UnitedHealth Group (UNH)

DIRECTOR COMPENSATION

Our compensation and benefit program is designed to compensate our non-employee directors fairly for work required for a company of our size and scope, and align their interests with the long-term interests of our shareholders. Director compensation reflects our desire to attract, retain and use the expertise of highly qualified people serving on the Company’s Board of Directors. The Compensation Committee reviews the compensation level of our non-employee directors on an annual basis and makes recommendations to the Board of Directors.

The Company uses annual retainers, meeting and committee fees, equity-based compensation, expense reimbursement and other forms of compensation, as appropriate, to attract and retain non-employee directors.

DIRECTOR COMPENSATION

Our compensation and benefit program is designed to compensate our non-employee directors fairly for work required for a company of our size and scope, and align their interests with the long-term interests of our shareholders. Director compensation reflects our desire to attract, retain, and use the expertise of highly qualified people serving on the Company’s Board of Directors. The Compensation Committee reviews the compensation level of our non-employee directors on an annual basis and makes recommendations to the Board of Directors.

The Company uses annual retainers, meeting and committee fees, equity-based compensation, expense reimbursement, and other forms of compensation, as appropriate, to attract and retain non-employee directors.

DIRECTOR COMPENSATION

Our compensation and benefit program for our non-employee directors is designed to compensate our non-employee directors fairly for work required for a company of our size and scope, and align our non-employee directors’ interests with the long-term interests of our shareholders. The Compensation Committee and the Board of Directors review the compensation level of our non-employee directors on an annual basis. As discussed under “Corporate Governance” above, our Board reduced quarterly equity compensation for continuing non-employee directors by approximately 40% in May 2006, following an earlier reduction of 20% in 2005. In addition, in January 2007, the Board, after considering recommendations from the Compensation Committee, reduced initial one-time grants of stock options to new directors by approximately 57%.

Directors who are not Company employees receive an annual cash retainer of $30,000, a cash meeting attendance fee of $1,500 for attending each Board meeting in person ($750 for attending by telephone), and a cash meeting attendance fee of $1,000 for attending each committee meeting in person ($500 for attending by telephone). We also pay our directors who are unable to attend a meeting the standard telephone attendance fee if they receive a briefing by telephone prior to or after the meeting. In addition, we pay the Chairman of the Board an additional annual cash retainer of $300,000 and the Chair of each of the Audit Committee and the Compensation Committee an additional annual cash retainer of $5,000. Director compensation payable in cash is paid on a quarterly basis.

Under our Directors’ Compensation Deferral Plan (Director Deferral Plan), non-employee directors may elect to defer annually receipt of all or a percentage of their retainer and meeting fees, including committee meeting fees (but not stock options or other stock-based compensation). Amounts deferred are credited to a bookkeeping account maintained for each director participant, and are distributable upon the termination of the director’s directorship for any reason. Subject to certain additional rules set forth in the Director Deferral Plan, participating directors may elect whether distribution is made in either (a) an immediate lump sum; (b) in a series of five or ten annual installments; (c) in a delayed lump sum following either the fifth or tenth anniversary of the termination of the director’s directorship; or (d) in pre-selected amounts and on pre-selected dates while the director remains a member of our Board of Directors. The Director Deferral Plan does not provide for matching contributions by the Company, but our Board of Directors may determine, in its discretion, to supplement the accounts of participating directors with additional amounts. No accounts were supplemented in 2006.

Non-employee directors also receive grants of non-qualified stock options under the UnitedHealth Group Incorporated 2002 Stock Incentive Plan. Under the 2002 Stock Incentive Plan and terms approved by the Board of Directors with respect to non-employee director grants made pursuant to the 2002 Stock Incentive Plan, our non-employee directors receive quarterly grants of non-qualified stock options to purchase 5,000 shares of our common stock and conversion grants made pursuant to an

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election by a director to convert certain cash compensation into equity of the Company as set forth more fully below.

A new director also receives an initial one-time grant of non-qualified stock options to purchase 25,000 shares of our common stock. The new director may elect to take all or a portion of the initial one-time stock option award in restricted stock units, using a four-to-one conversion ratio (which would result in an award of 6,250 restricted stock units if all options were elected to be received in the form of restricted stock units). These stock options or restricted stock units, as the case may be, are granted on the date of the director’s appointment to the Board. The options or restricted stock units vest 25% per year for four years subject to service on the Board on the vesting date. A director is required to retain the underlying shares of this equity award (net of any exercise price or taxes) until he or she completes his or her service on the Board.

