UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
For the transition period from _________ to _________
Commission file number: 0-13253
UNITED HEALTHCARE CORPORATION
State of Incorporation: Minnesota
I.R.S. Employer Identification No: 41-1321939
Principal Executive Offices:
300 Opus Center
9900 Bren Road East
Minnetonka MN, 55343
Telephone Number: (612)936-1300
Indicate by check mark (x) whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No _______
The number of shares of Common Stock, par value $.01 per share, outstanding on
August 7, 1995 was 173,543,568.
UNITED HEALTHCARE CORPORATION
INDEX
Part I. Financial Information. Page Number
Item 1. Financial Statements
Condensed Consolidated Balance Sheets at
June 30, 1995 and December 31, 1994 3
Condensed Consolidated Statements of Operations for the three
and six month periods ended June 30, 1995 and 1994 4
Condensed Consolidated Statements of Cash Flows for the
six month periods ended June 30, 1995 and 1994 5
Notes to Condensed Consolidated Financial Statements 6
Report of Independent Public Accountants 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K 16
Signatures 17
UNITED HEALTHCARE CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share & per share data)
(unaudited)
June 30, December 31,
ASSETS 1995 1994
Current Assets
Cash and cash equivalents $ 672,258 $ 1,519,049
Short-term investments 358,914 135,287
Accounts receivable, net 217,681 167,369
Other 55,262 86,510
Total Current Assets 1,304,115 1,908,215
Long-term Investments 1,456,333 1,115,054
Intangible Assets, net 807,947 303,613
Property and Equipment, net 187,591 162,597
TOTAL ASSETS $ 3,755,986 $ 3,489,479
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Medical costs payable $ 473,612 $ 443,559
Accounts payable 83,522 66,938
Accrued expenses 52,995 83,087
Unearned premiums 93,534 70,718
Total Current Liabilities 703,663 664,302
Long-term Obligations 20,545 24,275
Minority Interests 6,374 5,446
Shareholders' Equity
Preferred stock, $.001 par value - 10,000,000
shares authorized; no shares outstanding and
9,900,000 shares available for issuance -- --
Common stock, $.01 par value - 500,000,000 shares
authorized; 173,458,000 and 172,831,000 issued and
outstanding 1,735 1,728
Additional paid-in capital 769,187 752,472
Retained earnings 2,259,175 2,085,056
Deferred compensation -- (35)
Net unrealized holding losses on investments
available for sale, net of tax effects (4,693) (43,765)
Total Shareholders' Equity 3,025,404 2,795,456
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 3,755,986 $ 3,489,479
See notes to condensed consolidated financial statements
UNITED HEALTHCARE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
Three Months Ended June 30, Six Months Ended June 30,
1995 1994 1995 1994
REVENUES
Premium $1,048,773 $ 835,702 $2,053,262 $1,640,693
Management Services 68,749 77,552 133,973 158,974
Investment Income and Other 40,423 26,211 74,545 43,354
Total Revenues 1,157,945 939,465 2,261,780 1,843,021
OPERATING EXPENSES
Medical Costs 824,161 652,266 1,607,622 1,281,844
Selling, General and
Administrative Costs 169,519 148,168 327,097 291,534
Depreciation and Amortization 20,384 16,378 40,049 32,281
Total Operating Expenses 1,014,064 816,812 1,974,808 1,605,659
EARNINGS FROM OPERATIONS 143,881 122,653 286,972 237,362
Interest Expense (378) (569) (558) (1,137)
Merger Costs -- (35,940) -- (35,940)
EARNINGS BEFORE INCOME TAXES,
MINORITY INTERESTS AND
EXTRAORDINARY GAIN 143,503 86,144 286,414 200,285
Provision for Income Taxes (53,096) (33,031) (105,974) (76,098)
Minority Interests in Net
Earnings of Consolidated
Subsidiaries (528) (457) (1,129) (1,133)
NET EARNINGS BEFORE
EXTRAORDINARY GAIN 89,879 52,656 (1) 179,311 123,054 (1)
EXTRAORDINARY GAIN ON SALE OF
SUBSIDIARY (net of income
taxes of $808,758) -- 1,377,075 -- 1,377,075
NET EARNINGS $ 89,879 $1,429,731 $ 179,311 $1,500,129
NET EARNINGS PER SHARE
BEFORE EXTRAORDINARY GAIN $ 0.51 $ 0.30 (1) $ 1.02 $ 0.70 (1)
EXTRAORDINARY GAIN PER SHARE -- 7.85 -- 7.86
NET EARNINGS PER SHARE $ 0.51 $ 8.15 $ 1.02 $ 8.56
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 176,304 175,490 176,390 175,160
See notes to condensed consolidated financial statements
<FN>
<F1> Excluding the effects of the Ramsay-HMO, Inc. and Complete Health Services, Inc. merger
costs, net earnings before extraordinary gain for the three and six month periods ended June 30,
1994 would have been $74,939 and $145,337, respectively, or $.43 and $.83 per share.
