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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


Form 10-K

þ  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001

Commission file number: 1-10864


UnitedHealth Group Incorporated

(Exact name of registrant as specified in its charter)
     
Minnesota
(State or other jurisdiction of
incorporation or organization)
  41-1321939
(I.R.S. Employer
Identification No.)
 
UnitedHealth Group Center
9900 Bren Road East
Minnetonka, Minnesota
(Address of principal executive offices)
  55343
(Zip Code)

Registrant’s telephone number, including area code:

(952) 936-1300

Securities registered pursuant to Section 12(b) of the Act:

     
(Title of each class) (Name of each exchange on which registered)


Common Stock, $.01 Par Value   New York Stock Exchange, Inc.

Securities registered pursuant to Section 12(g) of the Act:

None

     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 þ          No o

     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.     o

     The aggregate market value of voting stock held by non-affiliates of the registrant as of March 18, 2002, was approximately $22,769,207,112 (based on the last reported sale price of $74.93 per share on March 18, 2002, on the New York Stock Exchange).*

     As of March 18, 2002, 307,949,440 shares of the registrant’s Common Stock, $.01 par value per share, were issued and outstanding.

     Note that in Part II of this report on Form 10-K, we “incorporate by reference” certain information from our Annual Report to Shareholders for the fiscal year ended December 31, 2001, and in Part III we “incorporate by reference” certain information from our Definitive Proxy Statement for the Annual Meeting of Shareholders to be held on May 15, 2002.

     These documents have been filed with the Securities and Exchange Commission (SEC). The SEC allows us to disclose important information by referring to it in that manner. Please refer to such information.


Only shares of common stock held beneficially by directors, executive officers and subsidiaries of the Company have been excluded in determining this number.




TABLE OF CONTENTS

TABLE OF CONTENTS
PART I
Item 1. Business
INTRODUCTION
DESCRIPTION OF BUSINESS SEGMENTS
EXPANSION AND DIVESTITURE OF OPERATIONS
GOVERNMENT REGULATION
MARKETING
COMPETITION
EMPLOYEES
CAUTIONARY STATEMENTS
EXECUTIVE OFFICERS OF THE REGISTRANT
Item 2. Properties
Item 3. Legal Proceedings
Item 4. Submission of Matters to a Vote of Security Holders
PART II
Item 5. Market for Registrant’s Common Equity and Related Stockholder Matters
Item 6. Selected Financial Data
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Item 8. Financial Statements and Supplementary Data
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
PART III
Item 10. Directors and Executive Officers of the Registrant
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management
Item 13. Certain Relationships and Related Transactions
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
SIGNATURES
EXHIBIT INDEX
Articles of Amendment to Articles of Incorporation
1998 Broad-Based Stock Incentive Plan
Amended and Resated 1991 Stock and Incentive Plan
Nonemployee Director Stock Option Plan
2001 Executive Savings Plan
Directors' Compensation Deferral Plan
Employment Agreement - Robert J. Sheehy
Portions of the Company's Annual Report
Subsidiaries of the Company
Consent of Independent Public Accountants
Powers of Attorney
Letter re: representations by Arthur Andersen LLP


Table of Contents

TABLE OF CONTENTS
             
Page

PART I
Item 1.
  Business     2  
    Introduction     2  
    Description of Business Segments     2  
    Expansion and Divestiture of Operations     6  
    Government Regulation     6  
    Marketing     8  
    Competition     8  
    Employees     9  
    Cautionary Statements     9  
    Executive Officers of the Registrant     15  
Item 2.
  Properties     16  
Item 3.
  Legal Proceedings     16  
Item 4.
  Submission of Matters to a Vote of Security Holders     17  
PART II
Item 5.
  Market for Registrant’s Common Equity and Related Stockholder Matters     17  
Item 6.
  Selected Financial Data     17  
Item 7.
  Management’s Discussion and Analysis of Financial Condition and Results of Operations     17  
Item 7A.
  Quantitative and Qualitative Disclosures about Market Risk     17  
Item 8.
  Financial Statements and Supplementary Data     17  
Item 9.
  Changes in and Disagreements with Accountants on Accounting and Financial Disclosure     18  
PART III
Item 10.
  Directors and Executive Officers of the Registrant     18  
Item 11.
  Executive Compensation     18  
Item 12.
  Security Ownership of Certain Beneficial Owners and Management     18  
Item 13.
  Certain Relationships and Related Transactions     18  
PART IV
Item 14.
  Exhibits, Financial Statement Schedules and Reports on Form 8-K     18  
Signatures        
Exhibit Index        

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PART I

Item 1.     Business

INTRODUCTION

      UnitedHealth Group is a leader in the health and well-being industry, serving more than 38 million Americans. Through our family of businesses, we combine clinical insight with consumer-friendly services and advanced technology to help people achieve optimal health and well-being through all stages of life. Our revenues are derived from premium revenues on insured (risk-based) products, fees from management, administrative and consulting services, and investment and other income. We conduct our business primarily through operating divisions in the following business segments:

  •  Uniprise;
 
  •  Health Care Services, which includes our UnitedHealthcare and Ovations businesses;
 
  •  Specialized Care Services; and
 
  •  Ingenix.

      While separate, our businesses remain interrelated as part of our health and well-being enterprise. Our businesses share customers, and in most instances, use common information systems and share administrative services. For a discussion of our results by segment see Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

      UnitedHealth Group Incorporated is a Minnesota corporation incorporated in January 1977. The terms “we,” “our” or the “Company” refer to UnitedHealth Group Incorporated and its subsidiaries. Our executive offices are located at UnitedHealth Group Center, 9900 Bren Road East, Minnetonka, Minnesota 55343; telephone (952) 936-1300. Our home page on the Internet is at www.unitedhealthgroup.com. You can learn more about us by visiting that site.

DESCRIPTION OF BUSINESS SEGMENTS

Uniprise

      Uniprise serves the employee benefit needs of large organizations by developing technology and service-driven solutions tailored to the specific needs of each corporate customer. Uniprise offers consumers access to a wide spectrum of health and well-being products and services. Together with its affiliates, Uniprise’s core business provides comprehensive, integrated health benefit services to multi-location employers with more than 5,000 employees, specializing in large volume transaction management, large-scale benefit design, care management programs and administration for large organizations, and innovative technology solutions designed to manage and control medical care costs, facilitate delivery of care, and transform complex administrative processes into simpler, efficient, high quality automated processes. Uniprise is the business through which large employers can access not only Uniprise services, but also all of UnitedHealth Group’s provider-based medical, insurance and specialty services, with a large variety of funding arrangements. As of December 31, 2001, Uniprise provided services to nearly 300 clients, representing approximately eight million individuals, including approximately 150 of the Fortune 500 companies.

      Uniprise also offers human resources and benefit administration outsourcing services to large organizations, including but not limited to call center services, enrollment services, and defined health benefit and contribution plan support services. Uniprise provides claim and customer services and technological solutions for six independent, or unaffiliated, non-UnitedHealthcare health plans, which serve approximately one million individuals.

      We believe that Internet technology has created a new channel for providing health information and transaction services to consumers, enrollees, physicians and employers. Uniprise has developed industry

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leading Internet applications for physician inquiries and transactions, customer-specific data analysis for employers, and consumer access to personal information and service applications. For example, one of these applications gives employers instant, real-time, online access to add, update or verify employee benefits information at any time. Another application allows consumers to make real-time inquiries into the status and history of their health claims, to view and search for care providers through an on-line provider directory, to view eligibility information and to access health and well-being information tailored to their specific needs and interests.

Health Care Services

      Our Health Care Services segment consists of the UnitedHealthcare and Ovations businesses.

     UnitedHealthcare

      UnitedHealthcare coordinates health and well-being services on behalf of local employers and consumers nationwide. UnitedHealthcare’s products are primarily marketed to small and mid-size employers with up to 5,000 employees. As of December 31, 2001, this business served approximately 7.6 million individuals. As of December 31, 2001, UnitedHealthcare also served approximately 345,000 Medicare individuals in 10 states with Medicare+Choice products and approximately 640,000 Medicaid eligible individuals in 11 states. With some of these product offerings, UnitedHealthcare assumes the risk of both medical and administrative costs for its members in return for premium revenue. UnitedHealthcare offers its products through subsidiaries that are usually licensed as health maintenance organizations (“HMOs”), preferred provider organizations (“PPOs”) or insurers, depending upon state regulations. It also provides administrative and other management services to health plans and self-funded customers for which UnitedHealthcare receives a fee, as it does not assume the risk of health care costs.

      UnitedHealthcare arranges for access to care through more than 360,000 physicians and 3,100 hospitals across the United States. The consolidated purchasing power represented by the individuals UnitedHealthcare serves makes it possible for UnitedHealthcare to contract for cost-effective access to a large number of conveniently located care providers. Through its family of companies, UnitedHealthcare offers:

  •  A broad range of benefit plans integrating medical, ancillary and alternative products so customers can choose what is right for them;
 
  •  Access to broad and diverse numbers of health care providers, including benefit plans that give customers direct access to specialists without obtaining referrals;
 
  •  Innovative programs that facilitate integrated care delivery;
 
  •  Convenient self-service for customer transactions, pharmacy services and health information;
 
  •  Clinical information that physicians can use in working with their patients;
 
  •  Simplified electronic transactions for customers; and
 
  •  Economic benefits of the purchasing power of millions of people.

      We believe that UnitedHealthcare’s history of innovation distinguishes its product offerings from the competition. UnitedHealthcare designs consumer-oriented health benefits and services that value individual choice and control in accessing health care. One of the goals is to make it easier for people to get the care they need, when they need it. UnitedHealthcare has programs that provide health education; admission counseling before hospital stays; care advocacy to help avoid delays in patients’ stays in the hospital; support for individuals at risk of needing intensive treatment; continuous coordination for people with chronic conditions; and prescription drug management, which promotes safe use of medications. We want consumers to be engaged and active participants in managing their own health and well-being. For example, UnitedHealthcare’s multi-layered pharmacy benefit program provides access to a wide range of generic and brand-name drugs. Individuals who choose to use generic drugs pay less, while those who

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prefer to use brand-name drugs pay more. Our agreement with Merck Medco Managed Care L.L.C. is an important part of this program. In addition, UnitedHealthcare was an early leader in offering open access products, which allow individuals to schedule appointments directly with specialists without a referral from a primary care physician. Further, UnitedHealthcare offers Web sites that enable access to a variety of information, including a directory of network physicians and hospitals, reports on thousands of health topics and a health profile tailored to individual interests.

     Ovations

      Ovations helps Americans in the second half of life address their unique needs for preventative and acute health care services, deal with chronic disease and respond to specialized issues relating to their overall well-being. Ovations is one of the few enterprises fully dedicated to this market segment. As a part of this business, in January 1998, we began a 10-year partnership with AARP, the nation’s largest organization for older Americans, and currently provide Medicare supplement and hospital indemnity insurance to more than 3.5 million AARP members. Ovations expanded services by instituting AARP Eye Health Services, which offers affordable eye exams, complimentary glaucoma screenings and discounts on eyewear to AARP members. In addition, Ovations’ Medicare Supplement Pharmacy Service addresses one of the most significant cost problems facing older Americans — prescription drug costs, providing AARP members cost-savings and greater access to prescription drugs and health and well-being products. Ovations also developed an offering with lower cost Medicare supplement coverage that provides consumers with a hospital network and 24-hour access to health care information from nurses. In June 2001, Ovations expanded its service relationship with AARP to include AARP Pharmacy Services, the country’s largest pharmacy discount card program, offering prescription drugs, over-the-counter products and drug store products through a retail network and mail order service. AARP Pharmacy Services is part of Ovations’ health and well-being division, which provides consumers with access to health care products, services and supporting health information. In February 2002, Ovations expanded its AARP Nurse HealthLine Services to cover beneficiaries of all AARP Medicare products, providing 24-hour access to health information from nurses. Ovations, through its licensed affiliates, provides its products and services in all 50 states, the District of Columbia, Puerto Rico and the U.S. Virgin Islands.

      The Evercare® division of Ovations provides a broad spectrum of health care services to older Americans. In February 2001, EverCare merged its operations with those of Lifemark Corporation to become the one of the nation’s leaders in offering complete, individualized care-planning, care coordination and care benefits for aging, vulnerable and chronically ill individuals living on their own, in community-based settings and in nursing facilities. Through Medicare, Medicaid and private-pay long-term care products and programs, EverCare is dedicated to enhancing the quality of life and maximizing well-being for this unique population, while preserving financial resources and ultimately minimizing associated costs. EverCare offers a continuum of services through innovative programs such as EverCare Choice, EverCare Select and EverCare Connections. EverCare Choice is a Medicare product that offers enhanced medical coverage to frail, elderly and chronically ill populations in both nursing homes and community settings. These services are provided primarily through nurse practitioners, physicians’ assistants and physicians. EverCare Select is a Medicaid, long-term health care product for elderly, physically disabled and other needy individuals. EverCare Connections is a comprehensive eldercare service program providing service coordination, consultation, underwriting support services, claim management and information and resources linkage nationwide.

Specialized Care Services

      Specialized Care Services is a portfolio of specialized health and well-being companies, each serving a specific market need with a unique blend of benefits, provider networks, services and resources. Specialized Care Services is uniquely positioned to provide comprehensive products and services that are focused on highly specialized health care needs such as mental health and chemical dependency, employee assistance, organ transplants, vision and dental services, chiropractic services, life insurance, health related information and other health and well-being services. These offerings are sold directly to employers and consumers and

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indirectly through other UnitedHealth Group businesses, as well as through unrelated entities, including HMOs, PPOs, insurers, reinsurers, third-party administrators (“TPAs”), labor unions and state and federal government customers. Our products and services include both risk-based products, in which we assume financial responsibility for health care costs, and management and administrative service fees. Most of our businesses operate on a national scale and are subject to the economic and regulatory conditions of various states and regions.

      Through United Behavioral Health (“UBH”) and its affiliated companies, we provide behavioral health care benefit services, employee assistance programs and psychiatric disability benefit services. UBH’s care management staff and extensive network of contracted mental health professionals represent the core of its product offerings. UBH’s services and products reach over 22 million individuals.

      Optum® provides health information assistance, support and related services all designed to improve the health and well-being of the approximately 19 million individuals it serves. Through multiple access points, including the Internet, telephone, audio tapes, print and in-person consultations, we help consumers address daily living concerns, make informed health care decisions and become more effective health care consumers.

      Dental Benefit Providers (“DBP”) and its affiliates provide management services for dental care benefits. Through an extensive relationship with contracted dental providers, DBP and its affiliates manage dental benefit offerings for approximately three million individuals. DBP’s products are distributed primarily through unaffiliated HMOs and insurers to commercial, Medicare and Medicaid populations. DBP also offers its products and services to and through UnitedHealth Group affiliates and has expanded its offering of both network based and indemnity dental care plan designs.

      United Resource Networks (“URN”) is the gateway to highly specialized critical care programs at more than 55 of the most widely recognized medical centers in the United States. URN negotiates fixed, competitive rates for high-cost, complex health care services. Access to URN’s programs and services is available to over 2,200 payers representing approximately 40 million individuals.

      National Benefit Resources (“NBR”) is a managing general underwriter that originates and administers medical stop loss insurance provided to employers with self-funded employee benefit plans. NBR markets stop loss coverage primarily through over 250 third party administrators located throughout the United States. NBR distributes to its customer base certain products and services of other Specialized Care Services’ businesses, including those of URN and Optum.

      Spectera Inc. represents Specialized Care Services’ operating platform for the vision care market. Spectera and its licensed subsidiaries specialize in building vision care benefit partnerships with physicians, employer groups and benefit consultants. Spectera administers vision benefits for more than six million individuals through more than 1,400 employer groups. Spectera provides comprehensive vision care services through its national network of more than 9,700 private doctors’ offices and retail store locations. In addition, our vision business enhances the value of existing vision benefits through coordinating the delivery of vision care services and ophthalmic materials for UnitedHealthcare customers.

      American Chiropractic Network, Inc. (“ACN”), provides consumers with access to networks of chiropractic, physical therapy and other complementary and alternative health care services as well as selected health care products.

      Specialized Care Services also manages units that market the sale of group life and accident insurance to small and medium-sized employer groups.

INGENIX

      Our Ingenix businesses are leaders in the field of health care data and information, research, analysis and application. Ingenix serves multiple health care market segments on a business-to-business basis, including pharmaceutical companies, health insurers and other payers, physicians and other health care

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providers, large employers and government agencies. Ingenix maintains two primary operating divisions: Ingenix Health Intelligence and Ingenix Pharmaceutical Services.

      Ingenix Health Intelligence offers three broad types of products and services: data and software products and services, consulting and publishing services. Ingenix Health Intelligence provides a wide variety of data and software services and products, including databases for benchmarking and reimbursement methodology development, software to analyze and report costs and utilization of services, data management services, HEDIS reporting, fraud and abuse detection and prevention services, claims editing software and reimbursement systems audits. The consulting services business focuses on actuarial and financial disciplines, product development, provider contracting and medical policy and management. Ingenix Health Intelligence also publishes print and electronic media products that provide information regarding coding, reimbursement, billing, compliance and other general health care issues.

      Ingenix Pharmaceutical Services offers product development and marketing-related services for pharmaceutical, biotechnology and medical device manufacturers on a global basis. Ingenix Pharmaceutical Services provides global clinical research services including strategic planning, research protocol development, investigator identification and training, patient recruitment, regulatory assistance, project management, data management and biostatistical analysis, quality assurance and medical writing. Ingenix Pharmaceutical Services addresses “real world” product questions through economic and outcomes research, safety and research and patient registries. Ingenix Pharmaceutical Services also provides medical education and communications through scientific publications, medical symposia and interactive web-based technologies.

EXPANSION AND DIVESTITURE OF OPERATIONS

      We continually evaluate expansion opportunities and, in the normal course of business, often consider whether to sell certain businesses or stop offering certain products or services. Expansion opportunities may include acquiring businesses that are complementary to our existing operations. During 2001, we completed several acquisitions and ceased offering some products in certain markets, all as part of our ongoing emphasis on our strategic focus. Further, we devote significant attention to internally developing new products and services in the health and well-being sector as we have broadly defined it.

      If we were to make any particular acquisition, it may affect our ability to integrate and manage our overall business effectively. Integration activities relating to acquisitions may increase costs, affect revenue and earnings growth and adversely affect our financial results.

GOVERNMENT REGULATION

      Most of our health and well-being services are heavily regulated. This regulation can vary significantly from jurisdiction to jurisdiction. Federal and state regulatory agencies generally have discretion to issue regulations and interpret and enforce laws and rules. Changes in applicable laws and regulations are continually being considered, and the interpretation of existing laws and rules also may change periodically. These revisions could affect our operations and financial results. Enactment of federal and state health benefit laws and regulations can also affect our businesses. Examples of such laws and regulations include: health plan liability laws; physician and provider prompt pay laws; data privacy; mandated benefits; limits on contractual terms with physicians and other health care providers, including audit, payment and termination provisions; implementation of a mandatory third party review process for coverage denials; and other laws and limits on utilization management and restrictions on our ability to carve out certain categories of risk, such as acts of terrorism. Further, as our businesses continue to implement their e-commerce initiatives, uncertainty surrounding the regulatory authority and requirements in this area will make compliance an important focus.

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Federal Programs

      Our Health Care Services segment, which includes UnitedHealthcare and Ovations, has Medicare+Choice contracts that are regulated by the Centers for Medicare and Medicaid Services (“CMS”). CMS has the right to audit such health plans in order to determine each plan’s compliance with CMS’ contracts and regulations and the quality of care being given to members. The significant level of regulations surrounding Medicare and Medicaid makes compliance in this product line a continuing challenge. Our Health Care Services segment also has Medicaid and State Children’s Health Insurance Program contracts that are subject to federal and state regulation regarding services to be provided to Medicaid enrollees, payment for those services, and other aspects of these programs. We believe we are in compliance in all material respects with these regulations.

State Regulation

      All of the states in which our subsidiaries offer insurance and HMO products regulate the activities of those products and operations. Most states require periodic financial reports and impose minimum capital or restricted cash reserve requirements. Many of UnitedHealthcare’s health plans and each of our insurance subsidiaries are regulated under state insurance holding company regulations. Such regulations generally require registration with the state department of insurance and the filing of reports that describe capital structure, ownership, financial condition, certain inter-company transactions and general business operations. Some state insurance holding company laws and regulations require prior regulatory approval or, in some circumstances, prior notice of acquisitions and material inter-company transfers of assets, as well as transactions between the regulated companies and their parent holding companies or affiliates. In addition, some of our subsidiaries or products may by subject to PPO, managed care organization (“MCO”) or third party administrator (“TPA”) related regulations and licensure requirements. These regulations differ greatly from state to state, but generally contain network, contracting, financial and reporting requirements. Many states also have enacted laws and/or adopted regulations governing utilization review and external appeals activities, and these laws may apply to some of our operations. Additionally, there are laws and regulations that set specific standards for delivery of services, prompt payment of claims, confidentiality of consumer health information and covered benefits and services. To date, these various laws and regulations have not materially affected our financial position or results of operations.

HIPAA

      The administrative simplification provisions of the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) apply to both the group and individual health insurance markets, including self-funded employee benefit plans. Covered entities must be compliant with standards for electronic transactions and code sets by October 2002, and with standards for privacy of protected health information by April 2003. New standards for health information security and national provider and employer identifiers are currently being developed by regulators. We are in the process of updating our business practices to comply with these standards. We plan to be in material compliance by the enforcement dates; however, the law is far-reaching and complex and the government’s delay in providing guidance may affect the timeliness of our compliance efforts. Additionally, different approaches to HIPAA’s provisions and varying enforcement philosophies in the different states may adversely affect our ability to standardize our products and services across state lines.

ERISA

      The Employee Retirement Income Security Act of 1974, as amended (“ERISA”), regulates how goods and services are provided to or through certain types of employer-sponsored health benefit plans. ERISA is a complex set of laws and regulations that is subject to periodic interpretation by the United States Department of Labor (“DOL”) as well as the federal courts. ERISA places controls on how our business units may do business with employers who sponsor employee benefit health plans, particularly those that maintain self-funded plans. New ERISA claim regulations, effective July 2002, require changes

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to operations and may lead to increased litigation activity. We plan to be in material compliance with the new regulations by the enforcement dates.

Fraud and Abuse

      The regulations and contractual requirements applicable to participants in federal government health care programs such as Medicare and Medicaid are complex and changing. We have re-emphasized our regulatory compliance efforts for these programs, but ongoing vigorous law enforcement and the highly technical regulations mean that compliance efforts in this arena will continue to require significant resources. Additionally, states have also begun to focus their anti-fraud efforts on insurance companies and health maintenance organizations. Some states now require filing and approval of anti-fraud plans and may monitor compliance as part of any market conduct examination.

Audits and Investigations

      We are regularly subject to governmental audits, investigations and enforcement actions. Any such government actions can result in assessment of damages, civil or criminal fines or penalties, or other sanctions, including loss of licensure or exclusion from participation in government programs. In addition, a state department of insurance or other state or federal authority (including CMS, the Office of the Inspector General and state attorneys general) may from time to time begin a special audit of one of our health plans, our insurance plans and products or one of our other operations regarding issues such as utilization management; financial, eligibility or other data reporting; prompt claims payment; or coverage of medically necessary care, including emergency room care. We are currently involved in various governmental investigations, audits and reviews. These include routine, regular and special investigations, audits and reviews by CMS, state insurance departments and state attorneys general, the Office of Personnel Management, the Office of the Inspector General and U.S. Attorneys. We do not believe the results of any of the current investigations, audits or reviews, individually or in the aggregate, will have a material adverse effect on our financial position or results of operations.

International Regulation

      Our Ingenix and UnitedHealthcare segments both have limited international operations. As of December 31, 2001, Ingenix had provided services to customers for trials occurring in over 40 countries, and UnitedHealthcare’s international division operated health companies or offered consulting services in nine markets around the world. These international operations are subject to different legal and regulatory requirements in local jurisdictions, including various tax, tariff and trade regulations, as well as employment, intellectual property and investment rules and laws.

MARKETING

      Our marketing strategy is defined and coordinated by each business’ dedicated marketing staff. Within these segments, primary marketing responsibility generally resides with a marketing leader and a direct sales force. In addition, several of the segments also rely upon independent insurance agents and brokers to sell some of their products. Marketing efforts also include public relations efforts and advertising programs that may use television, radio, newspapers, magazines, billboards, direct mail and telemarketing.

COMPETITION

      As a diversified health and well-being services company with a scope that extends far beyond the boundaries of traditional managed health care companies, we operate in highly competitive markets. Our competitors include managed health care companies, insurance companies, health care providers which have formed networks to directly contract with employers and various information and consulting companies. New entrants into the markets in which we compete as well as consolidation within these markets also contribute to this competitive environment. We believe that the principal competitive factors

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affecting us and the sales and pricing of our products and services include product innovation, consumer satisfaction, the level and quality of products and services, network capabilities, price, market share, product distribution systems, efficient administration operations, financial strength and marketplace reputation.

      We believe that our competitive strengths include the customer focus resulting from our operational realignment. Each UnitedHealth Group business represents a strategic platform from which we can penetrate more deeply into specific markets. These businesses are anchored in a common pursuit of improved health and well being, exploiting three core competencies: network management, knowledge and information and service infrastructure. Other strengths include the breadth and quality of our products, our geographic scope and diversity, our effective use of proprietary tools and products to coordinate and facilitate programs designed to realize appropriately lower health care costs, our disciplined underwriting and pricing practices and staff, our significant market position in certain geographic areas, the strength of our distribution network, our financial strength, our generally large provider networks that provide more consumer choice and minimize barriers to access our point-of-service products and our strong marketplace reputation. However, in some markets we may be at a disadvantage for a number of reasons, including competitors with more resources, longer operating histories, larger market shares, broader networks, narrower networks (which may allow greater cost control and lower prices) or more established names and reputations. These competitive factors could adversely affect our business and operating results.

EMPLOYEES

      As of December 31, 2001, we employed approximately 30,000 individuals. The Company believes its employee relations are good.

CAUTIONARY STATEMENTS

      The statements contained in this Annual Report on Form 10-K and the Management’s Discussion and Analysis of Financial Condition and Results of Operations and other sections of our Annual Report to Shareholders incorporated by reference in this document, include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 (the “PSLRA”). When used in this Annual Report on Form 10-K and in future filings by the Company with the Securities and Exchange Commission, in our press releases, presentations to securities analysts or investors, and in oral statements made by or with the approval of one of our executive officers, the words or phrases “believes,” “anticipates,” “intends,” “will likely result,” “estimates,” “projects” or similar expressions are intended to identify such forward-looking statements. Any of these forward-looking statements involve risks and uncertainties that may cause our actual results to differ materially from the results discussed in the forward-looking statements.

      The following discussion contains certain cautionary statements regarding our business that investors and others should consider. This discussion is intended to take advantage of the “safe harbor” provisions of the PSLRA. Except to the extent otherwise required by federal securities laws, in making these cautionary statements, we are not undertaking to address or update each factor in future filings or communications regarding our business or operating results, and are not undertaking to address how any of these factors may have caused results to differ from discussions or information contained in previous filings or communications. In addition, any of the matters discussed below may have affected our past, as well as current, forward-looking statements about future results. Any or all forward-looking statements in this report, in the 2001 Annual Report and in any other public statements we make may turn out to be wrong. They can be affected by inaccurate assumptions we might make or by known or unknown risks and uncertainties. Many factors discussed below will be important in determining future results. Consequently, no forward-looking statement can be guaranteed. Actual future results may vary materially from those expressed in our communications.

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Health Care Costs

      We use a large portion of our premium revenues to pay the costs of health care services or supplies delivered to our customers. Total health care costs are affected by the number of individual services rendered and the cost of each service. Much of our premium revenue is priced before services are delivered and the related costs are incurred, usually on a prospective annual basis. Although we base the premiums we charge on our estimate of future health care costs over the fixed premium period, inflation, regulations and other factors may cause actual health care costs to exceed what was estimated and reflected in premiums. These factors may include increased use of services, increased cost of individual services, catastrophes, epidemics, the introduction of new or costly treatments, new mandated benefits or other regulatory changes, insured population characteristics and seasonal changes in the level of health care use. In addition, the financial results we report for any particular period include estimates of costs incurred that have not yet been reported to us. Because of these estimates, our earnings may be adjusted later to reflect the actual costs. Relatively small changes in medical costs as a percentage of premium revenues and our ability to properly estimate future health care costs over fixed premium periods can create significant changes in our financial results because of the relatively narrow margins of our insurance products.

Industry Factors

      The managed care industry receives significant negative publicity and has been the subject of large jury awards. This publicity has been accompanied by litigation, legislative activity, regulation and governmental review of industry practices. These factors may adversely affect our ability to market our products or services, may require us to change our products and services, and may increase the regulatory burdens under which we operate, further increasing our costs of doing business and adversely affecting our profitability.

Competition

      In many of our geographic or product markets, we compete with a number of other entities, some of which may have certain characteristics or capabilities that give them a competitive advantage. We believe the barriers to entry in these markets are not substantial, so the addition of new competitors can occur relatively easily, and consumers enjoy significant flexibility in moving to new providers of health and well-being services. Certain of our customers may decide to perform for themselves functions or services we provide, which would decrease our revenues. Certain of our contracted physicians and other health care providers may decide to market products and services to our customers in competition with us. In addition, significant merger and acquisition activity has occurred in the industry in which we operate as well as in industries that act as suppliers to us, such as the hospital, physician, pharmaceutical, medical device and health information systems industries. To the extent that there is strong competition or that competition intensifies in any market, our ability to retain or increase customers or contracted physicians and other health care providers, or maintain or increase our revenue growth, pricing flexibility, control over medical cost trends and marketing expenses may be adversely affected.

AARP Contract

      Under our long-term contract with AARP, we provide Medicare Supplement and Hospital Indemnity health insurance and other products to AARP members. As of December 31, 2001, our portion of AARP’s insurance program represented approximately $3.5 billion in annual net premium revenue from approximately 3.5 million AARP members. The success of our AARP arrangement depends, in part, on our ability to service these customers, develop additional products and services, price the products and services competitively, and respond effectively to federal and state regulatory changes. Additionally, events that adversely affect AARP or one of its other business partners for its member insurance program could have an adverse effect on the success of our arrangement with AARP.

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Medicare Operations

      In response to medical cost increases that exceeded Medicare program reimbursement rate growth, we have withdrawn our Medicare+Choice product offerings from a number of counties and filed significant benefit adjustments in other counties. These and other actions have reduced Medicare+Choice enrollment and may result in further withdrawals of Medicare+Choice product offerings, when and as permitted by our contracts with the CMS. We are precluded from re-entering the counties from which we have withdrawn our Medicare+Choice product offerings until two years after the effective date of withdrawal.

      We will continue to offer Medicare+Choice products in economically viable markets and are exploring alternative arrangements to provide health benefits to seniors. However, the financial results of our Medicare+Choice operations depend on a number of factors, including future Medicare program reimbursement increases, government regulations, benefit design, physician and other health care provider contracting and other factors. There can be no assurance that our Medicare+Choice operations will be profitable in future periods.

Government Programs and Regulation

      Our business is heavily regulated domestically at the federal, state and local levels and internationally. The laws and rules governing our business and interpretations of those laws and rules are subject to frequent 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 in federal and state courts for coverage determinations, contract interpretation and other actions. We must obtain and maintain regulatory approvals to market many of our products. Delays in obtaining or failure to obtain or maintain these approvals could adversely affect our revenue or could increase our costs. We participate in federal, state and local government health care coverage programs. These programs generally are subject to frequent change, including changes that may reduce the number of persons enrolled or eligible, reduce the amount of reimbursement or payment levels, or increase our administrative or health care costs under such programs. Such changes have adversely affected our financial results and willingness to participate in such programs in the past and may also do so in the future.

      State legislatures and Congress continue to focus on health care issues. Congress is considering Patients’ Bill of Rights legislation that, if adopted, could fundamentally alter ERISA’s treatment of liability for noncompliance, fiduciary breach of contract and improper benefit coverage denials. Other bills and regulations at state and federal levels may affect certain aspects of our business including physician and other health care provider contracting, claim payments and processing, confidentiality of health information and government-sponsored programs. While we cannot predict if any of these initiatives will ultimately become binding law or regulation, or if enacted, what their terms will be, their enactment could increase our costs, expose us to expanded liability, require us to revise the ways in which we conduct business or put us at risk for a loss of business to new health care funding arrangements. Further, as our businesses continue to implement their e-commerce initiatives, uncertainty surrounding the regulatory authority and requirements in this area will make it difficult to ensure compliance.

      We are also subject to various governmental reviews, audits and investigations. Such oversight could result in the loss of licensure or the right to participate in certain programs, or the imposition of civil or criminal fines, penalties and other sanctions. In addition, disclosure of any adverse investigation or audit results or sanctions could damage our reputation in various markets and make it more difficult for us to sell our products and services. We are currently involved in various governmental investigations, audits and reviews. These include routine, regular and special investigations, audits and reviews by the CMS, state insurance departments and state attorneys general, the Office of Personnel Management, the Office of the Inspector General and U.S. Attorneys. We do not believe the results of any of the current investigations, audits or reviews, individually or in the aggregate, will have a material adverse effect on our financial position or results of operations.

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      Our operations are conducted through our wholly owned subsidiaries, which include health maintenance organizations and insurance companies. These 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 our regulated subsidiaries, without prior approval by state regulatory authorities, is limited based on the subsidiary’s level of statutory net income, statutory capital and surplus.

Physician, Hospital and Other Health Care Provider Relations

      One of the significant techniques we use to contain health care costs and facilitate care delivery is contracting with physicians, hospitals and other health care providers. Because our health plans are geographically diverse and most of those health plans contract with a large number of these providers, we believe our aggregate exposure to provider relations issues is limited. A number of organizations are advocating for legislation that would exempt certain of these providers from federal and state antitrust laws, the adoption of which could affect this assessment. In any particular market, these providers could refuse to contract, demand higher payments, or take other actions that could result in higher health care costs, less desirable products for customers or difficulty meeting regulatory or accreditation requirements. In some markets, certain providers, particularly hospitals, physician/hospital organizations or multi-specialty physician groups, may have significant market positions or near monopolies.

Litigation and Insurance

      We may be a party to a variety of legal actions that affect any business, such as employment and employment discrimination-related suits, employee benefit claims, breach of contract actions, tort claims, shareholder suits, including securities fraud, and intellectual property related litigation. In addition, because of the nature of our businesses, we are routinely party to a variety of legal actions related to the design, management and offerings of our services. These matters include: claims related to health care benefits coverage; medical malpractice actions; allegations of anti-competitive and unfair business activities; disputes over compensation and termination of contracts including those with physicians and other health care providers; disputes related to our administrative services, including actions alleging claim administration errors and failure to disclose rate discounts and other fee and rebate arrangements; disputes over benefit copayment calculations; claims related to disclosure of certain business practices; and claims relating to customer audits and contract performance. In 1999, a number of class action lawsuits were filed against us and virtually all major entities in the health benefits business. The suits are purported class actions on behalf of certain customers and physicians for alleged breaches of federal statutes, including ERISA and the Racketeer Influenced Corrupt Organization Act (“RICO”). While we believe these suits against us are without merit and we intend to defend our position vigorously, we will incur expenses in the defense of these matters and we cannot predict their outcome.

      Recent court decisions and legislative activity may increase our exposure for any of these types of claims. In some cases, substantial non-economic, treble or punitive damages may be sought. We currently have insurance coverage for some of these potential liabilities. Other potential liabilities may not be covered by insurance, insurers may dispute coverage, or the amount of insurance may not be enough to cover the damages awarded. In addition, certain types of damages, such as punitive damages, may not be covered by insurance and insurance coverage for all or certain forms of liability may become unavailable or prohibitively expensive in the future.

Information Systems

      Our businesses depend significantly on effective information systems. Our information systems require an ongoing commitment of significant resources to maintain and enhance existing systems and develop new systems to keep pace with continuing changes in information processing technology, evolving industry and regulatory standards, and changing customer preferences. For example, the administrative simplification provisions of HIPAA and the Department of Labor’s ERISA claim processing regulations may require

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changes to current systems. In addition, we obtain significant portions of our systems-related or other services or facilities from independent third parties, which may make our operations vulnerable to such third parties’ failure to perform adequately. As a result of our acquisition activities, we have acquired additional systems and have been taking steps to reduce the number of systems and have upgraded and expanded our information systems capabilities. Failure to maintain effective and efficient information systems could cause the loss of existing customers, difficulty in attracting new customers, issues in determining medical cost estimates, customer and physician and other health care provider disputes, regulatory problems, increases in administrative expenses or other adverse consequences.

Data and Proprietary Information

      Many of our products and services depend significantly on the integrity of the data on which they are based. If the information contained in our databases were found or perceived to be inaccurate, or if such information were generally perceived to be unreliable, commercial acceptance of our database-related products would be adversely and materially affected. Furthermore, the use of individually identifiable data by our businesses is regulated at international, federal, state and local levels. These laws and rules are changed frequently by legislation or administrative interpretation. These restrictions could adversely affect revenues from certain of our products or services and, more generally, affect our business, financial condition and results of operations.

      There are various recently adopted state laws that address the use and maintenance of individually identifiable health data. Most enact privacy provisions from the federal Gramm-Leach-Bliley Act. Additionally, new federal regulations promulgated pursuant to HIPAA are now effective with compliance required by April 2003. Compliance with these proposals and new regulations could result in cost increases due to necessary systems changes and the development of new administrative processes and may impose further restrictions on our use of patient identifiable data that is housed in one or more of our administrative databases. The success of our knowledge and information-related businesses also depends significantly on our ability to maintain proprietary rights to our databases and related products. We rely on our agreements with customers, confidentiality agreements with employees, and our trade secrets, copyrights and patents to protect our proprietary rights. We cannot assure that these legal protections and precautions will prevent misappropriation of our proprietary information. In addition, substantial litigation regarding intellectual property rights exists in the software industry, and we expect software products to be increasingly subject to third-party infringement claims as the number of products and competitors in this industry segment grows. Such litigation could have an adverse effect on the ability of our businesses to market and sell products and services and on our financial condition and results of operations.

Administration and Management

      Efficient and cost-effective administration of our operations is essential to our profitability and competitive positioning. While we manage expenses, staff-related and other administrative expenses may increase from time to time due to business or product start-ups or expansions, growth or changes in business or the mix of products purchased by customers, acquisitions, regulatory requirements or other reasons. Unanticipated expense increases may adversely affect our financial results. Further, we believe we currently have an experienced, capable management and technical staff. The market for management and technical personnel, including information systems professionals, in the health care industry is very competitive. Loss of certain key employees or a number of managers or technical staff could adversely affect our ability to administer and manage our business.

Marketing

      We market our products and services through both employed sales people and independent sales agents. Although we have many sales employees and agents, the departure of certain key sales employees or agents or a large subset of these individuals could impair our ability to retain existing customers. In addition, certain of our customers or potential customers consider our debt ratings, accreditation or certification by various private or governmental bodies or rating agencies necessary or important. Certain of

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our health plans or other business units may not have obtained or maintained, or may not desire or be able to obtain or maintain, such ratings, accreditation or certification, which could adversely affect our ability to obtain or retain business with these customers.

Acquisitions and Dispositions

      We have an active ongoing acquisition and disposition program under which we may engage in transactions involving the acquisition or disposition of assets, products or businesses, some or all of which may be material. These transactions may entail certain risks and uncertainties and may affect ongoing business operations because of unknown liabilities, unforeseen administrative needs or increased efforts to integrate the acquired operations. Failure to identify liabilities, anticipate additional administrative needs or effectively integrate acquired operations could result in reduced revenues, increased administrative and other costs and customer dissatisfaction.

Terrorist Attacks

      The terrorist attacks launched on September 11, 2001, the war on terrorism, the threat of future acts of terrorism and the related concerns of customers and providers have negatively affected, and may continue to negatively affect, the U.S. economy in general and our industry specifically. Depending on the government’s actions and the responsiveness of public health agencies and insurance companies, future acts of terrorism and bio-terrorism could adversely affect our Company through, among other things, increased use of health care services including, without limitation, hospital and physician services, ancillary testing and procedures, increased prescriptions for certain drugs, mental health and other services; loss of membership as a result of lay-offs or other reductions of employment; adverse effects upon the financial condition or business of employers who sponsor health care coverage for their employees; disruption of our information and payment systems; increased health care costs due to restrictions on our ability to carve out certain categories of risk, such as acts of terrorism; and disruption of the financial and insurance markets in general.

Financial Outlook

      From time to time in press releases and otherwise, we may publish forecasts or other forward-looking statements regarding our future results, including estimated revenues, net earnings and other operating and financial metrics. Any forecast of our future performance reflects various assumptions. These assumptions are subject to significant uncertainties, and as a matter of course, any number of them may prove to be incorrect. Further, the achievement of any forecast depends on numerous risks and other factors (including those described in this discussion), many of which are beyond our control. As a result, we cannot assure that our performance will be consistent with any management forecasts or that the variation from such forecasts will not be material and adverse. You are cautioned not to base your entire analysis of our business and prospects upon isolated predictions, but instead are encouraged to utilize the entire publicly available mix of historical and forward-looking information, as well as other available information affecting us and our services, when evaluating our prospective results of operations.

General Economic Conditions

      Changes in economic conditions could affect our business and results of operations. The state of the economy could affect our employer group renewal prospects and our ability to increase prices in some of our businesses. Although we are continuously striving to diversify our product offerings to address the changing needs of consumers, there can be no assurance that the effects of the current or a future downturn in economic conditions will not cause our existing customers to seek health coverage alternatives that we do not offer or will not result in significant loss of customers, or decreased margins on our continuing customers.

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Stock Market

      The market prices of the securities of the publicly-held companies in the industry in which we operate have shown volatility and sensitivity in response to many factors, including general market trends, public communications regarding managed care, litigation and judicial decisions, legislative or regulatory actions, health care cost trends, pricing trends, competition, earnings, membership reports of particular industry participants and acquisition activity. We cannot assure the level or stability of the price of our securities at any time or the affect of the foregoing or any other factors on such prices.

EXECUTIVE OFFICERS OF THE REGISTRANT

                     
First Elected as
Name Age Position Executive Officer




William W. McGuire, M.D. 
    53     Chairman, Chief Executive Officer and Director     1988  
Stephen J. Hemsley
    49     President, Chief Operating Officer and Director     1997  
Patrick J. Erlandson
    42     Chief Financial Officer and Chief Accounting Officer     2001  
David J. Lubben
    50     General Counsel and Secretary     1996  
Lois E. Quam
    40     Chief Executive Officer, Ovations     1998  
Jeannine M. Rivet
    53     Executive Vice President and Chief Executive Officer, Ingenix     1998  
Robert J. Sheehy
    44     Chief Executive Officer, UnitedHealthcare     2001  
R. Channing Wheeler
    50     Chief Executive Officer, Uniprise     1998  

      The Company’s Board of Directors elects executive officers annually. The Company’s executive officers serve until their successors are duly elected and qualified.

      Dr. McGuire is the Chairman of the Board of Directors and Chief Executive Officer of UnitedHealth Group. Dr. McGuire joined UnitedHealth Group as Executive Vice President in November 1988 and became its Chief Executive Officer in February 1991. Dr. McGuire also served as UnitedHealth Group’s Chief Operating Officer from May 1989 to June 1995 and as its President from November 1989 until May 1999.

      Mr. Hemsley is the President and Chief Operating Officer of UnitedHealth Group and has been a member of the Board of Directors since February 2000. Mr. Hemsley joined UnitedHealth Group in May 1997 as Senior Executive Vice President. He became Chief Operating Officer in September 1998 and was named President in May 1999. Prior to joining UnitedHealth Group, Mr. Hemsley was with Arthur Andersen LLP where he served since 1974 in various capacities, including Chief Financial Officer and Managing Partner, Strategy and Planning.

      Mr. Erlandson joined UnitedHealth Group in 1997. He became Controller and Chief Accounting Officer in September 1998 and was named Chief Financial Officer in January 2001. Prior to joining UnitedHealth Group, Mr. Erlandson was a partner with Arthur Andersen LLP where he served from 1981 to 1997.

      Mr. Lubben became UnitedHealth Group’s General Counsel and Secretary in October 1996. Prior to joining UnitedHealth Group, he was a partner in the law firm of Dorsey & Whitney LLP. Mr. Lubben first became associated with Dorsey & Whitney in 1977.

      Ms. Quam joined UnitedHealth Group in 1989 and became the Chief Executive Officer of Ovations in April 1998. Prior to April 1998, Ms. Quam served in various capacities including Chief Executive Officer, AARP Division; Vice President, Public Sector Services; and Director, Research. Prior to joining UnitedHealth Group, Ms. Quam served as Research Director from 1987-1989 for Partners National Health Plan.

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      Ms. Rivet joined UnitedHealth Group in June 1990 and became Executive Vice President of UnitedHealth Group and Chief Executive Officer of Ingenix in January 2001. Ms. Rivet was an Executive Vice President of UnitedHealthcare from October 1994 to March 1998 and served as the Chief Executive Officer of UnitedHealthcare from April 1998 to December 2000. She served as UnitedHealth Group’s Senior Vice President, Health Plan Operations from September 1993 to September 1994 and its Vice President of Health Service Operations from June 1990 to September 1993.

      Mr. Sheehy joined UnitedHealth Group in 1992 and became Chief Executive Officer of UnitedHealthcare in January 2001. From April 1998 to December 2000, he was President of UnitedHealthcare. Prior to April 1998, Mr. Sheehy served in various capacities with UnitedHealth Group, including Chief Executive Officer of United HealthCare of Ohio.

      Mr. Wheeler joined UnitedHealth Group in March 1995 and became Chief Executive Officer of Uniprise in May 1998. Prior to May 1998, he served in various capacities with UnitedHealth Group including Chief Executive Officer, Northeast Health Plans.

Item 2.     Properties

      As of December 31, 2001, the Company leased approximately 1.7 million aggregate square feet of space for its principal administrative offices in the greater Minneapolis/ St. Paul, Minnesota area and in Hartford, Connecticut. Excluding these areas, as of December 31, 2001, the Company leased approximately 4.9 million aggregate square feet in the United States and Europe. Such space accommodates health plans, managed care services, specialty programs or satellite administrative offices. The Company’s leases expire at various dates through May 31, 2025. As of December 31, 2001, the Company owned approximately 241,000 aggregate square feet of space for administrative offices in various states. Our administrative offices are accessed by our various businesses.

Item 3.     Legal Proceedings

      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, we have received several purported class action matters that generally challenge managed care practices including cost containment mechanisms, disclosure obligations and payment methodologies. We intend to defend vigorously all of these cases.

      In Re: Managed Care Litigation: MDL No. 1334. The multi-district litigation panel has consolidated several litigation matters involving UnitedHealth Group and its affiliates in the Southern District of Florida, Miami division. The UnitedHealth Group matters have been consolidated with litigation involving other industry members for the coordination of pre-trial proceedings. The litigation has been divided into two tracks, with one track comprising consumer claims and the other health care provider claims. Generally, the claims made in this consolidated litigation allege violations of ERISA and RICO in connection with alleged undisclosed policies intended to maximize profits. The litigation also asserts breach of state prompt payment laws and breach of contract claims alleging that UnitedHealth Group affiliates fail to timely reimburse providers for medical services rendered. The consolidated suits seek injunctive, compensatory and equitable relief as well as restitution, costs, fees and interest payments. Following the Court’s initial decisions on industry members’ motions to dismiss the complaints, amended complaints were filed in both tracks. On February 20, 2002 the Court granted in part and denied in part the industry defendants’ motion to dismiss the amended complaint in the member track litigation. In significant part, the Court limited the RICO and ERISA claims that could be brought by the plaintiffs, and dismissed entirely the common law claims for civil conspiracy and unjust enrichment. On March 14, 2002, the Court certified to the 11th Circuit the threshold issue of whether plaintiffs have standing to assert their RICO claims. The 11th Circuit has not ruled as to whether they will review the issue. All activity was stayed in the health care provider track pending resolution of a threshold appeal to determine which of the health care provider claims must be arbitrated. On March 14, 2002, the 11th Circuit affirmed the trial court’s arbitration ruling and it is anticipated that the stay will be lifted. In both tracks, decisions are pending on

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plaintiffs’ motions for class certification. Additionally, a decision is pending on industry members’ motion to dismiss in the health care provider track.

