UnitedHealth Group, Inc. (UNH)

Closing Price of the Stock At 4:01PM ET: 47.96   0.52 (1.10%)  

November 15, 2006

Hugh Armstrong, Stefanie Hilton, Anna Kriajeva, Nirav Mehta, & Simon Yu

UnitedHealth Group, Inc.

• Index: NYSE• Sector: Healthcare• Industry: Health Care Plans • Employees: 55,000• Senior Management: 5 members• Board of Directors: 10 members• Serves approximately 70 million individuals

Company Overview

• Customer Information– Mid-sized and small employers– Individuals and families– State sponsored Medicaid– Senior Citizens (50+)

Company Overview • Services

Uniprise

Delivers healthcare and well-being services to employers, consumers, and health care organizations

Healthcare Services

Provides health benefit plans and services

State sponsored Medicare programs

Specialized Care Services

Provides employee benefit offerings

Dental, vision, disease management, complex chronic illness and care facilitation

Ingenix

Offers database and data management services, software products, publications, & consulting services

Capital Structure

Debt/Total Capital 29.9 % Cash $Mil 8,361 Total Debt $Mil 7,523 Cash Flow from Operations $Mil 6,079

http://quicktake.morningstar.com

The company moderately finances its growth with debt.

UNH Key Statistics

• Market Cap: 62.110 B• Price/Sales: 0.97• Price/Book: 3.20• Profit Margin: 6.12%• % of Shares Held by Institution: 86%

• S&P Quality Ranking A+ (highest) The ratings measure how likely the firm is to default and the protection

creditors have in the event of default.

Balance SheetFinancingLong Term Debt IncreasingShort Term Debt IncreasingOther Liabilities Increasing

% of Assets 2005 2004 2003Intangibles 4.80% 4.30% 1%Current Assets 25.72% 30% 35%Long Term Assets 21.68% 28% 38%

% of Debt 2005 2004 2003Current Liabilities 70.40% 66% 70%Long Term Liabilities 16.29% 19.50% 14%

Cash and Cash Equivalents $5,421,000 $3,991,000   $2,262,000

Significant ChangesGoodwill Increase $9,470,000 to $16,206,000Other Assets Increase $76,000 to $1,890,000Assets Overall Increase $27,879,000 to $41,374,000Current Liabilities Increase $11,329,000 to $16,644,000Retained Earnings Increase $7,616,000 to $10,789,000Total Equity Increase $10,717,000 to $17,733,000

Turnover RatiosA/R Turnover 10.7807 33.8 daysA/P Turnover 4.0947 89.1 daysInventory Turnover 18.1907

Income Statement

• Total Revenue$45.365 B

• Cost of Goods Sold$32.725 B

• Gross Profit$12.64 B

• Earnings Before Interest and Taxes$5.373 B

• Net Income$3.3 B

Liquidity• Times Interest Earned (TIE) Ratio

22.29• Total Debt

7.35B• Current Ratio

.835• Quick Ratio

.66• Debt to Equity

.375

What do ratios mean:• Current ratio measures a company's ability to pay short-term

obligations. UNH .835

• Quick ratio  measures company's ability to meet its short-term obligations with its most liquid assets.

The higher the ratio, the better the position of the company(usually around 1).

UNH .66

• Times interest earned ratio used to measure the ability of a company to meet its debt obligations, indicates how many times a company can cover it's interest charges on a pretax basis since failure to meet these obligations could force a company into bankruptcy.

UNH 22.29

• http://www.investopedia.com

Beta 0.18 (S&P 500)

• Beta measures stock's volatility in relation to the market as a whole.

• The higher the beta, the more the stock goes up when the market heads up and drops when the market heads down

UNH- low beta stock:

less volatile than the stock market as a whole.

holds its value even when the market plunges

low risk stable performance

• http://quicktake.morningstar.com

Orange-industry

Red- UNH

Green- S&P 500

Stock Performance

Mergers and Acquisitions• 2006

– Acquired NWH, Inc. through subsidiary Ingenix– Reached an agreement to buy the assets of Student Resources, an

operating division of The MEGA Life and Health Insurance Company, from HealthMarkets

• 2005– $9.2 Billion acquisition of Pacificare– Acquisition of John Deere Health Care through subsidiary

UnitedHealthcare• 2004

– Acquired Mid Atlantic Medical Services, Inc., through subsidiary UnitedHealthcare

– $4.9 Billion acquisition of Oxford Health Plans– Acquired Definity Health Corporation

• 2002– Acquired AmeriChoice

• 2000– UnitedHealth Group Inc. merged with United Healthcare Corporation

CompetitorsPrivate Companies

• Centers for Medicare & Medicaid Services• Blue Cross and Blue Shield Association• Medco Health Solutions

Public Companies

• Caremark Rx, Inc.• HCA, Inc.• WellPoint, Inc.• Aetna, Inc

Largest Competitors WellPoint, Inc.

• Market Cap: $45.19B• Employees: 42,000• Revenue: $54.28B• Quarterly Revenue Growth: 29.30%

Aetna, Inc.

• Market Cap: $21.01B• Employees: 28,200• Revenue: $24.65B• Quarterly Revenue Growth: 10.50%

Blue Cross Blue Shield•Private Company•Employees: 150,000+•Revenue: $238.9 B

Positive news

• Democrats taking over the Congress…

Democrats favoring Medicaid and Medicare programs

• United Health Inks deals with Walmart, HAC – place kiosk in Walmart stores to inform people about Medicare

advantage and drug plans– new agreement giving its members access to HAC hospitals (150+

hospitals nationwide)

In The News

Concern:UnitedHealth Group, Inc.

• Former CEO Group is expected to face charges by SEC for backdating, William McGuire stepped down last month

• New executive management team

• CEO and CFO has agreed to remove all personal benefits from any past option grants that was questioned in a prior report

• Returning $300 million worth of stock option back to the company

• UNH has to re-evaluate all their option reports from 1994 to present

Discounted Cash Flow Model

Conclusion

UNH is a low risk stock

Stable company with steady growth

Great for portfolio diversification