<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
UNITED HEALTHCARE CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE>
[LOGO]
April 15, 1999 9900 Bren Road East Minnetonka, Minnesota 55343
Dear Shareholder:
We cordially invite you to attend our Annual Meeting of Shareholders. We will
hold our meeting on Wednesday, May 12, 1999, at 10:00 a.m., Central Time, at the
Lutheran Brotherhood Building Auditorium, 625 Fourth Avenue South, Minneapolis,
Minnesota.
On the following pages we include information about the business of the meeting.
We include information about the nominees for election as members of the Board
of Directors. We hope you can attend the meeting. If not, please exercise your
right as a shareholder and vote. The vote of every shareholder is important. We
appreciate your cooperation in promptly voting. You may do so by telephone, via
the internet, or by completing, signing and returning the enclosed proxy.
Sincerely,
[LOGO]
William W. McGuire, M.D.
Chairman, President and Chief Executive Officer
<PAGE>
[LOGO]
300 Opus Center
9900 Bren Road East
Minnetonka, Minnesota 55343
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
MAY 12, 1999
TO THE SHAREHOLDERS OF UNITED HEALTHCARE CORPORATION:
The Company will hold its Annual Meeting of Shareholders on Wednesday, May
12, 1999, at the Lutheran Brotherhood Building Auditorium, 625 Fourth Avenue
South, Minneapolis, Minnesota, at 10:00 a.m. Central Time. The purposes of the
meeting are:
1. To elect four people to the Company's Board of Directors.
2. To consider and vote on a shareholder proposal set forth in the Proxy
Statement, which is opposed by the Company's Board of Directors.
3. To consider and vote on a proposal to ratify the appointment of Arthur
Andersen LLP as independent public accountants for the Company for the
fiscal year ending December 31, 1999.
4. To transact other business that properly may come before the meeting or
any adjournment of the meeting.
Only shareholders of record of the Company's Common Stock at the close of
business on March 16, 1999, will be entitled to receive notice of and to vote at
the meeting or any adjournment thereof.
BY ORDER OF THE BOARD OF DIRECTORS,
[SIGNATURE]
David J. Lubben
SECRETARY
April 15, 1999
WE CORDIALLY INVITE YOU TO ATTEND THE MEETING. WHETHER OR NOT YOU PLAN TO BE
PRESENT AT THE MEETING, PLEASE VOTE BY TELEPHONE OR VIA THE INTERNET, OR BY
COMPLETING, SIGNING AND RETURNING THE ENCLOSED PROXY IN THE ENCLOSED ENVELOPE.
IF YOU LATER CHOOSE TO REVOKE YOUR PROXY, YOU MAY DO SO AT ANY TIME BEFORE IT IS
EXERCISED.
<PAGE>
[LOGO]
300 Opus Center
9900 Bren Road East
Minnetonka, Minnesota 55343
------------
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
MAY 12, 1999
------------
GENERAL MATTERS
The Board of Directors of UnitedHealth Group furnishes this Proxy Statement
in connection with the Board's solicitation of the enclosed proxy. The Board
will use the proxy at the Annual Meeting of Shareholders and at any adjournment
thereof. The Annual Meeting will take place on May 12, 1999, at 10:00 a.m.
Central Time, at the Lutheran Brotherhood Building Auditorium, 625 Fourth Avenue
South, Minneapolis, Minnesota. The Board will use the proxy for the purposes
listed in the Notice of Annual Meeting of Shareholders.
Management will vote in the manner a shareholder directs in the proxy. If a
shareholder gives no direction, management will vote FOR the election of the
director nominees named in this Proxy Statement, FOR the ratification of the
appointment of Arthur Andersen LLP to act as independent public accountants for
fiscal year 1999 and AGAINST the shareholder proposal. A shareholder can revoke
a proxy by delivering a written notice terminating the proxy's authority to
UnitedHealth Group's Secretary; by submitting another duly executed proxy
bearing a later date; or by attending the Annual Meeting and voting in person.
UnitedHealth Group will appoint inspectors of election for the meeting.
These inspectors will tabulate votes that shareholders cast by proxy or in
person at the Annual Meeting. To determine if a quorum is present, UnitedHealth
Group will count the number of shares represented in person or by proxy.
UnitedHealth Group will treat a shareholder who abstains from voting on any
matter as if he or she were present at the meeting for purposes of determining a
quorum and calculating the vote on that matter. If a broker returns a "non-vote"
proxy, indicating a lack of authority to vote on a matter, UnitedHealth Group
will deem the
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<PAGE>
shares covered by the non-vote to be present at the Annual Meeting for purposes
of determining a quorum but not for purposes of calculating the vote regarding
the matter. The affirmative vote of a majority of the shares of UnitedHealth
Group's Common Stock represented at the meeting in person or by proxy is
necessary to approve all matters proposed to the shareholders at the Annual
Meeting.
UnitedHealth Group is furnishing each shareholder with a copy of
UnitedHealth Group's Annual Report for the year ended December 31, 1998, with
this Proxy Statement. Management of UnitedHealth Group is mailing this Proxy
Statement and the enclosed form of proxy to shareholders beginning on or about
April 15, 1999.
Only shareholders of record at the close of business on March 16, 1999 will
be entitled to vote at the Annual Meeting. On March 16, 1999 a total of
180,823,336 shares were outstanding. Each share is entitled to one vote. There
is no right to cumulative voting as to any matter.
UnitedHealth Group will pay expenses in connection with the solicitation of
proxies. Management is primarily soliciting proxies by mail. In addition,
directors, officers and employees of UnitedHealth Group, who will receive no
extra compensation for their services, may solicit proxies by telephone,
telecopier, or personal calls. UnitedHealth Group has engaged Morrow & Co., Inc.
to assist in proxy solicitation for an estimated fee of $9,500 plus
out-of-pocket expenses.
ELECTION OF DIRECTORS
The Board of Directors of UnitedHealth Group is divided into three classes
as nearly equal in number as possible. Each class serves three years with the
term of office of one class expiring at the Annual Meeting each year in
successive years.
The Board has nominated four current directors for re-election. If elected,
these directors will serve a three-year term expiring at the annual meeting of
shareholders to be held in 2002. All of the nominees have informed the Board of
Directors that they are willing to serve as directors. If any nominee should
decline or become unable to serve as a director for any reason, the proxies will
vote for another person as they determine.
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<PAGE>
The following table provides certain information about the nominees for
election as directors of UnitedHealth Group and also provides information about
other directors whose terms of office continue after the Annual Meeting.
<TABLE>
<CAPTION>
NAME AGE DIRECTOR SINCE
- ------------------------------------------------------------------------------- --- ---------------
<S> <C> <C>
NOMINEES FOR ELECTION AS DIRECTORS WHOSE TERMS EXPIRE IN 2002
Thomas H. Kean................................................................. 63 1993
Robert L. Ryan................................................................. 55 1996
William G. Spears.............................................................. 60 1991
Gail R. Wilensky............................................................... 55 1993
DIRECTORS WHOSE TERMS EXPIRE IN 2000
James A. Johnson............................................................... 55 1993
Douglas W. Leatherdale......................................................... 62 1983
Walter F. Mondale.............................................................. 71 1997
Mary O. Mundinger.............................................................. 61 1997
DIRECTORS WHOSE TERMS EXPIRE IN 2001
William C. Ballard, Jr......................................................... 58 1993
Richard T. Burke............................................................... 55 1977
William W. McGuire, M.D........................................................ 50 1989
</TABLE>
MR. BALLARD retired in 1992 after 22 years as the Chief Financial Officer
and a director of Humana, Inc., a company operating managed health care
facilities. Mr. Ballard is currently of counsel to Greenebaum, Doll & McDonald,
a law firm in Louisville, Kentucky. Mr. Ballard is a director of American Safety
Razor Company, Healthcare Recoveries, Inc., HealthCare REIT, Inc., Jordan
Telecommunications Products, Inc., LG&E Energy Corp. and Mid-America Bancorp.