      The American Medical Association et al. v. Metropolitan Life Insurance Company, United HealthCare Services, Inc. and UnitedHealth Group was filed on March 15, 2000 in the Supreme Court of the State of New York, County of New York. On April 13, 2000, we removed this case to federal court. 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 non-network providers. The suit seeks declaratory, injunctive, exemplary and compensatory relief as well as costs, fees and interest payments. An amended complaint was filed on August 25, 2000, which alleged two classes of plaintiffs, an ERISA class and a non-ERISA class. After the Court dismissed certain ERISA claims and the claims brought by the American Medical Association, a third amended complaint was filed. We have filed a motion to dismiss the third amended complaint.

      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.

Item 4.     Submission of Matters to a Vote of Security Holders

      None

PART II

Item 5.     Market for Registrant’s Common Equity and Related Stockholder Matters

      The information contained under the heading “Investor Information” in the Company’s Annual Report to Shareholders for the fiscal year ended December 31, 2001, is incorporated herein by reference. As of March 18, 2002, the Company had 12,954 shareholders of record.

      Pursuant to Rule 416 under the Securities Act of 1933, the number of shares of the Company’s common stock registered for sale under the Securities Act by our Registration Statement on Form S-4 filed on January 21, 1998, have been deemed to be increased accordingly to reflect the two-for-one split of the Company’s common stock in the form of a stock dividend effected on December 22, 2000.

Item 6. Selected Financial Data

      The information contained under the heading “Results of Operations” in the Company’s Annual Report to Shareholders for the fiscal year ended December 31, 2001, is incorporated herein by reference.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation

      The information contained under the heading “Results of Operations” in the Company’s Annual Report to Shareholders for the fiscal year ended December 31, 2001, is incorporated herein by reference.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

      The information contained under the heading “Quantitative and Qualitative Disclosures About Market Risk” in the Company’s Annual Report to Shareholders for the fiscal year ended December 31, 2001, is incorporated herein by reference.

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Item 8. Financial Statements and Supplementary Data

      The Company’s consolidated financial statements, together with the Report of Independent Public Accountants thereon, appearing on pages 38 through 57 of the Company’s Annual Report to Shareholders for the fiscal year ended December 31, 2001, are incorporated herein by reference.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

      None

PART III

Item 10. Directors and Executive Officers of the Registrant

      The information included under the headings “Election of Directors” and “Section 16(a) Beneficial Ownership Reporting Compliance” in the Company’s definitive Proxy Statement for its Annual Meeting of Shareholders to be held May 15, 2002, is incorporated herein by reference.

      Pursuant to General Instruction G(3) to Form 10-K and Instruction 3 to Item 401(b) of Regulation S-K, information regarding executive officers of the Company is provided in Part I of this Annual Report on Form 10-K under the caption “Executive Officers of the Registrant.”

Item 11. Executive Compensation

      The information included under the heading “Executive Compensation” in the Company’s definitive Proxy Statement for the Annual Meeting of Shareholders to be held May 15, 2002, is incorporated herein by reference.

Item 12.      Security Ownership of Certain Beneficial Owners and Management

      The information included under the heading “Security Ownership of Certain Beneficial Owners and Management” in the Company’s definitive Proxy Statement for the Annual Meeting of Shareholders to be held May 15, 2002, is incorporated herein by reference.

Item 13.      Certain Relationships and Related Transactions

      Information regarding certain relationships and related transactions that appears under the heading “Certain Relationships and Transactions” in the Company’s definitive Proxy Statement for the Annual Meeting of Shareholders to be held May 15, 2002, is incorporated herein by reference.

PART IV

Item 14.      Exhibits, Financial Statement Schedules and Reports on Form 8-K

      (a)1. Financial Statements

      The following consolidated financial statements of the Company are included in the Company’s Annual Report to Shareholders for the fiscal year ended December 31, 2001 and are incorporated herein by reference:

        Consolidated Statements of Operations for the years ended December 31, 2001, 2000 and 1999.
 
        Consolidated Balance Sheets as of December 31, 2001 and 2000.

  Consolidated Statements of Changes in Shareholders’ Equity for the years ended December 31, 2001, 2000 and 1999.
 
  Consolidated Statements of Cash Flows for the years ended December 31, 2001, 2000 and 1999.

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        Notes to Consolidated Financial Statements.
 
        Report of Independent Public Accountants.

      (a)2. Financial Statement Schedules

      None

      (a)3. Exhibits

     
3(a)
  Articles of Amendment to Second Restated Articles of Incorporation of the Company
3(b)
  Second Restated Articles of Incorporation of the Company (incorporated by reference to Exhibit 3(a) to the Company’s Annual Report on Form 10-K for the year ended December 31, 1995 and Exhibit 3(a) to the Company’s Annual Report on Form 10-K for the year ended December 31, 1999)
3(c)
  Amended and Restated Bylaws of the Company (incorporated by reference to Exhibit 4.2 to the Company’s Registration Statement on Form S-8 (SEC File No. 333-55666))
4(a)
  Senior Indenture, dated as of November 15, 1998, between the Company and The Bank of New York (incorporated by reference to Exhibit 4.1 to the Company’s Registration Statement on Form S-3 (SEC File No. 333-44569))
4(b)
  Amendment to Senior Indenture, dated as of November 6, 2000, between the Company and The Bank of New York (incorporated by reference to Exhibit 4.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2001)
4(c)
  Pursuant to Item 601(b)(4)(iii) of Regulation S-K, copies of instruments defining the rights of certain holders of long-term debt are not filed. The Company agrees to furnish copies thereof to the Securities and Exchange Commission upon request.
*10(a)
  United HealthCare Corporation 1998 Broad-Based Stock Incentive Plan, as amended
*10(b)
  United HealthCare Corporation Amended and Restated 1991 Stock and Incentive Plan, Amended and Restated Effective May 9, 2001
*10(c)
  UnitedHealth Group Incorporated Nonemployee Director Stock Option Plan, Amended and Restated Effective October 30, 2001
*10(d)
  UnitedHealth Group Incorporated Leadership Results Plan (incorporated by reference to Exhibit 10(d) to the Company’s Annual Report on Form 10-K for the year ended December 31, 2000)
*10(e)
  UnitedHealth Group Incorporated 2001 Executive Savings Plan
*10(f)
  Supplemental Long Term Executive Compensation Plan (incorporated by reference to Exhibit 10(f) to the Company’s Annual Report on Form 10-K for the year ended December 31, 2000)
*10(g)
  UnitedHealth Group Directors’ Compensation Deferral Plan
*10(h)
  Employment Agreement, dated as of October 13, 1999, between United HealthCare Corporation and William W. McGuire, M.D. (incorporated by reference to Exhibit 10(f) to the Company’s Annual Report on Form 10-K for the year ended December 31, 1999)
*10(i)
  Letter to William W. McGuire, M.D., dated as of February 13, 2001, regarding Employment Agreement (incorporated by reference to Exhibit 10(h) of the Company’s Annual Report on Form 10-K for the year ended December 31, 2000)
*10(j)
  Employment Agreement dated as of October 13, 1999, between United HealthCare Corporation and Stephen J. Hemsley (incorporated by reference to Exhibit 10(g) to the Company’s Annual Report on Form 10-K for the year ended December 31, 1999)
*10(k)
  Letter to Stephen J. Hemsley, dated as of February 13, 2001, regarding Employment Agreement (incorporated by reference to Exhibit 10(j) to the Company’s Annual Report on Form 10-K for the year ended December 31, 2000)
*10(l)
  Employment Agreement, dated as of October 16, 1998 , between United HealthCare Services, Inc. and Robert J. Sheehy, as amended

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*10(m)
  Employment Agreement, dated as of October 16, 1998, between United HealthCare Services, Inc. and Lois E. Quam, as amended, and Memorandum of Understanding, effective as of October 11, 1999, between Lois E. Quam and United HealthCare Services, Inc. (incorporated by reference to Exhibit 10(l) of the Company’s Annual Report on Form 10-K for the year ended December 31, 2000)
*10(n)
  Employment Agreement, dated as of October 1, 1998, between United HealthCare Services, Inc. and Patrick J. Erlandson (incorporated by reference to Exhibit 10(m) of the Company’s Annual Report on Form 10-K for the year ended December 31, 2000)
*10(o)
  Employment Agreement, dated as of October 16, 1998, between United HealthCare Services, Inc. and Jeannine Rivet (incorporated by reference to Exhibit 10(h) to the Company’s Annual Report on Form 10-K for the year ended December 31, 1998)
*10(p)
  Employment Agreement, dated as of May 20, 1998, between United HealthCare Services, Inc. and R. Channing Wheeler (incorporated by reference to Exhibit 10(c) to the Company’s Quarterly Report of Form 10-Q for the quarter ended June 30, 1998)
*10(q)
  Employment Agreement, dated as of October 16, 1998, between United HealthCare Services, Inc. and David J. Lubben, as amended (incorporated by reference to Exhibit 10(p) to the Company’s Annual Report on Form 10-K for the year ended December 31, 2000)
†10(r)
  Information Technology Services Agreement between The MetraHealth Companies, Inc. and Integrated Systems Solutions Corporation dated as of November 1, 1995 (incorporated by reference to Exhibit 10(t) to the Company’s Annual Report on Form 10-K for the year ended December 31, 1995)
†10(s)
  AARP Health Insurance Agreement by and among American Association of Retired Persons, Trustees of the AARP Insurance Plan and United HealthCare Insurance Company dated as of February 26, 1997 (incorporated by reference to Exhibit 10(p) to the Company’s Annual Report on Form 10-K/ A for the year ended December 31, 1996)
†10(t)
  First Amendment to the AARP Health Insurance Agreement by and among American Association of Retired Persons, Trustees of the AARP Insurance Plan and United HealthCare Insurance Company effective January 1, 1998 (incorporated by reference to Exhibit 10(a) to the Company’s Quarterly Report on Form 10-Q for the quarter period ended June 30, 1998)
†10(u)
  Second Amendment to the AARP Health Insurance Agreement by and among American Association of Retired Persons, Trustees of the AARP Insurance Plan and United HealthCare Insurance Company effective January 1, 1998 (incorporated by reference to Exhibit 10(b) to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 1998)
†10(v)
  Information Technology Services Agreement between United HealthCare Services, Inc., a wholly owned subsidiary of the Company, and Unisys Corporation dated June 1, 1996 (incorporated by reference to Exhibit 10 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 1998)
†10(w)
  Pharmacy Benefit Management Agreement between United HealthCare Services, Inc. and Merck Medco Managed Care, L.L.C. (incorporated by reference to Exhibit 10(v) of the Company’s Annual Report on Form 10-K for the year ended December 31, 2000)
11
  Statement regarding computation of per share earnings (incorporated by reference to the information contained under the heading “Net Earnings Per Common Share” in Note 2 to the Notes to Consolidated Financial Statements included in the Company’s Annual Report to Shareholders for the fiscal year ended December 31, 2001 and which is included as part of Exhibit 13 hereto)
13
  Portions of the Company’s Annual Report to Shareholders for the fiscal year ended December 31, 2001
21
  Subsidiaries of the Company
23
  Consent of Independent Public Accountants
24
  Powers of Attorney
99
  Letter from the Company to the Securities and Exchange Commission confirming certain quality assurance representations made by Arthur Andersen to the Company

20


Table of Contents

     
  Pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended, confidential portions of these Exhibits have been deleted and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment.
*
  Denotes management contracts and compensation plans in which certain directors and named executive officers participate and which are being filed pursuant to Item 601(b)(10)(iii)(A) of Regulation S-K.

      (b) Reports on Form 8-K

      None

21


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SIGNATURES

      Pursuant to the requirements of Section 13 or 15(d) 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.

  UnitedHealth Group Incorporated

  By  /s/ WILLIAM W. MCGUIRE, M.D.
 
  William W. McGuire, M.D
  Chief Executive Officer

Dated: April 1, 2002

      Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

             
Signature Title Date



 
/s/ WILLIAM W. MCGUIRE, M.D.

William W. McGuire, M.D.
  Director, Chief
Executive Officer
(principal executive officer)
  April 1, 2002
 
/s/ PATRICK J. ERLANDSON

Patrick J. Erlandson
  Chief Financial Officer and
Chief Accounting Officer
(principal financial and accounting officer)
  April 1, 2002
 
*

William C. Ballard, Jr.
  Director   April 1, 2002
 
*

Richard T. Burke
  Director   April 1, 2002
 
*

Stephen J. Hemsley
  Director   April 1, 2002
 
*

James A. Johnson
  Director   April 1, 2002
 
*

Thomas H. Kean
  Director   April 1, 2002
 
*

Douglas W. Leatherdale
  Director   April 1, 2002
 
*

Walter F. Mondale
  Director   April 1, 2002

22


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Signature Title Date



 
*

Mary O. Mundinger
  Director   April 1, 2002
 
*

Robert L. Ryan
  Director   April 1, 2002
 
*

Gail R. Wilensky
  Director   April 1, 2002
 
*By   /s/ DAVID J. LUBBEN

David J. Lubben
As Attorney-in-Fact
       

23


Table of Contents

EXHIBIT INDEX
         
Number Description


  3(a )   Articles of Amendment to Second Restated Articles of Incorporation of the Company
  3(b )   Second Restated Articles of Incorporation of the Company (incorporated by reference to Exhibit 3(a) to the Company’s Annual Report on Form 10-K for the year ended December 31, 1995 and Exhibit 3(a) to the Company’s Annual Report on Form 10-K for the year ended December 31, 1999)
  3(c )   Amended and Restated Bylaws of the Company (incorporated by reference to Exhibit 4.2 to the Company’s Registration Statement on Form S-8 (SEC File No. 333-55666))
  4(a )   Senior Indenture, dated as of November 15, 1998, between the Company and The Bank of New York (incorporated by reference to Exhibit 4.1 to the Company’s Registration Statement on Form S-3 (SEC File No. 333-44569))
  4(b )   Amendment to Senior Indenture, dated as of November 6, 2000, between the Company and The Bank of New York (incorporated by reference to Exhibit 4.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2001)
  4(c )   Pursuant to Item 601(b)(4)(iii) of Regulation S-K, copies of instruments defining the rights of certain holders of long-term debt are not filed. The Company agrees to furnish copies thereof to the Securities and Exchange Commission upon request.
  10(a )   United HealthCare Corporation 1998 Broad-Based Stock Incentive Plan, as amended
  10(b )   United HealthCare Corporation Amended and Restated 1991 Stock and Incentive Plan, Amended and Restated Effective May 9, 2001
  10(c )   UnitedHealth Group Incorporated Nonemployee Director Stock Option Plan, Amended and Restated Effective October 30, 2001
  10(d )   UnitedHealth Group Incorporated Leadership Results Plan (incorporated by reference to Exhibit 10(d) to the Company’s Annual Report on Form 10-K for the year ended December 31, 2000)
  10(e )   UnitedHealth Group Incorporated’s 2001 Executive Savings Plan
  10(f )   Supplemental Long Term Executive Compensation Plan (incorporated by reference to Exhibit 10(f) to the Company’s Annual Report on Form 10-K for the year ended December 31, 2000)
  10(g )   UnitedHealth Group Directors’ Compensation Deferral Plan
  10(h )   Employment Agreement, dated as of October 13, 1999, between United HealthCare Corporation and William W. McGuire, M.D. (incorporated by reference to Exhibit 10(f) to the Company’s Annual Report on Form 10-K for the year ended December 31, 1999)
  10(i )   Letter to William W. McGuire, M.D., dated as of February 13, 2001, regarding Employment Agreement (incorporated by reference to Exhibit 10(h) of the Company’s Annual Report on Form 10-K for the year ended December 31, 2000)
  10(j )   Employment Agreement dated as of October 13, 1999, between United HealthCare Corporation and Stephen J. Hemsley (incorporated by reference to Exhibit 10(g) to the Company’s Annual Report on Form 10-K for the year ended December 31, 1999)
  10(k )   Letter to Stephen J. Hemsley, dated as of February 13, 2001, regarding Employment Agreement (incorporated by reference to Exhibit 10(j) to the Company’s Annual Report on Form 10-K for the year ended December 31, 2000)
  10(l )   Employment Agreement, dated as of October 16, 1998 , between United HealthCare Services, Inc. and Robert J. Sheehy, as amended
  10(m )   Employment Agreement, dated as of October 16, 1998, between United HealthCare Services, Inc. and Lois E. Quam, as amended, and Memorandum of Understanding, effective as of October 11, 1999, between Lois E. Quam and United HealthCare Services, Inc. (incorporated by reference to Exhibit 10(l) of the Company’s Annual Report on Form 10-K for the year ended December 31, 2000)


Table of Contents

         
Number Description


  10(n )   Employment Agreement, dated as of October 1, 1998, between United HealthCare Services, Inc. and Patrick J. Erlandson (incorporated by reference to Exhibit 10(m) of the Company’s Annual Report on Form 10-K for the year ended December 31, 2000)
  10(o )   Employment Agreement, dated as of October 16, 1998, between United HealthCare Services, Inc. and Jeannine Rivet (incorporated by reference to Exhibit 10(h) to the Company’s Annual Report on Form 10-K for the year ended December 31, 1998)
  10(p )   Employment Agreement, dated as of May 20, 1998, between United HealthCare Services, Inc. and R. Channing Wheeler (incorporated by reference to Exhibit 10(c) to the Company’s Quarterly Report of Form 10-Q for the quarter ended June 30, 1998)
  10(q )   Employment Agreement, dated as of October 16, 1998, between United HealthCare Services, Inc. and David J. Lubben, as amended (incorporated by reference to Exhibit 10(p) to the Company’s Annual Report on Form 10-K for the year ended December 31, 2000)
  †10(r )   Information Technology Services Agreement between The MetraHealth Companies, Inc. and Integrated Systems Solutions Corporation dated as of November 1, 1995 (incorporated by reference to Exhibit 10(t) to the Company’s Annual Report on Form 10-K for the year ended December 31, 1995)
  †10(s )   AARP Health Insurance Agreement by and among American Association of Retired Persons, Trustees of the AARP Insurance Plan and United HealthCare Insurance Company dated as of February 26, 1997 (incorporated by reference to Exhibit 10(p) to the Company’s Annual Report on Form 10-K/ A for the year ended December 31, 1996)
  †10(t )   First Amendment to the AARP Health Insurance Agreement by and among American Association of Retired Persons, Trustees of the AARP Insurance Plan and United HealthCare Insurance Company effective January 1, 1998 (incorporated by reference to Exhibit 10(a) to the Company’s Quarterly Report on Form 10-Q for the quarter period ended June 30, 1998)
  †10(u )   Second Amendment to the AARP Health Insurance Agreement by and among American Association of Retired Persons, Trustees of the AARP Insurance Plan and United HealthCare Insurance Company effective January 1, 1998 (incorporated by reference to Exhibit 10(b) to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 1998)
  †10(v )   Information Technology Services Agreement between United HealthCare Services, Inc., a wholly owned subsidiary of the Company, and Unisys Corporation dated June 1, 1996 (incorporated by reference to Exhibit 10 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 1998)
  †10(w )   Pharmacy Benefit Management Agreement between United HealthCare Services, Inc. and Merck Medco Managed Care, L.L.C. (incorporated by reference to Exhibit 10(v) of the Company’s Annual Report on Form 10-K for the year ended December 31, 2000)
  11     Statement regarding computation of per share earnings (incorporated by reference to the information contained under the heading “Net Earnings Per Common Share” in Note 2 to the Notes to Consolidated Financial Statements included in the Company’s Annual Report to Shareholders for the fiscal year ended December 31, 2001 and which is included as part of Exhibit 13 hereto)
  13     Portions of the Company’s Annual Report to Shareholders for the fiscal year ended December 31, 2001
  21     Subsidiaries of the Company
  23     Consent of Independent Public Accountants
  24     Powers of Attorney
  99     Letter from the Company to the Securities and Exchange Commission confirming certain quality assurance representations made by Arthur Andersen to the Company

†  Pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended, confidential portions of these Exhibits have been deleted and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment.

EXHIBIT 3(a) ARTICLES OF AMENDMENT TO SECOND RESTATED ARTICLES OF INCORPORATION OF UNITEDHEALTH GROUP INCORPORATED The undersigned, Thad C. Johnson, Assistant Secretary of UnitedHealth Group Incorporated, a Minnesota corporation (the "Company"), hereby certifies that the following amendment to the Company's Second Restated Articles of Incorporation was duly adopted pursuant to Chapter 302A of the Minnesota Statutes: Section 3(a) of the Company's Second Restated Articles of Incorporation is hereby amended in its entirety to read as follows: "3. (a) Authorized Classes of Stock. The total number of shares of capital stock which this corporation is authorized to issue is 1,510,000,000 shares, including 1,500,000,000 shares of Common Stock, $.01 par value, and 10,000,000 shares of Preferred Stock, $.001 par value. Shares of each class of stock of the corporation may be issued for such consideration and for such corporate purposes as the Board of Directors may from time to time determine." IN WITNESS WHEREOF, the undersigned, the Assistant Secretary of UnitedHealth Group Incorporated, being duly authorized on behalf of UnitedHealth Group Incorporated, has executed these Articles of Amendment as of May 14, 2001. /s/ Thad C. Johnson ------------------------------------ Thad C. Johnson, Assistant Secretary

EXHIBIT 10(a) UNITED HEALTHCARE CORPORATION 1998 BROAD-BASED STOCK INCENTIVE PLAN 1. PURPOSE OF PLAN. This Plan shall be known as the "United HealthCare Corporation 1998 Broad-Based Stock Incentive Plan" (the "Plan"). The purpose of the Plan is to aid in maintaining and developing personnel capable of contributing to the future success of United HealthCare Corporation, a Minnesota corporation (the "Company"), to offer such personnel additional incentives to put forth maximum efforts for the success of the business, and to afford them an opportunity to acquire a proprietary interest in the Company through stock options and other awards as provided herein. The Plan is intended to be a "broadly-based plan" within the meaning of the New York Stock Exchange Shareholder Approval Policy. Options granted under this Plan are not intended to be incentive stock options within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"). Other awards granted under this Plan shall be in the form of stock appreciation rights ("SARs"), restricted stock awards or performance awards as hereinafter described. 2. STOCK SUBJECT TO PLAN. Subject to adjustment as provided in Section 14 hereof and the provisions of this Section 2, the stock to be subject to options or other awards under the Plan shall be the Company's authorized shares of common stock, par value $.01 per share (the "Common Shares"). The Common Shares may be either authorized but unissued shares, or issued shares which have been reacquired by the Company. Subject to adjustment as provided in Section 14 hereof, the number of Common Shares as to which options may be granted or awards may be issued hereunder shall be 11,562,698 Common Shares (the "Initial Common Shares"). Each fiscal quarter 0.75% of the number of Common Shares which were issued and outstanding as of the end of the fiscal quarter immediately preceding the then-current fiscal quarter shall be added to the number of Initial Common Shares that were available for grant in any preceding fiscal quarter but were not otherwise granted. If grants or awards lapse, expire, terminate or are canceled prior to the issuance of Common Shares, or if Common Shares are reacquired by the Company pursuant to this Plan in connection with payment of the exercise price of options or awards or satisfaction of tax obligations, such Common Shares will be available for new grants or awards. 3. ADMINISTRATION OF PLAN. (a) Administration of Plan by Committee. The Plan shall be administered by a committee (the "Committee") of two or more directors of the Company, none of whom shall be officers or employees of the Company and all of whom shall be "Non-Employee Directors" with respect to the Plan within the meaning of Rule 16b-3 under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and any successor rule. The members of the Committee shall be appointed by and serve at the pleasure of the Board of Directors. (b) Authority of Committee. Subject to the express provisions of the Plan, the Committee shall have the plenary authority and discretion to: (i) determine the purchase price of the Common Shares covered by each option, (ii) determine the employees to whom and the time or times at which options and awards shall be granted and the number of shares to be subject to each, (iii) determine the form of payment to be made upon the exercise of an SAR or in connection with performance awards, either cash, Common Shares or a combination thereof, (iv) determine the terms of exercise of each option and award, (v) accelerate or defer the time at which all or any part of an option or award may be exercised, (vi) amend or modify the terms of any option or award with the consent of the holder of the optionee or grantee, (vii) interpret the Plan, (viii) prescribe, amend and rescind rules and regulations relating to the Plan, (ix) determine the terms and provisions of each option or award agreement under the Plan (any of which agreements need not be identical), (x) delegate such of its authority granted herein as it deems is in the best interests of the Company, and (xi) make all other determinations necessary or advisable for the administration of the Plan, subject to the exclusive authority of the Board of Directors under Section 16 herein to amend or terminate the Plan. The Committee's determinations on the foregoing matters, unless otherwise disapproved by the Board of Directors of the Company, shall be final and conclusive; provided, however, that the Committee's determinations with respect to the matters set forth in clauses (ii) and (iii) above, unless delegated as provided in subsection 3(C)

below, shall be final and conclusive without any right of disapproval by the Board of Directors of the Company. (c) Grants to Certain Officers and Directors. The Chief Executive Officer of the Company shall have the authority, as granted by the Committee pursuant to clause (x) of the preceding subsection, to grant, pursuant to the Plan, options or other awards to eligible persons who are not considered by the Company as its officers or directors for purposes of Section 16 of the Exchange Act. The Chief Executive Officer of the Company shall provide information as to any grants made pursuant to this subsection to the Committee at its next meeting. (d) Action of the Committee. The Committee shall select one of its members as its Chairperson and shall hold its meetings at such times and places as it may determine. A majority of its members shall constitute a quorum. All determinations of the Committee shall be made by not less than a majority of its members. Any decision or determination reduced to writing and signed by all of the members of the Committee shall be fully effective as if it had been made by a majority vote at a meeting duly called and held. The grant of an option or award shall be effective only if a written agreement shall have been duly executed and delivered or if notice of such option or award shall have been duly communicated by and on behalf of the Company following such grant. The Committee may appoint a Secretary and may make such rules and regulations for the conduct of its business as it shall deem advisable. 4. ELIGIBILITY; GRANTING OF OPTIONS AND AWARDS. (a) Generally. Subject to the provisions of Section 4(b) below, all full-time and part-time employees of, and consultants and independent contractors to, the Company or its subsidiaries shall be eligible to receive options and awards under this Plan. (b) Grants of Options and Awards. In determining the persons to whom options and awards shall be granted and the number of shares subject to each, the Committee may take into account any factors as the Committee in its discretion shall deem relevant. A person who has been granted an option or award under this Plan may be granted additional options or awards under the Plan if the Committee shall so determine. (c) No Right to Employment. Nothing in the Plan or in any agreement thereunder shall confer on any employee any right to continue in the employ of the Company or any of its subsidiaries or affect in any way the right of the Company or any of its subsidiaries to terminate his or her employment at any time. 5. PRICE. The Committee shall determine the option price for options and awards. For purposes of the preceding sentence and for all other valuation purposes under the Plan, the fair market value of the Common Shares shall be as reasonably determined by the Committee by such methods or procedures as shall be established from time to time by the Committee. 6. TERM. Each option and award and all rights and obligations thereunder shall expire on the date determined by the Committee and specified in the option or award agreement. The Committee shall be under no duty to provide terms of like duration for options or awards granted under the Plan. Notwithstanding the foregoing, the term of options granted under the Plan may not extend more than fifteen (15) years from the date of grant of such option. 7. EXERCISE OF OPTION OR AWARD. (a) Vesting. The Committee shall have full and complete authority to determine whether an option or award will be exercisable in full at any time or from time to time during the term thereof, or to provide for the exercise thereof in installments and upon the occurrence of certain events, such as termination of employment for any reason, and at such times during the term of the option or award as the Committee may determine and specify in the option or award agreement. (b) Compliance with Securities Laws. The exercise of any option or award granted hereunder shall be effective only at such time as the sale of Common Shares pursuant to such exercise will not violate any state or federal securities or other laws. (c) Notice of Exercise; Payment of Exercise Price. An optionee or grantee electing to exercise an option or award, or his or her representative, shall give notice to the Company of such election and of the number of shares subject to such exercise. The Company will verify the appropriateness of the election and determine the compensation and related withholding tax amounts. The exercise amount and applicable taxes shall be tendered either prior to the issuance of shares pursuant to the exercise or, if such option is exercised pursuant to a cashless exercise and sale transaction, on or prior to the settlement date of such transaction. Payment shall be made to the Company in cash (including wire transfer, bank check, certified check, personal check, or money order), or, at the discretion of the Committee and as specified by the Committee, by delivering either (i) Common Shares already owned by the optionee or grantee having a fair market value as of such date equal to the full purchase price of the shares, together with any applicable withholding taxes, or (ii) a combination of cash and such shares; provided, however, that an optionee shall not be entitled to tender Common Shares pursuant to successive, substantially simultaneous exercises of options granted under this or any other stock option plan of the Company. The fair market value of such tendered shares shall be determined as provided in Section 5 herein. Until such person has been issued the shares subject to such exercise, he or she shall possess no rights as a shareholder with respect to such shares. 8. ALTERNATIVE STOCK APPRECIATION RIGHTS. (a) Grant. At the time of grant of an option or award under the Plan (or at any other time), the Committee, in its discretion, may grant a SAR evidenced by an agreement in such form as the Committee shall from time to time approve. Any such SAR may be subject to restrictions on the exercise thereof as may be set forth in the agreement representing such SAR, which agreement shall comply with and be subject to the following terms and conditions and any additional terms and conditions established by the Committee that are consistent with the terms of the Plan. (b) Exercise. An SAR shall be exercised by the delivery to the Company of a written notice which shall state that the holder thereof elects to exercise his or her SAR as to the number of shares 2

specified in the notice and which shall further state what portion, if any, of the SAR exercise amount (hereinafter defined) the holder thereof requests be paid to him or her in cash and what portion, if any, is to be paid in Common Shares of the Company. The Committee promptly shall cause to be paid to such holder the SAR exercise amount, less any applicable withholding taxes, either in cash, in Common Shares of the Company, or in any combination of cash and shares as the Committee may determine. Such determination may be either in accordance with the request made by the holder of the SAR or in the sole and absolute discretion of the Committee. The SAR exercise amount is the excess of the fair market value of one share of the Company's Common Shares on the date of exercise over the per share exercise price in respect of which the SAR was granted, multiplied by the number of shares as to which the SAR is exercised. For the purposes, hereof, the fair market value of the Common Shares shall be determined as provided in Section 5 herein. 9. RESTRICTED STOCK AWARDS. The Committee may grant awards of Common Shares subject to forfeiture and transfer restrictions. Any restricted stock award shall be evidenced by an agreement in such form as the Committee shall from time to time approve, which agreement shall comply with and be subject to the following terms and conditions and any additional terms and conditions established by the Committee that are consistent with the terms of the Plan: (a) Grant of Restricted Stock Awards. Each restricted stock award made under the Plan shall be for such number of Common Shares as shall be determined by the Committee and set forth in the agreement containing the terms of such restricted stock award. Such agreement shall set forth a period of time during which the grantee must remain in the continuous employment of the Company in order for the forfeiture and transfer restrictions to lapse. If the Committee so determines, the restrictions may lapse during such restricted period in installments with respect to specified portions of the shares covered by the restricted stock award. The agreement may also, in the discretion of the Committee, set forth performance or other conditions that will subject the Common Shares to forfeiture and transfer restrictions. The Committee may, at its discretion, waive all or any part of the restrictions applicable to any or all outstanding restricted stock awards. (b) Delivery of Common Shares and Restrictions. At the time of a restricted stock award, the number of Common Shares awarded thereunder shall be registered in the name of the grantee. If a certificate representing such shares is issued, such certificate shall be held by the Company or any custodian appointed by the Company for the account of the grantee subject to the terms and conditions of the Plan, and shall bear such a legend setting forth the restrictions imposed thereon as the Committee, in its discretion, may determine. The grantee shall have all rights of a shareholder with respect to the Common Shares, including the right to receive dividends and the right to vote such shares, subject to the following restrictions: (i) the grantee shall not be entitled to delivery of the stock certificate, if one is issued, until the expiration of the restricted period and the fulfillment of any other restrictive conditions set forth in the restricted stock agreement with respect to such Common Shares; (ii) none of the Common Shares may be sold, assigned, transferred, pledged, hypothecated or otherwise encumbered or disposed of during such restricted period or until after the fulfillment of any such other restrictive conditions; and (iii) except as otherwise determined by the Committee, all of the shares shall be forfeited and all rights of the grantee to such shares shall terminate, without further obligation on the part of the Company, unless the grantee remains in the continuous employment of the Company for the entire restricted period in relation to which such Common Shares were granted and unless any other restrictive conditions relating to the restricted stock award are met. Any Common Shares, any other securities of the Company and any other property (except for cash dividends) distributed with respect to the Common Shares subject to restricted stock awards shall be subject to the same restrictions, terms and conditions as such restricted Common Shares. (c) Termination of Restrictions. At the end of the restricted period and provided that any other restrictive conditions of the restricted stock award are met, or at such earlier time as otherwise determined by the Committee, all restrictions set forth in any agreement relating to the restricted stock award or in the Plan shall lapse as to the restricted Common Shares subject thereto. Upon payment by the grantee to the Company of any withholding tax required to be paid, a stock certificate, if one is requested, for the appropriate number of Common Shares, free of the restrictions and the restricted stock legend, shall be delivered to the grantee or his or her beneficiary or estate, as the case may be. 10. PERFORMANCE AWARDS. The Committee is further authorized to grant performance awards. Subject to the terms of this Plan and any applicable award agreement, a performance award granted under the Plan (i) may be denominated or payable in cash, Common Shares (including, without limitation, restricted stock), other securities, other awards, or other property and (ii) shall confer on the holder thereof rights valued as determined by the Committee, in its discretion, and payable to, or exercisable by, the holder of the performance awards, in whole or in part, upon achievement of such performance goals during such performance periods as the Committee, in its discretion, shall establish. Subject to the terms of this Plan and any applicable award agreement, the Committee shall determine the performance goals to be achieved during any performance period, the length of any performance period, the amount of any performance award granted, and the amount of any payment or transfer to be made by the grantee and by the Company under any performance award. 11. INCOME TAX WITHHOLDING AND TAX BONUSES. (a) Income Tax Withholding. In order to comply with all applicable federal, state or local income tax laws or regulations, the Company may take such action as it deems appropriate to ensure that all applicable federal, state or local payroll, withholding, income or other taxes, which are the sole and absolute responsibility of an optionee or grantee under the Plan, are withheld or collected from such optionee or grantee prior to his or her receipt of Common Shares pursuant to the exercise of an option or the satisfaction of the conditions of any other award. In 3

order to assist an optionee or grantee in paying all federal and state taxes to be withheld or collected upon exercise of an option or award, the Committee may, in its absolute discretion, permit the optionee or grantee to satisfy such tax obligation by (i) electing to have the Company withhold a portion of the Common Shares otherwise to be delivered upon exercise of such option or award with a fair market value, determined in accordance with Section 5 herein, equal to such taxes or (ii) delivering to the Company Common Shares other than the shares issuable upon exercise of such option or award with a fair market value, determined in accordance with Section 5, equal to such taxes. The election must be made on or before the date that the amount of tax to be withheld is determined. (b) Tax Bonuses. The Committee shall have the authority, at the time of grant of an option under the Plan or at any time thereafter, to approve tax bonuses to designated optionees or grantees to be paid upon their exercise of options or awards granted hereunder. The amount of any such payments shall be determined by the Committee but shall not exceed one hundred percent (100%) of the excess of the fair market value of the shares received upon exercise of an option or award over the price paid therefor. The Committee shall have full authority in its absolute discretion to determine the amount of any such tax bonus and the terms and conditions affecting the vesting and payment thereof. 12. ADDITIONAL RESTRICTIONS. The Committee shall have full and complete authority to determine whether all or any part of the Common Shares of the Company acquired upon exercise of any of the options or awards granted under the Plan shall be subject to restrictions on the transferability thereof or any other restrictions affecting in any manner the optionee's or grantee's rights with respect thereto, but any such restriction shall be contained in the agreement relating to such options or awards. 13. NONTRANSFERABILITY. No option or award granted under the Plan shall be transferable by an optionee or grantee, otherwise than by will or the laws of descent or distribution. Except as otherwise provided in an option or award agreement, during the lifetime of an optionee or grantee, the option or award shall be exercisable only by such optionee or grantee. The Committee shall have the authority to waive the provisions of this Section with respect to any grant of options under the Plan subject to such terms, conditions or limitations as they may, in their discretion impose. 14. DILUTION OR OTHER ADJUSTMENTS. If there shall be any change in the Common Shares through merger, consolidation, reorganization, recapitalization, dividend in the form of stock (of whatever amount), stock split or other change in the corporate structure, appropriate adjustments in the Plan and outstanding options and awards shall be made by the Committee. In the event of any such changes, adjustments shall include, where appropriate, changes in the aggregate number of shares subject to the Plan, the number of shares and the price per share subject to outstanding options and awards and the amount payable upon exercise of outstanding awards, in order to prevent dilution or enlargement of option or award rights. 15. AMENDMENT OR DISCONTINUANCE OF PLAN. The Board of Directors may amend or discontinue the Plan at any time. The Committee, or the Company's Chief Executive Officer as authorized hereunder or by the Committee, may grant options and awards for the number of shares authorized by Section 2 herein without further amendment to the Plan increasing the number of shares authorized for distribution. The Board of Directors shall not alter or impair any option or award theretofore granted under the Plan without the consent of the holder of the option or award. 16. TIME OF GRANTING. Nothing contained in the Plan or in any resolution adopted or to be adopted by the Board of Directors or by the shareholders of the Company, and no action taken by the Committee, the Chief Executive Officer or the Board of Directors (other than the execution and delivery of an option or award agreement), shall constitute the granting of an option or award hereunder. 17. EFFECTIVE DATE AND TERMINATION OF PLAN. (a) Effective Date of Plan. The Board of Directors approved the Plan on May 13, 1998, which shall be the effective date of the Plan. (b) Termination of Plan. Unless the Plan shall have been discontinued as provided in Section 15 hereof, the Plan shall terminate on May 13, 2008. No option or award may be granted after such termination, but termination of the Plan shall not, without the consent of the optionee or grantee, alter or impair any rights or obligations under any option or award theretofore granted. 4

EXHIBIT 10(b) UNITED HEALTHCARE CORPORATION AMENDED AND RESTATED 1991 STOCK AND INCENTIVE PLAN, AMENDED AND RESTATED EFFECTIVE MAY 9, 2001 1. PURPOSE OF PLAN. This Plan shall be known as the "United HealthCare Corporation 1991 Stock and Incentive Plan" and is hereinafter referred to as the "Plan". The purpose of the Plan is to aid in maintaining and developing personnel capable of contributing to the future success of United HealthCare Corporation, a Minnesota corporation (the "Company"), to offer such personnel additional incentives to put forth maximum efforts for the success of the business, and to afford them an opportunity to acquire a proprietary interest in the Company through stock options and other awards as provided herein. Options granted under this Plan may be either incentive stock options ("Incentive Stock Options") within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the "Code), or options which do not qualify as Incentive Stock Options. Awards granted under this Plan shall be SARs, restricted stock or performance awards as hereinafter described. 2. STOCK SUBJECT TO PLAN. Subject to the adjustments authorized by Section 15 hereof and the provisions of the remaining subsection of this Section 2, the stock to be subject to options or other awards under the Plan shall be the Company's authorized common shares, par value $.01 per share (the "Shares"). Such shares may be either authorized but unissued shares, or issued shares which have been reacquired by the Company. Subject to adjustment as provided in Section 15 hereof, the number of shares on which options may be exercised or other awards issued under this Plan shall be 6,000,000 shares plus a number of shares equal to the sum of (i) one and one-half percent of the number of shares of the Company's Common Stock outstanding as of the December 31 immediately preceding the year in which such options may be granted plus (ii) options for such number of shares of Common Stock as were available for grant in any preceding year and were not otherwise granted. If awards lapse, expire, terminate or are canceled prior to the issuance of shares, or if shares issued under an option are reacquired by the Company pursuant to this Plan, those shares will be available for new awards. Notwithstanding the foregoing, the number of Shares that may be subject to Incentive Stock Options granted under the Plan may not exceed 2,000,000; such number may be adjusted pursuant to Section 15. 3. ADMINISTRATION OF PLAN. (a) The Plan shall be administered by a committee (the "Committee") of two or more directors of the Company, none of whom shall be officers or employees of the Company and all of whom shall be "Non-Employee Directors" with respect to the Plan within the meaning of Rule 16b-3 under the Securities Exchange Act of 1934, and any successor rule. The members of the Committee shall be appointed by and serve at the pleasure of the Board of Directors. (b) The Committee shall have plenary authority in its discretion, but subject to the express provisions of the Plan: (i) to determine the purchase price of the Common Shares covered by each option, (ii) to determine the employees to whom and the time or times at which such options and awards shall be granted and the number of shares to be subject to each, (iii) to determine the form of payment to be made upon the exercise of an SAR or in connection with performance awards, either cash, Common Shares of the Company or a combination thereof, (iv) to determine the terms of exercise of each option and award, (v) to accelerate the time at which all or any part of an option or award may be exercised, (vi) to amend or modify the terms of any option or award with the consent of the holder of the optionee or grantee, (vii) to interpret the Plan, (viii) to prescribe, amend and rescind rules and regulations relating to the Plan, (ix) to determine the

terms and provisions of each option or award agreement under the Plan (any of which agreements need not be identical), including the designation of those options intended to be Incentive Stock Options, (x) to delegate such of its authority granted herein as it deems is in the best interests of the Company, and (xi) to make all other determinations necessary or advisable for the administration of the Plan, subject to the exclusive authority of the Board of Directors under Section 16 herein to amend or terminate the Plan. The Committee's determinations on the foregoing matters, unless otherwise disapproved by the Board of Directors of the Company, shall be final and conclusive; provided, however, that the Committee's determinations with respect to the matters set forth in clauses (ii) and (iii) above, unless delegated as provided in subsection 3(C) below, shall be final and conclusive without any right of disapproval by the Board of Directors of the Company. (c) The Chief Executive Officer of the Company shall have the authority, as granted by the Committee pursuant to clause (x) of the preceding subsection, to grant, pursuant to the Plan, options or other awards to eligible persons who are not considered by the Company as its officers or directors for purposes of Section 16 of the Securities Exchange Act of 1934, as amended. The Chief Executive Officer of the Company shall provide information as to any grants made pursuant to this subsection to the Committee at its next meeting. (d) The Committee shall select one of its members as its Chairperson and shall hold its meetings at such times and places as it may determine. A majority of its members shall constitute a quorum. All determinations of the Committee shall be made by not less than a majority of its members. Any decision or determination reduced to writing and signed by all of the members of the Committee shall be fully effective as if it had been made by a majority vote at a meeting duly called and held. The grant of an option or award shall be effective only if a written agreement shall have been duly executed and delivered or if notice of such option or award shall have been duly communicated by and on behalf of the Company following such grant. The Committee may appoint a Secretary and may make such rules and regulations for the conduct of its business as it shall deem advisable. 4. ELIGIBILITY. Incentive Stock Options may be granted under this Plan only to any full or part-time employee (which term as used herein includes, but is not limited to, officers and directors who are also employees) of the Company and of its present and future subsidiary corporations within the meaning of Section 424(f) of the Code (herein called "subsidiaries"). Full or part-time employees, consultants or independent contractors to the Company or one of its subsidiaries shall be eligible to receive awards and options which do not qualify as Incentive Stock Options. In determining the persons to whom options and awards shall be granted and the number of shares subject to each, the Committee may take into account the nature of services rendered by the respective employees or consultants, their present and potential contributions to the success of the Company and such other factors as the Committee in its discretion shall deem relevant. A person who has been granted an option or award under this Plan may be granted additional options or awards under the Plan if the Committee shall so determine; provided, however, that for Incentive Stock Options granted after December 31, 1986, to the extent the aggregate fair market value (determined at the time the Incentive Stock Option is granted) of the Common Shares with respect to which all Incentive Stock Options are exercisable for the first time by an employee during any calendar year (under all plans described in subsection (d) of Section 422 of the Code of his or her employer corporation and its parent and subsidiary corporations) exceeds $100,000, such options shall be treated as options which do not qualify as Incentive Stock Options. Nothing in the Plan or in any agreement thereunder shall confer on any employee any right to continue in the employ of the Company or any of its subsidiaries or affect in any way the right of the Company or any of its subsidiaries to terminate his or her employment at any time. 5. PRICE. The option price for all Incentive Stock Options granted under the Plan shall be determined by the Committee but shall not be less than 100% of the fair market value of the Common Shares at the date of grant of such option. The option price for options granted under the Plan which do not qualify as Incentive Stock Options and, if applicable, the price for all awards shall also be determined by the Committee. For purposes of this Section 5 and for all other valuation purposes under the Plan, the fair market value of the Common Shares shall be as reasonably determined by such methods or procedures as shall be established from time to time by the Committee; provided, that for the purposes of the first sentence of this Section 5, the fair market value of the Common Shares shall not be less than the closing price of the stock on the date for which fair market value is being determined, as reported on any national securities exchange on which the Common Shares are then traded. If on the date of grant of any option or award hereunder the Common Shares are not traded on an established securities market, the Committee shall make a good faith attempt to satisfy the requirements of this Section 5 and in connection therewith shall take such action as it deems necessary or advisable. 6. TERM. Each option and award and all rights and obligations thereunder shall expire on the date determined by the Committee and specified in the option or award agreement. The Committee shall be under no duty to provide terms of like duration for options or awards granted under the Plan, but the term of an Incentive Stock Option may not extend more than ten (10) years from the date of grant of such option and the term of options granted under the Plan which do not qualify as Incentive Stock Options may not extend more than fifteen (15) years from the date of grant of such option. 7. EXERCISE OF OPTION OR AWARD. (a) The Committee shall have full and complete authority to determine whether the option or award will be exercisable in full at any time or from time to time during the term thereof, or to provide for the exercise thereof in such installments, upon the occurrence of such events, such as termination of employment for any reason, and at such times during the term of the option or 2

