UnitedHealth Group (UNH)

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.

Ingenix

Ingenix offers database and data management services, software products, publications, consulting and actuarial services, business process outsourcing services and pharmaceutical data consulting and research services in conjunction with the development of pharmaceutical products on a nationwide and international basis. As of December 31, 2008, Ingenix’s customers include approximately 6,000 hospitals, 240,000 physicians, 1,500 payers and intermediaries, 260 Fortune 500 companies, 300 life sciences companies, and 250 government entities, as well as other UnitedHealth Group businesses.

Ingenix is engaged in the simplification of health care administration with information and technology. Ingenix helps customers accurately and efficiently document, code and bill for the delivery of care services. It also sells reference materials and coding guides that health care professionals use to bill payers for their services. Ingenix uses data to help advance transparency on cost and quality and help customers streamline their processes to make health care more efficient. Ingenix is a leader in contract research services, and pharmacoeconomics, outcomes, drug safety and epidemiology research through its i3 businesses.

Ingenix’s products and services are sold primarily through a direct sales force focused on specific customers and market segments across the pharmaceutical, biotechnology, employer, government, hospital, physician, payer and property and casualty insurance market segments. Ingenix’s products are also supported and distributed through an array of alliance and business partnerships with other technology vendors, who integrate and interface its products with their applications.

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Many of our contract research services, consulting arrangements and software and related information services are performed over an extended period of time, often several years. We maintain an order backlog to track anticipated revenues yet to be earned for work that has not yet been performed under these long-term arrangements. Our backlog generally consists of estimated revenue from signed contracts or other legally binding agreements that either have not started but are anticipated to begin in the near future, or are in process and have not been completed. Our estimated aggregate backlog at December 31, 2008 was approximately $1.8 billion, including approximately $0.4 billion of intersegment agreements. We cannot provide any assurance that we will be able to realize all of the revenues included in backlog due to uncertainty regarding the timing and scope of services and the potential for cancellation or early termination of certain service arrangements.

The Ingenix companies are divided into two groups: Information Services and i3.

Information Services. Information Services’ diverse product offerings help clients strengthen health care administration and advance health care outcomes. These products include health care utilization reporting and analytics, physician clinical performance benchmarking, clinical data warehousing, analysis and management responses for medical cost trend management, physician practice revenue cycle management, including integrated electronic medical record systems, revenue cycle management for payer and health care professional organizations, decision-support portals for evaluation of health benefits and treatment options, risk management solutions, connectivity solutions and claims management tools to reduce administrative errors and support fraud recovery services. Information Services uses proprietary software applications that manage clinical and administrative data across diverse information technology environments. Information Services also uses proprietary predictive algorithmic applications to help clients detect and act on repetitive health care patterns in large data sets. Information Services offers comprehensive Electronic Data Interchange (EDI) services helping health care professionals and payers decrease costs of claims transmission, payment and reimbursement through both networked and direct connection services.

Information Services provides other services on an outsourced basis, such as verification of physician credentials, health care professional directories, Healthcare Effectiveness Data and Information Set (HEDIS) reporting, and fraud and abuse detection and prevention services. Information Services also offers consulting services, including actuarial and financial advisory work through its Ingenix Consulting division and health care policy research, implementation, strategy and management consulting through its subsidiary, The Lewin Group, as well as product development, health care professional contracting and medical policy management. Information Services also provides health care IT consulting for health care professionals. Information Services publishes print and electronic media products that provide customers with information regarding medical claims coding, reimbursement, billing and compliance issues.

i3. i3 helps to coordinate and manage clinical trials on a nationwide and international basis for products in development for pharmaceutical and biotechnology companies. i3’s focus is to help these customers effectively and efficiently get drug data to appropriate regulatory bodies and to improve health outcomes through integrated information, analysis and technology. i3’s capabilities and efforts focus on the entire range of product assessment, through commercialization of life-cycle management services – pipeline assessment, market access and product positioning, clinical trials, economic, epidemiology and safety and outcomes research. i3’s services include global contract research services, protocol development, investigator identification and training, regulatory assistance, project management, data management, biostatistical analysis, quality assurance, medical writing and staffing resource services. i3 delivers contract research services in 56 countries and is therapeutically focused on oncology, the central nervous system, respiratory, infectious and pulmonary diseases, and endocrinology. i3 uses comprehensive, science-based evaluation and analysis and benchmarking services to support pharmaceutical and biotechnology development.

