UnitedHealth Group (UNH)

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,

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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.

Health Care Services

Our Health Care Services reporting segment consists of the following businesses: UnitedHealthcare, Ovations and AmeriChoice. The financial results of UnitedHealthcare, Ovations and AmeriChoice have been aggregated in the Health Care Services reporting segment due to their similar economic characteristics, products and services, types of customers, distribution methods and operational processes, and regulatory environment. These businesses also share significant common assets, including our contracted networks of physicians, health care professionals, hospitals and other facilities, information technology infrastructure and other resources.

Health Care Services

UnitedHealthcare revenues of $40.3 billion in 2007 increased by $821 million, or 2%, over 2006. This increase was driven mainly by average net premium rate increases of 7% to 8% on UnitedHealthcare’s renewing commercial risk-based products, an increase in the number of individuals served by commercial fee-based products and businesses acquired since the beginning of 2006. This was partially offset by a 4% decrease in the number of individuals served by commercial risk-based products in 2007 primarily due to our internal pricing decisions in a competitive commercial risk-based pricing environment and the conversion of certain groups to commercial fee-based products. Ovations revenues of $26.5 billion in 2007 increased by approximately $1.8 billion, or 7%, over 2006. The increase was primarily driven by an increase in individuals served by standardized Medicare supplement and Evercare products, and rate increases on Medicare Advantage products as well as continued growth in our Medicare Part D program. The remaining Health Care Services revenue increase

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resulted from an increase in AmeriChoice revenues of $750 million, or 20%, over 2006 primarily due to an increase in the number of individuals served by Medicaid products as well as rate increases.

The increase in Health Care Services earnings from operations in 2007 was principally driven by a decrease in the medical care ratio for Ovations primarily due to favorable medical cost trends and an increase in the number of individuals served by certain Medicare products and related rate increases discussed above, partially offset by a decrease in individuals served by commercial risk-based products and an increase in the related medical care ratio. The UnitedHealthcare medical care ratio increased to 82.6% in 2007 from 80.5% in 2006. This increase was mainly due to our internal pricing decisions in a competitive commercial risk-based pricing environment as well as a shift from favorable medical cost development for UnitedHealthcare during 2006 to unfavorable medical cost development during 2007, which was partially driven by costs from higher benefit utilization in December 2006 primarily relating to high-deductible risk-based products. The Health Care Services operating margin for 2007 was 9.3%, an increase from 8.6% in 2006, which reflected productivity gains from technology deployment and disciplined operating cost management as well as the factors discussed above.

The increase in the number of individuals served with commercial fee-based products as of December 31, 2007 was driven by new customer relationships and customers converting from risk-based products to fee-based products, partially offset by employment attrition at continuing customers. The number of individuals served with commercial risk-based products decreased primarily due to a competitive pricing environment and the conversion of individuals to fee-based products.

The number of individuals served by Medicare Advantage products as of December 31, 2007 decreased primarily due to a decline in participation in private-fee-for-service offerings, while individuals served by standardized Medicare supplement products increased due to new customer relationships. Medicaid enrollment increased in 2007 primarily due to new customer gains, including 180,000 individuals served under the TennCare program in Tennessee.

Health Care Services

The Health Care Services segment had revenues for the three and nine months ended September 30, 2008 of $18.8 billion and $56.8 billion, respectively, representing an increase of $1.2 billion, or 7%, and $3.2 billion, or 6%, over the comparable 2007 periods. The revenue growth for both periods was primarily due to growth in individuals served by our Public and Senior Markets Group, premium rate increases for medical cost inflation and the 2008 acquisitions of Sierra, Fiserv Health, and Unison, offset by an organic decline in individuals served through commercial risk-based products and stand-alone Medicare Part D products and a decrease in investment income. UnitedHealthcare revenues for the three and nine months ended September 30, 2008 of $10.5 billion and $31.3 billion, respectively, increased over the comparable 2007 periods by $389 million, or 4%, and $1.1 billion, or 4%. The increases were primarily due to premium rate increases for medical cost inflation and the acquisitions of Sierra and Fiserv Health, offset by the impact of the decline in individuals served through risk-based product offerings. Ovations revenues for the three and nine months ended September 30, 2008 of $6.7 billion and $21.2 billion, respectively, increased over the comparable 2007 periods by $328 million, or 5%, and $1.0 billion, or 5%. The increases were primarily due to an increase in individuals served with the standardized Medicare Supplement and Medicare Advantage products gained through both organic growth and the Sierra acquisition. In addition, Ovations revenues increased from premium rate increases, which were partially offset by a net organic decrease of 650,000 stand-alone Medicare Part D members primarily due to the reassignment by the Centers for Medicare and Medicaid Services (CMS) of certain dual-eligible low income beneficiaries based on annual price bids. AmeriChoice generated revenues of $1.7 billion and $4.3 billion for the three and nine months ended September 30, 2008, respectively, an increase of $495 million, or 43%, and $1.0 billion, or 31%, over the comparable 2007 periods, primarily due to an increase in the number of individuals served by Medicaid plans, premium rate increases and the acquisition of Unison in the second quarter of 2008.