MR. BURKE has been a member of UnitedHealth Group's Board of Directors since
UnitedHealth Group's inception and was its Chief Executive Officer until
February 1988. Mr. Burke is owner, Chief Executive Officer and Governor of the
Phoenix Coyotes, a National Hockey League team. Mr. Burke is also a director of
First Cash, Inc.
MR. JOHNSON is the Chairman of the Executive Committee of the Board of
Directors of Fannie Mae, a diversified financial services company. On January 1,
1999, he retired as the Chairman and Chief Executive Officer of Fannie Mae,
positions he had held since 1990. Mr. Johnson is also a director of Cummins
Engine Company, Inc., Dayton Hudson Corporation and Kaufman and Broad Home
Corporation.
MR. KEAN is currently the President of Drew University in New Jersey. Mr.
Kean served as the Governor of the State of New Jersey from 1982 to 1990. From
1968 to 1977, he served in the New Jersey State Assembly, including two years in
the position of Speaker. Mr. Kean is
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<PAGE>
also a director of Amerada Hess Corporation, Aramark Corporation, Bell Atlantic
Corporation, and Fiduciary Trust Company International.
MR. LEATHERDALE has been the Chairman, Chief Executive Officer, President
and Chief Operating Officer of The St. Paul Companies, Inc. since 1990. The St.
Paul Companies is an insurance, financial and general business corporation. In
addition, Mr. Leatherdale is a director of The John Nuveen Company and Northern
States Power Company.
DR. MCGUIRE is the Chairman of the Board of Directors, President and Chief
Executive Officer of UnitedHealth Group. Dr. McGuire joined UnitedHealth Group
as Executive Vice President in November 1988, became UnitedHealth Group's
President in November 1989 and its Chief Executive Officer in February 1991. Dr.
McGuire also served as UnitedHealth Group's Chief Operating Officer from May
1989 to June 1995. Dr. McGuire is also a director of Healtheon Corporation.
MR. MONDALE has been a partner in the law firm of Dorsey & Whitney LLP since
January 1997, and was also a partner there from 1987 to 1993. He previously
served as a director of UnitedHealth Group from August 1991 to August 1993. Mr.
Mondale served as United States Ambassador to Japan from August 1993 through
December 1996. In 1984, he was the Democratic nominee for President of the
United States. From 1977 to 1981, Mr. Mondale was the Vice President of the
United States. From 1964 to 1976, Mr. Mondale was a U.S. Senator from Minnesota,
and he served as the Attorney General of Minnesota from 1960 to 1964. Mr.
Mondale also serves as a director of CNA Financial Corporation, Dain Rauscher
Corporation, Northwest Airlines Corporation, St. Jude Medical, Inc., and several
BlackRock mutual funds managed by BlackRock Financial Management, Inc.
MS. MUNDINGER is Dean and Centennial Professor of Health Policy, School of
Nursing and Associate Dean, Faculty of Medicine at Columbia University in New
York. She has been with Columbia University since 1982. She is also a director
of Cell Therapeutics, Inc.
MR. RYAN has been Senior Vice President and Chief Financial Officer of
Medtronic, Inc., a leading medical technology company specializing in
implantable and invasive therapies, since 1993. Mr. Ryan is also a director of
Brunswick Corporation and Dain Rauscher Corporation.
MR. SPEARS has been the Chairman of the Board of Spears, Benzak, Salomon &
Farrell, Inc., an investment counseling and management firm, since 1972. In
April 1995, Spears, Benzak, Salomon & Farrell became a wholly owned subsidiary
of KeyCorp. Mr. Spears is a Group Executive of KeyCorp and Chairman of Key Asset
Management. Mr. Spears also serves as a director of Alcide Corporation.
MS. WILENSKY is currently the John M. Olin Senior Fellow at Project HOPE, an
international health foundation, and Chair of the Medicare Payment Advisory
Commission. From 1992 to 1993, she served as the Deputy Assistant to President
George Bush for policy development,
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<PAGE>
and from 1990 to 1992 she was the Administrator of the Health Care Financing
Administration directing the Medicaid and Medicare programs for the United
States. Ms. Wilensky also serves as a director of Advanced Tissue Sciences,
Inc., Neopath, Inc., Pharmerica, Inc., Quest Diagnostics Incorporated, St. Jude
Medical, Inc., Shared Medical Systems Corporation and Syncor International.
DIRECTOR COMPENSATION
UnitedHealth Group pays directors who are not Company employees an annual
retainer of $20,000 and a $1,500 fee for attending each Board meeting.
UnitedHealth Group paid the chairman of the Audit Committee and the chairman of
the Compensation and Human Resources Committee each a $5,000 fee for the year
ended December 31, 1998.
UnitedHealth Group also provides health care coverage to current and past
directors who are not eligible for coverage under another group health care
benefit program or Medicare. During 1998, UnitedHealth Group paid approximately
$3,381 in health care premiums on behalf of Mr. Burke and an aggregate of
approximately $9,130 on behalf of past directors.
Directors of UnitedHealth Group who are not Company employees receive grants
of non-qualified stock options under the 1995 Non-employee Director Stock Option
Plan. Under the Plan, directors receive two types of option grants: initial
grants and annual grants. The initial grants (non-qualified stock options to
purchase 9,000 shares of common stock) are made automatically on the date the
eligible director is first elected to the Board of Directors and become
exercisable over the following three-year period at the rate of 3,000 shares per
year. The annual grants (non-qualified stock options to purchase 4,000 shares of
common stock) are made automatically on the first business day immediately
following each annual meeting of UnitedHealth Group's shareholders. They become
exercisable six months after grant. The option price for options granted under
the 1995 Plan is the closing sale price of UnitedHealth Group's Common Stock on
the date the option is granted.
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
During the year ended December 31, 1998, the Board of Directors held four
regular meetings and three special meetings. All incumbent directors attended at
least 75% of the Board and Committee meetings of which they were members. In
addition to the meetings, the Board passed several resolutions during 1998 by
written consent.
The Board of Directors has established four standing committees: an Audit
Committee, a Compensation and Human Resources Committee, an Executive Committee,
and a Nominating Committee. These committees help the Board fulfill its
responsibilities and assist it in making informed decisions as to UnitedHealth
Group's operations.
7
<PAGE>
The Audit Committee consists of Messrs. Leatherdale (Chairman), Mondale and
Johnson, and Ms. Wilensky, each of whom is a non-employee director and
independent of Company management. The Audit Committee held four meetings in
1998. The Audit Committee assists the Board by overseeing UnitedHealth Group's
financial reporting, public disclosure, and compliance activities. The Committee
operates as a direct line of communication between the Board and UnitedHealth
Group's independent public accountants as well as UnitedHealth Group's corporate
audit, compliance, and legal personnel. The Audit Committee has established a
subcommittee, the Compliance Committee, made up of senior executive officers of
UnitedHealth Group, to assist the Audit Committee in its responsibilities
relating to reviewing UnitedHealth Group's operational compliance with
applicable legal requirements and sound ethical standards.
The Compensation and Human Resources Committee consists of Messrs. Spears
(Chairman), Ryan, Kean and Ballard, and Ms. Mundinger, each of whom is a
non-employee director and independent of Company management. The Compensation
and Human Resources Committee held four regular meetings, one special meeting
and passed several resolutions by written consent during 1998. The Compensation
and Human Resources Committee is responsible for overseeing UnitedHealth Group's
compensation, employee benefit, and stock-based programs. The Committee also
negotiates and administers UnitedHealth Group's employment arrangements with its
Chief Executive Officer, supervises bonus programs for UnitedHealth Group's
employees and reviews and monitors director compensation programs.