Ingenix

The improvement in Ingenix revenues was due to continued growth in its health intelligence and contract research businesses as well as from business acquisitions. The decrease in earnings from operations and operating margin was primarily due to excess staffing costs during 2008 for certain research projects which were cancelled, as well as lower demand for certain consulting services due to the current economic environment.

Ingenix

The Ingenix revenues increase in 2007 was primarily driven by new business growth in the health information and contract research businesses as well as from businesses acquired since the beginning of 2006.

The increase in earnings from operations was primarily due to growth in the health information and contract research businesses, businesses acquired since the beginning of 2006 and effective operating cost management. The operating margin was 20.4% in 2007, up from 18.4% in 2006. This increase in operating margin was largely driven by business growth and operating cost management described above.

Ingenix

Ingenix revenues for the three and nine months ended September 30, 2008 were $383 million and $1.1 billion, respectively, an increase of $39 million, or 11%, and $236 million, or 27%, over the comparable 2007 periods. This improvement was due to continued growth in its health intelligence and contract research businesses as well as from businesses acquired since the beginning of 2007. Earnings from operations for the three and nine months ended September 30, 2008 were $57 million and $153 million, respectively, a decrease of $9 million, or 14%, and an increase of $7 million, or 5%, over the comparable 2007 periods. Ingenix’s operating margins for the three and nine months ended September 30, 2008 were 14.9% and 13.6%, respectively, representing a decrease of 430 basis points and 280 basis points from the comparable 2007 periods, driven primarily by excess staffing costs during 2008 for certain research projects which were cancelled, impacting overall business profitability.

Ingenix

Ingenix revenues for the three and six months ended June 30, 2008 were $381 million and $743 million, respectively, an increase of $97 million, or 34%, and $197 million, or 36%, over the comparable 2007 periods. This improvement was due to continued growth in its health intelligence and contract research businesses as well as from businesses acquired since the beginning of 2007. Earnings from operations for the three and six months ended June 30, 2008 were $49 million and $96 million, respectively, an increase of $7 million, or 17%, and $16 million, or 20%, over the comparable 2007 periods. Ingenix’s operating margins for both the three and six months ended June 30, 2008 were 12.9%, representing a decrease of 190 basis points and 170 basis points from the comparable 2007 periods, driven by staffing costs in the second quarter of 2008 for certain research projects which were cancelled, impacting overall business profitability.

Ingenix

Ingenix revenues for the first quarter of 2008 were $362 million, an increase of $100 million, or 38%, over the comparable period of 2007. This improvement was due to strong growth performance from both the pharmaceutical services business and the health intelligence business. Earnings from operations for the quarter were $47 million, up $9 million, or 24%, over the comparable period of 2007. Growth in the comparatively lower margin health care consulting services and large pharmaceutical projects have lowered the operating margin as compared to the same 2007 period.

Ingenix

Ingenix revenues for 2006 of $956 million increased by $160 million, or 20%, over 2005. This was primarily driven by new business growth in the health information and contract research businesses, as well as businesses acquired since the beginning of 2005. Earnings from operations in 2006 were $176 million, up $46 million, or 35%, from 2005. Operating margin was 18.4% in 2006, up from 16.3% in 2005. These increases in earnings from operations and operating margin were primarily due to growth in the health information and pharmaceutical services businesses, improving gross margins due to effective cost management, and businesses acquired since the beginning of 2005.

Ingenix

Ingenix revenues for the three and nine months ended September 30, 2007 of $347 million and $896 million, respectively, increased by $100 million, or 40%, and $225 million, or 34%, over the comparable periods of 2006 due primarily to new business growth in the health information and contract research businesses as well as revenue from businesses acquired since the beginning of 2006. Ingenix typically generates higher revenues in the second half of the year due to seasonally strong demand for higher margin health information products.

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Earnings from operations for the three and nine months ended September 30, 2007 of $70 million and $152 million, respectively, were up $18 million, or 35%, and $40 million, or 36%, over the comparable periods of 2006 due primarily to new growth in the health information and contract research businesses, earnings from businesses acquired since the beginning of 2006 and effective operating cost management.

The operating margin for the three months ended September 30, 2007 of 20.2% decreased from 21.1% in the comparable 2006 period due primarily to newly acquired businesses with lower margins as well as additional investments in technology in the third quarter of 2007. The operating margin for the nine months ended September 30, 2007 of 17.0% increased from 16.7% in the comparable 2006 period due primarily to effective operating cost management, partially offset by newly acquired businesses with lower margins as well as additional investments in technology.

