UnitedHealth CEO Compensation Grows 21 Pct In 2010
INDIANAPOLIS (AP) -- Health insurer UnitedHealth Group Inc.'s earnings rose 21 percent last year and so did the compensation it gave CEO Stephen J. Hemsley.
Hemsley, 58, received compensation totaling $10.8 million, according to an Associated Press analysis of a regulatory filing made Wednesday by the Minnetonka, Minn., managed care company. That's up from $8.9 million in 2009.
Last year, Hemsley received a salary and performance-related bonus amounting to $4.7 million and stock and options valued at $6 million at the time they were granted. The company also gave him $110,079 in other compensation, mostly for matching contributions under an executive savings plan.
The CEO also made $22.5 million selling stock after exercising options to acquire 2.4 million shares, but that total is not included in the AP compensation calculation because it's a personal finance decision tied to previous grants. A company spokesman said the options were about to expire.
Hemsley did not sell 1.2 million of the shares acquired in the options exercise, so he realized no cash value from those.
Hemsley has served as CEO since 2006, and his $1.3 million salary remained unchanged for the fourth straight year. But his performance-related bonus jumped 74 percent to $3.4 million in 2010. The value of his stock and options also rose.
The company said in the filing it considered its "strong growth, operating performance and financial results, achieved in a difficult economic environment" in determining pay last year.
UnitedHealth is the largest health insurer based on revenue, and that revenue grew 8 percent last year to $94.16 billion. Meanwhile, the insurer's earnings climbed 21 percent to $4.63 billion, or $4.10 per share. UnitedHealth also sells wellness programs and information services.
Premiums, the insurer's largest revenue source, climbed 8 percent last year to $85.4 billion, and health insurance enrollment rose 3 percent to nearly 33 million.
The price of UnitedHealth shares rose 18 percent last year to close 2010 at $36.11. That topped the performance of several competitors and the 12.8 percent increase recorded by the Standard & Poor's 500 index.
UnitedHealth's stock fell slightly in the first half of the year, after Congress passed the health care overhaul, which aims to cover millions of uninsured people but will impose a host of taxes and restrictions on insurers. But UnitedHealth shares have mostly climbed since last summer, like other managed care stocks, as investors saw minimal impact from the first few provisions of the overhaul and Republicans won seats in Congress.
Health care use slowed more than insurers anticipated last year, and that helped the managed care sector. The flu season was mild, especially compared with the final months of 2009, when the swine flu scare hit. Those factors helped UnitedHealth and other big insurers beat analyst expectations over the final months of 2010.
Last year, UnitedHealth became the first of the biggest insurers to beef up its dividend. It said in May it would spend about $560 million over the next 12 months on quarterly dividends of 12.5 cents per share.
That equates to 50 cents annually and trumps the company's previous annual dividend of 3 cents per share. Aetna Inc. and WellPoint Inc. have since followed UnitedHealth's lead and used some of the capital they piled up over the last part of 2010 to offer quarterly dividends.
The AP compensation formula calculates an executive's total compensation during the last fiscal year by adding salary, bonuses, perks, above-market interest the company pays on deferred compensation and the estimated value of stock and stock options awarded during the year. The AP formula does not count changes in the present value of pension benefits. That makes the AP total slightly different in most cases from the total reported by companies to the Securities and Exchange Commission.
The value that a company assigned to an executive's stock and option awards for 2010 was the present value of what the company expected the awards to be worth to the executive over time. Companies use one of several formulas to calculate that value. However, the number is just an estimate, and what an executive ultimately receives will depend on the performance of the company's stock in the years after the awards are granted. Most stock compensation programs require an executive to wait a specified amount of time to receive shares or exercise options.
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