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 and realized gains or losses are included in revenues when the securities are sold, or other-than-temporary 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 strive to price our risk-based business for a stable medical care ratio and, as a result, we would anticipate sustaining a stable medical care ratio over time for an equivalent mix of business. 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, our primary source of liquidity, 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. Cash flows generated by these entities are used to reinvest 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 and will pressure top line growth for our UnitedHealthcare business. This workplace attrition contributed nearly one-third of the 3% decrease in UnitedHealthcare's commercial membership in the first quarter 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. Our $22.1 billion portfolio of cash and investments is generally composed of high quality securities and cash, and has a relatively short aggregate duration. With $7.9 billion in cash and cash equivalents, our liquidity position and financial flexibility are strong. 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 these health care reform proposals include policy changes that would change the dynamics of the health care industry, such as having the federal or one or more state governments assume a larger role in the health care system or a fundamental restructuring of the Medicare or Medicaid programs. Any health care reforms enacted may be phased in over a number of years.

The new administration and various congressional leaders have signaled their interest in reducing payments to private plans offering Medicare Advantage over the intermediate term. Further, Centers for Medicare and Medicaid Services (CMS) has proposed a reduction in our Medicare Advantage reimbursements for 2010. Depending on the extent and phasing of these potential rate reductions, management believes that the number of seniors participating in Medicare Advantage and the industry-wide revenues and earnings derived from these plans may fall. Management believes that there are a number of annual adjustments we can make to our operations which may partially offset any impact from these rate reductions. For example, we can adjust members' benefits, decide on a county-by-county basis which geographies to participate in and seek to intensify our medical and operating cost management. 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 also 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.

Financial Performance Summary

Summary results of our quarter ended March 31, 2009 include:

• Diluted net earnings per common share of $0.81, an increase of 4% from $0.78 per share reported in the first quarter of 2008.

• Consolidated revenues of $22.0 billion, an increase of $1.7 billion, or 8%, over the first quarter of 2008.

• Earnings from operations of $1.7 billion in both the first quarter of 2009 and 2008.

• Cash flows from operations of $1.1 billion during the first quarter of 2009, an increase of $832 million, or 297%, from $280 million during the first quarter of 2008.

• Consolidated medical care ratio of 82.4% in both the first quarter of 2009 and 2008.

• Operating margin of 7.6% for the first quarter of 2009, a decrease from 8.4% in the first quarter of 2008.

RESULTS SUMMARY



                                                            Three Months Ended                Increase
                                                                 March 31,                   (Decrease)
(in millions, except percentages and per share data)        2009            2008            2009 vs. 2008
REVENUES
Premiums                                                 $   20,111       $ 18,389       $  1,722          9 %
Services                                                      1,296          1,273             23          2
Products                                                        439            363             76         21
Investment and Other Income                                     158            279           (121 )      (43 )

Total Revenues                                               22,004         20,304          1,700          8

OPERATING COSTS
Medical Costs                                                16,570         15,144          1,426          9
Medical Cost Ratio                                             82.4 %         82.4 %                      -
Operating Costs                                               3,128          2,897            231          8
Operating Cost Ratio                                           14.2 %         14.3 %                    (0.1 )
Cost of Products Sold                                           404            325             79         24
Depreciation and Amortization                                   234            225              9          4

Total Operating Costs                                        20,336         18,591          1,745          9

EARNINGS FROM OPERATIONS                                      1,668          1,713            (45 )       (3 )
Operating Margin                                                7.6 %          8.4 %                    (0.8 )
Interest Expense                                               (131 )         (154 )          (23 )      (15 )

EARNINGS BEFORE INCOME TAXES                                  1,537          1,559            (22 )       (1 )
Provision for Income Taxes                                     (553 )         (565 )          (12 )       (2 )
Tax Rate                                                       36.0 %         36.2 %                    (0.2 )

NET EARNINGS                                             $      984       $    994       $    (10 )       (1 )%

DILUTED NET EARNINGS PER COMMON SHARE                    $     0.81       $   0.78       $   0.03          4 %

RETURN ON EQUITY                                               18.7 %         20.0 %                    (1.3 )%

TOTAL PEOPLE SERVED                                              71             73             (2 )       (3 )%

RESULTS OF OPERATIONS

Consolidated Financial Results

Revenues

Consolidated revenues for the three months ended March 31, 2009 increased over the comparable 2008 period primarily due to the increase in premium revenues in the Health Care Services reporting segment.