The Health Care Services segment had earnings from operations of $1.3 billion and $3.8 billion for the three and nine months ended September 30, 2008, respectively, representing a decrease of $503 million, or 28%, and $1.2 billion, or 24%, from the comparable 2007 periods. The decrease was primarily due to pressure on enrollment

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and gross margins in the UnitedHealthcare risk-based business and on gross margins in certain senior market offerings, partially offset by acquisitions. The UnitedHealthcare medical care ratio increased to 83.8% in the third quarter of 2008 from 82.0% in the prior year third quarter. This increase was primarily driven by the effects of a competitive pricing environment where price increases, net of customer benefit package changes, did not fully match the rise in medical costs, and an increased mix of national account pharmaceutical benefit business. Health Care Services’ operating margins for the three and nine months ended September 30, 2008 were 6.8% and 6.7%, respectively, representing decreases of 340 basis points and 260 basis points from the comparable 2007 periods. These decreases were primarily driven by the increases in medical costs as discussed more fully in “Medical Costs” above.

The following table summarizes individuals served by Health Care Services, by major market segment and funding arrangement, at September 30, 2008 and 2007:

The number of individuals served with commercial products at September 30, 2008 increased by 895,000 members, or 3%, over September 30, 2007. The increase was due to acquisitions, which included the addition of 1,315,000 members from Fiserv Health in fee-based products and the addition of 310,000 risk-based individuals gained through the Sierra acquisition. These additions were partially offset by a net decline in individuals served with commercial products of 730,000, or 3%, from September 30, 2007, primarily due to a decline in individuals served with commercial risk-based products from the PacifiCare businesses and the impact of a competitive commercial risk-based pricing environment. The number of individuals served by Medicare Advantage products at September 30, 2008 increased by 110,000 members, or 8%, from September 30, 2007 through the addition of 60,000 seniors from our acquisition of Sierra and organic net growth of 50,000 seniors. Medicaid enrollment grew 640,000 individuals, or 38%, between the two periods due to the addition of 320,000 and 60,000 individuals from our Unison and Sierra acquisitions, respectively, and strong organic growth.

Health Care Services

The Health Care Services segment had revenues for the three and six months ended June 30, 2008 of $18.9 billion and $38.0 billion, respectively, representing an increase of $1.0 billion, or 5%, and $1.9 billion, or 5%, over the comparable 2007 periods. The revenue growth was primarily due to growth in people served by our Public and Senior Markets Group, premium rate increases for medical cost inflation, and the 2008 acquisitions of Sierra, Fiserv Health, and Unison, offset by an organic decline in consumers served through commercial risk-based products and a decrease in investment income. UnitedHealthcare revenues for the three and six months ended June 30, 2008 of $10.5 billion and $20.8 billion, respectively, increased over the comparable 2007 periods by $427 million, or 4%, and $738 million, or 4%. The increases were primarily due to premium rate increases for medical cost inflation and the acquisitions of Sierra and Fiserv Health, offset by the impact of the decline in people served through risk-based product offerings. Ovations revenues for the three and six months ended June 30, 2008 of $7.1 billion and $14.5 billion, respectively, increased over the comparable 2007 periods by $270 million, or 4%, and $694 million, or 5%. The increases were primarily due to an increase in members served with the standardized Medicare Supplement and Medicare Advantage products gained through both organic growth and the Sierra acquisition. In addition, Ovations revenues increased from premium rate increases, which were partially offset by a net organic decrease of approximately 600,000 stand-alone Medicare Part D members primarily due to the reassignment by CMS of certain dual-eligible low income beneficiaries based on annual price bids. AmeriChoice generated revenues of $1.4 billion and $2.6 billion for the three and six months ended June 30, 2008, respectively, an increase of $280 million, or 25%, and $506 million, or 24%, over the comparable 2007 periods primarily due to an increase in the number of individuals served by Medicaid plans, premium rate increases and the acquisition of Unison on May 30, 2008.