award as the Committee may determine and specify in the option or award agreement. (b) The exercise of any option or award granted hereunder shall be effective only at such time as the sale of Common Shares pursuant to such exercise will not violate any state or federal securities or other laws. To the extent required in order to comply with Rule 16b-3 of the Securities Exchange Act of 1934, as amended, in the case of an option or award granted to a person considered by the Company as one of its officers or directors for purposes of Section 16 of the Securities Exchange Act of 1934, as amended, the terms of the option or award will require that such shares are not disposed of by such officer or director for a period of at least six months from the date of grant. (c) An optionee or grantee electing to exercise an option or award, or his or her representative, shall give notice to the Company of such election and of the number of shares subject to such exercise. The Company will verify the appropriateness of the election and determine the compensation and related withholding tax amounts. The exercise amount and applicable taxes shall be tendered either prior to the issuance of shares pursuant to the exercise or, if such option is exercised pursuant to a cashless exercise and sale transaction, on or prior to the settlement date of such transaction. Payment shall be made to the Company in cash (including wire transfer, bank check, certified check, personal check, or money order), or, at the discretion of the Committee and as specified by the Committee, (i) by delivering Common Shares already owned by the optionee or grantee having a fair market value as of such date equal to the full purchase price of the shares, together with any applicable withholding taxes, or (ii) a combination of cash and such shares; provided, however, that an optionee shall not be entitled to tender shares of the Company's Common Stock pursuant to successive, substantially simultaneous exercises of options granted under this or any other stock option plan of the Company. The fair market value of such tendered shares shall be determined as provided in Section 5 herein. Until such person has been issued the shares subject to such exercise, he or she shall possess no rights as a shareholder with respect to such shares. 8. ALTERNATIVE STOCK APPRECIATION RIGHTS. (a) Grant. At the time of grant of an option or award under the Plan (or at any other time), the Committee, in its discretion, may grant a Stock Appreciation Right ("SAR") evidenced by an agreement in such form as the Committee shall from time to time approve. Any such SAR may be subject to restrictions on the exercise thereof as may be set forth in the agreement representing such SAR, which agreement shall comply with and be subject to the following terms and conditions and any additional terms and conditions established by the Committee that are consistent with the terms of the Plan. (b) Exercise. An SAR shall be exercised by the delivery to the Company of a written notice which shall state that the holder thereof elects to exercise his or her SAR as to the number of shares specified in the notice and which shall further state what portion, if any, of the SAR exercise amount (hereinafter defined) the holder thereof requests be paid to him or her in cash and what portion, if any, is to be paid in Common Shares of the Company. The Committee promptly shall cause to be paid to such holder the SAR exercise amount, less any applicable withholding taxes, either in cash, in Common Shares of the Company, or in any combination of cash and shares as the Committee may determine. Such determination may be either in accordance with the request made by the holder of the SAR or in the sole and absolute discretion of the Committee. The SAR exercise amount is the excess of the fair market value of one share of the Company's Common Shares on the date of exercise over the per share exercise price in respect of which the SAR was granted, multiplied by the number of shares as to which the SAR is exercised. For the purposes, hereof, the fair market value of the Company's shares shall be determined as provided in Section 5 herein. 9. RESTRICTED STOCK AWARDS. Awards of Common Shares subject to forfeiture and transfer restrictions may be granted by the Committee. Any restricted stock award shall be evidenced by an agreement in such form as the Committee shall from time to time approve, which agreement shall comply with and be subject to the following terms and conditions and any additional terms and conditions established by the Committee that are consistent with the terms of the Plan: (a) Grant of Restricted Stock Awards. Each restricted stock award made under the Plan shall be for such number of Common Shares as shall be determined by the Committee and set forth in the agreement containing the terms of such restricted stock award. Such agreement shall set forth a period of time during which the grantee must remain in the continuous employment of the Company in order for the forfeiture and transfer restrictions to lapse. If the Committee so determines, the restrictions may lapse during such restricted period in installments with respect to specified portions of the shares covered by the restricted stock award. The agreement may also, in the discretion of the Committee, set forth performance or other conditions that will subject the Common Shares to forfeiture and transfer restrictions. The Committee may, at its discretion, waive all or any part of the restrictions applicable to any or all outstanding restricted stock awards, provided that, in the case of restricted stock awards made to a person considered by the Company as an officer or director for purposes of Section 16 of the Securities Act of 1934, as amended, the terms of such restricted stock agreement will provide that the stock so awarded may not be disposed of for a period of at least six months from the date the award was made. (b) Delivery of Common Shares and Restrictions. At the time of a restricted stock award, the number of Common Shares awarded thereunder shall be registered in the name of the grantee. If a certificate representing such shares is issued, such certificate shall be held by the Company or any custodian appointed by the Company for the account of the grantee subject to the terms and conditions of the Plan, and shall bear such a legend setting forth the restrictions imposed thereon as the Committee, in its discretion, may determine. The grantee shall have all rights of a shareholder with respect to the Common Shares, including the right to receive dividends and the right to vote such shares, subject to the following restrictions: (i) the grantee shall not be entitled to delivery of the stock certificate, if one is issued, until the expiration of the restricted period and the fulfillment of any other 3

restrictive conditions set forth in the restricted stock agreement with respect to such Common Shares; (ii) none of the Common Shares may be sold, assigned, transferred, pledged, hypothecated or otherwise encumbered or disposed of during such restricted period or until after the fulfillment of any such other restrictive conditions; and (iii) except as otherwise determined by the Committee, all of the shares shall be forfeited and all rights of the grantee to such shares shall terminate, without further obligation on the part of the Company, unless the grantee remains in the continuous employment of the Company for the entire restricted period in relation to which such Common Shares were granted and unless any other restrictive conditions relating to the restricted stock award are met. Any Common Shares, any other securities of the Company and any other property (except for cash dividends) distributed with respect to the Common Shares subject to restricted stock awards shall be subject to the same restrictions, terms and conditions as such restricted Common Shares. (c) Termination of Restrictions. At the end of the restricted period and provided that any other restrictive conditions of the restricted stock award are met, or at such earlier time as otherwise determined by the Committee, all restrictions set forth in any agreement relating to the restricted stock award or in the Plan shall lapse as to the restricted Common Shares subject thereto. Upon payment by the grantee to the Company of any withholding tax required to be paid, a stock certificate, if one is requested, for the appropriate number of Common Shares, free of the restrictions and the restricted stock legend, shall be delivered to the grantee or his or her beneficiary or estate, as the case may be. 10. PERFORMANCE AWARDS. The Committee is further authorized to grant performance awards. Subject to the terms of this Plan and any applicable award agreement, a performance award granted under the Plan (i) may be denominated or payable in cash, Common Shares (including, without limitation, restricted stock), other securities, other awards, or other property and (ii) shall confer on the holder thereof rights valued as determined by the Committee, in its discretion, and payable to, or exercisable by, the holder of the performance awards, in whole or in part, upon achievement of such performance goals during such performance periods as the Committee, in its discretion, shall establish. Subject to the terms of this Plan and any applicable award agreement, the performance goals to be achieved during any performance period, the length of any performance period, the amount of any performance award granted, and the amount of any payment or transfer to be made by the grantee and by the Company under any performance award shall be determined by the Committee. 11. INCOME TAX WITHHOLDING AND TAX BONUSES. (a) In order to comply with all applicable federal, state or local income tax laws or regulations, the Company may take such action as it deems appropriate to ensure that all applicable federal, state or local payroll, withholding, income or other taxes, which are the sole and absolute responsibility of an optionee or grantee under the Plan, are withheld or collected from such optionee or grantee prior to his or her receipt of Common Shares pursuant to the exercise of an option or the satisfaction of the conditions of any other award. In order to assist an optionee or grantee in paying all federal and state taxes to be withheld or collected upon exercise of an option or award which does not qualify as an Incentive Stock Option hereunder, the Committee, in its absolute discretion and subject to such additional terms and conditions as it may adopt, shall permit the optionee or grantee to satisfy such tax obligation by (i) electing to have the Company withhold a portion of the shares otherwise to be delivered upon exercise of such option or award with a fair market value, determined in accordance with Section 5 herein, equal to such taxes or (ii) delivering to the Company Common Shares other than the shares issuable upon exercise of such option or award with a fair market value, determined in accordance with Section 5, equal to such taxes. The election must be made on or before the date that the amount of tax to be withheld is determined. (b) The Committee shall have the authority, at the time of grant of an option under the Plan or at any time thereafter, to approve tax bonuses to designated optionees or grantees to be paid upon their exercise of options or awards granted hereunder. The amount of any such payments shall be determined by the Committee but shall not exceed one hundred percent (100%) of the excess of the fair market value of the shares received upon exercise of an option or award over the price paid therefor. The Committee shall have full authority in its absolute discretion to determine the amount of any such tax bonus and the terms and conditions affecting the vesting and payment thereof. 12. ADDITIONAL RESTRICTIONS. The Committee shall have full and complete authority to determine whether all or any part of the Common Shares of the Company acquired upon exercise of any of the options or awards granted under the Plan shall be subject to restrictions on the transferability thereof or any other restrictions affecting in any manner the optionee's or grantee's rights with respect thereto, but any such restriction shall be contained in the agreement relating to such options or awards. 13. TEN PERCENT SHAREHOLDER RULE. Notwithstanding any other provision in the Plan, if at the time an option is otherwise to be granted pursuant to the Plan the optionee owns directly or indirectly (within the meaning of Section 424(d) of the Code) Common Shares of the Company possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or its parent or subsidiary corporations (within the meaning of Section 422(b)(5) of the Code), then any Incentive Stock Option to be granted to such optionee pursuant to the Plan shall satisfy the requirements of Section 422(c)(5) of the Code, and the option price shall be not less than 110% of the fair market value of the Common Shares of the Company determined as described herein, and such option by its terms shall not be exercisable after the expiration of five (5) years from the date such option is granted. 14. NONTRANSFERABILITY. No option or award granted under the Plan shall be transferable by an optionee or grantee, otherwise than by will or the laws of descent or distribution. Except as otherwise provided 4

in an option or award agreement, during the lifetime of an optionee or grantee, the option or award shall be exercisable only by such optionee or grantee. The Committee shall have the authority to waive the provisions of this Section with respect to any grant of options under the Plan subject to such terms, conditions or limitations as they may, in their discretion impose. 15. DILUTION OR OTHER ADJUSTMENTS. If there shall be any change in the Common Shares through merger, consolidation, reorganization, recapitalization, dividend in the form of stock (of whatever amount), stock split or other change in the corporate structure, appropriate adjustments in the Plan and outstanding options and awards shall be made by the Committee. In the event of any such changes, adjustments shall include, where appropriate, changes in the aggregate number of shares subject to the Plan, the number of shares and the price per share subject to outstanding options and awards and the amount payable upon exercise of outstanding awards, in order to prevent dilution or enlargement of option or award rights. 16. AMENDMENT OR DISCONTINUANCE OF PLAN. The Board of Directors may amend or discontinue the Plan at any time. Subject to the provisions of Section 15 no amendment of the Plan, however, shall without shareholder approval: (a) increase the number of shares authorized under the Plan as provided in Section 2 herein, (b) decrease the minimum price provided in Section 5 herein, (c) extend the maximum term under Section 6, or (d) modify the eligibility requirements for participation in the Plan. The Committee, or the Company's Chief Executive Officer as authorized by the Committee, may grant, each year, options and awards for the number of shares authorized by Section 2 herein without further amendment to the Plan increasing the number of shares authorized for distribution. The Board of Directors shall not alter or impair any option or award theretofore granted under the Plan without the consent of the holder of the option or award. 17. TIME OF GRANTING. Nothing contained in the Plan or in any resolution adopted or to be adopted by the Board of Directors or by the shareholders of the Company, and no action taken by the Committee, the Chief Executive Officer or the Board of Directors (other than the execution and delivery of an option or award agreement), shall constitute the granting of an option or award hereunder. 18. EFFECTIVE DATE AND TERMINATION OF PLAN. (a) The Plan was approved by the Board of Directors on February 15, 1993, and shall be approved by the shareholders of the Company within twelve (12) months thereof. (b) Unless the Plan shall have been discontinued as provided in Section 16 hereof, the Plan shall terminate on February 14, 2003. No option or award may be granted after such termination, but termination of the Plan shall not, without the consent of the optionee or grantee, alter or impair any rights or obligations under any option or award theretofore granted. 19. OPTION AND AWARD LIMITATIONS UNDER THE PLAN. No participant who is an employee of the Company at the time of grant may be granted an option or award the value of which is based solely on an increase in the value of the shares after the date of grant of such option or awards for more than 2,000,000 shares, in the aggregate, in any one calendar year period beginning with the period commencing on January 1, 1996 and ending December 31, 1996. The foregoing annual limitation specifically includes the grant of any options or awards representing qualified performance-based compensation within the meaning of Section 162(m) of the Code. 5

EXHIBIT 10(c) UNITEDHEALTH GROUP INCORPORATED NONEMPLOYEE DIRECTOR STOCK OPTION PLAN AMENDED AND RESTATED EFFECTIVE OCTOBER 30, 2001 SECTION 1. PURPOSE. This plan shall be known as the "UnitedHealth Group Incorporated Nonemployee Director Stock Option Plan, Amended and Restated Effective October 30, 2001" and is hereinafter referred to as the "Plan." The purpose of the Plan is to promote the interests of UnitedHealth Group Incorporated, a Minnesota corporation (the "Company"), by enhancing its ability to attract and retain the services of experienced and knowledgeable independent directors and by providing additional incentive for these directors to increase their interest in the Company's long-term success and progress. Nonqualified stock options or restricted stock may be granted under the Plan. SECTION 2. ADMINISTRATION. The Plan shall be administered by a committee (the "Committee") of two or more persons appointed by the Board of Directors of the Company. Except as set forth in Section 6(c) hereof, grants of stock options under the Plan and the amount and nature of the awards to be granted shall be automatic as described in Sections 6(a) and 6(b). Grants of restricted stock under the Plan and the amount and nature of restricted stock to be granted shall be at the discretion of the Committee. All questions of interpretation of the Plan or of any options or restricted stock granted under it shall be determined by the Committee and such determination shall be final and binding upon all persons having an interest in the Plan. SECTION 3. PARTICIPATION IN THE PLAN. Each director of the Company shall be eligible to participate in the Plan unless such director is also an employee of the Company or any subsidiary or affiliate of the Company. Notwithstanding the foregoing, no single director shall be eligible to acquire under the Plan more than 1% of the shares of the Company's common stock outstanding as of May 12, 1999. SECTION 4. STOCK SUBJECT TO THE PLAN. Subject to the provisions of Section 11 hereof, the stock to be subject to grants under the Plan shall be authorized but unissued shares of the Company's common stock, par value $.01 per share (the "Common Stock"). Subject to adjustment as provided in Section 11 hereof, the maximum number of shares with respect to which grants may be authorized under this Plan shall be 1,700,000 shares of Common Stock. If a grant under the Plan expires or for any reason is terminated prior to the exercise of an option or the lapse of a restriction on the shares underlying a restricted stock grant, the shares

underlying such grant shall again be available for grants thereafter during the term of the Plan. SECTION 5. NONQUALIFIED STOCK OPTIONS. All options granted under the Plan shall be nonqualified stock options that do not qualify as incentive stock options within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended. SECTION 6. TERMS AND CONDITIONS OF OPTIONS. Each option granted under this plan may, but is not required to, be evidenced by a written agreement or certificate in such form as the Committee shall from time to time approve. Each option granted under this plan shall comply with and be subject to the following terms and conditions: a) Annual Option Grants. Each eligible director of the Company in office on the first business day immediately following each annual meeting of the Company's shareholders (the "Annual Option Grant Date") held during the term of the Plan shall be granted automatically an option to purchase 10,000 shares of Common Stock (the "Annual Option Grant"), granted in 4 installments of 2,500 each on the first business day of each fiscal quarter following the Annual Option Grant Date. A director must be in office on the day of each installment of the Annual Option Grant or that installment will be forfeited. Notwithstanding the foregoing, no director shall be granted an Annual Option Grant if such director has been granted an option under Section 6(b) hereof within 12 months of such Annual Option Grant Date. Each option granted pursuant to this Section 6(a) shall have an exercise price as determined pursuant to Section 7 hereof. b) Initial Option Grants. Each eligible director of the Company that is elected to the Board of Directors shall be granted automatically on the date that the director is elected to the Board of Directors an option to purchase 18,000 shares of Common Stock. Notwithstanding Section 6(f), the options granted pursuant to this Section 6(b) shall not be exercisable for a period of one year after the date on which they were granted, but thereafter will become exercisable as to one-third of the shares covered by the option on each anniversary date of the option grant. Each option granted pursuant to this Section 6(b) shall have an exercise price as determined pursuant to Section 7 hereof. c) Stock Option Conversion Program. Each eligible director of the Company in office on the last business day of any calendar year may elect to convert into options to purchase Common Stock any percentage of the annual retainer and Board of Director and committee meeting fees to be paid to such director in the following year (the "Conversion Option"). With respect to any eligible director who is not a director on the last business day of any calendar year, such director shall have thirty (30) days after his or her election as a director in which to elect 2

the Conversion Option. Options granted pursuant to this Section 6(c) shall be granted on the dates of regularly scheduled Board of Director meetings, and each such option shall enable the holder thereof to purchase that number of shares of Common Stock as is equal to (i) four (4) times the sum of (A) the annual retainer that would have been received by the electing director (including any retainer that would have been received for acting as the chairperson of any committee of the Board of Directors), had such director not elected the Conversion Option, divided by the number of regularly scheduled Board of Director meetings for the calendar year and (B) the total Board of Director and committee meeting fees that would have been received by such director, had such director not elected the Conversion Option, for meetings attended subsequent to the date of the immediately preceding regularly scheduled Board of Directors meeting but prior to and including the date of the regularly scheduled Board of Directors meeting on which such option is to be granted, divided by (ii) the closing per share price of Common Stock on the date of grant; provided, however, that if such number is not a multiple of ten (10), such number shall be rounded up to the nearest multiple of ten (10) exceeding such number. d) Options Non-Transferable. No option granted under the Plan shall be transferable by the optionee otherwise than by will or by the laws of descent and distribution as provided in Section 6(g) hereof. During the lifetime of the optionee, the options shall be exercisable only by such optionee. No option or interest therein may be transferred, assigned, pledged or hypothecated by the optionee during such optionee's lifetime, whether by operation of law or otherwise, or be made subject to execution, attachment or similar process. The Committee shall have the authority to waive the provisions of this Section with respect to any grant of options under the Plan subject to such terms, conditions or limitations as they may, in their discretion, impose. e) Period of Options. Options shall terminate upon the expiration of 10 years from the date on which they were granted. f) Exercise of Options. i. Options granted under the Plan shall not be exercisable for a period of six months after the date on which they were granted, but thereafter will be exercisable in full at any time or from time to time during the term of the option, provided that options granted under the Plan may become fully exercisable upon a director's resignation from the Board of Directors or the death of the optionee. ii. The exercise of any option granted hereunder shall only be effective at such time as counsel to the Company shall have determined that the issuance and delivery of Common Stock pursuant to such exercise will not violate any federal or state securities or other laws. An optionee desiring to exercise an option may be required by the Company, as a condition of 3

the effectiveness of any exercise of an option granted hereunder, to agree in writing that all Common Stock to be acquired pursuant to such exercise shall be held for his or her own account without a view to any distribution thereof, that the certificates that may be issued for such shares shall bear an appropriate legend to that effect and that such shares will not be transferred or disposed of except in compliance with applicable federal and state securities laws. iii. An optionee electing to exercise an option, or his or her representative, shall give notice to the Company of such election and of the number of shares subject to such exercise. The full purchase price of such shares shall be tendered either prior to the issuance of shares pursuant to the exercise or, if such option is exercised pursuant to a cashless exercise and sale transaction, on or prior to the settlement date of such transaction. Payment shall be made to the Company in cash (including check, bank draft, money order or wire transfer). g) Effect of Death. If the optionee shall die prior to the time the option is fully exercised, such option may be exercised at any time within one year after his or her death by the personal representatives or administrators of the optionee or by any person or persons to whom the option is transferred by will or the applicable laws of descent and distribution, to the extent of the full number of shares the optionee was entitled to purchase under the option on the date of death and subject to the condition that no option shall be exercisable after the expiration of the term of the option. SECTION 7. OPTION EXERCISE PRICE. The option exercise price per share for the shares covered by each option shall be equal to the "fair market value" of a share of Common Stock as of the date on which the option is granted. For purposes of Section 6(a), the date on which the option is granted shall be the date of each quarterly installment. For the purposes of the Plan, the fair market value of the Common Stock on a given date shall be the closing price of the Common Stock on such date on the New York Stock Exchange, Inc. (the "NYSE") Composite Tape, if the Common Stock is then being traded on the NYSE. If on the date as of which the fair market value is being determined the Common Stock is not publicly traded, the Committee shall make a good faith attempt to determine such fair market value and, in connection therewith, shall take such actions and consider such factors as it deems necessary or advisable. SECTION 8. GRANTS OF RESTRICTED STOCK The Committee may grant restricted stock to eligible directors from time to time in its discretion. Any grant of restricted stock shall be evidenced by an agreement in such form as the Committee shall from time to time approve, which agreement shall comply 4

with and be subject to the following terms and conditions and any additional terms and conditions established by the Committee that are consistent with the terms of the Plan: a) Grant of Restricted Stock. Each grant of restricted stock under the Plan shall be for such number of shares of Common Stock as shall be determined by the Committee and set forth in an agreement containing the terms of the restricted stock grant. Each agreement shall set forth the restrictions which apply to the grant of restricted stock and the circumstances under which such restrictions lapse. The Committee may, in its discretion, waive any or all of the restrictions applicable to any or all outstanding grants of restricted stock, provided that for purposes of Section 16 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), restricted stock may not be transferable for a period of at least six months from the date of the grant. b) Delivery of Common Shares and Restrictions. At the time of a restricted stock grant, the number of shares of Common Stock granted thereunder shall be registered in the name of the grantee. If a certificate representing such shares is issued, such certificate shall bear a legend referencing the restrictions imposed thereon as the Committee, in its discretion, may determine. The grantee shall have all rights of a shareholder with respect to the restricted stock granted, including the right to receive dividends and the right to vote such shares, provided, however, that none of the shares of restricted stock may be sold, assigned, transferred, pledged, hypothecated or otherwise encumbered or disposed of during such restricted period or until after the fulfillment of any such other restrictive conditions. Any other securities of the Company and any other property (except for cash dividends) distributed with respect to the restricted stock shall be subject to the same restrictions, terms and conditions as the restricted stock. c) Termination of Restrictions. At the end of the restricted period and provided that any other restrictive conditions of the restricted stock are met, or at such earlier time as otherwise determined by the Committee, all restrictions set forth in the agreement relating to the restricted stock award or in the Plan shall lapse as to the restricted stock subject thereto. SECTION 9. TIME FOR GRANTING OPTIONS. Unless the Plan shall have been discontinued as provided in Section 12 hereof, the Plan shall terminate upon the expiration of 10 years from the date upon which it takes effect as provided in Section 12 hereof. No grants shall be made after such termination, but termination of the Plan shall not, without the consent of the grantee, alter or impair any rights or obligations under any option or restricted stock theretofore granted. SECTION 10. LIMITATION OF RIGHTS. a) No Right to Continue as a Director. Neither the Plan, nor the granting of an option or restricted stock nor any other action taken pursuant to the Plan, shall constitute, 5

or be evidence of, any agreement or understanding, express or implied, that the Company will retain a director for any period of time, or at any particular rate of compensation. b) No Shareholder Rights for Options. An optionee shall have no rights as a shareholder with respect to the shares covered by options until the date of the issuance to such optionee of a stock certificate therefor, and no adjustment will be made for cash dividends or other rights for which the record date is prior to the date such certificate is issued. SECTION 11. ADJUSTMENTS TO COMMON STOCK. If there shall be any change in the Common Stock through merger, consolidation, reorganization, recapitalization, stock dividend (of whatever amount), stock split or other change in the corporate structure, appropriate adjustments in the Plan and outstanding options shall be made. In the event of any such changes, adjustments shall include, where appropriate, changes in the aggregate number of shares subject to the Plan, the number of shares subject to outstanding grants and the option exercise prices thereof in order to prevent dilution or enlargement of rights previously granted. SECTION 12. EFFECTIVE DATE OF THE PLAN. The Plan shall take effect immediately upon its approval by the affirmative vote of the holders of a majority of the shares present in person or by proxy and voted at a duly held meeting of shareholders of the Company. SECTION 13. AMENDMENT OF THE PLAN. The Board may suspend or discontinue the Plan or revise or amend it in any respect whatsoever; provided, however, that without approval of the shareholders of the Company no revision or amendment shall be made that (a) absent such shareholder approval, would cause Rule 16b-3 of the Exchange Act, or any successor rule or regulation thereto, to become unavailable with respect to the Plan, or (b) requires the approval of the Company's shareholders under any rules or regulations of the NYSE that are applicable to the Company. The Board shall not alter or impair any grant previously granted under the Plan without the consent of the grantee. SECTION 14. GOVERNING LAW. The Plan and all determinations made and actions taken pursuant hereto shall be governed by the laws of the State of Minnesota and construed accordingly. SECTION 15. COMPLIANCE WITH EXCHANGE ACT. Transactions under the Plan are intended to comply with all applicable conditions of Rule 16b-3 or its successors under the Exchange Act. To the extent any provision of 6

the Plan or action by the Committee fails to so comply, such provision or action shall be deemed null and void to the extent permitted by law and deemed advisable by the Committee. 7

UNITEDHEALTH GROUP EXECUTIVE SAVINGS PLANS (1998 Statement)

UNITEDHEALTH GROUP EXECUTIVE SAVINGS PLANS (1998 STATEMENT) TABLE OF CONTENTS <TABLE> <CAPTION> PAGE <S> <C> SECTION 1. INTRODUCTION AND DEFINITIONS............................................................ 1 1.1. Restatement of Plans 1.2. Definitions 1.2.1. Account 1.2.2. Affiliate 1.2.3. Annual Valuation Date 1.2.4. Beneficiary 1.2.5. Board of Directors or Board 1.2.6. CEO 1.2.7. Code 1.2.8. Committee 1.2.9. Disability 1.2.10. Effective Date 1.2.11. Eligible Grade Level 1.2.12. Employers 1.2.13. ERISA 1.2.14. Incentive Award 1.2.15. Participant 1.2.16. Plans 1.2.17. Plan Statement 1.2.18. Plan Year 1.2.19. Section 16 Officer 1.2.20. SLTEC Bonus 1.2.21. Termination of Employment 1.2.22. UnitedHealth Group or UHG 1.2.23. Valuation Date 1.3. Transitional Rules 1.3.1. Participation Requirements 1.3.2. One-Year Wait for Matching Credits 1.3.3. 10-Year Installments 1.3.4. Delayed Lump Sum 1.3.5. Three (3) Annual Installments 1.3.6. Pre-Selected In-Service Distributions </TABLE> -i-

<TABLE> <S> <C> 1.3.7. On Demand In-Service Distributions 1.3.8. In-Service Distribution for Financial Hardship 1.3.9. Special Restructure Rule SECTION 2. ELIGIBILITY TO PARTICIPATE.............................................................. 5 2.1. General Eligibility Rule 2.2. Immediate Eligibility for Executive Leadership Team 2.3. Selection for Participation in the Plan SECTION 3. AUTOMATIC RESTORATION OPTION PLAN....................................................... 6 3.1. Automatic Enrollment 3.2. Voluntary Enrollment if Over 402(g) Limit at Hire 3.3. Election Out 3.4. Crediting to Accounts 3.5. Matching Credits SECTION 4. INCENTIVE DEFERRAL OPTION AND SALARY DEFERRAL OPTION PLAN............................................................................. 7 4.1. Incentive Deferral Option 4.1.1. Amount of Deferrals 4.1.2. Crediting to Accounts 4.1.3. Matching Credits 4.2. Salary Deferral Option 4.2.1. Amount of Deferrals 4.2.2. Crediting to Accounts 4.2.3. No Matching Credits 4.3. Limited Bonus Deferral Option 4.3.1. Amount of Deferrals 4.3.2. Crediting to Accounts 4.3.3. No Matching Credits 4.4. Supplemental Long Term Executive Compensation Deferral Option 4.4.1. Amount of Deferrals 4.4.2. Crediting to Accounts 4.4.3. No Matching Credits 4.5. Employer Discretionary Supplements SECTION 5. CREDITS FROM MEASURING INVESTMENTS...................................................... 9 5.1. Designation of Measuring Investments 5.2. UHG Stock as Measuring Investment 5.3. Operational Rules for Measuring Investments </TABLE> -ii-

<TABLE> <S> <C> SECTION 6. OPERATIONAL RULES....................................................................... 10 6.1. Operational Rules for Deferrals 6.2. Establishment of Accounts 6.3. Accounting Rules SECTION 7. VESTING OF ACCOUNTS..................................................................... 11 SECTION 8. SPENDTHRIFT PROVISION................................................................... 11 SECTION 9. DISTRIBUTIONS........................................................................... 11 9.1. Time of Distribution to Participant 9.1.1. General Rule 9.1.2. No Application for Distribution Required 9.1.3. Code Section 162(m) Delay 9.2. Form of Distribution 9.3. Election of Form of Distribution by Participant 9.3.1. Election at Initial Enrollment 9.3.2. Default Election of Form of Distribution 9.3.3. Periodic Re-Election 9.4. Payment to Beneficiary Upon Death of Participant 9.4.1. Payment to Beneficiary When Death Occurs Before Termination of Employment 9.4.2. Payment to Beneficiary When Death Occurs After Termination of Employment 9.4.3. Beneficiary Must Apply for Distribution 9.4.4. Election of Measuring Investments by Beneficiaries 9.5. Designation of Beneficiaries 9.5.1. Right to Designate 9.5.2. Failure of Designation 9.5.3. Disclaimers by Beneficiaries 9.5.4. Definitions 9.5.5. Special Rules 9.6. Death Prior to Full Distribution 9.7. Facility of Payment 9.8. In-Service Distributions 9.8.1. Pre-Selected In-Service Distributions. 9.8.2. On Demand In-Service Distributions 9.8.3. In-Service Distribution for Financial Hardship 9.9. Distributions in Cash SECTION 10. FUNDING OF PLAN......................................................................... 21 10.1. Unfunded Plan 10.2. Corporate Obligation </TABLE> -iii-

<TABLE> <S> <C> SECTION 11. AMENDMENT AND TERMINATION............................................................... 21 11.1. Amendment and Termination 11.2. Special Rule for Section 16 Officers 11.3. No Oral Amendments 11.4. Plan Binding on Successors SECTION 12. DETERMINATIONS -- RULES AND REGULATIONS................................................. 22 12.1. Determinations 12.2. Rules and Regulations 12.3. Method of Executing Instruments 12.4. Claims Procedure 12.4.1. Original Claim 12.4.2. Review of Denied Claim 12.4.3. General Rules 12.5. Limitations and Exhaustion 12.5.1. Limitations 12.5.2. Exhaustion Required SECTION 13. PLAN ADMINISTRATION..................................................................... 25 13.1. Officers 13.2. Chief Executive Officer 13.3. Board of Directors 13.4. Committee 13.5. Delegation 13.6. Conflict of Interest 13.7. Administrator 13.8. Service of Process 13.9. Expenses 13.10. Tax Withholding 13.11. Certifications 13.12. Errors in Computations SECTION 14. CONSTRUCTION............................................................................ 27 14.1. Applicable Laws 14.1.1. Separate Plans 14.1.2. ERISA Status 14.1.3. IRC Status 14.1.4. Securities Laws Compliance 14.1.5. References to Laws 14.2. Effect on Other Plans 14.3. Disqualification 14.4. Rules of Document Construction </TABLE> -iv-

<TABLE> <S> <C> 14.5. Choice of Law 14.6. No Employment Contract SCHEDULE I - EMPLOYERS PARTICIPATING IN THE UNITEDHEALTH GROUP EXECUTIVE SAVINGS PLANS............... SI-1 SCHEDULE II - MEASURING INVESTMENTS................................................................... SII-1 </TABLE> -v-

UNITEDHEALTH GROUP EXECUTIVE SAVINGS PLANS (1998 STATEMENT) SECTION 1 INTRODUCTION AND DEFINITIONS 1.1. RESTATEMENT OF PLANS. UNITEDHEALTH GROUP INCORPORATED (formerly known as United Healthcare Corporation), a Minnesota corporation (hereinafter sometimes referred to as "UHG"), as plan sponsor, hereby restates two previously established nonqualified, unfunded, deferred compensation plans for the benefit of a select group of management or highly compensated employees of the Employers: (1) the Automatic Restoration Option Plan, and (2) the Incentive Deferral, Salary Deferral and Limited Bonus Deferral Option Plan. 1.2. DEFINITIONS. When the following terms are used herein with initial capital letters, they shall have the following meanings: 1.2.1. ACCOUNT -- the separate bookkeeping account established for each Participant which represents the separate unfunded and unsecured general obligation of the Employers established with respect to each person who is a Participant in this Plan in accordance with Section 2 and to which are credited the dollar amounts specified in Sections 3, 4 and 5 and from which are subtracted payments made pursuant to Section 9. 1.2.2. AFFILIATE -- a business entity which is not an Employer but which is part of a "controlled group" with the Employer or under "common control" with an Employer or which is a member of an "affiliated service group" that includes an Employer, as those terms are defined in section 414(b), (c) and (m) of the Code. A business entity which is a predecessor to an Employer shall be treated as an Affiliate if the Employer maintains a plan of such predecessor business entity or if, and to the extent that, such treatment is otherwise required by regulations under section 414(a) of the Code. A business entity shall also be treated as an Affiliate if, and to the extent that, such treatment is required by regulations under section 414(o) of the Code. In addition to said required treatment, the Committee may, in its discretion, designate as an Affiliate any business entity which is not such a "controlled group," "common control," "affiliated service group" or "predecessor" business entity but which is otherwise affiliated with an Employer, subject to such limitations as the Committee may impose. 1.2.3. ANNUAL VALUATION DATE -- each December 31. 1.2.4. BENEFICIARY -- a person designated by a Participant (or automatically by operation of the Plan Statement) to receive all or a part of the Participant's Account in the event of the Participant's death prior to full distribution thereof. A person so designated shall not be considered a Beneficiary until the death of the Participant.

1.2.5. BOARD OF DIRECTORS OR BOARD -- the Board of Directors of UHG or its successor. "Board of Directors" shall also mean and refer to any properly authorized committee of the Board of Directors. 1.2.6. CEO -- the Chief Executive Officer of UHG or his or her delegee for Plan purposes. 1.2.7. CODE -- the Internal Revenue Code of 1986, as amended. 1.2.8. COMMITTEE -- the UnitedHealth Group Employee Benefits Committee (also known as the "EBC") consisting of one or more members appointed by and serving at the pleasure of the CEO. 1.2.9. DISABILITY -- a medically determinable physical or mental impairment which: (i) renders the individual incapable of performing any substantial gainful employment, (ii) can be expected to be of long-continued and indefinite duration or result in death, and (iii) is evidenced by a certification to this effect by a doctor of medicine approved by the Committee. In lieu of such a certification, the Committee may accept, as proof of Disability, the official written determination that the individual will be eligible for disability benefits under the federal Social Security Act as now enacted or hereinafter amended (when any waiting period expires). The Committee shall determine the date on which the Disability shall have occurred if such determination is necessary. 1.2.10. EFFECTIVE DATE -- January 1, 1998 (except as otherwise specified in this Plan Statement, including Section 1.3). 1.2.11. ELIGIBLE GRADE LEVEL -- (a) ON OR AFTER JANUARY 1, 2000. For Plan Years commencing on or after January 1, 2000, for regular full-time or part-time employees: the Executive Leadership Team; Salary Grades 31 and 32 (but only if base salary is equal to or exceeds any specific compensation criteria established by the Committee); and Medical Director Grades M2, M3 and M4 (but only if base salary is equal to or exceeds any specific compensation criteria established by the Committee). (b) PRIOR TO JANUARY 1, 2000. For Plan Years commencing prior to January 1, 2000, for regular full-time employees: the Executive Leadership Team or executive career band; Salary Grades 31 and 32 (but only if base salary is equal to or exceeds any specific compensation criteria established by the Committee); Medical Director Grades M2, M3 and M4; and Clinical Medical Staff Grades CD-2, CD-3, CM-2 and CM-3. (c) AUTHORITY TO MAKE CHANGES. Notwithstanding the foregoing, the Committee may from time to time in its discretion modify the applicable -2-

eligible grade levels, the compensation criteria and the full-time and part-time criteria. 1.2.12. EMPLOYERS -- UHG; each business entity listed as an Employer in the Schedule I to this Plan Statement; any other business entity that employs persons who are selected for participation under Section 2.3 of in this Plan; and any successor thereof. 1.2.13. ERISA -- the Employee Retirement Income Security Act of 1974, as amended. 1.2.14. INCENTIVE AWARD -- any incentive awards that were payable in calendar years prior to 2000 under the Management Incentive Plan, that are payable in 2000 through 2002 under the Leadership Results Plan, that are payable in 2003 or later years under the Rewarding Results Plan, and any comparable successor plan. 1.2.15. PARTICIPANT -- an employee of an Employer who is selected for participation in this Plan in accordance with the provisions of Section 2 and who either has been automatically enrolled under Section 3 or has elected to defer compensation under Section 4. An employee who has become a Participant shall continue to be a Participant in this Plan until the date of the Participant's death or, if earlier, the date when the Participant has received a distribution of the Participant's entire Account. 1.2.16. PLANS -- the two nonqualified, unfunded, deferred compensation programs maintained by the Employers for the benefit of Participants eligible to participate therein, as set forth in this Plan Statement: (1) the Automatic Restoration Option Plan (which is attributable to credits to Accounts described in Section 3), and (2) the Incentive Deferral, Salary Deferral and Limited Bonus Deferral Option Plan (which is attributable to credits to Accounts described in Section 4). (As used herein, "Plans" does not refer to the document pursuant to which the Plans are maintained. That document is referred to herein as the "Plan Statement".) The Plans taken together shall be referred to as the "UnitedHealth Group Executive Savings Plans." 1.2.17. PLAN STATEMENT -- this document entitled "UnitedHealth Group Executive Savings Plans (1998 Statement)" as adopted by the Committee and generally effective as of January 1, 1998, as the same may be amended from time to time thereafter. 1.2.18. PLAN YEAR -- the twelve (12) consecutive month period ending on any Annual Valuation Date. 1.2.19. SECTION 16 OFFICER -- an officer of an Employer who is subject to the provisions of Section 16 of the Securities Exchange Act of 1934, as amended. 1.2.20. SLTEC BONUS -- any awards or bonuses that may become payable in 2001 or any later year under the UnitedHealth Group Incorporated Supplemental Long Term Executive Compensation Plan or any comparable successor plan. -3-

1.2.21. TERMINATION OF EMPLOYMENT -- a complete severance of an employee's employment relationship with the Employers and all Affiliates, for any reason other than the employee's death. A transfer from employment with an Employer to employment with another Employer or an Affiliate of an Employer shall not constitute a Termination of Employment. If an Employer who is an Affiliate ceases to be an Affiliate because of a sale of substantially all the stock or assets of the Employer, then Participants who are employed by that Employer and who cease to be employed by an Employer on account of such sale shall be deemed to have thereby had a Termination of Employment for the purpose of commencing distributions from this Plan. 1.2.22. UNITEDHEALTH GROUP OR UHG -- UNITEDHEALTH GROUP INCORPORATED, a Minnesota corporation, or any successor thereto. 1.2.23. VALUATION DATE -- any day that the U.S. securities markets are open and conducting business. 1.3. TRANSITIONAL RULES. Notwithstanding the general effective date of Section 1.2.10 of this Plan Statement, the following special effective dates shall also apply: 1.3.1. PARTICIPATION REQUIREMENTS. For the Plan Year beginning January 1, 1998, Eligible Grade Level shall mean an employee of an Employer who has at least thirty (30) days of service in one of the following classes: Grades 33 and above; Medical Directors M2-M4; or Clinical Medical Staff CD2-3 and CM2-3. For the Plan Year beginning January 1, 1999, Eligible Grade Level shall mean a regular full-time or part-time employee of an Employer who has at least thirty (30) days of service in one of the following classes: the Executive Career Band; Grades 31 and 32 (but only if base salary is equal to or exceeds the specific compensation criteria established by the Committee); Medical Directors M2-M4; and Clinical Medical Staff CD2-3 and CM2-3. Notwithstanding the foregoing, for Plan Years beginning on January 1, 2000, and later, the thirty (30) day service requirement no longer applies. 1.3.2. ONE-YEAR WAIT FOR MATCHING CREDITS. Prior to January 1, 2001, a Participant was required to complete one year of service before the Participant was eligible to receive matching credits described in Sections 3.5 and 4.1.3. Effective January 1, 2001, the year of service requirement no longer applies and Participants are immediately eligible for such matching credits. 1.3.3. 10-YEAR INSTALLMENTS. The ten (10) annual installment distribution option under Section 9.2 is effective only for Participants who first enroll or are deemed to have enrolled in the Plan for a Plan Year that commences on or after January 1, 2001 (the "Restructure Date"). 1.3.4. DELAYED LUMP SUM. The delayed lump sum distribution option described in Section 9.2(c) of the Plan Statement is effective only for Participants who first enroll or are deemed to have enrolled in the Plan for a Plan Year that commences on or after January 1, 2001 (the "Restructure Date"). -4-

1.3.5. THREE (3) ANNUAL INSTALLMENTS. For Plan Years that commenced prior to January 1, 2001, Participants could elect distribution of their Accounts in the form of three (3) annual installments. The three (3) annual installment distribution option is no longer available effective with the first day of the enrollment period for the 2001 Plan Year; provided, however, that three (3) annual installment elections that were made by those Participants who enrolled in the Plan and elected the three (3) annual installment distribution option prior to the first day of the enrollment period of the 2001 Plan Year, shall continue to be effective until subsequently changed by the Participant in accordance with the terms of the Plan Statement. 1.3.6. PRE-SELECTED IN-SERVICE DISTRIBUTIONS. Section 9.8.1 of the Plan Statement is effective for Plan Years commencing on or after January 1, 2001. 1.3.7. ON DEMAND IN-SERVICE DISTRIBUTIONS. Section 9.8.2 of the Plan Statement is effective for Plan Years commencing on or after January 1, 2001. 1.3.8. IN-SERVICE DISTRIBUTION FOR FINANCIAL HARDSHIP. Section 9.8.3 of the Plan Statement is effective for Plan Years commencing on or after January 1, 2001. 1.3.9. SPECIAL RESTRUCTURE RULE. Notwithstanding the effective dates in Sections 1.3.3, 1.3.4 and 1.3.6, employees who were Participants in the Plan before January 1, 2001, shall have a one-time opportunity, under rules established by the Committee, to elect a new form of distribution under Section 9.2 and to elect a pre-selected distribution under Section 9.8.1. Specifically, employees who were Participants in the Plan before January 1, 2001, shall be eligible to make a one-time election to receive a pre-selected in-service distribution of all or part of such Participant's Account as of January 1, 2004 or, any later date specified by the Participant. Any such election made by the Participant must be submitted to the Committee by December 15, 2000, or such other date designated by the Committee. SECTION 2 ELIGIBILITY TO PARTICIPATE 2.1. GENERAL ELIGIBILITY RULE. An employee of an Employer who is in an Eligible Grade Level during a Plan Year and who is selected for participation (as described in Section 2.3) shall be eligible to become a Participant as of the first day of the Plan Year following the Plan Year in which such selection occurs (unless the Committee or the Board of Directors designates a different date). 2.2. IMMEDIATE ELIGIBILITY FOR EXECUTIVE LEADERSHIP TEAM. An employee of an Employer who is a member of the Executive Leadership Team or a comparable successor group and who is selected (as described in Section 2.3 below) for participation by the Committee (or, for a Section 16 Officer, by the Board of Directors) shall be eligible to become a Participant as soon as administratively feasible following such selection (unless the Committee or the Board of Directors designates a different date). -5-

2.3. SELECTION FOR PARTICIPATION IN THE PLAN. Only employees who are selected for participation in this Plan by the Committee (or, for a Section 16 Officer, by the Board of Directors) shall be eligible to become a participant in this Plan. The Committee shall not select any employee for participation unless the Committee determines that such employee is a member of a select group of management or highly compensated employees (as that expression is used in ERISA). The Committee may determine that a Participant is not eligible for automatic deferral or matching credits under the Automatic Restoration Option in Section 3 for any Plan Year at any time before such deferrals or credits have actually been made. The Committee also may at any time determine that a Participant is no longer eligible to make voluntary deferrals under Section 4. SECTION 3 AUTOMATIC RESTORATION OPTION PLAN 3.1. AUTOMATIC ENROLLMENT. Except as provided in Section 3.3, each Participant who participates in the UnitedHealth Group 401(k) Savings Plan (the "401(k) Plan") and whose deferrals under the 401(k) Plan cease midyear because an IRS Limit is reached shall automatically be enrolled in the Automatic Restoration Option. Such Participant shall be deemed to have elected to defer pay under the Automatic Restoration Option at the rate of deferral that is in effect under the 401(k) Plan at the time the IRS Limit is reached. Such deferrals under the Automatic Restoration Option shall begin as soon as administratively practicable after an IRS Limit first applies and shall continue until the following December 31. For purposes of this Section 3.1, an IRS Limit means either (a) the annual compensation limit under section 401(a)(17) of the Code (which is $170,000 for 2000 and 2001) or any comparable successor provision, or (b) the annual deferral limit under section 402(g) of the Code (which is $10,500 for 2000 and 2001) or any comparable successor provision. 3.2. VOLUNTARY ENROLLMENT IF OVER 402(G) LIMIT AT HIRE. If an employee: (a) is a member of the Executive Leadership Team ; (b) is selected for participation in this Plan after the first day of a Plan Year; and (c) has reached the annual deferral limit under section 402(g) of the Code under another qualified plan before becoming a UHG employee, such employee shall be eligible to participate in the Automatic Restoration Option and shall be eligible to elect, through a voice response system (or other written or electronic means) approved by the Committee, to defer between 1% and 15% of the employee's recognized compensation (as defined under the 401(k) Plan) for the remainder of the Plan Year. 3.3. ELECTION OUT. Notwithstanding Section 3.1, eligible employees and Participants can elect, through a voice response system (or other written or electronic means) approved by the Committee, to waive participation in the Automatic Restoration Option for a given Plan Year. Any such waiver shall be made in accordance with the procedures established by the Committee from time to time and must be received by the Committee by the December 15 preceding the first day of such Plan Year (or such other date before the first day of such Plan Year as the -6-

Committee may designate). A waiver of participation shall apply to such Plan Year. A new waiver must be filed for each Plan Year. 3.4. CREDITING TO ACCOUNTS. The Committee shall cause to be credited to the Account of each Participant the amounts, if any, of such Participant's automatic deferrals of pay determined under Section 3.1 or Section 3.2. Such amounts shall be credited as of the day such pay would otherwise have been paid to the Participant. 3.5. MATCHING CREDITS. The Committee shall also cause to be credited to the Account of each Participant an additional matching amount equal to 50% of the amount credited to such Participant's Account under Section 3.4. For this purpose, however, deferrals at a rate exceeding 6% of pay shall be disregarded. Such matching amounts shall be credited as of the same day that the related deferral of pay is credited. SECTION 4 INCENTIVE DEFERRAL OPTION AND SALARY DEFERRAL OPTION PLAN 4.1. INCENTIVE DEFERRAL OPTION. 4.1.1. AMOUNT OF DEFERRALS. Through a voice response system (or other written or electronic means) approved by the Committee, a Participant may elect to defer between (and including) 1% and 100% of such Participant's Incentive Award. To be effective for an Incentive Award paid during a Plan Year, the deferral election must be received by the Committee before the December 15 preceding the first day of such Plan Year (or such other date before the first day of such Plan Year as the Committee may designate). Such deferral election shall be irrevocable for the Plan Year with respect to which it is made once it has been received by the Committee. 4.1.2. CREDITING TO ACCOUNTS. The Committee shall cause to be credited to the Account of each Participant the amount, if any, of such Participant's voluntary deferrals of any Incentive Awards under Section 4.1.1. Such amount shall be credited as of the day such Incentive Award would otherwise have been paid to the Participant. 4.1.3. MATCHING CREDITS. The Committee shall cause to be credited to the Account of each Participant an additional matching amount equal to 50% of the amount credited to such Participant's Account under Section 4.1.2 above. For this purpose, however, deferrals at a rate exceeding 6% of the Participant's Incentive Award shall be disregarded. Such matching amounts shall be credited as of the same day that the related deferral of the Incentive Award is credited. -7-