</FN>
UNITED HEALTHCARE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Six Months Ended June 30,
1995 1994
OPERATING ACTIVITIES
Net Earnings $ 179,311 $1,500,129
Non Cash Items
Depreciation and amortization 40,049 32,281
Net gain on sale of subsidiary -- (1,377,075)
Other (5,953) 4,733
Net Change in Other Operating Items, net of effects from
acquisitions and sale of subsidiary
Accounts receivable and other current assets (19,834) (28,469)
Medical costs payable (13,042) (20,447)
Accounts payable (28,556) (42,876)
Accrued expenses (27,446) 15,983
Unearned premiums 22,237 (40,410)
Cash Flows From Operating Activities 146,766 43,849
INVESTING ACTIVITIES
Cash Received From Sale of Subsidiary, net of
cash surrendered and other effects -- 2,298,819
Cash Paid for Acquisitions, net of cash assumed
and other effects (546,054) (48,429)
Net Purchases of Property and Equipment (44,348) (35,116)
Purchases of Investments Available for Sale (1,843,338) (565,756)
Maturities/Sales of Investments Available for Sale 1,450,632 313,923
Purchases of Investments Held to Maturity (7,239) (945)
Maturities of Investments Held to Maturity 3,927 20,001
Other (8,590) (4,868)
Cash Flows From (Used for)Investing Activities (995,010) 1,977,629
FINANCING ACTIVITIES
Net Proceeds from Stock Option Exercises 11,239 24,467
Payment of Long-term Obligations (4,594) (16,166)
Dividends Paid (5,192) (4,626)
Cash Flows From (Used for) Financing Activities 1,453 3,675
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (846,791) 2,025,153
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 1,519,049 228,260
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 672,258 $2,253,413
See notes to condensed consolidated financial statements
UNITED HEALTHCARE CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. Basis of Accounting
In the opinion of management, the accompanying unaudited condensed
consolidated financial statements reflect all adjustments, consisting solely
of normal recurring adjustments, necessary for a fair presentation of the
financial results for the interim periods presented. Pursuant to the rules
and regulations of the Securities and Exchange Commission, footnote
disclosures which would substantially duplicate the disclosures contained in
the audited financial statements of the Company have been omitted from these
interim financial statements. Although the Company believes that the
disclosures presented below are adequate to make the interim financial
statements presented not misleading, it is suggested that these unaudited
condensed consolidated financial statements be read in conjunction with the
consolidated financial statements and the notes thereto incorporated by
reference in the Company's annual report on Form 10-K for the year ended
December 31, 1994.
2. Acquisitions
On June 25, 1995, the Company signed a definitive agreement to acquire The
MetraHealth Companies, Inc. (MetraHealth). MetraHealth was formed in January
1995 by combining the group health care operations of Metropolitan Life
Insurance Company and The Travelers Insurance Company. MetraHealth covers
more than 10 million individuals, including 4.6 million in network-based care
programs, approximately 450,000 of whom are health maintenance organization
members. In addition, MetraHealth covers approximately 18 million individuals
through its specialty care programs.
Under the terms of the agreement, the Company will pay $1.15 billion in cash
and $500 million of 5.75% convertible preferred stock, for a total
consideration at closing of $1.65 billion. The convertible preferred stock
will be convertible into the Company's common stock at $49.48 per share, will
have a three year no-call provision, and will have a ten-year mandatory
redemption. In addition, MetraHealth's current owners will be eligible to
receive up to an additional $350 million if MetraHealth achieves certain 1995
operating results, as defined. Any consideration payable for this 1995
earnout over and above the initial $1.65 billion may, at the Company's sole
discretion at that time, be in the form of cash, convertible debt, convertible
preferred stock, or straight debt. If the Company's post-acquisition combined
net income for 1996 and 1997 reaches certain specified levels, certain of
MetraHealth's current owners will be eligible to receive up to an
additional $175 million in cash for each of those years.
Completion of the acquisition, which is subject to regulatory approvals and
other steps, is expected before the end of 1995. At such time, the
transaction will be accounted for as a purchase.
On January 3, 1995, the Company completed its acquisition of GenCare Health
Systems, Inc. (GenCare), a health plan based in St. Louis, Missouri, which
UNITED HEALTHCARE CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(continued)
served 230,000 members at the time of acquisition. The total purchase price
of the acquisition was $515.4 million in cash. The acquisition was accounted
for using the purchase method of accounting whereby the purchase price was
allocated to assets and liabilities based on their estimated fair values at
the date of acquisition. The purchase price and associated acquisition costs
in excess of the estimated fair value of net assets acquired of $490.0 million
is being amortized on a straight-line basis over 40 years. Had the
transaction occurred on January 1, 1994, combined unaudited pro forma results
for the six month period ended June 30, 1994 would have been: revenues - $1.94
billion; net earnings before extraordinary gain $120.4 million; net earnings
$1.50 billion; net earnings per share before extraordinary gain - $0.69; and
net earnings per share - $8.55.
3. Dividends
On February 13, 1995, the Company's Board of Directors approved an annual
dividend for 1995 of $0.03 per share to holders of the Company's common stock.
This dividend, totaling $5.2 million, was paid on April 15, 1995 to
shareholders of record at the close of business on April 1, 1995.
4. Cash and Investments
As of June 30, 1995, the amortized cost, gross unrealized holding gains and
losses and fair value of the Company's cash and investments were as follows
(in thousands):
Gross Gross
Unrealized Unrealized
Amortized Holding Holding Fair
Cost Gains Losses Value
Cash and Cash Equivalents $ 672,258 $ -- $ -- $ 672,258
Investments Available for Sale 1,796,413 16,615 (24,064) 1,788,964
Investments Held to Maturity 26,283 318 (258) 26,343
Total Cash and Investments $2,494,954 $ 16,933 $ (24,322) $ 2,487,565
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To United HealthCare Corporation:
We have reviewed the accompanying condensed consolidated balance sheet of
United HealthCare Corporation (a Minnesota corporation) and Subsidiaries as of
June 30, 1995, and the related condensed consolidated statements of operations
for the three and six months periods ended June 30, 1995 and 1994, and the
condensed consolidated statements of cash flows for the six month periods
ended June 30, 1995 and 1994. These financial statements are the
responsibility of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures
to financial data and making inquiries of persons responsible for financial
and accounting matters. It is substantially less in scope than an audit
conducted in accordance with generally accepted auditing standards, the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the financial statements referred to above for them to be in
conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of United HealthCare Corporation and
Subsidiaries as of December 31, 1994 (not presented herein), and, in our
report dated February 14, 1995, we expressed an unqualified opinion on that
statement. In our opinion, the information set forth in the accompanying
condensed consolidated balance sheet as of December 31, 1994, is fairly
stated, in all material respects, in relation to the consolidated balance
sheet from which it has been derived.