The Health Care Services segment had earnings from operations of $1.1 billion and $2.5 billion, respectively, for the three and six months ended June 30, 2008, representing a decrease of $604 million, or 35%, and $691 million, or 22%, from the comparable periods of 2007. The decrease was primarily due to pressure on enrollment and gross margins in the UnitedHealthcare risk-based business and on gross margins in certain senior market offerings, partially offset by acquisitions. The UnitedHealthcare medical care ratio increased to 83.8% in the second quarter of 2008 from 82.4% in the prior year second quarter. This increase was primarily driven by the effects of a competitive pricing environment where price increases, net of customer benefit package changes, did not fully match the rise in medical costs. Health Care Services’ operating margins for the three and six months ended June 30, 2008 were 6.0% and 6.6%, respectively, representing decreases of 370 basis points and 230 basis points from the comparable 2007 periods. These decreases were primarily driven by reductions in gross margin for certain Ovations health benefit products for seniors as discussed more fully under medical costs above, pressure on commercial risk-based enrollment and margins and the mix effect of the national account pharmaceutical benefit business contributed to the increase in consolidated medical care ratio.

The following table summarizes individuals served by Health Care Services, by major market segment and funding arrangement, at June 30, 2008 and 2007:

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The number of individuals served with commercial products at June 30, 2008 increased by 800,000 members, or 3%, over June 30, 2007. The increase was due to acquisitions, which included the addition of 1,315,000 members from Fiserv Health in fee-based products and the addition of 310,000 risk-based individuals gained through the Sierra acquisition. These additions were partially offset by a net decline in individuals served with commercial products of 825,000, or 3%, from June 30, 2007, primarily due to a decline in individuals served with commercial risk-based products from the PacifiCare businesses and the impact of a competitive commercial risk-based pricing environment. The number of individuals served by Medicare Advantage products at June 30, 2008 increased by 105,000 members, or 8%, from June 30, 2007 through the addition of 60,000 seniors from our acquisition of Sierra and organic net growth of 45,000 seniors. Medicaid enrollment grew 555,000 individuals between the two periods, or 33%, due to the addition of 320,000 and 60,000 individuals from our Unison and Sierra acquisitions, respectively, and strong organic growth.

Health Care Services

The Health Care Services segment, comprised of the Commercial Markets and the Public and Senior Markets businesses, had revenues for the three months ended March 31, 2008 of $19.0 billion, representing an increase of $961 million, or 5%, over the comparable 2007 period. The revenue growth was primarily due to growth in people served by our Public and Senior Markets, premium rate increases for medical cost inflation, and the first quarter 2008 acquisitions of Sierra and Fiserv Health, partially offset by a decline in consumers served through Commercial Markets risk-based products. Commercial Markets revenues for the three months ended March 31, 2008 of $10.4 billion increased over the comparable 2007 period by $311 million, or 3%. The increase was primarily due to premium rate increases, expanded services and the acquisitions of Sierra and Fiserv Health, partially offset by the impact of the decline in people served through risk-based product offerings. Ovations revenues for the March 2008 quarter of $7.5 billion increased over the comparable 2007 period by $424 million, or 6%. The increase was primarily due to an increase in members served with the standardized Medicare Supplement and Medicare Advantage products, gained through both organic growth and the Sierra acquisition, as well as premium rate increases, which were partially offset by a net organic decrease of approximately 565,000 stand-alone Medicare Part D members primarily due to the previously announced reassignment by CMS of certain dual-eligible low income beneficiaries based on annual price bids. AmeriChoice generated revenues of $1.2 billion, an increase of $226 million, or 23%, for the three months ended March 31, 2008, over the comparable 2007 period primarily due to an increase in the number of individuals served by Medicaid plans and premium rate increases.