The Nominating Committee consists of Messrs. Ballard (Chairman), Kean,
Spears and Leatherdale, and Dr. McGuire. The Nominating Committee held one
meeting in 1998. The Nominating Committee's duties include identifying and
nominating individuals to be proposed for election as directors at the annual
meeting of shareholders, filling board vacancies, and overseeing the director
evaluation process. The Nominating Committee will consider candidates proposed
by shareholders upon timely written notice to UnitedHealth Group's Secretary. To
be timely for the next Annual Meeting, notice must be received at UnitedHealth
Group's principal executive offices on or before December 7, 1999. Shareholders
must include in such notice the information specified in the Company's Bylaws
that will enable the Nominating Committee to evaluate the qualifications of the
recommended nominee.
The Executive Committee consists of Messrs. Spears, Ballard and Leatherdale,
and Dr. McGuire. The Executive Committee held three meetings during 1998 and
passed several resolutions by written consent. The Executive Committee is
authorized to exercise all of the powers of the Board when the Board is not in
session.
8
<PAGE>
SHAREHOLDER PROPOSAL REQUESTING
ELIMINATION OF ELECTION OF DIRECTORS BY CLASSES
UnitedHealth Group has been informed that the Amalgamated Bank of New York
LongView Collective Investment Fund, whose address is 11-15 Union Square, New
York, New York 10003, a record holder of 55,100 shares of common stock, intends
to introduce at the Annual Meeting the following resolution:
"RESOLVED, the stockholders of United HealthCare Corporation request that
the board of directors take the necessary steps in accordance with Minnesota law
to declassify the board of directors so that all directors are elected annually,
such declassification to be carried out in a manner that does not affect the
unexpired terms of directors previously elected."
THE PROPONENT HAS FURNISHED THE FOLLOWING STATEMENT:
The election of directors is the primary avenue for shareholders to
influence corporate governance policies and to hold management accountable for
its implementation of those policies. We believe that the classification of the
board of directors, which results in only a portion of the board being elected
annually, is not in the best interests of our Company and its stockholders.
We therefore urge our fellow shareholders to support declassification of
UnitedHealth Group's board of directors, which is divided into three classes
with approximately one-third of the directors elected annually to three-year
terms. Eliminating this classification system would require each director to
stand for election annually and would give shareholders an opportunity to
register their views on the performance of the board collectively and each
director individually. We believe that electing directors in this manner is one
of the best methods available to shareholders to ensure that UnitedHealth Group
will be managed in a manner that is in the best interest of the stockholders.
We believe that this step is warranted as a matter of sound corporate
governance. We also deem it appropriate in light of the disappointing return in
recent years, with United HealthCare's performance lagging behind that of the
S&P index.
A number of companies have declassified boards. We regard as unfounded the
concern expressed by some that the annual election of all directors could leave
companies without experienced directors in the event that all incumbents are
voted out by stockholders. In the unlikely event that stockholders vote to
replace all directors this decision would express shareholder dissatisfaction
with the incumbent directors and reflect the need for change.
WE URGE YOU TO VOTE FOR THIS RESOLUTION.
9
<PAGE>
STATEMENT OF THE BOARD OF DIRECTORS IN OPPOSITION TO THE SHAREHOLDER PROPOSAL:
Under the law of Minnesota, where UnitedHealth Group is incorporated, the
change contemplated by the proposal would require an amendment to UnitedHealth
Group's Articles of Incorporation. That action must first be approved by the
Board of Directors and then submitted to a vote of the shareholders. A vote in
favor of this proposal, therefore, would constitute a request that the Board
initiate this amendment. The Board does not believe such an amendment would be
in the best interests of UnitedHealth Group or its shareholders.
The Board believes a classified Board of Directors facilitates continuity
and stability of leadership and policy by ensuring that people with deep
experience and knowledge of UnitedHealth Group's broad markets will be on the
Board of Directors at all times.
The Board believes classifying director terms is in the best interests of
the corporation and its stockholders.
The Board of Directors recommends a vote AGAINST this proposal. Management
will vote proxies against this shareholder proposal unless otherwise specified.
APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has appointed Arthur Andersen LLP as independent
public accountants for UnitedHealth Group for the fiscal year ending December
31, 1999. The Board has proposed the shareholders ratify this appointment at the
Annual Meeting. Arthur Andersen LLP has examined UnitedHealth Group's financial
statements since 1981. Representatives of Arthur Andersen LLP are expected to be
present at the Annual Meeting, will have an opportunity to make a statement, and
will be available to respond to questions from shareholders. If the shareholders
do not ratify the appointment, the Board of Directors is not obligated to
appoint other independent public accountants, but will reconsider the
appointment.
The Board of Directors recommends a vote FOR this proposal. Management will
vote proxies in favor of ratifying this appointment unless otherwise specified.
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<PAGE>
EXECUTIVE COMPENSATION
CASH AND OTHER COMPENSATION
The following table provides certain summary information relating to cash
and other forms of compensation paid to, or accrued by UnitedHealth Group on
behalf of, UnitedHealth Group's Chief Executive Officer and each of the four
other most highly compensated executive officers of UnitedHealth Group for the
years ended December 31, 1996, 1997 and 1998. As required by the Securities and
Exchange Commission, the table includes two former executive officers of
UnitedHealth Group.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
--------------
OTHER ANNUAL SECURITIES ALL OTHER
COMPENSATION UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) ($)(2) OPTIONS/(#) ($)(1)
- --------------------------- --------- ----------- ----------- --------------- -------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
William W. McGuire, M.D.... 1998 1,300,000 -0- 54,985 490,000 110,682
Chief Executive Officer 1997 1,200,000 -0- 70,604 450,000 104,364
1996 1,100,000 -0- 51,011 250,000 85,408
Stephen J. Hemsley(3)...... 1998 559,615 -0- 14,400 280,000 8,913
Chief Operating Officer 1997 282,692 -0- 7,200 300,000 -0-
1996 -0- -0- -0- -0- -0-
Jeannine M. Rivet.......... 1998 374,039 178,200 14,400 111,052 11,000
CEO, UnitedHealthcare 1997 320,192 -0- 14,400 75,000 4,750
1996 281,731 -0- 11,632 28,000 4,500
R. Channing Wheeler........ 1998 365,385 146,650 6,300 80,000 7,154
CEO, Uniprise 1997 308,077 -0- 10,800 45,000 7,421
1996 281,731 45,077 9,900 57,500 12,546
David J. Lubben(4)......... 1998 297,115 128,400 15,332 73,587 8,462
Secretary and General 1997 283,077 -0- 15,368 70,000 -0-
Counsel 1996 63,210 -0- 3,600 60,000 -0-
Travers H. Wills(5)........ 1998 525,000 196,875 15,563 -0- 15,298
1997 515,384 -0- -0- 190,000 15,462
1996 475,000 -0- -0- 60,000 23,625
David P. Koppe(6).......... 1998 367,500 147,000 15,200 20,000 10,937
1997 364,135 -0- 16,275 30,000 10,915
1996 350,000 -0- 16,666 35,000 15,585
</TABLE>
- ------------------------------
(1) For each of the named executive officers except Dr. McGuire, the indicated
amounts consist of Company contributions made pursuant to UnitedHealth
Group's 401(k) savings plan and Executive Savings Plan. The amounts
indicated for Dr. McGuire include Company-paid insurance premiums of $72,774
in 1998, $69,152 in 1997 and $26,706 in 1996, as well as Company
contributions made pursuant to UnitedHealth Group's 401(k) savings plan and
Executive Savings Plan.
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(2) Other annual compensation for Dr. McGuire includes Company provided
transportation of $29,625 in 1998, $37,164 in 1997 and $20,820 in 1996 and
an expense allowance of $21,600 in 1998, $21,600 in 1997 and $21,430 in
1996.
(3) Mr. Hemsley joined the Company on June 17, 1997.