4.2. SALARY DEFERRAL OPTION. 4.2.1. AMOUNT OF DEFERRALS. Through a voice response system (or other written or electronic means) approved by the Committee, a Participant may elect to defer between (and including) 1% and 100% of such Participant's base salary for a Plan Year. For this purpose, base salary shall include any non-stock periodic incentive pay but shall not include any Incentive Awards. The Committee may establish prospectively other limits or other pay eligible for deferral. To be effective for a Plan Year, the deferral election must be received by the Committee by the December 15 preceding the first day of such Plan Year (or such other date before the first day of such Plan Year as the Committee may designate). For a newly eligible Participant, however, the deferral election must be received by the Committee within 30 days after the first day of such eligibility, and, if so received, deferral shall be effective as of the first day of the month following such receipt. Such deferral election shall be irrevocable for the Plan Year with respect to which it is made, once it has been received by the Committee. 4.2.2. CREDITING TO ACCOUNTS. The Committee shall cause to be credited to the Account of each Participant the amount, if any, of such Participant's voluntary deferrals of salary or other pay under Section 4.2.1. Such amount shall be credited as of the day such salary or other pay would otherwise have been paid to the Participant. 4.2.3. NO MATCHING CREDITS. No matching amounts shall be credited for deferrals of salary or other pay under Section 4.2.1. 4.3. LIMITED BONUS DEFERRAL OPTION. 4.3.1. AMOUNT OF DEFERRALS. Through a voice response system (or other written or electronic means) approved by the Committee, a Participant may elect to defer between (and including) 1% and 100% of all bonuses, other than Incentive Awards and SLTEC Bonuses, received during the Plan Year, selected by the Committee to be eligible for deferral. Such eligible bonuses shall include but not be limited to) ad hoc bonuses, bonuses tied to employment agreements, bonuses under formal incentive programs (other than UHG's Leadership Results Plan), retention bonuses, and spot bonuses. To be effective for a bonus paid during a Plan Year, the deferral election must be received by the Committee before the December 15 preceding the first day of such Plan Year (or such other date as the Committee may designate). Such deferral election shall be irrevocable for the Plan Year with respect to which it is made once it has been received by the Committee. 4.3.2. CREDITING TO ACCOUNTS. The Committee shall cause to be credited to the Account of each Participant the amount, if any, of such Participant's voluntary deferral of such bonus pay under Section 4.3.1. Such amount shall be credited as of the day such bonus pay would otherwise have been paid to the Participant. 4.3.3. NO MATCHING CREDITS. No matching amounts shall be credited for deferrals of bonus pay under Section 4.3.1. -8-

4.4. SUPPLEMENTAL LONG TERM EXECUTIVE COMPENSATION DEFERRAL OPTION. 4.4.1. AMOUNT OF DEFERRALS. Through a voice response system (or other written or electronic means) approved by the Committee, a Participant may elect to defer between (and including) 1% and 100% of such Participant's SLTEC Bonus. To be effective for a SLTEC Bonus that becomes payable during a Plan Year, the deferral election must be received by the Committee before the December 15 preceding the first day of such Plan Year (or such other date before the first day of the such Plan Year as the Committee may designate). Such deferral election shall be irrevocable for the Plan Year which respect to which it is made once it has been received by the Committee. 4.4.2. CREDITING TO ACCOUNTS. The Committee shall cause to be credited to the Account of each Participant the amount, if any, of such Participant's voluntary deferrals of any SLTEC Bonuses under Section 4.4.1. Such amount shall be credited as soon as administratively feasible after the day such SLTEC Bonus would otherwise have been paid to the Participant. 4.4.3. NO MATCHING CREDITS. No matching amounts shall be credited for deferrals of SLTEC Bonuses under Section 4.4.1. 4.5. EMPLOYER DISCRETIONARY SUPPLEMENTS. Upon written notice to one or more Participants and to the Committee, the CEO (or, for any Section 16 Officer, the Board of Directors) may (but is not required to) determine that additional amounts shall be credited to the Accounts of such Participants. Such notice shall also specify the date of such crediting. Notwithstanding Section 7, such notice may also establish vesting rules for such amounts, in which case separate Accounts shall be established for such amounts for such Participants. SECTION 5 CREDITS FROM MEASURING INVESTMENTS 5.1. DESIGNATION OF MEASURING INVESTMENTS. Through a voice response system (or other written or electronic means) approved by the Committee, each Participant shall designate the following "Measuring Investments," which shall be used to determine the value of such Participant's Account (until changed as provided herein): (a) One or more Measuring Investments for the current Account balance, and (b) One or more Measuring Investments for amounts that are credited to the Account in the future. The Accounts and such Measuring Investments are specified solely as a device for computing the amount of benefits to be paid by the Employers under the Plans, and the Employers are not required to purchase such investments. The Measuring Investments as of November 10, 2000 -9-

are listed in Schedule II to the Plan Statement. Schedule II to the Plan Statement may be revised and amended by the Committee, in its discretion, from time to time. 5.2. UHG STOCK AS MEASURING INVESTMENT. The Board of Directors may (but shall not be required to) determine that the Measuring Investments available for election by Participants will include deemed (but not actual) investment in the common stock of UHG, valued at the closing price of UHG common stock as reported on the New York Stock Exchange composite tape on the applicable Valuation Date. 5.3. OPERATIONAL RULES FOR MEASURING INVESTMENTS. The Committee shall adopt rules specifying the Measuring Investments, the circumstances under which a particular Measuring Investment may be elected, or shall be automatically utilized, the minimum or maximum amount or percentage of an Account which may be allocated to a Measuring Investment, the procedures for making or changing Measuring Investment elections, the extent (if any) to which Beneficiaries of deceased Participants may make Measuring Investment elections and the effect of a Participant's or Beneficiary's failure to make an effective Measuring Investment election with respect to all or any portion of an Account. Notwithstanding the foregoing, any rules or revision with respect to deemed investment in the common stock of UHG elections by a Section 16 Officer shall be made only by the Board of Directors. SECTION 6 OPERATIONAL RULES 6.1. OPERATIONAL RULES FOR DEFERRALS. A Participant's waiver of automatic participation in the Automatic Restoration Option under Section 3.3 or election to defer compensation under Section 4 shall not be "evergreen" and shall remain in effect only for one Plan Year. If a Participant's pay after deferrals is not sufficient to cover pre-tax and after-tax benefit payroll deductions, and tax or other payroll withholding requirements, the Participant's deferrals shall be reduced to the extent necessary to meet such requirements. 6.2. ESTABLISHMENT OF ACCOUNTS. There shall be established for each Participant an unfunded, bookkeeping Account which shall be adjusted each Valuation Date. 6.3. ACCOUNTING RULES. The Committee may adopt (and revise) accounting rules for the Accounts. -10-

SECTION 7 VESTING OF ACCOUNTS The Account of each Participant shall be fully (100%) vested and nonforfeitable at all times (except for any special vesting rules that apply to employer discretionary supplements under Section 4.5 and any early distribution penalties that may apply under Section 9). SECTION 8 SPENDTHRIFT PROVISION Participants and Beneficiaries shall have no power to transfer any interest in an Account nor shall any Participant or Beneficiary have any power to anticipate, alienate, dispose of, pledge or encumber the same while it is in the possession or control of the Employers, nor shall the Committee recognize any assignment thereof, either in whole or in part, nor shall the Account be subject to attachment, garnishment, execution following judgment or other legal process (including without limitation any domestic relations order, whether or not a "qualified domestic relations order" under section 414(p) of the Code and section 206(d) of ERISA) before the Account is distributed to the Participant or Beneficiary. The power to designate Beneficiaries to receive the Account of a Participant in the event of such Participant's death shall not permit or be construed to permit such power or right to be exercised by the Participant so as thereby to anticipate, pledge, mortgage or encumber such Participant's Account or any part thereof. Any attempt by a Participant to so exercise said power in violation of this provision shall be of no force and effect and shall be disregarded by the Committee. SECTION 9 DISTRIBUTIONS 9.1. TIME OF DISTRIBUTION TO PARTICIPANT. 9.1.1. GENERAL RULE. A Participant's Account (reduced by the amount of any applicable payroll, withholding and other taxes) shall be distributable upon the Termination of Employment or Disability of the Participant. The amount of such distribution shall be determined as of the January 31 immediately following the Plan Year in which occurs such Termination of Employment or Disability and shall be actually paid (or, in the case of installments, commenced) to the Participant as soon as practicable after such determination (but not later than the last day of the following February). -11-

9.1.2. NO APPLICATION FOR DISTRIBUTION REQUIRED. A Participant's Account shall be distributed automatically following the Participant's Termination of Employment or Disability. A Participant shall not be required to apply for distribution. 9.1.3. CODE SECTION 162(M) DELAY. If the Committee (or, for any Section 16 Officer, the Board of Directors) determines that delaying the time that initial payments are made or commenced would increase the probability that such payments would be fully deductible for federal or state income tax purposes, the Employers may unilaterally delay the time of the making or commencement of payments for up to twenty-four (24) months after the date such payments would otherwise be payable. 9.2. FORM OF DISTRIBUTION. As determined under the rules in Section 9.3, distribution of the Participant's Account shall be made in one of the following forms: (a) LUMP SUM. In the form of a single lump sum. (b) INSTALLMENTS. In the form of a series of 5 or 10 annual installments. (i) GENERAL RULE. The amount of the first installment will be determined as of the January 31 described in Section 9.1 and the amount of future installments will be determined as of each following January 31. The amount of each installment shall be determined by dividing the Account balance as of the January 31 as of which the installment is being paid, by the number of remaining installment payments to be made (including the payment being determined). Such installments shall be actually paid as soon as practicable after each such determination (but not later than the last day of the following February). (ii) ACCELERATED PAYMENT. A Participant who has experienced a Termination of Employment or Disability and for whom an installment election is in effect may elect through a voice response system (or other written or electronic means) approved by the Committee to receive a cash lump sum payment of the total remaining balance of the Account (but not part thereof) for any reason; provided, however, that the Account balance will be reduced by a penalty of 10%, and the Participant will receive 90% of the Account balance. The penalty of 10% of the Account balance will be forfeited to the Employers to be used as the Committee determines in its discretion. The amount of such distribution will be determined as of the Valuation Date coincident with or next following receipt of the request by the Committee and shall be actually paid to the Participant as soon as practicable after such determination. -12-

(c) DELAYED LUMP SUM. In the form of a single lump sum following the tenth (10th) anniversary of the Participant's Termination of Employment or Disability. (i) GENERAL RULE. The amount of such distribution shall be determined as of the January 31 immediately following the calendar year in which occurs the tenth (10th) anniversary of the Participant's Termination of Employment or Disability. Actual distribution shall be made as soon as administratively practicable after such January 31. (ii) ACCELERATED PAYMENT. A Participant who has elected the delayed lump sum distribution option may elect through a voice response system (or other written or electronic means) approved by the Committee to receive a lump sum distribution of the Account before the tenth (10th) anniversary of the Participant's Termination of Employment or Disability; provided, however, that the Account balance will be reduced by a penalty of 10%, and the Participant will receive 90% of the Account balance. The penalty of 10% of the Account balance will be forfeited to the Employers to be used as the Committee determines in its discretion. (iii) SPECIAL RULES FOR SLTEC PARTICIPANTS. If a Participant who has elected the delayed lump sum distribution option is also a participant in the UnitedHealth Group Supplemental Long Term Executive Compensation Plan or any comparable successor plan, the Participant may, after employment has ended, make a one-time election through a voice response system (or other written or electronic means), approved by the Committee to receive either a lump sum distribution of the Account before the tenth (10th) anniversary of the Participant's Termination of Employment or Disability, or five (5) annual installments, subject to the following rules: (A) Any election to receive a lump sum payment before the tenth (10th) anniversary of the Participant's Termination of Employment or Disability must be received by the Committee no later than the December 31 of the calendar year in which occurs the eighth (8th) anniversary of the Participant's Termination of Employment or Disability. (B) Any election to receive five (5) annual installments must be received by the Committee no later than the December 31 the calendar year in which occurs the fourth (4th) -13-

anniversary of the Participant's Termination of Employment or Disability. (C) Any election to receive either a lump sum distribution of the Participant's Account before the tenth (10th) anniversary of the Participant's Termination of Employment or Disability or five (5) annual installments shall not be effective until twelve (12) months after it is received by the Committee (if the Participant dies before the end of such 12-month period, such election shall not be effective). 9.3. ELECTION OF FORM OF DISTRIBUTION BY PARTICIPANT. 9.3.1. ELECTION AT INITIAL ENROLLMENT. Through a voice response system (or other written or electronic means) approved by the Committee, each Participant shall elect at the time of initial enrollment in the Plan whether distribution shall be made (as described in Section 9.2) in either (i) an immediate lump sum, (ii) 5 or 10 annual installments, or (iii) a delayed lump sum following the tenth (10th) anniversary of the Participant's Termination of Employment or Disability. 9.3.2. DEFAULT ELECTION OF FORM OF DISTRIBUTION. If a Participant fails to elect a form of distribution, such Participant shall be deemed to have elected that distribution be made in an immediate lump sum as described in Section 9.2(a). 9.3.3. PERIODIC RE-ELECTION. Through a voice response system (or other written or electronic means) approved by the Committee, initial and default distribution elections may be changed by the Participant, provided that: (a) no change shall be effective until twelve (12) months after it is received by the Committee (if the Participant dies before the end of such 12-month period, such change shall not be effective), and (b) no change may be filed within twelve (12) months after the initial election (or, if one or more prior changes has been filed, within twelve (12) months after the latest of such changes was filed). No spouse, former spouse, Beneficiary or other person shall have any right to participate in the Participant's decision to revise distribution elections. 9.4. PAYMENT TO BENEFICIARY UPON DEATH OF PARTICIPANT. 9.4.1. PAYMENT TO BENEFICIARY WHEN DEATH OCCURS BEFORE TERMINATION OF EMPLOYMENT. If a Participant dies before Termination of Employment or Disability, such Participant's Beneficiary will receive payment of the Participant's Account at the same time and -14-

in the same form the Participant would have received if the Participant had experienced a Termination of Employment on the date of death. 9.4.2. PAYMENT TO BENEFICIARY WHEN DEATH OCCURS AFTER TERMINATION OF EMPLOYMENT. If a Participant dies after a Termination of Employment or Disability, the Participant's Beneficiary shall receive distribution of the Participant's Account at the same time and in the same form the Participant would have received if the Participant had survived. 9.4.3. BENEFICIARY MUST APPLY FOR DISTRIBUTION. Distribution shall not be made to any Beneficiary until such Beneficiary shall have filed a written application for benefits in a form acceptable to the Committee and such application shall have been approved by the Committee. 9.4.4. ELECTION OF MEASURING INVESTMENTS BY BENEFICIARIES. A Beneficiary of a deceased Participant shall generally have the same rights to designate Measuring Investments for the Participant's Account that Participants have under Section 5. The Committee may adopt (and revise) rules to govern designations of Measuring Investments by Beneficiaries. Unless changed by the Committee, the following rules shall apply: (a) The Measuring Investments for the Account of a deceased Participant shall not be changed until the Beneficiary so determines. (b) If a deceased Participant has more than one Beneficiary, the unanimous consent of all Beneficiaries shall be required to change Measuring Investments for such Participant's Account. 9.5. DESIGNATION OF BENEFICIARIES. 9.5.1. RIGHT TO DESIGNATE. Each Participant may designate, upon forms to be furnished by and filed with the Committee (or through other means approved by the Committee), one or more primary Beneficiaries or alternative Beneficiaries to receive all or a specified part of such Participant's Account in the event of such Participant's death. The Participant may change or revoke any such designation from time to time without notice to or consent from any Beneficiary. No such designation, change or revocation shall be effective unless executed by the Participant and received by the Committee during the Participant's lifetime. 9.5.2. FAILURE OF DESIGNATION. If a Participant: (a) fails to designate a Beneficiary, (b) designates a Beneficiary and thereafter revokes such designation without naming another Beneficiary, or (c) designates one or more Beneficiaries and all such Beneficiaries so designated fail to survive the Participant, -15-

such Participant's Account, or the part thereof as to which such Participant's designation fails, as the case may be, shall be payable to the first class of the following classes of automatic Beneficiaries in which a member survives the Participant and (except in the case of surviving issue) in equal shares if there is more than one member in such class surviving the Participant: (i) Participant's surviving spouse; (ii) Participant's surviving issue per stirpes and not per capita; (iii) Participant's surviving parents; (iv) Participant's surviving brothers and sisters; and (v) Representative of Participant's estate. 9.5.3. DISCLAIMERS BY BENEFICIARIES. A Beneficiary entitled to a distribution of all or a portion of a deceased Participant's Account may disclaim an interest therein subject to the following requirements. To be eligible to disclaim, a Beneficiary must be a natural person, must not have received a distribution of all or any portion of the Account at the time such disclaimer is executed and delivered, and must have attained at least age twenty-one (21) years as of the date of the Participant's death. Any disclaimer must be in writing and must be executed personally by the Beneficiary before a notary public. A disclaimer shall state that the Beneficiary's entire interest in the undistributed Account is disclaimed or shall specify what portion thereof is disclaimed. To be effective, duplicate original executed copies of the disclaimer must be both executed and actually delivered to the Committee after the date of the Participant's death but not later than nine (9) months after the date of the Participant's death. A disclaimer shall be irrevocable when delivered to the Committee. A disclaimer shall be considered to be delivered to the Committee only when actually received by the Committee. The Committee shall be the sole judge of the content, interpretation and validity of a purported disclaimer. Upon the filing of a valid disclaimer, the Beneficiary shall be considered not to have survived the Participant as to the interest disclaimed. A disclaimer by a Beneficiary shall not be considered to be a transfer of an interest in violation of any other provisions under this Plan. No other form of attempted disclaimer shall be recognized by the Committee. 9.5.4. DEFINITIONS. When used herein and, unless the Participant has otherwise specified in the Participant's Beneficiary designation, when used in a Beneficiary designation, "issue" means all persons who are lineal descendants of the person whose issue are referred to, subject to the following: (a) a legally adopted child and the adopted child's lineal descendants always shall be lineal descendants of each adoptive parent (and of each adoptive parent's lineal ancestors); (b) a legally adopted child and the adopted child's lineal descendants never shall be lineal descendants of any former parent whose parental rights were terminated by the adoption (or of that former parent's lineal ancestors); except that if, after a child's parent has died, the child is legally adopted by a stepparent who is the spouse of the child's surviving parent, -16-

the child and the child's lineal descendants shall remain lineal descendants of the deceased parent (and the deceased parent's lineal ancestors); (c) if the person (or a lineal descendant of the person) whose issue are referred to is the parent of a child (or is treated as such under applicable law) but never received the child into that parent's home and never openly held out the child as that parent's child (unless doing so was precluded solely by death), then neither the child nor the child's lineal descendants shall be issue of the person. "Child" means an issue of the first generation; "per stirpes" means in equal shares among living children of the person whose issue are referred to and the issue (taken collectively) of each deceased child of such person, with such issue taking by right of representation of such deceased child; and "survive" and "surviving" mean living after the death of the Participant. 9.5.5. SPECIAL RULES. Unless the Participant has otherwise specified in the Participant's Beneficiary designation, the following rules shall apply: (a) If there is not sufficient evidence that a Beneficiary was living at the time of the death of the Participant, it shall be deemed that the Beneficiary was not living at the time of the death of the Participant. (b) The automatic Beneficiaries specified in Section 9.5.2 and the Beneficiaries designated by the Participant shall become fixed at the time of the Participant's death so that, if a Beneficiary survives the Participant but dies before the receipt of all payments due such Beneficiary hereunder, such remaining payments shall be payable to the representative of such Beneficiary's estate. (c) If the Participant designates as a Beneficiary the person who is the Participant's spouse on the date of the designation, either by name or by relationship, or both, the dissolution, annulment or other legal termination of the marriage between the Participant and such person shall automatically revoke such designation. (The foregoing shall not prevent the Participant from designating a former spouse as a Beneficiary on a form executed by the Participant and received by the Committee after the date of the legal termination of the marriage between the Participant and such former spouse, and during the Participant's lifetime.) (d) Any designation of a nonspouse Beneficiary by name that is accompanied by a description of relationship to the Participant shall be given effect without regard to whether the relationship to the Participant exists either then or at the Participant's death. -17-

(e) Any designation of a Beneficiary only by statement of relationship to the Participant shall be effective only to designate the person or persons standing in such relationship to the Participant at the Participant's death. The Committee shall be the sole judge of the content, interpretation and validity of a purported Beneficiary designation. 9.6. DEATH PRIOR TO FULL DISTRIBUTION. If, at the death of the Participant, any payment to the Participant was due or otherwise pending but not actually paid, the amount of such payment shall be included in the Account which is payable to the Beneficiary (and shall not be paid to the Participant's estate). 9.7. FACILITY OF PAYMENT. In case of minority, incapacity or legal disability of a Participant or Beneficiary entitled to receive any distribution under this Plan, payment shall be made, if the Committee shall be advised of the existence of such condition: (a) to the court-appointed guardian or conservator of such Participant or Beneficiary, or (b) if there is no court-appointed guardian or conservator, to the lawfully authorized representative of the Participant or Beneficiary (and the Committee, in its sole discretion, shall determine whether a person is a lawfully authorized representative for this purpose), or (c) to an institution entrusted with the care or maintenance of the incapacitated or disabled Participant or Beneficiary, provided such institution has satisfied the Committee, in its sole discretion, that the payment will be used for the best interest and assist in the care of such Participant or Beneficiary, and provided further, that no prior claim for said payment has been made by a person described in (a) or (b) above. Any payment made in accordance with the foregoing provisions of this section shall constitute a complete discharge of any liability or obligation of the Employers therefor. 9.8. IN-SERVICE DISTRIBUTIONS. 9.8.1. PRE-SELECTED IN-SERVICE DISTRIBUTIONS. Each Participant has a one-time opportunity, when initially enrolling in the Plan, to elect that distribution be made to such Participant on one or more in-service distribution dates prior to Termination of Employment or Disability or death under the following rules: (a) Through a voice response system (or other written or electronic means) approved by the Committee, the Participant may request a pre-selected in-service distribution. -18-

(b) No such distribution will be made before January 1 of the year that follows the third full Plan Year after the Participant first enrolled; provided, however, for Participants in this Plan prior to January 1, 2001, no distribution shall be made before January 1, 2004. (c) Only one such in-service distribution will be made in any Plan Year. (d) Through a voice response system (or other written or electronic means) approved by the Committee, the Participant may request only once that any pre-selected distribution date be extended. The Participant must file the extension request with the Committee at least twelve (12) months before the scheduled date of distribution. (e) Through a voice response system (or other written or electronic means) approved by the Committee, the Participant may request that any pre-selected distribution date be cancelled (whether or not previously extended). The Participant must file the cancellation request with the Committee at least twelve (12) months before the scheduled date of distribution. (f) The distribution amount shall be determined as of the Valuation Date coincident with or next following the pre-selected distribution date and shall be actually paid as soon as practicable after such determination. (g) If the Participant dies or experiences a Termination of Employment or Disability before the scheduled pre-selected in-service distribution date, no in-service distribution shall be made on such date. 9.8.2. ON DEMAND IN-SERVICE DISTRIBUTIONS. (a) ELECTION. Through a voice response system (or other written or electronic means) approved by the Committee, a Participant may elect to receive all or a portion of such Participant's Account prior to Termination of Employment or Disability for any reason; provided, however, that the requested distribution amount will be reduced by a penalty equal to 10% of the requested amount, and the Participant will receive 90% of the requested amount. The penalty of 10% of the requested amount will be forfeited to the Employers to be used as the Committee determines in its discretion. (b) DISTRIBUTION AMOUNT. The amount of such distribution shall be determined as of the Valuation Date coincident with or next following receipt of the request by the Committee and shall be actually paid to the Participant as soon as practicable after such determination. -19-

(c) SUSPENSION RULE. If a Participant receives such a distribution, the Participant's deferrals under Sections 3 and 4 will cease as soon as administratively practicable following the date such distribution is made. The Participant may not again elect to defer compensation under this Plan until the enrollment period for the Plan Year that begins at least six (6) months after such distribution. 9.8.3. IN-SERVICE DISTRIBUTION FOR FINANCIAL HARDSHIP. (a) ELECTION. A Participant may elect in writing to receive all or part of the Participant's Account prior to Termination of Employment or Disability to alleviate a Financial Hardship. A Beneficiary of a deceased Participant may also request an early distribution for Financial Hardship. (b) FINANCIAL HARDSHIP DEFINED. For purposes of this Plan, "Financial Hardship" means a severe financial hardship to the Participant resulting from a sudden and unexpected illness or accident of the Participant or a dependent (as defined in section 152(a) of the Code), loss of the Participant's property due to casualty, or other similar extraordinary and unforeseeable emergency circumstances arising as a result of events beyond the control of the Participant. If a hardship is or may be relieved either (i) through reimbursement or compensation by insurance or otherwise, (ii) by liquidation of the Participant's assets (to the extent the liquidation of such assets would not itself cause severe financial hardship), or (iii) by cessation of deferrals under this Plan or any 401(k) plan, then the hardship shall not constitute a Financial Hardship for purposes of this Plan. If a Beneficiary of a deceased Participant requests an early distribution for Financial Hardship, then the references in this definition to "Participant" shall be deemed to be references to such Beneficiary. (c) DISTRIBUTION AMOUNT. The amount of such distribution shall be determined as of the Valuation Date next preceding approval of the request by the Committee and shall be actually paid as soon as practicable after such approval. (d) SUSPENSION RULE. If a Participant receives a distribution due to Financial Hardship, the Participant's deferrals under Sections 3 and 4 will cease as soon as administratively practicable following the date such distribution is made. The Participant may not again elect to defer compensation under this Plan until the enrollment period for the Plan Year that begins at least six (6) months after such distribution. 9.9. DISTRIBUTIONS IN CASH. All distributions from this Plan shall be made in cash. -20-

SECTION 10 FUNDING OF PLAN 10.1. UNFUNDED PLAN. The obligation of any Employer to make payments under the Plans constitutes only the unsecured (but legally enforceable) promises of that Employer to make such payments. No Participant shall have any lien, prior claim or other security interest in any property of any Employer. The Employers shall have no obligation to establish or maintain any fund, trust or account (other than a bookkeeping account) for the purpose of funding or paying the benefits promised under the Plans. If such a fund, trust or account is established, the property therein that is allocable to a particular Employer shall remain the sole and exclusive property of that Employer. The Employers shall be obligated to pay the cost of the Plans out of their general assets. All references to accounts, accruals, gains, losses, income, expenses, payments, custodial funds and the like are included merely for the purpose of measuring the obligation of the Employers to Participants in the Plans and shall not be construed to impose on the Employers the obligation to create any separate fund for purposes of the Plans. 10.2. CORPORATE OBLIGATION. Neither any officer of any Employer nor any member of the Committee in any way secures or guarantees the payment of any benefit or amount which may become due and payable hereunder to or with respect to any Participant. Each Participant and other person entitled at any time to payments hereunder shall look solely to the assets of such Participant's Employer for such payments as an unsecured, general creditor. After benefits have been paid to or with respect to a Participant and such payment purports to cover in full the benefit hereunder, such former Participant or other person or persons, as the case may be, shall have no further right or interest in any other Plan assets. No person shall be under any liability or responsibility for failure to effect any of the objectives or purposes of the Plans by reason of the insolvency of any of the Employers. SECTION 11 AMENDMENT AND TERMINATION 11.1. AMENDMENT AND TERMINATION. The Committee may unilaterally amend the Plan Statement prospectively, retroactively or both, at any time and for any reason deemed sufficient by it without notice to any person affected by this Plan and the Board of Directors may terminate this Plan both with regard to persons receiving benefits and persons expecting to receive benefits in the future; provided, however, that: (a) NO REDUCTION OR DELAY. The benefit, if any, payable to or with respect to a Participant, whether or not the Participant has had a Termination of Employment or Disability as of the effective date of such amendment, shall not be, without the written consent of the Participant, diminished or delayed by such amendment. -21-

(b) CASH LUMP SUM PAYMENT. If the Board of Directors terminates the Plan completely, all Accounts under the Plan shall be automatically and immediately distributed in single lump sum payments. 11.2. SPECIAL RULE FOR SECTION 16 OFFICERS. Notwithstanding anything in this Plan Statement to the contrary, the Committee may adopt rules to facilitate compliance with the rules and requirements of the Securities and Exchange Commission, including Section 16 of the Securities and Exchange Act of 1934, as amended, which rules may limit rights under this Plan for Section 16 Officers. 11.3. NO ORAL AMENDMENTS. No modification of the terms of the Plan Statement or termination of this Plan shall be effective unless it is in writing and signed on behalf of the Board of Directors by a person authorized to execute such writing. No oral representation concerning the interpretation or effect of the Plan Statement shall be effective to amend the Plan Statement. 11.4. PLAN BINDING ON SUCCESSORS. UHG shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise of all or substantially all of the business and/or assets of UHG), by agreement, to expressly assume and agree to perform this Plan Statement in the same manner and to the same extent that UHG would be required to perform it if no such succession had taken place. SECTION 12 DETERMINATIONS -- RULES AND REGULATIONS 12.1. DETERMINATIONS. The Committee shall make such determinations as may be required from time to time in the administration of the Plans. The Committee shall have the discretionary authority and responsibility to interpret and construe the Plan Statement and to determine all factual and legal questions under the Plans, including but not limited to the entitlement of Participants and Beneficiaries, and the amounts of their respective interests. Each interested party may act and rely upon all information reported to them hereunder and need not inquire into the accuracy thereof, nor be charged with any notice to the contrary. 12.2. RULES AND REGULATIONS. Any rule not in conflict or at variance with the provisions hereof may be adopted by the Committee. 12.3. METHOD OF EXECUTING INSTRUMENTS. Information to be supplied or written notices to be made or consents to be given by the Committee pursuant to any provision of the Plan Statement may be signed in the name of the Committee by any officer who has been authorized to make such certification or to give such notices or consents. 12.4. CLAIMS PROCEDURE. The claims procedure set forth in this Section 12.4 shall be the exclusive administrative procedure for the disposition of claims for benefits arising under the Plans. -22-

12.4.1. ORIGINAL CLAIM. Any person may, if he or she so desires, file with the Committee a written claim for benefits under the Plans. Within ninety (90) days after the filing of such a claim, the Committee shall notify the claimant in writing whether the claim is upheld or denied in whole or in part or shall furnish the claimant a written notice describing specific special circumstances requiring a specified amount of additional time (but not more than one hundred eighty (180) days from the date the claim was filed) to reach a decision on the claim. If the claim is denied in whole or in part, the Committee shall state in writing: (a) the specific reasons for the denial; (b) the specific references to the pertinent provisions of the Plan Statement on which the denial is based; (c) a description of any additional material or information necessary for the claimant to perfect the claim and an explanation of why such material or information is necessary; and (d) an explanation of the claims review procedure set forth in this section. 12.4.2. REVIEW OF DENIED CLAIM. Within sixty (60) days after receipt of notice that the claim has been denied in whole or in part, the claimant may file with the Compensation and Human Resources Committee of the Board of Directors (the "Comp Committee") a written request for a review and may, in conjunction therewith, submit written issues and comments. Within sixty (60) days after the filing of such a request for review, the Comp Committee shall notify the claimant in writing whether, upon review, the claim was upheld or denied in whole or in part or shall furnish the claimant a written notice describing specific special circumstances requiring a specified amount of additional time (but not more than one hundred twenty (120) days from the date the request for review was filed) to reach a decision on the request for review. If the claimant wishes to seek further review of the Comp Committee's decision upon review, the claimant shall submit the claim (or dispute or complaint) to binding arbitration pursuant to the rules of the American Arbitration Association. This is the only right a complainant has for further consideration. The matter must be submitted to binding arbitration within one (1) year of receipt of notice of the Comp Committee's final decision upon review. The arbitrators shall have no power to award any punitive or exemplary damages or to vary or ignore the provisions of the Plan Statement and shall be bound by controlling law. 12.4.3. GENERAL RULES. (a) No inquiry or question shall be deemed to be a claim or a request for a review of a denied claim unless made in accordance with the claims procedure. The Committee may require that any claim for benefits and any request for a review of a denied claim be filed on forms to be furnished by the Committee upon request. -23-

(b) All decisions on original claims shall be made by the Committee and all decisions on requests for a review of denied claims shall be made by the Comp Committee. (c) The Committee or the Comp Committee may, in their discretion, hold one or more hearings on a claim or a request for a review of a denied claim. (d) A claimant may be represented by a lawyer or other representative (at the claimant's own expense), but the Committee and the Comp Committee reserve the right to require the claimant to furnish written authorization. A claimant's representative shall be entitled, upon request, to copies of all notices given to the claimant. (e) The decision of the Committee on a claim and a decision of the Comp Committee on a request for a review of a denied claim shall be served on the claimant in writing. If a decision or notice is not received by a claimant within the time specified, the claim or request for a review of a denied claim shall be deemed to have been denied. (f) Prior to filing a claim or a request for a review of a denied claim, the claimant or his or her representative shall have a reasonable opportunity to review a copy of the Plan Statement and all other pertinent documents in the possession of the Committee and the Comp Committee. (g) The Committee and the Comp Committee may permanently or temporarily delegate its responsibilities under this claims procedure to an individual or a committee of individuals. 12.5. LIMITATIONS AND EXHAUSTION. 12.5.1. LIMITATIONS. No claim shall be considered under these administrative procedures unless it is filed with the Committee within one (1) year after the claimant knew (or reasonably should have known) of the principal facts on which the claim is based. Every untimely claim shall be denied by the Committee without regard to the merits of the claim. No legal action (whether arising under section 502 or section 510 of ERISA or under any other statute or non-statutory law) may be brought by any claimant on any matter pertaining to the Plans unless the legal action is commenced in the proper forum before the earlier of: (a) two (2) years after the claimant knew (or reasonably should have known) of the principal facts on which the claim is based, or (b) ninety (90) days after the claimant has exhausted these administrative procedures. Knowledge of all facts that a Participant knew (or reasonably should have known) shall be imputed to each claimant who is or claims to be a Beneficiary of the Participant (or otherwise -24-

claims to derive an entitlement by reference to a Participant) for the purpose of applying the one (1) year and two (2) year periods. 12.5.2. EXHAUSTION REQUIRED. The exhaustion of these administrative procedures is mandatory for resolving every claim and dispute arising under the Plans. As to such claims and disputes: (a) no claimant shall be permitted to commence any legal action relating to any such claim or dispute (whether arising under section 502 or section 510 of ERISA or under any other statute or non-statutory law) unless a timely claim has been filed under these administrative procedures and these administrative procedures have been exhausted; and (b) in any such legal action all explicit and implicit determinations by the Committee and the Comp Committee (including, but not limited to, determinations as to whether the claim was timely filed) shall be afforded the maximum deference permitted by law. SECTION 13 PLAN ADMINISTRATION 13.1. OFFICERS. Except as hereinafter provided, functions generally assigned to UHG shall be discharged by its officers or delegated and allocated as provided herein. 13.2. CHIEF EXECUTIVE OFFICER. Except as hereinafter provided, the CEO may delegate or redelegate and allocate and reallocate to one or more persons or to a committee of persons jointly or severally, and whether or not such persons are directors, officers or employees, such functions assigned to UHG generally hereunder as the CEO may from time to time deem advisable. 13.3. BOARD OF DIRECTORS. Notwithstanding the foregoing, the Board of Directors shall have the authority to terminate the Plans and the exclusive authority to determine eligibility of Section 16 Officers to participate in this Plan under Section 2. 13.4. COMMITTEE. The Committee shall: (a) keep a record of all its proceedings and acts and keep all books of account, records and other data as may be necessary for the proper administration of the Plans; notify the Employers of any action taken by the Committee and, when required, notify any other interested person or persons; (b) determine from the records of the Employers the compensation, status and other facts regarding Participants and other employees; -25-

(c) prescribe forms to be used for distributions, notifications, etc., as may be required in the administration of the Plans; (d) set up such rules, applicable to all Participants similarly situated, as are deemed necessary to carry out the terms of this Plan Statement; (e) perform all other acts reasonably necessary for administering the Plans and carrying out the provisions of this Plan Statement and performing the duties imposed on it by the Board of Directors; (f) resolve all questions of administration of the Plans not specifically referred to in this section; (g) in accordance with regulations of the Secretary of Labor, provide adequate notice in writing to any claimant whose claim for benefits under the Plans has been denied, setting forth the specific reasons for such denial, written in a manner calculated to be understood by the claimant; and (h) delegate or redelegate to one or more persons, jointly or severally, and whether or not such persons are members of the Committee or employees of the Employers, such functions assigned to the Committee hereunder as it may from time to time deem advisable. If there shall at any time be three (3) or more members of the Committee serving hereunder who are qualified to perform a particular act, the same may be performed, on behalf of all, by a majority of those qualified, with or without the concurrence of the minority. No person who failed to join or concur in such act shall be held liable for the consequences thereof, except to the extent that liability is imposed under ERISA. 13.5. DELEGATION. The Board of Directors and the members of the Committee shall not be liable for an act or omission of another person with regard to a responsibility that has been allocated to or delegated to such other person pursuant to the terms of the Plan Statement or pursuant to procedures set forth in the Plan Statement. 13.6. CONFLICT OF INTEREST. If any individual to whom authority has been delegated or redelegated hereunder shall also be a Participant in either Plan, such Participant shall have no authority with respect to any matter specially affecting such Participant's individual rights hereunder or the interest of a person superior to him or her in the organization (as distinguished from the rights of all Participants and Beneficiaries or a broad class of Participants and Beneficiaries), all such authority being reserved exclusively to other individuals as the case may be, to the exclusion of such Participant, and such Participant shall act only in such Participant's individual capacity in connection with any such matter. 13.7. ADMINISTRATOR. UHG shall be the administrator for purposes of section 3(16)(A) of ERISA. -26-

13.8. SERVICE OF PROCESS. In the absence of any designation to the contrary by the Committee, the General Counsel of UHG is designated as the appropriate and exclusive agent for the receipt of process directed to the Plans in any legal proceeding, including arbitration, involving the Plans. 13.9. EXPENSES. All expenses of administering this Plan prior to November 1, 2000 shall be borne by the Employers. Effective November 1, 2000, the expenses of administering the Plans shall be payable out of the trust fund established for the Plans except to the extent that the Employers, in their discretion, directly pay the expenses. 13.10. TAX WITHHOLDING. The Employer (or its delegee) shall withhold the amount of any federal, state or local income tax or other tax required to be withheld by the Employer under applicable law with respect to any amount payable under the Plans. 13.11. CERTIFICATIONS. Information to be supplied or written notices to be made or consents to be given by the Committee pursuant to any provision of this Plan Statement may be signed in the name of the Committee by any officer who has been authorized to make such certification or to give such notices or consents. 13.12. ERRORS IN COMPUTATIONS. Neither UHG or the Employer shall be liable or responsible for any error in the computation of the Account or the determination of any benefit payable to or with respect to any Participant resulting from any misstatement of fact made by the Participant or by or on behalf of any survivor to whom such benefit shall be payable, directly or indirectly, to the Employer and used by the Committee in determining the benefit. The Committee shall not be obligated or required to increase the benefit payable to or with respect to such Participant which, on discovery of the misstatement, is found to be understated as a result of such misstatement of the Participant. However, the benefit of any Participant which is overstated by reason of any such misstatement or any other reason shall be reduced to the amount appropriate in view of the truth (and to recover any prior overpayment). SECTION 14 CONSTRUCTION 14.1. APPLICABLE LAWS. 14.1.1. SEPARATE PLANS. For purposes of state taxation of benefits under the Plans, the Plans are two separate plans: (1) the Automatic Restoration Option Plan, and (2) the Incentive Deferral, Salary Deferral, and Limited Bonus Deferral Option Plan. The purpose of the Plans is to provide retirement income to Participants. 14.1.2. ERISA STATUS. The Plans are maintained with the understanding that the Plans are unfunded plans maintained primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees as provided -27-

in section 201(2), section 301(3) and section 401(a)(1) of ERISA. Each provision shall be interpreted and administered accordingly. If any individually contracted supplemental retirement arrangement with any Section 16 Officer is deemed to be covered by ERISA, such arrangement shall be included in the Incentive Deferral Option and Salary Deferral Option Plan but only to the extent that such inclusion is necessary to comply with ERISA. 14.1.3. IRC STATUS. The Plans are intended to be a nonqualified deferred compensation arrangement. The rules of section 401(a) et. seq. of the Code shall not apply to the Plans. The rules of section 3121(v) and section 3306(r)(2) of the Code shall apply to the Plans. 14.1.4. SECURITIES LAWS COMPLIANCE. If any security of UHG is offered as a Measuring Investment under the Plans, then decisions assigned in this Plan Statement to the Committee shall instead by made by the Board of Directors to the extent any such decision could affect the interest of any Section 16 Officer in securities of United, including without limitation any change in Valuation Dates. 14.1.5. REFERENCES TO LAWS. Any reference in the Plan Statement to a statute or regulation shall be considered also to mean and refer to any subsequent amendment or replacement of that statute or regulation. 14.2. EFFECT ON OTHER PLANS. This Plan Statement shall not alter, enlarge or diminish any person's employment rights or obligations or rights or obligations under any other employee pension benefit or employee welfare benefit plan. 14.3. DISQUALIFICATION. Notwithstanding any other provision of the Plan Statement or any election or designation made under the Plans, any potential Beneficiary who feloniously and intentionally kills a Participant shall be deemed for all purposes of the Plans and all elections and designations made under the Plans to have died before such Participant. A final judgment of conviction of felonious and intentional killing is conclusive for this purpose. In the absence of a conviction of felonious and intentional killing, the Committee shall determine whether the killing was felonious and intentional for this purpose. 14.4. RULES OF DOCUMENT CONSTRUCTION. (a) Whenever appropriate, words used herein in the singular may be read in the plural, or words used herein in the plural may be read in the singular; the masculine may include the feminine; and the words "hereof," "herein" or "hereunder" or other similar compounds of the word "here" shall mean and refer to the entire Plan Statement and not to any particular paragraph or Section of the Plan Statement unless the context clearly indicates to the contrary. (b) The titles given to the various Sections of the Plan Statement are inserted for convenience of reference only and are not part of the Plan Statement, and they shall not be considered in determining the purpose, meaning or intent of any provision hereof. -28-

(c) Notwithstanding any thing apparently to the contrary contained in the Plan Statement, the Plan Statement shall be construed and administered to prevent the duplication of benefits provided under the Plans and any other qualified or nonqualified plan maintained in whole or in part by the Employers. 14.5. CHOICE OF LAW. This instrument has been executed and delivered in the State of Minnesota and has been drawn in conformity to the laws of that State and shall, except to the extent that federal law is controlling, be construed and enforced in accordance with the laws of the State of Minnesota. 14.6. NO EMPLOYMENT CONTRACT. This Plan Statement is not and shall not be deemed to constitute a contract of employment between the Employer and any person, nor shall anything herein contained be deemed to give any person any right to be retained in the employ of the Employer or in any way limit or restrict any such Employer's right or power to discharge any person at any time and to treat any person without regard to the effect which such treatment might have upon him or her as a Participant in the Plans. Neither the terms of the Plan Statement nor the benefits under the Plans nor the continuance of the Plans shall be a term of the employment of any employee. The Employer shall not be obliged to continue the Plans. Dated: ____________________, 200__. UNITEDHEALTH GROUP INCORPORATED By:___________________________________ L. Robert Dapper Senior Vice President of Human Capital and Chairman of the Employee Benefits Committee -29-

SCHEDULE I EMPLOYERS PARTICIPATING IN THE UNITEDHEALTH GROUP EXECUTIVE SAVINGS PLANS 1. United HealthCare Services, Inc. 2. United HealthCare of California, Inc. 3. U.S. Behavioral Health Plan, California 4. UHC International Services, Inc. 5. United HealthCare of Illinois, Inc. (prior to January 1, 2001) 6. United Healthcare International, Inc. (formerly known as United HealthCare Global Consulting, Inc.) 7. UnitedHealth Group Finance Company, Inc. (effective as of January 1, 2000) 8. UnitedHealthcare of Minnesota, Inc. (effective as of January 1, 2001) SI-1

SCHEDULE II MEASURING INVESTMENTS A. MEASURING INVESTMENTS AS OF NOVEMBER 10, 2000. The following are the Measuring Investments as of November 10, 2000: 1. One-Choice Conservative -- American Century Strategic Allocation: Conservative Fund 2. One-Choice Moderate -- American Century Strategic Allocation: Moderate Fund 3. One-Choice Aggressive -- American Century Strategic Allocation: Aggressive Fund 4. Bond Index -- Vanguard Total Bond Market Index Fund 5. S & P 500 Index -- First American Index Fund 6. Wilshire 4500 Index -- Vanguard Extended Market Index Fund 7. Money Market -- First American Prime Obligations Fund 8. Stable Value -- Wells Fargo Stable Income Fund 9. Bond -- Loomis Sayles Bond Fund 10. Large-Cap -- Dodge & Cox Stock Fund 11. Large-Cap Growth -- Alliance Premier Growth Fund 12. Mid-Cap Value -- Sound Share Fund 13. Mid-Cap Growth -- Wanburg Pincus Emerging Growth Fund 14. International Value -- Templeton Foreign Fund 15. International Growth -- American Century International Growth Fund 16. Small-Cap Value -- Loomis Sayles Small-Cap Value Fund 17. Small-Cap Growth -- Loomis Sayles Small-Cap Growth Fund 18. Mid-Cap Growth -- PBHG Growth Fund SII-1

B. DEFAULT RULES. If a Participant does not designate which Measuring Investments shall be used to determine the value of the Participant's Account, the value of the Participant's Account will be determined using the following Measuring Investments: (i) ON OR AFTER NOVEMBER 10, 2000. For all amounts credited to the Participant's Account on or after November 10, 2000, the default Measuring Investment shall be the American Century Strategic Allocation Conservative Fund. (ii) PRIOR TO NOVEMBER 10, 2000. For all amounts credited to the Participant's Account prior to November 10, 2000, the default Measuring Investment shall be the First American Prime Obligations Fund. SII-2

Exhibit 10(g) UNITEDHEALTH GROUP DIRECTORS' COMPENSATION DEFERRAL PLAN (2002 STATEMENT)

UNITEDHEALTH GROUP DIRECTORS' COMPENSATION DEFERRAL PLAN (2002 STATEMENT) TABLE OF CONTENTS <Table> <Caption> PAGE ---- <S> <C> SECTION 1. INTRODUCTION AND DEFINITIONS................................................................1 1.1. Establishment of Plan 1.2. Definitions 1.2.1. Account 1.2.2. Annual Valuation Date 1.2.3. Beneficiary 1.2.4. Board Compensation 1.2.5. Board of Directors or Board 1.2.6. Code 1.2.7. Committee 1.2.8. Effective Date 1.2.9. Participant 1.2.10. Plan 1.2.11. Plan Statement 1.2.12. Plan Year 1.2.13. Termination of Directorship 1.2.14. UnitedHealth Group or UHG 1.2.15. Valuation Date SECTION 2. ELIGIBILITY TO PARTICIPATE..................................................................2 SECTION 3. COMPENSATION DEFERRAL OPTION................................................................3 3.1. Option to Defer Board Compensation 3.1.1. Amount of Deferrals 3.1.2. Crediting to Accounts 3.1.3. No Matching Credits 3.2. Discretionary Supplements from UnitedHealth Group 3.3. Credits Limited to Outside Directors SECTION 4. CREDITS FROM MEASURING INVESTMENTS..........................................................4 4.1. Designation of Measuring Investments 4.2. UnitedHealth Group Stock as Measuring Investment </Table> -i-

<Table> <S> <C> 4.3. Operational Rules for Measuring Investments 4.4. Measuring Investments and Rules to be Identical to Executive Savings Plan SECTION 5. OPERATIONAL RULES...........................................................................5 5.1. Operational Rules for Deferrals 5.2. Establishment of Accounts 5.3. Accounting Rules SECTION 6. VESTING OF ACCOUNTS.........................................................................5 SECTION 7. SPENDTHRIFT PROVISION.......................................................................5 SECTION 8. DISTRIBUTIONS...............................................................................6 8.1. Time of Distribution to Participant 8.1.1. General Rule 8.1.2. No Application for Distribution Required 8.2. Form of Distribution 8.3. Election of Form of Distribution by Participant 8.3.1. Election at Initial Enrollment 8.3.2. Default Election of Form of Distribution 8.3.3. Periodic Re-Election 8.4. Payment to Beneficiary Upon Death of Participant 8.4.1. Payment to Beneficiary When Death Occurs Before Termination of Directorship 8.4.2. Payment to Beneficiary When Death Occurs After Termination of Directorship 8.4.3. Beneficiary Must Apply for Distribution 8.4.4. Election of Measuring Investments by Beneficiaries 8.5. Designation of Beneficiaries 8.5.1. Right to Designate 8.5.2. Failure of Designation 8.5.3. Disclaimers by Beneficiaries 8.5.4. Definitions 8.5.5. Special Rules 8.6. Death Prior to Full Distribution 8.7. Facility of Payment 8.8. In-Service Distributions 8.8.1. Pre-Selected In-Service Distributions 8.8.2. On Demand In-Service Distributions 8.8.3. In-Service Distribution for Financial Hardship 8.9. Distributions in Cash </Table> -ii-

<Table> <S> <C> SECTION 9. FUNDING OF PLAN............................................................................15 9.1. Unfunded Plan 9.2. Corporate Obligation SECTION 10. AMENDMENT AND TERMINATION..................................................................15 10.1. Amendment and Termination 10.2. No Oral Amendments 10.3. Plan Binding on Successors SECTION 11. DETERMINATIONS-- RULES AND REGULATIONS.....................................................16 11.1. Determinations 11.2. Rules and Regulations 11.3. Method of Executing Instruments 11.4. Claims Procedure 11.4.1. Original Claim 11.4.2. Review of Denied Claim 11.4.3. General Rules 11.5. Limitations and Exhaustion 11.5.1. Limitations 11.5.2. Exhaustion Required SECTION 12. PLAN ADMINISTRATION........................................................................19 12.1. Officers 12.2. Chief Executive Officer 12.3. Board of Directors 12.4. Committee 12.5. Delegation 12.6. Conflict of Interest 12.7. Service of Process 12.8. Expenses 12.9. Certifications 12.10. Errors in Computations SECTION 13. CONSTRUCTION...............................................................................21 13.1. Applicable Laws 13.1.1. ERISA Status 13.1.2. IRC Status 13.1.3. References to Laws 13.2. Effect on Other Plans 13.3. Disqualification </Table> -iii-

<Table> <S> <C> 13.4. Rules of Document Construction 13.5. Choice of Law SCHEDULE I - MEASURING INVESTMENTS....................................................................SI-1 </Table> -iv-

UNITEDHEALTH GROUP DIRECTORS' COMPENSATION DEFERRAL PLAN (2002 STATEMENT) SECTION 1 INTRODUCTION AND DEFINITIONS 1.1. ESTABLISHMENT OF PLAN. Effective January 1, 2002, UNITEDHEALTH GROUP INCORPORATED, a Minnesota corporation (hereinafter sometimes referred to as "UnitedHealth Group"), as plan sponsor, hereby establishes a nonqualified, unfunded, deferred compensation plan for the benefit of certain members of its Board of Directors. 1.2. DEFINITIONS. When the following terms are used herein with initial capital letters, they shall have the following meanings: 1.2.1. ACCOUNT -- the separate bookkeeping account established for each Participant which represents the separate unfunded and unsecured general obligation of UnitedHealth Group established with respect to each person who is a Participant in this Plan in accordance with Section 2 and to which are credited the dollar amounts specified in Sections 3 and 4 and from which are subtracted payments made pursuant to Section 8. 1.2.2. ANNUAL VALUATION DATE -- each December 31. 1.2.3. BENEFICIARY -- a person designated by a Participant (or automatically by operation of the Plan Statement) to receive all or a part of the Participant's Account in the event of the Participant's death prior to full distribution thereof. A person so designated shall not be considered a Beneficiary until the death of the Participant. 1.2.4. BOARD COMPENSATION -- Board retainer fees, Board meeting fees and Board committee fees but not stock options or other stock-based compensation. The Committee may designate prospectively that other pay is included in Board Compensation. 1.2.5. BOARD OF DIRECTORS or BOARD -- the Board of Directors of UnitedHealth Group or its successor, and any properly authorized committee of the Board of Directors. 1.2.6. CODE -- the Internal Revenue Code of 1986, as amended. 1.2.7. COMMITTEE -- the Compensation and Human Resources Committee of the Board of Directors (also known as the "Compensation Committee"). 1.2.8. EFFECTIVE DATE -- January 1, 2002.