Ingenix

Ingenix revenues for the three and six months ended June 30, 2007 of $286 million and $549 million, respectively, increased by $70 million, or 32%, and $125 million, or 29%, over the comparable periods of 2006 due primarily to new business growth in the health information and contract research businesses as well as revenue from businesses acquired since the beginning of 2006.

Earnings from operations for the three and six months ended June 30, 2007 of $44 million and $82 million, respectively, were up $14 million, or 47%, and $22 million, or 37%, over the comparable periods of 2006. The operating margin for the three and six months ended June 30, 2007 of 15.4% and 14.9%, respectively, improved from 13.9% and 14.2% over the comparable periods of 2006. These increases were driven primarily by growth in the health information and contract research businesses, earnings from businesses acquired since the beginning of 2006 and effective operating cost management. Ingenix typically generates higher revenues and operating margins in the second half of the year due to seasonally strong demand for higher margin health information products.

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Ingenix

Ingenix revenues in the first quarter of 2007 of $263 million increased by $55 million, or 26%, over the comparable 2006 period due primarily to new business growth in the health information and contract research businesses as well as revenue from businesses acquired since the beginning of 2006.

Earnings from operations were $38 million in the first quarter of 2007, up $8 million, or 27%, from the comparable 2006 period. The operating margin was unchanged at 14.4% from the first quarter of 2006. The increase to earnings from operations was driven primarily by growth in the health information and contract research businesses and earnings from businesses acquired since the beginning of 2006. Ingenix typically generates higher revenues and operating margins in the second half of the year due to seasonally strong demand for higher margin health information products.

Ingenix

Ingenix 2005 revenues of $807 million increased by $100 million, or 14%, over 2004. This was driven primarily by growth in the health information and contract research businesses as well as businesses acquired since the beginning of 2004.

Earnings from operations in 2005 were $135 million, up $34 million, or 34%, from 2004. Ingenix’s operating margin was 16.7% in 2005, up from 14.3% in 2004. The increase in earnings from operations and operating margin was primarily due to growth in the health information and contract research businesses, improving gross margins due to effective cost management and businesses acquired since the beginning of 2004.

Ingenix

Ingenix revenues for the three and nine months ended September 30, 2006 of $247 million and $671 million, respectively, increased by $31 million, or 14%, and $107 million, or 19%, over the comparable 2005 periods due primarily to new business growth in the health information and contract research businesses, as well as businesses acquired since the beginning of 2005.

Earnings from operations were $52 million and $112 million, respectively, for the three and nine months ended September 30, 2006, up $7 million, or 16%, and $32 million, or 40%, from the comparable 2005 periods. Ingenix’s operating margins were 21.1% and 16.7%, respectively, for the three and nine months ended September 30, 2006, up from 20.8% and 14.2% in the comparable 2005 periods. These increases were driven by growth in the health information and pharmaceutical services businesses, improved gross margins due to effective cost management and businesses acquired since the beginning of 2005 as well as by higher seasonal sales in several health information products. Ingenix typically generates higher revenues and operating margins in the second half of the year due to seasonally strong demand for higher margin health information products.

Ingenix

Ingenix revenues in the first quarter of 2006 of $208 million increased by $38 million, or 22%, over the comparable 2005 period due primarily to new business growth in the health information and contract research businesses, as well as businesses acquired since the beginning of 2005.

Earnings from operations were $30 million in the first quarter of 2006, up $15 million, or 100%, from the comparable 2005 period. The operating margin was 14.4% in the first quarter of 2006, up from 8.8% in the first quarter of 2005. These increases were driven by growth in the health information and contract research businesses, improved gross margins due to effective cost management and businesses acquired since the beginning of 2005. Ingenix typically generates higher revenues and operating margins in the second half of the year due to seasonally strong demand for higher margin health information products.

Ingenix

Ingenix revenues for the three and six months ended June 30, 2006 of $216 million and $424 million, respectively, increased by $38 million, or 21%, and $76 million, or 22% over the comparable 2005 periods due primarily to new business growth in the health information and contract research businesses, as well as businesses acquired since the beginning of 2005.