Directors may also elect to convert cash Board retainers, cash retainers for service as Chair of the Audit Committee or Compensation Committee and cash meeting attendance fees for regularly scheduled quarterly Board and committee meetings into non-qualified stock options or shares of common stock of the Company. The cash retainer payable for service as Chairman of the Board and cash meeting attendance fees for special meetings are not eligible for conversion into either non-qualified stock options or shares of common stock of the Company. The conversion grants are made on the day of each regularly scheduled quarterly Board meeting and become exercisable immediately upon grant. If a director elects to convert his or her eligible cash compensation into stock options, he or she will receive a non-qualified stock option to purchase the number of shares of our common stock equal to four times the amount of the cash compensation foregone, divided by the fair market value of one share of our common stock on the date of grant. If a director elects to convert his or her eligible cash compensation into shares of our common stock, he or she will receive the number of shares equal to the cash compensation foregone, divided by the fair market value of one share of our common stock on the date of grant. The quarterly grants are made automatically on the first business day following the end of each fiscal quarter and become exercisable immediately upon grant.

The exercise price for all stock options granted under the 2002 Stock Incentive Plan is the closing sale price of our common stock on the date the option is granted.

Under our stock ownership guidelines, we require new directors to achieve ownership of 10,000 shares of the Company’s common stock (excluding stock options, but including restricted stock units after vesting) within five years upon appointment to the Board and require current directors to achieve ownership of 20,000 shares of the Company’s common stock by April 26, 2009. All directors subject to the 20,000 share ownership requirement have satisfied the requirement other than Dr. Shalala who is not seeking re-election.

We reimburse directors for any out-of-pocket expenses incurred in connection with service as a director. We also provide health care coverage to current and past directors who are not eligible for coverage under another group health care benefit program or Medicare.

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The following table provides summary information for the fiscal year ended December 31, 2006 relating to compensation paid to or accrued by us on behalf of any of our non-employee directors who served in such capacity during 2006.

Director Compensation

Directors who are not Company employees receive an annual retainer of $30,000, a $1,500 fee for attending each Board meeting in person ($750 for attending by telephone), and a $1,000 fee for attending each committee meeting in person ($500 for attending by telephone). Directors also receive the standard fee for attendance by telephone if they are unable to attend a meeting, but receive an update by telephone prior to or after the meeting. In addition, we pay the Chairman of each of the Audit Committee and the Compensation and Human Resources Committee an annual retainer of $5,000.

We provide health care coverage to current and past directors who are not eligible for coverage under another group health care benefit program or Medicare. During 2005, we paid approximately $5,944 in health care premiums on behalf of Mr. Burke.

Under our Directors’ Compensation Deferral Plan (the “Director Deferral Plan”), non-employee directors may elect to defer annually receipt of all or a percentage of their retainer and meeting fees, including committee meeting fees (but not stock options or other stock-based compensation). Amounts deferred are credited to a bookkeeping account maintained for each director participant, and are distributable upon the termination of the director’s directorship for any reason. Participating directors may elect whether distribution is made in either (a) an immediate lump sum; (b) in a series of five or ten annual installments (subject to certain additional rules set forth in the Director Deferral Plan); (c) in a delayed lump sum following either the fifth or tenth anniversary of the termination of the director’s directorship (subject to certain additional rules set forth in the Director Deferral Plan); or (d) in pre-selected amounts and on pre-selected dates while the director remains a member of our Board of Directors (subject to certain additional rules set forth in the Director Deferral Plan). The Director Deferral Plan does not provide for matching contributions by the Company, but our Board of Directors may determine, in its discretion, to supplement the accounts of participating directors with additional amounts. No accounts were supplemented in 2005.

