponding charges to operations of $725 million in the second quarter of 1998, which reflected the estimated costs to be incurred under the Plan. The charges included costs associated with asset impairments; employee terminations; disposing of or discontinuing business units, product lines, and contracts; and consolidating and eliminating certain claims processing operations and associated real estate obligations. Activities associated with the Plan will result in the reduction of approximately 5,200 positions, affecting approximately 6,400 people in various locations. Through March 31, 2000, we have eliminated approximately 4,300 positions, affecting approximately 4,000 people, pursuant to the Plan. The remaining positions are expected to be eliminated by December 31, 2000.</FONT></P> <P><FONT SIZE=2> Remaining markets where we plan to curtail or make changes to our operating presence include two health plan markets that are in non-strategic markets. In Puerto Rico, we have substantially transitioned out of this market and expect to complete sale of our remaining assets by September 30, 2000. In the Pacific Coast region, we will be exiting our operations related to small and mid-sized customer groups with anticipated completion in 2000. We believe the balances accrued in our operational realignment and other charges will be sufficient to cover expenses incurred in the sale and exit of these markets.</FONT></P> <P><FONT SIZE=2> Our accompanying financial statements include the operating results of businesses and markets disposed of or discontinued and markets we plan to exit in connection with the operational realignment. The carrying value of the net assets held for sale or disposal is approximately $12 million as of March 31, 2000. Our accompanying Consolidated Statements of Operations include revenues and operating losses</FONT></P> <P ALIGN="CENTER"><FONT SIZE=2>18</FONT></P> <P><FONT SIZE=2><HR NOSHADE></FONT></P> <!-- ZEQ.=5,SEQ=18,EFW="2014632",CP="UNITEDHEALTH GROUP INCORPORATED",DN="1",CHK=783645,FOLIO=18,FILE='DISK014:[00STP5.00STP1615]DO1615B.;14',USER='AGAETZ',CD='15-MAY-2000;15:14 --> <P><FONT SIZE=2>from businesses disposed of and markets we plan to exit for the three months ending March 31 as follows (in millions):</FONT></P> <!-- User-specified TAGGED TABLE --> <CENTER><TABLE WIDTH="70%" BORDER=0 CELLSPACING=0 CELLPADDING=0> <TR VALIGN="BOTTOM"> <TH WIDTH="74%" ALIGN="LEFT"><FONT SIZE=2> </FONT><BR></TH> <TH WIDTH="2%"><FONT SIZE=1> </FONT></TH> <TH WIDTH="9%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2000</B></FONT><HR NOSHADE></TH> <TH WIDTH="2%"><FONT SIZE=1> </FONT></TH> <TH WIDTH="9%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>1999</B></FONT><HR NOSHADE></TH> <TH WIDTH="2%"><FONT SIZE=1> </FONT></TH> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="TOP"> <TD WIDTH="74%"><FONT SIZE=2>Revenues</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>104</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>233</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="TOP"> <TD WIDTH="74%"><FONT SIZE=2>Loss from operations</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>—</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>(15</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD> </TR> </TABLE></CENTER> <!-- end of user-specified TAGGED TABLE --> <P><FONT SIZE=2> The table above does not include operating results from the counties where we withdrew our Medicare product offerings, effective January 1, 2000. Annual revenues for 1999 from the Medicare counties we exited in January 2000 were approximately $230 million.</FONT></P> <P><FONT SIZE=2> The operational realignment and other charges do not cover certain aspects of the Plan, including new information systems, data conversions, process re-engineering, and employee relocation and training. These costs are charged to expense as incurred or capitalized, as appropriate. During the three month periods ended March 31, 2000 and 1999, we incurred expenses of approximately $9 million and $15 million, respectively, related to these activities.