The Health Care Services segment had earnings from operations of $1.4 billion for the three months ended March 31, 2008, representing a decrease of $87 million, or 6%, from the comparable period of 2007. The decrease was primarily due to a reduction in commercial risk-based business, relatively higher levels of operating expenses and influenza costs, partially offset by premium rate increases, acquisitions, and both the growth in and the improved medical care ratios of certain public and senior products. The UnitedHealthcare medical care ratio

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increased to 81.5% in the first quarter of 2008 from 81.2% in the prior year first quarter. The increased medical care ratio at UnitedHealthcare was primarily driven by the effects of a competitive pricing environment where achieved price increases, net of customer benefit package changes, did not fully match the rise in medical costs, as well as the relatively higher level of influenza costs experienced during the first quarter of 2008 as compared to the prior year quarter. The Commercial Markets medical care ratio increased to 82.5% in the first quarter of 2008 from 81.8% in the first quarter of 2007. The increase was driven by the same factors as the increase in the UnitedHealthcare ratio, as well as the commencement of The State of New York—Empire Plan Prescription Drug Program. During the first quarter of 2008, the Health Care Services segment experienced unusually high influenza costs of approximately $80 million above normal levels. Health Care Services’ operating margin for the three months ended March 31, 2008 was 7.2%, representing a decrease of 90 basis points from the comparable 2007 period, reflecting changes in product mix and operating expenses that were at a level to support anticipated revenue growth that did not fully materialize.

The following table summarizes individuals served by Health Care Services, by major market segment and funding arrangement, as of March 31, 2008 and 2007:

The number of individuals served with commercial products as of March 31, 2008 increased by 845,000 members, or 3%, over March 31, 2007. The increase was primarily due to acquisitions, which included the addition of 1,315,000 members from Fiserv Health in fee-based products, and the addition of 310,000 risk-based individuals gained through the Sierra acquisition. These additions were partially offset by a net decline in individuals served with commercial products of 780,000, or 3%, from March 31, 2007, primarily due to a decline in individuals served with commercial risk-based products from the PacifiCare businesses and the impact of a competitive commercial risk-based pricing environment. The number of individuals served by Medicare Advantage products as of March 31, 2008 increased by 115,000 members, or 9%, from March 31, 2007 through the addition of 60,000 seniors from our acquisition of Sierra and organic net growth of 55,000 people. Medicaid enrollment grew 380,000 people between the two periods, or 25%, due to strong organic growth, supplemented by the acquisition of 60,000 people from our Sierra acquisition.

Health Care Services

Health Care Services had revenues of $67.8 billion in 2006, representing an increase of $23.7 billion, or 54%, over 2005. Excluding the impact of businesses acquired since the beginning of 2005, Health Care Services revenues increased by approximately $8.6 billion, or 20%, over 2005. Commercial Markets revenues of $39.5 billion in 2006 increased by $8.1 billion, or 26%, over 2005. Excluding the impact of businesses acquired since the beginning of 2005, Commercial Markets revenues increased by approximately 2% over 2005. This was primarily due to an 8% increase in the number of individuals served with commercial fee-based products and annual service fee rate increases for self-insured customers, as well as average premium rate increases of approximately 8% or above on UnitedHealthcare’s renewing risk-based products, partially offset by lower premium yields from a larger portion of new customer sales generated from high-deductible lower-premium

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products and a 5% decrease in the number of individuals served by commercial risk-based products in 2006 primarily due to the Company’s internal pricing decisions in a competitive commercial risk-based pricing environment and the conversion of certain groups to fee-based products. Ovations revenues of $24.6 billion in 2006 increased by approximately $15.2 billion, or 162%, over 2005. Excluding the impact of acquisitions since the beginning of 2005, Ovations revenues increased by $7.8 billion, or 85%, over 2005. The increase was primarily driven by the successful launch of the Medicare Part D program, which had premium revenues of $5.7 billion for 2006, and an increase in the number of individuals served by Medicare Advantage and standardized Medicare supplement products, as well as rate increases on these products. The remaining increase in Health Care Services revenues is attributable to a 8% increase in AmeriChoice revenues, excluding the impact of businesses acquired since the beginning of 2005, primarily driven by membership growth and premium revenue rate increases on Medicaid products.