(4) Mr. Lubben joined the Company on October 1, 1996.
(5) Mr. Wills resigned as Chief Operating Officer of the Company, effective as
of June 30, 1998.
(6) Mr. Koppe resigned as Chief Financial Officer of the Company, effective as
of June 30, 1998.
OPTION GRANTS IN 1998
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS
---------------------------------- VALUE AT ASSUMED
NUMBER OF ANNUAL RATES OF STOCK
SECURITIES % OF TOTAL PRICE APPRECIATION FOR
UNDERLYING OPTIONS GRANTED EXERCISE OR OPTION TERM(2)
OPTIONS GRANTED TO EMPLOYEES IN BASE PRICE EXPIRATION ----------------------
NAME (#) 1998 ($/ SHARE) DATE(1) 5%($) 10%($)
- ---------------------------- ----------------- --------------- ----------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
William W. McGuire, M.D..... 250,000(3) 4.3% $ 47.9375 01/20/08 7,536,909 19,100,007
240,000(4) 4.2% 40.0000 10/16/08 5,548,720 14,521,805
-------- ---------- ----------
490,000 13,085,629 33,621,812
Stephen J. Hemsley.......... 60,000(4) 1.0% 52.2500 02/06/08 1,971,585 4,996,383
100,000(4) 1.7% 31.9375 08/17/08 2,008,532 5,090,015
120,000(4) 2.1% 40.0000 10/16/08 2,774,360 7,260,902
-------- ---------- ----------
280,000 6,754,477 17,347,300
Jeannine M. Rivet........... 51,052(4) 0.9% 52.2500 02/06/08 1,677,556 4,251,255
60,000(4) 1.0% 40.0000 10/16/08 1,387,180 3,630,451
-------- ---------- ----------
111,052 3,064,736 7,881,706
R. Channing Wheeler......... 20,000(4) 0.3% 52.2500 02/06/08 657,195 1,665,461
60,000(4) 1.0% 40.0000 10/16/08 1,387,180 3,630,451
-------- ---------- ----------
80,000 2,044,375 5,295,912
David J. Lubben............. 23,587(4) 0.4% 52.2500 02/06/08 775,063 1,964,161
50,000(4) 0.9% 40.0000 10/16/08 1,155,983 3,025,376
-------- ---------- ----------
73,587 1,931,046 4,989,537
Travers H. Wills............ -0- -0- -0- -0- -0- -0-
David P. Koppe.............. 20,000(4) 0.35% 52.2500 02/06/08 657,195 1,665,461
</TABLE>
- ------------------------------
(1) All options granted in 1998 expire ten years following the date of grant,
subject to earlier termination upon certain events related to termination of
employment. Options not yet exercisable generally become exercisable upon a
change in control of UnitedHealth Group. A change of control as defined in
UnitedHealth Group's Amended and Restated 1991 Stock and Incentive Plan
occurs upon the sale of all or substantially all of the assets of
UnitedHealth Group or any merger, reorganization or exchange or tender offer
that will result in a change in the
12
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power to elect 50% or more of UnitedHealth Group's Board of Directors. The
exercise price may be paid in cash, in shares of stock or pursuant to a
cashless exercise procedure under which the optionee instructs a brokerage
firm to sell the purchased shares and remit to UnitedHealth Group out of the
proceeds an amount equal to the exercise price plus all applicable
withholding taxes.
(2) The "potential realizable value" shown is the potential gain on the last day
the option remains exercisable. This value will be achieved only if the
options have been held for the full 10 years and the stock price has
appreciated at the assumed rate. Potential realizable value is listed for
illustration only. The values disclosed are not intended to be, and should
not be interpreted as, representations or projections of future value of
company stock or of the stock price.
(3) Options become exercisable at the rate of 25% per year over a period of four
years on the first day of each year, beginning on January 1, 1999.
(4) Options are 100% exercisable following the sixth anniversary of the date of
the grant. Pursuant to the terms of the plan under which these options were
granted, the Compensation and Human Resources Committee has the authority to
establish earlier exercise dates for all or a portion of these options prior
to their expiration, based on the optionee's performance.
AGGREGATED OPTION EXERCISES IN 1998
AND OPTION VALUES AT DECEMBER 31, 1998
<TABLE>
<CAPTION>
NUMBER OF VALUE OF UNEXERCISED
SECURITIES UNDERLYING IN-THE-MONEY OPTIONS
SHARES VALUE UNEXERCISED OPTIONS AT 12/31/98
ACQUIRED ON REALIZED AT 12/31/98 EXERCISABLE/
NAME EXERCISE (#) ($) (1) EXERCISABLE/UNEXERCISABLE UNEXERCISABLE ($) (2)
- --------------------------- ------------- ---------- -------------------------- ----------------------
<S> <C> <C> <C> <C>
William W. McGuire, M.D.... 290,000 19,130,865 1,218,948/1,112,364 21,987,649/2,581,482
Stephen J. Hemsley......... -0- -0- 50,000/530,000 -0-/1,480,000
Jeannine M. Rivet.......... -0- -0- 212,269/225,602 2,094,580/508,514
R. Channing Wheeler........ 23,812 1,105,907 70,625/205,313 75,195/674,313
David J. Lubben............ 14,631 258,786 39,000/149,956 158,438/238,438
Travers H. Wills........... 171,780 5,667,156 116,500/271,445 712,125/585,965
David P. Koppe............. 30,000 1,383,750 145,665/96,015 759,589/326,356
</TABLE>
- ------------------------------
(1) Calculated as market price per share at time of exercise less the per share
exercise price, times the number of shares purchased.
(2) Calculated as market price per share on December 31, 1998 of $43.0625, less
the per share exercise price, times the number of unexercised options.
13
<PAGE>
PERFORMANCE GRAPH
The following graph compares the cumulative total return to shareholders
with the Standard & Poor's 500 stock index and an index of a group of peer
companies selected by UnitedHealth Group for a five-year period ended December
31, 1998. The comparison assumes the investment of $100 on December 31, 1993 in
each index and that dividends were reinvested when paid. The companies included
in the peer group are Aetna, Inc., First Health Group Corporation, Humana, Inc.,
Oxford Health Plans, Inc., PacifiCare Health Systems, Inc., Sierra Health
Services, Inc., and Wellpoint Health Networks, Inc. UnitedHealth Group is not
included in the peer group index. In calculating the cumulative total
shareholder return of the peer group index, the shareholder returns of the peer
group companies are weighted according to the stock market capitalizations of
the companies.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
UNITEDHEALTH GROUP PEER GROUP S&P 500 INDEX
<S> <C> <C> <C>
1993 $100.00 $100.00 $100.00
1994 $119.03 $106.51 $101.32
1995 $172.55 $144.59 $139.40
1996 $118.83 $151.59 $171.40
1997 $131.29 $126.32 $228.59
1998 $113.84 $151.29 $293.91
</TABLE>
14
<PAGE>
REPORT OF THE COMPENSATION AND HUMAN RESOURCES COMMITTEE
ON EXECUTIVE COMPENSATION
The Board of Directors has delegated to the Compensation and Human Resources
Committee (the "Committee") the authority to make certain decisions with respect
to the compensation of UnitedHealth Group's Chief Executive Officer, as well as
various aspects of other compensation and fringe benefit matters affecting all
of UnitedHealth Group's employees, including executive officers. In addition,
the Committee administers UnitedHealth Group's stock option and stock based
incentive plans.
COMPENSATION POLICIES FOR EXECUTIVE OFFICERS. UnitedHealth Group seeks to
attract, retain and motivate highly qualified executives who will contribute to
UnitedHealth Group's continued success. To achieve these goals, UnitedHealth
Group emphasizes cash compensation and stock programs that are tied to Company
performance. Specifically, UnitedHealth Group's stock programs give key
employees the opportunity to acquire a significant ownership interest in
UnitedHealth Group through various stock option, restricted stock and stock
purchase plans. UnitedHealth Group also makes available to its executive
officers a broad range of benefit programs, which also are available to
employees generally, including life and disability insurance, a 401(k) savings
plan, an employee stock ownership plan and other benefit programs.
