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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No.           )

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Soliciting Material under §240.14a-12

 

UnitedHealth Group Incorporated

(Name of Registrant as Specified In Its Charter)

 

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GRAPHIC

9900 Bren Road East, Minnetonka, Minnesota 55343

April 23, 2014

Dear Shareholder:

We cordially invite you to attend our 2014 Annual Meeting of Shareholders. We will hold our meeting on Monday, June 2, 2014, at 10:00 a.m. Pacific Time at Anthony Marlon Auditorium, 2700 North Tenaya Way, Las Vegas, Nevada 89128. This is the operating site of our UnitedHealthcare plan servicing Nevada.

As a shareholder of UnitedHealth Group, you play an important role in our company by considering and taking action on the matters set forth in the attached proxy statement. We appreciate the time and attention you invest in making thoughtful decisions.

Attached you will find a notice of meeting and proxy statement that contain further information about the items upon which you will be asked to vote and the meeting itself, including:

Every shareholder vote is important, and we encourage you to vote as promptly as possible. If you cannot attend the meeting in person, you may listen to the meeting via webcast. Instructions on how to access the live webcast are included in the proxy statement.

Sincerely,

GRAPHIC

Stephen J. Hemsley
President and Chief Executive Officer

GRAPHIC

Richard T. Burke
Chairman of the Board


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GRAPHIC

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

To the Shareholders of UnitedHealth Group Incorporated:

        UnitedHealth Group Incorporated (the "Company") will hold its Annual Meeting of Shareholders on Monday, June 2, 2014, at 10:00 a.m. Pacific Time at Anthony Marlon Auditorium, 2700 North Tenaya Way, Las Vegas, Nevada 89128. The purposes of the meeting are:

        Only shareholders of record of the Company's common stock at the close of business on April 4, 2014 are entitled to receive notice of, and to vote at, the meeting and any adjournments or postponements of the meeting.

  By Order of the Board of Directors,

 

 


GRAPHIC

 

Dannette L. Smith
Secretary to the Board of Directors

April 23, 2014

Even if you plan to attend the Annual Meeting, we still encourage you to submit your proxy by internet, telephone or mail prior to the meeting. If you later choose to revoke your proxy or change your vote, you may do so by following the procedures described under Question 13 of the "Questions and Answers About the Annual Meeting and Voting" section in the attached proxy statement.

IMPORTANT NOTICE REGARDING AVAILABILITY OF PROXY MATERIALS
FOR THE ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 2, 2014:

The Notice of Internet Availability of Proxy Materials, Notice of Annual Meeting of Shareholders,
Proxy Statement and Annual Report are available at
www.unitedhealthgroup.com/proxymaterials.


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TABLE OF CONTENTS

 
  Page

Summary

  1

Proposal 1 — Election Of Directors

  4

Director Nomination Process

  4

2014 Director Nominees

  5

Corporate Governance

  8

Overview

  8

Principles of Governance

  10

Code of Conduct: Our Principles of Ethics & Integrity

  10

Compliance and Ethics

  10

Director Independence

  11

Independent Board Leadership

  12

Risk Oversight

  12

Board Meetings and Annual Meeting Attendance

  13

Board Committees

  14

Communication with the Board of Directors

  15

Executive Compensation

  16

Executive Summary

  16

Compensation Discussion and Analysis

  17

Compensation Committee Report

  30

2013 Summary Compensation Table

  31

2013 Grants of Plan-Based Awards

  34

Outstanding Equity Awards at 2013 Fiscal Year-End

  36

2013 Option Exercises and Stock Vested

  37

2013 Pension Benefits

  39

2013 Non-Qualified Deferred Compensation

  40

Executive Employment Agreements

  41

Potential Payments Upon Termination or Change in Control

  44

Proposal 2 — Advisory Approval of the Company's Executive Compensation

  45

Director Compensation

  47

Cash Compensation

  47

Equity-Based Compensation

  48

Stock Ownership Guidelines

  48

Other Compensation

  48

Equity Conversion Program

  49

Cash Deferral Plan

  49

2013 Director Compensation Table

  49

Certain Relationships and Transactions

  51

Approval or Ratification of Related-Person Transactions

  51

Related-Person Transactions

  51

Compensation Committee Interlocks and Insider Participation

  53

Audit Committee Report

  53

Independent Registered Public Accounting Firm

  55

Disclosure of Fees Paid to Independent Registered Public Accounting Firm

  55

Audit Committee's Consideration of Independence of Independent Registered Public Accounting Firm

  55

Audit and Non-Audit Services Approval Policy

  55

Proposal 3 — Ratification of Independent Registered Public Accounting Firm

  56

Proposal 4 — Shareholder Proposal Regarding Cumulative Voting

  56

Shareholder Proposal — Cumulative Voting

  56

Board of Directors' Recommendation

  57

Proposal 5 — Shareholder Proposal Regarding Lobbying Disclosure

  58

Shareholder Proposal — Lobbying Disclosure Report

  58

Board of Directors' Recommendation

  59

Questions and Answers About the Annual Meeting and Voting

  61

Security Ownership of Certain Beneficial Owners and Management

  67

Section 16(a) Beneficial Ownership Reporting Compliance

  68

Householding Notice

  68

Other Matters at Meeting

  69

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SUMMARY

        This summary highlights information contained elsewhere in this proxy statement. We encourage you to review the entire proxy statement. This proxy statement and our Annual Report for the year ended December 31, 2013 are first being mailed to the Company's shareholders and made available on the internet at www.unitedhealthgroup.com/proxymaterials on or about April 23, 2014. Website addresses included throughout this proxy statement are for reference only. The information contained on our website is not incorporated by reference into this proxy statement.

UnitedHealth Group

        We are a diversified health and well-being company whose mission is to help people live healthier lives and to make the health care system work better for everyone. Despite significant pressures relating to government reductions in Medicare Advantage program funding and the impacts of health care reform implementation, we achieved strong business results in 2013 including:

This strong financial performance was driven by a broad range of initiatives intended to position the Company for future growth, and a focus on fundamental execution in all our operations.


Corporate Governance

        UnitedHealth Group is committed to meeting high standards of ethical behavior, corporate governance and business conduct in everything we do, every day. This commitment has led us to implement the following practices:

   

 


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        See the "Corporate Governance" portion of this proxy statement for further information on our governance practices.

Enterprise-Wide Risk Oversight

        Our Board of Directors, assisted by its committees, oversees management's enterprise-wide risk management activities. Risk management activities include assessing and taking actions necessary to manage risk incurred in connection with the long-term strategic direction and operation of our business.


Executive Compensation

        Our executive compensation program uses a mix of base salary, annual and long-term cash incentives, equity awards and standard benefits to attract and retain highly qualified executives and maintain a strong relationship between executive pay and Company performance. Shareholders expressed strong support for our executive compensation program at our 2013 Annual Meeting of Shareholders, reflected by the fact that more than 97% of the votes cast were in favor of our say-on-pay proposal.

 

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        Mr. Hemsley's total compensation is below the CEO median of the Company's peer group, even though the Board believes his performance has been outstanding. Information regarding compensation paid to each of our named executive officers in 2013 is described in the "Compensation Discussion and Analysis" section.


Proposal 1 — Election of Directors (see pages 4-8)

        The Board has nominated eleven candidates for election to our Board of Directors. The Board recommends that shareholders vote FOR the election of each nominee.


Proposal 2 — Advisory Approval of the Company's Executive Compensation (see pages 45-47)

        The Board is seeking advisory approval of the compensation paid to the Company's named executive officers as disclosed in this proxy statement. In considering this proposal, please read our Compensation Discussion and Analysis, which explains the Compensation Committee's compensation decisions and how our executive compensation program aligns the interests of our executive officers with those of our shareholders. Although the vote is advisory and is not binding on the Board, the Compensation Committee will take into account the outcome of the vote when considering future executive compensation decisions. At the 2013 Annual Meeting, more than 97% of the votes cast on this proposal were in favor of our executive compensation. The Board recommends that shareholders vote FOR the approval of the Company's executive compensation.


Proposal 3 — Ratification of Independent Registered Public Accounting Firm (see page 56)

        The Audit Committee has appointed Deloitte & Touche LLP as our independent registered public accounting firm for the year ending December 31, 2014. The Board is seeking shareholder ratification of this appointment. The Board recommends that shareholders vote FOR ratification of the appointment of Deloitte & Touche LLP.


Proposal 4 — Shareholder Proposal Regarding Cumulative Voting (see pages 56-58)

        We have been informed that a shareholder intends to introduce a resolution requesting that the Board adopt cumulative voting. The Board has concluded that the proposal is not in the best interests of the Company and its shareholders. The Board recommends that shareholders vote AGAINST the shareholder proposal.


Proposal 5 — Shareholder Proposal Regarding Lobbying Disclosure (see pages 58-60)

        We have been informed that a shareholder intends to introduce a resolution requesting that the Board authorize the preparation of a report expanding our disclosure of lobbying expenditures. The Board has concluded that the proposal is not in the best interests of the Company and its shareholders. The Board recommends that shareholders vote AGAINST the shareholder proposal.

 

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PROPOSAL 1 — ELECTION OF DIRECTORS

Director Nomination Process

Criteria for Nomination to the Board

        The Nominating Committee analyzes, on an annual basis, director skills and attributes, and recommends to the Board of Directors appropriate individuals for nomination as Board members.

        The Nominating Committee developed and maintains a skills matrix to assist it in considering the appropriate balance of experience, skills and attributes required of a director and to be represented on the Board as a whole. The skills matrix is based on the Company's strategic plan and is periodically reviewed and updated by the Nominating Committee. The Nominating Committee evaluates Board candidates against the skills matrix when determining whether to recommend candidates for initial election to the Board and when determining whether to recommend currently serving directors for reelection to the Board.

        The skills matrix has two sections — a list of core criteria that every member of the Board should meet and a list of skills and attributes to be represented collectively on the Board. Following are core director criteria that should be satisfied by each director or nominee:

The skills matrix provides further that the Board as a whole should represent diversity and have expertise in the following areas:

        Our Nominating Committee strives to maintain a balance of tenure on the Board. Long-serving directors bring valuable experience with our Company and familiarity with the challenges it has faced over the years, while newer directors bring fresh perspectives and ideas.

Diversity

        UnitedHealth Group embraces and encourages a culture of diversity and inclusion. We believe that valuing diversity makes good business sense and helps to ensure our future success. Diversity is included as one of the collective attributes in our director skills matrix. Our Board has not adopted a formal definition of diversity.

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        Our Board assesses its overall effectiveness through an annual evaluation process. This evaluation includes, among other things, an assessment of the overall composition of the Board, including the diversity of its members.

Nominating Advisory Committee

        The Board of Directors formed the Nominating Advisory Committee in 2006 to provide the Nominating Committee with additional input from shareholders and others regarding desirable characteristics of director candidates and the composition of the Board of Directors. The Nominating Committee considers, but is not bound by, input provided by the Nominating Advisory Committee. The Nominating Advisory Committee currently includes four individuals affiliated with long-term shareholders of the Company and one individual who is a member of the medical community. Members of the Nominating Advisory Committee do not receive any compensation from the Company for serving on the Nominating Advisory Committee. The Nominating Advisory Committee met in January 2014. A description of the Nominating Advisory Committee can be found on the Company's website at www.unitedhealthgroup.com.

Process for Identifying and Evaluating Nominees

        In assessing currently serving directors for potential re-nomination, the Nominating Committee reviews the directors' overall performance on the Board of Directors and other relevant factors, including the factors listed above under "Criteria for Nomination to the Board."

        In considering potential candidates for election to the Board, the Nominating Committee, with input from the full Board of Directors, assesses the potential candidate's qualifications and how these qualifications fit with the desired composition of the Board of Directors as a whole. The Nominating Committee considers views expressed by members of the Nominating Advisory Committee and other shareholders regarding skill sets that would be valuable for a new director to possess. The Nominating Committee has an outside firm on retainer to assist the Committee in identifying and evaluating director candidates.

Shareholder Nominations and Recommendations for Director Candidates

        Shareholders may nominate candidates for election to the Board of Directors by submitting timely written notice to the Secretary to the Board in accordance with the Bylaws. The notice must include the information set forth in the Bylaws about each proposed nominee, including: (i) the name, age, business address, residence address and principal occupation or employment, (ii) the number of shares of the Company's common stock which are beneficially owned, and (iii) other information concerning the nominee as would be required in soliciting proxies for the election of that nominee. The notice must also include the information set forth in the Bylaws about the shareholder making the nomination and any associated person, including information about the direct and indirect ownership of, or derivative positions in, the Company's common stock and arrangements and understandings related to the proposed nomination or the voting of the Company's common stock. The notice must also include a signed consent of each nominee to serve as a director of the Company, if elected. For the 2015 Annual Meeting, this notice must be received at our principal executive offices, directed to the Secretary to the Board of Directors, on or before December 24, 2014. If we do not receive a notice and the required information regarding the shareholder and any associated person by the specified deadline, the director nomination will be void and disregarded for all purposes.

        The Company will also consider recommendations submitted by shareholders for director candidates. Recommendations should be directed to the Secretary to the Board of Directors.

        No shareholders nominated or recommended candidates for the Board of Directors in connection with the 2014 Annual Meeting.


2014 Director Nominees

        Our Articles of Incorporation and Bylaws provide that each member of our Board of Directors is elected annually by a majority of votes cast if the election is uncontested. The Board of Directors has nominated the eleven directors set forth below for election by the shareholders at the 2014 Annual Meeting. All of the nominees were elected by our shareholders at the 2013 Annual Meeting. All of the nominees have informed the Board that

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they are willing to serve as directors if elected. If any nominee should decline or become unable to serve as a director for any reason, the persons named as proxies will elect a replacement.

        The Board of Directors recommends that you vote FOR the election of each of the nominees. Executed proxies will be voted FOR the election of each nominee unless you specify otherwise.

Name

  Age   Director Since

William C. Ballard, Jr.

  73   1993

 

Edson Bueno, M.D.

  70   2012

 

Richard T. Burke

  70   1977

 

Robert J. Darretta

  67   2007

 

Stephen J. Hemsley

  61   2000

 

Michele J. Hooper

  62   2007

 

Rodger A. Lawson

  67   2011

 

Douglas W. Leatherdale

  77   1983

 

Glenn M. Renwick

  58   2008

 

Kenneth I. Shine, M.D.

  79   2009

 

Gail R. Wilensky, Ph.D.

  70   1993

 

        The director nominees, if elected, will serve until the 2015 Annual Meeting or until their successors are elected and qualified. The following is a brief biographical description of each director nominee, which includes a discussion of the skills and attributes held by each director that are reflected in the skills matrix, as described above, and that, in part, led the Board to conclude that each respective director should continue to serve as a member of the Board.

        Mr. Ballard served as Of Counsel to Bingham Greenebaum Doll LLP (formerly Greenebaum Doll & McDonald PLLC), a law firm in Louisville, Kentucky, from June 1992 until July 2008. In 1992, Mr. Ballard retired from Humana, Inc., a company operating managed health care facilities, after serving with Humana in various roles for 22 years, including as the Chief Financial Officer ("CFO") and a director. Mr. Ballard has satisfied all the core director criteria set forth in the skills matrix. Mr. Ballard also has health care industry, legal and finance/capital markets expertise and qualifies as a financial expert under applicable Securities and Exchange Commission ("SEC") regulations. Mr. Ballard currently serves as a director of Health Care REIT, Inc.