</FONT></P> <P><FONT SIZE=2> The Plan provided for substantial completion in 1999. However, some initiatives, including the consolidation of certain claims and administrative processing functions and certain divestitures and market realignment activities are requiring additional time in order to complete them in the most effective manner and will extend through 2000. Based on current facts and circumstances, we believe the remaining realignment reserve is adequate to cover the costs to be incurred in executing the remainder of the Plan. However, as we proceed with the execution of the Plan and more current information becomes available, it may be necessary to adjust our estimates for severance, lease obligations on exited facilities, and losses on disposition of businesses.</FONT></P> <P><FONT SIZE=2> The following is a roll-forward of accrued operational realignment and other charges, which are included in accounts payable and accrued liabilities in the accompanying balance sheets, through March 31, 2000 (in millions):</FONT></P> <!-- User-specified TAGGED TABLE --> <TABLE WIDTH="96%" BORDER=0 CELLSPACING=0 CELLPADDING=0> <TR VALIGN="BOTTOM"> <TH WIDTH="31%" ALIGN="LEFT"><FONT SIZE=2> </FONT><BR></TH> <TH WIDTH="2%"><FONT SIZE=1> </FONT></TH> <TH WIDTH="12%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Asset Impairments</B></FONT><HR NOSHADE></TH> <TH WIDTH="2%"><FONT SIZE=1> </FONT></TH> <TH WIDTH="13%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Severance and Outplacement Costs</B></FONT><HR NOSHADE></TH> <TH WIDTH="2%"><FONT SIZE=1> </FONT></TH> <TH WIDTH="14%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Noncancelable Lease Obligations</B></FONT><HR NOSHADE></TH> <TH WIDTH="2%"><FONT SIZE=1> </FONT></TH> <TH WIDTH="12%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Disposition of Businesses and Other Costs</B></FONT><HR NOSHADE></TH> <TH WIDTH="2%"><FONT SIZE=1> </FONT></TH> <TH WIDTH="7%" COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Total</B></FONT><HR NOSHADE></TH> <TH WIDTH="1%"><FONT SIZE=1> </FONT></TH> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM"> <TD WIDTH="31%"><FONT SIZE=2>Balance at December 31, 1997</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>—</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>—</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>—</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>—</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>—</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="BOTTOM"> <TD WIDTH="31%"><FONT SIZE=2>Provision for Operational Realignment and Other Charges</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>430</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>142</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>82</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>71</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>725</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM"> <TD WIDTH="31%"><FONT SIZE=2>Additional Charges (Credits)</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>21</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(20</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>(9</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>) </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>8</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>—</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="BOTTOM"> <TD WIDTH="31%"><FONT SIZE=2>Cash Payments</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>—</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(19</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>(6</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>) </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(13</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>(38</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM"> <TD WIDTH="31%"><FONT SIZE=2>Noncash Charges</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(451</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>—</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>—</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>—</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>(451</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD> </TR> <TR VALIGN="TOP"> <TD WIDTH="31%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="12%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="14%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="12%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="BOTTOM"> <TD WIDTH="31%"><FONT SIZE=2>Balance at December 