Along with other highly compensated employees of UnitedHealth Group,
executive officers also are eligible to participate in UnitedHealth Group's
non-qualified compensation deferral plans. These deferral plans include a
component under which UnitedHealth Group matches a portion of the amount of
compensation deferred by the employee, up to a certain percentage. The employee
also may defer compensation without a Company match. In addition, certain of
UnitedHealth Group's executive officers are eligible to participate in a
long-term incentive plan created by UnitedHealth Group's Board of Directors in
February 1998. Part of the compensation paid to UnitedHealth Group's executive
officers is determined by employment agreements between UnitedHealth Group and
certain officers. The employment agreements with the named executive officers
are described elsewhere in this Proxy Statement.
The Committee recognizes that the industry in which UnitedHealth Group
operates is highly competitive. Additionally, the industry is continually
undergoing significant changes resulting in a substantial demand for qualified,
experienced executive personnel. For these reasons, the Committee believes
UnitedHealth Group's compensation arrangements must remain competitive with
those offered by other companies of similar size and scope, including some but
not all of the companies in the peer group used in the Performance Graph. One
aim of UnitedHealth Group's executive compensation policies is to make it
possible for executives to earn cash compensation equaling or exceeding the
amount the executive would earn at a competitor. The Committee believes,
however, that the higher level of compensation should be paid only when
performance warrants. For these reasons, UnitedHealth
15
<PAGE>
Group's executive cash compensation consists of fixed base salary and incentive
compensation. The Committee reviews the base salary ranges for the executive
officers periodically. The Committee may increase (or decrease) these ranges to
reflect changes in the responsibilities of a particular position, changes in the
base salaries paid to executives at other companies of similar size and
operating complexity, changes in the size and scope of UnitedHealth Group's
operations, or the effect of inflation. Increases to an executive's base salary
are based upon the executive's personal contribution to corporate performance,
increases in his or her responsibilities, and salaries paid to executives at
other companies of similar size and operating complexity.
The other, and potentially more significant, part of executive cash
compensation is incentive payments under UnitedHealth Group's 1999 Leadership
Incentive Program. Under the 1999 Leadership Incentive Program, an executive's
annual incentive compensation payment generally depends on three performance
factors: (i) the overall performance of UnitedHealth Group; (ii) the overall
performance of the business segment or corporate division in which the executive
serves; and (iii) the executive's individual performance. As UnitedHealth Group
realigns its resources and activities to more directly support the operations of
its businesses, the 1999 Leadership Incentive Program tailors the performance
factors to match those of the business segment in which the particular executive
serves. The Committee establishes performance objectives for UnitedHealth Group,
and management sets the objectives for each business segment or corporate
division based on UnitedHealth Group's operating budget and targets for the
upcoming year, along with projections for growth and strategic objectives. They
take into account UnitedHealth Group's goal to remain a growing, highly
respected leader in the health and well-being market. The performance objectives
consist of financial goals, including earnings per share and operating income,
and non-financial goals, including quality, compliance, corporate integrity and
service initiatives. Individual executive performance is measured against an
annual incentive target, which represents a percentage of base salary the
executive can earn as bonus compensation if performance warrants. This
percentage ranges from 35% to 100% of an executive's base salary. The incentive
target is set at a higher percentage for more senior officers. The more senior
executive officers have a higher percentage of their potential total
compensation subject to UnitedHealth Group's results and to their individual
performance.
The Committee concluded that UnitedHealth Group performed very well in 1998,
particularly in light of the very challenging conditions facing the industry in
which the Company operates. The Committee recognized that many of the Company's
business segments and functional units met or exceeded goals established for
them, while several fell short of the goals established. Similarly, UnitedHealth
Group, as a consolidated entity, achieved the majority but not all of its goals.
Most notable was that earnings per share were less than the original internal
target due in part to losses in certain under-performing Medicare markets. In
light of these factors, the Committee adopted management's recommendations for
1998 and paid approximately $22 million in cash incentive compensation, an
amount considerably
16
<PAGE>
less than full target for the year. These payments favored the business segments
and functional units that exceeded expectations, while units that did not meet
expectations received significantly reduced payments. The Committee further
concluded that the strong performance UnitedHealth Group achieved resulted in
significant part from the leadership efforts of the Company's Chief Executive
Officer and Chief Operating Officer, and in the Committee's opinion these
efforts justified an award under UnitedHealth Group's incentive program. The
Committee, however, accepted the recommendation of the Chief Executive Officer
that no incentive compensation be paid to the Chief Executive Officer or the
Chief Operating Officer since the Company had fallen short of the performance
goals (as noted above) relative to earnings that UnitedHealth Group had set for
itself.
The Committee believes that it is important to provide executive officers
with a longer term interest in UnitedHealth Group's performance through various
stock ownership programs, including stock option, restricted stock grant, stock
purchase and other programs. The Committee recognizes that increases in
UnitedHealth Group's stock price have been a significant source of compensation
to some employees and have contributed to employee productivity and loyalty.
Beginning in late 1992 and continuing to the present, the majority of the
options granted to executives had one-time vesting schedules between six to nine
years after issuance. Under these options, the Committee can establish an
earlier exercise date for all or a portion of the grant based on a review of the
executive's performance. That review would consider UnitedHealth Group
performance, business segment performance, and individual performance factors
and goals under the Leadership Incentive Plan described above. As part of its
deliberations on 1998 incentive compensation, the Committee continued its
practice of regularly reviewing outstanding options to determine whether it was
appropriate to establish earlier exercise dates.
The Committee currently believes that the total number of shares outstanding
at any time that are subject to unexercised stock options and restricted stock
grants with unlapsed restrictions should be approximately 10% of UnitedHealth
Group's total issued and outstanding shares of Common Stock at the close of the
preceding calendar year. Over the past three years, the amount of shares subject
to unexercised employee options has averaged approximately 7.4% to 8.8% of
outstanding shares at year-end. The Committee continues to place ongoing
emphasis on stock option programs as a means of compensating employees and
further expects that the number of shares and the percentage of outstanding
shares subject to employee options will increase. In determining the amount of
options or restricted share awards to grant to executive officers, the Committee
considers various factors, including: (i) the executive's responsibilities and
potential for directly contributing to UnitedHealth Group's performance; (ii)
base salary amount; (iii) the practicality of tying vesting of options to
individual or Company performance standards; and (iv) the total number of
options previously granted to the executive.
17
<PAGE>
CHIEF EXECUTIVE OFFICER'S 1998 COMPENSATION. The Committee determines Dr.
McGuire's compensation consistent with the principles noted above and by the
terms of his employment agreement with UnitedHealth Group. As UnitedHealth
Group's Chief Executive Officer, a significant amount of Dr. McGuire's cash
compensation varies with overall Company performance.
Dr. McGuire's 1998 base salary of $1,300,000 was established based on the
Committee's review of his performance on behalf of UnitedHealth Group and
according to his employment agreement. The Committee determines any increases in
Dr. McGuire's annual base salary from year to year, in addition to any increases
required by his employment agreement, to be competitive with compensation paid
similarly situated chief executives in the health care industry as well as other
companies of comparable size and operating complexity. Based on the advice it
received in 1992 and 1995, when the Committee used the services of an
independent compensation consulting firm to help develop Dr. McGuire's
compensation package, the Committee believes Dr. McGuire's base salary is
consistent with that for chief executive officers of other comparable companies.
Dr. McGuire's employment agreement is described in this Proxy Statement under
the section titled EXECUTIVE EMPLOYMENT AGREEMENTS.