Premium Revenues. The increase in premium revenues was primarily due to strong growth in risk-based offerings in our public and senior markets businesses, premium rate increases and the effect of 2008 Health Care Services acquisitions.

Product Revenues. Product revenues for 2009 increased due to increased prescription volume at our Prescription Solutions reporting segment.

Investment and Other Income. The decrease in investment and other income in 2009 was primarily due to capital market conditions causing lower investment yields and a decrease in realized gains.

Medical Costs

Medical costs for three months ended March 31, 2009 increased primarily due to the factors that increased premium revenues described above.

Our consolidated medical care ratio was flat year-over-year with improvements in the medical care ratio for the commercial risk-based business offset by the mix effect from growth in our public and senior markets businesses, which have higher medical care ratios.

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. Medical costs for both the three months ended March 31, 2009 and 2008 included $200 million of net favorable medical cost development related to prior fiscal years.

Operating Costs

Operating costs increased in 2009 due to the effect of acquisitions completed in 2008, retroactive and current state insurance premium assessments and growth in our public and senior markets businesses, partially offset by productivity improvements to our underlying cost structure. These cost structure improvements were the primary driver in the reduced operating cost ratio. Also during the quarter, there was a $91 million reduction to operating costs resulting from a release of our former CEO's Supplemental Executive Retirement Plan accrual. Included in operating costs for the three months ended March 31, 2009 is an accrual of $91 million for a charitable commitment to the United Health Foundation.

Cost of Products Sold

Cost of products sold increased due to increased prescription volume at our Prescription Solutions reporting segment.

Interest Expense

Interest expense decreased due to reduced levels in our debt outstanding and by 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 11 of Notes to the Condensed Consolidated Financial Statements for a description of the types and services from which each of these business 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 medical benefits cost, quality and utilization data and predictive modeling 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 months ended March 31, 2009 and 2008:

                                             Three Months Ended            Increase
                                                  March 31,               (Decrease)
   (in millions)                              2009          2008         2009 vs. 2008
   Revenues
   Health Care Services                    $   20,672     $ 19,017     $  1,655        9 %
   OptumHealth                                  1,332        1,304           28        2
   Ingenix                                        385          362           23        6
   Prescription Solutions                       3,539        3,206          333       10
   Eliminations                                (3,924 )     (3,585 )       (339 )     nm

   Consolidated Revenues                   $   22,004     $ 20,304     $  1,700        8 %

   Earnings from Operations
   Health Care Services                    $    1,321     $  1,371     $    (50 )     (4 )%
   OptumHealth                                    158          197          (39 )    (20 )
   Ingenix                                         49           47            2        4
   Prescription Solutions                         140           98           42       43

   Consolidated Earnings from Operations   $    1,668     $  1,713     $    (45 )     (3 )%

   Operating Margin
   Health Care Services                           6.4 %        7.2 %                (0.8 )%
   OptumHealth                                   11.9         15.1                  (3.2 )
   Ingenix                                       12.7         13.0                  (0.3 )
   Prescription Solutions                         4.0          3.1                   0.9

   Consolidated Operating Margin                  7.6 %        8.4 %                (0.8 )%

nm = not meaningful

The following summarizes the number of individuals served, by major market segment and funding arrangement, as of March 31, 2009 and 2008:

