The following discussion should be read together with the accompanying Condensed Consolidated Financial Statements and Notes. References to the terms "we", "our" or "us" used throughout this Management's Discussion and Analysis of Financial Condition and Results of Operations refer to UnitedHealth Group Incorporated and its subsidiaries.

EXECUTIVE OVERVIEW

General

We are a diversified health and well-being company, serving more than 70 million Americans. Our focus is on enhancing the performance of the health system and improving the overall health and well-being of the people we serve and their communities. We work with health care professionals and other key partners to expand access to high quality health care. We help people get the care they need at an affordable cost, support the physician/patient relationship, and empower people with the information, guidance and tools they need to make personal health choices and decisions.

Through our diversified family of businesses, we leverage core competencies in advanced technology-based transactional capabilities; health care data, knowledge and information; and health care resource organization and care facilitation to make health care work better. These core competencies are focused in two market areas, health benefits and health services. Health benefits are offered in the individual and employer markets and the public and senior markets through our UnitedHealthcare, Ovations and AmeriChoice businesses. Health services are provided to the participants in the health system itself, ranging from employers and health plans to physicians and life sciences companies through our OptumHealth, Ingenix and Prescription Solutions businesses. In aggregate, these businesses have more than two dozen distinct business units that address specific end markets. Each of these business units focuses on the key goals in health and well-being: access, affordability, quality and simplicity as they apply to their specific market.

Revenues

Our revenues are primarily comprised of premiums derived from risk-based health insurance arrangements in which the premium is fixed, typically for a one-year period, and we assume the economic risk of funding our customers' health care benefits and related administrative costs. We also generate revenues from services performed for customers that self-insure the medical costs of their employees and employees' dependants. For both risk-based and fee-based health care benefit arrangements, we provide coordination and facilitation of medical services; transaction processing; health care professional services; and access to contracted networks of physicians, hospitals and other health care professionals. Service revenues are also generated from Ingenix health intelligence and contract research businesses. Product revenues are mainly comprised of products sold by our Prescription Solutions pharmacy benefit management business and also include sales of Ingenix publishing and software products. Investment income is derived primarily from interest earned on our investments in fixed income and debt securities. Gains or losses are included in revenues when the securities are sold, or other-than-temporarily impaired.

Operating Costs

Medical Costs. Our operating results depend in large part on our ability to effectively estimate, price for and manage our medical costs through underwriting criteria, product design, negotiation of favorable provider contracts and medical management programs. Controlling medical costs requires a comprehensive and integrated approach to organize and advance the full range of interrelationships among patients/consumers, health professionals, hospitals, pharmaceutical/technology manufacturers and other key stakeholders.

Medical costs include estimates of our obligations for medical care services that have been rendered on behalf of insured consumers but for which we have either not yet received nor processed claims, and for liabilities for physician, hospital and other medical cost disputes. In every reporting period, our operating results include the effects of more completely developed medical costs payable estimates associated with previously reported periods.

Our medical care ratio, calculated as medical costs as a percentage of premium revenues, reflects the combination of pricing, benefit designs, consumer health care utilization and comprehensive care facilitation efforts. We seek to sustain a stable medical care ratio for an equivalent mix of business, however, changes in business mix, such as expanding participation in comparatively higher medical care ratio government-sponsored public sector programs, will change the dynamics of our results.

Operating Costs. Operating costs are primarily comprised of costs related to employee compensation and benefits, agent and broker commissions, premium taxes and assessments, professional fees, advertising and occupancy costs.

Cash Flows

Cash flows generated from operating activities are principally from net earnings, prior to depreciation and amortization and other non-cash expenses. Our regulated subsidiaries generate significant cash flows from operations. Cash in excess of the capital needs of our regulated entities is paid to their non-regulated parent companies, typically in the form of dividends, for general corporate use, when and as permitted by applicable regulations. Our non-regulated businesses also generate significant cash flows from operations for general corporate use. We reinvest cash flows in our businesses by making capital expenditures, expanding our services through business acquisitions and repurchasing shares of our common stock, depending on market conditions.