        Dr. Bueno is the founder and CEO of Amil Assistência Médica Internacional S.A., formerly Amil Participações S.A. ("Amil"), in which UnitedHealth Group owns a 90% interest. Founded in 1978, Amil is the largest health care organization in Brazil, currently assisting more than five million people. Dr. Bueno holds a medical degree from the Federal University of Rio de Janeiro, with specialization in general surgery. He has attended courses in the Business Administration program at the Pontifical Catholic University of Rio de Janeiro and management programs at Harvard Business School. Dr. Bueno has satisfied all the core director criteria set forth in the skills matrix except that he is not an independent director because he is the founder and CEO of Amil. Dr. Bueno also has health care industry, health care policy, brand marketing/public relations and clinical practice expertise.

        Mr. Burke is Chair of the Board of Directors of UnitedHealth Group, has been a member of our Board since inception, and was CEO of UnitedHealthcare, Inc., our predecessor corporation, until February 1988. From 1995 until February 2001, Mr. Burke was the owner, CEO and Governor of the Phoenix Coyotes, a National Hockey League team. Mr. Burke has satisfied all the core director criteria set forth in the skills matrix. Mr. Burke also has health care industry expertise and qualifies as a financial expert under applicable SEC regulations. Mr. Burke currently serves as a director of Meritage Homes Corporation. In the past five years, he has also served as a director of First Cash Financial Services, Inc.

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        Mr. Darretta is the retired Vice Chair of the Board of Directors, CFO and member of the Executive Committee of Johnson & Johnson, a health care products company. Mr. Darretta served as CFO and a member of the Executive Committee of Johnson & Johnson from March 1997 to March 2007. Mr. Darretta joined Johnson & Johnson in 1968. Mr. Darretta has satisfied all the core director criteria set forth in the skills matrix. Mr. Darretta also has corporate governance, health care industry, consumer marketing, technology/business process and finance/capital markets expertise and qualifies as a financial expert under applicable SEC regulations. Mr. Darretta currently serves as a trustee for certain Putnam mutual funds.

        Mr. Hemsley is President and CEO of UnitedHealth Group and has served in that capacity since November 2006. He has been a member of the Board of Directors since February 2000. Mr. Hemsley joined the Company in 1997 as Senior Executive Vice President. He became Chief Operating Officer in 1998, was named President in 1999, and served as President and Chief Operating Officer from 1999 to November 2006. Mr. Hemsley has satisfied all the core director criteria set forth in the skills matrix except that he is not an independent director because he is our CEO. Mr. Hemsley also has health care industry, finance/capital markets and technology/business process expertise.

        Ms. Hooper is President and CEO of The Directors' Council, a private company she co-founded in 2003 that works with corporate boards to increase their independence, effectiveness and diversity. She was President and CEO of Voyager Expanded Learning, a developer and provider of learning programs and teacher training for public schools, from 1999 until 2000. Prior to that, she was President and CEO of Stadtlander Drug Company, Inc., a provider of disease-specific pharmaceutical care, from 1998 until Stadtlander was acquired in 1999. Ms. Hooper has satisfied all the core director criteria set forth in the skills matrix and is a nationally recognized corporate governance expert. She also has health care industry expertise and qualifies as a financial expert under applicable SEC regulations. Ms. Hooper currently serves as a director of PPG Industries, Inc. In the past five years, she also served as a director of AstraZeneca plc. and Warner Music Group Corp.

        Mr. Lawson served as President of Fidelity, the world's largest mutual fund company, from August 2007 to March 2010. Prior to joining Fidelity, Mr. Lawson was Vice Chairman of the Board of Directors of Prudential Financial from 2002 to 2007 where he was responsible for the International Operating Division and for Global Marketing Communications. Mr. Lawson served as Executive Vice President of Prudential from 1996 to 2002. Prior to joining Prudential, Mr. Lawson was President and CEO of VanEck Global from June 1994 to June 1996. Mr. Lawson was Managing Director and Partner-in-Charge of Private Global Banking and Mutual Funds at Bankers Trust from January 1992 to April 1994. Mr. Lawson was a Managing Director and CEO at Fidelity Investments — Retail from May 1985 to May 1991, and President and CEO at Dreyfus Service Corporation from May 1982 to May 1985. Mr. Lawson has satisfied all the core director criteria set forth in the skills matrix. Mr. Lawson also has corporate governance, consumer marketing, finance/capital markets, brand marketing/public relations and technology/business process expertise and qualifies as a financial expert under applicable SEC regulations. We believe that Mr. Lawson's past experience as an executive at a major institutional investor is also of significant value to the Board. Mr. Lawson currently serves as Chair of the Board of Directors of E*TRADE Financial Corporation.

        Mr. Leatherdale served as Chair of the Board of Directors and CEO of The St. Paul Companies, Inc. (currently known as Travelers Companies, Inc.), a property casualty insurance company, from 1990 until he retired in October 2001. Mr. Leatherdale has satisfied all the core director criteria set forth in the skills matrix. Mr. Leatherdale also has corporate governance and finance/capital markets expertise and qualifies as a financial expert under applicable SEC regulations. In the past five years Mr. Leatherdale has also served as a director of Xcel Energy Inc.

        Mr. Renwick is Chair of the Board of Directors, President and CEO of The Progressive Corporation, an auto insurance holding company. Before being named President and CEO in 2001, Mr. Renwick served as CEO-Insurance Operations and Business Technology Process Leader from 1998 through 2000. Prior to that, he led Progressive's Consumer Marketing group and served as President of various divisions within Progressive. Mr. Renwick joined Progressive in 1986 as Auto Product Manager for Florida. Mr. Renwick has satisfied all the

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core director criteria set forth in the skills matrix. Mr. Renwick also has corporate governance, health care industry, consumer marketing, finance/capital markets, brand marketing/public relations and technology/business process expertise and qualifies as a financial expert under applicable SEC regulations. Mr. Renwick also currently serves as a director of Fiserv, Inc.

        Dr. Shine has been the Special Advisor to the Chancellor for Health Affairs of the University of Texas System (the "UT System"), which consists of nine academic campuses and six health institutions, since September 2013. Dr. Shine served as Executive Vice Chancellor for Health Affairs of the UT System from November 2003 to September 2013 and as the interim Chancellor of the UT System from May 2008 until February 2009. Dr. Shine served as President of the Institute of Medicine at the National Academy of Sciences from 1992 until 2002. From 1993 until 2003, Dr. Shine served as a Clinical Professor of Medicine at the Georgetown University School of Medicine. From 1971 until 1992, Dr. Shine served in several positions at the University of California at Los Angeles School of Medicine, with his final position being Dean and Provost, Medical Sciences, and he continues to hold the position of Professor of Medicine Emeritus. Dr. Shine has also served as Chair of the Council of Deans of the Association of American Medical Colleges from 1991 until 1992 and as President of the American Heart Association from 1985 until 1986. Dr. Shine has satisfied all the core director criteria set forth in the skills matrix. He is also a nationally recognized cardiologist and has health care policy and clinical practice expertise.

        Dr. Wilensky has been a senior fellow at Project HOPE, an international health foundation, since 1993. From 2008 to 2009, Dr. Wilensky was President of the Department of Defense Health Board and chaired its sub-committee on health care delivery. From December 2006 to December 2007, Dr. Wilensky co-chaired the Department of Defense Task Force on the Future of Military Health Care. During 2007 she also served as a commissioner on the President's Commission on Care for America's Returning Wounded Warriors. From May 2001 to May 2003, she was the Co-Chair of the President's Task Force to Improve Health Care for our Nation's Veterans. From 1997 to 2001, she was also Chair of the Medicare Payment Advisory Commission. From 1992 to 1993, Dr. Wilensky served as the Deputy Assistant to President George H. W. Bush for policy development, and from 1990 to 1992, she was the Administrator of the Health Care Financing Administration (now known as the Centers for Medicare and Medicaid Services) directing the Medicaid and Medicare programs for the United States. Dr. Wilensky has satisfied all the core director criteria set forth in the skills matrix. She also is a nationally recognized health care economist and has health care policy expertise. Dr. Wilensky currently serves as a director of Quest Diagnostics Incorporated. In the past five years, she has also served as a director of Cephalon, Inc., Gentiva Health Services, Inc. and SRA International Inc.


CORPORATE GOVERNANCE

Overview

        UnitedHealth Group is committed to high standards of corporate governance and ethical business conduct. Important documents that are reflective of this commitment include our Articles of Incorporation, Bylaws, Principles of Governance, Board of Directors Committee Charters, Standards for Director Independence, Code of Conduct: Our Principles of Ethics & Integrity, Related-Person Transactions Approval Policy, Board of Directors Communication Policy, Political Contributions Policy and Corporate Environmental Policy. You can access these documents at www.unitedhealthgroup.com to learn more about our corporate governance practices. We will also provide copies of any of these documents without charge upon written request to the Company's Secretary to the Board of Directors. Our key corporate governance practices are highlighted below.

Board Structure and Shareholder Rights

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Board and Board Committee Composition and Performance

Guidelines and Board Policies

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Independent Auditors


Principles of Governance

        Our Articles of Incorporation and Bylaws, together with Minnesota law and NYSE and SEC rules, govern the Company. Our Principles of Governance set forth many of the practices, policies and procedures that provide the foundation for our commitment to strong corporate governance. The policies and practices covered in our Principles of Governance include shareholder rights and proxy voting; structure, composition and performance of the Board of Directors; stock ownership and retention requirements; Board of Directors operation; individual director responsibilities; and Board committees. Our Principles of Governance are reviewed at least annually by our Nominating Committee and are revised as necessary.


Code of Conduct: Our Principles of Ethics & Integrity

        The Code of Conduct: Our Principles of Ethics & Integrity is posted on the Company's website and covers our principles and policies related to business conduct, conflicts of interest, public disclosure, legal compliance, reporting and accountability, corporate opportunities, confidentiality, fair dealing and protection and proper use of Company assets. Any waiver of the Code of Conduct for the Company's executive officers, senior financial officers or directors may be made only by the Board of Directors or a committee of the Board. We will publish any amendments to the Code of Conduct and waivers of the Code of Conduct for an executive officer or director on the Company's website.


Compliance and Ethics

        We strongly encourage employees to raise ethics and compliance concerns, including concerns about accounting, internal controls or auditing matters. We offer several channels for employees and third parties to report ethics and compliance concerns or incidents, including by phone or online, and individuals may choose to remain anonymous in jurisdictions where anonymous reporting is permissible. We prohibit retaliatory action against any individual who in good faith raises concerns or questions regarding ethics and compliance matters or reports suspected violations. We train all employees and periodically advise them regarding the means by which they may report possible ethics or compliance issues and their affirmative responsibility to report any possible issues. In our 2013 employee survey, 97% of employees said they knew what to do if they believed unethical behavior or misconduct occurred in their work area.

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Director Independence

        Our Board of Directors has adopted the Company's Standards for Director Independence, which are available on the Company's website at www.unitedhealthgroup.com. The Standards for Director Independence requirements exceed the independence standards set by the NYSE.

        Our Board of Directors has determined that William C. Ballard, Jr., Richard T. Burke, Robert J. Darretta, Michele J. Hooper, Rodger A. Lawson, Douglas W. Leatherdale, Glenn M. Renwick, Kenneth I. Shine, M.D. and Gail R. Wilensky, Ph.D. are each "independent" under the NYSE rules and the Company's Standards for Director Independence and have no material relationships with the Company that would prevent the directors from being considered independent. Stephen J. Hemsley, the Company's President and CEO, and Edson Bueno, M.D., founder and CEO of Amil, are not independent directors.

        In determining independence, the Board of Directors considered, among other factors, all of the business relationships between the Company and our directors and nominees, their immediate family members (as defined by the NYSE) and their affiliated companies. The Board of Directors considered whether any director or any nominee was a director, partner, significant shareholder or executive officer of an organization that has a relationship with the Company, and also considered charitable contributions that the Company or its affiliates made to organizations with which such directors or nominees are or have been associated. In particular, the Board of Directors evaluated the following relationships and determined that such relationships were in the normal course of business and did not impair the directors' exercise of independent judgment:

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The Board of Directors also considered relationships between the Company and organizations on which our outside directors or their immediate family members serve only as directors and determined that such relationships did not impair the directors' exercise of independent judgment.


Independent Board Leadership

        Our Board of Directors believes that having independent Board leadership is an important component of our governance structure. As such, our Bylaws require the Company to have either an independent Chair of the Board or a Lead Independent Director. The Company believes the current leadership structure delineates the separate roles of managers and directors. Our CEO sets the strategic direction for the Company, working with the Board, and provides day-to-day leadership; our independent Chair of the Board leads the Board in the performance of its duties and serves as the principal liaison between the independent directors and the CEO. In addition to these overall differences in duties, our Principles of Governance outline the specific duties of the Chair of the Board or a Lead Independent Director, including:


Risk Oversight

Enterprise-Wide Risk Oversight

        Our Board of Directors oversees management's enterprise-wide risk management activities. Risk management activities include assessing and taking actions necessary to manage risk incurred in connection with the long-term strategic direction and operation of our business. Each director on our Board is required to have risk oversight

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ability for each skill and attribute the director possesses that is reflected in the collective skills section of our director skills matrix described in "Proposal 1 — Election of Directors — Director Nomination Process — Criteria for Nomination to the Board" above. Collectively, our Board of Directors uses its committees to assist in its risk oversight function as follows:

        Our Board of Directors maintains overall responsibility for oversight of the work of its various committees by receiving regular reports from the Committee Chairs regarding their work. In addition, discussions about the Company's strategic plan, consolidated business results, capital structure, merger and acquisition related activities and other business discussed with the Board of Directors include a discussion of the risks associated with the particular item under consideration.

Enterprise-Wide Incentive Compensation Risk Assessment

        Our Compensation Committee requested that management conduct a risk assessment of the Company's enterprise-wide compensation programs. The risk assessment reviewed both cash incentive compensation plans and individual cash incentive awards paid in 2013 for the presence of potential design elements that could incent employees to incur excessive risk, the ratio and level of incentive to fixed compensation, the amount of manager discretion, the percentage of compensation expense as compared to the business units' revenues, and the presence of other design features that serve to mitigate excessive risk-taking, such as the Company's clawback policy, stock ownership guidelines, multiple performance measures and similar features. The Compensation Committee also receives an annual report on the Company's compliance with its equity award program controls.

        After considering the results of the risk assessment, management concluded that the level of risk associated with the Company's enterprise-wide compensation programs is not reasonably likely to have a material adverse effect on the Company. The results of the risk assessment were reviewed with the Compensation Committee at its February 2014 meeting. Please see "Compensation Discussion and Analysis" for a discussion of compensation design elements intended to mitigate excessive risk-taking by our executive officers.


Board Meetings and Annual Meeting Attendance

        Directors are expected to attend Board meetings, meetings of committees on which they serve and the Annual Meeting of Shareholders. All eleven directors attended the 2013 Annual Meeting. During the year ended December 31, 2013, the Board of Directors held ten meetings. All directors attended at least 75% of the meetings of the Board and any Board committees of which they were members in 2013.