1.2.9. PARTICIPANT -- a member of the Board of Directors of UnitedHealth Group who has elected to defer compensation under Section 3. A director who has become a Participant shall continue to be a Participant in this Plan until the date of the Participant's death or, if earlier, the date when the Participant has received a distribution of the Participant's entire Account. 1.2.10. PLAN -- the nonqualified, unfunded, deferred compensation program maintained by UnitedHealth Group for the benefit of Participants eligible to participate therein, as set forth in this Plan Statement. (As used herein, "Plan" does not refer to the document pursuant to which the Plan is maintained. That document is referred to herein as the "Plan Statement".) The Plan shall be referred to as the "UnitedHealth Group Directors' Compensation Deferral Plan." 1.2.11. PLAN STATEMENT -- this document entitled "UnitedHealth Group Directors' Compensation Deferral Plan (2002 Statement)" as adopted by the Board of Directors and generally effective as of January 1, 2002, as the same may be amended from time to time thereafter. 1.2.12. PLAN YEAR -- the twelve (12) consecutive month period ending on any Annual Valuation Date. 1.2.13. TERMINATION OF DIRECTORSHIP -- a complete severance of a Participant's membership on the Board of Directors of UnitedHealth Group for any reason other than the Participant's death. 1.2.14. UNITEDHEALTH GROUP OR UHG -- UNITEDHEALTH GROUP INCORPORATED, a Minnesota corporation, or any successor thereto. 1.2.15. VALUATION DATE -- any day that the U.S. securities markets are open and conducting business. SECTION 2 ELIGIBILITY TO PARTICIPATE Each member of the Board of Directors of UnitedHealth Group as of the initial adoption of this Plan who is not an employee of UnitedHealth Group or any affiliate shall be eligible to become a Participant in this Plan as of January 1, 2002. Each person who later becomes a member of the Board and is not then an employee of UnitedHealth Group or any affiliate shall be eligible to become a Participant in this Plan as of such member's election to the Board. Each person (a) who is both a member of the Board and an employee of UnitedHealth Group or any affiliate, and (b) who later ceases to be so employed but continues as a member of the Board, shall be eligible to become a Participant in this Plan as of such cessation of employment. -2-

SECTION 3 COMPENSATION DEFERRAL OPTION 3.1. OPTION TO DEFER BOARD COMPENSATION. 3.1.1. AMOUNT OF DEFERRALS. Through a voice response system (or other written or electronic means) approved by the Committee, a Participant may elect to defer between (and including) 1% and 100% of such Participant's Board Compensation for Board services for a Plan Year. The Committee may establish prospectively other percentage limits. To be effective for a Plan Year, the deferral election must be received by the Committee by the December 15 preceding the first day of such Plan Year (or such other date before the first day of such Plan Year as the Committee may designate). For a newly eligible Participant, however, the deferral election must be received by the Committee within 30 days after the first day of such eligibility, and, if so received, deferral shall be effective as of the first day of the month following such receipt with respect to the remainder of the Plan Year. Such deferral election shall be irrevocable for the Plan Year with respect to which it is made, once it has been received by the Committee. 3.1.2. CREDITING TO ACCOUNTS. The Committee shall cause to be credited to the Account of each Participant the amount, if any, of such Participant's voluntary deferrals of Board Compensation under Section 3.1.1. Such amount shall be credited as soon as administratively feasible following the time such Board Compensation would otherwise have been paid to the Participant. 3.1.3. NO MATCHING CREDITS. No matching amounts shall be credited for deferrals of Board Compensation under Section 3.1.1. 3.2. DISCRETIONARY SUPPLEMENTS FROM UNITEDHEALTH GROUP. Upon written notice to one or more Participants and to the Committee, the Board of Directors may (but is not required to) determine that additional amounts shall be credited to the Accounts of such Participants. Such notice shall also specify the date of such crediting. Notwithstanding Section 6, such notice may also establish vesting rules for such amounts, in which case separate Accounts shall be established for such amounts for such Participants. 3.3. CREDITS LIMITED TO OUTSIDE DIRECTORS. No Participant who becomes an employee of UnitedHealth Group or any affiliate shall be eligible to receive credits under this Section 3 while such an employee. -3-

SECTION 4 CREDITS FROM MEASURING INVESTMENTS 4.1. DESIGNATION OF MEASURING INVESTMENTS. Through a voice response system (or other written or electronic means) approved by the Committee, each Participant shall designate the following "Measuring Investments," which shall be used to determine the value of such Participant's Account (until changed as provided herein): (a) One or more Measuring Investments for the current Account balance, and (b) One or more Measuring Investments for amounts that are credited to the Account in the future. The Accounts and such Measuring Investments are specified solely as a device for computing the amount of benefits to be paid by UnitedHealth Group under the Plan, and UnitedHealth Group is not required to purchase such investments. The Measuring Investments as of January 1, 2002 are listed in Schedule I to the Plan Statement. Schedule I to the Plan Statement may be revised and amended by the Committee, in its discretion, from time to time. 4.2. UNITEDHEALTH GROUP STOCK AS MEASURING INVESTMENT. The Board of Directors may (but shall not be required to) determine that the Measuring Investments available for election by Participants will include deemed (but not actual) investment in the common stock of UnitedHealth Group, valued at the closing price of the common stock of UnitedHealth Group as reported on the New York Stock Exchange composite tape on the applicable Valuation Date. 4.3. OPERATIONAL RULES FOR MEASURING INVESTMENTS. The Committee may adopt rules specifying the Measuring Investments, the circumstances under which a particular Measuring Investment may be elected, or shall be automatically utilized, the minimum or maximum amount or percentage of an Account which may be allocated to a Measuring Investment, the procedures for making or changing Measuring Investment elections, the extent (if any) to which Beneficiaries of deceased Participants may make Measuring Investment elections and the effect of a Participant's or Beneficiary's failure to make an effective Measuring Investment election with respect to all or any portion of an Account. 4.4. MEASURING INVESTMENTS AND RULES TO BE IDENTICAL TO EXECUTIVE SAVINGS PLAN. Unless the Committee specifies otherwise, the Measuring Investments and operational rules for this Plan shall be identical to those under the UnitedHealth Group Executive Savings Plan and any change to the Measuring Investments or operational rules under the Executive Savings Plan shall automatically apply to this Plan. -4-

SECTION 5 OPERATIONAL RULES 5.1. OPERATIONAL RULES FOR DEFERRALS. A Participant's election to defer Board Compensation under Section 3 shall be "evergreen" and shall remain in effect until changed by the Participant for a future Plan Year as specified in Section 3.1.1. 5.2. ESTABLISHMENT OF ACCOUNTS. There shall be established for each Participant an unfunded, bookkeeping Account which shall be adjusted each Valuation Date. 5.3. ACCOUNTING RULES. The Committee may adopt (and revise) accounting rules for the Accounts. SECTION 6 VESTING OF ACCOUNTS The Account of each Participant shall be fully (100%) vested and nonforfeitable at all times (except for any special vesting rules that apply to discretionary supplements of UnitedHealth Group under Section 3.2 and any early distribution penalties that may apply under Section 8). SECTION 7 SPENDTHRIFT PROVISION Participants and Beneficiaries shall have no power to transfer any interest in an Account nor shall any Participant or Beneficiary have any power to anticipate, alienate, dispose of, pledge or encumber the same while it is in the possession or control of UnitedHealth Group, nor shall the Committee recognize any assignment thereof, either in whole or in part, nor shall the Account be subject to attachment, garnishment, execution following judgment or other legal process (including without limitation any domestic relations order, whether or not a "qualified domestic relations order" under section 414(p) of the Code) before the Account is distributed to the Participant or Beneficiary. The power to designate Beneficiaries to receive the Account of a Participant in the event of such Participant's death shall not permit or be construed to permit such power or right to be exercised by the Participant so as thereby to anticipate, pledge, mortgage or encumber such Participant's Account or any part thereof. Any attempt by a Participant to so exercise said power in violation of this provision shall be of no force and effect and shall be disregarded by the Committee. -5-

SECTION 8 DISTRIBUTIONS 8.1. TIME OF DISTRIBUTION TO PARTICIPANT. 8.1.1. GENERAL RULE. A Participant's Account shall be distributable upon the Termination of Directorship of the Participant. 8.1.2. NO APPLICATION FOR DISTRIBUTION REQUIRED. A Participant's Account shall be distributed automatically following the Participant's Termination of Directorship. A Participant shall not be required to apply for distribution. 8.2. FORM OF DISTRIBUTION. As determined under the rules of Section 8.3, distribution of the Participant's Account shall be made in one of the following forms: (a) IMMEDIATE LUMP SUM. In the form of a single lump sum. The amount of such distribution shall be determined as of the January 31 immediately following the Plan Year in which occurs the Participant's Termination of Directorship and shall be actually paid to the Participant as soon as practicable after such determination (but not later than the last day of the following February). (b) INSTALLMENTS. In the form of a series of 5 or 10 annual installments, subject to the following rules: (i) GENERAL RULE. The amount of the first installment will be determined as of the January 31 immediately following the Plan Year in which occurs the Participant's Termination of Directorship and the amount of future installments will be determined as of each following January 31. The amount of each installment shall be determined by dividing the Account balance as of the January 31 as of which the installment is being paid by the number of remaining installment payments to be made (including the payment being determined). Such installments shall be actually paid as soon as practicable after each such determination (but not later than the last day of the following February). (ii) IMMEDIATE ACCELERATED PAYMENT. A Participant who has elected the installment option may, after Termination of Directorship, elect through a voice response system (or other written or electronic means) approved by the Committee to receive a cash lump sum payment of the total remaining balance of the Account (but not part thereof) for any reason; provided, however, that the Account balance will be reduced by a penalty of 10%, and the Participant -6-

will receive 90% of the Account balance. The penalty of 10% of the Account balance will be forfeited to UnitedHealth Group to be used as the Committee determines in its discretion. The amount of such distribution will be determined as of the Valuation Date coincident with or next following receipt of the request by the Committee and shall be actually paid to the Participant as soon as practicable after such determination. (c) DELAYED LUMP SUM. In the form of a single lump sum following the tenth (10th) anniversary of the Participant's Termination of Directorship, subject to the following rules: (i) GENERAL RULE. The amount of such distribution shall be determined as of the January 31 immediately following the calendar year in which occurs the tenth (10th) anniversary of the Participant's Termination of Directorship. Actual distribution shall be made as soon as administratively practicable after such January 31. (ii) IMMEDIATE ACCELERATED PAYMENT. A Participant who has elected the delayed lump sum distribution option may, after Termination of Directorship, elect through a voice response system (or other written or electronic means) approved by the Committee to receive a lump sum distribution of the Account before the tenth (10th) anniversary of the Participant's Termination of Directorship; provided, however, that the Account balance will be reduced by a penalty of 10%, and the Participant will receive 90% of the Account balance. The penalty of 10% of the Account balance will be forfeited to UnitedHealth Group to be used as the Committee determines in its discretion. (iii) DELAYED ACCELERATED PAYMENT. A Participant who has elected the delayed lump sum distribution option may, after Termination of Directorship, make a one-time election through a voice response system (or other written or electronic means), approved by the Committee to receive either a lump sum distribution of the Account before the tenth (10th) anniversary of the Participant's Termination of Directorship, or five (5) annual installments, subject to the following rules: (A) Any election to receive a lump sum payment before the tenth (10th) anniversary of the Participant's Termination of Directorship must be received by the Committee no later than the December 31 of the calendar year in which occurs -7-

the eighth (8th) anniversary of the Participant's Termination of Directorship. (B) Any election to receive five (5) annual installments must be received by the Committee no later than the December 31 the calendar year in which occurs the fourth (4th) anniversary of the Participant's Termination of Directorship. (C) Any election to receive either a lump sum distribution of the Participant's Account before the tenth (10th) anniversary of the Participant's Termination of Directorship or five (5) annual installments shall not be effective until twelve (12) months after it is received by the Committee (if the Participant dies before the end of such 12-month period, such election shall not be effective). 8.3. ELECTION OF FORM OF DISTRIBUTION BY PARTICIPANT. 8.3.1. ELECTION AT INITIAL ENROLLMENT. Through a voice response system (or other written or electronic means) approved by the Committee, each Participant shall elect at the time of initial enrollment in the Plan whether distribution shall be made (as described in Section 8.2) in either (i) an immediate lump sum, (ii) 5 or 10 annual installments, or (iii) a delayed lump sum following the tenth (10th) anniversary of the Participant's Termination of Directorship. 8.3.2. DEFAULT ELECTION OF FORM OF DISTRIBUTION. If a Participant fails to elect a form of distribution, such Participant shall be deemed to have elected that distribution be made in an immediate lump sum as described in Section 8.2(a). 8.3.3. PERIODIC RE-ELECTION. Through a voice response system (or other written or electronic means) approved by the Committee, initial and default distribution elections may be changed by the Participant, provided that: (a) no change shall be effective until twelve (12) months after it is received by the Committee (if the Participant dies before the end of such 12-month period, such change shall not be effective), and (b) no change may be filed within twelve (12) months after the initial election (or, if one or more prior changes has been filed, within twelve (12) months after the latest of such changes was filed). No spouse, former spouse, Beneficiary or other person shall have any right to participate in the Participant's decision to revise distribution elections. -8-

8.4. PAYMENT TO BENEFICIARY UPON DEATH OF PARTICIPANT. 8.4.1. PAYMENT TO BENEFICIARY WHEN DEATH OCCURS BEFORE TERMINATION OF DIRECTORSHIP. If a Participant dies before Termination of Directorship, such Participant's Beneficiary will receive payment of the Participant's Account at the same time and in the same form the Participant would have received if the Participant had experienced a Termination of Directorship on the date of death. 8.4.2. PAYMENT TO BENEFICIARY WHEN DEATH OCCURS AFTER TERMINATION OF DIRECTORSHIP. If a Participant dies after a Termination of Directorship, the Participant's Beneficiary shall receive distribution of the Participant's Account at the same time and in the same form the Participant would have received if the Participant had survived. 8.4.3. BENEFICIARY MUST APPLY FOR DISTRIBUTION. Distribution shall not be made to any Beneficiary until such Beneficiary shall have filed a written application for benefits in a form acceptable to the Committee and such application shall have been approved by the Committee. 8.4.4. ELECTION OF MEASURING INVESTMENTS BY BENEFICIARIES. A Beneficiary of a deceased Participant shall generally have the same rights to designate Measuring Investments for the Participant's Account that Participants have under Section 4. The Committee may adopt (and revise) rules to govern designations of Measuring Investments by Beneficiaries. Unless changed by the Committee, the following rules shall apply: (a) The Measuring Investments for the Account of a deceased Participant shall not be changed until the Beneficiary so determines. (b) If a deceased Participant has more than one Beneficiary, the unanimous consent of all Beneficiaries shall be required to change Measuring Investments for such Participant's Account. 8.5. DESIGNATION OF BENEFICIARIES. 8.5.1. RIGHT TO DESIGNATE. Each Participant may designate, upon forms to be furnished by and filed with the Committee (or through other means approved by the Committee), one or more primary Beneficiaries or alternative Beneficiaries to receive all or a specified part of such Participant's Account in the event of such Participant's death. The Participant may change or revoke any such designation from time to time without notice to or consent from any Beneficiary. No such designation, change or revocation shall be effective unless executed by the Participant and received by the Committee during the Participant's lifetime. 8.5.2. FAILURE OF DESIGNATION. If a Participant: (a) fails to designate a Beneficiary, -9-

(a) designates a Beneficiary and thereafter revokes such designation without naming another Beneficiary, or (c) designates one or more Beneficiaries and all such Beneficiaries so designated fail to survive the Participant, such Participant's Account, or the part thereof as to which such Participant's designation fails, as the case may be, shall be payable to the first class of the following classes of automatic Beneficiaries in which a member survives the Participant and (except in the case of surviving issue) in equal shares if there is more than one member in such class surviving the Participant: (i) Participant's surviving spouse; (ii) Participant's surviving issue per stirpes and not per capita; (iii) Participant's surviving parents; (iv) Participant's surviving brothers and sisters; and (v) Representative of Participant's estate. 8.5.3. DISCLAIMERS BY BENEFICIARIES. A Beneficiary entitled to a distribution of all or a portion of a deceased Participant's Account may disclaim an interest therein subject to the following requirements. To be eligible to disclaim, a Beneficiary must be a natural person, must not have received a distribution of all or any portion of the Account at the time such disclaimer is executed and delivered, and must have attained at least age twenty-one (21) years as of the date of the Participant's death. Any disclaimer must be in writing and must be executed personally by the Beneficiary before a notary public. A disclaimer shall state that the Beneficiary's entire interest in the undistributed Account is disclaimed or shall specify what portion thereof is disclaimed. To be effective, duplicate original executed copies of the disclaimer must be both executed and actually delivered to the Committee after the date of the Participant's death but not later than nine (9) months after the date of the Participant's death. A disclaimer shall be irrevocable when delivered to the Committee. A disclaimer shall be considered to be delivered to the Committee only when actually received by the Committee. The Committee shall be the sole judge of the content, interpretation and validity of a purported disclaimer. Upon the filing of a valid disclaimer, the Beneficiary shall be considered not to have survived the Participant as to the interest disclaimed. A disclaimer by a Beneficiary shall not be considered to be a transfer of an interest in violation of any other provisions under this Plan. No other form of attempted disclaimer shall be recognized by the Committee. 8.5.4. DEFINITIONS. When used herein and, unless the Participant has otherwise specified in the Participant's Beneficiary designation, when used in a Beneficiary designation, "issue" means all persons who are lineal descendants of the person whose issue are referred to, subject to the following: (a) a legally adopted child and the adopted child's lineal descendants always shall be lineal descendants of each adoptive parent (and of each adoptive parent's lineal ancestors); -10-

(b) a legally adopted child and the adopted child's lineal descendants never shall be lineal descendants of any former parent whose parental rights were terminated by the adoption (or of that former parent's lineal ancestors); except that if, after a child's parent has died, the child is legally adopted by a stepparent who is the spouse of the child's surviving parent, the child and the child's lineal descendants shall remain lineal descendants of the deceased parent (and the deceased parent's lineal ancestors); (c) if the person (or a lineal descendant of the person) whose issue are referred to is the parent of a child (or is treated as such under applicable law) but never received the child into that parent's home and never openly held out the child as that parent's child (unless doing so was precluded solely by death), then neither the child nor the child's lineal descendants shall be issue of the person. "Child" means an issue of the first generation; "per stirpes" means in equal shares among living children of the person whose issue are referred to and the issue (taken collectively) of each deceased child of such person, with such issue taking by right of representation of such deceased child; and "survive" and "surviving" mean living after the death of the Participant. 8.5.5. SPECIAL RULES. Unless the Participant has otherwise specified in the Participant's Beneficiary designation, the following rules shall apply: (a) If there is not sufficient evidence that a Beneficiary was living at the time of the death of the Participant, it shall be deemed that the Beneficiary was not living at the time of the death of the Participant. (b) The automatic Beneficiaries specified in Section 8.5.2 and the Beneficiaries designated by the Participant shall become fixed at the time of the Participant's death so that, if a Beneficiary survives the Participant but dies before the receipt of all payments due such Beneficiary hereunder, such remaining payments shall be payable to the representative of such Beneficiary's estate. (c) If the Participant designates as a Beneficiary the person who is the Participant's spouse on the date of the designation, either by name or by relationship, or both, the dissolution, annulment or other legal termination of the marriage between the Participant and such person shall automatically revoke such designation. (The foregoing shall not prevent the Participant from designating a former spouse as a Beneficiary on a form executed by the Participant and received by the Committee after the date of the legal termination of the marriage between the Participant and such former spouse, and during the Participant's lifetime.) -11-

(d) Any designation of a nonspouse Beneficiary by name that is accompanied by a description of relationship to the Participant shall be given effect without regard to whether the relationship to the Participant exists either then or at the Participant's death. (e) Any designation of a Beneficiary only by statement of relationship to the Participant shall be effective only to designate the person or persons standing in such relationship to the Participant at the Participant's death. The Committee shall be the sole judge of the content, interpretation and validity of a purported Beneficiary designation. 8.6. DEATH PRIOR TO FULL DISTRIBUTION. If, at the death of the Participant, any payment to the Participant was due or otherwise pending but not actually paid, the amount of such payment shall be included in the Account which is payable to the Beneficiary (and shall not be paid to the Participant's estate). 8.7. FACILITY OF PAYMENT. In case of minority, incapacity or legal disability of a Participant or Beneficiary entitled to receive any distribution under this Plan, payment shall be made, if the Committee shall be advised of the existence of such condition: (a) to the court-appointed guardian or conservator of such Participant or Beneficiary, or (b) if there is no court-appointed guardian or conservator, to the lawfully authorized representative of the Participant or Beneficiary (and the Committee, in its sole discretion, shall determine whether a person is a lawfully authorized representative for this purpose), or (c) to an institution entrusted with the care or maintenance of the incapacitated or disabled Participant or Beneficiary, provided such institution has satisfied the Committee, in its sole discretion, that the payment will be used for the best interest and assist in the care of such Participant or Beneficiary, and provided further, that no prior claim for said payment has been made by a person described in (a) or (b) above. Any payment made in accordance with the foregoing provisions of this section shall constitute a complete discharge of any liability or obligation of UnitedHealth Group therefor. 8.8. IN-SERVICE DISTRIBUTIONS. 8.8.1. PRE-SELECTED IN-SERVICE DISTRIBUTIONS. Each Participant has a one-time opportunity, when initially enrolling in the Plan, to elect that distribution be made to such Participant on one or more in-service distribution dates prior to Termination of Directorship or death under the following rules: -12-

(a) Through a voice response system (or other written or electronic means) approved by the Committee, the Participant may request a pre-selected in-service distribution. (b) No such distribution will be made before January 1 of the year that follows the third full Plan Year after the Participant first enrolled. (c) Only one such in-service distribution will be made in any Plan Year. (d) Through a voice response system (or other written or electronic means) approved by the Committee, the Participant may request only once that any pre-selected distribution date be extended. The Participant must file the extension request with the Committee at least twelve (12) months before the scheduled date of distribution. (e) Through a voice response system (or other written or electronic means) approved by the Committee, the Participant may request that any pre-selected distribution date be cancelled (whether or not previously extended). The Participant must file the cancellation request with the Committee at least twelve (12) months before the scheduled date of distribution. (f) The distribution amount shall be determined as of the Valuation Date coincident with or next following the pre-selected distribution date and shall be actually paid as soon as practicable after such determination. (g) If the Participant dies or experiences a Termination of Directorship before the scheduled pre-selected in-service distribution date, no distribution shall be made on such date. 8.8.2. ON DEMAND IN-SERVICE DISTRIBUTIONS. (a) ELECTION. Through a voice response system (or other written or electronic means) approved by the Committee, a Participant may elect to receive all or a portion of such Participant's Account prior to Termination of Directorship for any reason; provided, however, that the requested distribution amount will be reduced by a penalty equal to 10% of the requested amount, and the Participant will receive 90% of the requested amount. The penalty of 10% of the requested amount will be forfeited to UnitedHealth Group to be used as the Committee determines in its discretion. (b) DISTRIBUTION AMOUNT. The amount of such distribution shall be determined as of the Valuation Date coincident with or next following receipt of the request by the Committee and shall be actually paid to the Participant as soon as practicable after such determination. -13-

(c) SUSPENSION RULE. If a Participant receives such a distribution, the Participant's deferrals under Section 3 will cease as soon as administratively practicable following the date such distribution is made. The Participant may not again elect to defer compensation under this Plan until the enrollment period for the Plan Year that begins at least six (6) months after such distribution. 8.8.3. IN-SERVICE DISTRIBUTION FOR FINANCIAL HARDSHIP. (a) ELECTION. A Participant may elect in writing to receive all or part of the Participant's Account prior to Termination of Directorship to alleviate a Financial Hardship. A Beneficiary of a deceased Participant may also request an early distribution for Financial Hardship. (b) FINANCIAL HARDSHIP DEFINED. For purposes of this Plan, "Financial Hardship" means a severe financial hardship to the Participant resulting from a sudden and unexpected illness or accident of the Participant or a dependent (as defined in section 152(a) of the Code), loss of the Participant's property due to casualty, or other similar extraordinary and unforeseeable emergency circumstances arising as a result of events beyond the control of the Participant. If a hardship is or may be relieved either (i) through reimbursement or compensation by insurance or otherwise, (ii) by liquidation of the Participant's assets (to the extent the liquidation of such assets would not itself cause severe financial hardship), or (iii) by cessation of deferrals under this Plan or any 401(k) plan, then the hardship shall not constitute a Financial Hardship for purposes of this Plan. If a Beneficiary of a deceased Participant requests an early distribution for Financial Hardship, then the references in this definition to "Participant" shall be deemed to be references to such Beneficiary. (c) DISTRIBUTION AMOUNT. The amount of such distribution shall be determined as of the Valuation Date next preceding approval of the request by the Committee and shall be actually paid as soon as practicable after such approval. (d) SUSPENSION RULE. If a Participant receives a distribution due to Financial Hardship, the Participant's deferrals under Section 3 will cease as soon as administratively practicable following the date such distribution is made. The Participant may not again elect to defer compensation under this Plan until the enrollment period for the Plan Year that begins at least six (6) months after such distribution. -14-

8.9. DISTRIBUTIONS IN CASH. All distributions from this Plan shall be made in cash. SECTION 9 FUNDING OF PLAN 9.1. UNFUNDED PLAN. The obligation of UnitedHealth Group to make payments under the Plan constitutes only the unsecured (but legally enforceable) promises of UnitedHealth Group to make such payments. No Participant shall have any lien, prior claim or other security interest in any property of UnitedHealth Group. UnitedHealth Group shall have no obligation to establish or maintain any fund, trust or account (other than a bookkeeping account) for the purpose of funding or paying the benefits promised under the Plan. If such a fund, trust or account is established, the property therein shall remain the sole and exclusive property of UnitedHealth Group. UnitedHealth Group shall be obligated to pay the cost of the Plan out of its general assets. All references to accounts, accruals, gains, losses, income, expenses, payments, custodial funds and the like are included merely for the purpose of measuring the obligation of UnitedHealth Group to Participants in the Plan and shall not be construed to impose on UnitedHealth Group the obligation to create any separate fund for purposes of the Plan. 9.2. CORPORATE OBLIGATION. Neither any officer of UnitedHealth Group nor any member of the Committee in any way secures or guarantees the payment of any benefit or amount which may become due and payable hereunder to or with respect to any Participant. Each Participant and other person entitled at any time to payments hereunder shall look solely to the assets of UnitedHealth Group for such payments as an unsecured, general creditor. After benefits have been paid to or with respect to a Participant and such payment purports to cover in full the benefit hereunder, such former Participant or other person or persons, as the case may be, shall have no further right or interest in any other Plan assets. No person shall be under any liability or responsibility for failure to effect any of the objectives or purposes of this Plan by reason of the insolvency of UnitedHealth Group. SECTION 10 AMENDMENT AND TERMINATION 10.1. AMENDMENT AND TERMINATION. The Committee may unilaterally amend the Plan Statement prospectively, retroactively or both, at any time and for any reason deemed sufficient by it without notice to any person affected by this Plan, and the Board of Directors may terminate this Plan both with regard to persons receiving benefits and persons expecting to receive benefits in the future; provided, however, that: -15-

(a) NO REDUCTION OR DELAY. The benefit, if any, payable to or with respect to a Participant, whether or not the Participant has had a Termination of Directorship as of the effective date of such amendment, shall not be, without the written consent of the Participant, diminished or delayed by such amendment. (b) CASH LUMP SUM PAYMENT. If the Board of Directors terminates the Plan completely, all Accounts under the Plan shall be automatically and immediately distributed in single lump sum payments. 10.2. NO ORAL AMENDMENTS. No oral representation concerning the interpretation or effect of the Plan Statement shall be effective to amend the Plan Statement. No amendment of the Plan Statement shall be effective unless it is in writing and signed on behalf of the Committee by a person authorized to execute such writing. No termination of the Plan shall be effective unless it is in writing and signed on behalf of the Board of Directors by a person authorized to execute such writing. 10.3. PLAN BINDING ON SUCCESSORS. UnitedHealth Group shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise of all or substantially all of the business and/or assets of UnitedHealth Group), by agreement, to expressly assume and agree to perform this Plan Statement in the same manner and to the same extent that UnitedHealth Group would be required to perform it if no such succession had taken place. SECTION 11 DETERMINATIONS -- RULES AND REGULATIONS 11.1. DETERMINATIONS. The Committee shall make such determinations as may be required from time to time in the administration of the Plan. The Committee shall have the discretionary authority and responsibility to interpret and construe the Plan Statement and to determine all factual and legal questions under the Plan, including but not limited to the entitlement of Participants and Beneficiaries, and the amounts of their respective interests. Each interested party may act and rely upon all information reported to them hereunder and need not inquire into the accuracy thereof, nor be charged with any notice to the contrary. 11.2. RULES AND REGULATIONS. Any rule not in conflict or at variance with the provisions hereof may be adopted by the Committee. 11.3. METHOD OF EXECUTING INSTRUMENTS. Information to be supplied or written notices to be made or consents to be given by the Committee pursuant to any provision of the Plan Statement may be signed in the name of the Committee by any officer who has been authorized to make such certification or to give such notices or consents. -16-

11.4. CLAIMS PROCEDURE. The claims procedure set forth in this Section 11.4 shall be the exclusive administrative procedure for the disposition of claims for benefits arising under the Plan. 11.4.1. ORIGINAL CLAIM. Any person may, if he or she so desires, file with the Committee a written claim for benefits under the Plan. Within ninety (90) days after the filing of such a claim, the Committee shall notify the claimant in writing whether the claim is upheld or denied in whole or in part or shall furnish the claimant a written notice describing specific special circumstances requiring a specified amount of additional time (but not more than one hundred eighty (180) days from the date the claim was filed) to reach a decision on the claim. If the claim is denied in whole or in part, the Committee shall state in writing: (a) the specific reasons for the denial; (b) the specific references to the pertinent provisions of the Plan Statement on which the denial is based; (c) a description of any additional material or information necessary for the claimant to perfect the claim and an explanation of why such material or information is necessary; and (d) an explanation of the claims review procedure set forth in this section. 11.4.2. REVIEW OF DENIED CLAIM. Within sixty (60) days after receipt of notice that the claim has been denied in whole or in part, the claimant may file with the Committee a written request for a review and may, in conjunction therewith, submit written issues and comments. Within sixty (60) days after the filing of such a request for review, the Committee shall notify the claimant in writing whether, upon review, the claim was upheld or denied in whole or in part or shall furnish the claimant a written notice describing specific special circumstances requiring a specified amount of additional time (but not more than one hundred twenty (120) days from the date the request for review was filed) to reach a decision on the request for review. If the claimant wishes to seek further review of the Committee's decision upon review, the claimant shall submit the claim (or dispute or complaint) to binding arbitration pursuant to the rules of the American Arbitration Association. This is the only right a complainant has for further consideration. The matter must be submitted to binding arbitration within one (1) year of receipt of notice of the Committee's final decision upon review. The arbitrators shall have no power to award any punitive or exemplary damages or to vary or ignore the provisions of the Plan Statement and shall be bound by controlling law. 11.4.3. GENERAL RULES. (a) No inquiry or question shall be deemed to be a claim or a request for a review of a denied claim unless made in accordance with the claims procedure. The Committee may require that any claim for benefits and any request for a review of a denied claim be filed on forms to be furnished by the Committee upon request. -17-

(b) All decisions on original claims and all decisions on requests for a review of denied claims shall be made by the Committee. (c) The Committee may, in its discretion, hold one or more hearings on a claim or a request for a review of a denied claim. (d) A claimant may be represented by a lawyer or other representative (at the claimant's own expense), but the Committee reserves the right to require the claimant to furnish written authorization. A claimant's representative shall be entitled, upon request, to copies of all notices given to the claimant. (e) The decision of the Committee on a claim and a decision of the Committee on a request for a review of a denied claim shall be served on the claimant in writing. If a decision or notice is not received by a claimant within the time specified, the claim or request for a review of a denied claim shall be deemed to have been denied. (f) Prior to filing a claim or a request for a review of a denied claim, the claimant or his or her representative shall have a reasonable opportunity to review a copy of the Plan Statement and all other pertinent documents in the possession of the Committee. (g) The Committee may permanently or temporarily delegate its responsibilities under this claims procedure to an individual or a committee of individuals. 11.5. LIMITATIONS AND EXHAUSTION. 11.5.1. LIMITATIONS. No claim shall be considered under these administrative procedures unless it is filed with the Committee within one (1) year after the claimant knew (or reasonably should have known) of the principal facts on which the claim is based. Every untimely claim shall be denied by the Committee without regard to the merits of the claim. No legal action (whether arising under any statute or non-statutory law) may be brought by any claimant on any matter pertaining to the Plan unless the legal action is commenced in the proper forum before the earlier of: (a) two (2) years after the claimant knew (or reasonably should have known) of the principal facts on which the claim is based, or (b) ninety (90) days after the claimant has exhausted these administrative procedures. Knowledge of all facts that a Participant knew (or reasonably should have known) shall be imputed to each claimant who is or claims to be a Beneficiary of the Participant (or otherwise -18-

claims to derive an entitlement by reference to a Participant) for the purpose of applying the one (1) year and two (2) year periods. 11.5.2. EXHAUSTION REQUIRED. The exhaustion of these administrative procedures is mandatory for resolving every claim and dispute arising under the Plan. As to such claims and disputes: (a) no claimant shall be permitted to commence any legal action relating to any such claim or dispute (whether arising under any statute or non-statutory law) unless a timely claim has been filed under these administrative procedures and these administrative procedures have been exhausted; and (b) in any such legal action all explicit and implicit determinations by the Committee (including, but not limited to, determinations as to whether the claim was timely filed) shall be afforded the maximum deference permitted by law. SECTION 12 PLAN ADMINISTRATION 12.1. OFFICERS. Except as hereinafter provided, functions generally assigned to UnitedHealth Group shall be discharged by its officers or delegated and allocated as provided herein. 12.2. CHIEF EXECUTIVE OFFICER. Except as hereinafter provided, the Chief Executive Officer of UnitedHealth Group may delegate or redelegate and allocate and reallocate to one or more persons or to a committee of persons jointly or severally, and whether or not such persons are directors, officers or employees, such functions assigned to UnitedHealth Group generally hereunder as he or she may from time to time deem advisable. 12.3. BOARD OF DIRECTORS. Notwithstanding the foregoing, the Board of Directors shall have the sole authority to terminate the Plan. 12.4. COMMITTEE. The Committee shall: (a) keep a record of all its proceedings and acts and keep all books of account, records and other data as may be necessary for the proper administration of the Plan; notify UnitedHealth Group of any action taken by the Committee and, when required, notify any other interested person or persons; -19-

(b) determine from the records of UnitedHealth Group the compensation, status and other facts regarding Participants; (c) prescribe forms to be used for distributions, notifications, etc., as may be required in the administration of the Plan; (d) set up such rules, applicable to all Participants similarly situated, as are deemed necessary to carry out the terms of this Plan Statement; (e) perform all other acts reasonably necessary for administering the Plan and carrying out the provisions of this Plan Statement and performing the duties imposed on it by the Board of Directors; (f) resolve all questions of administration of the Plan not specifically referred to in this section; (g) provide adequate notice in writing to any claimant whose claim for benefits under the Plan has been denied, setting forth the specific reasons for such denial, written in a manner calculated to be understood by the claimant; and (h) delegate or redelegate to one or more persons, jointly or severally, and whether or not such persons are members of the Committee or employees of UnitedHealth Group, such functions assigned to the Committee hereunder as it may from time to time deem advisable. If there shall at any time be three (3) or more members of the Committee serving hereunder who are qualified to perform a particular act, the same may be performed, on behalf of all, by a majority of those qualified, with or without the concurrence of the minority. No person who failed to join or concur in such act shall be held liable for the consequences thereof. 12.5. DELEGATION. The Board of Directors and the members of the Committee shall not be liable for an act or omission of another person with regard to a responsibility that has been allocated to or delegated to such other person pursuant to the terms of the Plan Statement or pursuant to procedures set forth in the Plan Statement. 12.6. CONFLICT OF INTEREST. If any individual to whom authority has been delegated or redelegated hereunder shall also be a Participant in the Plan, such Participant shall have no authority with respect to any matter specially affecting such Participant's individual rights hereunder (as distinguished from the rights of all Participants and Beneficiaries or a broad class of Participants and Beneficiaries), all such authority being reserved exclusively to other individuals as the case may be, to the exclusion of such Participant, and such Participant shall act only in such Participant's individual capacity in connection with any such matter. 12.7. SERVICE OF PROCESS. In the absence of any designation to the contrary by the Committee, the General Counsel of UnitedHealth Group is designated as the appropriate and -20-

exclusive agent for the receipt of process directed to this Plan in any legal proceeding, including arbitration, involving the Plan. 12.8. EXPENSES. The expenses of administering this Plan shall be payable out of the trust fund, if any, established for this Plan except to the extent that UnitedHealth Group, in its discretion, directly pays the expenses. If no such trust fund exists, UnitedHealth Group shall pay such expenses. 12.9. CERTIFICATIONS. Information to be supplied or written notices to be made or consents to be given by the Committee pursuant to any provision of this Plan Statement may be signed in the name of the Committee by any officer who has been authorized to make such certification or to give such notices or consents. 12.10. ERRORS IN COMPUTATIONS. UnitedHealth Group shall not be liable or responsible for any error in the computation of the Account or the determination of any benefit payable to or with respect to any Participant resulting from any misstatement of fact made by the Participant or by or on behalf of any survivor to whom such benefit shall be payable, directly or indirectly, to UnitedHealth Group and used by the Committee in determining the benefit. The Committee shall not be obligated or required to increase the benefit payable to or with respect to such Participant which, on discovery of the misstatement, is found to be understated as a result of such misstatement of the Participant. However, the benefit of any Participant which is overstated by reason of any such misstatement or any other reason shall be reduced to the amount appropriate in view of the truth (and to recover any prior overpayment). SECTION 13 CONSTRUCTION 13.1. APPLICABLE LAWS. 13.1.1. ERISA STATUS. Since no employee of UnitedHealth Group or any affiliate may actively participate in this Plan (see Sections 2 and 3.3), this Plan is not subject to regulation under the Employee Retirement Income Security Act of 1974 ("ERISA"). 13.1.2. IRC STATUS. The Plan is intended to be a nonqualified, unfunded, deferred compensation arrangement. 13.1.3. REFERENCES TO LAWS. Any reference in the Plan Statement to a statute or regulation shall be considered also to mean and refer to any subsequent amendment or replacement of that statute or regulation. -21-

13.2. EFFECT ON OTHER PLANS. This Plan Statement shall not alter, enlarge or diminish any person's rights or obligations under any other benefit plan for members of the Board of Directors. 13.3. DISQUALIFICATION. Notwithstanding any other provision of the Plan Statement or any election or designation made under the Plan, any potential Beneficiary who feloniously and intentionally kills a Participant shall be deemed for all purposes of the Plan and all elections and designations made under the Plan to have died before such Participant. A final judgment of conviction of felonious and intentional killing is conclusive for this purpose. In the absence of a conviction of felonious and intentional killing, the Committee shall determine whether the killing was felonious and intentional for this purpose. 13.4. RULES OF DOCUMENT CONSTRUCTION. (a) Whenever appropriate, words used herein in the singular may be read in the plural, or words used herein in the plural may be read in the singular; the masculine may include the feminine; and the words "hereof," "herein" or "hereunder" or other similar compounds of the word "here" shall mean and refer to the entire Plan Statement and not to any particular paragraph or Section of the Plan Statement unless the context clearly indicates to the contrary. (b) The titles given to the various Sections of the Plan Statement are inserted for convenience of reference only and are not part of the Plan Statement, and they shall not be considered in determining the purpose, meaning or intent of any provision hereof. (c) Notwithstanding any thing apparently to the contrary contained in the Plan Statement, the Plan Statement shall be construed and administered to prevent the duplication of benefits provided under the Plan and any other plan maintained in whole or in part by UnitedHealth Group. 13.5. CHOICE OF LAW. This instrument has been executed and delivered in the State of Minnesota and has been drawn in conformity to the laws of that State and shall be construed and enforced in accordance with the laws of the State of Minnesota. This Plan Statement was approved by the Board of Directors on October 30, 2001. UNITEDHEALTH GROUP INCORPORATED By: ------------------------------------ David J. Lubben, General Counsel and Secretary -22-

SCHEDULE I MEASURING INVESTMENTS A. MEASURING INVESTMENTS AS OF JANUARY 1, 2002. The following are the Measuring Investments as of January 1, 2002: 1. One-Choice Conservative-- American Century Strategic Allocation: Conservative Fund 2. One-Choice Moderate-- American Century Strategic Allocation: Moderate Fund 3. One-Choice Aggressive-- American Century Strategic Allocation: Aggressive Fund 4. Bond Index -- Vanguard Total Bond Market Index Fund 5. S & P 500 Index-- First American Index Fund 6. Wilshire 4500 Index-- Vanguard Extended Market Index Fund 7. Money Market -- First American Prime Obligations Fund 8. Stable Value -- Wells Fargo Stable Income Fund 9. Bond -- Loomis Sayles Bond Fund 10. Large-Cap -- Dodge & Cox Stock Fund 11. Large-Cap Growth -- Alliance Premier Growth Fund 12. Mid-Cap Value -- Sound Share Fund 13. Mid-Cap Growth -- Wanburg Pincus Emerging Growth Fund 14. International Value -- Templeton Foreign Fund 15. International Growth -- American Century International Growth Fund 16. Small-Cap Value -- Loomis Sayles Small-Cap Value Fund 17. Small-Cap Growth -- Loomis Sayles Small-Cap Growth Fund 18. Mid-Cap Growth -- PBHG Growth Fund SI-1

B. DEFAULT RULES. If a Participant does not designate which Measuring Investments shall be used to determine the value of the Participant's Account, the default Measuring Investment shall be the American Century Strategic Allocation Conservative Fund. SI-2

EXHIBIT 10(1) EMPLOYMENT AGREEMENT This Agreement, effective as of October 16, 1998 (the "Effective Date"), is made by and between Robert J. Sheehy ("Executive") and United HealthCare Services, Inc. ("United HealthCare") for the purpose of setting forth the terms and conditions of Executive's employment by United HealthCare, or an affiliate or subsidiary of United HealthCare, and to protect United HealthCare's knowledge, expertise, customer relationships and the confidential information United HealthCare has developed about its customers, products, operations and services. Unless the context otherwise requires, when used in this Agreement "United HealthCare" includes any entity affiliated with United HealthCare. WHEREAS, as additional consideration for entering into this Agreement Executive shall receive, upon execution of this Agreement, a nonqualified stock option to purchase 60,000 shares of United HealthCare Corporation ("UHC") common stock with a grant date the same as the Effective Date pursuant to the terms of the UHC Amended and Restated 1991 Stock and Incentive Plan. WHEREAS, Executive and United HealthCare desire to enter into this Agreement, which shall supersede any and all other prior employment-related agreements between Executive and United HealthCare. NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained and intending to be legally bound hereby, the parties hereto agree as follows: 1. EMPLOYMENT AND DUTIES; TERMINATION OF PRIOR AGREEMENTS. A. EMPLOYMENT. United HealthCare hereby employs Executive, either directly or through an affiliate or subsidiary of United HealthCare, and Executive hereby accepts such employment on the terms and conditions set forth in this Agreement. Except as specifically superseded by this Agreement, Executive's employment hereunder shall be subject to all of United HealthCare's policies and procedures in regard to its employees. Executive's employment hereunder shall begin on the Effective Date and shall continue until terminated as set forth in Section 3 hereof. B. DUTIES. Executive shall initially hold the executive level position of COO, Health Plans and perform the duties associated therewith. Executive shall perform such other executive level responsibilities as are reasonably assigned Executive from time to time. Executive agrees to devote substantially all of Executive's business time and energy to the performance of Executive's duties in a diligent and proper manner. C. TERMINATION OF PRIOR AGREEMENTS. As of the Effective Date all other prior employment related agreements between Executive and United HealthCare will terminate in their entirety and no longer be of any force or effect.