Arthur Andersen LLP
Minneapolis, Minnesota,
August 3, 1995
UNITED HEALTHCARE CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The consolidated financial results and related comparisons presented in this
discussion include two significant transactions which affect year-to-year
comparability. On May 27, 1994, the Company sold Diversified Pharmaceutical
Services, Inc. (Diversified), then a wholly owned subsidiary, to SmithKline
Beecham Corporation for $2.3 billion in cash. In connection with this
transaction, the Company recognized an extraordinary gain after transaction
costs and income tax effects of $1.38 billion, or $7.86 per share. The
results of Diversified subsequent to the sale are not included in the
consolidated financial results of the Company.
On January 3, 1995, the Company acquired GenCare Health Systems, Inc.
(GenCare), a health plan based in St. Louis, Missouri serving 230,000 members
at the time of acquisition. On February 28, 1995, the Company acquired Group
Sales and Services of Puerto Rico, Inc. (Group Sales), a health plan based in
San Juan, Puerto Rico serving 135,000 memebers at the time of acquisition.
Each of these acquisitions was accounted for as a purchase transaction.
Accordingly, only the post-acquisition results of GenCare and Group Sales are
included in the Company's consolidated financial results.
The following discussion should be read in conjunction with the accompanying
condensed consolidated financial statements and notes thereto.
CONSOLIDATED OPERATING RESULTS
Revenues for the three and six month periods ended June 30, 1995 of $1.16
billion and $2.26 billion exceeded revenues reported for the comparable 1994
periods by 23%. The growth in revenues was driven primarily by enrollment
gains within the Company s owned and managed health plans. In addition, the
Company's 1995 acquisitions of GenCare and Group Sales accounted for
approximately 40% of the increase in revenues for the three and six month
periods. The loss of revenues from the sale of Diversified was more than
offset by the investment income earned on the proceeds from the sale.
Total operating expenses as a percent of revenues for the first six months of
1995 were 87.3%, up slightly from 87.1% for the comparable 1994 period.
However, in the second quarter of 1995, this ratio increased to 87.6% compared
to 86.9% for the same three month period in 1994, primarily due to higher
medical costs in relation to the premium revenues associated with the
Company's Medicaid products and the Company's continued investment spending in
the internal development of new products and programs.
The Company s provision for income taxes represents the tax effects of its
current operations based on the Federal statutory tax rate, adjusted primarily
for the effects of tax-exempt investment income and state income taxes. The
effective income tax rate was 37% in 1995 and 38% in 1994.
Second quarter net earnings were $89.9 million in 1995, a 20% increase over
comparable net earnings of $74.9 million in 1994. On a per share basis, net
earnings for those periods increased from $0.43 in 1994 to $0.51 in 1995. For
the six months ended June 30, 1995, net earnings increased 23% to $179.3
million, or $1.02, per share from comparable 1994 net earnings of $145.3
million, or $0.83 per share.
In the second quarter of 1994, the Company recorded nonrecurring, non-
operating merger costs of $35.9 million associated with its May 1994
UNITED HEALTHCARE CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
acquisitions of Complete Health Services, Inc. (Complete) and Ramsay-HMO, Inc.
(Ramsay). This reduced second quarter 1994 net earnings by $22.3 million, or
$0.13 per share. Each of these acquisitions was accounted for as a pooling of
interests and, accordingly, the Company's consolidated operating results
include Complete Health and Ramsay for all periods presented.
LINE OF BUSINESS REPORTING
The Company operates in a single industry segment, managed health care. The
general management and various aspects of the Company s operations, including
information systems, transaction processing and certain administrative
functions and procedures, are interrelated. The following table presents
financial information reflecting the Company s operations by two primary lines
of business: (i) owned health plans and (ii) managed health plans and
specialty managed care services. This information is provided to facilitate a
more meaningful discussion of the Company s results of operations.
Owned health plan operations include health plans in which the Company has a
majority ownership interest and the Company s related insurance operations.
This line of business is characterized by operations in which the Company
assumes underwriting risk in return for premium revenue. The second line of
business, managed health plan and specialty managed care services operations,
provides administrative and other management services to health plans in which
the Company has less than a majority ownership interest, if any, and also
includes the results of the Company s specialty managed care services
operations. This line of business is characterized by operations in which the
Company receives fees for the provision of service, primarily administrative
in nature, and generally accepts no financial responsibility for health care
costs, except in the case of its subsidiary United Behavioral Systems (UBS)
and the formerly-owned Diversified. Through UBS, the Company does accept some
health care cost responsibility for the provision of mental health and
substance abuse services and thus recognizes premium revenue and medical
services expense. Except for directly identifiable expenses, the Company s
general and administrative expenses are allocated between the two lines of
business, primarily on the basis of enrollment, revenues, information systems
or other resource usage.
Diversified has been included in the managed and specialty line of business
through the date of sale. As a result of the acquisitions of Complete Health,
Ramsay and GenCare and the sale of Diversified, the managed health plans and
specialty managed care services line of business comprises a smaller portion
of the Company s total revenues and operating income.