Non-employee directors also receive grants of non-qualified stock options under the UnitedHealth Group Incorporated 2002 Stock Incentive Plan (the “Stock Incentive Plan”). Under the Stock Incentive Plan (and terms approved by the Compensation and Human Resources Committee with respect to non-employee director grants made pursuant to the Stock Incentive Plan), our non-employee directors receive three types of option grants: (1) initial one-time grants of non-qualified stock options to purchase 58,000 shares of our common stock; (2) quarterly grants of non-qualified stock options to purchase 8,000 shares of our common stock; and (3) conversion grants made pursuant to an election by a director to convert annual retainer and meeting attendance fees into options to purchase our common stock.

The initial grants are made automatically on the date the eligible director is first elected to the Board of Directors and become exercisable over the following three years at the rate of 19,333 shares per year. The quarterly grants are made automatically on the first business day following the end of each fiscal quarter and become exercisable immediately upon grant. The conversion grants are made on the day of each regularly scheduled Board meeting and become exercisable immediately upon grant. The number of shares covered by a conversion option will equal four times the amount of the

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retainer and meeting fees foregone, divided by the fair market value of one share of our common stock on the date of grant. The exercise price for all options granted under the Stock Incentive Plan is the closing sale price of our common stock on the date the option is granted. Directors are eligible to receive restricted stock awards and other grants under the Stock Incentive Plan, although no such awards were made in 2005.

Director Compensation

Directors who are not Company employees receive an annual retainer of $30,000, a $1,500 fee for attending each Board meeting in person ($750 for attending by telephone), and a $1,000 fee for attending each committee meeting in person ($500 for attending by telephone). Directors also receive the standard fee for attendance by telephone if they are unable to attend a meeting, but receive an update by telephone prior to or after the meeting. In addition, we pay the Chairman of each of the Audit Committee and the Compensation and Human Resources Committee an annual retainer of $5,000.

We provide health care coverage to current and past directors who are not eligible for coverage under another group health care benefit program or Medicare. During 2004, we paid approximately $5,575 in health care premiums on behalf of Mr. Burke.

Under our Directors’ Compensation Deferral Plan (the “Director Deferral Plan”), non-employee directors may elect to defer annually receipt of all or a percentage of their retainer and meeting fees, including committee meeting fees (but not stock options or other stock-based compensation). Amounts deferred are credited to a bookkeeping account maintained for each director participant, and are distributable upon the termination of the director’s directorship for any reason. Participating directors may elect whether distribution is made in either (a) an immediate lump sum; (b) in a series of five or ten annual installments (subject to certain additional rules set forth in the Director Deferral Plan); (c) in a delayed lump sum following either the fifth or tenth anniversary of the termination of the director’s directorship (subject to certain additional rules set forth in the Director Deferral Plan); or (d) in pre-selected amounts and on pre-selected dates while the director remains a member of our Board of Directors (subject to certain additional rules set forth in the Director Deferral Plan). The Director Deferral Plan does not provide for matching contributions by us, but our Board of Directors may determine, in its discretion, to supplement the accounts of participating directors with additional amounts. No accounts were supplemented in 2004.

Non-employee directors also receive grants of non-qualified stock options under the UnitedHealth Group Incorporated 2002 Stock Incentive Plan (the “Stock Incentive Plan”). Under the Stock Incentive Plan (and terms approved by the Compensation and Human Resources Committee with respect to non-employee director grants made pursuant to the Stock Incentive Plan), our non-employee directors receive three types of option grants: (1) initial one-time grants of non-qualified stock options to purchase 36,000 shares of our common stock; (2) quarterly grants of non-qualified stock options to purchase 5,000 shares of our common stock; and (3) conversion grants made pursuant to an election by a director to convert annual retainer and meeting attendance fees into options to purchase our common stock.

The initial grants are made automatically on the date the eligible director is first elected to the Board of Directors and become exercisable over the following three years at the rate of 12,000 shares per year. The quarterly grants are made automatically on the first business day of each fiscal quarter and become exercisable immediately upon grant. The conversion grants are made on the day of each regularly scheduled Board meeting and become exercisable immediately upon grant. The number of shares covered by a conversion option will equal four times the amount of the retainer and meeting fees foregone, divided by the fair market value of one share of our common stock on the date of grant.

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The exercise price for all options granted under the Stock Incentive Plan is the closing sale price of our common stock on the date the option is granted. Directors may also receive restricted stock awards and other grants under the Stock Incentive Plan.