31, 1998</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>—</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>103</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>67</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>66</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>236</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM"> <TD WIDTH="31%"><FONT SIZE=2>Additional Charges (Credits)</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>—</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(22</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>13</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>9</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>—</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="BOTTOM"> <TD WIDTH="31%"><FONT SIZE=2>Cash Payments</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>—</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(46</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>(18</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(45</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>(109</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD> </TR> <TR VALIGN="TOP"> <TD WIDTH="31%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="12%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="14%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="12%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM"> <TD WIDTH="31%"><FONT SIZE=2>Balance at December 31, 1999</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>—</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>35</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>62</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>30</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>127</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="White" VALIGN="BOTTOM"> <TD WIDTH="31%"><FONT SIZE=2>Cash Payments</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>—</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(6</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>) </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>(3</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>) </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(5</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>) </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>(14</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD> </TR> <TR VALIGN="TOP"> <TD WIDTH="31%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="12%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="14%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="12%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM"> <TD WIDTH="31%"><FONT SIZE=2>Balance at March 31, 2000</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>—</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>29</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>59</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>25</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD> <TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>113</FONT></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> <TR VALIGN="TOP"> <TD WIDTH="31%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="12%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="13%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="14%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="12%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="7%" COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD> <TD WIDTH="1%"><FONT SIZE=2> </FONT></TD> </TR> </TABLE> <!-- end of user-specified TAGGED TABLE --> <P ALIGN="CENTER"><FONT SIZE=2>19</FONT></P> <P><FONT SIZE=2><HR NOSHADE></FONT></P> <!-- ZEQ.=6,SEQ=19,EFW="2014632",CP="UNITEDHEALTH GROUP INCORPORATED",DN="1",CHK=839562,FOLIO=19,FILE='DISK014:[00STP5.00STP1615]DO1615B.;14',USER='AGAETZ',CD='15-MAY-2000;15:14 --> <P><FONT SIZE=2><B>Financial Condition and Liquidity at March 31, 2000</B></FONT></P> <P><FONT SIZE=2> During the first quarter of 2000, we generated cash from operations of $366 million. We continued to maintain a strong financial condition and liquidity position, with cash and investments of $4.4 billion at March 31, 2000. Total cash and investments decreased by approximately $270 million since December 31, 1999, primarily resulting from common stock repurchases, a decline in the market value of our equity holdings during the first quarter of 2000, and our contribution of over 700,000 shares of Healtheon/ WebMD Corporation common stock to the UnitedHealth Foundation.