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Board Committees

        The Board of Directors has established four standing committees: the Audit Committee, the Compensation Committee, the Nominating Committee and the Public Policy Committee. These committees help the Board fulfill its responsibilities and assist the Board in making informed decisions. Each committee operates under a written charter, and evaluates its charter and conducts a committee performance evaluation annually. The following table identifies the members of each committee as of April 18, 2014.

Director

  Audit   Compensation   Nominating   Public Policy

William C. Ballard, Jr.

      X   X    
 

Edson Bueno, M.D.

              X
 

Richard T. Burke*

               
 

Robert J. Darretta

  X            
 

Stephen J. Hemsley

               
 

Michele J. Hooper

  X       Chair    
 

Rodger A. Lawson

      Chair        
 

Douglas W. Leatherdale

      X   X    
 

Glenn M. Renwick

  Chair            
 

Kenneth I. Shine, M.D.

              X
 

Gail R. Wilensky, Ph.D.

              Chair
 
*
Mr. Burke is the Chair of the Board and ex-officio member of each Board committee. As an ex-officio member, Mr. Burke has a standing invitation to attend each Board committee meeting, but does not count for quorum purposes or vote on committee matters.

Audit Committee

        The Audit Committee consists of Messrs. Renwick (Chair) and Darretta and Ms. Hooper, each of whom is an independent director under the NYSE listing standards and the SEC rules. The Board of Directors has determined that Messrs. Renwick and Darretta and Ms. Hooper are "audit committee financial experts" as defined by the SEC rules. The Audit Committee has responsibility for the selection and retention of the independent registered public accounting firm and assists the Board of Directors by overseeing financial reporting and internal controls and public disclosure. The Audit Committee reviews and assesses the effectiveness of the Company's policies, procedures and resource commitment in the areas of compliance, ethics, privacy and data security, by interacting with the leadership and management responsible for these functions. The Audit Committee also oversees management's processes to identify and quantify material risks facing the Company. The Audit Committee establishes procedures concerning the receipt, retention and treatment of complaints regarding accounting, internal accounting controls and auditing matters. The Audit Committee operates as a direct line of communication between the Board of Directors and our independent registered public accounting firm, as well as our internal audit, compliance and legal personnel. The Audit Committee held ten meetings in 2013.

Compensation Committee

        The Compensation Committee consists of Messrs. Lawson (Chair), Ballard and Leatherdale, each of whom is an independent director under the NYSE listing standards and the SEC rules, a non-employee director under the SEC rules and an outside director under the Internal Revenue Code of 1986 (the "Internal Revenue Code"). The Compensation Committee is responsible for overseeing our policies and practices related to total compensation for executive officers, the administration of our incentive and equity-based plans and the risk associated with our compensation practices and plans. The Compensation Committee also establishes our employment arrangements with our CEO and other executive officers, conducts an annual performance review of the CEO, and reviews and

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monitors director compensation programs and the Company's stock ownership guidelines. The Compensation Committee held six meetings in 2013.

Nominating Committee

        The Nominating Committee consists of Ms. Hooper (Chair) and Messrs. Ballard and Leatherdale, each of whom is an independent director under the NYSE listing standards. The Nominating Committee's duties include identifying and nominating individuals to be proposed as nominees for election as directors at each Annual Meeting or to fill Board vacancies, conducting the Board evaluation process, evaluating the categorical standards which the Board of Directors uses to determine director independence, and monitoring and evaluating corporate governance. The Nominating Committee also oversees Board processes and corporate governance-related risk. The Nominating Committee held four meetings in 2013.

Public Policy Committee

        The Public Policy Committee consists of Dr. Wilensky (Chair), Dr. Bueno and Dr. Shine. Dr. Wilensky and Dr. Shine are each independent directors under the NYSE listing standards. The Public Policy Committee is responsible for assisting the Board of Directors in fulfilling its responsibilities relating to the Company's public policy, health care reform and modernization activities, political contributions, government relations, community and charitable activities and corporate social responsibility. The Public Policy Committee is also responsible for overseeing the risks associated with these activities. The Public Policy Committee held four meetings in 2013.


Communication with the Board of Directors

        The Board of Directors values the input and insights of our shareholders and other interested parties and believes that effective communication strengthens the Board of Directors' role as an active, informed and engaged fiduciary. The Board of Directors has adopted a Board of Directors Communication Policy to facilitate communication between shareholders and other interested parties and the Board. Under this policy, the Board of Directors has designated the Company's Secretary to the Board of Directors as its agent to receive and review communications.

        The Secretary to the Board of Directors will not forward to the directors communications received which are of a personal nature or not related to the duties and responsibilities of the Board of Directors, including, without limitation, junk mail, mass mailings, business solicitations, routine customer service complaints, new product or service suggestions, and opinion survey polls. The Secretary to the Board of Directors will forward such complaints and suggestions received to the appropriate members of the Company's management.

        Appropriate matters to raise in communications to the Board include:

        The policy, including information on how to contact the Board of Directors, may be found in the corporate governance section of the Company's website, www.unitedhealthgroup.com.

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EXECUTIVE COMPENSATION

Executive Summary

        UnitedHealth Group's compensation program is designed to attract and retain highly qualified executives and to maintain a strong link between pay and the achievement of enterprise-wide goals. We emphasize and reward teamwork and collaboration among executive officers, which we believe produces Company growth and performance, optimizes the use of enterprise-wide capabilities, drives efficiencies and integrates products and services for the benefit of our customers and other stakeholders.

        In determining 2013 executive compensation, the Compensation Committee considered the Company's strong growth, operating performance and financial results, all of which were achieved in a challenging economic environment, as well as individual executive performance. Some of our key business results for 2013 were:

        As described in the Compensation Discussion and Analysis, this strong financial performance was driven by a broad range of initiatives intended to position the Company for future growth, and a focus on fundamental execution in all our operations.

        The Compensation Committee believes that total compensation for the executive officers listed in the 2013 Summary Compensation Table (the "named executive officers") should be heavily weighted toward long-term performance-based compensation, and this was the case for 2013. The elements of compensation for our named executive officers were unchanged from 2012, except that non-qualified stock options were included in the mix of equity awards granted. In 2013, long-term compensation represented approximately 70% of the total mix of compensation granted to our named executive officers.

        As discussed in detail below and reflected in the 2013 Summary Compensation Table, in 2013, the Compensation Committee determined that our CEO, Mr. Hemsley, should receive the following compensation:

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        We endeavor to maintain strong governance standards in the oversight of our executive compensation programs, including the following policies and practices that were in effect during 2013:


Compensation Discussion and Analysis

Philosophy and Objectives of our Compensation Program

        We seek to attract and retain highly qualified executives and establish a strong pay-for-performance alignment by linking senior management compensation to enterprise goals. The primary objectives of our executive compensation program are to:

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Compensation Program Principles

        Our Compensation Committee uses the following principles to implement our compensation philosophy and achieve our executive compensation program objectives:

Determination of Total Compensation

Role of the Compensation Committee

        The Compensation Committee oversees the Company's policies and philosophy related to total compensation for executive officers. The Compensation Committee approves the compensation for the named executive officers based on its own evaluation, input from our CEO (for all executive officers except for himself), internal pay equity considerations, the tenure and performance of each named executive officer, input from its independent consultant and market data.

        In addition, in making compensation decisions, the Compensation Committee considers the results of the Company's annual shareholder advisory votes approving the Company's executive compensation. More than 97% of the votes cast were in favor of the Company's executive compensation at each of our annual meetings since our inaugural vote in 2011. The Compensation Committee believes these shareholder votes indicate strong support for the Company's executive compensation program.

The Compensation Committee's Use of an Independent Compensation Consultant

        The Compensation Committee retains a separate independent compensation consultant, Jon Weinstein of Pay Governance LLC, to advise the Compensation Committee on executive and director compensation matters, assess total compensation program levels and program elements for executive officers and evaluate competitive compensation trends. Pay Governance does not provide any other services to the Company and does not perform any work for management. The Compensation Committee has assessed the independence of Mr. Weinstein and of Pay Governance, specifically considering, in accordance with SEC rules, whether Mr. Weinstein and Pay Governance had any relationships with the Company, our officers or our Board members that would impair their independence. Based on this evaluation, the Compensation Committee concluded that Mr. Weinstein's and Pay Governance's work for the Compensation Committee does not raise any conflict of interest.

Competitive Positioning

        The Compensation Committee believes that total compensation for the named executive officers should be heavily weighted toward long-term performance-based compensation, but it does not target a specific mix of annual and long-term compensation or cash and equity compensation and does not use competitive compensation benchmark data to formulaically set compensation amounts.

        In general, the Compensation Committee's goal is to achieve total compensation for the named executive officers as a group that falls within a range of the 50th to 75th percentiles of the market data for our peer group (as discussed below) if paid at target. Target total compensation of our named executive officers as a group in

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2013, consisting of base salary, target annual cash incentive award, target long-term cash incentive award and the grant date fair value of equity awards (including performance shares at target), resulted in a target compensation opportunity for our named executive officers as a group between the 50th and the 75th percentile of the market data for our peer group. The Compensation Committee believes this range is an appropriate reflection of the Company's size, complexity and relative performance over the past several years. The following is a brief summary of the processes followed by the Compensation Committee to select competitive compensation benchmark data and how the Compensation Committee uses that data.

        The Compensation Committee requests Pay Governance to conduct an annual review of the peer group data. This review occurs at the second quarter Compensation Committee meeting because recent financial and compensation data are generally available. The annual review is intended to ensure that competitive compensation data considered by the Compensation Committee is:

        The Compensation Committee uses market data developed from a broad industry group of premier companies. This group is developed by Pay Governance as follows:

Neither directors nor management participates in the selection of the companies in the peer group, rather, the Compensation Committee approves the process by which the peer group companies are selected. The Compensation Committee is not made aware of the companies in the peer group until the independent compensation consultant presents its benchmarking results to the committee.

        The Compensation Committee also considers market data from the five largest publicly traded managed care companies with which we compete for business. However, the Compensation Committee does not use this group of managed care companies as a primary reference point for benchmarking compensation practices because the Company is substantially larger, more complex and more diverse than these companies, and because we believe that the Company competes primarily for talent and capital with other successful large companies across a broader group of industries.

        Once the process by which peer group companies will be selected is determined, the Compensation Committee generally uses the peer group data as follows. At the fourth quarter Compensation Committee meeting, Pay Governance conducts an annual review of the market competitiveness of the Company's executive compensation program for the Company's Section 16 officers. The review compares the compensation opportunities provided to the Company's Section 16 officers to benchmark companies on a position by position basis and on an aggregate basis. The market competitive information is used as a reference point to assist the Compensation Committee in determining pay opportunities at the subsequent first quarter Compensation Committee meeting. When making executive compensation determinations at its first quarter meeting, the Compensation Committee takes into consideration the Company's performance against previously established performance goals and other relevant business performance that may not be adequately captured by the pre-set goals. Those compensation determinations are then compared to the competitive compensation benchmark data for reference purposes.

        The companies that were included in the 2013 peer group and the five managed care companies are listed at the end of this Compensation Discussion and Analysis.

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Role of Management and CEO in Determining Executive Compensation

        The Compensation Committee has the responsibility to approve and monitor all compensation for our executive officers. Management recommends appropriate enterprise-wide financial and non-financial performance goals for use in incentive compensation. Our CEO assists the Compensation Committee by evaluating the performance of the executive officers that report directly to him and recommending compensation levels for these executive officers. Our CEO does not, however, make recommendations regarding his own compensation.

Use of Tally Sheets and Wealth Accumulation Analysis

        When approving compensation decisions, the Compensation Committee reviews comprehensive tally sheet information for each of our executive officers. These tally sheets are prepared by management and quantify the elements of each executive officer's total compensation. The tally sheets include a summary of all equity awards previously granted to each executive officer, the gain realized from past vesting or exercise of equity awards, the projected value of accumulated equity awards based upon various stock price scenarios, and compensation to be paid under various potential employment termination scenarios. This is done to effectively analyze the compensation each executive officer has accumulated to date and to fully understand the amount the executive officer could accumulate in the future.

Elements of our Compensation Program

Overview

        The compensation program for our named executive officers consists of the following elements:

Compensation Element

Objective

Type of Compensation
Base salary   To provide a base level of cash compensation for executive officers   Annual compensation, not variable

 
Annual cash incentive awards   To encourage and reward executive officers for individual performance and for achieving annual corporate performance goals   Annual performance compensation, variable

 
Long-term cash incentive awards   To encourage and reward executive officers for achieving three-year corporate performance goals   Long-term performance compensation, variable

 
Equity awards   To motivate and retain executive officers and align their interests with shareholders through the use of:   Long-term performance compensation, variable
   

Performance shares to motivate sustained performance and growth and potentially assist executives in building ownership in the Company

   
   

RSUs to retain executive officers and build stock ownership positions

   
   

Non-qualified stock options to encourage sustained stock price appreciation

   

 
Employee benefits   To promote health, well-being and financial security of employees, including executive officers; constitutes the smallest part of total remuneration   Annual indirect compensation, not variable

 

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Annual Compensation

        The Compensation Committee generally determines base salary levels for our named executive officers early in the fiscal year, with changes becoming effective during the first quarter of the fiscal year. In February 2013, following consideration of 2012 performance evaluations and to reflect increased responsibilities undertaken in connection with 2012 business realignment activities, the Compensation Committee approved the following changes to base salary levels for our named executive officers for fiscal 2013:

Name


2013 Base Salary
($)


2012 Base Salary
($)


2013 to 2012 Increase
(%)

Stephen J. Hemsley

  1,300,000   1,300,000   0%

 

David S. Wichmann

     900,000      850,000   6%

 

Gail K. Boudreaux

     900,000      850,000   6%

 

Larry C. Renfro

     900,000      850,000   6%

 

Marianne D. Short

     750,000                 —    

 

        Annual cash incentive awards may be paid if our Company meets or exceeds annual performance goals for that year as determined by the Compensation Committee. In establishing the performance measures for the 2013 annual cash incentive awards in early 2013, the Compensation Committee sought to align broadly the compensation of our executive officers with key elements of the Company's 2013 business plan. Development of the Company's 2013 business plan was a robust process that involved input from all of the Company's business units and was reviewed with the Company's Board of Directors in the fourth quarter of 2012 and the first quarter of 2013. These performance measures are based on enterprise-wide measures because the Compensation Committee believes that the named executive officers share the responsibility to support the goals and performance of the Company as key members of the Company's leadership team. At the target level, the financial performance goals were consistent with or higher than the 2013 financial outlook presented publicly in November 2012 at the Company's annual investor conference. The following table sets forth the performance measures and goals established, as well as actual 2013 performance results:

2013 Performance Measure

Weight

     Threshold
     Performance


     Target
     Performance


     Maximum
     Performance


              Actual 2013
              Performance
Revenue*   1/3   $117.8 billion       $124.0 billion       $130.2 billion       $122.5 billion

 
Operating Income*   1/3   $8.220 billion       $9.67 billion       $11.121 billion       $9.623 billion
Cash Flows from Operations*       $6.375 billion       $7.5 billion       $8.625 billion       $6.991 billion

 
Stewardship:

Customer and Physician Satisfaction

Employee Engagement

Employee Teamwork

  1/3   2 points below    
2013 target    
  1 point above    
2012 results    
  2 points above    
2013 target    
  At 2013 target for
employee engagement
and employee
teamwork and between
2013 target and
maximum for customer
and physician
satisfaction

 
*
The Company's annual incentive plan allows for adjustments to the Company's reported earnings for the impact of changes in accounting principles, extraordinary items and unusual or non-recurring gains or losses, including significant

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        The 2013 financial performance measures at target level represented year-over-year growth in revenues of $13.4 billion or 12.1%, year-over-year growth in operating income of $416 million or 4.5%, and year-over-year increase in operating cash flows of $345 million or 4.8%. These targets reflect the Company's view that there would be a continued difficult business environment in 2013, including expectations that:

        The 2013 non-financial performance measures were based on survey data results and at target level represented an increase over 2012 in all categories. These measures were viewed to be important to obtaining longer-term financial successes that might not be immediately reflected in annual financial results. The Compensation Committee was of the view that the breadth of financial and non-financial performance measures for the 2013 annual cash incentive award would motivate the executive officers to achieve results that should contribute to value creation for our shareholders on a long-term basis and avoid excessive risks.