                                                                       Increase
                                                                      (Decrease)
   (in thousands)                                 2009     2008     2009 vs. 2008
   Commercial Risk-based                          9,915   10,585       (670 )    (6 )%
   Commercial Fee-based                          15,525   16,005       (480 )    (3 )

   Total Commercial                              25,440   26,590     (1,150 )    (4 )

   Medicare Advantage                             1,695    1,455        240      16
   Medicaid                                       2,695    1,880        815      43
   Standardized Medicare Supplement               2,600    2,450        150       6

   Total Public and Senior                        6,990    5,785      1,205      21

   Total Health Care Services Medical Benefits   32,430   32,375         55       - %

Health Care Services

The revenue growth in Health Care Services for the three months ended March 31, 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 for the three months ended March 31,

2009 were essentially flat compared to the comparable 2008 period as premium rate increases offset the reduction in consumers served. Ovations revenues of $8.4 billion for the three months ended March 31, 2009 increased over the comparable 2008 period by $973 million, or 13%. The increase was 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 $1.9 billion for the three months ended March 31, 2009, an increase of $707 million, or 59%, over the comparable 2008 period, primarily due to an increase in the number of individuals served by Medicaid plans, premium rate increases and the impact of 2008 acquisitions.

The decrease in Health Care Services earnings from operations was primarily due to the $112 million year-over-year decrease in investment and other income for this reporting segment. The UnitedHealthcare medical care ratio improved to 81.5% for the three months ended March 31, 2009 from 82.5% for the comparable 2008 period. This improvement was primarily driven by the decreased incidence of influenza-like illnesses year-over-year as well as favorable development in prior year medical cost estimates. Health Care Services' operating margin was 6.4% for the three months ended March 31, 2009, a decrease from 7.2% in 2008, as an expansion in the commercial business operating margin was more than offset by the reduction in margin contribution from investment and other income as well as the impact from strong growth in comparably lower margin public and senior markets businesses.

OptumHealth

Increased revenues in OptumHealth were driven by new business development in large scale behavioral health programs for state clients offset by a decline in individuals served through commercial products. OptumHealth provided services to approximately 58 million consumers.

Earnings from operations and operating margin decreased due to the decrease in membership described above, decreased investment and other income and a higher mix of lower margin public sector business.

Ingenix

The modest improvements in Ingenix revenues and earnings from operations are primarily due to the impact of new service offerings and the effect of 2008 acquisitions.

Prescription Solutions

The increased Prescription Solutions revenues were primarily due to growth in customers served through Medicare Part D prescription drug plans by our Ovations business, which is the largest customer of this reporting segment. Intersegment revenues eliminated in consolidation were $3.1 billion and $2.8 billion for the three months ended March 31, 2009 and 2008, respectively.

Prescription Solutions earnings from operations increased primarily due to prescription volume growth, improved drug purchasing, gains in mail service drug fulfillment and a continuing favorable mix shift to generic pharmaceuticals.

LIQUIDITY, FINANCIAL CONDITION AND CAPITAL RESOURCES

Liquidity and Financial Condition

We manage our cash, investments and capital structure to meet the short- and long-term obligations of our business while maintaining liquidity and financial flexibility. We forecast, analyze and monitor our cash flows to enable prudent investment management and financing within the confines of our financial strategy.

Our regulated subsidiaries generate significant cash flows from operations. A majority of the assets held by our regulated subsidiaries are in the form of cash, cash equivalents and investments. After considering expected cash flows from operating activities, we generally invest cash of regulated subsidiaries that exceeds our expected short-term obligations in longer term, investment-grade, marketable debt securities to improve our overall investment return. These investments are made pursuant to our Board of Directors' approved investment policy, which focuses on preservation of capital, diversification and duration. It also generally governs return objectives, regulatory limitations, tax implications and risk tolerances. 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. Cash flows generated by these entities, combined with dividends from our regulated entities and financing through the issuance of commercial paper and long-term debt, as well as the availability of committed credit facilities, further strengthen our operating and financial . . .