For the reasons described in the preceding section, the Committee accepted
Dr. McGuire's recommendation that he receive no cash incentive compensation for
1998.
The Committee believes it is important to link a significant portion of Dr.
McGuire's potential compensation to future Company performance. As part of his
overall compensation package, Dr. McGuire receives grants of stock options and
restricted stock awards from time to time. In 1998, Dr. McGuire received two
stock option grants. On January 20, 1998, Dr. McGuire was granted an option to
purchase 250,000 shares of Company common stock with an exercise price of
$47.9375 per share, which was the fair market value of one share of stock on the
grant date. This option may be exercised at the rate of 25% a year, over a
period of four years, on the first day of each year beginning on January 1,
1999. On October 16, 1998, along with other Company executives, Dr. McGuire
received an additional option to purchase 240,000 shares of UnitedHealth Group's
common stock with an exercise price of $40.00 per share. This option will become
100% exercisable on October 16, 2004, although the Committee has the authority
to establish earlier exercise dates for all or a portion of these options prior
to that date, based on Dr. McGuire's performance. In addition, during 1998, the
Committee established 1998 exercise dates for options granted to Dr. McGuire in
prior years representing the right to purchase a total of 79,862 shares of
Company common stock. In establishing these earlier exercise dates, the
Committee considered UnitedHealth Group's overall performance during 1998 and
reviewed Dr. McGuire's performance in connection with UnitedHealth Group's
performance.
18
<PAGE>
COMPLIANCE WITH INTERNAL REVENUE CODE SECTION 162(M). Section 162(m) of the
Internal Revenue Code, enacted in 1993, generally disallows a tax deduction to
publicly held companies for compensation exceeding $1 million paid to the
corporation's chief executive officer and four other most highly compensated
executive officers. Qualifying performance-based compensation will not be
subject to the deduction limit if certain requirements are met. UnitedHealth
Group's stock option programs have been structured in a manner that appears to
comply with the statute's requirements. As a result, UnitedHealth Group does not
expect performance-based compensation associated with stock options to be
subject to the deduction limit. Because the majority of UnitedHealth Group's
executive officers' compensation that could exceed the $1 million limitation is
associated with such stock options, UnitedHealth Group does not expect this
deduction limitation to have a material effect on its operations or financial
condition. UnitedHealth Group does not expect to take any further action with
respect to its compensation programs to avoid paying compensation that exceeds
the $1 million limitation and for which UnitedHealth Group would lose the
corresponding tax deduction.
SUBMITTED BY THE COMPENSATION AND HUMAN RESOURCES COMMITTEE.
William C. Ballard
Thomas H. Kean
Mary O. Mundinger
Robert L. Ryan
William G. Spears
EXECUTIVE EMPLOYMENT AGREEMENTS
UnitedHealth Group has entered into an employment agreement with each of the
executive officers named in the Summary Compensation Table.
WILLIAM W. MCGUIRE, M.D. Dr. McGuire entered into an employment agreement,
effective January 1, 1996, to serve as Chief Executive Officer and President.
The initial term of this agreement was three years, ending on January 1, 1999;
this agreement automatically extends for additional one-year periods unless
either party delivers prior notice of intent not to renew.
Pursuant to this agreement, Dr. McGuire currently receives a base salary of
$1,300,000 annually. Dr. McGuire is eligible to participate in UnitedHealth
Group's incentive bonus plan at prescribed levels and its other employee benefit
programs. Dr. McGuire receives an annual non-qualified stock option to purchase
a minimum of 250,000 shares of UnitedHealth Group's Common Stock. These stock
options vest over a period of four years at the rate of 25% per year, subject to
additional vesting provisions if specified future events occur. In addition,
UnitedHealth Group provides and pays for life and disability insurance policies
on Dr. McGuire that he owns. The agreement also requires UnitedHealth Group to
provide
19
<PAGE>
Dr. McGuire with a supplemental retirement benefit equal to a percentage of his
final average highest three-year cash compensation.
The agreement provides severance benefits if Dr. McGuire's employment by
UnitedHealth Group ends under certain circumstances. If his employment is
terminated by UnitedHealth Group without Cause or by Dr. McGuire with Good
Reason (as defined in the agreement), UnitedHealth Group would pay Dr. McGuire
salary and bonus pursuant to the agreement for 36 months following the
termination. Any stock options or restricted stock awards granted to Dr. McGuire
would vest immediately. If Dr. McGuire terminated his employment without Good
Reason, UnitedHealth Group would pay Dr. McGuire salary and bonus pursuant to
the agreement through the end of the term of the agreement. Any stock options or
restricted stock awards granted to Dr. McGuire would cease to vest but would
remain exercisable for 36 months following termination.
If Dr. McGuire's employment is terminated because of his death or permanent
disability, UnitedHealth Group would pay his beneficiaries salary and bonus
pursuant to the agreement to the end of the term of the agreement. In addition,
he or his beneficiaries would receive the proceeds from his disability or life
insurance policies, and any stock options or restricted stock awards would vest
immediately and remain exercisable for 36 months from the date of termination.
Pursuant to the agreement, Dr. McGuire is subject to a non-solicitation
provision during the term of the agreement, while he receives any severance
payments, and for a one year period thereafter. He is subject to a
non-competition provision during the term of the agreement and while he receives
any severance payments. In addition, he is prohibited from disclosing the
Company's confidential information at all times.
STEPHEN J. HEMSLEY. Mr. Hemsley and the Company currently operate under an
oral employment agreement, pursuant to which he serves as Chief Operating
Officer of UnitedHealth Group. The Company and Mr. Hemsley are negotiating the
terms of a written employment agreement to reflect his appointment as Chief
Operating Officer in November 1998. The written employment agreement between Mr.
Hemsley and the Company is expected to be finalized during the first half of
1999.
This employment agreement is expected to provide Mr. Hemsley with a minimum
base salary, a minimum annual stock option grant, supplemental retirement
benefits, life and disability insurance, and participation in incentive bonus
and stock plans and other employee benefits offered by the Company. It is
expected that Mr. Hemsley will be entitled to receive severance compensation for
a 12-month period equal to his base salary and bonus (as determined by the
agreement) if his employment is terminated by UnitedHealth Group without Cause
or by Mr. Hemsley for Good Reason (as defined in the agreement). Mr. Hemsley's
severance compensation would be greater if these events occur within one
20
<PAGE>
year following a change in control. In addition, it is expected that Mr. Hemsley
or his beneficiaries will be entitled to receive severance compensation for a
12-month period equal to his base salary and bonus (as determined by the
agreement) if his employment is terminated due to his permanent disability or
death.
In addition, it is expected that during the term of the employment
agreement, and during certain periods of time following its termination, Mr.
Hemsley will be subject to non-solicitation and non-competition provisions.
JEANNINE M. RIVET. Ms. Rivet entered into an employment agreement,
effective October 16, 1998, to serve as Chief Executive Officer of
UnitedHealthcare. This agreement remains in effect until it is terminated by
either party under certain circumstances. Under this agreement, Ms. Rivet
receives a minimum base salary of $400,000 annually, and is eligible to
participate in UnitedHealth Group's incentive bonus and stock plans and its
other employee benefit plans.
R. CHANNING WHEELER. Mr. Wheeler entered into an employment agreement,
effective June 9, 1998, to serve as Chief Executive Officer of Uniprise. The
initial term of this agreement is three years; after the initial term this
agreement automatically renews for additional one year terms unless either party
provides prior notice of intent not to renew. Under this agreement, Mr. Wheeler
receives a minimum base salary of $400,000 annually, and is eligible to
participate in UnitedHealth Group's incentive bonus and stock plans and its
other employee benefit plans.