2. COMPENSATION. A. BASE SALARY. Executive shall initially be paid a base annual salary in the amount of $350,000, payable bi-weekly, less all applicable withholdings and deductions (the "Initial Base Salary"). Executive shall receive a periodic performance review and consideration for an increase in the Initial Base Salary. B. BONUS AND STOCK PLANS. Executive shall be eligible to participate in the incentive compensation plans and the stock option and grant plans maintained by United HealthCare or an affiliate or subsidiary of United HealthCare, in the sole discretion of United HealthCare and in accordance with the terms and conditions of those plans and applicable laws and regulations. C. EMPLOYEE BENEFITS. Executive shall be eligible to participate in the employee benefit plans maintained by either United HealthCare or an affiliate or subsidiary of United HealthCare, including without limitation, any life, health, dental, short-term and long-term disability insurance coverages and any retirement plans, in the sole discretion of United HealthCare and in accordance with the terms and conditions of those plans and applicable laws and regulations. D. VACATION; ILLNESS. Executive shall be eligible for paid vacation and sick leave each year in accordance with the then-current policies of either United HealthCare or an affiliate or subsidiary of United HealthCare, in the sole discretion of United HealthCare and in accordance with the terms and conditions of those plans and applicable laws and regulations. 3. TERM AND TERMINATION. A. TERM. The term of this Agreement shall begin on the Effective Date and shall continue until terminated as set forth in Section 3B. B. TERMINATION OF AGREEMENT. 1. BY MUTUAL AGREEMENT. This Agreement and Executive's employment hereunder may be terminated at any time by the mutual written agreement of the parties. 2. BY UNITED HEALTHCARE. United HealthCare may terminate this Agreement and Executive's employment hereunder on 30 days' written notice. 3. BY EXECUTIVE. Executive may terminate this Agreement and Executive's employment hereunder on 30 days' written notice. 4. DEATH, DISABILITY, ETC. This Agreement and Executive's employment by United HealthCare shall terminate immediately upon Executive's death. This Agreement and Executive's employment hereunder shall automatically terminate in the event of a permanent and total disability which renders Executive incapable of -2-

performing Executive's duties, with or without reasonable accommodation. United HealthCare has the sole discretion to determine whether Executive is permanently or totally disabled with the meaning of this Section 3B4, and the effective date on which Executive was rendered so disabled. C. EMPLOYEE BENEFITS. On the effective date of the termination of this Agreement and Executive's employment by United HealthCare, Executive shall cease to be eligible for all employee benefit plans maintained by United HealthCare, except as required by federal or state continuation of coverage laws ("COBRA Benefits"). If Executive elects COBRA Benefits, Executive shall pay the entire cost of such benefits either through after-tax payroll deductions from the cash component of any severance compensation Executive receives or directly if Executive does not receive such severance compensation or if such severance compensation ceases. D. SEVERANCE EVENTS AND BENEFITS. If a Severance Event, as hereinafter defined, occurs, Executive shall receive the severance benefits set forth in this Section 3D for a period of 12 months from the effective date of the applicable Severance Event (the "Severance Period"). For purposes of this Agreement a Severance Event shall occur if and when: (i) United HealthCare (a) terminates this Agreement and Executive's employment without Cause, as hereinafter defined, or (b) terminates this Agreement without terminating Executive's employment and Executive elects to treat such termination of this Agreement as a Change in Employment, as hereinafter defined (collectively a "Termination without Cause"), or (ii) Within two years following a Change in Control, as hereinafter defined, either (a) United HealthCare terminates this Agreement and Executive's employment without Cause, or (b) a Change in Employment occurs and Executive elects to treat such Change in Employment as a termination of Executive's employment (collectively a "Termination following a Change in Control"). 1. SEVERANCE COMPENSATION. Executive shall receive the following severance compensation (the "Severance Compensation"): a) TERMINATION WITHOUT CAUSE. Subject to Section 3D(1)(b) below, upon a Termination without Cause Executive shall receive biweekly payments equal to 1/26 of two times the sum of (1) Executive's annualized base salary as of the date of the Severance Event, less all applicable withholdings or deductions required by law and Executive's COBRA Benefit payments, if any, plus (2) one-half of the total of any bonus or incentive compensation paid or payable to Executive for the two most recent calendar years (excluding any special or one-time bonus or incentive compensation payments), or if Executive has been eligible for such bonus or incentive compensation payments for less than two such periods, the last such payment paid or payable to Executive (excluding any special or one-time bonus or incentive compensation payments). -3-

b) TERMINATION FOLLOWING A CHANGE IN CONTROL. Upon a Termination following a Change in Control, Executive shall receive biweekly payments equal to 1/26 of three times the sum of (1) Executive's highest annualized base salary during the 2 year period immediately preceding the Severance Event, less all applicable withholdings or deductions required by law and Executive's COBRA Benefit payments, if any, plus (2) the greater of (i) all bonuses that would be payable to Executive under any incentive compensation plans in which Executive then participates at Executive's then-current target level, or (ii) one-half of the total of any bonus or incentive compensation paid or payable to Executive for the two most recent calendar years (excluding any special or one-time bonus or incentive compensation payments), or if Executive has been eligible for such bonus or incentive compensation payments for less than two such periods, the last such payment paid or payable to Executive (excluding any special or one-time bonus or incentive compensation payments). 2. CASH PAYMENT. Executive shall receive a one-time cash payment within a reasonable time following commencement of the Severance Period in an amount equal to the portion of the premiums that United HealthCare, or its affiliate or subsidiary, as applicable, subsidizes for employee-only health, dental and group term life benefit coverages (the "Cash Payment"). The Cash Payment shall cover the Severance Period and shall be determined as of the effective date of the applicable Severance Event. 3. JOB SEARCH FEES. For a period not to exceed the Severance Period, United HealthCare shall pay to an outplacement firm selected by United HealthCare an amount deemed reasonable by United HealthCare for outplacement and job search services for Executive. 4. EXCISE TAX PAYMENT. If any portion of the Severance Compensation payable upon a Termination following a Change in Control constitutes an Excess Parachute Payment, as hereinafter defined, such that an Excise Tax, as hereinafter defined, is due, Executive shall receive a one-time cash payment in an amount sufficient to cover (a) the full cost of the Excise Tax plus (b) Executive's federal, state and city income, employment and Excise Tax on this one-time cash payment and on all such iterative payments so that Executive is made entirely whole for the impact of the Excise Tax (collectively the "Gross-Up Payment"). United HealthCare shall calculate these amounts on a timely and accurate basis, and for this purpose Executive shall be deemed to be in the highest marginal rate of federal, state and city taxes. The Gross-Up Payment shall be made within 30 days following the effective date of Executive's employment termination. For purposes of this Agreement the term "Excess Parachute Payment" shall have the meaning set forth in Section 28OG of the Internal Revenue Code of 1986, as amended (the "Code"). For purposes of this Agreement the term "Excise Tax" shall mean the tax imposed on an Excess Parachute Payment pursuant to Sections 28OG and 4999 of the Code. -4-

This Section 3D shall be the sole liability of United HealthCare to Executive upon the termination of this Agreement and Executive's employment hereunder, and shall replace and be in lieu of any payments or benefits which otherwise might be owed Executive under any other severance plan or program maintained by United HealthCare. Such compensation and benefits shall be conditioned on receipt by United HealthCare of a separation agreement and a release of claims by Executive on terms and conditions acceptable to United HealthCare in its sole discretion. E. DEFINITIONS AND PROCEDURES. 1. CAUSE. For purposes of this Agreement "Cause" shall mean (a) the refusal of Executive to follow the reasonable direction of the Board of Directors of United HealthCare or Executive's supervisor or to perform any duties reasonably required on material matters by United HealthCare, (b) material violations of United HealthCare's Code of Conduct or (c) the commission of any criminal act or act of fraud or dishonesty by Executive in connection with Executive's employment by United HealthCare. Prior to the termination of Executive's employment under subsection (a) of this definition of Cause, United HealthCare shall provide Executive with a 30 day notice specifying the basis for Cause. If the Cause described in the notice is cured to United HealthCare's reasonable satisfaction prior to the end of the 30 day notice period, Executive's employment hereunder shall not be terminated on that basis. 2. CHANGE IN CONTROL. For purposes of this Agreement "Change in Control" shall mean (a) the acquisition by any person, entity or "group," within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934 (the 'Exchange Act"), other than United HealthCare or any employee benefit plan of United HealthCare, of beneficial ownership (as defined in the Exchange Act) of 20% or more of the common stock of UHC or the combined voting power of UHC's then-outstanding voting securities in a transaction or series of transactions not approved in advanced by a vote of at least three-quarters of the directors of UHC; (b) a change in 50% or more of the directors of UHC in any 12 month period; (c) the approval by the shareholders of UHC of a reorganization, merger, consolidation, liquidation or dissolution of UHC or of the sale (in one transaction or a series of related transactions) of all or substantially all of the assets of UHC other than a reorganization, merger, consolidation, liquidation, dissolution or sale approved in advance by a vote of at least three-quarters of the directors; (d) the first purchase under any tender offer or exchange offer (other than an offer by UHC) pursuant to which shares of UHC common stock are purchased; or (e) at least a majority of the directors of UHC determine in their sole discretion that there has been a change of control of UHC. 3. CHANGE IN EMPLOYMENT. For purposes of this Agreement a "Change in Employment" shall be deemed to have occurred (a) if (i) Executive's duties are materially and adversely changed without Executive's prior consent, (ii) Executive's salary or benefits are reduced other than as a general reduction of salaries and -5-

benefits by United HealthCare, (iii) without terminating Executive's employment United HealthCare terminates this Agreement, or (iv) the geographic location for the performance of Executive's duties hereunder is moved more than 50 miles from the geographic location at the Effective Date without Executive's prior consent, and (b) if in each case under subsections (a) (i), (ii), (iii) and (iv), in the period beginning 90 days before the time the Change in Employment occurs, Cause does not exist or if Cause does exist United HealthCare has not given Executive written notice that Cause exists. Notwithstanding the foregoing, an isolated, insubstantial or inadvertent action by United HealthCare, which is remedied by United HealthCare within 30 days after receipt of notice thereof by Executive, shall not constitute a Change in Employment. Executive may elect to treat a Change in Employment as a termination of this Agreement and Executive's employment hereunder. To do so Executive shall send written notice of such election to United HealthCare within 90 days after the date Executive receives notice from United HealthCare or otherwise is definitively informed of the events constituting the Change in Employment. No Change in Employment shall be deemed to have occurred if Executive fails to send the notice of election within the 90 day period. Executive's failure to treat a particular Change in Employment as a termination of employment shall not preclude Executive from treating a subsequent Change in Employment as a termination of employment. The effective date of a Change in Employment termination shall be the date 30 days after United HealthCare receives the written notice of election. 4. PROPERTY RIGHTS, CONFIDENTIALITY. NON-DISPARAGEMENT, NON-SOLICIT AND NON-COMPETE PROVISIONS. A. UNITED HEALTHCARE'S PROPERTY. 1. ASSIGNMENT OF PROPERTY RIGHTS. Executive shall promptly disclose to United HealthCare in writing all inventions, discoveries and works of authorship, whether or not patentable or copyrightable, which are conceived, made, discovered, written or created by Executive alone or jointly with another person, group or entity, whether during the normal hours of employment at United HealthCare or on Executive's own time, during the term of this Agreement. Executive assigns, all rights to all such inventions and works of authorship to United HealthCare. Executive shall give United HealthCare any assistance it reasonably requires in order for United HealthCare to perfect, protect, and use its rights to inventions and works of authorship. This provision shall not apply to an invention for which no equipment, supplies, facility or trade secret information of United HealthCare was used and which was developed entirely on the Executive's own time and which (1) does not relate to the business of United HealthCare or to United HealthCare's anticipated research or development, or (2) does not result from any work performed by the Executive for United HealthCare. -6-

2. NO REMOVAL OF PROPERTY. Executive shall not remove any records, documents, or any other tangible items (excluding Executive's personal property) from the premises of United HealthCare in either original or duplicate form, except as is needed in the ordinary course of conducting business for United HealthCare. 3. RETURN OF PROPERTY. Executive shall immediately deliver to United HealthCare, upon termination of employment with United HealthCare, or at any other time upon United HealthCare's request, any property, records, documents, and other tangible items (excluding Executive's personal property) in Executive's possession or control, including data incorporated in word processing, computer and other data storage media, and all copies of such records, documents and information, including all Confidential Information, as defined below. B. CONFIDENTIAL INFORMATION. During the course of employment Executive will develop, become aware of and accumulate expertise, knowledge and information regarding United HealthCare's organization, strategies, business and operations and United HealthCare's past, current or potential customers and suppliers. United HealthCare considers such expertise, knowledge and information to be valuable, confidential and proprietary and it shall be considered Confidential Information for purposes of this Agreement. During this Agreement and at all times thereafter Executive shall not use such Confidential Information or disclose it to other persons or entities except as is necessary for the performance of Executive's duties for United HealthCare or as has been expressly permitted in writing by United HealthCare. This Section 4B shall survive the termination of this Agreement. C. NON-DISPARAGEMENT. Executive agrees that he will not criticize, make any negative comments or otherwise disparage or put in disrepute United HealthCare, or those associated with United HealthCare, in any way, whether orally, in writing or otherwise, directly or by implication in communication with any person, including but not limited to customers or agents of United HealthCare. This Section 4C shall survive the termination of this Agreement. D. NON-SOLICITATION. During (i) the term of this Agreement, (ii) the Severance Period or any period in which Executive receives severance compensation pursuant to United HealthCare' election under Section 4E, as applicable (iii) any period following the termination or expiration of this Agreement during which Executive remains employed by United HealthCare and (iv) for a period of one year after the last day of the latest of any period described in (i), (ii) or (iii), Executive shall not (y) directly or indirectly attempt to hire away any then-current employee of United HealthCare or a subsidiary of United HealthCare or to persuade any such employee to leave employment with United HealthCare, or (z) directly or indirectly solicit, divert, or take away, or attempt to solicit, divert, or take away, the business of any person, partnership, company or corporation with whom United HealthCare (including any subsidiary or affiliated company in which United HealthCare has a more than 20% equity interest) has established or is actively seeking to establish a business or customer relationship. This Section 4D shall survive the termination of this Agreement. -7-

E. NON-COMPETITION. During (i) the term of this Agreement, (ii) the Severance Period or any period in which Executive receives severance compensation pursuant to United HealthCare' election under this Section 4E, as applicable, and (iii) any period following the termination or expiration of this Agreement during which Executive remains employed by United HealthCare, Executive shall not, without United HealthCare's prior written consent, engage or participate, either individually or as an employee, consultant or principal, partner, agent, trustee, officer or director of a corporation, partnership or other business entity, in any business in which United HealthCare (including any subsidiary or affiliated company in which United HealthCare has more than a 20% equity interest) is engaged. If Executive terminates this Agreement, and as of such termination or within 90 days of such termination Executive also terminates Executive's employment by United HealthCare, United HealthCare may elect to have the provisions of this Section 4E be in effect for up to 24 months following the effective date of Executive's employment termination if, during the period up to 24 months specified by United HealthCare, United HealthCare pays Executive severance compensation equal to biweekly payments of 1/26 of the Severance Compensation and the Cash Payment. United HealthCare must send written notice of such election within 10 days after it receives written notice of Executive's termination of employment. This Section 4E shall survive the termination of this Agreement. 5. MISCELLANEOUS. A. ASSIGNMENT. This Agreement shall be binding upon and shall inure to the benefit of the parties and their successors and assigns, but may not be assigned by either party without the prior written consent of the other party, except that United HealthCare in its sole discretion may assign this Agreement to an entity controlled by United HealthCare at the time of the assignment. If United HealthCare subsequently loses or gives up control of the entity to which this Agreement is assigned, such entity shall become United HealthCare for all purposes under this Agreement, beginning on the date on which United HealthCare loses or gives up control of the entity. Any successor to United HealthCare shall be deemed to be United HealthCare for all purposes of this Agreement. B. NOTICES. All notices under this Agreement shall be in writing and shall be deemed to have been duly given if delivered by hand or mailed by registered or certified mail, return receipt requested, postage prepaid, to the party to receive the same at the address set forth below or at such other address as may have been furnished by proper notice. United HealthCare: 300 Opus Center 9900 Bren Road East Minnetonka, MN 55343 Attn: General Counsel Executive: -8-

C. ENTIRE AGREEMENT. This Agreement contains the entire understanding of the parties with respect to its subject matter and may be amended or modified only by a subsequent written amendment executed by the parties. This Agreement replaces and supersedes any and all prior employment or employment related agreements and understandings, including any letters or memos which may have been construed as agreements, between the Executive and United HealthCare. D. CHOICE OF LAW. This Agreement shall be construed and interpreted under the applicable laws and decisions of the State of Minnesota. E. WAIVERS. No failure on the part of either party to exercise, and no delay in exercising, any right or remedy under this Agreement shall operate as a waiver; nor shall any single or partial exercise of any right or remedy preclude any other or further exercise of any right or remedy. F. ADEQUACY OF CONSIDERATION. Executive acknowledges and agrees that Executive has received adequate consideration from United HealthCare to enter into this Agreement. G. DISPUTE RESOLUTION AND REMEDIES. Any dispute arising between the parties relating to this Agreement or to Executive's employment by United HealthCare shall be resolved by binding arbitration pursuant to United HealthCare' Employment Arbitration Policy. The arbitrators shall not ignore or vary the terms of this Agreement and shall be bound by and apply controlling law. The parties acknowledge that Executive's failure to comply with the Confidential Information, Non-Solicitation and Non-Competition provisions of this Agreement will cause immediate and irreparable injury to United HealthCare and that therefore the arbitrators, or a court of competent jurisdiction if an arbitration panel cannot be immediately convened, will be empowered to provide injunctive relief, including temporary or preliminary relief, to restrain any such failure to comply. H. NO THIRD-PARTY BENEFICIARIES. This Agreement shall not confer or be deemed or construed to confer any rights or benefits upon any person other than the parties. THIS AGREEMENT CONTAINS A BINDING ARBITRATION PROVISION THAT MAY BE ENFORCED BY THE PARTIES. IN WITNESS WHEREOF, this Agreement has been signed by the parties hereto as of the Effective Date set forth above. United HealthCare Services, Inc. Executive By /s/ Robert J. Backes /s/ Robert J. Sheehy --------------------------------- ------------------------------ Its Senior Vice President Human Resources --------------------------------- -9-

RESULTS OF OPERATIONS 2001 FINANCIAL PERFORMANCE HIGHLIGHTS 2001 was a very strong year for UnitedHealth Group, as the company continued to advance diversified business growth and productivity improvements. Financial performance highlights include(1): > Record revenues of $23.5 billion, an 11% increase over 2000. > Record operating earnings of $1.6 billion, up 31% over 2000, with each business segment delivering strong advances in year-over-year revenue and operating earnings. > Record net earnings of $913 million and diluted net earnings per common share of $2.79, representing increases over 2000 of 30% and 33%, respectively. > Record operating cash flows of more than $1.8 billion, an increase of 21% over 2000. > Consolidated operating margin of 6.7%, up from 5.7% in 2000, driven by productivity gains, effective care facilitation efforts, and favorable mix shift from risk-based products to higher-margin, fee-based products. > Return on shareholders' equity of 24.5%, up from 19.0% in 2000. (1) Where applicable, 2000 results exclude the effects of separate dispositions of UnitedHealth Capital investments, further described in footnote 1 at the bottom of this page. Following is a five-year summary of selected financial data: <TABLE> <CAPTION> For the Year Ended December 31, (in millions, except per share data) 2001 2000 1999 1998 1997 ----------------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> <C> CONSOLIDATED OPERATING RESULTS Revenues $23,454 $21,122 $19,562 $17,355 $11,794 Earnings (Loss) From Operations $ 1,566 $ 1,200 $ 943 $ (42)(3) $ 742 ----------------------------------------------------------------------------------------------- Net Earnings (Loss) $ 913 $ 736(1) $ 568(2) $ (166) $ 460 Net Earnings (Loss) Applicable to Common Shareholders $ 913 $ 736 $ 568 $ (214)(3) $ 431 ----------------------------------------------------------------------------------------------- Basic Net Earnings (Loss) per Common Share $ 2.92 $ 2.27 $ 1.63 $ (0.56) $ 1.15 Diluted Net Earnings (Loss) per Common Share $ 2.79 $ 2.19(1) $ 1.60(2) $ (0.56)(3) $ 1.13 ----------------------------------------------------------------------------------------------- Common Stock Dividends per Share $ 0.03 $ 0.02 $ 0.02 $ 0.02 $ 0.02 ----------------------------------------------------------------------------------------------- CONSOLIDATED CASH FLOWS FROM OPERATING ACTIVITIES $ 1,844 $ 1,521 $ 1,189 $ 1,071 $ 683 ----------------------------------------------------------------------------------------------- CONSOLIDATED FINANCIAL CONDITION (As of December 31) ----------------------------------------------------------------------------------------------- Cash and Investments $ 5,698 $ 5,053 $ 4,719 $ 4,424 $ 4,041 Total Assets $12,486 $11,053 $10,273 $ 9,675 $ 7,623 Debt $ 1,584 $ 1,209 $ 991 $ 708 (4) $ -- Convertible Preferred Stock $ -- $ -- $ -- $ -- (4) $ 500 Shareholders' Equity $ 3,891 $ 3,688 $ 3,863 $ 4,038 $ 4,534 Return on Shareholders' Equity 24.5% 19.0% 14.1% na (3) 10.4% ----------------------------------------------------------------------------------------------- </TABLE> Results of Operations should be read together with the accompanying Consolidated Financial Statements and Notes. (1) 2000 results include a $14 million net permanent tax benefit related to the contribution of UnitedHealth Capital investments to the UnitedHealth Foundation and a $27 million gain ($17 million after tax) related to a separate disposition of UnitedHealth Capital investments. Excluding these items, Net Earnings and Diluted Net Earnings per Common Share were $705 million and $2.10 per share for the year ended December 31, 2000. (2) 1999 results include a net permanent tax benefit primarily related to the contribution of UnitedHealth Capital investments to the UnitedHealth Foundation. Excluding this benefit, Net Earnings and Diluted Net Earnings per Common Share were $563 million and $1.59 per share. (3) Excluding the operational realignment and other charges of $725 million, $175 million of charges related to contract losses associated with certain Medicare markets and other increases to commercial and Medicare medical costs payable estimates, and the $20 million convertible preferred stock redemption premium from 1998 results, Earnings From Operations and Net Earnings Applicable to Common Shareholders would have been $858 million and $509 million, or $1.31 Diluted Net Earnings per Common Share, and Return on Shareholders' Equity would have been 11.9%. (4) During 1998, we issued debt totaling $708 million and redeemed $500 million of convertible preferred stock. na -- not applicable PAGE 22 UnitedHealth Group

2001 RESULTS COMPARED TO 2000 RESULTS CONSOLIDATED FINANCIAL RESULTS REVENUES Revenues include premium revenue from risk-based (insured) products, fees from management, administrative and consulting services, and investment and other income. Consolidated revenues increased in 2001 to $23.5 billion. Strong and balanced growth across all business segments was partially offset by the impact of planned exits in 2000 from UnitedHealthcare's commercial businesses in the Pacific Coast region, the withdrawal of its Medicare+Choice product offering from targeted counties and the closure of Uniprise's Medicare fiscal intermediary operations. Adjusted for the effects of these business and market exits and excluding revenues from acquired businesses, consolidated revenues increased approximately $3.0 billion, or 15%, over 2000. Following is a discussion of 2001 consolidated revenue trends for each revenue component. PREMIUM REVENUES Consolidated premium revenues in 2001 totaled $20.7 billion, an increase of $1.8 billion, or 9%, compared with 2000. Adjusted for the effect of business and market exits and excluding revenues from acquired businesses, premium revenues increased 13% over 2000. This increase was primarily driven by average net premium yield increases in excess of 13% on UnitedHealthcare's renewing commercial insured business. FEE REVENUES Fee revenues in 2001 totaled $2.5 billion, an increase of $526 million, or 27%, over 2000. The overall increase in fee revenues is primarily the result of record growth of 20% in Uniprise's multi-site, large-employer customer base, growth in UnitedHealthcare's fee-based business, and Ovations' Pharmacy Services business that began operations in June 2001. INVESTMENT AND OTHER INCOME Investment and other income in 2001 totaled $281 million, an increase of $49 million over 2000. Lower interest yields on investments in 2001 compared with 2000 were largely offset by increased levels of cash and fixed-income investments in 2001. Net realized capital gains in 2001 were $11 million, compared to net realized capital losses of $34 million in 2000. MEDICAL COSTS The combination of pricing, benefit designs and comprehensive care facilitation efforts is reflected in the medical care ratio (medical costs as a percentage of premium revenues). The consolidated medical care ratio decreased from 85.4% in 2000 to 85.3% in 2001. Excluding AARP business, the medical care ratio was 83.9% in both 2000 and 2001, as net premium yield increases were generally well matched with increases in medical benefit costs. On an absolute dollar basis, medical costs increased $1.5 billion, or 9%, over 2000. The increase was driven by medical cost inflation, increased consumption patterns, benefit changes and product mix changes. PAGE 23 UnitedHealth Group

OPERATING COSTS Operating costs as a percentage of total revenues (the operating cost ratio) was 17.0% in 2001, compared with 16.7% in 2000. Changes in productivity and revenue mix affect the operating cost ratio. For our fastest-growing businesses (Uniprise, Specialized Care Services, Ingenix and Ovations Pharmacy Services), most direct costs of revenue are included in operating costs, not medical costs. Using a revenue mix comparable to 2000, the 2001 operating cost ratio would have decreased 70 basis points to 16.0%. This decrease was principally driven by productivity gains from process improvements, technology deployment and cost management initiatives, primarily in the areas of claim processing and customer billings and enrollment. Additionally, because our infrastructure can be scaled efficiently, we have been able to grow revenues at a proportionately higher rate than associated expenses. On an absolute dollar basis, operating costs increased by $459 million, or 13%, over 2000. This increase reflects additional costs to support product and technology development initiatives and the 11% increase in consolidated revenues in 2001, partially offset by productivity and technology improvements discussed above. DEPRECIATION AND AMORTIZATION Depreciation and amortization was $265 million in 2001 and $247 million in 2000. This increase resulted primarily from higher levels of capital expenditures to support business growth and technology enhancements, as well as the amortization of goodwill and other intangible assets related to acquisitions. INCOME TAXES The 2000 income tax provision includes nonrecurring tax benefits primarily related to the contribution of UnitedHealth Capital investments to the UnitedHealth Foundation. Excluding nonrecurring tax benefits, our effective income tax rate was 38.0% in 2001 and 37.5% in 2000. BUSINESS SEGMENTS The following summarizes the operating results of our business segments for the years ended December 31 (in millions): <TABLE> <CAPTION> REVENUES Percent 2001 2000 Change ------------------------------------------------------------------------- <S> <C> <C> <C> Health Care Services $ 20,494 $ 18,696 10% Uniprise 2,462 2,140 15% Specialized Care Services 1,254 974 29% Ingenix 447 375 19% Corporate and Eliminations (1,203) (1,063) nm ------------------------------------------------------------------------- Consolidated Revenues $ 23,454 $ 21,122 11% ------------------------------------------------------------------------- </TABLE> <TABLE> <CAPTION> EARNINGS FROM OPERATIONS Percent 2001 2000 Change ------------------------------------------------------------------------- <S> <C> <C> <C> Health Care Services $ 944 $ 739 28% Uniprise 374 289 29% Specialized Care Services 214 174 23% Ingenix 48 32 50% ------------------------------------------------------------------------- Total Operating Segments 1,580 1,234 28% Corporate (14) (34) nm ------------------------------------------------------------------------- Consolidated Earnings from Operations $ 1,566 $ 1,200 31% ------------------------------------------------------------------------- </TABLE> nm -- not meaningful PAGE 24 UnitedHealth Group

Health Care Services The Health Care Services segment consists of the UnitedHealthcare and Ovations businesses. UnitedHealthcare provides health and well-being services on behalf of local employers and consumers nationwide. Ovations offers health and well-being services for Americans age 50 and older. The Health Care Services segment posted record revenues of $20.5 billion in 2001, an increase of $1.8 billion, or 10%, over 2000. This increase resulted from average net premium yield increases in excess of 13% on UnitedHealthcare's renewing commercial insured business, partially offset by the impact of UnitedHealthcare's targeted exits in 2000 from its commercial businesses in the Pacific Coast region and the withdrawal of its Medicare+Choice product offering from certain counties. Adjusted for the effects of these actions and excluding revenues from acquired businesses, Health Care Services' revenues increased by 13% on a year-over-year basis. The Health Care Services segment had earnings from operations of $944 million in 2001, an increase of $205 million, or 28%, over 2000. This increase resulted from revenue growth and stable gross margins on UnitedHealthcare's commercial business and improved operating cost efficiencies from process improvement, technology deployment and cost management initiatives. Health Care Services' operating margin increased to 4.6% in 2001 from 4.0% in 2000, driven by the productivity improvements described above and a positive shift in product mix from risk-based products to higher-margin, fee-based products. UnitedHealthcare's commercial medical care ratio remained flat compared with 2000 at 84.1%, as net premium yield increases were generally well matched with increases in overall medical benefit costs. UnitedHealthcare sets commercial health plan premium rates based on anticipated benefit costs, including the effects of medical cost inflation, consumption patterns, benefit changes, product mix and market conditions. UnitedHealthcare's commercial individuals served increased by 135,000, or 2%, from December 31, 2000 to December 31, 2001, consisting of an increase of 380,000 in the number of individuals served with fee-based products, partially offset by a 245,000 decrease in individuals served by risk-based products. The decrease in individuals served by risk-based products was driven by a combination of customers converting to self-funded, fee-based arrangements and UnitedHealthcare's targeted withdrawal of its risk-based product offerings from unprofitable arrangements with customers using multiple health benefit carriers. The increase in fee-based customers was driven by customers converting from risk-based products and new customer relationships established in 2001. UnitedHealthcare's year-over-year Medicare enrollment decreased 15% because of actions taken to better position this program for long-term success. Effective January 1, 2001, UnitedHealthcare withdrew its Medicare+Choice product from targeted counties affecting 56,000 individuals. Annual revenues in 2000 from the Medicare markets exited as of January 1, 2001, were approximately $320 million. Effective January 1, 2002, UnitedHealthcare withdrew its Medicare+Choice product from targeted counties affecting 57,000 individuals. Annual revenues in 2001 from the Medicare markets exited as of January 1, 2002, were approximately $370 million. These withdrawals are primarily in response to insufficient Medicare program reimbursement rates in specific counties. These actions will further reduce Medicare enrollment, but will preserve profit margins in the long term. UnitedHealthcare will continue to evaluate Medicare markets and, where necessary, take actions that may result in further withdrawals of Medicare product offerings or reductions in membership, when and as permitted by its contracts with the Centers for Medicare and Medicaid Services (CMS), formerly known as the Health Care Financing Administration. PAGE 25 UnitedHealth Group

The following table summarizes individuals served by UnitedHealthcare, by major market segment and funding arrangement, as of December 31 (in thousands): <TABLE> <CAPTION> 2001 2000 -------------------------------------------------------------------------- <S> <C> <C> Commercial Insured (risk-based) 5,250 5,495 Fee-based 2,305 1,925 -------------------------------------------------------------------------- Total Commercial 7,555 7,420 Medicare 345 405 Medicaid 640 550 -------------------------------------------------------------------------- Total UnitedHealthcare 8,540 8,375 -------------------------------------------------------------------------- </TABLE> Uniprise Uniprise provides health and well-being services, business-to-business transaction processing services, consumer connectivity and technology support for large employers and health plans. Uniprise revenues were $2.5 billion in 2001, up $322 million, or 15%, over 2000. This increase was driven primarily by continued growth in Uniprise's large multi-site customer base, which had a 20% increase in the number of individuals served. Uniprise served 8.0 million individuals as of December 31, 2001, and 6.7 million individuals as of December 31, 2000. Uniprise's earnings from operations grew by $85 million, or 29%, over 2000 as a result of the increased revenues. The operating margin improved to 15.2% in 2001 from 13.5% in 2000. As revenues have increased, Uniprise has expanded its operating margin by improving productivity through process improvement initiatives and deployment of technology. Additionally, Uniprise's infrastructure can be scaled efficiently, allowing their business to grow revenues at a proportionately higher rate than associated expenses. Specialized Care Services Specialized Care Services is an expanding portfolio of health and well-being companies, each serving a specialized market need with a unique blend of benefits, networks, services and resources. Specialized Care Services had revenues of $1.3 billion in 2001, an increase of $280 million, or 29%, over 2000. This increase was driven primarily by an increase in the number of individuals served by United Behavioral Health, its mental health benefit business, and an increase in specialized services purchased by customers serviced by Uniprise and UnitedHealthcare. Earnings from operations reached $214 million in 2001, an increase of 23% over 2000. Specialized Care Services' operating margin decreased from 17.9% in 2000 to 17.1% in 2001. The decrease in operating margin is the result of a shifting product mix, with a larger percentage of revenues coming from businesses with higher revenues per individual served and lower percentage operating margins. Ingenix Ingenix is a leader in the field of health care data analysis and application, serving pharmaceutical companies, health insurers and payers, health care providers, large employers and governments. Revenues were $447 million in 2001, an increase of $72 million, or 19%, over 2000. This increase reflects growth in both the health information and pharmaceutical services businesses. Earnings from operations were $48 million, up 50% over 2000. Operating margin increased to 10.7% in 2001 from 8.5% in 2000, principally as a result of revenue growth and improved productivity. Corporate Corporate includes investment income derived from cash and investments not assigned to operating segments, companywide costs for certain core process improvement initiatives, net expenses from charitable contributions to the UnitedHealth Foundation and eliminations of intersegment transactions. The decrease of $20 million in 2001 corporate expenses reflects lower companywide process improvement expenses in 2001 compared to 2000, as certain process improvement initiatives were completed in 2001. PAGE 26 UnitedHealth Group

2000 RESULTS COMPARED TO 1999 RESULTS CONSOLIDATED FINANCIAL RESULTS Revenues Consolidated revenues increased in 2000 to $21.1 billion. Balanced growth across all business segments was partially offset by targeted pullbacks and exits from certain geographic and Medicare markets. Adjusted for the effects of these market transitions, consolidated revenues increased approximately $2.2 billion, or 12%, over 1999. Following is a discussion of 2000 consolidated revenue trends for each revenue component. Premium Revenues Consolidated premium revenues in 2000 totaled $18.9 billion, an increase of $1.4 billion, or 8%, compared with 1999. This increase was driven by two primary factors: premium yield increases on UnitedHealthcare's renewing commercial insured business and growth in the number of individuals served. These increases were partially offset by withdrawals from certain geographic and Medicare markets. Adjusted for the effect of these market withdrawals, premium revenues increased 12% over 1999. Fee Revenues Fee revenues in 2000 totaled $2.0 billion, an increase of $171 million, or 10%, over 1999. This increase resulted from record growth in Uniprise's multi-site customer base, growth in UnitedHealthcare's fee-based business, modest price increases, and acquisitions and growth in the Specialized Care Services and Ingenix businesses. Investment and Other Income Investment and other income in 2000 totaled $232 million, an increase of $13 million over 1999. Higher interest yields on investments in 2000 compared with 1999 were largely offset by $34 million of net realized capital losses in 2000. Net realized capital losses were $6 million in 1999. Medical Costs The consolidated medical care ratio decreased from 85.7% in 1999 to 85.4% in 2000. Excluding AARP business, on a year-over-year basis, the medical care ratio decreased 30 basis points to 83.9%. Year-over-year medical care ratios decreased because commercial net premium yield increases exceeded the increase in total benefit costs. On an absolute dollar basis, medical costs increased $1.1 billion, or 7%, over 1999. The increase was driven by growth in the number of individuals served with insured products, medical cost inflation, increased consumption patterns, benefit changes and product mix changes. Operating Costs The operating cost ratio was 16.7% in 2000, compared with 17.1% in 1999. Using a revenue mix comparable to 1999, the 2000 operating cost ratio would have decreased 80 basis points to 16.3%. This decrease was primarily driven by productivity gains from process improvements, technology deployment and cost management initiatives, and by further leveraging our fixed costs. On an absolute dollar basis, operating costs increased by $177 million, or 5%, over 1999. This increase reflects additional costs to support product and technology development initiatives and the 8% increase in consolidated revenues in 2000, partially offset by productivity and technology improvements discussed above. Depreciation and Amortization Depreciation and amortization was $247 million in 2000 and $233 million in 1999. This increase resulted primarily from higher levels of capital expenditures to support business growth and technology enhancements, as well as amortization of goodwill and other intangible assets related to acquisitions. PAGE 27 UnitedHealth Group

Income Taxes The 2000 income tax provision includes nonrecurring tax benefits primarily related to the contribution of UnitedHealth Capital investments to the UnitedHealth Foundation. Excluding nonrecurring tax benefits, our effective income tax rate was 37.5% in 2000 and 37.0% in 1999. BUSINESS SEGMENTS The following summarizes the operating results of our business segments for the years ended December 31 (in millions): <TABLE> <CAPTION> REVENUES Percent 2000 1999 Change ------------------------------------------------------------------------- <S> <C> <C> <C> Health Care Services $ 18,696 $ 17,581 6% Uniprise 2,140 1,865 15% Specialized Care Services 974 726 34% Ingenix 375 258 45% Corporate and Eliminations (1,063) (868) nm ------------------------------------------------------------------------- Consolidated Revenues $ 21,122 $ 19,562 8% ------------------------------------------------------------------------- </TABLE> <TABLE> <CAPTION> EARNINGS FROM OPERATIONS Percent 2000 1999 Change ------------------------------------------------------------------------- <S> <C> <C> <C> Health Care Services $ 739 $ 578 28% Uniprise 289 222 30% Specialized Care Services 174 128 36% Ingenix 32 25 28% ------------------------------------------------------------------------- Total Operating Segments 1,234 953 29% Corporate (34) (10) nm ------------------------------------------------------------------------- Consolidated Earnings from Operations $ 1,200 $ 943 27% ------------------------------------------------------------------------- </TABLE> nm -- not meaningful HEALTH CARE SERVICES The Health Care Services segment posted revenues of $18.7 billion in 2000, an increase of $1.1 billion, or 6%, over 1999. This increase was primarily due to premium yield increases on UnitedHealthcare's renewing commercial insured business and growth of approximately 7% in the number of individuals served in continuing markets, partially offset by targeted pullbacks in certain geographic and Medicare markets. Adjusted for the effects of these market changes, Health Care Services' revenues increased by 10% on a year-over-year basis. The Health Care Services segment contributed earnings from operations of $739 million in 2000, an increase of $161 million, or 28%, over 1999. This increase was primarily the result of improved margins on UnitedHealthcare's commercial business and lower operating costs as a percentage of revenues, driven by process improvement, technology deployment and cost management initiatives. Health Care Services' operating margin increased to 4.0% in 2000 from 3.3% in 1999. UnitedHealthcare's commercial medical care ratio improved to 84.1% in 2000 from 84.6% in 1999, as net premium yield increases exceeded increases in medical costs. PAGE 28 UnitedHealth Group

The following table summarizes individuals served by UnitedHealthcare, by major market segment and funding arrangement, as of December 31 (in thousands): <TABLE> <CAPTION> 2000 1999 -------------------------------------------------------------------------- <S> <C> <C> Commercial Insured (risk-based) 5,495 5,150 Fee-based 1,925 1,745 -------------------------------------------------------------------------- Total Commercial 7,420 6,895(1) Medicare 405 435 Medicaid 550 480 -------------------------------------------------------------------------- Total UnitedHealthcare 8,375 7,810 -------------------------------------------------------------------------- </TABLE> (1) Excludes individuals served through UnitedHealthcare platforms located in Puerto Rico and Pacific Coast regions. As of December 31, 2000, UnitedHealthcare had substantially transitioned from these markets. Including these markets, commercial individuals served at December 31, 1999, were 5,650 for insured products and 1,885 for fee-based products. UNIPRISE Uniprise had revenues of $2.1 billion in 2000, an increase of $275 million, or 15%, over 1999. This increase was driven primarily by continued growth in Uniprise's large multi-site customer base, which had an 11% increase in individuals served, as well as changes in funding arrangements selected by certain customers and price increases on fee-based business. Uniprise served 6.7 million and 6.0 million individuals as of December 31, 2000 and 1999, respectively. Uniprise's earnings from operations grew by $67 million, or 30%, over 1999 as a result of increased revenues. Operating margin improved to 13.5% in 2000 from 11.9% in 1999. Uniprise has expanded its operating margin by improving productivity through process improvement initiatives, increased deployment of technology and further leveraging of fixed costs. SPECIALIZED CARE SERVICES Specialized Care Services' revenues were $974 million in 2000, an increase of $248 million, or 34%, over 1999. This increase was driven primarily by an increase in the number of individuals served by United Behavioral Health, and the acquisitions of Dental Benefit Providers, Inc. in June 1999 and National Benefit Resources, Inc. in November 1999. Earnings from operations of $174 million increased by 36% compared with 1999, in line with 2000 revenue growth. Specialized Care Services' operating margin improved from 17.6% in 1999 to 17.9% in 2000. INGENIX Ingenix had revenues of $375 million in 2000, an increase of $117 million, or 45%, over 1999. This increase was driven by organic growth of $54 million and acquisitions made in 1999 that expanded the company's clinical research and development, clinical marketing and health information services. Earnings from operations of $32 million increased 28% over 1999. Operating margin decreased to 8.5% in 2000 from 9.7% in 1999, principally as a result of increased goodwill amortization expense associated with acquisitions. CORPORATE The decrease of $24 million in 2000 earnings reflects a decline in the level of unassigned cash and investments and associated investment income, primarily due to share repurchases and incremental process improvement costs in 2000. PAGE 29 UnitedHealth Group

OPERATIONAL REALIGNMENT AND OTHER CHARGES In conjunction with a comprehensive operational realignment initiated in 1998, we developed and approved an implementation plan (the Plan). 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 claim processing and customer service operations and associated real estate obligations. We completed our operational realignment plan in 2001. Actual costs incurred executing the Plan exceeded estimates by approximately $4 million, which has been included in 2001 operating costs in the Consolidated Statements of Operations. These excess costs were incurred in the fourth quarter of 2001. Activities associated with the Plan resulted in the reduction of approximately 5,100 positions, affecting approximately 5,800 people. As of December 31, 2000, we had completed all planned business dispositions and market exits pursuant to the Plan. Accordingly, our 2001 financial statements do not include the operating results of exited businesses or markets. Our Consolidated Statements of Operations include results for businesses disposed of and markets exited in connection with our operational realignment as follows: $312 million in revenues and $9 million in earnings from operations in 2000, and $689 million in revenues and $41 million of losses from operations in 1999. These amounts do not include operating results from the counties where UnitedHealthcare withdrew its Medicare product offerings effective January 1, 2001, and January 1, 2000. Annual revenues for 2000 from the counties exited effective January 1, 2001, were approximately $320 million. Annual revenues for 1999 from the counties exited effective January 1, 2000, were approximately $230 million. The operational realignment and other charges did not cover certain aspects of the Plan, including new information systems, data conversions, process re-engineering, temporary duplicate staffing costs as we consolidated processing and service centers, and employee relocation and training. These costs were expensed as incurred or capitalized, as appropriate. During 2001, 2000 and 1999, we incurred expenses of approximately $20 million, $57 million and $52 million, respectively, related to these activities. FINANCIAL CONDITION AND LIQUIDITY AT DECEMBER 31, 2001 LIQUIDITY We manage our cash, investments and capital structure so we are able to meet the short- and long-term obligations of our business while maintaining financial flexibility and liquidity. We forecast, analyze and monitor our cash flows to enable prudent investment and financing within the overall constraints of our financial strategy, such as our self-imposed limit of 30% on our debt-to-total-capital ratio (calculated as the sum of commercial paper and debt divided by the sum of commercial paper, debt and shareholders' equity). Much of the assets held by our regulated subsidiaries are in the form of cash, cash equivalents and investments. After considering expected cash flows from operating activities, we generally invest monies of regulated subsidiaries that exceed our near-term obligations in longer term marketable debt securities, to improve our overall income return. Factors we consider in making these investment decisions include our board of directors' approved policy, regulatory limitations, return objectives, tax implications, risk tolerance and maturity dates. Even our long-term investments are available for sale to meet liquidity and other needs. Monies in excess of the capital needs of our regulated entities are paid to their non-regulated parent companies, typically in the form of dividends, for general corporate use, when and as permitted by applicable regulations. PAGE 30 UnitedHealth Group