UNITED HEALTHCARE CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
LINE OF BUSINESS FINANCIAL INFORMATION
(in thousands, except ratios)
Three Months Ended June 30, Six Months Ended June 30,
1995 1994 1995 1994
REVENUES (1)
Owned Health Plans $1,047,298 $ 831,819 $2,053,080 $1,635,070
Managed Health Plan
and Specialty Managed
Care Services (2) 100,212 133,892 193,024 283,716
Corporate and
Eliminations (3) 10,435 (26,246) 15,676 (75,765)
TOTAL REVENUES $1,157,945 $ 939,465 $2,261,780 $1,843,021
OPERATING INCOME (1)
Owned Health Plans $ 101,647 85,231 $ 208,792 168,882
Managed Health Plan
and Specialty Managed
Care Services (2) 18,631 19,687 35,807 43,130
Corporate and
Eliminations (3) 23,603 17,735 42,373 26,350
TOTAL OPERATING
INCOME $ 143,881 $122,653 $ 286,972 $ 237,362
OPERATING MARGIN
Owned Health Plans 9.7% 10.2% 10.2% 10.3%
Managed Health Plan
and Specialty Managed
Care Services (2) 18.6% 14.7% 18.6% 15.2%
TOTAL OPERATING MARGIN 12.4% 13.1% 12.7% 12.9%
<FN>
<F1> Revenues and operating income for each line of business include its respective
investment income. Interest earned on cash available for general corporate use is included
in "corporate and eliminations." Investment income included in the owned health plan line
of business for the second quarter of 1995 and 1994 was $13.3 million and $8.5 million,
respectively, and for the six month periods ended June 30, 1995 and 1994, $25.7 million and
$16.4 million, respectively. Investment income included in the "corporate and eliminations"
for the second quarter of 1995 and 1994 was $27.1 million and $17.7 million, respectively,
and for the six month periods ended June 30, 1995 and 1994, $48.8 million and $27.0,
respectively.
<F2> Excludes the post-disposition results of Diversified.
<F3> "Corporate and eliminations" includes revenue eliminations between lines of business and
amounts not deemed to be related to a line of business, including interest earned on cash
available for general corporate use, research and development costs and certain other
corporate expenses.
</FN>
UNITED HEALTHCARE CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
OWNED HEALTH PLANS
Revenues generated by the Company s owned health plans increased by 26% in
each of the three and six month periods ended June 30, 1995 compared to the
same periods in 1994. Excluding the effects of the GenCare amd Group Sales
acquisitions, the increase in revenues in three and six month periods ended
June 30, 1995 over the same periods in 1994 was 16%. This increase reflects
year-over-year enrollment growth of 17% and an average premium rate increase
on renewing commercial groups of approximately 2% in 1995.
The Company's enrollment growth during these periods slightly exceeded the
corrseponding growth in revenues in this line of business due to a small
change in the customer mix. Much of the commercial enrollment growth has been
in the small group product which is generally characterized as having lower
benefits (and therefore lower premiums) than the Company's other commercial
products. In addition, enrollment in the Company's self funded product (a
product where the Company receives administrative fees rather than premiums)
has increased 29% year-over-year.
Owned health plan commercial premiums are established by the Company based on
anticipated health care costs. The Company has been able to effectively manage
health care costs and maintain the rate at which its health care costs have
grown to 1% to 2% within the commercial line of business.
Competition for commercial enrollment in certain of the Company's owned health
plan markets has increased in recent quarters. However, the Company has
continued to follow its strategy of pricing in accordance with anticipated
health care costs. Depending on the level of future competition or other
external factors beyond the Company's control, there can be no assurances that
the Company's recent enrollment growth trends will continue.
The combination of the Company's pricing strategy and combined medical cost
management efforts are reflected in the owned health plans' medical expense
ratio (the percent of premium revenues used for medical costs). The medical
expense ratio for the first six months of 1995 was 79.2% down slightly from
79.3% for the same period in 1994. However, the owned health plans medical
expense ratio for the three month period ended June 30, 1995 increased to
79.4% from 79.1% for the comparable 1994 period. This second quarter increase
is largely a reflection of declines in Medicaid revenue rates in certain
markets and the Company's strategic decision to selectively increase Medicaid
provider reimbursements.
Owned health plan operating income increased 19% from $85.2 million for the
three months ended June 30, 1994 to $101.6 million for the same period in
1995. Through the first six months of 1995, operating income was $208.8
million, an increase of 24% over the same period in 1994. The operating
margin in this line of business for the six month period ended June 30, 1995
of 10.2% was comparable to the 10.3% for the same period in 1994. Consistent
with the movement in the medical expense ratio, the operating margin for the
second quarter of 1995 of 9.7% was down from 10.2% for the same quarter in
1994.
UNITED HEALTHCARE CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
MANAGED HEALTH PLAN AND
SPECIALTY MANAGED CARE SERVICES
As reported, revenues generated by the Company s managed health plans and
specialty managed care services operations decreased over 25% in each of the
three and six month periods ended June 30, 1995 compared to the same periods
in 1994. These results were significantly impacted by the effects of the sale
of Diversified in May 1994 and a change in the terms of the Company s
management agreement with the Minneapolis, Minnesota, based Medica health plan
in August 1994. The results of Diversified s operations have been included in
this line of business only through the date of sale. Under the new Medica
agreement, the Company transferred cost responsibility for certain management
contract expenses and employees to Medica. The Company s selling, general and
administrative expenses decreased accordingly, matched with a corresponding
decrease in management services revenues. Excluding the effects of the sale of
Diversified and the Medica contract change, revenues generated in this line of
business increased approximately 20% in each of the three and six month
periods ended June 30, 1995 compared to the same periods in 1994.