Earnings from operations were $30 million and $60 million, respectively, for the three and six months ended June 30, 2006, up $10 million, or 50%, and $25 million, or 71%, from the comparable 2005 periods. Ingenix’s operating margins were 13.9% and 14.2% for both of the three and six months ended June 30, 2006, up from 11.2% and 10.1% in the comparable 2005 periods. These increases were driven by growth in the health information and pharmaceutical services businesses, cost management initiatives and businesses acquired since the beginning of 2005. Ingenix typically generates higher revenues and operating margins in the second half of the year due to seasonally strong demand for higher margin health information products.

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About Ingenix

A leading health information company, Ingenix provides products and services to a diverse customer base within the health care community. Organizations rely on its innovative technology to improve the delivery and operations of their business. More information about Ingenix and its products and services can be obtained at www.ingenix.com.

Ingenix

Ingenix revenues in the first quarter of 2006 of $200 million increased by $34 million, or 20%, over the comparable 2005 period due primarily to new business growth in the health information and contract research businesses, as well as businesses acquired since the beginning of 2005.

Earnings from operations were $34 million in the first quarter of 2006, up $16 million, or 89%, from the comparable 2005 period. The operating margin was 17.0% in the first quarter of 2006, up from 10.8% in the first quarter of 2005. These increases were driven by growth in the health information and contract research businesses, improving gross margins due to effective cost management and businesses acquired since the beginning of 2005. Ingenix typically generates higher revenues and operating margins in the second half of the year due to seasonally strong demand for higher margin health information products.

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Ingenix

Ingenix revenues in 2004 of $670 million increased by $96 million, or 17%, over 2003. This was driven primarily by new business growth in the health information and contract research businesses. Earnings from operations in 2004 were $129 million, up $54 million, or 72%, from 2003. Operating margin was 19.3% in 2004, up from 13.1% in 2003. The increase in earnings from operations and operating margin was primarily due to growth and improving gross margins in the health information and clinical research businesses.

Ingenix

For the three and nine months ended September 30, 2005, Ingenix revenues of $205 million and $546 million, respectively, increased by $35 million, or 21%, and $90 million, or 20%, over the comparable 2004 periods. These increases were due primarily to new business growth in the health information and clinical research businesses as well as businesses acquired since the beginning of 2004. Earnings from operations for the three and nine months ended September 30, 2005 were $49 million and $102 million, respectively, increasing by 44% and 40% over the comparable 2004 periods. The operating margin for the three and nine months ended September 30, 2005 improved to 23.9% and 18.7%, from 20.0% and 16.0%, respectively, in the comparable 2004 periods. These increases were driven primarily by new business growth in the health information and clinical research businesses as well as businesses acquired since the beginning of 2004. Ingenix typically generates higher revenues and operating margins in the second half of the year due to seasonally strong demand for higher margin health information products.

Ingenix

For the three and six months ended June 30, 2005, Ingenix revenues of $175 million and $341 million, respectively, increased by $29 million, or 20%, and $55 million, or 19%, over the comparable 2004 periods. These increases were due primarily to new business growth in the health information and clinical research businesses as well as businesses acquired since the beginning of 2004.

Earnings from operations for the three and six months ended June 30, 2005 were $29 million and $53 million, respectively, increasing by 45% and 36% over the comparable 2004 periods. The operating margin for the three and six months ended June 30, 2005 improved to 16.6% and 15.5%, from 13.7% and 13.6%, respectively, in the comparable 2004 periods. These increases were driven primarily by new business growth in the health information and clinical research businesses as well as businesses acquired since the beginning of 2004. Ingenix typically generates higher revenues and operating margins in the second half of the year due to seasonally strong demand for higher margin health information products.

Ingenix

Ingenix revenues in the first quarter of 2005 of $166 million increased by $26 million, or 19%, over the comparable 2004 period due primarily to new business growth in the health information and clinical research businesses.

Earnings from operations were $24 million in the first quarter of 2005, up $5 million, or 26%, from the comparable 2004 period. The operating margin was 14.5% in the first quarter of 2005, up from 13.6% in the first quarter of 2004. These increases were driven by growth and improving gross margins in the health information and clinical research businesses. Ingenix typically generates higher revenues and operating margins in the second half of the year due to seasonally strong demand for higher margin health information products.

Ingenix

Ingenix revenues in 2003 of $574 million increased by $83 million, or 17%, over 2002. This was driven primarily by new business growth in the health information business. Earnings from operations in 2003 were $75 million, up $20 million, or 36%, from 2002. Operating margin was 13.1% in 2003, up from 11.2% in 2002. The increase in the operating margin was primarily due to growth in the health information business.