Our non-regulated businesses also generate cash from operations. Additionally, we issue long-term debt and commercial paper with staggered maturity dates and have available credit facilities. These additional sources of liquidity allow us to maintain further operating and financial flexibility. Because of this flexibility, we typically maintain low cash and investment balances in our non-regulated companies. Cash in these entities is generally used to reinvest in our businesses in the form of capital expenditures, to expand the depth and breadth of our services through business acquisitions, and to repurchase shares of our common stock. Cash generated from operating activities, our primary source of liquidity, is principally attributable to net earnings, excluding depreciation and amortization. As such, any future decline in our profitability would likely have a negative impact on our liquidity. The availability of financing, in the form of debt or equity, is influenced by many factors including our profitability, operating cash flows, debt levels, debt ratings, contractual restrictions, regulatory requirements and market conditions. We believe that our strategies and actions toward maintaining financial flexibility mitigate much of this risk. CASH AND INVESTMENTS During 2001, we generated cash from operations of more than $1.8 billion, an increase of $323 million, or 21%, over 2000. The increase in operating cash flows primarily resulted from an increase of $195 million in net income excluding depreciation and amortization expense and working capital improvements of approximately $111 million. We maintained a strong financial condition and liquidity position, with cash and investments of $5.7 billion at December 31, 2001. Total cash and investments increased by $645 million since December 31, 2000, primarily resulting from strong cash flows from operations partially offset by common stock repurchases. As further described under "Regulatory Capital and Dividend Restrictions," many of our subsidiaries are subject to various government regulations that restrict the timing and amount of dividends and other distributions that may be paid to their parent companies. At December 31, 2001, approximately $660 million of our $5.7 billion of cash and investments was held by non-regulated subsidiaries. Of this amount, approximately $260 million was segregated for future regulatory capital needs and $230 million was available for general corporate use, including acquisitions and share repurchases. The remaining $170 million consists primarily of public and non-public equity securities held by UnitedHealth Capital, our investment capital business. FINANCING AND INVESTING ACTIVITIES We use commercial paper and debt to maintain adequate operating and financial flexibility. As of December 31, 2001 and 2000, we had commercial paper and debt outstanding of $1.6 billion and $1.2 billion, respectively. Proceeds from the net increase of $375 million in total commercial paper and debt will be used for general corporate purposes, which may include working capital, business acquisitions, capital expenditures and share repurchases. Our debt-to-total-capital ratio was 28.9% and 24.7% as of December 31, 2001 and 2000, respectively. We expect to maintain our debt-to-total-capital ratio between 25% and 30%. Within this range, we believe our cost of capital and return on shareholders' equity are optimized, while maintaining a prudent level of leverage and liquidity. Commercial paper outstanding at December 31, 2001, totaled $684 million, with interest rates ranging from 1.9% to 2.7%. In November 2001, we issued $100 million of floating-rate notes due November 2003 and $150 million of floating-rate notes due November 2004. The interest rates on the notes are reset quarterly to PAGE 31 UnitedHealth Group

the three-month LIBOR (London Interbank Offered Rate) plus 0.3% for the notes due November 2003 and to the three-month LIBOR plus 0.6% for the notes due November 2004. As of December 31, 2001, the applicable rates on the notes were 2.4% and 2.7%, respectively. A portion of the proceeds from these borrowings was used to repay $150 million of floating-rate notes that matured in November 2001. In January 2002, we issued $400 million of 5.2% fixed-rate notes due January 2007. Proceeds from this borrowing will be used to repay commercial paper and for general corporate purposes, including working capital, capital expenditures, business acquisitions and share repurchases. When we issued these notes, we entered into interest rate swap agreements to convert a portion of our interest rate exposure from a fixed rate to a variable rate. The interest rate swap agreements have an aggregate notional amount of $200 million maturing January 2007. The variable rates approximate the six-month LIBOR and are reset on a semiannual basis. We have credit arrangements for $900 million that support our commercial paper program. These credit arrangements include a $450 million revolving facility that expires in July 2005, and a $450 million, 364-day facility that expires in July 2002. We also have the capacity to issue approximately $200 million of extendible commercial notes (ECNs). As of December 31, 2001 and 2000, we had no amounts outstanding under our credit facilities or ECNs. Our debt arrangements and credit facilities contain various covenants, the most restrictive of which require us to maintain a debt-to-total-capital ratio below 45% and to exceed specified minimum interest coverage levels. We are in compliance with the requirements of all debt covenants. Our senior debt is rated "A" by Standard & Poor's (S&P) and Fitch, and "A3" by Moody's. Our commercial paper and ECN programs are rated "A-1" by S&P, "F-1" by Fitch, and "P-2" by Moody's. Consistent with our intention of maintaining our senior debt ratings in the "A" range, we intend to maintain our debt-to-total-capital ratio at 30% or less. A significant downgrade in our debt and commercial paper ratings could adversely affect our borrowing capacity and costs. The remaining issuing capacity of all securities covered by our shelf registration statement for common stock, preferred stock, debt securities and other securities is $450 million, after giving effect to the $400 million fixed-rate notes issued in January 2002. We may publicly offer such securities from time to time at prices and terms to be determined at the time of offering. Under our board of directors' authorization, we maintain 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 2001, we repurchased 19.6 million shares at an aggregate cost of approximately $1.1 billion. Through December 31, 2001, we had repurchased approximately 112.5 million shares for an aggregate cost of $3.7 billion since the program began in November 1997. As of December 31, 2001, we had board of directors' authorization to purchase up to an additional 8.8 million shares of our common stock. In February 2002, the board of directors authorized us to repurchase up to an additional 30 million shares of common stock under the program. As part of our share repurchase activities, we have entered into agreements with an independent third party to purchase shares of our common stock, where the number of shares we purchase, if any, depends upon market conditions and other contractual terms. As of December 31, 2001, we had conditional agreements to purchase up to 6.1 million shares of our common stock at various times and prices through 2003, at an average price of approximately $58 per share. During 2001 and 2000, we invested $425 million and $245 million, respectively, in property, equipment and capitalized software. These investments were made to support business growth, operational efficiency, service improvements and technology enhancements. PAGE 32 UnitedHealth Group

CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS We have various contractual obligations and commercial commitments to make future payments including debt agreements, lease obligations, stock repurchase contracts and data center service agreements. The following table summarizes our future obligations under these contracts due by period as of December 31, 2001 (in millions): <TABLE> <CAPTION> 2002 2003 to 2004 2005 to 2006 Thereafter Total ------------------------------------------------------------------------------------------ <S> <C> <C> <C> <C> <C> Debt and Commercial Paper(1) $ 684 $ 500 $400 $ -- $1,584 Operating Leases 99 167 128 224 618 Data Center Service Agreements 206 443 263 -- 912 Stock Repurchase Contracts(2) 217 138 -- -- 355 ------------------------------------------------------------------------------------------ Total Contractual Obligations $1,206 $1,248 $791 $224 $3,469 ------------------------------------------------------------------------------------------ </TABLE> (1) Debt payments could be accelerated upon violation of debt covenants. We believe the likelihood of a debt covenant violation is remote. (2) Reflects maximum potential purchases under stock repurchase contracts. In the event of certain termination events, including a default on our debt or credit agreements or a downgrade of our debt ratings below investment grade, we could be required to immediately settle our remaining obligations under the contracts. We may elect to settle the contracts by issuing common stock in lieu of cash. We believe the likelihood of a debt covenant violation or a downgrade of our debt rating below investment grade is remote. 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. AARP In January 1998, we began providing services under a 10-year contract to provide insurance products and services to members of AARP. Under the terms of the contract, we are compensated for claim 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. Premium revenues from our portion of the AARP insurance offerings were approximately $3.5 billion during 2001, 2000 and 1999. The underwriting gains or losses related to the AARP business are recorded as an increase or decrease to a rate stabilization fund (RSF), which is reported in Other Policy Liabilities in the accompanying Consolidated Balance Sheets. The company is at risk for underwriting losses to the extent cumulative net losses exceed the balance in the RSF. We may recover RSF deficits, if any, from gains in future contract periods. We believe the RSF balance is sufficient to cover potential future underwriting or other risks associated with the contract. The effects of changes in balance sheet amounts associated with the AARP program accrue to AARP policyholders through the RSF balance. Accordingly, we do not include the effect of such changes in our Consolidated Statements of Cash Flows. PAGE 33 UnitedHealth Group

REGULATORY CAPITAL AND DIVIDEND RESTRICTIONS We conduct our operations through our wholly-owned subsidiaries. These companies are subject to standards established by the National Association of Insurance Commissioners (NAIC) that, among other things, require them to maintain specified levels of statutory capital, as defined by each state, and restrict the timing and amount of dividends and other distributions that may be paid to their parent companies. Generally, the amount of dividend distributions that may be paid by a regulated subsidiary, without prior approval by state regulatory authorities, is limited based on the entity's level of statutory net income and statutory capital and surplus. The agencies that assess our creditworthiness also consider capital adequacy levels when establishing our debt ratings. Consistent with our intention of maintaining our senior debt ratings in the "A" range, we maintain an aggregate statutory capital and surplus level for our regulated subsidiaries that is significantly higher than the level regulators require. As of December 31, 2001, our regulated subsidiaries had aggregate statutory capital and surplus of approximately $2.0 billion, more than $1.1 billion above the $850 million of required aggregate capital and surplus. CRITICAL ACCOUNTING POLICIES AND ESTIMATES Critical accounting policies are those policies that require the application of management's most challenging, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods. Critical accounting policies involve judgments and uncertainties that are sufficiently sensitive to result in materially different results under different assumptions and conditions. We believe that our most critical accounting policies are those described below. For a detailed discussion of these and other accounting policies, see Note 2 to the Consolidated Financial Statements. MEDICAL COSTS A substantial portion of our medical costs payable balance is based on estimates. This balance includes estimates for the costs of health care services people have received, but for which claims have not yet been submitted, and estimates for the costs of claims we have received but have not yet processed. We develop medical costs payable estimates using actuarial methods based upon historical claim submission and payment data, cost trends, customer and product mix, seasonality, utilization of health care services, contracted service rates and other relevant factors. The estimates may change as actuarial methods change or as underlying facts upon which estimates are based change. We did not change actuarial methods during 2001, 2000 and 1999. Management believes the amount of medical costs payable is adequate to cover the company's liability for unpaid claims as of December 31, 2001; however, actual claim payments may differ from established estimates. Assuming a hypothetical 1% difference between our December 31, 2001 estimates of medical costs payable and actual costs payable, 2001 earnings from operations would increase or decrease by approximately $20 million and basic and diluted net earnings per common share would increase or decrease by approximately $0.04 per share. Adjustments to medical costs payable estimates are reflected in operating results in the period in which the change in estimate is identified. PAGE 34 UnitedHealth Group

REVENUES Our revenue is principally derived from health care insurance premiums. Premium revenues are recognized in the period enrolled members are entitled to receive health care services. Customers are typically billed monthly at a contracted rate per enrolled member multiplied by the number of members eligible to receive services, as recorded in our records. Because employer groups generally provide us with changes to their eligible member population one month in arrears, each billing includes an adjustment for prior month changes in member status that were not reflected in our billing. We estimate the amount of future adjustments and adjust the current period's revenues and accounts receivable accordingly. Our estimates are based on historical trends, premiums billed, the level of contract renewal activity, and other relevant information. We also estimate the amount of uncollectible receivables each period and record valuation allowances based on historical collection rates, the age of unpaid amounts, and information about the creditworthiness of the customers. Estimates of revenue adjustments and uncollectible accounts receivable are revised each period, and changes are recorded in the period they become known. INVESTMENTS As of December 31, 2001, we had approximately $4.2 billion of investments, primarily held in marketable debt securities. Our investments are principally classified as available for sale and are recorded at their fair values as of the date reported. Unrealized investment gains and losses are excluded from earnings and reported as a separate component in shareholders' equity. We continually monitor the difference between the cost and fair value of our investments. If any of our investments experience a decline in fair value that we believe is other than temporary, we record a realized loss in our Consolidated Statements of Operations. Management judgment is involved in evaluating whether a decline in an investment's fair value is other than temporary. The discovery of new information and the passage of time can change these judgments. Revisions of impairment judgments are made when new information becomes known, and any resulting impairment adjustments are made at that time. We manage our investment portfolio to limit our exposure to any one issuer or industry, and largely limit our investments to U.S. Government and Agency securities, state and municipal securities, and corporate debt obligations that are investment grade. LONG-LIVED ASSETS As of December 31, 2001 and 2000, we had long-lived assets, including goodwill, other intangible assets, and property, equipment and capitalized software of $3.7 billion and $3.2 billion, respectively. We review these assets for events and changes in circumstances that would indicate we might not recover their carrying value. In assessing the recoverability of our long-lived assets, we must make assumptions regarding estimated future cash flows and other factors to determine the fair value of the respective assets. If these estimates or their related assumptions change in the future, we may be required to record impairment charges for these assets. CONTINGENT LIABILITIES Because of the nature of our businesses, we are routinely involved in various disputes, legal proceedings and governmental audits and investigations. We record liabilities for our estimate of probable costs resulting from these matters. Our estimates are developed in consultation with outside legal counsel and are based upon an analysis of potential results, assuming a combination of litigation and settlement strategies and considering our insurance coverages for such matters. We do not believe any matters currently threatened or pending will have a material adverse effect on our consolidated financial position. It is possible, however, that future results of operations for any particular quarterly or annual period could be materially affected by changes in our assumptions or the effectiveness of our strategies related to these proceedings. PAGE 35 UnitedHealth Group

INFLATION The national health care cost inflation rate significantly exceeds the general inflation rate. We use various strategies to lessen the effects of health care cost inflation. This includes setting commercial premiums based on anticipated health care costs and coordinating care with physicians and other health care providers. Through contracts with physicians and other health care providers, our health plans emphasize preventive health care, appropriate use of specialty and hospital services, education and closing gaps in care. We believe our strategies to mitigate the impact of health care cost inflation on our operating results have been and will continue to be successful. However, other factors including competitive pressures, new health care and pharmaceutical product introductions, demands from physicians and other health care providers and consumers, and applicable regulations may affect our ability to control the impact of health care cost inflation. Changes in medical cost trends that were not anticipated in establishing premium rates, because of the narrow operating margins of our insurance products, can create significant changes in our financial results. LEGAL MATTERS Because of the nature of our businesses, we are routinely party to a variety of legal actions related to the design, management and offerings of our services. These matters include: claims relating to health care benefits coverage; medical malpractice actions; allegations of anti-competitive and unfair business activities; disputes over compensation and termination of contracts including those with physicians and other health care providers; disputes related to our administrative services, including actions alleging claim administration errors and failure to disclose rate discounts and other fee and rebate arrangements; disputes over benefit copayment calculations; claims related to disclosure of certain business practices; and claims relating to customer audits and contract performance. In 1999, a number of class action lawsuits were filed against us and virtually all major entities in the health benefits business. The suits are purported class actions on behalf of certain customers and physicians for alleged breaches of federal statutes, including the Employee Retirement Income Security Act of 1974, as amended (ERISA), and the Racketeer Influenced Corrupt Organization Act (RICO). Although the results of pending litigation are always uncertain, we do not believe the results of any such actions, including those described above, currently threatened or pending will, individually or in aggregate, have a material adverse effect on our results of operations or financial position. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Market risk represents the risk of changes in value of a financial instrument caused by changes in interest rates and equity prices. Approximately $5.5 billion of our cash and investments at December 31, 2001, 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 or decrease in interest rates applicable to our fixed income portfolio at December 31, 2001, the fair value of our fixed income investments would decrease or increase by approximately $160 million. At December 31, 2001, we had approximately $170 million of equity investments in various public and non-public companies concentrated in the areas of health care delivery and related information technologies. Market conditions that affect the value of health care or technology stocks will likewise impact the value of our equity portfolio. PAGE 36 UnitedHealth Group

CONCENTRATIONS OF CREDIT RISK Investments in financial instruments such as marketable securities and accounts receivable may subject UnitedHealth Group to concentrations of credit risk. Our investments in marketable securities are managed under an investment policy authorized by our board of directors. This policy limits the amounts that may be invested in any one issuer and generally limits our investments to U.S. Government, Agency and municipal securities and corporate debt obligations that are investment grade. Concentrations of credit risk with respect to accounts receivable are limited to the large number of employer groups that constitute our customer base. As of December 31, 2001, there were no significant concentrations of credit risk. CAUTIONARY STATEMENT REGARDING "FORWARD-LOOKING" STATEMENTS The statements contained in Results of Operations and other sections of this annual report to shareholders, include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 (PSLRA). When used in this report, the words or phrases "believes," "anticipates," "intends," "will likely result," "estimates," "projects" or similar expressions are intended to identify such forward-looking statements. Any of these forward-looking statements involve risks and uncertainties that may cause the company's actual results to differ materially from the results discussed in the forward-looking statements. Statements that are not strictly historical are "forward-looking" and unknown risks may cause actual results and corporate developments to differ materially from those expected. Except to the extent otherwise required by federal securities laws, in making these statements we are not undertaking to address or update each statement in future filings or communications regarding our business or results, and are not undertaking to address how any of these factors may have caused results to differ from discussions or information contained in previous filings or communications. In addition, any of the matters discussed in this annual report may have affected our past, as well as current, forward-looking statements about future results. Any or all forward-looking statements in this report and in any other public statements we make may turn out to be inaccurate or false. They can be affected by inaccurate assumptions we might make or by known or unknown risks and uncertainties. Many factors discussed below will be important in determining future results. Consequently, no forward-looking statement can be guaranteed. Actual future results may vary materially from those expressed in our prior communications. Factors that could cause results and developments to differ materially from expectations include, without limitation, (a) increases in medical costs that are higher than we anticipated in establishing our premium rates, including increased use of or costs of medical services; (b) increases in costs associated with increased litigation, legislative activity and government regulation and review of our industry, including costs associated with compliance with proposed legislation related to the Patients' Bill of Rights, e-commerce activities and consumer privacy issues; (c) heightened competition as a result of new entrants into our market, mergers and acquisitions of health care companies and suppliers, and expansion of physician or practice management companies; (d) events that may negatively affect our contract with AARP, including any failure on our part to service AARP customers in an effective manner and any adverse events that directly affect AARP or its business partners; (e) medical cost increases or benefit changes associated with our remaining Medicare+Choice operations; (f) significant deterioration in customer retention; and (g) significant deterioration in economic conditions, including the effects of acts of terrorism, particularly bioterrorism. A further list and description of these risks, uncertainties and other matters can be found in the company's annual report on Form 10-K for the year ended December 31, 2001, and in its periodic reports on Forms 10-Q and 8-K (if any). PAGE 37 UnitedHealth Group

CONSOLIDATED STATEMENTS OF OPERATIONS <TABLE> <CAPTION> For the Year Ended December 31, (in millions, except per share data) 2001 2000 1999 -------------------------------------------------------------------------------------------- <S> <C> <C> <C> REVENUES Premiums $ 20,683 $ 18,926 $ 17,550 Fees 2,490 1,964 1,793 Investment and Other Income 281 232 219 -------------------------------------------------------------------------------------------- Total Revenues 23,454 21,122 19,562 -------------------------------------------------------------------------------------------- MEDICAL AND OPERATING COSTS Medical Costs 17,644 16,155 15,043 Operating Costs 3,979 3,520 3,343 Depreciation and Amortization 265 247 233 -------------------------------------------------------------------------------------------- Total Medical and Operating Costs 21,888 19,922 18,619 -------------------------------------------------------------------------------------------- EARNINGS FROM OPERATIONS 1,566 1,200 943 Gain on Disposition of UnitedHealth Capital Investments -- 27 -- Interest Expense (94) (72) (49) -------------------------------------------------------------------------------------------- EARNINGS BEFORE INCOME TAXES 1,472 1,155 894 Provision for Income Taxes (559) (419) (326) -------------------------------------------------------------------------------------------- NET EARNINGS $ 913 $ 736 $ 568 -------------------------------------------------------------------------------------------- BASIC NET EARNINGS PER COMMON SHARE $ 2.92 $ 2.27 $ 1.63 -------------------------------------------------------------------------------------------- DILUTED NET EARNINGS PER COMMON SHARE $ 2.79 $ 2.19 $ 1.60 -------------------------------------------------------------------------------------------- BASIC WEIGHTED-AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 312.4 324.2 348.2 DILUTIVE EFFECT OF OUTSTANDING STOCK OPTIONS 14.4 12.3 6.8 -------------------------------------------------------------------------------------------- WEIGHTED-AVERAGE NUMBER OF COMMON SHARES OUTSTANDING ASSUMING DILUTION 326.8 336.5 355.0 -------------------------------------------------------------------------------------------- </TABLE> See notes to consolidated financial statements. PAGE 38 UnitedHealth Group

CONSOLIDATED BALANCE SHEETS <TABLE> <CAPTION> As of December 31, (in millions, except share and per share data) 2001 2000 ------------------------------------------------------------------------------------ <S> <C> <C> ASSETS Current Assets Cash and Cash Equivalents $ 1,540 $ 1,419 Short-Term Investments 270 200 Accounts Receivable, net of allowances of $127 and $118 856 867 Assets Under Management 1,903 1,646 Deferred Income Taxes 316 235 Other Current Assets 61 38 ------------------------------------------------------------------------------------ Total Current Assets 4,946 4,405 Long-Term Investments 3,888 3,434 Property, Equipment and Capitalized Software, net of accumulated depreciation and amortization of $670 and $599 847 557 Goodwill and Other Intangible Assets, net of accumulated amortization of $500 and $415 2,805 2,657 ------------------------------------------------------------------------------------ TOTAL ASSETS $12,486 $11,053 ------------------------------------------------------------------------------------ LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities Medical Costs Payable $ 3,460 $ 3,266 Accounts Payable and Accrued Liabilities 1,209 1,050 Other Policy Liabilities 1,595 1,216 Commercial Paper and Current Maturities of Long-Term Debt 684 559 Unearned Premiums 543 479 ------------------------------------------------------------------------------------ Total Current Liabilities 7,491 6,570 Long-Term Debt, less current maturities 900 650 Deferred Income Taxes and Other Liabilities 204 145 Commitments and Contingencies (Note 11) ------------------------------------------------------------------------------------ Shareholders' Equity Common Stock, $0.01 par value - 1,500,000,000 shares authorized; 308,626,000 and 317,235,000 shares outstanding 3 3 Additional Paid-In Capital 39 -- Retained Earnings 3,805 3,595 Accumulated Other Comprehensive Income: Net Unrealized Gains on Investments, net of tax effects 44 90 ------------------------------------------------------------------------------------ TOTAL SHAREHOLDERS' EQUITY 3,891 3,688 ------------------------------------------------------------------------------------ TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $12,486 $11,053 ------------------------------------------------------------------------------------ </TABLE> See notes to consolidated financial statements PAGE 39 UnitedHealth Group

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY <TABLE> <CAPTION> Additional Common Stock Paid-In Retained (in millions) Shares Amount Capital Earnings -------------------------------------------------------------------------------------------- <S> <C> <C> <C> BALANCE AT DECEMBER 31, 1998 368 $ 4 $ 1,107 $ 2,883 Issuances of Common Stock, and related tax benefits 6 -- 125 -- Common Stock Repurchases (39) (1) (982) -- Comprehensive Income Net Earnings -- -- -- 568 Other Comprehensive Income Adjustments Change in Net Unrealized Gains on Investments, net of tax effects -- -- -- -- Comprehensive Income -- -- -- -- Common Stock Dividend -- -- -- (6) -------------------------------------------------------------------------------------------- BALANCE AT DECEMBER 31, 1999 335 3 250 3,445 Issuances of Common Stock, and related tax benefits 13 -- 349 -- Common Stock Repurchases (31) -- (599) (581) Comprehensive Income Net Earnings -- -- -- 736 Other Comprehensive Income Adjustments Change in Net Unrealized Gains on Investments, net of tax effects -- -- -- -- Comprehensive Income -- -- -- -- Common Stock Dividend -- -- -- (5) -------------------------------------------------------------------------------------------- BALANCE AT DECEMBER 31, 2000 317 3 -- 3,595 Issuances of Common Stock, and related tax benefits 11 -- 474 -- Common Stock Repurchases (19) -- (435) (694) Comprehensive Income Net Earnings -- -- -- 913 Other Comprehensive Income Adjustments Change in Net Unrealized Gains on Investments, net of tax effects -- -- -- -- Comprehensive Income -- -- -- -- Common Stock Dividend -- -- -- (9) -------------------------------------------------------------------------------------------- BALANCE AT DECEMBER 31, 2001 309 $ 3 $ 39 $ 3,805 -------------------------------------------------------------------------------------------- </TABLE> <TABLE> <CAPTION> Net Unrealized Gains on Total Investments Shareholders' Comprehensive (in millions) Available for Sale Equity Income ---------------------------------------------------------------------------------------------------- <S> <C> <C> <C> BALANCE AT DECEMBER 31, 1998 $ 44 $ 4,038 Issuances of Common Stock, and related tax benefits -- 125 Common Stock Repurchases -- (983) Comprehensive Income Net Earnings -- 568 $ 568 Other Comprehensive Income Adjustments Change in Net Unrealized Gains on Investments, net of tax effects 121 121 121 ----- Comprehensive Income -- -- $ 689 ----- Common Stock Dividend -- (6) ---------------------------------------------------------------------------------------------------- BALANCE AT DECEMBER 31, 1999 165 3,863 Issuances of Common Stock, and related tax benefits -- 349 Common Stock Repurchases -- (1,180) Comprehensive Income Net Earnings -- 736 $ 736 Other Comprehensive Income Adjustments Change in Net Unrealized Gains on Investments, net of tax effects (75) (75) (75) ----- Comprehensive Income -- -- $ 661 ----- Common Stock Dividend -- (5) ---------------------------------------------------------------------------------------------------- BALANCE AT DECEMBER 31, 2000 90 3,688 Issuances of Common Stock, and related tax benefits -- 474 Common Stock Repurchases -- (1,129) Comprehensive Income Net Earnings -- 913 $ 913 Other Comprehensive Income Adjustments Change in Net Unrealized Gains on Investments, net of tax effects (46) (46) (46) ----- Comprehensive Income -- -- $ 867 ----- Common Stock Dividend -- (9) ---------------------------------------------------------------------------------------------------- BALANCE AT DECEMBER 31, 2001 $ 44 $ 3,891 ---------------------------------------------------------------------------------------------------- </TABLE> See notes to consolidated financial statements. PAGE 40 UnitedHealth Group

CONSOLIDATED STATEMENTS OF CASH FLOWS <TABLE> <CAPTION> For the Year Ended December 31, (in millions) 2001 2000 1999 ------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> OPERATING ACTIVITIES Net Earnings $ 913 $ 736 $ 568 Noncash Items Depreciation and Amortization 265 247 233 Deferred Income Taxes and Other 40 73 35 Net Change in Other Operating Items, net of effects from acquisitions, sales of subsidiaries and changes in AARP balances Accounts Receivable and Other Current Assets 7 26 84 Medical Costs Payable 156 288 165 Accounts Payable and Accrued Liabilities 280 75 68 Other Policy Liabilities 131 87 (8) Unearned Premiums 52 (11) 44 ------------------------------------------------------------------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES 1,844 1,521 1,189 ------------------------------------------------------------------------------------------------------- INVESTING ACTIVITIES Cash Paid for Acquisitions, net of cash assumed and other effects (92) (76) (334) Purchases of Property, Equipment and Capitalized Software (425) (245) (196) Purchases of Investments (2,088) (3,022) (2,208) Maturities and Sales of Investments 1,467 2,375 2,115 ------------------------------------------------------------------------------------------------------- CASH FLOWS USED FOR INVESTING ACTIVITIES (1,138) (968) (623) ------------------------------------------------------------------------------------------------------- FINANCING ACTIVITIES Proceeds from Common Stock Issuances 178 228 102 Proceeds from (Payments of) Commercial Paper, net 275 (182) 532 Proceeds from Issuance of Long-Term Debt 250 400 150 Payments for Retirement of Long-Term Debt (150) - (400) Common Stock Repurchases (1,129) (1,180) (983) Dividends Paid (9) (5) (6) ------------------------------------------------------------------------------------------------------- CASH FLOWS USED FOR FINANCING ACTIVITIES (585) (739) (605) ------------------------------------------------------------------------------------------------------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 121 (186) (39) ------------------------------------------------------------------------------------------------------- CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 1,419 1,605 1,644 ------------------------------------------------------------------------------------------------------- CASH AND CASH EQUIVALENTS, END OF PERIOD $ 1,540 $ 1,419 $ 1,605 ------------------------------------------------------------------------------------------------------- SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING ACTIVITIES Common Stock Issued for Acquisitions $ 163 $ - $ - ------------------------------------------------------------------------------------------------------- </TABLE> See notes to consolidated financial statements. PAGE 41 UnitedHealth Group

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS [1] DESCRIPTION OF BUSINESS UnitedHealth Group Incorporated (also referred to as "UnitedHealth Group," "the company," "we," "us," "our") is a national leader in forming and operating orderly, efficient markets for the exchange of high quality health and well-being services. Through independent but strategically aligned, market-defined businesses, we offer health care access and coverage and related administrative, technology and information services designed to enable, facilitate and advance optimal health care. [2] SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTATION We have prepared the consolidated financial statements according to accounting principles generally accepted in the United States and have included the accounts of UnitedHealth Group and its subsidiaries. We have eliminated all significant intercompany balances and transactions. USE OF ESTIMATES These financial statements include some amounts that are based on our estimates and judgments. The most significant estimates relate to medical costs, medical costs payable, contingent liabilities, and asset valuations, allowances and impairments. We adjust these estimates as more current information becomes available, and any adjustment could have a significant impact on our consolidated operating results. The impact of any changes in estimates is included in the determination of earnings in the period in which the change in estimate is identified. REVENUES We recognize premium revenues in the period in which enrolled members are entitled to receive health care services. We record premium payments received from our customers prior to such period as unearned premiums. We recognize fee revenues in the period the related services are performed. Premium revenues related to Medicare and Medicaid programs as a percentage of total premium revenues were 17% in 2001 and 2000, and 21% in 1999. MEDICAL COSTS AND MEDICAL COSTS PAYABLE Medical costs include claims paid, claims processed but not yet paid, estimates for claims received but not yet processed, and estimates for the costs of health care services people have received, but for which claims have not yet been submitted. We develop our estimates of medical costs payable using actuarial methods based upon historical claim submission and payment data, cost trends, customer and product mix, seasonality, utilization of health care services, contracted service rates and other relevant factors. The estimates may change as actuarial methods change or as underlying facts upon which estimates are based change. We did not change actuarial methods during 2001, 2000 and 1999. Management believes the amount of medical costs payable is adequate to cover the company's liability for unpaid claims as of December 31, 2001; however, actual claim payments may differ from established estimates. Adjustments to medical costs payable estimates are reflected in operating results in the period in which the change in estimate is identified. CASH, CASH EQUIVALENTS AND INVESTMENTS Cash and cash equivalents are highly liquid investments with an original maturity of three months or less. The fair value of cash and cash equivalents approximates their carrying value because of the short maturity of the instruments. Investments with a maturity of less than one year are classified as short-term. We may sell investments classified as long-term before their maturity to fund working capital or for other purposes. PAGE 42 UnitedHealth Group

Because of regulatory restrictions, certain investments are included in long-term investments regardless of their maturity date. These investments are classified as held to maturity and are reported at amortized cost. All other investments are classified as available for sale and reported at fair value based on quoted market prices. We have no investments classified as trading securities. Unrealized gains and losses on investments available for sale are excluded from earnings and reported as a separate component of shareholders' equity, net of income tax effects. We continually monitor the difference between the cost and estimated fair value of our investments. If any of our investments experience a decline in value that we believe is other than temporary, we record a realized loss in Investment and Other Income in our Consolidated Statements of Operations. To calculate realized gains and losses on the sale of investments, we use the specific cost of each investment sold. ASSETS UNDER MANAGEMENT We administer certain aspects of AARP's insurance program (see Note 5). Pursuant to our agreement, AARP assets are managed separately from our general investment portfolio and are used to pay costs associated with the AARP program. These assets are invested at our discretion, within investment guidelines approved by AARP. At December 31, 2001, the assets were invested in marketable debt securities. We do not guarantee any rates of investment return on these investments and, upon transfer of the AARP contract to another entity, cash equal in amount to the fair value of these investments would be transferred to that entity. Because the purpose of these assets is to fund the medical costs payable and rate stabilization fund liabilities associated with the AARP contract, assets under management are classified as current assets, consistent with the classification of these liabilities. Interest earnings and realized investment gains and losses on these assets accrue to AARP policyholders through the rate stabilization fund and, as such, are not included in our earnings. Interest income and realized gains and losses related to assets under management are recorded as an increase to the AARP rate stabilization fund and were $113 million and $91 million in 2001 and 2000, respectively. Assets under management are reported at their fair market value, and unrealized gains and losses are included in the rate stabilization fund associated with the AARP program. As of December 31, 2001 and 2000, the AARP investment portfolio included net unrealized gains of $56 million and $19 million, respectively. PROPERTY, EQUIPMENT AND CAPITALIZED SOFTWARE Property, equipment and capitalized software is stated at cost, net of accumulated depreciation and amortization. Capitalized software consists of certain costs incurred in the development of internal-use software, including external direct material and service costs and payroll costs of employees fully devoted to specific software development. We calculate depreciation and amortization using the straight-line method over the estimated useful lives of the assets. The useful lives for property, equipment and capitalized software are: from three to seven years for furniture, fixtures and equipment; the shorter of five years or the remaining lease term for leasehold improvements; and from three to nine years for capitalized software. The weighted-average useful life of property, equipment and capitalized software at December 31, 2001, was approximately five years. The net book value of property and equipment was $421 million and $303 million as of December 31, 2001 and 2000, respectively. The net book value of capitalized software was $426 million and $254 million as of December 31, 2001 and 2000, respectively. PAGE 43 UnitedHealth Group

GOODWILL AND OTHER INTANGIBLE ASSETS Goodwill represents the amount by which the purchase price and transaction costs of businesses we have acquired exceeds the estimated fair value of the net tangible assets and identifiable intangible assets of these businesses. Goodwill and other intangible assets are amortized on a straight-line basis over useful lives ranging from three years to 40 years, with a weighted-average useful life of 32 years at December 31, 2001. The two most significant components of goodwill and other intangible assets are: 1) goodwill of $2.2 billion at December 31, 2001, and $2.1 billion at December 31, 2000, net of accumulated amortization; and 2) employer group contracts, supporting infrastructure, distribution networks and institutional knowledge of $512 million at December 31, 2001, and $530 million at December 31, 2000, net of accumulated amortization. LONG-LIVED ASSETS We review long-lived assets, including goodwill and other intangible assets, and property, equipment and capitalized software, for events or changes in circumstances that would indicate we might not recover their carrying value. We consider many factors, including estimated future cash flows associated with the assets, to make this decision. We record assets held for sale at the lower of their carrying amount or fair value, less any costs for the final settlement. OTHER POLICY LIABILITIES Other policy liabilities include the rate stabilization fund associated with the AARP program (see Note 5) and customer balances related to experience-rated insurance products. Customer balances represent premium payments we have received that exceed what customers owe based on actual claim experience, and deposit accounts that have accumulated under experience-rated contracts. At the customer's option, these balances may be refunded or used to pay future premiums or claims under eligible contracts. INCOME TAXES Deferred income tax assets and liabilities are recognized for the differences between the financial and income tax reporting bases of assets and liabilities based on enacted tax rates and laws. The deferred income tax provision or benefit generally reflects the net change in deferred income tax assets and liabilities during the year. The current income tax provision reflects the tax consequences of revenues and expenses currently taxable or deductible on various income tax returns for the year reported. STOCK-BASED COMPENSATION We do not recognize compensation expense in connection with employee stock option grants because we grant stock options at exercise prices that equal or exceed the fair market value of the stock on the date the options are granted. Information on what our stock-based compensation expenses would have been had we calculated those expenses using the fair market values of outstanding stock options is included in Note 9. PAGE 44 UnitedHealth Group

NET EARNINGS PER COMMON SHARE We compute basic net earnings per common share by dividing net earnings by the weighted-average number of common shares outstanding during the period. We determine diluted net earnings per common share using the weighted-average number of common shares outstanding during the period, adjusted for the dilutive effect of common stock equivalents, consisting of shares that might be issued upon exercise of common stock options. DERIVATIVE FINANCIAL INSTRUMENTS As part of our risk management strategy, we may enter into interest rate swap agreements to manage our exposure to interest rate risk. The differential between fixed and variable rates to be paid or received is accrued and recognized over the life of the agreements as an adjustment to interest expense in the Consolidated Statements of Operations. RECENTLY ISSUED ACCOUNTING STANDARDS In June 2001, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 141, "Business Combinations," and SFAS No. 142, "Goodwill and Other Intangible Assets." Under SFAS No. 141, business combinations initiated after June 30, 2001, must be accounted for using the purchase method of accounting. Under SFAS No. 142, amortization of goodwill and indefinite-lived intangible assets will cease, and the carrying value of these assets will instead be evaluated for impairment using a fair-value-based test, applied at least annually. We adopted SFAS No. 142 on January 1, 2002, completed the initial impairment tests of goodwill as required by SFAS No. 142, and determined that our goodwill is not impaired. The following table shows net earnings and earnings per common share adjusted to reflect the adoption of the non-amortization provisions of SFAS No. 142 as of the beginning of the respective periods: <TABLE> <CAPTION> For the Year Ended December 31, (in millions, except per share data) 2001 2000 1999 ------------------------------------------------------------------------------------- NET EARNINGS <S> <C> <C> <C> Reported Net Earnings $ 913 $ 736 $ 568 Goodwill Amortization, net of tax effects 89 85 76 --------- ------- ------- Adjusted Net Earnings $ 1,002 $ 821 $ 644 --------- ------- ------- BASIC NET EARNINGS PER COMMON SHARE Reported Basic Net Earnings per Share $ 2.92 $ 2.27 $ 1.63 Goodwill Amortization, net of tax effects 0.29 0.26 0.22 --------- ------- ------- Adjusted Basic Net Earnings per Share $ 3.21 $ 2.53 $ 1.85 --------- ------- ------- DILUTED NET EARNINGS PER COMMON SHARE Reported Diluted Net Earnings per Share $ 2.79 $ 2.19 $ 1.60 Goodwill Amortization, net of tax effects 0.28 0.25 0.21 --------- ------- ------- Adjusted Diluted Net Earnings per Share $ 3.07 $ 2.44 $ 1.81 --------- ------- ------- </TABLE> In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement Obligations." SFAS No. 143 addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated retirement costs. We must adopt the standard on January 1, 2003. We do not expect the adoption of SFAS No. 143 will have any impact on our financial position or results of operations. PAGE 45 UnitedHealth Group

In August 2001, the FASB issued SFAS No. 144, "Accounting for Impairment or Disposal of Long-Lived Assets," which provides new accounting and financial reporting guidance for the impairment or disposal of long-lived assets and the disposal of segments of a business. We adopted the standard on January 1, 2002, and its adoption did not have any impact on our financial position or results of operations. RECLASSIFICATIONS Certain 1999 and 2000 amounts in the consolidated financial statements have been reclassified to conform to the 2001 presentation. These reclassifications have no effect on net earnings or shareholders' equity as previously reported. [3] ACQUISITIONS In October 2001, our Specialized Care Services business segment acquired Spectera, Inc. (Spectera), a leading vision care benefit company in the United States, to expand the breadth of service offerings we extend to our customers. We paid $37 million in cash, accrued $25 million for additional consideration due, and issued 1.2 million shares of common stock with a value of $81 million in exchange for all outstanding shares of Spectera. The purchase price and related acquisition costs of approximately $146 million exceeded the preliminary estimated fair value of net assets acquired by $126 million. Under the purchase method of accounting, we assigned this amount to goodwill. The results of Spectera's operations since the acquisition date are included in our 2001 Consolidated Statement of Operations. The pro forma effects of the Spectera acquisition on our consolidated financial statements were not material. In February 2002, the $25 million of accrued consideration was satisfied by issuing an additional 335,000 shares of our common stock. In September 1999, our Ingenix business segment acquired Worldwide Clinical Trials, Inc. (WCT), a leading clinical research organization. We paid $214 million in cash in exchange for all outstanding shares of WCT, and we accounted for the purchase using the purchase method of accounting. Only the post-acquisition results of WCT are included in our consolidated financial statements. The purchase price and other acquisition costs exceeded the estimated fair value of net assets acquired by $214 million, which was assigned to goodwill and is being amortized over its estimated useful life of 30 years. The pro forma effects of the WCT acquisition on our consolidated financial statements were not material. In June 1999, our Specialized Care Services business segment acquired Dental Benefit Providers, Inc. (DBP), one of the largest dental benefit management companies in the United States. We paid $105 million in cash, and we accounted for the acquisition using the purchase method of accounting. The purchase price and other acquisition costs exceeded the estimated fair value of net assets acquired by $105 million, which was assigned to goodwill and is being amortized over its estimated useful life of 40 years. The pro forma effects of the DBP acquisition on our consolidated financial statements were not material. For the years ended December 31, 2001, 2000 and 1999, consideration paid or issued for smaller acquisitions accounted for under the purchase method, which were not material to our consolidated financial statements, was $134 million, $76 million and $15 million, respectively. PAGE 46 UnitedHealth Group

[4] OPERATIONAL REALIGNMENT AND OTHER CHARGES In conjunction with a comprehensive operational realignment initiated in 1998, we developed and approved an implementation plan (the Plan). 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 claim processing and customer service operations and associated real estate obligations. We completed our operational realignment plan in 2001. Actual costs incurred executing the Plan exceeded estimates by approximately $4 million, which has been included in 2001 operating costs in the Consolidated Statements of Operations. These excess costs were incurred in the fourth quarter of 2001. Activities associated with the Plan resulted in the reduction of approximately 5,100 positions, affecting approximately 5,800 people. As of December 31, 2000, we had completed all planned business dispositions and market exits pursuant to the Plan. Accordingly, our 2001 financial statements do not include the operating results of exited businesses or markets. Our Consolidated Statements of Operations include results for businesses disposed of and markets exited in connection with our operational realignment as follows: $312 million in revenues and $9 million in earnings from operations in 2000, and $689 million in revenues and $41 million of losses from operations in 1999. These amounts do not include operating results from the counties where UnitedHealthcare withdrew its Medicare product offerings effective January 1, 2001, and January 1, 2000. Annual revenues for 2000 from the counties exited effective January 1, 2001, were approximately $320 million. Annual revenues for 1999 from the counties exited effective January 1, 2000, were approximately $230 million. The operational realignment and other charges did not cover certain aspects of the Plan, including new information systems, data conversions, process re-engineering, temporary duplicate staffing costs as we consolidated processing and service centers, and employee relocation and training. These costs were expensed as incurred or capitalized, as appropriate. During 2001, 2000 and 1999, we incurred expenses of approximately $20 million, $57 million and $52 million, respectively, related to these activities. The table below is a roll-forward of accrued operational realignment and other charges, which are included in Accounts Payable and Accrued Liabilities in the accompanying Consolidated Balance Sheets (in millions): <TABLE> <CAPTION> Severance and Noncancelable Disposition of Asset Outplacement Lease Businesses and Impairments Costs Obligations Other Costs Total -------------------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> <C> Balance at December 31, 1997 $ -- $ -- $ -- $ -- $ -- Provision for Operational Realignment and Other Charges 430 142 82 71 725 Additional Charges (Credits) 21 (20) (9) 8 -- Cash Payments -- (19) (6) (13) (38) Noncash Charges (451) -- -- -- (451) -------------------------------------------------------------------------------------------------------------------- Balance at December 31, 1998 -- 103 67 66 236 Additional Charges (Credits) -- (22) 13 9 -- Cash Payments -- (46) (18) (45) (109) ------------------------------------------------------------------------------------------------------------------- Balance at December 31, 1999 -- 35 62 30 127 Cash Payments -- (24) (20) (18) (62) -------------------------------------------------------------------------------------------------------------------- Balance at December 31, 2000 -- 11 42 12 65 Additional Charges (Credits) -- 10 -- (6) 4 Cash Payments -- (21) (11) (6) (38) Noncash Charges(1) -- -- (31) -- (31) ------------------------------------------------------------------------------------------------------------------- BALANCE AT DECEMBER 31, 2001 $ -- $ -- $ -- $ -- $ -- ==================================================================================================================== </TABLE> -------- (1) Consists of noncancelable lease obligations for which definitive subleases have been finalized. These amounts have been transferred to other liability accounts as they are fixed and determinable obligations. PAGE 47 UnitedHealth Group

[5] AARP In January 1998, we began providing services under a 10-year contract to provide insurance products and services to members of AARP. Under the terms of the contract, we are compensated for claim 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. Premium revenues from our portion of the AARP insurance offerings were approximately $3.5 billion during 2001, 2000 and 1999. The underwriting gains or losses related to the AARP business are recorded as an increase or decrease to a rate stabilization fund (RSF). The primary components of the underwriting results are premium revenue, medical costs, investment income, administrative expenses, member service expenses, marketing expenses and premium taxes. Underwriting gains and losses are charged to the RSF and accrue to AARP policyholders, unless cumulative net losses were to exceed the balance in the RSF. To the extent underwriting losses exceed the balance in the RSF, we would have to fund the deficit. Any deficit we fund could be recovered by underwriting gains in future periods of the contract. The RSF balance is reported in Other Policy Liabilities in the accompanying Consolidated Balance Sheets. We believe the RSF balance is sufficient to cover potential future underwriting or other risks associated with the contract. When we entered the contract, we assumed the policy and other policy liabilities related to the AARP program, and we received cash and premium receivables from the previous insurance carrier equal to the carrying value of these liabilities as of January 1, 1998. The following AARP program-related assets and liabilities are included in our Consolidated Balance Sheets (in millions): <TABLE> <CAPTION> Balance as of December 31, 2001 2000 --------------------------------------------------------------------------------- <S> <C> <C> Assets Under Management $1,882 $1,625 Accounts Receivable $ 281 $ 277 Medical Costs Payable $ 867 $ 855 Other Policy Liabilities $1,180 $ 932 Accounts Payable and Accrued Liabilities $ 116 $ 115 --------------------------------------------------------------------------------- </TABLE> The effects of changes in balance sheet amounts associated with the AARP program accrue to AARP policyholders through the RSF balance. Accordingly, we do not include the effect of such changes in our Consolidated Statements of Cash Flows. PAGE 48 UnitedHealth Group

[6] CASH, CASH EQUIVALENTS AND INVESTMENTS As of December 31, the amortized cost, gross unrealized holding gains and losses, and fair value of cash, cash equivalents and investments were as follows (in millions): <TABLE> <CAPTION> Amortized Gross Unrealized Gross Unrealized Fair 2001 Cost Gains Losses Value ----------------------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> CASH AND CASH EQUIVALENTS $1,540 $ -- $ -- $1,540 DEBT SECURITIES -- AVAILABLE FOR SALE 3,806 121 (20) 3,907 EQUITY SECURITIES -- AVAILABLE FOR SALE 201 16 (46) 171 DEBT SECURITIES -- HELD TO MATURITY 80 -- -- 80 ----------------------------------------------------------------------------------------------------- TOTAL CASH AND INVESTMENTS $5,627 $ 137 $ (66) $5,698 ----------------------------------------------------------------------------------------------------- 2000 ----------------------------------------------------------------------------------------------------- Cash and Cash Equivalents $1,419 $ -- $ -- $1,419 Debt Securities -- Available for Sale 3,198 89 (6) 3,281 Equity Securities -- Available for Sale 201 61 -- 262 Debt Securities -- Held to Maturity 91 -- -- 91 ----------------------------------------------------------------------------------------------------- Total Cash and Investments $4,909 $ 150 $ (6) $5,053 ----------------------------------------------------------------------------------------------------- </TABLE> As of December 31, 2001, debt securities consisted of $1,073 million in U.S. Government and Agency obligations, $1,684 million in state and municipal obligations, and $1,230 million in corporate obligations. At December 31, 2001, we held $306 million in debt securities with maturities less than one year, $1,475 million in debt securities maturing in one to five years, and $2,206 million in debt securities with maturities of more than five years. During 2001, 2000 and 1999, respectively, we contributed UnitedHealth Capital investments valued at approximately $22 million, $52 million and $50 million to the UnitedHealth Foundation, a non-consolidated, not-for-profit organization. The realized gain of approximately $18 million in 2001, $51 million in 2000 and $49 million in 1999 was offset by the related contribution expense of $22 million in 2001, $52 million in 2000 and $50 million in 1999. The net expense of $4 million in 2001 and $1 million in both 2000 and 1999 is included in Investment and Other Income in the accompanying Consolidated Statements of Operations. In a separate disposition of UnitedHealth Capital investments during 2000, we realized a gain of $27 million. We recorded realized gains and losses on the sale of investments, excluding the UnitedHealth Capital dispositions described above, as follows (in millions): <TABLE> <CAPTION> For the Year Ended December 31, 2001 2000 1999 --------------------------------------------------------------------------------- <S> <C> <C> <C> Gross Realized Gains $ 30 $ 12 $ 9 Gross Realized Losses (19) (46) (15) --------------------------------------------------------------------------------- Net Realized Gains (Losses) $ 11 $(34) $ (6) --------------------------------------------------------------------------------- </TABLE> PAGE 49 United Health Group