After excluding the effects of the Diversified sale and the change in the
Medica agreement, the principal factors behind the growth in revenues for the
three and six month periods ended June 30, 1995 were enrollment gains and
premium rate increases in the managed health plans and growth in the specialty
managed care services operations. The Company s revenues from its managed
health plans are typically based on a percentage of the plans premium
revenues. The managed health plans experienced year-over-year enrollment
growth of 19% and an average premium rate increase on renewing commercial
groups of approximately 2% in 1995. In addition, lives served by the Company s
specialty managed care services operations (excluding Diversified) increased
by 18% for the period ended June 30, 1995 compared to the same period in 1994.
The sale of Diversified also had an impact on the operating income generated
by this line of business. Operating income as reported for the three and six
month periods ended June 30, 1995, decreased $1.1 million and $7.3 million,
respectively, as compared to the same periods in 1994. However, after
excluding the effects of Diversified, operating income in each of these
periods actually increased over 30% reflecting the growth experienced by the
remaining managed health plan and specialty managed care services operations.
These remaining operations also have comparatively higher operating margins
than that experienced by Diversified. Accordingly, operating margins in this
line of business increased from 14.7% and 15.2% for the three and six month
periods ended June 30, 1994, to 18.6% for the same periods in 1995.
INFLATION
Although the general rate of inflation has remained relatively stable and
health care cost inflation has declined in recent years, the national total
health care cost inflation rate still exceeds the general inflation rate. The
Company uses various strategies to mitigate the negative effects of health
care cost inflation on its operations, including setting commercial premiums
based on its anticipated health care costs, risk-sharing arrangements with the
Company s various health care providers and other health care cost containment
measures. The Company s health plans attempt to control medical and hospital
costs through contractual arrangements with independent providers of health
UNITED HEALTHCARE CORPORATION
MANAGMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION
(continued)
care services which set fixed prices for certain periods of time, generally at
least a year. Cost-effective delivery of health care services by health care
providers is also achieved by the reduction of unnecessary hospitalizations,
appropriate use of specialty referral services and emphasizing preventive
health services. While the Company believes its current strategies to
mitigate health care cost inflation are successful, there is no assurance that
those efforts will be as effective as they have been in the past.
GOVERNMENT REGULATIONS
Government regulation of employee benefit plans, including health care
coverage, health plans and the Company s specialty managed care products, is a
changing area of law that varies from jurisdiction to jurisdiction and
generally gives responsible administrative agencies broad discretion. The
Company believes that it is in compliance in all material respects with the
various federal and state regulations applicable to its current operations. To
maintain such compliance, it may be necessary for the Company or a subsidiary
to make changes from time to time in its services, products, structure or
marketing methods. Additional governmental regulation or future interpretation
of existing regulations could increase the cost of the Company s compliance or
otherwise affect the Company s operations, products, profitability or business
prospects. The Company is unable to predict what additional government
regulations, if any, affecting its business may be enacted in the future or
how existing or future regulations might be interpreted.
FINANCIAL CONDITION AND LIQUIDITY
The Company s cash and investments decreased from $2.77 billion at December
31, 1994, to $2.49 billion at June 30, 1995. The decrease of $281.9 million
during the first six months of 1995 reflects the January purchase of GenCare
for $515.4 million in cash, offset primarily by cash generated from
operations.
The Company generally invests a large portion of its cash resources in high-
quality, long-term instruments. During the first six months of 1995, the
Company invested a substantial portion of its cash and cash equivalents in
longer term investments. As a result of this investment strategy and the
purchase of GenCare, the Company's working capital decreased from $1.24
billion at December 31, 1994 to $600.5 million at June 30, 1995.
Under applicable state regulations, certain of the Company s subsidiaries are
required to retain cash generated from their operations. After giving effect
to these restrictions, the Company had approximately $1.54 billion in cash and
investments available for general corporate use at June 30, 1995.
On June 25, 1995, the Company signed a definitive agreement to acquire The
MetraHealth Companies, Inc. (MetraHealth). Under the terms of the
agreement, the Company will pay $1.15 billion in cash and $500 million of
5.75% convertible preferred stock, for a total consideration at closing of
$1.65 billion. The convertible preferred stock will be convertible into the
Company's common stock at $49.48 per share, will have a three year no-call
provision, and will have a ten-year mandatory redemption. In addition,
certain of MetraHealth's current owners will be eligible to receive up to an
UNITED HEALTHCARE CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
additional $350 million if MetraHealth achieves certain 1995 operating results
as defined. Any consideration payable for this 1995 earnout over and above the
initial $1.65 billion may, at the Company's sole discretion at that time, be
in the form of cash, convertible debt, convertible preferred stock, or
straight debt. If the Company's post-acquisition combined net
income for 1996 and 1997 reaches certain specified levels, certain of
MetraHealth's current owners will be eligible to receive up to an additional
$175 million in cash for each of those years. Completion of the
acquisition, which is subject to regulatory approvals and other steps, is
expected before the end of 1995. At such time, the transaction will be
accounted for as a purchase. The Company will begin to move certain
investments to shorter term instruments in anticipation of the $1.15 billion
in cash required for the MetraHealth closing.
The Company believes its available cash resources will be sufficient to meet
its current operating requirements and internal development initiatives. Other
than the MetraHealth agreement, there currently are no material definitive
commitments for future use of the Company s available cash resources; however,
management continually evaluates opportunities to expand its health plan
operations and specialty managed care services, which includes internal
development of new products and programs and may include additional
acquisitions. A portion of the Company's available cash resources will be
retained by the Company to maintain its strong financial position.
UNITED HEALTHCARE CORPORATION
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
The following exhibits are filed in response to Item 601 of Regulation
S-K.
Exhibit No. Exhibit
Exhibit 10 - Employment agreement Dated as of April 1, 1995 between United
HealthCare Corporation and Marshall V. Rozzi
Exhibit 11 - Statements Re Computation of Per Share Earnings.