Health Care Services earnings from operations in 2006 were $5.9 billion, representing an increase of $1.5 billion, or 34%, over 2005. This increase was principally driven by acquisitions and increases in the number of individuals served by Ovations’ Medicare and Part D products and Commercial Markets’ fee-based products. The segment also benefited by productivity gains from technology deployment and other cost management initiatives, including cost savings associated with the PacifiCare acquisition integration. These initiatives also reduced labor and occupancy costs in the transaction processing and customer service, billing and enrollment functions. The Commercial Markets medical care ratio increased to 80.5% in 2006 from 79.6% in 2005 and the UnitedHealthcare medical care ratio increased to 79.8% in 2006 from 78.6% in 2005, mainly due to the impact of the PacifiCare acquisition and changes in product, business and customer mix. Health Care Services’ operating margin for 2006 was 8.6%, a decrease from 9.9% in 2005. This decrease was driven mainly by the acquisition of PacifiCare and the new Medicare Part D program, which have lower operating margins than historic UnitedHealth Group businesses.

The following table summarizes the number of individuals served by Health Care Services, by major market segment and funding arrangement, as of December 31:

The number of individuals served by commercial products as of December 31, 2006 increased by approximately 1.1 million, or 5%, over the prior year. Excluding the impact of businesses acquired since the beginning of 2005, commercial business individuals served increased by 565,000, or 3%, over the prior year. This included an increase of approximately 1.0 million in the number of individuals served with commercial fee-based products, driven by new customer relationships and customers converting from risk-based products to fee-based products, offset by a decrease of approximately 475,000 in the number of individuals served with commercial risk-based products primarily due to the Company’s internal pricing decisions in a competitive commercial risk-based pricing environment and the conversion of certain groups to fee-based products.

Excluding businesses acquired since the beginning of 2005, the number of individuals served by Medicare Advantage products increased by 230,000 from 2005 primarily due to new customer relationships, while individuals served by standardized Medicare supplement products increased by 125,000, or 6%, due to new

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customer gains. Excluding the impact of businesses acquired since the beginning of 2005, Medicaid enrollment increased 65,000, or 5%, primarily due to new customer gains.

Health Care Services

The Health Care Services segment, comprised of the UnitedHealthcare, Ovations and AmeriChoice businesses, had revenues for the three and nine months ended September 30, 2007 of $16.7 billion and $50.8 billion, respectively, representing increases of $570 million, or 4%, and $2.9 billion, or 6%, over the comparable 2006 periods.

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UnitedHealthcare revenues for the three and nine months ended September 30, 2007 increased over the comparable 2006 periods by $169 million, or 2%, and $511 million, or 2%, to $9.0 billion and $26.8 billion, respectively. These increases were driven mainly by average net premium rate increases of 7% to 8% on UnitedHealthcare’s renewing commercial risk-based products, an increase in the number of individuals served by UnitedHealthcare’s fee-based products and business acquired since the beginning of 2006, partially offset by a decrease in the number of individuals served by UnitedHealthcare’s commercial risk-based products. Ovations revenues for the three and nine months ended September 30, 2007 increased over the comparable 2006 periods by $196 million, or 3%, and $1.8 billion, or 10%, to $6.6 billion and $20.8 billion, respectively. The increase for the three months ended September 30, 2007 was primarily due to rate increases on the Medicare Advantage and Medicare supplement products, partially offset by the seasonal revenue timing caused by the Medicare Part D product benefit design. The increase for the nine months ended September 30, 2007 was driven primarily by rate increases on the Medicare Advantage and Medicare supplement products, resolution of certain matters pertaining to Medicare population risk status and eligibility and continued growth in our Medicare Part D program. The remaining increase in Health Care Services revenues was attributable to an increase of $205 million, or 22%, and $523 million, or 19%, for the three and nine months ended September 30, 2007, respectively, over the comparable 2006 periods for AmeriChoice, which was due primarily to an increase in the number of individuals served by Medicaid plans as well as rate increases.