        At the beginning of 2013, the Compensation Committee believed that achievement of the annual incentive goals required substantial performance on a broad range of initiatives contained in the 2013 business plan. These initiatives included the following:

        The Company's 2013 business plan assumed that sequestration would be deferred or otherwise resolved through legislation. Subsequent to establishing the 2013 targets, legislative efforts to change sequestration proved unsuccessful, and reductions in Medicare funding took effect in April 2013. These sequestration cuts are estimated to have reduced 2013 consolidated earnings from operations by approximately $250 million. Expanded regulatory requirements in Brazil put further pressure on earnings at Amil.

        The Company made substantial progress with regard to the initiatives above and significantly exceeded its enrollment targets, growing by over 4.5 million individuals. Revenues, however, were $1.5 billion below target, driven by decreases in Medicare funding discussed above and the unplanned conversion of a large public sector client from a risk arrangement to a fee arrangement, which provided significant savings to the public sector client by avoidance of the health insurers' fee assessed on fully insured businesses under the Affordable Care Act.

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        Operating income for 2013 was slightly below target, as the Company was able to offset most but not all of the impact from sequestration and new regulatory pressures. Cash flows from operations were also below target, but above threshold. Non-financial performance measures were at or above target levels. Earnings per share increased 4% in 2013, and the Company's total shareholder return was 41%, reflecting continued successful performance in an uncertain environment.

        While the Company uses defined performance measures and weightings to determine an overall funding level for the Company's bonus pool, individual annual cash incentive awards are not purely formulaic. In determining the amount of the actual annual incentive award to be paid, the Compensation Committee considers the CEO's recommendations for executive officers other than himself, the business performance underlying each of the performance measures, macroeconomic factors disproportionately impacting business performance, individual executive performance, market positioning, teamwork and related matters. The Compensation Committee retains discretion to pay an annual incentive award that is higher or lower than the performance level achieved based on these considerations if threshold performance is achieved on any performance measure. However, the overall pool cannot be exceeded.

        At the beginning of each year, the Compensation Committee approves an "annual cash incentive target opportunity" for each executive officer as a percentage of the executive officer's base salary.

        The target opportunity established for the named executive officers is intended to increase collaboration, teamwork and accountability across the enterprise, to recognize the skills and versatility of each executive officer and to reflect relative contributions to the success of the overall enterprise. The target percentages for annual cash incentive awards to our named executive officers and the actual 2013 annual cash incentive awards paid are set forth in the table below:

  2013 Annual Cash Incentive Awards  

Name

Target
Percentage
(% of Salary)



Target
Award Value
($)



Actual
Award Paid
($)



Paid Award
(% of Target)

Stephen J. Hemsley

  175%   2,275,000   1,800,000     79%

 

David S. Wichmann

  150%   1,350,000   1,750,000   130%

 

Gail K. Boudreaux

  150%   1,350,000   1,150,000     85%

 

Larry C. Renfro

  150%   1,350,000   3,000,000   222%

 

Marianne D. Short

  100%      750,000      750,000   100%

 

        In determining the 2013 annual cash incentive award amounts, the Compensation Committee took into account the Company's performance against the 2013 annual performance goals set forth in the table above and a qualitative assessment of individual performance and accomplishments. Individual factors considered are as follows:

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The Compensation Committee did not make specific assessments of, quantify or otherwise assign relative weightings to the factors considered in reaching its decisions with respect to any of the named executive officers. See the 2013 Summary Compensation Table and other related compensation tables below for details regarding 2013 total compensation.

Long-Term Incentive Compensation

        Long-term incentive compensation, consisting of the long-term cash incentive program and equity awards, represents the largest portion of executive officer compensation. This combination of long-term incentives provides a compelling performance-based compensation opportunity, aids in aligning and retaining the senior management team and accelerates the optimization of business unit capabilities across the enterprise.

        The long-term cash incentive award and performance share programs create a financial incentive for achieving or exceeding three-year financial goals for the enterprise. The earned long-term cash incentive award and performance shares for the 2011-2013 performance period were based on achieving the following performance results versus the pre-set goals:

2011-2013 Performance Measure

Weight

Threshold
Performance


Target
Performance


Maximum
Performance


Actual
2011-2013
Performance

Cumulative Earnings Per Share

  50%   $11.62     $12.38     $13.43     $15.51  

 

Return on Equity

  50%     13.4%     15.4%     17.4%     18.4%

 

        The performance measures and goals for the 2011-2013 performance period were established during the first quarter of 2011 based on the Company's Long-Term Plan. The first year of the Long-Term Plan was based on the Company's 2011 business plan. Subsequent years were based on assumptions and growth initiatives developed in conjunction with the Company's business units and reviewed by the Board of Directors. Some key assumptions and elements of the Long-Term Plan were:

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        To achieve maximum performance for both the long-term cash incentive plan and the performance share plan, the Company would have to achieve cumulative three-year earnings per share ("EPS") performance of $13.43 and an average return on equity ("ROE") of 17.4%. These maximum performance levels corresponded to a compound annual growth rate in EPS of 7.9% over the three-year period, with a decrease in EPS projected for 2011 due to the minimum medical loss ratio regulation and rate pressures noted above, followed by EPS growth of 14% and 17% in 2012 and 2013, respectively. The Company had a compound annual EPS growth rate of 10.3% over the three-year performance period. The resulting cumulative EPS of $15.51 was $2.08 above the maximum performance level.

        Factors that positively or negatively influenced our results subsequent to the approval of the Long-Term Plan in early 2011 included:

        Similar to the annual incentive plan, the Company's long-term incentive plan allows for adjustments to the Company's reported results in determining long-term incentive plan awards, namely adjustments that account for the impact of changes in accounting principles, extraordinary items and unusual or non-recurring gains or losses. No adjustments were made to the Company's financial results in determining long-term incentive award and performance share payout levels for the 2011-2013 performance period.

        At the beginning of each three-year performance period, the Compensation Committee approves a "long-term cash incentive target opportunity" for each executive officer as a percentage of the executive officer's average base salary over the performance period. For the 2011-2013 performance period, the target opportunity for each executive officer was 50% of base salary and the maximum cash incentive award that an executive officer could earn was set by the Compensation Committee to be equal to two times the applicable long-term cash incentive target opportunity.

        The Compensation Committee believed that it was important to provide the same relative target opportunity to all of the named executive officers to increase collaboration, teamwork and accountability across the enterprise and to recognize the skills and versatility of each executive officer. The target percentages for long-term cash

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incentive awards to our named executive officers and the actual long-term cash incentive awards paid for the 2011-2013 performance period are set forth in the table below:

  Long-Term Cash Incentive Award  

Name

Target Percentage
(% of 3-Year Average
Base Salary)



Threshold
Award Value
($)



Target
Award Value
($)



Maximum
Award Value
($)



Actual
Award Paid
($)



Paid
Award
(% of Target)

Stephen J. Hemsley

  50%   4,276   650,000   1,300,000   1,300,000   200%

 

David S. Wichmann

  50%   2,824   429,263      858,526      858,526   200%

 

Gail K. Boudreaux

  50%   2,824   429,263      858,526      858,526   200%

 

Larry C. Renfro

  50%   2,824   429,263      858,526      858,526   200%

 

Marianne D. Short

  50%      791   120,192      240,384      240,384   200%

 

        The primary factor considered by the Compensation Committee in the determination of the long-term cash incentive award amounts was achievement of 2011-2013 long-term incentive plan measures above the maximum goal. Ms. Short, who joined the Company on December 31, 2012, received a pro rata payout of the 2011-2013 long-term cash incentive award.

        The use of performance shares as a component of the overall equity awards granted was based upon the Compensation Committee's consideration of competitive market data; the desirability of utilizing a balanced system to facilitate prudent decision-making and mitigate risk; the desire to encourage superior performance and build ownership; and conversations with shareholders about the desirability of this type of equity award as a component of a pay-for-performance program. The actual shares that were earned for the 2011-2013 performance period are set forth in the table below as well as reflected in the 2013 Option Exercises and Stock Vested table:

  Long-Term Performance Shares  

Name

Threshold
Shares
(#)



Target
Shares
(#)



Maximum
Shares
(#)



Actual
Shares Paid
(#)



Paid
Award
(% of Target)

Stephen J. Hemsley

  547   83,195   166,390   166,390   200%

 

David S. Wichmann

  352   53,483   106,966   106,966   200%

 

Gail K. Boudreaux

  352   53,483   106,966   106,966   200%

 

Larry C. Renfro

  352   53,483   106,966   106,966   200%

 

        Awards of equity-based compensation to our executive officers serve the purposes described above under "Long-Term Incentive Compensation." The Compensation Committee determined that equity-based compensation for 2013 should include grants of RSUs, performance shares and non-qualified stock options to achieve balance and effectiveness in our equity-based compensation and to align the interests of our executive officers and our shareholders. RSU grants were selected because they are full value shares with time vesting and, as such, provide added retention value. Performance share grants were selected to ensure a strong pay-for-performance alignment of the Company's compensation program with shareholder interests. The Compensation Committee's decision to grant performance shares was informed, in part, by past discussions held between the Company and certain of its shareholders regarding the merits of performance shares in a pay-for-performance executive compensation program. Non-qualified stock options were selected because they have value only if the Company's stock price increases and, as such, provide incentives for sustained long-term stock appreciation.

        The Compensation Committee's equity award policy requires that all grants of equity be made at set times, and the Compensation Committee does not delegate authority to management to grant equity awards. We do not

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have a specific program, plan or practice to time equity compensation awards to named executive officers in coordination with our release of material information.

        The Company does not pay dividend equivalents on performance shares granted to employees. After considering general market practices, the Compensation Committee amended the RSU award agreements to permit the payment of dividend equivalents on RSUs awarded in 2011 and after. The dividend equivalents are subject to the same terms as the RSUs and will be forfeited if the underlying RSUs do not vest.

        The aggregate number of shares subject to equity awards made in 2013 for all employees was approximately 1% of the Company's shares outstanding at the end of 2013.

        In February 2013, the Compensation Committee granted the following target number of performance shares, RSUs and stock options to Messrs. Hemsley, Wichmann and Renfro and Mses. Boudreaux and Short:

Name

Target Number of
Performance Shares
(#)



Annual RSU
Award
(#)



Annual Stock Option
Award
(#)

Stephen J. Hemsley

  65,354   32,677   99,312

 

David S. Wichmann

  39,213   19,607   59,587

 

Gail K. Boudreaux

  39,213   19,607   59,587

 

Larry C. Renfro

  39,213   19,607   59,587

 

Marianne D. Short

  17,428   34,856   52,967

 

The grant date fair values and terms of these equity awards are discussed in the 2013 Grants of Plan-Based Awards table.

Other Compensation

        In addition to generally available benefits, our executive officers are eligible to receive supplemental long-term disability coverage equal to 60% of base salary (up to $420,000) and all of our named executive officers, other than Mr. Hemsley, receive supplemental group term life insurance coverage of $2 million. Executive officers are also eligible to participate in our non-qualified Executive Savings Plan. See the 2013 Non-Qualified Deferred Compensation table for additional information regarding contributions, earnings and distributions for each named executive officer under the Executive Savings Plan. Our Executive Savings Plan does not provide for guaranteed or above-market interest.

        As part of our continued focus on the community, the Company implemented an Executive Board Service Matching Program. This program is available to approximately 200 senior leaders of the Company, including the named executive officers. This program provides for Company matching contributions on a 1:1 or 2:1 basis to certain charitable and nonprofit organizations up to a maximum amount of $10,000 per organization and a maximum annual Company match amount of $40,000 per senior leader. In order to receive the matching contribution, the employee must serve on the board of the charitable or nonprofit organization and make an equivalent personal financial contribution.

        We do not believe that providing generous executive perquisites is either necessary to attract and retain executive talent or consistent with our pay-for-performance philosophy. Therefore, other than the benefits described above, we do not provide perquisites such as excise tax gross-ups, company automobiles, security services, private jet services, financial planning services, club memberships, apartments or vacation homes to our executive officers. Our corporate aircraft use policy prohibits personal use of corporate aircraft by any executive officer. Because there is essentially no incremental cost to the Company, however, the policy does permit an executive officer's family member to accompany the executive officer on a business flight on Company aircraft provided a seat is available.

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        The Company has a policy of entering into employment agreements with each of our named executive officers. These employment agreements are described in greater detail in "Executive Employment Agreements."

        None of the employment agreements provides for ongoing fixed minimum annual equity awards or fixed cash incentive awards. The Company's policies related to post-employment payments and benefits do not provide for enhanced cash severance payments upon termination in connection with a change in control or for excise tax gross-up payments payable in connection with a change in control. The Company also does not have any ongoing supplemental executive retirement plan obligations for its named executive officers.

        The employment agreements with our executive officers provide for certain severance payments in connection with their termination of employment under various circumstances, typically termination by the Company without "cause" or by the executive officer for "good reason." See "Executive Employment Agreements" and "Potential Payments Upon Termination or Change in Control" for additional information regarding potential severance payments that may be made to the named executive officers. We have provided these post-employment payments and benefits and severance payment triggers because they have enabled us to obtain specific post-employment non-competition, non-solicitation and non-disclosure agreements with our executive officers that we believe are of value to the Company and our shareholders.

        Our equity award agreements include a "double-trigger" provision, which provides for accelerated vesting only if there is a change in control and the executive officer's employment is terminated without "cause" or the executive officer terminates his or her employment for "good reason" within two years of the change in control. For performance shares, the target number of performance shares will immediately vest upon a change in control of the Company. The Compensation Committee determined that "double-trigger" acceleration of vesting for time-based equity better preserved the retentive value of the equity award and was more consistent with the interests of our shareholders. Our equity award agreements also generally provide for continued vesting and exercisability during any period in which an executive officer receives severance and for continued exercisability of vested awards for a limited period of time after termination of employment for other reasons. In addition, stock option awards granted in 2009 and going forward provide for continued vesting and exercisability for up to five years after retirement, subject to certain conditions. The Compensation Committee elected to provide such continued vesting and exercisability because such provisions are a common market practice and our other retirement benefits are limited to the Company's 401(k) plan and non-qualified deferred compensation plan.