Exhibit 15 - Letter Re Unaudited Interim Financial Information.
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K.
During the quarter for which this report is filed, the Registrant filed
Form 8-K Current Reports with the Securities and Exchange Commission as
follows:
1. Form 8-K Current Report Dated June 25, 1995. The items reported on
this Form 8-K were items 5 and 7 concerning the Registrant's
announcement of the execution of an Agreement and Plan of Merger with
MetraHealth Companies, Inc. and certain of its shareholders and
their affiliates, The Travelers Insurance Company, The Travelers
Insurance Group, Inc., MetLife HealthCare Holdings, Inc. and
Metropolitan Life Insurance Company.
2. Form 8-K Current Report Dated August 3, 1995. The items
reported on this Form 8-K were Items 5 and 7 concerning the
Registrant's announcement of its financial results for the
quarter ended June 30, 1995.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
UNITED HEALTHCARE CORPORATION
Dated: August 11, 1995 By /s/ William W. McGuire, M.D.
William W. McGuire, M.D.
President and Chief Executive Officer
Dated: August 11, 1995 By /s/ David P. Koppe
David P. Koppe
Chief Financial Officer
UNITED HEALTHCARE CORPORATION
Exhibit Index
Exhibit Number Description Page
10 Employment Agreement dated as of April 19
1, 1995 between United HealthCare and
Marshall V. Rozzi
11 Statements Re Computation of Per 27
Share Earnings
15 Letter Re Unaudited Interim Financial 28
Information
27 Financial Data Schedule
EXHIBIT 10
EMPLOYMENT AGREEMENT
This Agreement is made by and between Marshall Rozzi ("Executive") and
United HealthCare Corporation, ("United") for the purpose of setting forth
certain terms and conditions of Executive's employment by United and to
protect United's knowledge, expertise, customer relationships and the
confidential information United has developed about its customers, products,
operations and services. As of the Effective Date, this Agreement supersedes
any prior employment-related agreement or agreements between Executive and
United or any subsidiary or affiliate of United.
1. Employment and Duties.
A. Employment. United hereby directly or through its subsidiaries
employs Executive as an Executive Vice-President. Executive accepts
such employment on the terms and conditions set forth in this Agreement
and, except as specifically superseded by this Agreement, subject to all
of United's policies and procedures in regard to its employees.
B. Duties. Executive shall perform such duties as are commonly
associated with his position or as are reasonably assigned to Executive
by his supervisor from time-to-time. Executive agrees to devote
substantially all of his business time and energy to the performance of
his duties in a diligent and proper manner.
2. Compensation.
A. Base Salary. Executive shall initially be paid a base annual
salary in the amount of $275,000 payable bi-weekly, less all applicable
withholdings and deductions. Executive shall receive a periodic
performance review, whenever deemed appropriate by the parties and
generally on an annual basis, from his supervisor and consideration for
an increase of such base salary.
B. Bonus and Stock Plans. Executive shall be eligible to participate
in United's incentive compensation plans and its stock option and grant
plans, in accordance with the terms and conditions of those plans and
applicable laws and regulations. Upon execution of this Agreement and
commencement of employment, Executive shall be paid a one-time initial
bonus of $20,000, less applicable withholdings and deductions.
Executive's initial target under the Management Incentive Plan ("MIP")
will be 100% of his base salary. For calendar year 1995 Executive's MIP
payment will be no less than 100% and no more than 200% of the base
salary actually paid to Executive in calendar year 1995, assuming that
all terms and conditions of the MIP are met, including continued
employment by United at the time the MIP payment is to be made.
C. Employee Benefits. The Executive shall be eligible to participate
in United's other employee benefit plans, including without limitation,
any life, health, dental, short-term and long-term disability insurance
coverages and any retirement plans, in accordance with the terms and
conditions of those plans and applicable laws and regulations.
Executive will initially receive a car allowance of $750 per month, a
health club allowance of $125 per month and up to $500 for initiation
dues on joining a health club; all subject to change from time-to-time
in United's discretion.
D. Vacation; Illness. Executive shall be entitled to paid vacation
and sick leave each year in accordance with United's then-current
policies.
E. Stock Options and Grants. United will recommend to its
Compensation Committee that Executive be granted non-qualified,
performance-based stock options to purchase 135,000 shares of United's
common stock, as evidenced by a written stock option agreement, and that
Executive be awarded 5,000 shares of the Company's common stock on a
restricted basis, as evidenced by a written restricted stock award
agreement. The restrictions relating to 1,250 of these restricted
shares shall lapse on the date 6 months after the first day of
Executive's employment; the restrictions relating to 1,250 of these
shares shall lapse on the date 12 months after the first day of
Executive's employment; the restrictions relating to 1,250 of these
shares shall lapse on the date 18 months after the first day of
Executive's employment; and the restrictions relating to 1,250 of these
shares shall lapse on the date 24 months after the first day of
Executive's employment; provided however, that the lapsing of these
restrictions is contingent upon Executive's employment on the specified
dates and shall be subject to all other terms and conditions of United's
stock plans.
F. Relocation Benefits. United shall provide Executive with
relocation assistance according to its Relocation Policy, subject to
Executive's obligation to reimburse any amounts advanced to him or paid
to him under the Relocation Policy if Executive terminates his
employment with United prior to the date 12 months after the first day
of Executive's employment. Reimbursement shall be made on a pro rata
basis which decreases by 1/12th for each month Executive is employed by
United. For example, if Executive terminates his employment 9 months
after the date his employment began, Executive shall reimburse United
1/4 of the expenses paid or advanced under the relocation policy.