</FONT></P> <P><FONT SIZE=2> As further described under "Regulatory Capital and Dividend Restrictions," many of our subsidiaries are subject to various government regulations. After taking into account these regulations, approximately $70 million (excluding equity securities of $343 million) of our $4.4 billion of cash and investments as of March 31, 2000, was available for general corporate use, including share repurchases, acquisitions and working capital needs. Our operating cash flows and financing capability also provide us with funds, as needed, for general corporate use.</FONT></P> <P><FONT SIZE=2> In August 1999, we increased our commercial paper program and supporting credit arrangements with a group of banks to an aggregate of $900 million. As of March 31, 2000, we had $496 million of commercial paper outstanding, with interest rates ranging from 5.9% to 6.4%. The supporting credit arrangements are comprised of a $300 million revolving credit facility, expiring in December 2003, and a $600 million 364-day facility, expiring in August 2000. We also have the capacity to issue approximately $180 million of extendible commercial notes ("ECNs") under our ECN program. At March 31, 2000, we had no amounts outstanding under our credit facilities or ECN program.</FONT></P> <P><FONT SIZE=2> Our debt arrangements and credit facilities contain various covenants, the most restrictive of which place limitations on secured and unsecured borrowings and require the Company to exceed minimum interest coverage levels. We are in compliance with the requirements of all debt covenants.</FONT></P> <P><FONT SIZE=2> Our senior debt is rated "A" by Standard & Poor's and Duff & Phelps, and "A-3" by Moody's. Our commercial paper and ECN programs are rated "A-1" by Standard & Poor's, "D-1" by Duff & Phelps, and "P-2" by Moody's.</FONT></P> <P><FONT SIZE=2> The aggregate issuing capacity of all securities covered by shelf registration statements for common stock, preferred stock, debt securities and other securities is $1.25 billion. We may publicly offer such securities from time to time at prices and terms to be determined at the time of offering.</FONT></P> <P><FONT SIZE=2> Under the board of directors' authorization, we are operating a common stock repurchase program. Repurchases may be made from time to time at prevailing prices, subject to certain restrictions on volume, pricing and timing. During the first quarter of 2000, we repurchased 6.0 million shares at an aggregate cost of $339 million. Through March 2000, we have repurchased 37.0 million shares for an aggregate of $1.8 billion since the inception of the program in November 1997. In December 1998, we also repurchased $500 million of preferred stock that was convertible into 10.1 million shares of common stock. As of March 31, 2000, we have board of directors' authorization to purchase up to an additional 8.2 million shares of our common stock.</FONT></P> <P><FONT SIZE=2> We expect our available cash and investment resources, operating cash flows, and financing capability to be sufficient to meet our current operating requirements and other corporate development initiatives. A substantial portion of our long-term investments (approximately $2.7 billion as of March 31, 2000) is classified as available for sale. Subject to the previously described regulations, these investments may be sold prior to their maturity to fund working capital or for other purposes.</FONT></P> <P><FONT SIZE=2> Currently, we do not have any other material definitive commitments that require cash resources; however, we continually evaluate opportunities to expand our operations. This includes internal development of new products and programs and may include acquisitions.</FONT></P> <P ALIGN="CENTER"><FONT SIZE=2>20</FONT></P> <P><FONT SIZE=2><HR NOSHADE></FONT></P> <!-- ZEQ.