Business Trends

Our businesses participate in the U.S. health economy, which comprises approximately 16% of gross domestic product and which has grown consistently for many years. Management expects overall spending on health care in the U.S. to continue to rise in the future, based on inflation, demographic trends in the U.S. population and national interest in health and well-being. The rate of market growth may be impacted by a variety of factors, including macro-economic conditions and proposed health care reforms, which could also impact our results of operations.

Adverse Economic Conditions. The current U.S. recessionary economic environment has impacted demand for certain of our products and services. For example, decreases in employment have reduced the number of workers and dependants offered health care benefits by our employer customers, putting pressure on top line growth for our UnitedHealthcare and OptumHealth businesses. This workplace attrition contributed nearly 50% of the 5% decrease in UnitedHealthcare's commercial membership in the first half of 2009, and this trend is expected to continue at a generally elevated level until employment stabilizes. In contrast, our AmeriChoice business has seen increased participation in its state Medicaid offerings as employment rates fall. If the recessionary economic environment continues for a prolonged period, federal and state governments may decrease funding for various health care government programs in which we participate and/or impose new or higher levels of taxes or assessments. Our revenues are also impacted by U.S. monetary and fiscal policy. Currently, the U.S. Federal Reserve has decreased the target federal funds rate to a range of zero to 25 basis points. As of June 30, 2009, our $21.3 billion portfolio of cash and investments is generally composed of high quality securities and cash, and has a relatively short aggregate duration. Changes in federal monetary policy have reduced the level of investment income received from this portfolio on a year-over-year basis.

In total, management believes that economic recessions will slow our revenue growth rate and could impact our operating profitability. Management also believes that government funding pressure, coupled with recessionary

economic conditions, will impact the financial positions of hospitals, physicians and other care providers and could therefore increase medical cost trends experienced by our businesses. For additional discussions regarding how a prolonged economic downturn could affect our business, see "Item 1A. Risk Factors" in Part I of our 2008 10-K, as amended, for the year ended December 31, 2008 as filed with the U.S. Securities and Exchange Commission (SEC) (2008 10-K).

American Recovery and Reinvestment Act. Our businesses may benefit from elements of the federal economic stimulus package that was enacted in response to the current recession. These elements include expansion of funding to state programs, which could mitigate funding pressure for AmeriChoice Medicaid offerings at the state level, and funding for health care information technology, which could expand market opportunities for Ingenix.

Proposed Health Care Reforms and Reimbursement Changes. There is regular dialogue about health care reforms at both state and national levels, due to the size of and national interest in the health economy. Examples of health care reform proposals include policy changes that would change the dynamics of the health care industry, including having the federal or one or more state governments assume a larger role in the health care system such as competing with private health insurers, imposing new taxes on health insurers, or restructuring of the Medicare or Medicaid programs. Any health care reforms enacted may be phased in over a number of years, but, if enacted, could increase our costs, expose us to expanded liability and require us to revise the ways in which we conduct business or put us at risk for loss of business. In addition, our operating results, financial position and cash flows could be materially adversely affected by such changes even if we correctly predict their occurrence.

The new administration and various congressional leaders have expressed their interest in reducing payments to private plans offering Medicare Advantage over the intermediate term. Further, Centers for Medicare and Medicaid Services (CMS) has announced a reduction in Medicare Advantage reimbursements of approximately 5% for 2010. Management believes that there are a number of annual adjustments we can make to our operations which may serve to partially offset any impact from these rate reductions. For example, we can adjust members' benefits and/or premiums, decide on a county-by-county basis which geographies to participate in and seek to intensify our medical and operating cost management. There can be no assurance that we will be able to successfully execute on these or other strategies to address changes in the Medicare Advantage program. The reduction of payments to private plans may also cause declines in the number of seniors participating in Medicare Advantage and the industry-wide revenues and earnings derived from these plans. Our operating results, financial position and cash flows could be materially adversely affected by such declines. If industry-wide Medicare Advantage membership declines, there is likely to be increased demand for Medicare Supplemental insurance and Part D prescription drug coverage, and in both categories Ovations is a market leader.

