UnitedHealth Group (UNH)

Stock Options and SARs

Stock options and SARs generally vest ratably over four to six years and may be exercised up to 10 years from the date of grant. Stock option and SAR activity for the three months ended March 31, 2009 is summarized in the table below:

To determine compensation expense related to the Company’s stock options and SARs, the fair value of each award is estimated on the date of grant using an option-pricing model. For purposes of estimating the fair value of the Company’s employee stock option and SAR grants, the Company uses a binomial model. The principal assumptions the Company used in applying the option-pricing models were as follows:

Risk-free interest rates are based on U.S. Treasury yields in effect at the time of grant. Expected volatilities are based on the historical volatility of the Company’s common stock and the implied volatility from exchange-traded options on the Company’s common stock. Beginning in 2009, the Company changed the weighting of historical and implied volatilities used in the calculation of expected volatility to 90% and 10%, respectively. Prior to the change the Company had weighted historical and implied volatility at 50% each. Due to the significant economic turbulence and resulting instability of the exchange-traded options throughout 2008, the Company concluded that they were no longer as representative of the fair value of its common stock over the expected life of its options and SARs. The change had no impact on the Company’s reported Net Earnings nor Earnings Per Share. The Company uses historical data to estimate option and SAR exercises and forfeitures within the valuation model. The expected lives of options and SARs granted represents the period of time that the awards granted are expected to be outstanding based on historical exercise patterns.

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UNITEDHEALTH GROUP

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

The weighted-average grant date fair value of stock options and SARs granted during the three months ended March 31, 2009 and 2008 was approximately $10 per share and $12 per share, respectively. The total intrinsic value of stock options and SARs exercised during the three months ended March 31, 2009 and 2008 was $207 million and $61 million, respectively.

Stock Options and SARs

Stock options and SARs generally vest ratably over four to six years and may be exercised up to 10 years from the date of grant. Stock option and SAR activity for the year ended December 31, 2008 is summarized in the table below:

To determine compensation expense related to the Company’s stock options and SARs, the fair value of each award is estimated on the date of grant using an option-pricing model. For purposes of estimating the fair value of the Company’s employee stock option and SAR grants, the Company uses a binomial model. The principal assumptions the Company used in applying the option-pricing models were as follows:

The risk-free interest rate is based on U.S. Treasury yields in effect at the time of grant. Expected volatilities are based on the implied volatilities from traded options on the Company’s common stock and the historical volatility of the Company’s common stock. The Company uses historical data to estimate option and SAR exercises and forfeitures within the valuation model. The expected lives of options and SARs granted represents the period of time that the awards granted are expected to be outstanding based on historical exercise patterns.

The weighted-average grant date fair value of stock options and SARs granted for 2008, 2007 and 2006 was $9 per share, $14 per share and $11 per share, respectively. The total intrinsic value of stock options and SARs exercised during 2008, 2007 and 2006 was $244 million, $1.1 billion and $753 million, respectively.

Stock Options and SARs

Stock options and SARs generally vest ratably over four to six years and may be exercised up to 10 years from the date of grant. Stock option and SAR activity for the nine months ended September 30, 2008 is summarized in the table below:

At September 30, 2008, outstanding stock options and SARs had an aggregate intrinsic value of $630 million, and a weighted-average remaining contractual life of 5.1 years. At September 30, 2008, exercisable stock options and SARs had an aggregate intrinsic value of $630 million, and a weighted-average remaining contractual life of 3.9 years.

To determine compensation expense related to the Company’s stock options and SARs, the fair value of each award is estimated on the date of grant using an option-pricing model. For purposes of estimating the fair value of the Company’s employee stock option and SAR grants, the Company uses a binomial model. The principal assumptions the Company used in applying the option-pricing models were as follows:

The risk-free interest rate is based on U.S. Treasury yields in effect at the time of grant. Expected volatilities are based on a blend of the implied volatilities from traded options on the Company’s common stock and the historical volatility of the Company’s common stock. The Company uses historical data to estimate option and SAR exercises and forfeitures within the valuation model. The expected lives of options and SARs granted represents the period of time that the awards granted are expected to be outstanding based on historical exercise patterns.

The weighted-average fair value of stock options and SARs granted in the three and nine months ended September 30, 2008 was $8 and $9 per share, respectively. The weighted-average fair value of stock options and SARs granted in the three and nine months ended September 30, 2007 was $13 and $14 per share, respectively. The total intrinsic value of options and SARs exercised during the three and nine months ended September 30, 2008 was $39 million and $116 million, respectively. The total intrinsic value of options and SARs exercised during the three and nine months ended September 30, 2007 was $203 million and $862 million, respectively.