The Health Care Services segment had earnings from operations of $1.6 billion and $4.6 billion for the three and nine months ended September 30, 2007, respectively, representing increases of $268 million, or 19%, and $900 million, or 25%, over the comparable periods of 2006. These increases were principally driven by a decrease in the medical care ratio for Ovations due primarily to favorable medical cost trends and an increase in the number of individuals served by Medicare Part D, partially offset by a decrease in individuals served by UnitedHealthcare’s commercial risk-based products and an increase in the related medical care ratio. UnitedHealthcare’s commercial medical care ratio increased to 81.6% in the third quarter of 2007 from 79.4% in the third quarter of 2006, and to 81.6% for the nine months ended September 30, 2007 from 79.6% over the comparable period of 2006. These increases were mainly due to the Company’s internal pricing decisions in a competitive commercial risk-based pricing environment as well as a shift from favorable medical cost development for UnitedHealthcare during 2006 versus unfavorable medical cost development during 2007, partially driven by costs from higher benefit utilization in December 2006 relating primarily to our high-deductible risk-based products. Health Care Services’ operating margin for the three and nine months ended September 30, 2007 was 9.9% and 9.0%, respectively, representing an increase of 140 basis points over each of the comparable periods of 2006, which reflected productivity gains from technology deployment and disciplined operating cost management as well as the factors discussed above.

The following table summarizes individuals served by Health Care Services, by major market segment and funding arrangement, as of September 30 (in thousands) (1):

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The number of individuals served by UnitedHealthcare’s commercial business as of September 30, 2007 decreased 15,000 from the third quarter of 2006. This included an increase of 210,000 in the number of individuals served with commercial fee-based products, driven by new customer relationships and customers converting from risk-based products to fee-based products, which was more than offset by a decrease of approximately 225,000 in the number of individuals served with commercial risk-based products due primarily to a competitive pricing environment and the conversion of individuals to fee-based products.

The number of individuals served by Ovations’ Medicare Advantage products decreased by 75,000 from the third quarter of 2006 due primarily to a decline in participation in private-fee-for-service offerings. The number of individuals served by Medicare Part D on a stand-alone basis increased by 200,000 from the third quarter of 2006 to the third quarter of 2007 due to new customer relationships gained in the program. AmeriChoice’s Medicaid enrollment increased by 245,000 due to new customer gains, including 175,000 individuals served under the TennCare program in Tennessee.

Health Care Services

The Health Care Services segment, comprised of the UnitedHealthcare, Ovations and AmeriChoice businesses, had revenues for the three and six months ended June 30, 2007 of $17.1 billion and $34.1 billion, respectively, representing increases of $994 million, or 6%, and $2.3 billion, or 7%, over the comparable 2006 periods.

UnitedHealthcare revenues for the three and six months ended June 30, 2007 increased over the comparable 2006 periods by $139 million, or 2%, and $342 million, or 2%, to $8.9 billion and $17.8 billion, respectively. These increases were driven mainly by average net premium rate increases of 7% to 8% on UnitedHealthcare’s renewing commercial risk-based products, an increase in the number of individuals served by UnitedHealthcare’s fee-based products and business acquired since the beginning of 2006, partially offset by a decrease in the number of individuals served by UnitedHealthcare’s commercial risk-based products. Ovations revenues for the three and six months ended June 30, 2007 increased over the comparable 2006 periods by $625 million, or 10%, and $1.6 billion, or 13%, to $7.0 billion and $14.2 billion, respectively. These increases were driven primarily by rate increases on the Medicare Advantage and Medicare supplement products, resolution of certain matters pertaining to Medicare population risk status and eligibility and continued growth in our Medicare Part D program. The remaining increase in Health Care Services revenues was attributable to an increase of

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$230 million, or 26%, and $318 million, or 18%, for the three and six months ended June 30, 2007, respectively, over the comparable 2006 periods for AmeriChoice, which was due primarily to an increase in the number of individuals served by Medicaid products.