We operate a diversified set of health care focused businesses; this business model has been intentionally designed to address a multitude of market sectors. Therefore, we could see simultaneous increases and decreases in demand for our various products and services, depending on the scope, shape and timing of health care reforms. It is difficult to predict the outcome of reform discussions with precision over the mid- to long-term time horizon. For additional discussions regarding our risks related to health care reforms and Medicare Advantage reimbursement changes, see "Item 1A. Risk Factors" in Part I of our 2008 10-K.

RESULTS SUMMARY



                                                     Three Months Ended June 30,                             Six Months Ended June 30,
                                                                              Increase                                               Increase
(in millions, except percentages and per                                     (Decrease)                                             (Decrease)
share data)                                  2009           2008           2009 vs. 2008            2009           2008           2009 vs. 2008
Revenues:
Premiums                                   $  19,746      $  18,344      $  1,402         8 %     $  39,857      $  36,733      $  3,124         9 %
Services                                       1,307          1,297            10         1           2,603          2,570            33         1
Products                                         449            391            58        15             888            754           134        18
Investment and other income                      153            240           (87 )     (36 )           311            519          (208 )     (40 )

Total revenues                                21,655         20,272         1,383         7          43,659         40,576         3,083         8

Operating costs:
Medical costs                                 16,507         15,257         1,250         8          33,077         30,401         2,676         9
Medical care ratio                              83.6 %         83.2 %                   0.4            83.0 %         82.8 %                   0.2
Operating costs                                3,037          3,746          (709 )     (19 )         6,165          6,643          (478 )      (7 )
Operating cost ratio                            14.0 %         18.5 %                  (4.5 )          14.1 %         16.4 %                  (2.3 )
Cost of products sold                            422            353            69        20             826            678           148        22
Depreciation and amortization                    249            243             6         2             483            468            15         3

Total operating costs                         20,215         19,599           616         3          40,551         38,190         2,361         6

Earnings from operations                       1,440            673           767       114           3,108          2,386           722        30
Operating margin                                 6.6 %          3.3 %                   3.3             7.1 %          5.9 %                   1.2
Interest expense                                (139 )         (164 )         (25 )     (15 )          (270 )         (318 )         (48 )     (15 )

Earnings before income taxes                   1,301            509           792       156           2,838          2,068           770        37
Provision for income taxes                      (442 )         (172 )         270       157            (995 )         (737 )         258        35
Tax rate                                        34.0 %         33.8 %                   0.2            35.1 %         35.6 %                  (0.5 )

Net earnings                               $     859      $     337      $    522       155 %     $   1,843      $   1,331      $    512        38 %

Diluted net earnings per common share      $    0.73      $    0.27      $   0.46       170 %     $    1.54      $    1.05      $   0.49        47 %
Return on equity                                16.0 %          6.9 %                   9.1 %          17.4 %         13.5 %                   3.9 %
Total people served                               71             73            (2 )      (3 )%

RESULTS OF OPERATIONS

Consolidated Financial Results

Revenues

Consolidated revenues for the three and six months ended June 30, 2009 increased over the comparable 2008 periods primarily due to the increase in premium revenues in the Health Care Services reporting segment.

Premium Revenues. The increases in premium revenues for both the three and six months ended June 30, 2009 over the comparable 2008 periods were primarily due to strong organic growth in risk-based offerings in our public and senior markets businesses and premium rate increases in response to growth in underlying medical costs. The effect of 2008 Health Care Services acquisitions also contributed to the increase in premium revenues in the six month period.