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UNITEDHEALTH GROUP

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

Stock Options and SARs

Stock options and SARs generally vest ratably over four to six years and may be exercised up to 10 years from the date of grant. Stock option and SAR activity for the three and six months ended June 30, 2008 is summarized in the table below:

At June 30, 2008, outstanding stock options and SARs had an aggregate intrinsic value of $716 million, and a weighted-average remaining contractual life of 5.4 years. At June 30, 2008, exercisable stock options and SARs had an aggregate intrinsic value of $716 million, and a weighted-average remaining contractual life of 4.1 years.

To determine compensation expense related to the Company’s stock options and SARs, the fair value of each award grant is estimated on the date of grant using an option-pricing model. For purposes of estimating the fair value of the Company’s employee stock option and SAR grants, the Company uses a binomial model. The principal assumptions the Company used in applying the option-pricing models were as follows:

The risk-free interest rate is based on U.S. Treasury yields in effect at the time of grant. Expected volatilities are based on a blend of the implied volatilities from traded options on the Company’s common stock and the historical volatility of the Company’s common stock. The Company uses historical data to estimate option and SAR exercises and employee terminations within the valuation model. The expected term of options and SARs granted represents the period of time that the awards granted are expected to be outstanding based on historical exercise patterns.

The weighted-average fair value of stock options and SARs granted in the three and six months ended June 30, 2008 was $9 per share. The weighted-average fair value of stock options and SARs granted in the three and six months ended June 30, 2007 was $14 per share. The total intrinsic value of options and SARs exercised during the three and six months ended June 30, 2008 was $17 million and $78 million, respectively. The total intrinsic value of options and SARs exercised during the three and six months ended June 30, 2007 was $388 million and $659 million, respectively.

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UNITEDHEALTH GROUP

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Stock Options and SARs

Stock options and SARs generally vest ratably over four to six years and may be exercised up to 10 years from the date of grant. Stock option and SAR activity for the three months ended March 31, 2008 is summarized in the table below:

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UNITEDHEALTH GROUP

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

As of March 31, 2008, outstanding stock options and SARs had an aggregate intrinsic value of $1.3 billion, and a weighted-average remaining contractual life of 5.2 years. As of March 31, 2008, exercisable stock options and SARs had an aggregate intrinsic value of $1.3 billion, and a weighted-average remaining contractual life of 4.0 years.

To determine compensation expense related to our stock options and SARs, the fair value of each award grant is estimated on the date of grant using an option-pricing model. For purposes of estimating the fair value of our employee stock option and SAR grants, we use a binomial model. The principal assumptions we used in applying the option-pricing models were as follows:

The risk-free interest rate is based on U.S Treasury yields in effect at the time of grant. Expected volatilities are based on a blend of the implied volatilities from traded options on our common stock and the historical volatility of our common stock. We use historical data to estimate option and SAR exercises and employee terminations within the valuation model. The expected term of options and SARs granted represents the period of time that the awards granted are expected to be outstanding based on historical exercise patterns.

The weighted-average fair value of stock options and SARs granted in the three months ended March 31, 2008 and 2007 was $12 per share and $13 per share, respectively. The total intrinsic value of options and SARs exercised during the three months ended March 31, 2008 and 2007 was $61 million and $270 million, respectively.

Stock Options and SARs

Stock options and SARs generally vest ratably over four to six years and may be exercised up to 10 years from the date of grant. Stock option and SAR activity for the year ending December 31, 2007 is summarized in the table below:

As of December 31, 2007, outstanding stock options and SARs had an aggregate intrinsic value of $3.9 billion, and a weighted-average remaining contractual life of 5.5 years. As of December 31, 2007, exercisable stock options and SARs had an aggregate intrinsic value of $3.5 billion, and a weighted-average remaining contractual life of 4.2 years.

To determine compensation expense related to our stock options and SARs, the fair value of each award grant is estimated on the date of grant using an option-pricing model. For purposes of estimating the fair value of our employee stock option and SAR grants, we utilize a binomial model. The principal assumptions we used in applying the option-pricing models were as follows:

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The risk-free interest rate is based on U.S. Treasury yields in effect at the time of grant. Expected volatilities are based on a blend of the implied volatilities from traded options on our common stock and the historical volatility of our common stock. We use historical data to estimate option and SAR exercises and employee terminations within the valuation model. The expected term of options and SARs granted represents the period of time that the awards granted are expected to be outstanding based on historical exercise patterns.

The weighted-average fair value of stock options and SARs granted for 2007, 2006 and 2005 was $14 per share, $11 per share and $14 per share, respectively. The total intrinsic value of options and SARs exercised during 2007, 2006 and 2005 was $1,076 million, $753 million and $847 million, respectively.