The Health Care Services segment had earnings from operations of $1.6 billion and $2.9 billion for the three and six months ended June 30, 2007, respectively, representing increases of $389 million, or 32%, and $632 million, or 28%, over the comparable periods of 2006. These increases were principally driven by a decrease in the medical care ratios for Ovations’ Medicare programs due to favorable medical cost trends and an increase in the number of individuals served by Medicare Part D, partially offset by a decrease in individuals served by UnitedHealthcare’s commercial risk-based products and an increase in the related medical care ratio. UnitedHealthcare’s commercial medical care ratio increased to 82.0% in the second quarter of 2007 from 79.9% in the second quarter of 2006, and to 81.6% for the six months ended June 30, 2007 from 79.7% over the comparable period of 2006. These increases were mainly due to a shift from favorable medical cost development for UnitedHealthcare in 2006 versus unfavorable medical cost development in 2007, partially driven by costs from higher benefit utilization in December 2006 relating primarily to our high-deductible risk-based products, as well as the Company’s internal pricing decisions in a competitive commercial risk-based pricing environment. Health Care Services’ operating margin for the three and six months ended June 30, 2007 was 9.5% and 8.5%, respectively, representing an increase of 190 basis points and 130 basis points over the comparable periods of 2006, which reflected productivity gains from technology deployment and disciplined operating cost management as well as the factors discussed above.

The following table summarizes individuals served by Health Care Services, by major market segment and funding arrangement, as of June 30 (in thousands) (1):

The number of individuals served by UnitedHealthcare’s commercial business as of June 30, 2007 decreased 20,000 from the second quarter of 2006. This included an increase of 160,000 in the number of individuals served with commercial fee-based products, driven by new customer relationships and customers converting from risk-based products to fee-based products, which was more than offset by a decrease of approximately 180,000 in the number of individuals served with commercial risk-based products due primarily to the Company’s internal pricing decisions in a competitive commercial risk-based pricing environment and the conversion of individuals to fee-based products.

The number of individuals served by Ovations’ Medicare Advantage products decreased by 75,000 from the second quarter of 2006 due primarily to a decline in participation in private-fee-for-service offerings. The number of individuals served by Medicare Part D on a stand-alone basis increased by 200,000 from the second quarter of 2006 to the second quarter of 2007 due to new customer relationships gained in the program. AmeriChoice’s Medicaid enrollment increased by 290,000 due to new customer gains, including 175,000 individuals served under the TennCare program in Tennessee, as well as from acquisitions completed since the second quarter of 2006.

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Health Care Services

The Health Care Services segment, comprised of the UnitedHealthcare, Ovations and AmeriChoice businesses, had first quarter 2007 revenues of $17.1 billion, representing an increase of $1.3 billion, or 8%, over the first quarter of 2006.

UnitedHealthcare revenues increased by $203 million, or 2%, to $8.9 billion in the first quarter of 2007. This increase was driven mainly by average net premium rate increases of 7% to 8% on UnitedHealthcare’s renewing commercial risk-based products, an increase in the number of individuals served by UnitedHealthcare’s fee-based products and business acquired since the beginning of 2006, partially offset by a decrease in the number of individuals served by UnitedHealthcare’s commercial risk-based products. Ovations revenues increased by $1.0 billion, or 16%, to $7.2 billion in the first quarter of 2007. This increase was driven primarily by an increase in the number of individuals served by Medicare Advantage and Medicare supplement products, rate increases on these products and growth in our Medicare Part D program. The remaining increase in Health Care Services revenues is attributable to an $88 million, or 10%, increase in AmeriChoice revenues which were due primarily to a combination of rate increases and an increase in the number of individuals served by Medicaid products.

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The Health Care Services segment had first quarter 2007 earnings from operations of $1.3 billion, representing an increase of $243 million, or 23%, over the first quarter of 2006. This increase was principally driven by earnings from increases in the number of individuals served by Ovations’ Medicare products and UnitedHealthcare’s fee-based products as well as a decrease in the medical care ratio related to Ovations Medicare programs due to favorable medical cost trends, partially offset by a decrease in individuals served by UnitedHealthcare’s commercial risk-based products and an increase in the related medical care ratio. UnitedHealthcare’s commercial medical care ratio increased to 81.2% in the first quarter of 2007 from 79.4% in the first quarter of 2006, mainly due to a shift from favorable medical cost development of approximately $90 million in the first quarter of 2006 to unfavorable medical cost development of approximately $100 million in the first quarter of 2007. This was partially driven by higher benefit utilization in December 2006 relating primarily to UnitedHealthcare’s high-deductible risk-based products. Health Care Services’ first quarter 2007 operating margin was 7.6%, an increase of 90 basis points over the first quarter of 2006, which reflected productivity gains from technology deployment and disciplined operating cost management.