=7,SEQ=20,EFW="2014632",CP="UNITEDHEALTH GROUP INCORPORATED",DN="1",CHK=563183,FOLIO=20,FILE='DISK014:[00STP5.00STP1615]DO1615B.;14',USER='AGAETZ',CD='15-MAY-2000;15:14 --> <P><FONT SIZE=2> During 1999, we formed and initiated funding of the UnitedHealth Foundation. Through March 31, 2000, we have made contributions using a portion of our investment in Healtheon/WebMD Corporation common stock valued at approximately $100 million. UnitedHealth Foundation is dedicated to improving American's health and well-being by supporting consumer and physician education and awareness programs, generating objective information that will contribute to improving health care delivery, and sponsoring community-based health and well-being activities.</FONT></P> <P><FONT SIZE=2><B>Regulatory Capital and Dividend Restrictions</B></FONT></P> <P><FONT SIZE=2> Our operations are conducted through our wholly-owned subsidiaries, which include health maintenance organizations ("HMOs") and insurance companies. HMOs and insurance companies are subject to state regulations that, among other things, may require the maintenance of minimum levels of statutory capital, as defined by each state, and may restrict the timing and amount of dividends and other distributions that may be paid to their respective parent companies. Generally, the amount of dividend distributions that may be paid by regulated insurance and HMO companies, without prior approval by state regulatory authorities, is limited based on the entity's level of statutory net income and statutory capital and surplus.</FONT></P> <P><FONT SIZE=2> As of March 31, 2000, the Company's regulated subsidiaries had aggregate statutory capital and surplus of approximately $1.1 billion, compared with their aggregate minimum statutory capital and surplus requirements of $350 million.</FONT></P> <P><FONT SIZE=2> The National Association of Insurance Commissioners has adopted rules which, to the extent that they are implemented by the states, will set new minimum capitalization requirements for insurance companies, HMOs and other entities bearing risk for health care coverage. The requirements take the form of risk-based capital rules. The change in rules for insurance companies was effective December 31, 1998. The new HMO rules are subject to state-by-state adoption, but not many states have adopted the rules as of March 31, 2000. The HMO rules, if adopted by the states in their proposed form, would significantly increase the minimum capital required for certain of our subsidiaries. Although we believe we can redeploy capital among our regulated entities, such rule changes may require incremental investments of general corporate resources into regulated subsidiaries.</FONT></P> <P><FONT SIZE=2><B>Inflation</B></FONT></P> <P><FONT SIZE=2> Although the general rate of inflation has remained relatively stable and health care cost inflation has stabilized in recent years, the national health care cost inflation rate still exceeds the general inflation rate. We use various strategies to mitigate the negative effects of health care cost inflation, including setting commercial premiums based on anticipated health care costs, unique approaches to utilization review, and other health care cost containment measures. Specifically, health plans try to control medical and hospital costs through contracts with independent providers of health care services. Through these contracted care providers, our health plans emphasize preventive health care and appropriate use of specialty and hospital services.</FONT></P> <P><FONT SIZE=2> While we currently believe our strategies to mitigate health care cost inflation will continue to be successful, competitive pressures, new health care product introductions, demands from health care providers and customers, applicable regulations or other factors may affect our ability to control the impact of health care cost increases. In addition, certain non-network-based products do not have health care cost containment measures similar to those in place for network-based products. As a result, there is added health care cost inflation risk with these products, which comprise approximately 4% of our consolidated risk-based membership. We consider these inflation risks when determining prices for those products.</FONT></P> <P ALIGN="CENTER"><FONT SIZE=2>21</FONT></P> <P><FONT SIZE=2><HR NOSHADE></FONT></P> <!-- ZEQ.