Other Compensation Practices

        The Compensation Committee believes that executive stock ownership aligns management's interests with those of shareholders and fosters a long-term outlook, while also assisting in the mitigation of compensation risk. Under our stock ownership guidelines, each executive officer must beneficially own at least the following amounts of the Company's common stock within five years of the executive officer's election or appointment as an executive officer:

        Stock options and stock appreciation rights ("SARs") do not count towards satisfying the ownership requirements under the guidelines, regardless of their vesting status, and performance shares do not count towards satisfying the ownership requirements until they are vested. Time-based RSUs and restricted stock awards are counted toward the satisfaction of the ownership requirements. The Compensation Committee periodically reviews compliance with the ownership requirements. As of April 4, 2014, all of our named executive officers were in compliance with the ownership requirements, including Mr. Hemsley, who directly owned shares with a value equal to 174 times his base salary.

        Additionally, in 2009, the Board established a stock retention policy for executive officers that are subject to Section 16 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), which includes our named

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executive officers. For equity awards received after October 23, 2009, Section 16 officers are required to retain one-third of the net shares acquired upon the vesting or exercise of any equity awards for at least one year.

        In general, SEC rules prohibit uncovered short sales of our common stock by our executive officers, including the named executive officers. Accordingly, our insider trading policy prohibits short sales of our common stock by all employees and directors. Our insider trading policy prohibits hedging transactions by all directors and employees and requires advance approval of the Compensation Committee of any pledging of common stock by directors, executive officers and other members of management. Pledges that existed prior to the policy's adoption in November 2012 have been grandfathered. In 2013, no executive officer or director sought or received advance approval from the Compensation Committee regarding pledging transactions.

        If the Board of Directors determines that an executive officer has engaged in fraud or misconduct, the Board of Directors may take a range of actions to remedy the misconduct, prevent its recurrence and impose such discipline as would be appropriate, including, without limit: (i) terminating employment and (ii) initiating legal action against the executive officer. In addition, with respect to our senior executives, including our named executive officers, if the fraud or misconduct causes, in whole or in part, a material restatement of the Company's financial statements, action may include (a) seeking reimbursement of the entire amount of cash incentive compensation awarded to the executive officer, if the executive officer would have received a lower (or no) cash incentive award if calculated based on the restated financial results and (b) canceling all outstanding vested and unvested equity awards subject to the clawback policy and requiring the executive officer to return to the Company all gains from equity awards realized during the 12-month period following the filing of the incorrect financial statements.

        The Compensation Committee plans to review our clawback policy and revise it as necessary to comply with any forthcoming SEC rules implementing the Dodd-Frank Wall Street Reform and Consumer Protection Act.

        Our compensation programs are balanced, focused on long-term pay-for-performance and allow for discretion. The Compensation Committee believes that the design of the compensation program for our executive officers does not encourage excessive or unnecessary risk-taking, as illustrated by the following list of features:

In addition, our Compensation Committee retains discretion to adjust compensation for quality of performance, adherence to Company values and other factors.

        Internal Revenue Code Section 162(m) imposes a $1 million corporate deduction limit for compensation to the Company's CEO and its three other highest-paid executive officers (other than the CFO) employed at the end of the year, unless the compensation is "performance-based," as defined in Section 162(m), and provided under a plan that has been approved by the shareholders. As part of the federal health care reform legislation enacted in 2010, Section 162(m) was revised as it pertains to compensation paid by health insurers, including the Company. Starting in 2013, an annual tax deduction limit of $500,000 per person applies to compensation that we pay to any

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of our employees and certain service providers, regardless of whether such compensation is deemed performance-based under Section 162(m) or is provided pursuant to a shareholder-approved plan. Any outstanding stock options and SARs that were fully vested prior to 2010 are not subject to the tax deduction limitation.

Peer Group and Managed Care Companies

  Peer Group  

 Managed Care Companies  
3M Company   Google Inc.   Aetna Inc.
Abbott Laboratories   Hewlett-Packard Company   CIGNA Corp.
Amazon.com Inc.   Home Depot, Inc. (The)   Coventry Health Care Inc.
American Express Co.   Intel Corporation   Humana Inc.
American International Group, Inc.   International Business Machines Corp.   WellPoint Inc.
Ameriprise Financial Inc.   Johnson & Johnson    
AmerisourceBergen Corporation   JPMorgan Chase & Co.    
Amgen Inc.   Kraft Foods Inc.    
Apple Inc.   Kroger Co. (The)    
Archer Daniels Midland Company   Lowe's Companies Inc.    
AT&T, Inc.   MasterCard Incorporated    
Bank of America Corp.   McDonald's Corp.    
Berkshire Hathaway Inc.   McKesson Corporation    
Best Buy Co. Inc.   Medtronic, Inc.    
Bristol-Myers Squibb Co.   Merck & Co. Inc.    
Bunge Limited   MetLife, Inc.    
Cardinal Health Inc.   Microsoft Corporation    
Cargill, Incorporated   Oracle Corp.    
Cisco Systems Inc.   PepsiCo, Inc.    
Citigroup, Inc.   Pfizer Inc.    
Coca-Cola Company (The)   Procter & Gamble Co.    
Colgate-Palmolive Co.   Prudential Financial Inc.    
Costco Wholesale Corporation   QUALCOMM Incorporated    
CVS Caremark Corporation   Safeway Inc.    
Dell Inc.   Sears Holdings Corporation    
Dow Chemical Company (The)   Sysco Corp.    
eBay Inc.   Target Corp.    
E.l. duPont de Nemours & Company   Travelers Companies, Inc. (The)    
Eli Lily and Co.   U.S. Bancorp    
EMC Corporation   United Parcel Service, Inc.    
Express Scripts Holding Company   Verizon Communications Inc.    
FedEx Corporation   Visa, Inc.    
General Electric Company   Walgreen Co.    
General Mills, Inc.   WellPoint Inc.    
Goldman Sachs Group, Inc. (The)   Wells Fargo & Company    


Compensation Committee Report

        The Compensation Committee has reviewed and discussed the above Compensation Discussion and Analysis with management. Based on its review and discussions, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in the proxy statement and incorporated by reference into the Company's Annual Report on Form 10-K for the year ended December 31, 2013. This report was provided by the following independent directors who comprise the Compensation Committee:

Rodger A. Lawson (Chair)
William C. Ballard, Jr.
Douglas W. Leatherdale

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2013 Summary Compensation Table*

        The following table provides certain summary information for the years ended December 31, 2013, 2012 and 2011 relating to compensation paid or granted to, or accrued by us on behalf of, our named executive officers.

Name and Principal Position

Year

Salary
($)(1)


Bonus
($)


Stock
Awards
($)(2)



Option/SAR
Awards
($)(3)



Non-Equity
Incentive Plan
Compensation
($)(4)




Change in
Pension Value
and
Non-Qualified
Deferred
Compensation
Earnings
($)(5)








All Other
Compensation
($)(6)



Total
($)
Stephen J. Hemsley   2013   1,300,000             —     5,625,019   1,875,011   3,100,000   (7)   173,254   12,073,284

President and CEO

  2012   1,300,000             —     7,000,012                 —     5,300,000   —     287,443   13,887,455
    2011   1,300,000             —     7,000,028                 —     4,940,000   —     154,804   13,394,832
 
David S. Wichmann   2013      892,885             —     3,375,092   1,125,003   2,608,526   —     114,061     8,115,567

Executive Vice President

  2012      850,000             —     4,500,074                 —     3,044,230   —     106,549     8,500,853

and CFO

  2011      832,692             —     7,000,070                 —     2,794,200   —       84,212   10,711,174
 
Gail K. Boudreaux   2013      892,885             —     3,375,092   1,125,003   2,008,526   —     111,282     7,512,788

Executive Vice President

  2012      850,000             —     4,500,074                 —     3,044,230   —     103,770     8,498,074

and CEO, UnitedHealthcare

  2011      832,692   205,000     7,000,070                 —     2,794,200   —       93,353   10,925,315
 
Larry C. Renfro   2013      892,885             —     3,375,092   1,125,003   3,858,526   —       49,928     9,301,434

Executive Vice President

  2012      850,000             —     4,500,074        37,494   3,044,230   —     185,006     8,616,804

and CEO, Optum

  2011      832,692             —     7,000,070                 —     2,734,600   —       35,825   10,603,187
 
Marianne D. Short   2013      721,154   250,000(8)   3,000,056   1,000,017      990,384   —       65,744     6,027,355

Executive Vice President and
Chief Legal Officer

                                   
 
*
Please see "Compensation Discussion and Analysis" above for a description of our executive compensation program necessary for an understanding of the information disclosed in this table. Please see "Executive Employment Agreements" below for a description of the material terms of each named executive officer's employment agreement.

(1)
Amounts reported reflect the base salary earned by named executive officers in the years ended December 31, 2013, 2012 and 2011. Amounts reported for 2013 include the following salary amounts deferred by the named executive officers under our Executive Savings Plan:

Name
  Amount
Deferred
 

Stephen J. Hemsley

  $ 78,000  

David S. Wichmann

  $ 53,573  

Gail K. Boudreaux

  $ 62,502  

Larry C. Renfro

  $ 53,573  

Marianne D. Short

  $ 39,808  
(2)
The amounts reported in this column reflect the aggregate grant date fair value of the RSUs and performance shares (at target) granted in 2013, 2012 and 2011 and computed in accordance with FASB ASC Topic 718, based on the closing stock price on the grant date. The grant date fair value of RSUs granted in 2013 and the grant date fair value of performance shares granted in 2013 if target performance and maximum performance is achieved are as follows:

 
   
  Performance Shares  
 
  Restricted
Stock Units
 
Name
  Target   Maximum  

Stephen J. Hemsley

  $ 1,875,006   $ 3,750,013   $ 7,500,026  

David S. Wichmann

  $ 1,125,050   $ 2,250,042   $ 4,500,084  

Gail K. Boudreaux

  $ 1,125,050   $ 2,250,042   $ 4,500,084  

Larry C. Renfro

  $ 1,125,050   $ 2,250,042   $ 4,500,084  

Marianne D. Short

  $ 2,000,037   $ 1,000,019   $ 2,000,038  

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(3)
The actual value to be realized by a named executive officer depends upon the performance of the Company's stock and the length of time the award is held. No value will be realized with respect to any award if the Company's stock price does not increase following the award's grant date or if the executive officer does not satisfy the vesting criteria.

The amounts reported in this column for 2013 reflect the aggregate grant date fair value of stock options granted in 2013 computed in accordance with FASB ASC Topic 718. The amount shown for 2012 for Mr. Renfro reflects the incremental increase in fair value with respect to SARs granted in 2009 and 2010, the award agreements for which were amended in 2012 in order to revise the terms pursuant to which Mr. Renfro will be deemed retirement eligible. The grant prices for Mr. Renfro's 2009 and 2010 SARs were not modified in connection with such amendments. For a description of the assumptions used in computing the aggregate grant date fair value, see Note 11 to the Consolidated Financial Statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2013. These same assumptions have been used in computing aggregate grant date fair value since fiscal year 2009.

(4)
Amounts reported include both annual and long-term cash incentive awards to our named executive officers under our 2008 Executive Incentive Plan. The 2013 annual incentive awards, including amounts deferred by the named executive officers, were the following:

Name
  Total Amount of
Annual Cash
Incentive Award
  Amount of Annual
Cash Incentive
Award Deferred

Stephen J. Hemsley

  $1,800,000   $108,000

David S. Wichmann

  $1,750,000   $105,000

Gail K. Boudreaux

  $1,150,000   $115,000

Larry C. Renfro

  $3,000,000             —

Marianne D. Short

     $750,000   $206,507

Name
  Period   Total Amount of
Long-Term Cash
Incentive Award

Stephen J. Hemsley

  2011-2013   $1,300,000

David S. Wichmann

  2011-2013      $858,526

Gail K. Boudreaux

  2011-2013      $858,526

Larry C. Renfro

  2011-2013      $858,526

Marianne D. Short

  2011-2013      $240,384
(5)
Named executive officers participate in our Executive Savings Plan, which is a non-qualified deferred compensation plan. The Executive Savings Plan does not credit above-market earnings or preferential earnings to the amounts deferred, and accordingly, no non-qualified deferred compensation earnings have been reported. Under the Executive Savings Plan, there are no measuring investments tied to Company stock performance. The measuring investments are a collection of unaffiliated mutual funds identified by the Company.

(6)
All other compensation includes the following:

Name
  Year   Company Matching Contributions Under 401(k) Savings Plan   Company Matching Contributions Under Executive Savings Plan   Company Matching Contributions Under Executive Board Service Matching Program(a)   Insurance Premiums(b)

Stephen J. Hemsley

  2013   $11,475   $159,000           —           —

David S. Wichmann

  2013   $11,475   $  94,287           —           —

Gail K. Boudreaux

  2013   $11,475   $  94,287           —           —

Larry C. Renfro

  2013   $11,475   $  26,787           —   $11,666

Marianne D. Short

  2013             —     $  19,904   $30,000   $15,840

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(7)
The amount of Mr. Hemsley's supplemental retirement benefit was frozen in 2006 based on his then current age and average base salary and converted into a lump sum of $10,703,229. As such, there was no increase in the benefit payable to Mr. Hemsley under his supplemental retirement benefit in fiscal year 2013.

(8)
Reflects a sign-on bonus paid to Ms. Short in connection with her joining the Company as an executive officer.

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2013 Grants of Plan-Based Awards*

        The following table presents information regarding each grant of an award under our compensation plans made during 2013 to our named executive officers for fiscal year 2013.

