EXHIBIT 99
CAUTIONARY STATEMENTS
The statements contained in this Form 10-Q include forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995 (the "PSLRA"). When used in this Form 10-Q and in future filings by the
Company with the Securities and Exchange Commission, in the Company's press
releases, presentations to securities analysts or investors, and in oral
statements made by or with the approval of an authorized executive officer of
the Company, 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.
The following discussion contains certain cautionary statements regarding
United's business that investors and others should consider. This discussion is
intended to take advantage of the "safe harbor" provisions of the PSLRA. In
making these cautionary statements, the Company is not undertaking to address or
update each factor in future filings or communications regarding the Company's
business or results, and is 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 United's past, as well as current, foward-looking
statements about future results, so that the Company's actual results in the
future may differ materially from those expressed in prior communications.
HEALTH CARE COSTS. A large portion of the revenue received by United is
used to pay the costs of health care services or supplies delivered to its
members. The total health care costs incurred by United are affected by the
number of individual services rendered and the cost of each service. Much of the
Company's premium revenue is set in advance of the actual delivery of services
and incurrence of the related costs, usually on a prospective annual basis.
While United attempts to base the premiums it charges at least in part on its
estimate of future health care costs over the fixed premium period, competition,
regulations and other circumstances may limit United's ability to fully base
premiums on estimated costs. In addition, many factors may and often do cause
actual health care costs to exceed that estimated and reflected in premiums.
These factors may include increased utilization of services, increased cost of
individual services, catastrophes, epidemics, the introduction of new or costly
treatments, general inflation, new mandated benefits or other regulatory
changes, and insured population characteristics. In addition, the Company's
earnings reported for any particular quarter include estimates of covered
services incurred by the Company's enrollees during that period but for which a
claim has not been received or processed. These are estimates and therefore the
Company's earnings may be subject to later adjustment based on the actual costs.
INDUSTRY FACTORS. The managed care industry has recently received
significant amounts of negative publicity. This publicity, in turn, has
contributed to increased legislative activity, regulation and review of industry
practices. These factors may adversely affect the Company's ability to market
its products or services, could necessitate changes in the Company's products
and services, and may increase regulatory burdens under which the Company
operates, further increasing the costs of doing business and adversely affecting
profitability.
COMPETITION. In many of its geographic or product markets, the Company
competes with a number of other entities, some of which may have certain
characteristics or capabilities that give them an advantage in competing with
the Company. The Company believes the barriers to entry in these markets are not
substantial, so that the addition of new competitors can occur relatively
easily. Certain of the Company's customers may decide to perform for themselves
functions or services formerly provided by the Company, which would result in a
decrease in the Company's revenues. Certain of the Company's
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providers may decide to market products and services to Company customers in
competition with the Company. In addition, significant merger and acquisition
activity has occurred in the industry in which the Company operates as well as
in industries that act as suppliers to the Company, such as the hospital,
physician, pharmaceutical and medical device industries. This activity may
create stronger competitors or result in higher health care costs. To the extent
that there is strong competition or that competition intensifies in any market,
the Company's ability to retain or increase customers or providers, its revenue
growth, its pricing flexibility, its control over medical cost trends and its
marketing expenses may all be adversely affected.
AARP CONTRACT. In early 1997, the Company finalized its contract
arrangements with the American Association of Retired Persons ("AARP") under
which the Company will provide Medicare supplement health insurance products to
AARP members, effective January 1, 1998. As a result of this agreement, the
Company will significantly expand the number of members served, the products
offered and the services it must provide. The success of the AARP arrangement
will depend, in part, on the Company's ability to service these new members,
develop additional products and services, and price the products and services
competitively.
GOVERNMENT PROGRAMS AND REGULATION. The Company's business is heavily
regulated on a federal, state and local level. The laws and rules governing the
Company's business and interpretations of those laws and rules are subject to
frequent change and broad latitude is given to the agencies administering those
regulations. Existing or future laws and rules could force United to change how
it does business, may restrict United's revenue and/or enrollment growth,
increase its health care and administrative costs, and/ or increase the
Company's liability for medical malpractice or other actions. Regulatory
approvals must be obtained and maintained to market many of United's products
and services. Delays in obtaining or failure to obtain or maintain such
approvals could adversely affect United's revenue or the number of its members,
or could increase costs. A significant portion of United's revenues relate to
federal, state and local government health care coverage programs. These types
of programs, such as the federal Medicare program and the federal and state
Medicaid programs, are generally subject to frequent change including changes
that may reduce the number of persons enrolled or eligible, reduce the revenue
received by United or increase the Company's administrative or health care costs
under such programs. Such changes have in the past and may in the future
adversely affect United's results and its willingness to participate in such
programs.
The Company is also subject to various governmental audits and
investigations. Such activities could result in the loss of licensure or the
right to participate in certain programs, or the imposition of fines, penalties
and other sanctions. In addition, disclosure of any adverse investigation or
audit results or sanctions could negatively affect the Company's reputation in
various markets and make it more difficult for the Company to sell its products
and services.
The National Association of Insurance Commissioners (the "NAIC") has an
effort underway that would require new minimum capitalization limits for health
care coverages provided by insurance companies, HMOs and other risk bearing
health care entities. The requirements would take the form of risk-based capital
rules similar to those which currently apply only to insurance companies.