Executive specifically authorizes United to deduct any amounts owed
United from his final paycheck.
3. Term and Termination.
A. Term. The term of this Agreement shall begin on April 1, 1995 (the
"Effective Date") and shall continue unless and until terminated as set
forth in Section 3B.
B. Termination of Agreement and/or Employment.
1. This Agreement may be terminated at any time by the mutual
written agreement of the parties.
2. United may terminate Executive's employment or terminate this
Agreement by giving written notice of termination which is received
by Executive at least 30 days before the effective date of
termination of employment or of this Agreement, as the case may be.
3. Executive may terminate his employment by giving written
notice of termination of employment which is received by United at
least 30 days before the effective date of termination of
employment.
4. This Agreement shall automatically terminate on the effective
date of the termination of Executive's employment or on the date of
Executive's death, retirement or permanent and total disability
which renders Executive incapable of performing Executive's duties.
United, through documented medical opinion, has the sole discretion
to determine whether employee is permanently or totally disabled
within the meaning of this Section 3B4.
C. Severance Events and Compensation. In the event a Change in
Control occurs and within one year after the effective date of the
Change in Control (i) Executive's employment with United is terminated
by United pursuant to Section 3B2 and without Cause or (ii) a Change in
Employment occurs which Executive elects to treat as a termination of
Executive's employment under Section 3B2 ((i) and (ii) are collectively
referred to as the "Severance Events"), then:
1. For 12 months following the effective date of the termination
of Executive's employment ("Severance Period"), Executive shall
receive biweekly payments equal to 1/26 of (a) Executive's
annualized base salary at the effective date of termination, less
all applicable withholdings or deductions required by law or
Executive's elections under any employee benefit plans which
Executive continues to participate in under Section 3C2, plus (b)
one-half of the total of any bonus or incentive compensation (but
not including any special or one-time bonus or incentive
compensation payments) paid or payable to Executive for the two
most recent calendar years or other periods generally used by
United to determine such bonus or incentive compensation, 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 ((a) and (b) are collectively
referred to as the "Severance Compensation").
2. As of the effective date of termination of employment,
Executive shall cease to be eligible for all benefit plans
maintained by United, except as required by federal or state
continuation of coverage laws. If Executive elects continuation of
coverage under one or more benefit plans subject to such
continuation requirements, United shall, for the Severance Period,
pay on behalf of Executive an amount equal to United's employer
contribution for similarly situated active employees' coverages
under such benefit plans. During the Severance Period Executive's
share of coverage costs for such benefit plans shall be deducted
automatically through after-tax payroll deduction from the
Severance Compensation.
3. During the Severance Period United shall pay to an
outplacement firm selected by United an amount deemed reasonable by
United for outplacement and job search services for Executive.
4. Any unvested stock options or grants awarded Executive under
any of United's stock option or grant plans shall continue to vest
during the Severance Period in accordance with those options' or
grants' pre-established or usual vesting schedule.
The payments and benefits to Executive under this Section 3C shall be
the sole liability of United to Executive in the event of a Severance
Event and shall replace and be in lieu of any payments or benefits which
otherwise might be owed by United under any other severance plan or
program and such payments and benefits may be conditioned by United upon
receipt of a release of claims from Executive. Solely for purposes of
stock options and grants and MIP payments, the date of termination of
employment shall be the last day of the Severance Period and Executive
shall for such purposes be considered as continuing his employment with
United until such time.
D. Initial Employment Period. Notwithstanding any other provisions of
this Agreement, in the event that prior to the end of the first year
after the Effective Date Executive's employment with United is
terminated by United without Cause or a Change in Employment occurs,
such event shall be treated as a Severance Event under Section 3C.
E. Definitions and Procedure.
1. For purposes of this Agreement, "Cause" shall mean the (a) the
failure or refusal of Executive to follow the reasonable directions
of United's Board of Directors or Executive's supervisor or to
perform any duties reasonably required by United, (b) a failure to
adequately meet reasonable performance expectations, (c) material
violations of United's Code of Conduct or (d) the commission of any
criminal act or act of fraud or dishonesty by Executive in
connection with Executive's employment by United. In the event
that United terminates Executive's employment under subsections (a)
or (b) of this Cause definition, United shall specify in the notice
of termination the basis for Cause. If the Cause described in the
notice is cured to United's reasonable satisfaction prior to the
end of the 30 day notice period, the notice of termination of
employment shall be withdrawn.
2. For purposes of this Agreement a "Change in Employment" shall
be deemed to have occurred (a) if (i) Executive's duties are
materially adversely changed without Executive's prior consent or
(ii) Executive's salary or benefits are reduced other than as a
general reduction of salaries and benefits by United or (iii) the
location of performance of most of Executive's duties is moved from
the general geographic location in which Executive performed such
duties prior to the move or (iv) without terminating Executive's
employment this Agreement is terminated by United pursuant to
Section 3B2, and (b) if in each case under subsections (a) (i),
(ii), (iii) and (iv), in the period beginning 60 days before the
time the Change in Employment occurs, Cause does not exist or if
Cause does exist United has not given Executive written notice that
Cause exists. Executive may elect to treat a Change in Employment
as a termination of employment by United. To do so Executive shall
send written notice of such election to United within 60 days after
the date Executive receives notice from United 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 60 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
receives the written notice of election.
3. For purposes of this Agreement a "Change in Control" of United
shall mean the sale of all or substantially all of its assets or
any merger, reorganization, or exchange or tender offer which, in
each case, will result in a change in the power to elect 50% or
more of the members of the Board of Directors of United.
4. Property Rights, Confidentiality, Non-Solicit and Non-Compete
Provisions.