The following table summarizes individuals served by Health Care Services, by major market segment and funding arrangement, as of March 31 (in thousands) (1):

The number of individuals served by UnitedHealthcare’s commercial business as of March 31, 2007 increased 20,000 over the first quarter of 2006. This included an increase of approximately 175,000 in the number of individuals served with commercial fee-based products, driven by new customer relationships and customers converting from risk-based products to fee-based products, offset by a decrease of approximately 155,000 in the number of individuals served with commercial risk-based products due primarily to the Company’s internal pricing decisions in a competitive commercial risk-based pricing environment and the conversion of individuals to fee-based products.

The number of individuals served by Ovations’ Medicare Advantage products increased by 15,000 from the first quarter of 2006 due to new customer relationships. The number of individuals served by Medicare Part D increased by 1.3 million from the first quarter of 2006 to the first quarter of 2007 due to new customer relationships gained in the initial contract year of the program. AmeriChoice’s Medicaid enrollment increased by 100,000 due to new customer gains as well as from acquisitions completed since the first quarter of 2006.

Health Care Services

Health Care Services had revenues of $40.0 billion in 2005, representing an increase of $7.3 billion, or 22%, over 2004. Excluding the impact of acquisitions, Health Care Services revenues increased by approximately $3.0 billion, or 11%, over 2004. UnitedHealthcare accounted for approximately $1.6 billion of this increase, driven by average premium rate increases of approximately 8% to 9% on UnitedHealthcare’s renewing commercial risk-based products. Ovations contributed approximately $1.2 billion to the revenue advance over 2004 largely attributable to growth in the number of individuals served by Ovations’ Medicare supplement products provided to AARP members and by its Medicare Advantage products as well as rate increases on these products. The remaining increase in Health Care Services revenues is attributable to an 8% increase in AmeriChoice’s revenues, excluding the impact of acquisitions, driven primarily by premium revenue rate increases on Medicaid products.

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Health Care Services earnings from operations in 2005 were $3.7 billion, representing an increase of $976 million, or 36%, over 2004. This increase primarily resulted from revenue growth and improved gross margins on UnitedHealthcare’s risk-based products, increases in the number of individuals served by UnitedHealthcare’s commercial fee-based products, and the acquisitions of Oxford and MAMSI during 2004. UnitedHealthcare’s commercial medical care ratio decreased to 78.6% in 2005 from 79.3% in 2004 mainly due to changes in product, business and customer mix. Health Care Services’ 2005 operating margin was 9.2%, an increase from 8.2% in 2004. This increase was driven mainly by the lower commercial medical care ratio as well as changes in business and customer mix.

The following table summarizes the number of individuals served by Health Care Services, by major market segment and funding arrangement, as of December 31 (1):

The number of individuals served by UnitedHealthcare’s commercial business as of December 31, 2005, excluding the PacifiCare acquisition, increased by approximately 700,000 over the prior year. This included an increase of 590,000 in the number of individuals served with fee-based products driven by the addition of approximately 335,000 individuals served resulting from new customer relationships and customers converting from risk-based products to fee-based products as well as approximately 255,000 individuals served by a benefits administrative services company acquired in December 2005. In addition, the number of individuals served with commercial risk-based products increased by 110,000 driven primarily by the addition of approximately 130,000 individuals served by Neighborhood Health Partnership, acquired in September 2005, and a slight increase in net new customer relationships more than offset by customers converting from risk-based products to fee-based products.

Excluding the PacifiCare acquisition, the number of individuals served by Ovations’ Medicare Advantage products increased by 65,000, or 20%, over 2004 due primarily to new customer relationships. AmeriChoice’s Medicaid enrollment decreased by 10,000 from 2004 due primarily to the withdrawal of participation in one market during the third quarter of 2005 partially offset by new customer relationships since 2004.