DAVID J. LUBBEN. Mr. Lubben entered into an employment agreement, effective
October 16, 1998, to serve as General Counsel of UnitedHealth Group. This
agreement remains in effect until it is terminated by either party under certain
circumstances. Under this agreement, Mr. Lubben receives a minimum base salary
of $300,000 annually, and is eligible to participate in UnitedHealth Group's
incentive bonus and stock plans and its other employee benefit plans.
Pursuant to each of their agreements, Ms. Rivet and Mssrs. Wheeler and
Lubben are entitled to receive severance compensation for a 12-month period
equal to the executive's base salary and bonus (as determined by his or her
agreement) if the executive's employment is terminated by UnitedHealth Group
without Cause or if a Change in Employment occurs (as defined in his or her
agreement). This severance compensation is greater if these events occur within
two years following a Change in Control (as defined in his or her agreement).
During the term of these agreements and during certain periods of time following
termination of these agreements, each executive is subject to a non-solicitation
provision, and Ms. Rivet and Mr. Wheeler are subject to a non-competition
provision.
21
<PAGE>
SEVERANCE ARRANGEMENTS AND CHANGE-IN-CONTROL PROVISIONS
According to UnitedHealth Group's Severance Pay Plan, which applies to all
regular Company employees, certain of the executive officers may be eligible to
receive severance pay following their termination in certain events. However,
any payments an executive officer receives in connection with a
change-in-control (as defined in and pursuant to an employment agreement with
UnitedHealth Group) will replace and be in lieu of payment and/or benefits under
any Company severance program, including UnitedHealth Group's Severance Pay
Plan. Under UnitedHealth Group's Severance Pay Plan, the amounts of severance
payments following termination depend upon the executive officer's length of
service, grade level within UnitedHealth Group, and the execution of a
Company-approved release.
In the case of a change-in-control of UnitedHealth Group, certain of the
outstanding stock options granted under UnitedHealth Group's Amended and
Restated 1991 Stock and Incentive Plan will become exercisable in full.
Change-in-control is defined for this purpose as the sale of all or
substantially all of UnitedHealth Group's assets, or any merger, reorganization
or exchange or tender offer that will result in a change in the power to elect
50% or more of the members of UnitedHealth Group's Board of Directors.
22
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table provides information about each shareholder known to
UnitedHealth Group to own beneficially more than 5% of the outstanding shares of
Company Common Stock as of March 16, 1999.
<TABLE>
<CAPTION>
AMOUNT AND NATURE PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP (1) CLASS (2)
- ------------------------------------------------------------ --------------------------- -------------
<S> <C> <C>
Massachusetts Financial Services Company ................... 18,560,260(3) 10.3
500 Boylston Street, 15th Floor
Boston, MA 02116
FMR Corporation ............................................ 9,907,121(4) 5.5
82 Devonshire Street
Boston, MA 02109-3614
Southeastern Asset Management, Inc. ........................ 9,866,600(5) 5.5
6075 Poplar
Suite 900
Memphis, TN 38119
</TABLE>
- ------------------------
(1) Except as otherwise described, the shareholders in the table have sole
voting and investment powers with respect to the shares listed.
(2) Percent of class calculation is based on 180,823,336 shares of UnitedHealth
Group's Common Stock outstanding as of March 16, 1999.
(3) This information is based on a Schedule 13G/A filed by Massachusetts
Financial Services Company ("MFS") with the SEC on February 11, 1999,
reporting beneficial ownership data as of February 11, 1999. MFS holds sole
voting power with respect to 18,474,960 shares of Common Stock and sole
investment power with respect to 18,560,260 shares. The MFS Schedule 13G/A
further indicates that these shares are also beneficially owned by certain
other nonreporting entities.
(4) This information is based on a Schedule 13G/A filed by FMR Corp. ("FMR")
with the SEC on February 12, 1999, reporting beneficial ownership data as of
December 31, 1998. FMR, through its control over Fidelity Management and
Research Company, a wholly-owned investment adviser subsidiary of FMR, and
Fidelity Management Trust Company and Fidelity International Limited, holds
sole investment power with respect to 9,907,121 shares of Common Stock.
(5) This information is based on a Schedule 13G filed by Southeastern Asset
Management ("SAM") with the SEC on February 4, 1999, reporting beneficial
ownership data as of December 31, 1998. SAM holds sole voting power with
respect to 4,272,600 shares of Common Stock and sole investment power with
respect to 5,000,600 shares. The SAM Schedule 13G further indicates that
these shares are also beneficially owned by certain other nonreporting
entities.
23
<PAGE>
The following table provides information about the beneficial ownership of
Company Common Stock as of March 16, 1999 by each director and nominee for
director, each named executive officer, and by all directors and all executive
officers as a group.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
NAME OF BENEFICIAL OWNER OR IDENTITY OF GROUP BENEFICIAL OWNERSHIP(1)(2)(3)
- --------------------------------------------------- -----------------------------
<S> <C>
William C. Ballard................................. 99,200
Richard T. Burke................................... 787,131(4)
James A. Johnson................................... 73,200(5)
Thomas H. Kean..................................... 66,000(6)
Douglas W. Leatherdale............................. 325,170(7)
William W. McGuire, M.D............................ 1,653,047
Walter F. Mondale.................................. 12,620
Mary O. Mundinger.................................. 10,100
Robert L. Ryan..................................... 11,000
William G. Spears.................................. 99,612
Gail R. Wilensky................................... 64,000
Stephen J. Hemsley................................. 132,159
Jeannine M. Rivet.................................. 273,181
R. Channing Wheeler................................ 90,350
David J. Lubben.................................... 66,071(8)
All executive officers and directors as a group (17
persons)......................................... 5,080,476(9)
</TABLE>
- ------------------------
(1) Unless otherwise noted, each person and group identified possesses sole
voting and investment power with respect to the shares shown opposite such
person's or group's name. Shares not outstanding but deemed beneficially
owned by virtue of the right of an individual to acquire them within 60 days
are treated as outstanding only when determining the amount and percent
owned by such individual or group. All amounts shown for individuals reflect
less than 1 percent of the outstanding shares. The group total reflects 2.8%
of the shares outstanding.
(2) Includes the following number of shares which may be acquired by the named
persons or group within 60 days upon exercise of options: Mr. Ballard,
96,000 shares; Mr. Burke, 192,000 shares; Mr. Burke's spouse, 16,116 shares;
Mr. Johnson, 64,000 shares; Mr. Kean, 64,000 shares; Mr. Leatherdale,
224,000 shares; Dr. McGuire, 1,473,115 shares; Mr. Mondale, 10,000 shares;
Ms. Mundinger, 10,000 shares; Mr. Ryan, 10,000 shares; Mr. Spears, 96,000
shares; Ms. Wilensky, 64,000 shares; Stephen J. Hemsley, 130,000 shares;
Jeannine M. Rivet, 247,532 shares; R. Channing Wheeler, 89,375 shares; David
J. Lubben, 65,730 shares.
24
<PAGE>
(3) Includes the following number of shares held in account by the Trustee of
UnitedHealth Group's ESOP for each of the following, who have sole voting
power and no investment power: Dr. McGuire, 768 shares; Mr. Hemsley, 9
shares; Ms. Rivet, 195 shares; Mr. Wheeler, 21 shares; Mr. Lubben, 13
shares.
(4) Includes 415 shares held directly by Mr. Burke's spouse. Mr. Burke disclaims
beneficial ownership with respect to these shares.
(5) Includes 200 shares held by Mr. Johnson in a family trust. Mr. Johnson
disclaims beneficial ownership with respect to these shares.
(6) Includes 1,000 shares held by Mr. Kean for the benefit of his minor child.
(7) Includes 1,420 shares held by Mr. Leatherdale's two dependent children. Mr.
Leatherdale disclaims beneficial ownership with respect to these shares.
(8) Includes 128 shares held directly by Mr. Lubben's spouse. Mr. Lubben
disclaims beneficial ownership with respect to these shares.