        Estimated Future Payouts
Under Non-Equity Incentive Plan
Awards
 




  Estimated Future Payouts
Under Equity Incentive Plan
Awards
 




  All Other
Stock
Awards:
Number
of Shares
of Stock






All Other
Option/
SAR
Awards:
Number of
Securities
Underlying
Options/








Exercise
or Grant
Price of
Option/
SAR





Grant Date
Fair Value
of Stock
or Option/
SAR

Name


 

Grant
Date


Threshold
($)


Target
($)


Maximum
($)


Threshold
(#)


Target
(#)


Maximum
(#)


or Units
(#)


SARs
(#)


Awards
($/Sh)


Awards
($)(1)

Stephen J. Hemsley

                                             

Annual Cash Incentive Award(2)

      2,047,500   2,275,000   4,550,000      —           —             —           —           —         —                 —  

2013-15 Long-Term Incentive Award(3)

              3,250       650,000   1,300,000      —           —             —           —           —         —                 —  

Stock Option Award(4)

    2/6/2013               —               —               —      —           —             —           —    99,312    57.38   1,875,011

RSU Award(5)

    2/6/2013               —               —               —      —           —             —    32,677           —         —   1,875,006

Performance Share Award(6)

    2/6/2013               —               —               —    327    65,354    130,708           —           —         —   3,750,013
 

David S. Wichmann

                                             

Annual Cash Incentive Award(2)

      1,215,000   1,350,000   2,700,000      —           —             —           —           —         —                 —  

2013-15 Long-Term Incentive Award(3)

              2,244       448,814      897,628      —           —             —           —           —         —                 —  

Stock Option Award(4)

    2/6/2013               —               —               —      —           —             —           —    59,587    57.38   1,125,003

RSU Award(5)

    2/6/2013               —               —               —      —           —             —    19,607           —         —   1,125,050

Performance Share Award(6)

    2/6/2013               —               —               —    196    39,213     78,426           —           —         —   2,250,042
 

Gail K. Boudreaux

                                             

Annual Cash Incentive Award(2)

      1,215,000   1,350,000   2,700,000      —           —             —           —           —         —                 —  

2013-15 Long-Term Incentive Award(3)

              2,244       448,814      897,628      —           —             —           —           —         —                 —  

Stock Option Award(4)

    2/6/2013               —               —               —      —           —             —           —    59,587    57.38   1,125,003

RSU Award(5)

    2/6/2013               —               —               —      —           —             —    19,607           —         —   1,125,050

Performance Share Award(6)

    2/6/2013               —               —               —    196    39,213      78,426           —           —         —   2,250,042
 

Larry C. Renfro

                                             

Annual Cash Incentive Award(2)

      1,215,000   1,350,000   2,700,000      —           —             —           —           —         —                 —  

2013-15 Long-Term Incentive Award(3)

              2,244       448,814      897,628      —           —             —           —           —         —                 —  

Stock Option Award(4)

    2/6/2013               —               —               —      —           —             —           —    59,587    57.38   1,125,003

RSU Award(5)

    2/6/2013               —               —               —      —           —             —    19,607           —         —   1,125,050

Performance Share Award(6)

    2/6/2013               —               —               —    196    39,213      78,426           —           —         —   2,250,042
 

Marianne D. Short

                                             

Annual Cash Incentive Award(2)

         675,000      750,000   1,500,000      —           —             —           —           —       —                 —  

2013-15 Long-Term Incentive Award(3)

              1,851       370,192      740,384      —           —             —           —           —         —                 —  

2012-14 Long-Term Incentive Award(3)

              1,318       245,192      490,384      —           —             —           —           —         —                 —  

2011-13 Long-Term Incentive Award(3)

                 791       120,192      240,384      —           —             —           —           —         —                 —  

Stock Option Award(4)

    2/6/2013               —               —               —      —           —             —           —    52,967    57.38   1,000,017

RSU Award(5)

    2/6/2013               —               —               —      —           —             —    34,856           —         —   2,000,037

Performance Share Award(6)

    2/6/2013               —               —               —      87    17,428      34,856           —           —         —   1,000,019
 
*
Please see "Compensation Discussion and Analysis" above for a description of our executive compensation program necessary for an understanding of the information disclosed in this table.

(1)
The actual value to be realized by a named executive officer depends upon the appreciation in value of the Company's stock and the length of time the award is held. No value will be realized with respect to any stock option/SAR award if the Company's stock price does not increase following the grant date. For a description of the assumptions used in computing grant date fair value for stock option/SAR awards pursuant to FASB ASC Topic 718, see Note 11 to the Consolidated Financial Statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2013. The grant date fair value of each RSU award and targeted grant date value of each performance share award was computed in accordance with FASB ASC Topic 718 based on the closing stock price on the grant date.

(2)
Amounts represent estimated payouts of annual cash incentive awards granted under our Executive Incentive Plan in 2013. The Executive Incentive Plan permits a maximum annual bonus pool for executive officers equal to 2% of the Company's net income (as defined in the plan) and no executive officer may receive more than 25% of such annual bonus pool. The Compensation Committee has generally limited annual cash incentive payouts to not more than two times the target amount, and the maximum amounts shown for each named executive officer equal two times each executive officer's target amount. For Mr. Renfro, the Compensation Committee determined to pay him an annual cash incentive award for 2013 of $3,000,000 (equal to 222% of his target amount) as discussed in the "Compensation Discussion and Analysis" section. In order for any amount to be paid, the Company must achieve approved performance measures of (i) revenue, (ii) operating income, (iii) cash flow, (iv) consumer, customer and physician satisfaction, (v) employee engagement and (vi) employee teamwork. The estimated threshold award represents the amount that may be paid if threshold performance is achieved on each of the performance measures. Once threshold performance is

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(3)
For Messrs. Hemsley, Wichmann and Renfro and Ms. Boudreaux, the amounts represent estimated future payouts of long-term cash incentive awards granted under our Executive Incentive Plan in 2013 for the 2013-2015 performance period to be paid in 2016. For Ms. Short, the amounts represent estimated future payouts of long-term cash incentive awards granted under our Executive Incentive Plan in 2013 for the 2013-2015 performance period to be paid in 2016, as well as pro-rated incentives for the 2011-2013 and 2012-2014 performance periods for which she is eligible. The performance measures used to determine payouts under the Executive Incentive Plan for the 2011-2013 and 2012-2014 performance periods are the same as the performance measures described below for the 2013-2015 performance period. A payout of the maximum incentive for the 2011-2013 performance period was made to Ms. Short in February 2014 and that amount is reported on the 2013 Summary Compensation Table. The long-term cash incentive award for the 2012-2014 performance period would be paid to Ms. Short in 2015. The Executive Incentive Plan permits a maximum long-term bonus pool for executive officers equal to 2% of the Company's average net income (as defined in the plan) during the performance period and no executive officer may receive more than 25% of such long-term bonus pool. The Compensation Committee has limited the long-term cash incentive payout maximum amount to not more than two times each named executive officer's target amount, which is reflected in the maximum payout column. In 2013, upon recommendation by management, the Compensation Committee approved a cumulative EPS measure and an average ROE measure for the 2013-2015 incentive period, either one of which must be achieved before the threshold amount shown above becomes earned and payable. Each measure is weighted equally. The Compensation Committee will determine whether the goals have been achieved at the end of the performance period. The estimated threshold award represents the amount that may be paid if threshold performance on one of the performance measures is exceeded. Once threshold performance is achieved, the Compensation Committee has the discretion to pay an award ranging from 0% up to a maximum of 200% of target. The estimated threshold, target and maximum awards listed in the table were computed based on participants' estimated average salary over the 2013-2015 performance period. This three year average salary was determined using their actual 2013 salary earned with their current salary used to estimate their 2014 and 2015 salaries. In the case of Ms. Short, her average salary over the 2011-2013 performance period and the 2012-2014 performance period was calculated consistently with this methodology.

(4)
Amounts represent the number of stock options granted under our 2011 Stock Incentive Plan. These stock options proportionately vest on February 6, 2014, February 6, 2015, February 6, 2016 and February 6, 2017. Unless the holder is retirement eligible, these stock options are subject to earlier termination upon certain events related to termination of employment. Unvested stock options will vest in full upon death or disability. Unvested stock options will also vest in full if, within two years of a change in control, an executive terminates employment for Good Reason or is terminated without Cause (i.e., "double-trigger" vesting), as these terms are defined in each executive's equity-award agreement. Stock options may also continue to vest following retirement, if the executive officer is retirement eligible, or over any severance period following termination of employment.

(5)
Amounts represent the number of RSUs granted under our 2011 Stock Incentive Plan. These RSUs proportionately vest on February 6, 2014, February 6, 2015, February 6, 2016 and February 6, 2017, other than for Mr. Hemsley as described in footnote 4 to the Outstanding Equity Awards at 2013 Fiscal Year-End table. The RSUs are eligible to receive dividend equivalents, which are subject to the same terms as the RSUs and will be forfeited if the underlying RSUs do not vest. Unless the holder is retirement eligible, these RSUs are subject to earlier termination upon certain events related to termination of employment. Unvested RSUs will vest in full upon death or disability. Unvested RSUs will also vest in full if, within two years of a change in control, an executive terminates employment for Good Reason or is terminated without Cause (i.e., "double-trigger" vesting), as these terms are defined in each executive's equity-award agreement. RSUs may also continue to vest following retirement, if the executive officer is retirement eligible, or over any severance period following termination of employment.

(6)
Amounts represent the estimated future number of performance shares that may be earned under our 2011 Stock Incentive Plan at each of the threshold, target and maximum levels. The performance share award will be paid out in shares of Company common stock. The number of performance shares that the executive officer will receive will be determined at the conclusion of the 2013-2015 performance period and will be dependent upon the Company's achievement of a cumulative EPS measure and an average ROE measure approved by the Compensation Committee. The Compensation Committee has the discretion to reduce the number of performance shares an executive officer is entitled to receive. The estimated threshold award represents the number of performance shares that may be awarded if threshold performance is achieved on one of the performance measures. No dividend equivalents are paid on performance shares. The full target number of performance shares will immediately vest upon a change in control of the Company, as this term is defined in each executive's equity-award agreement. Upon retirement, if the executive officer is retirement eligible, the executive officer will vest in the full number of performance shares that are earned at the end of the performance period as if the executive officer had been continuously employed throughout the entire performance period, provided the executive officer had served for at least one year of the performance period. Upon death, disability or termination of employment for Good Reason or other than for Cause (as these terms are defined in the performance share award agreement), the executive officer will receive at the end of the applicable performance period, a pro-rata number of performance shares that are earned based on the number of full months employed plus, if applicable, the number of months for any severance period.

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Outstanding Equity Awards at 2013 Fiscal Year-End

        The following table presents information regarding outstanding equity awards held at the end of fiscal year 2013 by our named executive officers.

  Option/SAR Awards  

  Stock Awards  

Name


Date of
Option/
SAR
Grant




Number of
Securities
Underlying
Unexercised
Options/
SARs (#)
Exercisable







Number of
Securities
Underlying
Unexercised
Options/
SARs (#)
Unexercisable







Option/
SAR
Exercise/
Grant
Price ($)





Option/
SAR
Expiration
Date(1)




Stock Award
Grant Date


Number of
Shares or
Units of
Stock That
Have Not
Vested (#)






Market
Value of
Shares or
Units of
Stock
That Have
Not Vested
($)(2)








Equity
Incentive
Plan Awards:
Number of
Unearned
Shares or
Units That
Have Not
Vested (#)









Equity
Incentive
Plan Awards:
Market Value
of Unearned
Shares or
Units That
Have Not
Vested ($)(2)

Stephen J. Hemsley

      2/6/2013             —   99,312(3)   57.3800       2/6/2023     2/6/2013   31,874(4)   2,400,112         —               —

      2/9/2010     85,527   28,509(3)   33.0000       2/9/2020     2/6/2013           —                    —     65,354(5)   4,921,156

    2/23/2009   169,683           —      29.7400     2/23/2019     2/7/2012   46,214(6)   3,479,914         —               —

    1/31/2006   200,000           —      59.4200     1/31/2016     2/7/2012           —                    —     67,269(5)   5,065,356

      5/2/2005     62,500           —      57.4183       5/2/2015     2/9/2011   28,941(7)   2,179,257         —               —

      5/2/2005   187,500           —      48.3550       5/2/2015     2/9/2010   11,363(8)      855,634         —               —

      2/3/2005   450,000           —      45.2800       2/3/2015                    

      2/3/2005   150,000           —      55.3583       2/3/2015                    
 

David S. Wichmann

      2/6/2013             —     59,587(3)   57.3800       2/6/2023     2/6/2013   19,922(4)   1,500,127         —               —

      2/9/2010     57,018   19,006(3)   33.0000       2/9/2020     2/6/2013           —                    —     39,213(5)   2,952,739

    2/23/2009   113,122           —      29.7400     2/23/2019     2/7/2012   29,710(6)   2,237,163         —               —

      6/5/2008   203,642           —      33.9400       6/5/2018     2/7/2012           —                    —     43,245(5)   3,256,349

    5/28/2007     25,000           —      54.4100     5/28/2017     2/9/2011   18,605(7)   1,400,957         —               —

    5/28/2007   150,000           —      54.4100     5/28/2017     2/9/2011   62,016(9)   4,669,805         —               —

      5/2/2006   150,000           —      48.5800       5/2/2016     2/9/2010     7,576(8)      570,473         —               —

  10/31/2005     65,000           —      59.0000   10/31/2015                    

      5/2/2005     25,000           —      49.7886       5/2/2015                    

      5/2/2005     75,000           —      48.3550       5/2/2015                    
 

Gail K. Boudreaux

      2/6/2013             —     59,587(3)   57.3800       2/6/2023     2/6/2013   19,922(4)   1,500,127         —               —

      2/9/2010             —     19,006(3)   33.0000       2/9/2020     2/6/2013           —                    —     39,213(5)   2,952,739

                        2/7/2012   29,710(6)   2,237,163         —               —

                        2/7/2012           —                    —     43,245(5)   3,256,349

                        2/9/2011   18,605(7)   1,400,957         —               —

                        2/9/2011   62,016(9)   4,669,805         —               —

                        2/9/2010     7,576(8)      570,473         —               —
 

Larry C. Renfro

      2/6/2013             —     59,587(3)   57.3800       2/6/2023     2/6/2013   19,922(4)   1,500,127         —               —

      2/9/2010     57,018   19,006(3)   33.0000       2/9/2020     2/6/2013           —                    —     39,213(5)   2,952,739

      2/3/2009     92,800           —    29.7400       2/3/2019     2/7/2012   29,710(6)   2,237,163         —               —

                        2/7/2012           —                    —     43,245(5)   3,256,349

                        2/9/2011   18,605(7)   1,400,957         —               —

                        2/9/2011   62,016(9)   4,669,805         —               —

                        2/9/2010     7,576(8)      570,473         —               —
 

Marianne D. Short

      2/6/2013             —     52,967(3)   57.3800       2/6/2023     2/6/2013   35,416(4)   2,666,825         —               —

                        2/6/2013           —                    —     17,428(5)   1,312,328
 
(1)
The expiration date shown is the latest date that stock options/SARs may be exercised. Stock options/SARs may terminate earlier in certain circumstances, such as in connection with the named executive officer's termination of employment.

(2)
Based on the per share closing market price of our common stock on December 31, 2013 of $75.30.

(3)
Vest 25% annually over a four-year period beginning on the first anniversary of the grant date.

(4)
Vest 25% annually over a four-year period beginning on the first anniversary of the grant date, other than for retirement eligible executive officers. A portion of a retirement eligible executive officer's award that otherwise would have vested on the next specified vesting date is cancelled to pay applicable FICA taxes owed by the executive officer. The cancellation occurs in the year of grant if the executive officer is retirement eligible during that year or in the first year the executive officer becomes retirement eligible. The remainder of the award vests proportionally over the remaining vesting period. Mr. Hemsley is retirement eligible. These RSUs are eligible to and did receive dividend equivalents converted into additional shares; accordingly, the number of shares shown has been rounded to the nearest whole share. For more information on RSUs cancelled in 2013, please see the 2013 Option Exercises and Stock Vested table.

(5)
Vest 100% at the end of the three-year performance period. The number of performance shares that the executive officer will receive is dependent upon the achievement of a cumulative EPS measure and an average ROE measure approved by

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(6)
Vest 331/3% on December 28, 2012, February 7, 2014 and February 7, 2015, other than for retirement eligible executive officers. A portion of a retirement eligible executive officer's award that otherwise would have vested on the next specified vesting date is cancelled to pay applicable FICA taxes owed by the executive officer. The cancellation occurs in the year of grant if the executive officer is retirement eligible during that year or in the first year the executive officer becomes retirement eligible. The remainder of the award vests proportionally over the remaining vesting period. Mr. Hemsley was retirement eligible on the grant date. These RSUs are eligible to and did receive dividend equivalents converted into additional shares; accordingly, the number of shares shown has been rounded to the nearest whole share.