[7] COMMERCIAL PAPER AND DEBT Commercial paper and debt consisted of the following as of December 31 (in millions): <TABLE> <CAPTION> 2001 2000 ------------------------------------------------------------------ Carrying Fair Carrying Fair Value Value Value Value ------------------------------------------------------------------------------------------------------------------ <S> <C> <C> <C> <C> Commercial Paper $ 684 $ 684 $ 409 $ 409 Floating-Rate Notes due November 2001 -- -- 150 150 Floating-Rate Notes due November 2003 100 100 -- -- Floating-Rate Notes due November 2004 150 150 -- -- 6.6% Senior Unsecured Notes due December 2003 250 266 250 250 7.5% Senior Unsecured Notes due November 2005 400 433 400 413 ------------------------------------------------------------------------------------------------------------------ Total Commercial Paper and Debt 1,584 1,633 1,209 1,222 Less Current Maturities (684) (684) (559) (559) ------------------------------------------------------------------------------------------------------------------ Long-Term Debt, less current maturities $ 900 $ 949 $ 650 $ 663 ------------------------------------------------------------------------------------------------------------------ </TABLE> As of December 31, 2001, our outstanding commercial paper had interest rates ranging from 1.9% to 2.7%. In November 2001, we issued $100 million of floating-rate notes due November 2003 and $150 million of floating-rate notes due November 2004. The interest rates on the notes are reset quarterly to the three-month LIBOR (London Interbank Offered Rate) plus 0.3% for the notes due November 2003 and to the three-month LIBOR plus 0.6% for the notes due November 2004. As of December 31, 2001, the applicable rates on the notes were 2.4% and 2.7%, respectively. A portion of the proceeds from these borrowings was used to repay the $150 million of floating-rate notes that matured in November 2001. In January 2002, we issued $400 million of 5.2% fixed-rate notes due January 2007. Proceeds from this borrowing will be used to repay commercial paper and for general corporate purposes including working capital, capital expenditures, business acquisitions and share repurchases. When we issued these notes, we entered into interest rate swap agreements that qualify as fair value hedges to convert a portion of our interest rate exposure from a fixed to a variable rate. The interest rate swap agreements have an aggregate notional amount of $200 million maturing January 2007. The variable rates approximate the six-month LIBOR and are reset on a semiannual basis. We have credit arrangements for $900 million that support our commercial paper program. These credit arrangements include a $450 million revolving facility that expires in July 2005, and a $450 million, 364-day facility that expires in July 2002. We also have the capacity to issue approximately $200 million of extendible commercial notes (ECNs). As of December 31, 2001 and 2000, we had no amounts outstanding under our credit facilities or ECNs. Our debt agreements and credit facilities contain various covenants, the most restrictive of which require us to maintain a debt-to-total-capital ratio below 45% and to exceed specified minimum interest coverage levels. We are in compliance with the requirements of all debt covenants. Maturities of commercial paper and debt, excluding the impact of the debt issued in January 2002, for the years ending December 31 are as follows (in millions): <TABLE> <CAPTION> 2002 2003 2004 2005 2006 Thereafter --------------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> <C> $ 684 $ 350 $ 150 $ 400 $ - $ - --------------------------------------------------------------------------------------------------------------- </TABLE> We made cash payments for interest of $91 million, $68 million and $43 million in 2001, 2000 and 1999, respectively. PAGE 50 UnitedHealth Group

[8] SHAREHOLDERS' EQUITY REGULATORY CAPITAL AND DIVIDEND RESTRICTIONS We conduct our operations through our wholly-owned subsidiaries. These companies are subject to standards established by the National Association of Insurance Commissioners (NAIC) that, among other things, require them to maintain specified levels of statutory capital, as defined by each state, and restrict the timing and amount of dividends and other distributions that may be paid to their parent companies. Generally, the amount of dividend distributions that may be paid by a regulated subsidiary, without prior approval by state regulatory authorities, is limited based on the entity's level of statutory net income and statutory capital and surplus. At December 31, 2001, approximately $660 million of our $5.7 billion of cash and investments was held by non-regulated subsidiaries. Of this amount, approximately $260 million was segregated for future regulatory capital needs and $230 million was available for general corporate use, including acquisitions and share repurchases. The remaining $170 million consists primarily of public and non-public equity securities held by UnitedHealth Capital, our investment capital business. The agencies that assess our creditworthiness also consider capital adequacy levels when establishing our debt ratings. Consistent with our intention of maintaining our senior debt ratings in the "A" range, we maintain an aggregate statutory capital and surplus level for our regulated subsidiaries that is significantly higher than the level regulators require. As of December 31, 2001, our regulated subsidiaries had aggregate statutory capital and surplus of approximately $2.0 billion, more than $1.1 billion above the $850 million of required aggregate capital and surplus. STOCK REPURCHASE PROGRAM Under our board of directors' authorization, we maintain a common stock repurchase program. Repurchases may be made from time to time at prevailing prices, subject to restrictions on volume, pricing and timing. During 2001, we repurchased 19.6 million shares for an aggregate of $1.1 billion. Through December 31, 2001, we had repurchased approximately 112.5 million shares for an aggregate cost of $3.7 billion since the program began in November 1997. As of December 31, 2001, we had board of directors' authorization to purchase up to an additional 8.8 million shares of our common stock. In February 2002, the board of directors authorized us to repurchase up to an additional 30 million shares of common stock under the program. As part of our share repurchase activities, we have entered into agreements with an independent third party to purchase shares of our common stock, where the number of shares we purchase, if any, depends upon market conditions and other contractual terms. As of December 31, 2001, we had conditional agreements to purchase up to 6.1 million shares of our common stock at various times and prices through 2003, at an average price of approximately $58 per share. PREFERRED STOCK At December 31, 2001, we had 10 million shares of $0.001 par value preferred stock authorized for issuance, and no preferred shares issued and outstanding. DIVIDENDS On February 12, 2002, the board of directors approved an annual dividend for 2002 of $0.03 per share. The dividend will be paid on April 17, 2002, to shareholders of record at the close of business on April 1, 2002. [9] STOCK-BASED COMPENSATION PLANS The company maintains various stock and incentive plans for the benefit of eligible employees and directors. As of December 31, 2001, employee stock and incentive plans allowed for the future granting of up to 29.6 million shares as incentive or non-qualified stock options, stock appreciation rights, restricted stock awards and performance awards. Our non-employee director stock option plan allowed for future granting of 710,000 non-qualified stock options as of December 31, 2001. PAGE 51 UnitedHealth Group

Stock options are granted at an exercise price not less than the fair market value of the common stock at the date of grant. They generally vest over four years and may be exercised up to 10 years from the date of grant. Activity under our various stock plans is summarized in the table below (shares in thousands): <TABLE> <CAPTION> 2001 2000 1999 ------------------------------ --------------------------- ------------------------------ Weighted-Average Weighted-Average Weighted-Average Shares Exercise Price Shares Exercise Price Shares Exercise Price ------------------------------------------------------------------------------------------------------------------------------------ <S> <C> <C> <C> <C> <C> <C> Outstanding at Beginning of Year 38,810 $22 44,080 $19 36,748 $19 Granted 8,333 $53 8,516 $30 14,406 $20 Exercised (7,716) $20 (12,331) $17 (4,666) $17 Forfeited (1,090) $25 (1,455) $20 (2,408) $20 ------------------------------------------------------------------------------------------------------------------------------------ Outstanding at End of Year 38,337 $29 38,810 $22 44,080 $19 ------------------------------------------------------------------------------------------------------------------------------------ Exercisable at End of Year 19,585 $21 17,367 $20 15,558 $17 ------------------------------------------------------------------------------------------------------------------------------------ </TABLE> <TABLE> <CAPTION> As of December 31, 2001 Options Outstanding Options Exercisable --------------------------------------------------------- ----------------------------- Weighted-Average Range of Number Remaining Weighted-Average Number Weighted-Average Exercise Prices Outstanding Option Term(years) Exercise Price Exercisable Exercise Price ------------------------------------------------------------------------------------------------------------------------ <S> <C> <C> <C> <C> <C> $ 0-$20 6,170 5.4 $ 17 5,253 $ 17 $21-$40 23,853 7.4 $ 24 14,188 $ 22 $41-$70 8,314 9.1 $ 53 144 $ 51 ------------------------------------------------------------------------------------------------------------------------ $ 0-$70 38,337 7.4 $ 29 19,585 $ 21 ------------------------------------------------------------------------------------------------------------------------ </TABLE> We do not recognize compensation expense in connection with stock option grants because we grant stock options at exercise prices that equal or exceed the fair market value of the stock at the time options are granted. If we had determined compensation expense using fair market values for the stock options, net earnings per common share would have been reduced to the following pro forma amounts: <TABLE> <CAPTION> 2001 2000 1999 ------------------------------------------------------------------------------------------------ <S> <C> <C> <C> Net Earnings (in millions) As Reported $913 $736 $ 568 Pro Forma $831 $660 $ 531 ------------------------------------------------------------------------------------------------ Basic Net Earnings per Common Share As Reported $2.92 $2.27 $1.63 Pro Forma $2.66 $2.04 $1.52 ------------------------------------------------------------------------------------------------ Diluted Net Earnings per Common Share As Reported $2.79 $2.19 $1.60 Pro Forma $2.54 $1.96 $1.50 ------------------------------------------------------------------------------------------------ Weighted-Average Fair Value per Share of Options Granted $ 23 $ 14 $ 12 ------------------------------------------------------------------------------------------------ </TABLE> To determine compensation cost under the fair value method, the fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model. Principal assumptions we used in applying the Black-Scholes model were as follows: <TABLE> <CAPTION> 2001 2000 1999 ---------------------------------------------------- <S> <C> <C> <C> Risk-Free Interest Rate 3.7% 5.0% 6.7% Expected Volatility 45.9% 49.0% 50.0% Expected Dividend Yield 0.1% 0.1% 0.1% Expected Life in Years 4.8 4.5 5.0 ---------------------------------------------------- </TABLE> We also maintain a non-leveraged employee stock ownership plan and an employee stock purchase plan. Activity related to these plans was not significant in relation to our consolidated financial results in 2001, 2000 and 1999. PAGE 52 UnitedHealth Group

[10] INCOME TAXES Components of the Provision (Benefit) for Income Taxes <TABLE> <CAPTION> Year Ended December 31, (in millions) 2001 2000 1999 ---------------------------------------------------------------------------------- <S> <C> <C> <C> Current Federal $ 524 $ 330 $ 264 State 45 38 36 ---------------------------------------------------------------------------------- Total Current 569 368 300 Deferred (10) 51 26 ---------------------------------------------------------------------------------- Total Provision $ 559 $ 419 $ 326 ---------------------------------------------------------------------------------- </TABLE> Reconciliation of the Tax Provision at the U.S. Federal Statutory Rate to the Provision for Income Taxes <TABLE> <CAPTION> Year Ended December 31, (in millions) 2001 2000 1999 ------------------------------------------------------------------------------------------ <S> <C> <C> <C> Tax Provision at the U.S. Federal Statutory Rate $ 515 $ 404 $ 313 State Income Taxes, net of federal benefit 29 29 24 Tax-Exempt Investment Income (21) (17) (16) Non-deductible Amortization 29 27 25 Charitable Contributions -- (18) (16) Other, net 7 (6) (4) ------------------------------------------------------------------------------------------ Provision for Income Taxes $ 559 $ 419 $ 326 ------------------------------------------------------------------------------------------ </TABLE> Components of Deferred Income Tax Assets and Liabilities <TABLE> <CAPTION> As of December 31, (in millions) 2001 2000 ---------------------------------------------------------------------- <S> <C> <C> Deferred Income Tax Assets Accrued Expenses and Allowances $ 198 $ 126 Unearned Premiums 65 74 Medical Costs Payable and Other Policy Liabilities 84 84 Net Operating Loss Carryforwards 39 42 Other 30 10 ---------------------------------------------------------------------- Subtotal 416 336 Less: Valuation Allowances (53) (56) ---------------------------------------------------------------------- Total Deferred Income Tax Assets 363 280 ---------------------------------------------------------------------- Deferred Income Tax Liabilities Capitalized Software Development (128) (80) Net Unrealized Gains on Investments Available for Sale (31) (59) Depreciation & Amortization (22) (12) ---------------------------------------------------------------------- Total Deferred Income Tax Liabilities (181) (151) Net Deferred Income Tax Assets $ 182 $ 129 ---------------------------------------------------------------------- </TABLE> Valuation allowances are provided when it is considered unlikely that deferred tax assets will be realized. The valuation allowance primarily relates to future tax benefits on certain purchased domestic and foreign net operating loss carryforwards. We made cash payments for income taxes of $384 million in 2001, $352 million in 2000 and $214 million in 1999. We increased additional paid-in capital and reduced income taxes payable by $133 million in 2001, $116 million in 2000 and $23 million in 1999 to reflect the tax benefit we received upon the exercise of non-qualified stock options. The company, together with its wholly-owned subsidiaries, files a consolidated federal income tax return. Tax returns for fiscal years 1998 and 1999 are currently being examined by the Internal Revenue Service. We do not believe any adjustments that may result will have a significant impact on our consoli- PAGE 53 UnitedHealth Group

dated operating results or financial position. Examinations for the 1996 and 1997 tax years have been completed and did not have a significant impact on our consolidated operating results or financial position. [11] COMMITMENTS AND CONTINGENCIES LEASES We lease facilities, computer hardware and other equipment under long-term operating leases that are noncancelable and expire on various dates through 2011. Rent expense under all operating leases was $135 million in 2001, $132 million in 2000 and $129 million in 1999. At December 31, 2001, future minimum annual lease payments, net of sublease income, under all noncancelable operating leases were as follows (in millions): <TABLE> <CAPTION> 2002 2003 2004 2005 2006 Thereafter ------------------------------------------------------------------------------------------------------------------ <S> <C> <C> <C> <C> <C> <C> $ 99 $ 90 $ 77 $ 68 $ 60 $ 224 </TABLE> SERVICE AGREEMENTS In 1995 and 1996, we entered into three separate contracts for certain data center operations and support, and network and voice communication services, each with an approximate term of 10 years. Expenses incurred in connection with these agreements were $196 million in 2001, $182 million in 2000 and $172 million in 1999. LEGAL MATTERS Because of the nature of our businesses, we are routinely party to a variety of legal actions related to the design, management and offerings of our services. These matters include: claims relating to health care benefits coverage; medical malpractice actions; allegations of anti-competitive and unfair business activities; disputes over compensation and termination of contracts including those with physicians and other health care providers; disputes related to our administrative services, including actions alleging claim administration errors and failure to disclose rate discounts and other fee and rebate arrangements; disputes over benefit copayment calculations; claims related to disclosure of certain business practices; and claims relating to customer audits and contract performance. In 1999, a number of class action lawsuits were filed against us and virtually all major entities in the health benefits business. The suits are purported class actions on behalf of certain customers and physicians for alleged breaches of federal statutes, including the Employee Retirement Income Security Act of 1974, as amended (ERISA), and the Racketeer Influenced Corrupt Organization Act (RICO). Although the results of pending litigation are always uncertain, we do not believe the results of any such actions, including those described above, currently threatened or pending will, individually or in aggregate, have a material adverse effect on our results of operations or financial position. GOVERNMENT REGULATION Our business is regulated domestically at federal, state and local levels, and internationally. The laws and rules governing our business are subject to frequent change, and agencies have broad latitude to administer those regulations. State legislatures and Congress continue to focus on health care issues as the subject of proposed legislation. 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 related to coverage interpretations or other actions. Further, we must obtain and maintain regulatory approvals to market many of our products. We are also subject to various governmental reviews, audits and investigations. However, we do not believe the results of any of the current audits, individually or in the aggregate, will have a material adverse effect on our financial position or results of operations. [12] SEGMENT FINANCIAL INFORMATION Factors used in determining our reportable business segments include the nature of operating activities, existence of separate senior management teams, and the type of information presented to the company's chief operating decision-maker to evaluate our results of operations. PAGE 54 UnitedHealth Group

Our accounting policies for business segment operations are the same as those described in the Summary of Significant Accounting Policies (see Note 2). Transactions between business segments principally consist of customer service and claim processing services Uniprise provides to UnitedHealthcare, certain product offerings sold to Uniprise and UnitedHealthcare customers by Specialized Care Services, and sales of medical benefits cost, quality and utilization data and predictive modeling to UnitedHealthcare by Ingenix. These transactions are recorded at management's best estimate of fair value, as if the services 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 or working capital for non-regulated businesses. The "Corporate and Eliminations" column includes companywide costs associated with core process improvement initiatives, net expenses from charitable contributions to the UnitedHealth Foundation, and eliminations of intersegment transactions. In accordance with accounting principles generally accepted in the United States, segments with similar economic characteristics may be combined. The financial results of UnitedHealthcare and Ovations have been combined in the Health Care Services segment column in the tables presented on this page because both businesses have similar products and services, types of customers, distribution methods and operational processes, and both operate in a similar regulatory environment (in millions): <TABLE> <CAPTION> Corporate Health Care Specialized and 2001 Services Uniprise Care Services Ingenix Eliminations Consolidated ----------------------------------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> <C> <C> REVENUES -- EXTERNAL CUSTOMERS $20,259 $ 1,841 $ 734 $ 339 $ -- $23,173 REVENUES -- INTERSEGMENT -- 587 504 108 (1,199) -- INVESTMENT AND OTHER INCOME 235 34 16 -- (4) 281 ----------------------------------------------------------------------------------------------------------------------------------- TOTAL REVENUES $20,494 $ 2,462 $ 1,254 $ 447 $(1,203) $23,454 ----------------------------------------------------------------------------------------------------------------------------------- EARNINGS FROM OPERATIONS $ 944 $ 374 $ 214 $ 48 $ (14) $ 1,566 TOTAL ASSETS(1) $ 9,014 $ 1,737 $ 848 $ 771 $ (200) $12,170 NET ASSETS(1) $ 3,408 $ 1,020 $ 514 $ 646 $ (158) $ 5,430 PURCHASES OF PROPERTY, EQUIPMENT AND CAPITALIZED SOFTWARE $ 152 $ 171 $ 33 $ 69 $ -- $ 425 DEPRECIATION AND AMORTIZATION $ 101 $ 81 $ 33 $ 50 $ -- $ 265 ----------------------------------------------------------------------------------------------------------------------------------- 2000 ----------------------------------------------------------------------------------------------------------------------------------- Revenues -- External Customers $18,502 $ 1,595 $ 503 $ 290 $ -- $20,890 Revenues -- Intersegment -- 520 461 85 (1,066) -- Investment and Other Income 194 25 10 -- 3 232 ----------------------------------------------------------------------------------------------------------------------------------- Total Revenues $18,696 $ 2,140 $ 974 $ 375 $(1,063) $21,122 ----------------------------------------------------------------------------------------------------------------------------------- Earnings From Operations $ 739 $ 289 $ 174 $ 32 $ (34) $ 1,200 Total Assets(1) $ 8,118 $ 1,578 $ 525 $ 730 $ (133) $10,818 Net Assets(1) $ 3,085 $ 978 $ 276 $ 617 $ (113) $ 4,843 Purchases of Property, Equipment and Capitalized Software $ 88 $ 94 $ 28 $ 35 $ -- $ 245 Depreciation and Amortization $ 100 $ 75 $ 25 $ 47 $ -- $ 247 ----------------------------------------------------------------------------------------------------------------------------------- 1999 ----------------------------------------------------------------------------------------------------------------------------------- Revenues -- External Customers $17,419 $ 1,398 $ 328 $ 198 $ -- $19,343 Revenues -- Intersegment -- 445 393 59 (897) -- Investment and Other Income 162 22 5 1 29 219 ----------------------------------------------------------------------------------------------------------------------------------- Total Revenues $17,581 $ 1,865 $ 726 $ 258 $ (868) $19,562 ----------------------------------------------------------------------------------------------------------------------------------- Earnings From Operations $ 578 $ 222 $ 128 $ 25 $ (10) $ 943 Total Assets(1) $ 7,364 $ 1,411 $ 446 $ 683 $ 206 $10,110 Net Assets(1) $ 2,892 $ 953 $ 230 $ 573 $ 221 $ 4,869 ----------------------------------------------------------------------------------------------------------------------------------- Purchases of Property, Equipment and Capitalized Software $ 69 $ 71 $ 28 $ 28 $ -- $ 196 Depreciation and Amortization $ 97 $ 76 $ 23 $ 37 $ -- $ 233 ----------------------------------------------------------------------------------------------------------------------------------- </TABLE> -------- (1) Total Assets and Net Assets exclude, where applicable, debt and accrued interest of $1,603 million, $1,222 million and $1,002 million, income tax-related assets of $316 million, $235 million and $163 million, and income tax-related liabilities of $252 million, $168 million and $167 million as of December 31, 2001, 2000 and 1999, respectively. PAGE 55 UnitedHealth Group

[13] QUARTERLY FINANCIAL DATA (UNAUDITED) <TABLE> <CAPTION> For the Quarter Ended (in millions, except per share data) March 31 June 30 September 30 December 31 ------------------------------------------------------------------------------------------------------------------ <S> <C> <C> <C> <C> 2001 REVENUES $ 5,680 $ 5,813 $ 5,941 $ 6,020 MEDICAL AND OPERATING EXPENSES $ 5,315 $ 5,429 $ 5,545 $ 5,599 EARNINGS FROM OPERATIONS $ 365 $ 384 $ 396 $ 421 NET EARNINGS $ 212 $ 223 $ 231 $ 247 BASIC NET EARNINGS PER COMMON SHARE $ 0.67 $ 0.71 $ 0.75 $ 0.79 DILUTED NET EARNINGS PER COMMON SHARE $ 0.64 $ 0.68 $ 0.71 $ 0.76 ------------------------------------------------------------------------------------------------------------------ 2000 Revenues $ 5,099 $ 5,220 $ 5,369 $ 5,434 Medical and Operating Expenses $ 4,826 $ 4,932 $ 5,060 $ 5,104 Earnings From Operations $ 273 $ 288 $ 309 $ 330 Net Earnings $ 174(1) $ 170 $ 182 $ 210(2) Basic Net Earnings per Common Share $ 0.53 $ 0.52 $ 0.56 $ 0.66 Diluted Net Earnings per Common Share $ 0.52(1) $ 0.50 $ 0.54 $ 0.63(2) ------------------------------------------------------------------------------------------------------------------ </TABLE> ------- (1) Includes a $14 million, net permanent tax benefit related to the contribution of UnitedHealth Capital investments to the UnitedHealth Foundation. Excluding this benefit, Net Earnings and Diluted Net Earnings per Common Share were $160 million and $0.48 per share, respectively. (2) Includes a $27 million gain ($17 million after tax) related to the disposition of UnitedHealth Capital investments. Excluding this gain, Net Earnings and Diluted Net Earnings per Common Share were $193 million and $0.58 per share, respectively. PAGE 56 UnitedHealth Group

REPORT OF MANAGEMENT The management of UnitedHealth Group is responsible for the integrity and objectivity of the consolidated financial information contained in this annual report. The consolidated financial statements and related information were prepared according to accounting principles generally accepted in the United States and include some amounts that are based on management's best estimates and judgments. To meet its responsibility, management depends on its accounting systems and related internal accounting controls. These systems are designed to provide reasonable assurance, at an appropriate cost, that financial records are reliable for use in preparing financial statements and that assets are safeguarded. Qualified personnel throughout the organization maintain and monitor these internal accounting controls on an ongoing basis. The Audit Committee of the board of directors, composed entirely of directors who are not employees of the company, meets periodically and privately with the company's independent public accountants and management to review accounting, auditing, internal control, financial reporting and other matters. WILLIAM W. MCGUIRE, MD Chairman and Chief Executive Officer STEPHEN J. HEMSLEY President and Chief Operating Officer PATRICK J. ERLANDSON Chief Financial Officer REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Shareholders and Directors of UnitedHealth Group Incorporated: We have audited the accompanying consolidated balance sheets of UnitedHealth Group Incorporated (a Minnesota Corporation) and Subsidiaries as of December 31, 2001 and 2000, and the related consolidated statements of operations, changes in shareholders' equity and cash flows for each of the three years in the period ended December 31, 2001. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of UnitedHealth Group Incorporated and its Subsidiaries as of December 31, 2001 and 2000, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2001, in conformity with accounting principles generally accepted in the United States. ARTHUR ANDERSEN LLP Minneapolis, Minnesota January 24, 2002 PAGE 57 UnitedHealth Group

CORPORATE AND BUSINESS LEADERS UNITEDHEALTH GROUP WILLIAM W. MCGUIRE, MD Chairman and Chief Executive Officer STEPHEN J. HEMSLEY President and Chief Operating Officer PATRICK J. ERLANDSON Chief Financial Officer DAVID J. LUBBEN General Counsel JEANNINE M. RIVET Executive Vice President JAMES B. HUDAK Chief Executive Officer UnitedHealth Technologies REED V. TUCKSON, MD Senior Vice President Consumer Health and Medical Care Advancement L. ROBERT DAPPER Senior Vice President Human Capital JOHN S. PENSHORN Director of Capital Markets Communications and Strategy UNITEDHEALTHCARE ROBERT J. SHEEHY Chief Executive Officer OVATIONS LOIS QUAM Chief Executive Officer UNIPRISE R. CHANNING WHEELER Chief Executive Officer SPECIALIZED CARE SERVICES RONALD B. COLBY Chief Executive Officer INGENIX JEANNINE M. RIVET Chief Executive Officer BOARD OF DIRECTORS WILLIAM C. BALLARD, JR. Of Counsel Greenebaum, Doll & McDonald Louisville, Kentucky, law firm RICHARD T. BURKE Former Chief Executive Officer and Governor Phoenix Coyotes National Hockey League team STEPHEN J. HEMSLEY President and Chief Operating Officer UnitedHealth Group JAMES A. JOHNSON Vice Chairman Perseus, LLC Private merchant banking and investment firm THOMAS H. KEAN President Drew University DOUGLAS W. LEATHERDALE Former Chairman and Chief Executive Officer The St. Paul Companies, Inc. Insurance and related services WILLIAM W. MCGUIRE, MD Chairman and Chief Executive Officer UnitedHealth Group WALTER F. MONDALE Partner Dorsey & Whitney LLP Minneapolis, Minnesota, law firm MARY O. MUNDINGER, RN, DRPH Dean and Centennial Professor in Health Policy, School of Nursing, and Associate Dean, Faculty of Medicine Columbia University ROBERT L. RYAN Senior Vice President and Chief Financial Officer Medtronic, Inc. Medical technology company DONNA E. SHALALA, PHD President University of Miami WILLIAM G. SPEARS Managing Partner Spears Grisanti & Brown LLC New York City-based investment counseling and management firm GAIL R. WILENSKY, PHD Senior Fellow Project HOPE International health foundation AUDIT COMMITTEE WILLIAM C. BALLARD, JR. JAMES A. JOHNSON DOUGLAS W. LEATHERDALE ROBERT L. RYAN COMPENSATION AND HUMAN RESOURCES COMMITTEE THOMAS H. KEAN MARY O. MUNDINGER WILLIAM G. SPEARS COMPLIANCE AND GOVERNMENT AFFAIRS COMMITTEE RICHARD T. BURKE WALTER F. MONDALE GAIL R. WILENSKY EXECUTIVE COMMITTEE WILLIAM C. BALLARD, JR. DOUGLAS W. LEATHERDALE WILLIAM W. MCGUIRE WILLIAM G. SPEARS NOMINATING COMMITTEE WILLIAM C. BALLARD, JR. THOMAS H. KEAN DOUGLAS W. LEATHERDALE WILLIAM W. MCGUIRE WILLIAM G. SPEARS PAGE 58 UnitedHealth Group

FINANCIAL PERFORMANCE AT A GLANCE <TABLE> <CAPTION> GROWTH & PROFITS -- CONSOLIDATED(1) (in millions, except per share data) 2001 2000 1999 --------------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> Revenues $ 23,454 $ 21,122 $ 19,562 Continuing Markets Revenue Growth Rate 15% 12% 13% Earnings From Operations $ 1,566 $ 1,200 $ 943 Operating Margin 6.7% 5.7% 4.8% Return on Net Assets 30.7% 25.5% 19.8% Net Earnings $ 913 $ 705 $ 563 Net Margin 3.9% 3.3% 2.9% Diluted Net Earnings per Share $ 2.79 $ 2.10 $ 1.59 </TABLE> <TABLE> <CAPTION> GROWTH & PROFITS -- BY SEGMENT (in millions) 2001 2000 1999 --------------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> HEALTH CARE SERVICES Revenues $ 20,494 $18,696 $ 17,581 Earnings From Operations $ 944 $ 739 $ 578 Operating Margin 4.6% 4.0% 3.3% Return on Net Assets 29.2% 24.6% 20.6% UNIPRISE Revenues $ 2,462 $ 2,140 $ 1.865 Earnings From Operations $ 374 $ 289 $ 222 Operating Margin 15.2% 13.5% 11.9% Return on Net Assets 37.2% 30.6% 22.6% SPECIALIZED CARE SERVICES Revenues $ 1,254 $ 974 $ 726 Earnings From Operations $ 214 $ 174 $ 128 Operating Margin 17.1% 17.9% 17.6% Return on Net Assets 59.1% 68.8% 80.0% INGENIX Revenues $ 447 $ 375 $ 258 Earnings From Operations $ 48 $ 32 $ 25 Operating Margin 10.7% 8.5% 9.7% Return on Net Assets 7.5% 5.2% 5.4% </TABLE> <TABLE> <CAPTION> CAPITAL ITEMS (in millions, except per share data) 2001 2000 1999 --------------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> Cash Flows From Operating Activities $ 1,844 $ 1,521 $ 1,189 Capital Expenditures $ 425 $ 245 $ 196 Consideration Paid or Issued for Acquisitions $ 255 $ 76 $ 334 Debt to Total Capital 28.9% 24.7% 20.4% Return on Shareholders' Equity 24.5% 19.0% 14.1% Year-End Market Capitalization $21,841 $ 19,470 $ 8,896 Year-End Common Share Price $ 70.77 $ 61.38 $ 26.56 </TABLE> ------------------------------------------------------------------------------- (1) Excludes nonrecurring items in 1999 and 2000, as described in footnotes 1 and 2 at the bottom of page 22. PAGE 59 UnitedHealth Group

INVESTOR INFORMATION MARKET PRICE OF COMMON STOCK The following table shows the range of high and low sales prices for the company's stock as reported on the New York Stock Exchange for the calendar periods shown through February 25, 2002. These prices do not include commissions or fees associated with purchasing or selling this security. <TABLE> <CAPTION> HIGH LOW ---------------------------------------------------- <S> <C> <C> 2002 First Quarter Through February 25, 2002 $75.75 $ 68.52 ---------------------------------------------------- 2001 First Quarter $64.36 $50.50 Second Quarter $67.40 $52.50 Third Quarter $70.00 $58.80 Fourth Quarter $72.80 $62.42 ---------------------------------------------------- 2000 First Quarter $32.33 $23.18 Second Quarter $44.50 $28.88 Third Quarter $50.56 $39.06 Fourth Quarter $63.44 $48.63 ---------------------------------------------------- </TABLE> As of February 25, 2002, the company had 12,970 shareholders of record. ACCOUNT QUESTIONS Our transfer agent, Wells Fargo, can help you with a variety of shareholder-related services, including: Change of address Lost stock certificates Transfer of stock to another person Additional administrative services You can call our transfer agent at (800) 468-9716 or locally at (651) 450-4064. You can write them at: Wells Fargo Shareowner Services P.O. Box 64854 Saint Paul, Minnesota 55164-0854 Or you can e-mail our transfer agent at: stocktransfer@wellsfargo.com INVESTOR RELATIONS You can contact UnitedHealth Group Investor Relations any time to order, without charge, financial documents, such as the annual report and Form 10-K. You can write to us at: Investor Relations, MN008-T930 UnitedHealth Group P.O. Box 1459 Minneapolis, Minnesota 55440-1459 ANNUAL MEETING We invite UnitedHealth Group shareholders to attend our annual meeting, which will be held on Wednesday, May 15, 2002, at 10 a.m., at UnitedHealth Group Center, 9900 Bren Road East, Minnetonka, Minnesota. DIVIDEND POLICY UnitedHealth Group's dividend policy was established by its board of directors in August 1990. The policy requires the board to review the company's audited financial statements following the end of each fiscal year and decide whether it is advisable to declare a dividend on the outstanding shares of common stock. Shareholders of record on April 2, 2001, received an annual dividend for 2001 of $0.03 per share. On February 12, 2002, the board of directors approved an annual dividend for 2002 of $0.03 per share. The dividend will be paid on April 17, 2002, to shareholders of record at the close of business on April 1, 2002. STOCK LISTING The company's common stock is traded on the New York Stock Exchange under the symbol UNH. INFORMATION ONLINE You can view our annual report and obtain more information about UnitedHealth Group and its businesses via the Internet at: www.unitedhealthgroup.com

EXHIBIT 21 SUBSIDIARIES OF THE REGISTRANT <Table> <Caption> STATE OF NAME OF ENTITY INCORPORATION SUBSIDIARY OF WHAT ENTITY --------------------------------------------------------------- ------------------ ----------------------------------------------- <S> <C> <C> Ingenix, Inc. Delaware UnitedHealth Group Incorporated Reden & Anders, Ltd. Minnesota Ingenix, Inc. Subrogation Advantage, Ltd. Minnesota Ingenix, Inc. Ingenix Publishing, Inc. Delaware Ingenix, Inc. Ingenix Health Intelligence, L.L.C. Delaware Ingenix Publishing, Inc. Ingenix Pharmaceutical Services, Inc. Delaware Ingenix, Inc. Ingenix International (Canada), Inc. Canada Ingenix Pharmaceutical Services, Inc. Ingenix Services, Inc. Delaware Ingenix Pharmaceutical Services, Inc. Ingenix Pharmaceutical Services (Deutschland) GmbH Germany Ingenix Pharmaceutical Services, Inc. Ingenix International (Hong Kong) Limited Hong Kong Ingenix Pharmaceutical Services, Inc. Ingenix Pharmaceutical Services Holdings, Inc. Delaware Ingenix Pharmaceutical Services, Inc. ClinPharm International Limited United Kingdom Ingenix Pharmaceutical Services Holdings, Inc. Ingenix Pharmaceutical Services (UK) Limited United Kingdom ClinPharm International Limited Ingenix Pharmaceutical Services (Spain) SL Spain Ingenix Pharmaceutical Services (UK) Limited Ingenix Pharmaceutical Services (Australia) Pty Ltd Australia Ingenix Pharmaceutical Services (UK) Limited Ingenix International (Italy) s.r.l. Italy Ingenix Pharmaceutical Services (UK) Limited ClinPharm International SARL France Ingenix Pharmaceutical Services (UK) Limited Worldwide Clinical Trials SARL France ClinPharm International SARL Ingenix Pharmaceutical Services, LLC Delaware Ingenix Pharmaceutical Services Holdings, Inc. InSite Clinical Trials LLC Delaware Ingenix Pharmaceutical Services Holdings, Inc. CT Management, Inc. California Ingenix Pharmaceutical Services Holdings, Inc. ICT (UK) Limited United Kingdom Ingenix Pharmaceutical Services Holdings, Inc. Ingenix International (Australia) Pty Limited Australia Ingenix Pharmaceutical Services Holdings, Inc. Ingenix International (Netherlands) BV Netherlands Ingenix Pharmaceutical Services Holdings, Inc. Ingenix Pharmaceutical Services (Sweden) AB Sweden Ingenix Pharmaceutical Services Holdings, Inc. Ingenix Pharmaceutical Services de Argentina S.R.L. Argentina Ingenix Pharmaceutical Services Holdings, Inc. Ingenix International (Czech Republic), s.r.o. Czechoslovakia Ingenix Pharmaceutical Services Holdings, Inc. Worldwide Clinical Trials, SL Spain Ingenix Pharmaceutical Services Holdings, Inc. Ingenix International (Hungary) Ltd. Hungary Ingenix Pharmaceutical Services Holdings, Inc. Ingenix Pharmaceutical Services (RSA) Proprietary Limited South Africa Ingenix Pharmaceutical Services Holdings, Inc. Ingenix International (Finland) Oy Finland Ingenix Pharmaceutical Services Holdings, Inc. Ingenix International (UK) Limited United Kingdom Ingenix Pharmaceutical Services Holdings, Inc. UnitedHealthcare International Asia, LLC Delaware UnitedHealth Group Incorporated UnitedHealthcare International Malaysia Sdn. Bhd. Malaysia UnitedHealthcare International Asia, LLC UnitedHealthcare Asia Limited Hong Kong UnitedHealthcare International Asia, LLC United HealthCare (Deutschland) GmbH Germany UnitedHealth Group Incorporated Philam Care Health Systems, Inc. Philippines UnitedHealth Group Incorporated AIG United HealthCare LLC Delaware UnitedHealth Group Incorporated AIA United HealthCare Limited Hong Kong AIG United HealthCare LLC H&W Indemnity, Ltd. Caymans UnitedHealth Group Incorporated UHC International Holdings, Inc. Delaware UnitedHealth Group Incorporated UHC International Services, Inc. Delaware UnitedHealth Group Incorporated UnitedHealthcare International Inc. Delaware UnitedHealth Group Incorporated United Healthcare International Mauritius Limited Maruitius UnitedHealth Group Incorporated Sedgewick Parekh Health Management (Private) Limited India United Healthcare International Mauritius Limited UnitedHealth Group Finance Company, Inc. Delaware UnitedHealth Group Incorporated Asia Services, LLC Delaware UnitedHealth Group Finance Company, Inc. Ovations, Inc. Delaware United HealthCare Services, Inc. Evercare of New York, IPA, Inc. New York Ovations, Inc. Optage, LLC Delaware Ovations, Inc. The Ovations Press, Inc. Delaware Ovations, Inc. The Ovations Press/Wurman, L.L.C. Delaware The Ovations Press, Inc. Lifemark Corporation Delaware Ovations, Inc. Arizona Health Concepts, Inc. Arizona Lifemark Corporation </Table> Page 1 of 3

EXHIBIT 21 SUBSIDIARIES OF THE REGISTRANT <Table> <Caption> STATE OF NAME OF ENTITY INCORPORATION SUBSIDIARY OF WHAT ENTITY --------------------------------------------------------------- ------------------ ----------------------------------------------- <S> <C> <C> Evercare at Home, Inc. Arizona Lifemark Corporation Evercare of Arizona, Inc. Arizona Lifemark Corporation Evercare Connections, Inc. Delaware Lifemark Corporation Lifemark Care Management, Inc. Delaware Lifemark Corporation Lifemark Government Services, LLC Indiana Lifemark Care Management, Inc. Lifemark New York, Inc. Delaware Lifemark Corporation Lifemark at Home NY, Inc. New York Lifemark Corporation MCS HP New York, LLC New York Lifemark Corporation Evercare of Texas, L.L.C. Texas Lifemark Corporation Lifemark Healthplans of Delaware, Inc. Delaware Lifemark Corporation Uniprise, Inc. Delaware United HealthCare Services, Inc. United HealthCare Service Corp. New York Uniprise, Inc. United HealthCare (Ireland) Limited Ireland Uniprise, Inc. Charter Oak HealthCare Services, Inc. Delaware Uniprise, Inc. United Healthcare Services, Inc. Minnesota UnitedHealth Group Incorporated UnitedHealthcare, Inc. Delaware United HealthCare Services, Inc. United HealthCare of Alabama, Inc. Alabama United HealthCare, Inc. United HealthCare of Arizona, Inc. Arizona United HealthCare, Inc. Arizona Physicians IPA, Inc. Arizona United HealthCare of Arizona, Inc. United HealthCare of Arkansas, Inc. Arkansas United HealthCare, Inc. United HealthCare of Colorado, Inc. Colorado United HealthCare, Inc. United HealthCare of Florida, Inc. Florida United HealthCare, Inc. United HealthCare of Georgia, Inc. Georgia United HealthCare, Inc. United HealthCare of Illinois, Inc. Delaware United HealthCare, Inc. United HealthCare of Louisiana, Inc. Louisiana United HealthCare, Inc. United HealthCare of the Mid-Atlantic, Inc. Maryland United HealthCare, Inc. United HealthCare of the Midlands, Inc. Nebraska United HealthCare, Inc. United HealthCare of the Midwest, Inc. Missouri United HealthCare, Inc. United HealthCare of Mississippi, Inc. Mississippi United HealthCare, Inc. United HealthCare of Nevada, Inc. Nevada United HealthCare, Inc. United HealthCare of New Jersey, Inc. New Jersey United HealthCare, Inc. United HealthCare of New York, Inc. New York United HealthCare, Inc. United HealthCare of North Carolina, Inc. North Carolina United HealthCare, Inc. United HealthCare of Tennessee, Inc. Tennessee United HealthCare, Inc. United HealthCare of Texas, Inc. Texas United HealthCare, Inc. United HealthCare of Utah Utah United HealthCare, Inc. United HealthCare of Wisconsin, Inc. Wisconsin United HealthCare, Inc. United HealthCare Network, Inc. Alabama United HealthCare, Inc. United HealthCare of Upstate New York, Inc. New York United HealthCare, Inc. Unified Limited United Kingdom United HealthCare Services, Inc. United HealthCare of New England, Inc. Rhode Island United HealthCare Services, Inc. United HealthCare of Ohio, Inc. Ohio United HealthCare Services, Inc. United HealthCare of Oregon, Inc. Oregon United HealthCare Services, Inc. United HealthCare Plans of Puerto Rico, Inc. Puerto Rico United HealthCare Services, Inc. United HealthCare Networks, Inc. Delaware United HealthCare Services, Inc. UnitedHealth Capital, LLC Delaware United HealthCare Services, Inc. Commonwealth Physicians Services Corporation Kentucky United HealthCare Services, Inc. United HealthCare of Minnesota, Inc. Minnesota United HealthCare Services, Inc. United HealthCare of Washington, Inc. Washington United HealthCare Services, Inc. UnitedHealth Financial Services, Inc. Delaware United HealthCare Services, Inc. Exante Bank, Inc. Utah UnitedHealth Financial Services, Inc. United HealthCare of Kentucky, Ltd. Kentucky United HealthCare Services, Inc. </Table> Page 2 of 3

EXHIBIT 21 SUBSIDIARIES OF THE REGISTRANT <Table> <Caption> STATE OF NAME OF ENTITY INCORPORATION SUBSIDIARY OF WHAT ENTITY --------------------------------------------------------------- ------------------ ---------------------------------------------- <S> <C> <C> Specialized Care Services, Inc. Delaware United HealthCare Services, Inc. Optum Group, LLC Delaware Specialized Care Services, Inc. Coordinated Vision Care, Inc. Delaware Specialized Care Services, Inc. Coordinated Vision Care of New York, IPA, Inc. New York Coordinated Vision Care, Inc. Unimerica Insurance Company Maryland Specialized Care Services, Inc. United Resource Networks, Inc. Delaware Specialized Care Services, Inc. Specialty Resource Services, Inc. Delaware United Resource Networks, Inc. National Benefit Resources, Inc. Minnesota Specialized Care Services, Inc. Stop-Loss Life Reinsurance Company Arizona National Benefit Resources, Inc. Spectera, Inc. Maryland Specialized Care Services, Inc. Spectera Vision Services of California, Inc. California Specialized Care Services, Inc. Spectera Vision Services of Florida, Inc. Florida Specialized Care Services, Inc. Spectera Insurance Company Maryland Specialized Care Services, Inc. Spectera Eyecare of North Carolina, Inc. North Carolina Specialized Care Services, Inc. Spectera Insurance Company, Inc. Texas Specialized Care Services, Inc. Spectera Vision, Inc. Virginia Specialized Care Services, Inc. Group Vision Associates, Inc. Pennsylvania Specialized Care Services, Inc. American Chiropractic Network, Inc. Minnesota United HealthCare Services, Inc. Managed Physical Network, Inc. New York American Chiropractic Network, Inc. Managed Physical Network IPA of New York, Inc. New York American Chiropractic Network, Inc. American Chiropractic Network IPA of New York, Inc. New York American Chiropractic Network, Inc. Dental Benefit Providers, Inc. Delaware United HealthCare Services, Inc. Dental Benefit Providers of California, Inc. California Dental Benefit Providers, Inc. Dental Benefit Providers of Illinois, Inc. Illinois Dental Benefit Providers, Inc. Dental Benefit Providers of New Jersey, Inc. New Jersey Dental Benefit Providers, Inc. Dental Insurance Company of America New York Dental Benefit Providers, Inc. DBP-KAI, Inc. New York Dental Benefit Providers, Inc. Dental Benefit Providers of Maryland, Inc. Maryland Dental Benefit Providers, Inc. Dental Benefit Services of Illinois, Inc. (non-profit) Illinois Dental Benefit Providers, Inc. United Behavioral Health California United HealthCare Services, Inc. U.S. Behavioral Health Plan, California (Knox Keene) California United Behavioral Health Behavioral Health Administrators California United Behavioral Health United Behavioral Health of New York, I.P.A., Inc. New York United Behavioral Health Working Solutions, Inc. Oregon United Behavioral Health Unimerica, Inc. Delaware United HealthCare Services, Inc. United HealthCare Insurance Company (Ins.) Connecticut Unimerica, Inc. Clarite, LLC United HealthCare Insurance Company (Ins.) The MetraHealth Employee Benefits Company, Inc. United HealthCare Insurance Company (Ins.) The MetraHealth Care Network, Inc. The MetraHealth Employee Benefits Company, Inc. MetraHealth Care Management Corporation Delaware United HealthCare Insurance Company (Ins.) United HealthCare of California, Inc. California MetraHealth Care Management Corporation United HealthCare Insurance Company of Illinois (Ins.) Illinois United HealthCare Insurance Company (Ins.) United HealthCare Insurance Company of New York (Ins.) New York United HealthCare Insurance Company (Ins.) United HealthCare Insurance Company of Ohio (Ins.) Ohio United HealthCare Insurance Company (Ins.) United HealthCare Life Insurance Company of New York New York United HealthCare Insurance Company (Ins.) United HealthCare Products, LLC Delaware United HealthCare Insurance Company (Ins.) United HealthCare Service LLC Delaware United HealthCare Insurance Company (Ins.) </Table> Page 3 of 3

EXHIBIT 23 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation of our report dated January 24, 2002, incorporated by reference in this Form 10-K, into the Company's previously filed Registration Statement File Nos. 2-95342, 33-3558, 33-22310, 33-27208, 33-36579, 33-50282, 33-59083, 33-59623, 33-63885, 33-67918, 33-68300, 33-75846, 33-79632, 33-79634, 33-79636, 33-79638, 333-01517, 333-01915, 333-02525, 333-04401, 333-04875, 333-05291, 333-05717, 333-06533, 333-25923, 333-27277, 333-41661, 333-44569, 333-44613, 333-45289, 333-45319, 333-50461, 333-55777, 333-66013, 333-71007, 333-81337, 333-87243, 333-90247, 333-46284 and 333-55666. /s/ ARTHUR ANDERSEN LLP Minneapolis, Minnesota, April 1, 2002

EXHIBIT 24 POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints William W. McGuire, M.D., Stephen J. Hemsley, and David J. Lubben, and each of them, his or her true and lawful attorneys-in-fact and agents, each acting alone, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign an Annual Report on Form 10-K for the year ended December 31, 2001 for UnitedHealth Group Incorporated, and any and all amendments thereto, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting authority to do and perform each and every act and thing requisite or necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, each acting alone, or his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Dated: February 12, 2002 /s/ William C. Ballard /s/ Walter F. Mondale ----------------------------------- ------------------------------------ William C. Ballard, Jr. Walter F. Mondale /s/ Richard T. Burke, Sr. /s/ Mary O'Neil Mundinger ----------------------------------- ------------------------------------ Richard T. Burke, Sr. Mary O'Neil Mundinger /s/ Stephen J. Hemsley /s/ Robert L. Ryan ----------------------------------- ------------------------------------ Stephen J. Hemsley Robert L. Ryan /s/ James A. Johnson /s/ Donna E. Shalala ----------------------------------- ------------------------------------ James A. Johnson Donna E. Shalala /s/ Thomas H. Kean ----------------------------------- ------------------------------------ Thomas H. Kean William G. Spears /s/ Douglas W. Leatherdale /s/ Gail R. Wilensky ----------------------------------- ------------------------------------ Douglas W. Leatherdale Gail R. Wilensky /s/ William W. McGuire ----------------------------------- William W. McGuire, M.D.

EXHIBIT 99 April 1, 2002 Securities and Exchange Commission Washington, D.C. 20549 Re: Arthur Andersen LLP ("Andersen") Representations In connection with Andersen's audit of the consolidated financial statements of UnitedHealth Group Incorporated and its subsidiaries for the year ended December 31, 2001, Andersen has represented to UnitedHealth Group that its audit was subject to Andersen's quality control system for the U.S. accounting and auditing practice to provide reasonable assurance that the engagement was conducted in compliance with professional standards and that there was appropriate continuity of Andersen personnel working on the audit and availability of national office consultation. Availability of personnel at foreign affiliates of Andersen is not relevant to this audit. UnitedHealth Group Incorporated By: /s/ Patrick J. Erlandson -------------------------------- Chief Financial Officer