(9) Includes 1304 shares held by the Trustee of UnitedHealth Group's ESOP for
the accounts of executive officers of UnitedHealth Group, with respect to
which such persons have sole voting power and no investment power, the
indirect holdings included in footnotes (4), (5), (6) and (7) above, and the
holdings of spouses of executive officers.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires executive
officers and directors, and persons who beneficially own more than 10% of
UnitedHealth Group's Common Stock, to file initial reports of ownership and
reports of changes in ownership with the Securities and Exchange Commission
("SEC") and the New York Stock Exchange. Executive officers, directors and
greater than 10% beneficial owners are required by SEC regulations to furnish
UnitedHealth Group with copies of all Section 16(a) forms they file.
Based solely on UnitedHealth Group's review of copies of such reports and
written representations from UnitedHealth Group's executive officers and
directors, UnitedHealth Group believes that its executive officers and directors
complied with all Section 16(a) filing requirements during 1998, except as
follows: On December 9, 1998, Mr. Leatherdale transferred by gift 250 shares of
Company Common Stock. This transaction was reported to the SEC on an amended
Form 4 for December 1998, which was filed in March 1999.
25
<PAGE>
CERTAIN RELATIONSHIPS AND TRANSACTIONS
During UnitedHealth Group's fiscal year ended December 31, 1998,
UnitedHealth Group paid insurance premiums, in an amount which was not material
to either the St. Paul Companies or UnitedHealth Group, to The St. Paul
Companies, Inc., of which Mr. Leatherdale is a director and an executive
officer.
Dorsey & Whitney LLP is UnitedHealth Group's corporate legal counsel. Mr.
Mondale is a partner of Dorsey & Whitney.
OTHER MATTERS
In accordance with the requirements of advance notice described in the
Company's Bylaws, no other proposals of shareholders will be presented at the
Annual Meeting. The Board of Directors of UnitedHealth Group knows of no other
matters that may come before the Annual Meeting. However, if any matters calling
for a vote of the shareholders, other than those referred to in this Proxy
Statement, should properly come before the meeting, the persons named in the
enclosed proxy will vote such proxy according to their individual judgment.
26
<PAGE>
SHAREHOLDER PROPOSALS FOR THE NEXT ANNUAL MEETING
In order to be eligible for inclusion in the Company's next Proxy Statement
or consideration at the Company's next Annual Meeting, shareholder proposals
must be in writing and must be delivered to UnitedHealth Group's principal
executive offices at 300 Opus Center, 9900 Bren Road East, Minnetonka, Minnesota
55343, not later than December 7, 1999. Shareholder proposals must be in the
form provided in the Company's Bylaws.
If the Company does not receive timely notice, shareholder proposals will be
excluded from inclusion in the Proxy Statement and from consideration at the
meeting. This advance notice requirement supersedes the statutory notice period
in Rule 14a-4(c)(1) of the federal proxy rules regarding the discretionary proxy
voting authority of the Board of Directors in connection with such shareholder
business.
BY ORDER OF THE BOARD OF DIRECTORS,
[SIGNATURE]
David J. Lubben
SECRETARY
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COMPANY #
CONTROL #
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THERE ARE THREE WAYS TO VOTE YOUR PROXY:
1. VOTE BY PHONE -- TOLL FREE -- 1-800-240-6326
- - Use any touch-tone telephone to vote your proxy 24 hours a day, 7 days a
week.
- - You will be prompted to enter your 3-digit company number and your
7-digit control number, located in the box above.
- - Follow the simple instructions.
2. VOTE BY INTERNET -- http://www.eproxy.com/unh/
- - Use the internet to vote your proxy 24 hours a day, 7 days a week.
- - You will be prompted to enter your 3-digit company number and your
7-digit control number, located in the box above, to obtain your records
and create an electronic ballot.
3. VOTE BY MAIL
- - Mark, sign and date the proxy card below.
- - Detach the proxy card and return it in the enclosed postage-prepaid
envelope.
YOUR TELEPHONE OR INTERNET VOTE AUTHORIZES THE NAMED PROXIES TO VOTE YOUR
SHARES IN THE SAME MANNER AS IF YOU MARKED, SIGNED AND RETURNED YOUR PROXY
CARD.
IF YOU VOTE BY TELEPHONE OR INTERNET, PLEASE DO NOT MAIL YOUR PROXY CARD
- Please detach here -
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1 AND 3,
AND AGAINST PROPOSAL 2.
1. Election of directors: / / Vote FOR / / Vote WITHHELD
01 Thomas H. Kean all Nominees from all Nominees
02 Robert L. Ryan
03 William G. Spears
04 Gail R. Wilensky
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO ----------------------------
VOTE FOR ANY INDICATED NOMINEE, WRITE THE
NUMBER(S) OF THE NOMINEE(S) IN THE BOX ----------------------------
PROVIDED TO THE RIGHT.)
2. Shareholder Proposal Requesting / / For / / Against / / Abstain
Elimination of Election of Directors
by Classes.
3. Proposal to ratify appointment of / / For / / Against / / Abstain
independent public accountants.
4. In their discretion, the Proxies are authorized to transact other
business that properly may come before the meeting or any adjournment of the
meeting.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED OR, IF NO
DIRECTION IS GIVEN, WILL BE VOTED FOR PROPOSALS 1 AND 3 AND AGAINST
PROPOSAL 2.
Date , 1999
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- --------------------------------------------------------
Signature(s) in Box
Additional Signature if Held in Joint Tenancy or Name and Title if Signing on
Behalf of Corporation or Partnership
PLEASE SIGN EXACTLY AS YOUR NAME(S) APPEARS. IF YOUR SHARES ARE HELD IN
JOINT TENANCY, ALL PERSONS MUST SIGN. TRUSTEES, ADMINISTRATORS, ETC. SHOULD
INCLUDE TITLE AND AUTHORITY. CORPORATIONS AND PARTNERSHIPS SHOULD PROVIDE
NAME OF ENTITY AND TITLE OF AUTHORIZED PERSONS SIGNING.
<PAGE>
UNITEDHEALTH GROUP BUSINESSES
[UNITEDHEALTHCARE LOGO]
United Healthcare operates locally based organized health systems in more
than 40 geographic markets nationally, and provides management consulting
services in selected international markets.
[OVATIONS LOGO]
Ovations offers health and well-being services for Americans age 50 and older.
[UNIPRISE LOGO]
Uniprise provides employee solutions for large organizations with 5,000 or
more employees, including benefits design and implementation, large-volume
transaction processing and customer services.
[SPECIALIZED CARE SERVICES LOGO]
Specialized Care Services is a portfolio of companies offering highly
specialized benefits, networks, services and resources to improve health and
well-being.
[INGENIX LOGO]
Ingenix delivers knowledge and information products and services to all
participants in the health care marketplace.
[UNIMERICA LOGO]
Unimerica is comprosed of UnitedHealth Group's insurance affiliates and
provides insurance products on behalf of other UnitedHealth Group business.
UNITEDHEALTH GROUP PROXY
- --------------------------------------------------------------------------------
[UNITEDHEALTH GROUP LOGO]
ANNUAL MEETING OF SHAREHOLDERS
WEDNESDAY, MAY 12, 1999
10:00 A.M.
LUTHERAN BROTHERHOOD BUILDING AUDITORIUM
625 FOURTH AVENUE SOUTH
MINNEAPOLIS, MINNESOTA
The undersigned hereby appoints William W. McGuire, M.D. and David J. Lubben
as Proxies, each with the power to appoint his substitute, and hereby
authorizes each or either of them to represent and to vote, as designated
below, all of the shares of Common Stock of United HealthCare Corporation
held of record by the undersigned on March 16, 1999, at the Annual Meeting of
the Shareholders to be held on May 12, 1999 or any adjournment thereof.
SEE REVERSE FOR VOTING INSTRUCTIONS.