=8,SEQ=21,EFW="2014632",CP="UNITEDHEALTH GROUP INCORPORATED",DN="1",CHK=356785,FOLIO=21,FILE='DISK014:[00STP5.00STP1615]DO1615B.;14',USER='AGAETZ',CD='15-MAY-2000;15:14 --> <BR> <P><FONT SIZE=2><A NAME="do1615_item_3._quantitative_and_quali__ite02633"> </A></FONT> <FONT SIZE=2><B>Item 3. Quantitative and Qualitative Disclosures about Market Risk </B></FONT></P> <P><FONT SIZE=2> Market risk represents the risk of changes in value of a financial instrument caused by fluctuations in interest rates and equity prices.</FONT></P> <P><FONT SIZE=2> Approximately $4.1 billion of our cash and investments at March 31, 2000, was invested in fixed income securities. We manage our investment portfolio within risk parameters approved by our board of directors; however, our fixed income securities are subject to the effects of market fluctuations in interest rates. Assuming a hypothetical and immediate 1% increase in rates applicable to our fixed income portfolio at March 31, 2000, the fair value of our fixed income investments would decrease by approximately $100 million.</FONT></P> <P><FONT SIZE=2> As of March 31, 2000, we owned approximately 7.0 million shares of Healtheon/WebMD Corporation common stock. With Healtheon's public stock offering in February 1999 and subsequent increases to the fair value of Healtheon's stock, we have recorded a $153 million unrealized gain, or $97 million net of income tax effects, in shareholder's equity as of March 31, 2000. Assuming an immediate decrease of 25% in Healtheon's stock price, the hypothetical reduction in shareholders' equity related to these holdings is estimated to be $24 million (net of income tax effects), or 0.7% of total shareholders' equity at March 31, 2000.</FONT></P> <P ALIGN="CENTER"><FONT SIZE=2>22</FONT></P> <P><FONT SIZE=2><HR NOSHADE></FONT></P> <!-- ZEQ.=9,SEQ=22,EFW="2014632",CP="UNITEDHEALTH GROUP INCORPORATED",DN="1",CHK=297517,FOLIO=22,FILE='DISK014:[00STP5.00STP1615]DO1615B.;14',USER='AGAETZ',CD='15-MAY-2000;15:14 --> <!-- Generated by Merrill Corporation (www.merrillcorp.com) --> <H2><FONT SIZE=2> </FONT></H2> <BR> <P ALIGN="CENTER"><FONT SIZE=2><A NAME="dq1615_part_ii._other_information"> </A></FONT> <FONT SIZE=2><B>Part II. Other Information </B></FONT></P> <P><FONT SIZE=2><A NAME="dq1615_item_1._legal_proceedings"> </A></FONT> <FONT SIZE=2><B>Item 1. Legal Proceedings </B></FONT></P> <P><FONT SIZE=2> In September 1999, a group of plaintiffs' trial lawyers publicly announced that they were targeting the managed care industry by way of class action litigation. Since that time, like other managed care companies, we have received several purported class action matters that generally challenge managed care practices including cost containment mechanisms, disclosure obligations and payment methodologies. These cases, which we intend to defend vigorously, are described below.</FONT></P> <P><FONT SIZE=2> </FONT><FONT SIZE=2><I>McRaney et al. v. UnitedHealthcare, Inc. and UnitedHealth Group</I></FONT><FONT SIZE=2> was filed on February 8, 2000 in the United States District Court for the Southern District of Mississippi, Hattiesburg Division. The suit alleges violations of the Employee Retirement Income Security Act ("ERISA") and the Racketeer Influenced and Corrupt Organizations Act in connection with alleged undisclosed policies intended to maximize profits. The suit seeks injunctive, compensatory and equitable relief as well as restitution, costs, fees and interest payments. On April 21, 2000, we filed a motion to dismiss, and on April 26, 2000, the case was stayed for multi-district litigation consideration.</FONT></P> <P><FONT SIZE=2> </FONT><FONT SIZE=2><I>The American Medical Association et al. v. Metropolitan Life Insurance Company, United HealthCare Services, Inc. and UnitedHealth Group</I></FONT><FONT SIZE=2> was filed on March 15, 2000 in the Supreme Court of the State of New York, County of New York. The suit alleges breach of contract and the implied covenant of good faith and fair dealing, deceptive acts and practices, and trade libel in connection with the calculation of reasonable and customary reimbursement rates for out-of-network providers. The suit seeks declaratory, injunctive, exemplary and compensatory relief as well as costs, fees and interest payments. On April 12, 2000, we removed this case to federal court and, on May 5, 2000, we filed a motion to dismiss on behalf of all defendants.