Product Revenues. Product revenues for the three and six months ended June 30, 2009 increased over the comparable 2008 periods due to increased prescription volume at our Prescription Solutions reporting segment.

Investment and Other Income. The decreases in investment and other income for both the three and six months ended June 30, 2009 over the comparable 2008 periods were primarily due to capital market conditions causing lower investment yields and a decrease in realized gains.

Medical Costs

Medical costs for the three and six months ended June 30, 2009 increased primarily due to growth in public and senior markets risk-based businesses, medical cost inflation and increased utilization of medical services.

For each period, our operating results include the effects of revisions in medical cost estimates related to all prior periods. Changes in medical cost estimates related to prior periods, resulting from more complete claim information identified in the current period, are included in total medical costs reported for the current period. For the three months ended June 30, 2009, there was no net favorable medical cost development related to prior fiscal years and $30 million of net favorable medical cost development related to the first quarter of 2009. For the three months ended June 30, 2008, there was no net medical cost development related to prior fiscal years or related to the first quarter of 2008. For the six months ended June 30, 2009 and 2008, medical costs included $200 million of net favorable medical cost development related to prior fiscal years.

Operating Costs

Operating costs decreased in 2009 for both the three and six month periods primarily due to the effect of certain expenses incurred in the second quarter of 2008 as discussed below and productivity improvements to our underlying cost structure, partially offset by increased costs due to retroactive and current state insurance premium assessments and the impact of 2008 acquisitions.

Operating costs for the three and six months ended June 30, 2008 included pre-tax Operating Costs of $922 million for settlement of two class action lawsuits related to our historical stock option practices and related legal costs, and $46 million for employee severance related to operating cost reduction initiatives and other items, partially offset by a $185 million reduction in operating costs for proceeds from the sale of certain assets and membership in the individual Medicare Advantage business in Nevada in May 2008.

Cost of Products Sold

Cost of products sold for the three and six months ended June 30, 2009 increased over the comparable 2008 periods due to increased prescription volume at our Prescription Solutions reporting segment.

Interest Expense

Interest expense for the three and six months ended June 30, 2009 decreased over the comparable 2008 periods primarily due to reduced levels in our debt outstanding and lower market interest rates on our floating-rate debt.

Reporting Segments

We have four reporting segments:

• Health Care Services, which includes UnitedHealthcare, Ovations and AmeriChoice;

• OptumHealth;

• Ingenix; and

• Prescription Solutions.

See Note 12 of Notes to the Condensed Consolidated Financial Statements for a description of the types and services from which each of these reporting segments derives its revenues.

Transactions between reporting segments principally consist of sales of pharmacy benefit products and services to Health Care Services customers by Prescription Solutions, certain product offerings sold to Health Care Services customers by OptumHealth, and consulting and other services sold to Health Care Services by Ingenix. These transactions are recorded at management's estimate of fair value. Intersegment transactions are eliminated in consolidation.

The following summarizes the operating results of our reporting segments for the three and six months ended June 30, 2009 and 2008:

                                                        Three Months Ended June 30,                                    Six Months Ended June 30,
                                                                                   Increase                                                      Increase
                                                                                  (Decrease)                                                    (Decrease)
(in millions, except percentages)             2009             2008             2009 vs. 2008               2009             2008             2009 vs. 2008
Revenues
Health Care Services                       $   20,282       $   18,945       $   1,337          7 %      $   40,954       $   37,962       $   2,992          8 %
OptumHealth                                     1,356            1,321              35          3             2,688            2,625              63          2
Ingenix                                           421              381              40         10               806              743              63          8
Prescription Solutions                          3,556            3,173             383         12             7,095            6,379             716         11
Eliminations                                   (3,960 )         (3,548 )          (412 )       nm            (7,884 )         (7,133 )          (751 )       nm

Consolidated revenues                      $   21,655       $   20,272       $   1,383          7 %      $   43,659       $   40,576       $   3,083          8 %