A. United's Property.
1. Executive shall promptly disclose to United 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 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. Executive shall give
United any the assistance it reasonably requires in order for
United 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
was used and which was developed entirely on the Executive's own
time and which (1) does not relate to the business of United or to
United's anticipated research or development, or (2) does not
result from any work performed by the Executive for United.
2. Executive shall not remove any records, documents, or any other
tangible items (excluding Executive's personal property) from the
premises of United in either original or duplicate form, except as
is needed in the ordinary course of conducting business for United.
3. Executive shall immediately deliver to United, upon termination
of employment with United, or at any other time upon United'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 his employment
Executive will develop, become aware of and accumulate expertise,
knowledge and information regarding United's organization, strategies,
business and operations and United's past, current or potential
customers and suppliers. United 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 or as has been expressly permitted in writing by
United.
C. Non-Solicitation. During (i) the term of this Agreement, (ii) any
period for which Executive is receiving payments under Section 3C of
this Agreement, (iii) any period following the termination or expiration
of this Agreement during which Executive remains employed by United 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
or a subsidiary of United or to persuade any such employee to leave
employment with United, 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
(including any subsidiary or affiliated company in which United has a
more than 20% equity interest) has established or is actively seeking to
establish a business or customer relationship.
D. Non-Competition. During (i) the term of this Agreement, (ii) any
period for which Executive is receiving payments under Section 3C of
this Agreement, and (iii) any period following the termination or
expiration of this Agreement during which Executive remains employed by
United, Executive shall not, without United'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 (including any subsidiary or affiliated company in which
United has a more than 20% equity interest) is engaged. In the event
that Executive elects to terminate Executive's employment pursuant to
Section 3B3, United may elect to have the provisions of this Section 4D
be in effect for six months following the effective date of such
resignation if during that six month period United pays Executive
biweekly payments equal to 1/26 of the Severance Compensation. United
must send written notice of such election within 10 days after it
receives written notice of the termination of employment.
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 in its sole discretion may assign this
Agreement to an entity controlled by United at the time of the
assignment. If United subsequently loses or gives up control of the
entity to which this Agreement is assigned, such entity shall become
United for all purposes under this Agreement, beginning on the date on
which United loses or gives up control of the entity. Any successor to
United shall be deemed to be United 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: 300 Opus Center
9900 Bren Road East
Minnetonka, MN 55343
Attn: Vice President Human Resources
Executive: Marshall Rozzi
6430 City West Parkway, Apt.5201
Eden Prairie, MN 55344
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 or any of its subsidiaries and affiliated
companies.
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
he/she has received adequate consideration from United 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 shall be resolved by binding arbitration pursuant to the Rules of
the American Arbitration Association. In no event may the arbitration
be initiated more than one year after the date one party first gave
written notice of the dispute to the other party. The arbitrators shall
interpret and construe this Agreement pursuant to controlling law but
may not in any case award any punitive or exemplary damages. The
parties acknowledge that Executive's failure to comply with the
Confidentiality, Non-Solicit and Non-Compete provisions of this
Agreement will cause immediate and irreparable injury to United 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.
UNITED HEALTHCARE CORPORATION
By /s/Kevin H. Roche /s/Marshall V. Rozzi
Executive
Date April 1, 1995 Date April 1, 1995
EXHIBIT 11
UNITED HEALTHCARE CORPORATION
STATEMENTS RE COMPUTATION OF PER SHARE EARNINGS
(in thousands, except per share data)
(Unaudited)
Three Months Ended June 30, Six Months Ended June 30,
1995 1994 1995 1994
NET EARNINGS BEFORE
EXTRAORDINARY GAIN $ 89,879 $ 52,656 $ 179,311 $ 123,054
EXTRAORDINARY GAIN ON SALE OF
SUBSIDIARY -- 1,377,075 -- 1,377,075
NET EARNINGS $ 89,879 $1,429,731 $ 179,311 $1,500,129
Weighted average number of
common shares outstanding 173,238 170,824 173,075 170,620
Additional equivalent shares
issuable from assumed exercise
of common stock options
and warrants 3,066 4,666 3,315 4,540
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 176,304 175,490 176,390 175,160
NET EARNINGS PER SHARE
BEFORE EXTRAORDINARY GAIN $ 0.51 $ 0.30(1) $ 1.02 $ 0.70(1)
EXTRAORDINARY GAIN PER SHARE -- 7.85 -- 7.86
NET EARNINGS PER SHARE $ 0.51 $ 8.15 $ 1.02 $ 8.56
<FN>
<F1> Excluding the effects of the Ramsay-HMO, Inc. and Complete Health Services, Inc.
merger costs, net earnings before extraordinary gain for the three and six month periods
ended June 30, 1994 would have been $74,939 and $145,337, respectively, or $.43 and $.83
per share.
</FN>
EXHIBIT 15
LETTER RE UNAUDITED INTERIM FINANCIAL INFORMATION
August 3, 1995
To United HealthCare Corporation:
We are aware that United HealthCare Corporation and Subsidiaries has
incorporated by reference in its Registration Statements No. 33-3558, 2-95342,
33-22310, 33-21813, 33-27208, 33-30869, 33-35365, 33-39060, 33-45263, 33-
50282, 33-65994, 33-67918, 33-68158, 33-68300, 33-75846, 33-79632, 33-79634,
33-79636, 33-79638, 33-59083, 33-59623 its Form 10-Q for the quarter ended
June 30, 1995, which includes our report dated August 3, 1995, covering the
unaudited interim condensed consolidated financial information contained
herein. Pursuant to Regulation C of the Securities Act of 1933, that report
is not considered a part of the registration statement prepared or certified
by our firm or a report prepared or certified by our firm within the meaning
of Sections 7 and 11 of the Act.
Very truly yours,