</FONT></P> <P><FONT SIZE=2> </FONT><FONT SIZE=2><I>Murphy et al. v. UnitedHealth Group</I></FONT><FONT SIZE=2> was filed on April 20, 2000 in the United States District Court for the District of Minnesota. The suit alleges breach of ERISA's fiduciary duty obligations and the failure to make ERISA required disclosures. The suit seeks declaratory and equitable relief as well as restitution, costs, fees and interest payments.</FONT></P> <P><FONT SIZE=2> Because of the nature of our business, we are routinely subject to suits alleging various causes of action. Some of these suits may include claims for substantial non-economic or punitive damages. Although the results of pending litigation are always uncertain, we do not believe that any such actions, including those described above, or any other types of actions, currently threatened or pending will, individually or in the aggregate, have a material adverse effect on our financial position or results of operations.</FONT></P> <BR> <P><FONT SIZE=2><A NAME="dq1615_item_6._exhibits"> </A></FONT> <FONT SIZE=2><B>Item 6. Exhibits </B></FONT></P> <DL compact> <DT><FONT SIZE=2>(a)</FONT></DT><DD><FONT SIZE=2>The following exhibits are filed in response to Item 601 of Regulation S-K.</FONT></DD></DL> <BR><BR> <!-- User-specified TAGGED TABLE --> <TABLE WIDTH="77%" BORDER=0 CELLSPACING=0 CELLPADDING=0> <TR VALIGN="BOTTOM"> <TH WIDTH="11%" ALIGN="CENTER"><FONT SIZE=1><B>Exhibit<BR> Number</B></FONT><HR NOSHADE></TH> <TH WIDTH="2%"><FONT SIZE=1> </FONT></TH> <TH WIDTH="2%" ALIGN="LEFT"><FONT SIZE=1> </FONT><BR></TH> <TH WIDTH="2%"><FONT SIZE=1> </FONT></TH> <TH WIDTH="82%" ALIGN="LEFT"><FONT SIZE=1><B>Description<BR></B></FONT><HR NOSHADE></TH> </TR> <TR VALIGN="TOP"> <TD WIDTH="11%"><FONT SIZE=2>Exhibit 15</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%" ALIGN="RIGHT"><FONT SIZE=2>—</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="82%"><FONT SIZE=2>Letter Re Unaudited Interim Financial Information</FONT></TD> </TR> <TR VALIGN="TOP"> <TD WIDTH="11%"><FONT SIZE=2>Exhibit 27</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%" ALIGN="RIGHT"><FONT SIZE=2>—</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="82%"><FONT SIZE=2>Financial Data Schedule</FONT></TD> </TR> <TR VALIGN="TOP"> <TD WIDTH="11%"><FONT SIZE=2>Exhibit 99</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%" ALIGN="RIGHT"><FONT SIZE=2>—</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="82%"><FONT SIZE=2>Cautionary Statements</FONT></TD> </TR> </TABLE> <!-- end of user-specified TAGGED TABLE --> <P ALIGN="CENTER"><FONT SIZE=2>23</FONT></P> <P><FONT SIZE=2><HR NOSHADE></FONT></P> <!-- ZEQ.=1,SEQ=23,EFW="2014632",CP="UNITEDHEALTH GROUP INCORPORATED",DN="1",CHK=623417,FOLIO=23,FILE='DISK014:[00STP5.00STP1615]DQ1615A.;11',USER='AGAETZ',CD='15-MAY-2000;13:08 --> <!-- Generated by Merrill Corporation (www.merrillcorp.com) --> <H2><FONT SIZE=2> </FONT></H2> <BR> <P ALIGN="CENTER"><FONT SIZE=2><A NAME="jc1615_signatures"> </A></FONT> <FONT SIZE=2><B>SIGNATURES </B></FONT></P> <P><FONT SIZE=2> Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.</FONT></P> <!-- User-specified TAGGED TABLE --> <TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0> <TR VALIGN="TOP"> <TD WIDTH="36%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="62%" COLSPAN=2><FONT SIZE=2>UNITEDHEALTH GROUP INCORPORATED</FONT></TD> </TR> </TABLE> <!-- end of user-specified TAGGED TABLE --> <!-- User-specified TAGGED TABLE --> <TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0> <TR VALIGN="BOTTOM"> <TH WIDTH="36%" ALIGN="CENTER"><FONT SIZE=1> </FONT><BR></TH> <TH WIDTH="2%"><FONT SIZE=1> </FONT></TH> <TH WIDTH="45%" ALIGN="LEFT"><FONT SIZE=1> </FONT><BR></TH> <TH WIDTH="2%"><FONT SIZE=1> </FONT></TH> <TH WIDTH="15%" ALIGN="LEFT"><FONT SIZE=1> </FONT><BR></TH> </TR> <TR VALIGN="TOP"> <TD WIDTH="36%" ALIGN="CENTER"><FONT SIZE=2>/s/ </FONT><FONT SIZE=2>STEPHEN J. HEMSLEY</FONT><FONT SIZE=2> </FONT><HR NOSHADE><FONT SIZE=2> Stephen J. Hemsley</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="45%"><FONT SIZE=2>President and Chief Operating Officer</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="15%" ALIGN="CENTER"><FONT SIZE=2>Dated: May 12, 2000</FONT></TD> </TR> <TR VALIGN="TOP"> <TD WIDTH="36%" ALIGN="CENTER"><FONT SIZE=2> <BR> /s/ </FONT><FONT SIZE=2>ARNOLD H. KAPLAN</FONT><FONT SIZE=2> </FONT><HR NOSHADE><FONT SIZE=2> Arnold H. Kaplan</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> <BR> </FONT></TD> <TD