(7)
Vest 331/3% on February 9, 2012, December 28, 2012 and February 9, 2014, other than for retirement eligible executive officers. A portion of a retirement eligible executive officer's award that otherwise would have vested on the next specified vesting date is cancelled to pay applicable FICA taxes owed by the executive officer. The cancellation occurs in the year of grant if the executive officer is retirement eligible during that year or in the first year the executive officer becomes retirement eligible. The remainder of the award vests proportionally over the remaining vesting period. Mr. Hemsley was retirement eligible on the grant date. These RSUs are eligible to and did receive dividend equivalents converted into additional shares; accordingly, the number of shares shown has been rounded to the nearest whole share.

(8)
Vest 25% annually over a four-year period beginning on the first anniversary of the grant date, other than for retirement eligible executive officers. A portion of a retirement eligible executive officer's award that otherwise would have vested on the next specified vesting date is cancelled to pay applicable FICA taxes owed by the executive officer. The cancellation occurs in the year of grant if the executive officer is retirement eligible during that year or in the first year the executive officer becomes retirement eligible. The remainder of the award vests proportionally over the remaining vesting period. Mr. Hemsley was retirement eligible on the grant date.

(9)
Vest 100% on the fourth anniversary of the grant date. These RSUs are eligible to and did receive dividend equivalents converted into additional shares; accordingly, the number of shares shown has been rounded to the nearest whole share.


2013 Option Exercises and Stock Vested

        The following table presents information regarding the exercise of stock options during fiscal year 2013 by our named executive officers and vesting of restricted stock awards held by our named executive officers for fiscal year 2013.

Option Awards  

  Stock Awards  

Name


Number of Shares
Acquired on Exercise
(#)



Value
Realized on Exercise
($)(1)



Number of Shares
Acquired on Vesting
(#)



Value
Realized on Vesting
($)

Stephen J. Hemsley

  600,000   9,480,000(2)   193,505   14,085,816(3)

 

David S. Wichmann

         —           —   124,157     9,028,207(4)

 

Gail K. Boudreaux

    66,292   1,515,482(5)   124,157     9,028,207(6)

 

Larry C. Renfro

         —           —   141,192     9,978,249(7)

 

Marianne D. Short

         —           —           —             —

 
(1)
Computed by determining the market value per share of the shares acquired based on the difference between: (a) the per share market value of our common stock at exercise, defined as the closing price on the date of exercise, or the weighted average selling price if same-day sales occurred, and (b) the exercise price of the stock options.

(2)
Mr. Hemsley's value was computed as described in footnote 1 above and was based on the following:

Date of Award
  Exercise Date   Number of
Options Exercised
  Stock Splits Since
Date of Award
  Market Price
at Exercise
  Exercise Price
2/11/2004   12/2/2013   600,000   2:1   $74.16   $58.36

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(3)
Reflects the vesting of a portion of the RSUs granted to Mr. Hemsley. The value realized on vesting was computed based on the following:

Date of Award
  Vesting Date   Number of Shares
Acquired on Vesting
  Market Price
at Vesting
  Value Realized
on Vesting
2/23/2009   2/3/2013   14,423   $55.77   $804,371
  2/9/2010   2/9/2013   11,364   $57.74   $656,157

Date of Award
  Performance Period
Completion Date
  Number of Shares
Acquired on Vesting
  Market Price at end of
Performance Period
  Value Realized
on Vesting
2/9/2011   12/31/2013   166,390   $75.30   $12,529,167
(4)
Reflects the vesting of a portion of the RSUs granted to Mr. Wichmann. The value realized on vesting was computed based on the following:

Date of Award
  Vesting Date   Number of Shares
Acquired on Vesting
  Market Price
at Vesting
  Value Realized
on Vesting
2/23/2009   2/3/2013   9,615   $55.77   $536,229
  2/9/2010   2/9/2013   7,576   $57.74   $437,438

Date of Award
  Performance Period
Completion Date
  Number of Shares
Acquired on Vesting
  Market Price at end of
Performance Period
  Value Realized
on Vesting
2/9/2011   12/31/2013   106,966   $75.30   $8,054,540
(5)
Ms. Boudreaux's value was computed as described in footnote 1 above and was based on the following:

Date of Award
  Exercise Date   Number of
Options Exercised
  Stock Splits Since
Date of Award
  Market Price
at Exercise
  Exercise Price
2/23/2009   2/25/2013   28,280     $54.47   $29.74
  2/9/2010   2/25/2013   38,012     $54.47   $33.00
(6)
Reflects the vesting of a portion of the RSUs granted to Ms. Boudreaux. The value realized on vesting was computed based on the following:

Date of Award
  Vesting Date   Number of Shares
Acquired on Vesting
  Market Price
at Vesting
  Value Realized
on Vesting
2/23/2009   2/3/2013   9,615   $55.77   $536,229
  2/9/2010   2/9/2013   7,576   $57.74   $437,438

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Date of Award
  Performance Period
Completion Date
  Number of Shares
Acquired on Vesting
  Market Price at end of
Performance Period
  Value Realized
on Vesting
2/9/2011   12/31/2013   106,966   $75.30   $8,054,540
(7)
Reflects the vesting of a portion of the RSUs granted to Mr. Renfro. The value realized on vesting was computed based on the following:

Date of Award
  Vesting Date   Number of Shares
Acquired on Vesting
  Market Price
at Vesting
  Value Realized
on Vesting
2/3/2009   2/3/2013   26,650   $55.77   $1,486,271
2/9/2010   2/9/2013     7,576   $57.74   $   437,438

Date of Award
  Performance Period
Completion Date
  Number of Shares
Acquired on Vesting
  Market Price at end of
Performance Period
  Value Realized
on Vesting
2/9/2011   12/31/2013   106,966   $75.30   $8,054,540


2013 Pension Benefits

        The following table presents information regarding the present value of accumulated benefits payable under our non-qualified defined-benefit pension plans covering our named executive officers for fiscal year 2013.

Name

 


Plan Name





Number of
Years Credited
Service (#)




Present
Value of
Accumulated
Benefit ($)





Payments
During Last
Fiscal Year ($)

Stephen J. Hemsley

  Individual Agreement for
Supplemental Executive
Retirement Pay
  (1)
  
    
  10,703,229(1)
  
    
 
 
    
 

David S. Wichmann

  N/A   —                 —    
 

Gail K. Boudreaux

  N/A   —                 —    
 

Larry C. Renfro

  N/A   —                 —    
 

Marianne D. Short

  N/A   —                 —    
 
(1)
Upon termination of Mr. Hemsley's employment for any reason, a lump-sum benefit of $10,703,229 will be paid six months and one day after his termination. In the event of Mr. Hemsley's death prior to payment of his entire supplemental retirement benefit, his surviving spouse will receive any unpaid benefit. The dollar amount of this lump sum benefit was frozen in 2006 and will not vary, regardless of Mr. Hemsley's age, years of service or average compensation at the time of his actual termination.

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Table of Contents


2013 Non-Qualified Deferred Compensation

        The following table presents information as of the end of 2013 regarding the non-qualified deferred compensation arrangements for our named executive officers for fiscal year 2013.

Name (a)

  Executive
Contributions
in Last FY ($)(1)(2)
(b)




Registrant
Contributions
in Last FY ($)(1)(3)
(c)




Aggregate
Earnings
in Last FY ($)(4)
(d)




Aggregate
Withdrawals/
Distributions ($)(5)
(e)




Aggregate
Balance at
Last FYE ($)(1)
(f)

Stephen J. Hemsley

  318,000   159,000     10,344     9,194,697
 

David S. Wichmann

  188,573     94,287   835,240     3,536,330
 

Gail K. Boudreaux

  287,502     94,287   183,692     1,725,857
 

Larry C. Renfro

    53,573     26,787     23,045        336,316
 

Marianne D. Short

    39,808     19,904       1,444          61,156
 
(1)
All amounts in columns (b) and (c) have been reported as compensation. In addition to the amounts shown in columns (b) and (c), column (f) includes the following amounts reported in the summary compensation table for prior years:
Name
 
Amount
Previously
Reported
   

Stephen J. Hemsley

  $6,644,476    

David S. Wichmann

  $1,268,502    

Gail K. Boudreaux

  $   918,923    

Larry C. Renfro

  $   212,677    

Marianne D. Short

  $           —    
(2)
Named executive officers are eligible to participate in our Executive Savings Plan, which is a non-qualified deferred compensation plan. Under the plan, employees may generally defer up to 80% of their eligible annual base salary (100% prior to January 1, 2007) and up to 100% of their annual and long-term cash incentive awards. Amounts deferred, including Company credits, are credited to a bookkeeping account maintained for each participant, and are distributable pursuant to an election made by the participant as to time and form of payment that is made prior to the time of deferral. The Company maintains a Rabbi Trust for the plan. The Company's practice is to set aside amounts in the Rabbi Trust to be used to pay for all benefits under the plan, but the Company is under no obligation to do so except in the event of a change in control.

(3)
For the first 6% of the employee's base salary and annual incentive award deferrals under our Executive Savings Plan, the Company provides a matching credit of up to 50% of amounts deferred at the time of each deferral. This matching credit does not apply to deferrals of long-term cash incentive awards, or other special incentive awards.

(4)
Amounts deferred are credited with earnings from measuring investments selected by the employee from a collection of unaffiliated mutual funds identified by the Company. The Executive Savings Plan does not credit above-market earnings or preferential earnings to amounts deferred. The returns on the mutual funds available to employees during 2013 ranged from -8.83% to 40.55%, with a median return of 15.54% for the year ended December 31, 2013. Employees may change their selection of measuring investments on a daily basis.

(5)
Under our Executive Savings Plan, unless an employee in the plan elects to receive distributions during the term of his or her employment with the Company, benefits will be paid no earlier than at the beginning of the year following the employee's termination. However, upon a showing of severe financial hardship, an employee may be allowed to access funds in his or her deferred compensation account earlier. Benefits can be received either as a lump sum payment, in five or ten annual installments, in pre-selected amounts and on pre-selected dates, or a combination thereof. An employee may change his or her election with respect to the timing and form of distribution for such deferrals under certain conditions. However, for deferrals relating to services performed on or after January 1, 2004, employees may not accelerate the timing of the distributions.

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Executive Employment Agreements

        We have entered into an employment agreement with each of the named executive officers.

Stephen J. Hemsley

        On November 7, 2006, the Board of Directors entered into an employment agreement with Mr. Hemsley to serve as President and CEO. On December 14, 2010, the employment agreement was amended to extend the employment period to December 1, 2014. The employment agreement will extend automatically for additional one-year periods after December 1, 2014 unless sooner terminated in accordance with the terms of the employment agreement. During the period of his employment, the Board of Directors will nominate Mr. Hemsley for election to the Board of Directors by the shareholders of the Company.

        Under the employment agreement, Mr. Hemsley receives a base salary of $1,300,000, with any increases at the sole discretion of the Compensation Committee and ultimately the independent members of the Board of Directors. The employment agreement does not set any minimum or target level for any bonus or other incentive compensation. All bonus and incentive compensation awards are solely at the discretion of the Compensation Committee. Mr. Hemsley is eligible to participate in the Company's generally available employee benefit programs.

        Upon termination of Mr. Hemsley's employment for any reason, he is entitled to a previously accrued and vested lump sum supplemental retirement benefit of $10,703,229 to be paid six months and one day after his termination.

        If Mr. Hemsley's employment is terminated by the Company without Cause, other than upon expiration of the term of the employment agreement, or by Mr. Hemsley for Good Reason, the Company will pay Mr. Hemsley a lump sum in an amount equal to his annual base salary for the longer of the remainder of the term under the employment agreement or 12 months.

        If Mr. Hemsley's employment is terminated because of his death or permanent disability, the Company will pay him or his beneficiaries a lump sum in an amount equal to two years' total compensation of base salary plus the average bonus for the last two calendar years, excluding any special or one-time bonus or incentive compensation payments.

        If Mr. Hemsley's employment is terminated by the Company for Cause, by Mr. Hemsley without Good Reason or because of his retirement or upon expiration of the term of the employment agreement, he will not be entitled to any further compensation from the Company other than earned but unpaid salary and benefits.

        As defined in the employment agreement, "Cause" generally means willful and continued failure to perform his duties after written notice and a failure to remedy the deficiency, a violation of the Company's Code of Conduct that is materially detrimental to the Company and is not remedied after written notice, engaging in fraud, material dishonesty or gross misconduct in connection with the Company's business, conviction of a felony or willful and material breach of the employment agreement that is not remedied after written notice. As defined in the employment agreement, "Good Reason" generally means an assignment of duties inconsistent with his position or duties or other diminution of duties, a relocation of primary work location by more than 25 miles, failure by the Board of Directors to elect Mr. Hemsley as CEO, failure by the Board of Directors to nominate Mr. Hemsley to serve on the Board of Directors, the Company's failure to pay or provide Mr. Hemsley's base salary, incentive compensation or other benefits, or any other material breach of Mr. Hemsley's employment agreement that is not remedied.

        Pursuant to the employment agreement, Mr. Hemsley is subject to provisions prohibiting his solicitation of the Company's employees and customers or competing with the Company during the term of the employment agreement and the longer of two years following termination or the period that severance payments are made to

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him under the employment agreement. In addition, he is prohibited at all times from disclosing confidential information related to the Company.

David S. Wichmann, Gail K. Boudreaux, Larry C. Renfro and Marianne D. Short

        Mr. Wichmann entered into an employment agreement with the Company that was effective December 1, 2006 and was amended and restated most recently on December 31, 2008. Ms. Boudreaux entered into an employment agreement with the Company that was effective April 8, 2008, and was amended and restated most recently on August 8, 2011. Mr. Renfro entered into an employment agreement with the Company that was effective January 29, 2009 and was amended and restated most recently on March 26, 2012. Ms. Short entered into an employment agreement with the Company that was effective January 1, 2013.

        Under their respective employment agreements, Messrs. Wichmann and Renfro and Mses. Boudreaux and Short report to the President and CEO of the Company and receive base salaries with any adjustments at the discretion of the Compensation Committee. These executive officers are eligible to participate in the Company's incentive compensation plans. The target and maximum amount of any actual bonus payable to each executive officer is in the discretion of the Compensation Committee. These executive officers also are eligible to receive stock-based awards in the discretion of the Compensation Committee and to participate in the Company's generally available employee benefit programs. During the term of their respective employment, in addition to the Company's generally available benefits, the Company will provide each executive officer, at the Company's expense, a $2 million face value term life insurance policy. In addition, the executive officers also participate in a long-term disability policy, at the Company's expense, which provides an annual benefit that covers 60% of eligible base salary in the event of a qualifying long-term disability, subject to the terms of the policy.