Depending on the nature and extent of the new minimum capitalization
requirements ultimately adopted, there could be an increase in the capital
required for certain of United's subsidiaries and there may be some potential
for disparate treatment relative to competing products. Failure of the NAIC to
act may result in some form of federal solvency regulation of companies
providing Medicare-related benefit programs.
PROVIDER RELATIONS. One of the significant techniques United uses to manage
health care costs and utilization and monitor the quality of care being
delivered is contracting with physicians, hospitals and other providers. Because
of the geographic diversity of its health plans and the large number of
providers with which most of those health plans contract, United currently
believes it has a limited exposure to provider relations issues. In any
particular market, however, providers could refuse to contract with
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United, demand higher payments or take other actions that could result in higher
health care costs, less desirable products for customers and members, 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. In addition, physician or
practice management companies, which aggregate physician practices for purposes
of administrative efficiency and marketing leverage, continue to expand. These
providers may compete directly with the Company. If such providers refuse to
contract with United, use their market position to negotiate favorable
contracts, or place United at a competitive disadvantage, United's ability to
market products or to be profitable in those areas could be adversely affected.
LITIGATION AND INSURANCE. United may be a party to a variety of legal
actions to which any corporation may be subject, including employment and
employment discrimination-related suits, employee benefit claims, breach of
contract actions, tort claims, shareholder suits, including for securities
fraud, and intellectual property related litigation. In addition, because of the
nature of its business, United is subject to a variety of legal actions relating
to its business operations, such as claims relating to the denial of health care
benefits, medical malpractice actions, provider disputes including disputes over
withheld compensation and termination of provider contracts, disputes related to
self-funded business including actions alleging claim administration errors and
the failure to disclose network rate discounts and other fee and rebate
arrangements, disputes over copayment calculations, and claims relating to
customer audits and contract performance. Recent court decisions and legislative
activity may have the effect of increasing the Company's exposure for any of
these types of claims. In some cases, substantial non-economic or punitive
damages may be sought. While United currently has insurance coverage for some of
these potential liabilities, others may not be covered by insurance, the
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. United's business is significantly dependent on
effective information systems. United has many different information systems for
its various businesses. The Company's information systems require an ongoing
commitment of resources to maintain and enhance existing systems and develop new
systems. As a result of United's acquisition activities, United is in the
process of attempting to reduce the number of systems and also upgrade and
expand its information systems capabilities. Failure to maintain effective and
efficient information systems could result in loss of existing customers,
difficulty in attracting new customers, customer and provider disputes,
regulatory problems, increases in administrative expenses or other adverse
consequences. In addition, the Company may, from time-to-time, obtain
significant portions of its systems-related or other services or facilities from
independent third parties, which may make the Company's operations vulnerable to
such third parties' failure to perform adequately.
THE YEAR 2000. The Company is in the process of modifying its computer
systems to accommodate the year 2000 and currently expects to complete this
modification sufficiently in advance of the year 2000 so as not adversely to
affect its operations. The Company is expensing the costs incurred to make these
modifications. The inability of the Company to complete timely its year 2000
modifications or the inability of other companies with which United does
business to complete timely their year 2000 modifications could adversely affect
the Company's operations.
ADMINISTRATION AND MANAGEMENT. Efficient and cost-effective administration
of the Company's operations is integral to United's profitability and
competitive positioning. While United attempts to effectively manage such
expenses, increases in staff-related and other administrative expenses may occur
from time-to-time due to business or product start-ups or expansions, growth or
changes in business, acquisitions, regulatory requirements or other reasons.
Such expense increases are not clearly predictable and increases in
administrative expenses may adversely affect results.
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United believes it currently has a relatively experienced, capable
management staff. Loss of certain managers or a number of such managers could
adversely affect United's ability to administer and manage its business.
MARKETING. The Company markets its products and services through both
employed sales people and independent sales agents. Although the Company has a
number of such sales employees and agents, if certain key sales employees or
agents or a large subset of such individuals were to leave the Company, its
ability to retain existing customers and members could be impaired. In addition,
certain of the Company's customers or potential customers consider rating,
accreditation or certification of the Company by various private or governmental
bodies or rating agencies necessary or important. Certain of the Company's
health plans or other business units may not have obtained or may not desire or
be able to obtain or maintain such accreditation or certification, which could
adversely affect the Company's ability to obtain or retain business with such
customers.
ACQUISITIONS. The Company has made several large acquisitions in recent
years and has an active ongoing acquisition program. These acquisitions may
entail certain risks and uncertainties in addition to those present in its
ongoing business operations, 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, or customer confusion or dissatisfaction.
STOCK MARKET. The market prices of the securities of certain of the
publicly-held companies in the industry in which United operates have shown
volatility and sensitivity in response to many factors, including general market
trends, public communications regarding managed care, legislative or regulatory
actions, health care cost trends, pricing trends, competition, earnings or
membership reports of particular industry participants, and acquisition
activity. During 1996, the market price for United's securities experienced
similar volatility. There can be no assurance regarding the level or stability
of United's share price at any time or of the impact of these or any other
factors on the share price.
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