WIDTH="45%"><FONT SIZE=2> <BR> Chief Financial Officer</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> <BR> </FONT></TD> <TD WIDTH="15%" ALIGN="CENTER"><FONT SIZE=2> <BR> Dated: May 12, 2000</FONT></TD> </TR> <TR VALIGN="TOP"> <TD WIDTH="36%" ALIGN="CENTER"><FONT SIZE=2> <BR> <BR> /s/ </FONT><FONT SIZE=2>PATRICK J. ERLANDSON</FONT><FONT SIZE=2> </FONT><HR NOSHADE><FONT SIZE=2> Patrick J. Erlandson</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> <BR> <BR> </FONT></TD> <TD WIDTH="45%"><FONT SIZE=2> <BR> <BR> Chief Accounting Officer</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> <BR> <BR> </FONT></TD> <TD WIDTH="15%" ALIGN="CENTER"><FONT SIZE=2> <BR> <BR> Dated: May 12, 2000</FONT></TD> </TR> </TABLE> <!-- end of user-specified TAGGED TABLE --> <P ALIGN="CENTER"><FONT SIZE=2>24</FONT></P> <P><FONT SIZE=2><HR NOSHADE></FONT></P> <!-- ZEQ.=1,SEQ=24,EFW="2014632",CP="UNITEDHEALTH GROUP INCORPORATED",DN="1",CHK=735759,FOLIO=24,FILE='DISK014:[00STP5.00STP1615]JC1615A.;11',USER='MGUZA',CD='12-MAY-2000;12:26 --> <!-- Generated by Merrill Corporation (www.merrillcorp.com) --> <H2><FONT SIZE=2> </FONT></H2> <BR> <P ALIGN="CENTER"><FONT SIZE=2><B>UNITEDHEALTH GROUP</B></FONT></P> <P ALIGN="CENTER"><FONT SIZE=2><A NAME="ka1615_exhibits"> </A></FONT> <FONT SIZE=2><B>EXHIBITS </B></FONT></P> <!-- User-specified TAGGED TABLE --> <TABLE WIDTH="77%" BORDER=0 CELLSPACING=0 CELLPADDING=0> <TR VALIGN="BOTTOM"> <TH WIDTH="11%" ALIGN="CENTER"><FONT SIZE=1><B>Exhibit<BR> Number</B></FONT><HR NOSHADE></TH> <TH WIDTH="2%"><FONT SIZE=1> </FONT></TH> <TH WIDTH="2%" ALIGN="LEFT"><FONT SIZE=1> </FONT><BR></TH> <TH WIDTH="2%"><FONT SIZE=1> </FONT></TH> <TH WIDTH="82%" ALIGN="LEFT"><FONT SIZE=1><B>Description<BR></B></FONT><HR NOSHADE></TH> </TR> <TR VALIGN="TOP"> <TD WIDTH="11%" ALIGN="CENTER"><FONT SIZE=2>Exhibit 15</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%" ALIGN="CENTER"><FONT SIZE=2>—</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="82%"><FONT SIZE=2>Letter Re Unaudited Interim Financial Information</FONT></TD> </TR> <TR VALIGN="TOP"> <TD WIDTH="11%" ALIGN="CENTER"><FONT SIZE=2>Exhibit 27</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%" ALIGN="CENTER"><FONT SIZE=2>—</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="82%"><FONT SIZE=2>Financial Data Schedule</FONT></TD> </TR> <TR VALIGN="TOP"> <TD WIDTH="11%" ALIGN="CENTER"><FONT SIZE=2>Exhibit 99</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="2%" ALIGN="CENTER"><FONT SIZE=2>—</FONT></TD> <TD WIDTH="2%"><FONT SIZE=2> </FONT></TD> <TD WIDTH="82%"><FONT SIZE=2>Cautionary Statements</FONT></TD> </TR> </TABLE> <!-- end of user-specified TAGGED TABLE --> <P ALIGN="CENTER"><FONT SIZE=2>25</FONT></P> <P><FONT SIZE=2><HR NOSHADE></FONT></P> <!-- ZEQ.=1,SEQ=25,EFW="2014632",CP="UNITEDHEALTH GROUP INCORPORATED",DN="1",CHK=819598,FOLIO=25,FILE='DISK014:[00STP5.00STP1615]KA1615A.;6',USER='MGUZA',CD='12-MAY-2000;12:26 --> <!-- Generated by Merrill Corporation (www.merrillcorp.com) --> <BR> <H2><FONT SIZE=2><A NAME="00STP1615_1">QuickLinks</A></FONT></H2> <!-- TOC_BEGIN --> <FONT SIZE=2><A HREF="#bg1615_index">INDEX</A></FONT><BR> <!-- TOC_END --> <!-- TOC_BEGIN --> <FONT SIZE=2><A HREF="#de1615_part_i._financial_information___par02578">Part I. Financial Information Item I. Financial Statements (unaudited)</A></FONT><BR> <!-- TOC_END --> <!-- TOC_BEGIN --> <FONT SIZE=2><A HREF="#do1615_item_2._management_s_discussio__ite03663">Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS</A></FONT><BR> <FONT SIZE=2><A HREF="#do1615_item_3._quantitative_and_quali__ite02633">Item 3. Quantitative and Qualitative Disclosures about Market Risk</A></FONT><BR> <!-- TOC_END --> <!-- TOC_BEGIN --> <FONT SIZE=2><A HREF="#dq1615_part_ii._other_information">Part II. Other Information</A></FONT><BR> <FONT SIZE=2><A HREF="#dq1615_item_1._legal_proceedings">Item 1. Legal Proceedings</A></FONT><BR> <FONT SIZE=2><A HREF="#dq1615_item_6._exhibits">Item 6. Exhibits</A></FONT><BR> <!-- TOC_END --> <!-- TOC_BEGIN --> <FONT SIZE=2><A HREF="#jc1615_signatures">SIGNATURES</A></FONT><BR> <!-- TOC_END --> <!-- TOC_BEGIN --> <FONT SIZE=2><A HREF="#ka1615_exhibits">EXHIBITS</A></FONT><BR> <!-- TOC_END --> <!-- SEQ=,FILE='QUICKLINK',USER=JKEENE,SEQ=,EFW="2014632",CP="UNITEDHEALTH GROUP INCORPORATED",DN="1" --> </BODY> </HTML>