Earnings from operations
Health Care Services                       $    1,073       $    1,144       $     (71 )       (6 )%     $    2,394       $    2,515       $    (121 )       (5 )%
OptumHealth                                       142              169             (27 )      (16 )             300              366             (66 )      (18 )
Ingenix                                            59               49              10         20               108               96              12         13
Prescription Solutions                            166               94              72         77               306              192             114         59
Corporate                                          -              (783 )           783         nm                -              (783 )           783         nm

Consolidated earnings from operations      $    1,440       $      673       $     767        114 %      $    3,108       $    2,386       $     722         30 %

Operating margin
Health Care Services                              5.3 %            6.0 %                     (0.7 )%            5.8 %            6.6 %                     (0.8 )%
OptumHealth                                      10.5             12.8                       (2.3 )            11.2             13.9                       (2.7 )
Ingenix                                          14.0             12.9                        1.1              13.4             12.9                        0.5
Prescription Solutions                            4.7              3.0                        1.7               4.3              3.0                        1.3

Consolidated operating margin                     6.6 %            3.3 %                      3.3 %             7.1 %            5.9 %                      1.2 %

nm = not meaningful

The following summarizes the number of individuals served, by major market segment and funding arrangement, as of June 30, 2009 and 2008:

                                                                       Increase
                                                                      (Decrease)
   (in thousands, except percentages)             2009     2008     2009 vs. 2008
   Commercial risk-based                          9,655   10,490       (835 )    (8 )%
   Commercial fee-based                          15,375   16,000       (625 )    (4 )

   Total commercial                              25,030   26,490     (1,460 )    (6 )

   Medicare Advantage                             1,740    1,455        285      20
   Medicaid                                       2,750    2,255        495      22
   Standardized Medicare supplement               2,625    2,475        150       6

   Total Public and Senior                        7,115    6,185        930      15

   Total Health Care Services medical benefits   32,145   32,675       (530 )    (2 )%

Health Care Services

The revenue growth in Health Care Services for the three and six months ended June 30, 2009 was primarily due to premium rate increases and growth in the number of individuals served by our public and senior markets businesses, partially offset by a decline in individuals served through commercial products and a decrease in investment and other income. UnitedHealthcare revenues of $10.3 billion and $20.6 billion for the three and six months ended June 30, 2009, respectively, were essentially flat compared to the comparable 2008 periods as the reduction in consumers served was offset by premium rate increases. Ovations revenues of $8.0 billion and $16.4 billion for the three and six months ended June 30, 2009, respectively, increased over the comparable 2008 periods by $928 million, or 13%, and $1.9 billion, or 13%. The increases were primarily due to an increase in individuals served through Medicare Part D, Medicare Advantage and standardized Medicare Supplement offerings, as well as premium rate increases. AmeriChoice generated revenues of $2.0 billion and $4.0 billion for the three and six months ended June 30, 2009, respectively, an increase of $632 million, or 45%, and $1.3 billion, or 51%, over the comparable 2008 periods, primarily due to the impact of a 2008 acquisition, an increase in the number of individuals served by Medicaid plans and premium rate increases.

The decreases in Health Care Services earnings from operations for the three and six months ended June 30, 2009 over the comparable 2008 periods were primarily due to the three and six month year-over-year decreases in investment and other income for this reporting segment of $78 million and $190 million, respectively. The UnitedHealthcare medical care ratio increased to 84.2% from 83.8% for the three months ended June 30, 2009 and 2008, respectively, largely due to elevated medical costs related to the H1N1 influenza virus. The UnitedHealthcare medical care ratio for the six months ended June 30, 2009 and 2008 decreased to 82.8% from 83.2%, respectively, primarily due to the net favorable change in prior period reserve development as well as the impact of Leap Year in 2008. Health Care Services' operating margins for the three and six months ended June 30, 2009 decreased from the comparable 2008 operating margins due to decreases in investment income and the growth in comparatively lower margin public and senior markets businesses. . . .