        The employment agreements for Mses. Boudreaux and Short and Mr. Renfro also contain provisions for equity awards and bonuses in connection with commencement of employment. In addition, the employment agreement for Mr. Renfro states that for purposes of determining his eligibility for retirement, he will receive two years of service credit for each year he remains employed with the Company after age 59, clarifies that he will be deemed eligible for retirement if, prior to otherwise becoming eligible for retirement, his employment is terminated by the Company without Cause or he resigns for Good Reason, and amends his outstanding and future equity awards to reflect these provisions.

        Each employment agreement and each executive officer's employment may be terminated (a) at any time by mutual agreement or, with prior written notice, by the Company with or without Cause, (b) at any time by the executive officer with or without Good Reason and (c) upon the executive officer's death or disability that renders him or her incapable of performing the essential functions of his or her job, with or without reasonable accommodation. If an executive officer's employment is terminated by the Company without Cause or by the executive officer for Good Reason, the Company will provide the executive officer with outplacement services consistent with those provided to similarly situated executives and pay the executive officer severance compensation equal to the sum of (a) 200% of his or her annualized base salary as of his or her termination date, (b) 200% of the average of his or her last two calendar year bonuses, excluding any equity awards and any special or one-time bonus or incentive compensation payments, and (c) $12,000 to offset the costs of benefit continuation coverage. The severance compensation will be payable over a 24-month period for Mr. Wichmann and Mses. Boudreaux and Short and will be payable over a 12-month period for Mr. Renfro.

        For purposes of each applicable employment agreement, "Cause" generally means (a) material failure to follow the Company's reasonable direction or to perform any duties reasonably required on material matters, (b) a material violation of, or failure to act upon or report known or suspected violations of, the Company's Code of Conduct, (c) conviction of a felony, commission of any criminal, fraudulent or dishonest act or any conduct that is materially detrimental to the interests of the Company, or (d) material breach of the employment agreement. The employment agreement provides that the Company will, within 120 days of the discovery of the conduct constituting Cause, give the executive officer written notice specifying in reasonable detail the conduct constituting

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Cause and the executive officer will have 60 days to remedy the conduct, if the conduct is reasonably capable of being remedied. In any instance where the Company may have grounds for Cause, failure by the Company to provide written notice of the grounds for Cause within 120 days of discovery will be a waiver of its right to assert the subject conduct as a basis for termination for Cause.

        For purposes of each applicable employment agreement, "Good Reason" will generally exist if the Company (a) reduces the executive officer's base salary or long- or short-term target bonus percentage other than in connection with a general reduction affecting a group of similarly situated employees, (b) moves the executive officer's primary work location more than 50 miles, (c) makes changes that substantially diminish the executive officer's duties or responsibilities, or (d) changes the executive officer's reporting relationship away from the President and CEO of the Company (except that "Good Reason" will also exist for Mr. Renfro if the Company makes a change so that he no longer holds the position of CEO of Optum, Inc. or another equivalent position). The employment agreement provides that the executive officer must give the Company written notice specifying in reasonable detail the circumstances constituting Good Reason within 120 days of becoming aware of the circumstances, or those circumstances will not constitute Good Reason. If the circumstances constituting Good Reason are reasonably capable of being remedied, the Company will have 60 days to remedy the circumstances.

        Pursuant to their respective employment agreements, each executive officer is subject to provisions prohibiting his or her solicitation of the Company's employees or competing with the Company during the term of the employment agreement and two years following termination for any reason. In addition, each executive officer is prohibited at all times from disclosing confidential information related to the Company.

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Potential Payments Upon Termination or Change in Control

        The following table describes the potential payments to named executive officers upon termination of employment or a change in control of the Company as of December 31, 2013. Amounts are calculated based on the benefits available to the named executive officers under existing plans and arrangements, including each of their employment agreements described under "Executive Employment Agreements."

  For Good Reason
or Not For Cause
($)



Death
($)


Disability
($)


Retirement
($)


Change
In Control
($)

Stephen J. Hemsley

                   

Cash Payments

    1,300,000   10,240,000   10,240,000                  —                    —  

Annual Cash Incentive(1)

                 —       4,550,000     4,550,000     4,550,000                  —  

Long-Term Cash Incentive(2)

                 —       1,300,000     1,300,000     1,300,000     1,300,000

SERP

  10,703,229   10,703,229   10,703,229   10,703,229   10,703,229

Insurance Benefits

                 —                    —          420,000                  —                    —  

Acceleration of Equity(3)

  21,887,040   16,917,842   16,917,842   21,887,040   21,887,040
 

Total(4)

  33,890,269   43,711,071   44,131,071   38,440,269   33,890,269
 

David S. Wichmann

                   

Cash Payments

    6,112,000                  —                    —                    —                    —  

Annual Cash Incentive(1)

                 —       2,700,000     2,700,000     2,700,000                  —  

Long-Term Cash Incentive(2)

                 —          886,517        886,517        886,517        886,517

Insurance Benefits

                 —       2,000,000        420,000                  —                    —  

Acceleration of Equity(3)

  17,175,366   15,405,379   15,405,379                  —     18,459,321
 

Total(4)

  23,287,366   20,991,896   19,411,896     3,586,517   19,345,838
 

Gail K. Boudreaux

                   

Cash Payments

    6,112,000                  —                    —                    —                    —  

Annual Cash Incentive(1)

                 —       2,700,000     2,700,000     2,700,000                  —  

Long-Term Cash Incentive(2)

                 —          886,517        886,517        886,517        886,517

Insurance Benefits

                 —       2,000,000        420,000                  —                    —  

Acceleration of Equity(3)

  17,175,366   15,405,379   15,405,379                  —     18,459,321
 

Total(4)

  23,287,366   20,991,896   19,411,896     3,586,517   19,345,838
 

Larry C. Renfro

                   

Cash Payments

    6,116,614                  —                    —                    —                    —  

Annual Cash Incentive(1)

                 —       2,700,000     2,700,000     2,700,000                  —  

Long-Term Cash Incentive(2)

                 —          886,517        886,517        886,517        886,517

Insurance Benefits

                 —       2,000,000        420,000                  —                    —  

Acceleration of Equity(3)

  18,459,321   15,405,379   15,405,379                  —     18,459,321
 

Total(4)

  24,575,935   20,991,896   19,411,896     3,586,517   19,345,838
 

Marianne D. Short

                   

Cash Payments

    3,012,000                  —                    —                    —                    —  

Annual Cash Incentive(1)

                 —       1,500,000     1,500,000     1,500,000                  —  

Long-Term Cash Incentive(2)

                 —          573,717        573,717        573,717        573,717

Insurance Benefits

                 —       2,000,000        420,000                  —                    —  

Acceleration of Equity(3)

    3,120,335     4,053,489     4,053,489                  —       4,928,324
 

Total(4)

    6,132,335     8,127,206     6,547,206     2,073,717     5,502,041
 
(1)
Represents the maximum amount the Compensation Committee may in its discretion determine, but is not required, to pay the executive officer (or the executive officer's estate, if applicable) based upon a pro-rated portion of the award that the executive officer would have received but for the death, disability or retirement, calculated at the achievement of the maximum performance target, as more fully described in footnote 2 to the 2013 Grants of Plan-Based Awards table. For the purposes of this table, the potential amounts have not been pro-rated because the table assumes a death, disability or retirement on December 31, 2013.

(2)
With respect to "Death," "Disability" and "Retirement," represents the maximum amount the Compensation Committee may in its discretion determine, but is not required, to pay the executive officer (or the executive officer's estate, if applicable) based upon the portion of the incentive periods the executive officer served prior to death, disability or retirement and measurement of Company and executive performance based on performance through the end of the fiscal

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(3)
Represents the (i) unvested RSUs multiplied by the closing stock price on December 31, 2013 ($75.30), (ii) intrinsic value of the unvested stock options and SARs which is calculated based on the difference between the closing price of our stock on December 31, 2013 ($75.30), and the exercise or grant price of the unvested stock options and SARs as of that date, and (iii) the number of performance shares earned if target performance is achieved multiplied by the closing stock price on December 31, 2013 ($75.30). If maximum performance is achieved for the performance shares, the amounts for Acceleration of Equity would be (a) for "For Good Reason or Not for Cause," $31,873,552 for Mr. Hemsley; $23,384,453 each for Mr. Wichmann and Ms. Boudreaux; $24,668,408 for Mr. Renfro; and $4,432,664 for Ms. Short; (b) for "Death" and "Disability," $21,935,157 for Mr. Hemsley; $18,560,524 each for Messrs. Wichmann and Renfro and Ms. Boudreaux; and $4,490,982 for Ms. Short; (c) for "Retirement," $31,873,552 for Mr. Hemsley; and (d) for "Change in Control," $31,873,552 for Mr. Hemsley; $24,668,408 each for Messrs. Wichmann and Renfro and Ms. Boudreaux; and $6,240,653 for Ms. Short.


For "For Good Reason or Not for Cause," the amount includes the value of unvested equity awards held by the named executive officer that will not immediately vest upon termination but will continue to vest through any applicable severance. For "Retirement," the amount includes the value of certain unvested equity awards granted in 2010 and 2013 that will continue to vest and be exercisable for a period of five years (but not after the award's expiration date). The value of the awards that will not immediately vest is based on their intrinsic values on December 31, 2013. However, because these awards would continue to vest after termination of employment or retirement, the actual value the named executive officer would receive is not determinable. At December 31, 2013, Mr. Hemsley had met the retirement eligibility provisions. Mr. Renfro's employment agreement as revised in 2012 provides that he will be deemed retirement eligible if he terminates employment for Good Reason or his employment is terminated by the Company without Cause.

(4)
Does not include value of benefits, plans or arrangements that would be paid or available following termination of employment that do not discriminate in scope, terms or operation in favor of our executive officers and that are generally available to all salaried employees or accrued balances under any non-qualified deferred compensation plan that is described above.

PROPOSAL 2 — ADVISORY APPROVAL OF THE COMPANY'S EXECUTIVE COMPENSATION

        The Board of Directors recognizes the significant interest of shareholders in executive compensation matters. We are seeking shareholders' views on our executive compensation philosophy and practices through an advisory vote on the following resolution at the Annual Meeting:

The Compensation Discussion and Analysis, the compensation tables and the related narrative disclosures appear on pages 17-45 of this proxy statement.

        As discussed in the Compensation Discussion and Analysis, the Board of Directors believes that our executive compensation program attracts and retains highly qualified executives while linking executive compensation directly to Company-wide performance. In deciding how to vote on this proposal, the Board of Directors asks you to consider the following key points with regard to our executive compensation program:

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        This advisory proposal, commonly referred to as a "say-on-pay" proposal, is not binding on the Board of Directors. Although the voting results are not binding, the Board and the Compensation Committee will review and consider them when evaluating our executive compensation program. Our shareholders expressed strong support

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for our executive compensation program in the say-on-pay votes at our 2011, 2012 and 2013 Annual Meetings of Shareholders. The next say-on-pay advisory vote will occur at our 2015 Annual Meeting of Shareholders.

        In addition to our annual advisory vote to approve the Company's executive compensation, we are committed to ongoing engagement with our shareholders on executive compensation and corporate governance issues. These engagement efforts take place throughout the year through meetings, telephone calls and correspondence involving our senior management, directors and representatives of our shareholders.

        For these reasons, the Board of Directors recommends that you vote FOR approval of the compensation of the named executive officers, as disclosed in this proxy statement. Executed proxies will be voted FOR approval of the compensation of the named executive officers unless you specify otherwise.


DIRECTOR COMPENSATION

        Our director compensation and benefit program is designed to compensate our non-employee directors fairly for work required for a company of our size and scope and to align their interests with the long-term interests of our shareholders. Director compensation reflects our desire to attract, retain and use the expertise of highly qualified people serving on the Company's Board of Directors. The Compensation Committee reviews the compensation level of our non-employee directors on an annual basis and makes recommendations to the Board of Directors. In August 2013, the Compensation Committee, with the advice of its independent compensation consultant, undertook an annual review of the structure and philosophy of the director compensation program. This review analyzed the structure and the overall level and mix of compensation delivered by the Company's director compensation program as compared to the Company's general industry peer group and also the four large managed health care companies. Following this review, the Compensation Committee recommended, and the Board approved, increases effective as of October 1, 2013 to the annual cash retainers paid to the chairs of the Audit, Nominating and Public Policy Committees. The Compensation Committee's recommendations, and the Board's subsequent approval, were made after considering the results of the market practices review, the complexity of the Company's structure and operations, and the time and effort required to discharge the Committee Chairs' duties.

        The following table highlights the material elements of our director compensation program:

Compensation Element


Compensation

&zwsp; Value
 

Annual Cash Retainer

        $125,000    
 

Annual Audit Committee Chair Cash Retainer

        $  25,000 *  
 

Annual Compensation Committee Chair Cash Retainer

        $  15,000    
 

Annual Nominating Committee Chair Cash Retainer

        $  15,000 **  
 

Annual Public Policy Committee Chair Cash Retainer

        $  15,000 **  
 

Annual Board Chair Cash Retainer

        $300,000    
 

Annual Equity Award

  $150,000 aggregate fair value of deferred stock units
 

Initial Equity Award to New Directors

  6,250 deferred stock units
 

Equity Conversion Program

            Cash compensation converted into deferred
          stock units at the director's election           
 
*
Prior to October 1, 2013, cash retainer was $15,000

**
Prior to October 1, 2013, cash retainer was $10,000


Cash Compensation

        Director cash compensation is payable on a quarterly basis in arrears and prorated if the director did not serve the entire quarter. Directors may elect to convert cash compensation into equity or defer receipt of the cash compensation to a later date.

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Equity-Based Compensation

        Non-employee directors receive grants of deferred stock units under the 2011 Stock Incentive Plan. To continue to align the interests of directors with the long-term interests of our shareholders, each director is required to retain all deferred stock units granted until completion of his or her service on the Board of Directors. Upon completion of service, the deferred stock units convert to an equal number of shares of the Company's common stock. A director may defer receipt of the shares for up to ten years after completion of service.

Initial Equity Award

        A new non-employee director receives an initial one-time grant of 6,250 deferred stock units on the date of the director's appointment to the Board of Directors. The new director award vests at a rate of 25% per year for four years, subject to continued service on the Board of Directors on the vesting date. Each director is required to retain the deferred stock units until completion of his or her service on the Board of Directors.

Annual Equity Award

        Non-employee directors also receive an annual grant of deferred stock units having an annual aggregate fair value of $150,000. This grant is in consideration of general service and responsibilities and required meeting preparation. The grants are issued quarterly in arrears on the first business day following the end of each fiscal quarter and prorated if the director did not serve the entire quarter. The number of deferred stock units granted is determined by dividing $37,500 (the quarterly value of the annual equity award) by the closing stock price on the grant date, rounded up to the nearest share. These awards are vested immediately upon grant and must be held until the director's completion of his or her service on the Board of Directors.

Deferred Stock Unit Dividends

        The Company pays dividend equivalents in the form of additional deferred stock units on all outstanding deferred stock units. Dividend equivalents are paid at the same rate and at the same time that dividends are paid to Company shareholders. The dividend equivalents are subject to the same vesting conditions as the underlying grant and must be held until the director's completion of his or her service on the Board of Directors.


Stock Ownership Guidelines

        Under our stock ownership guidelines, we require non-employee directors to achieve ownership of shares of the Company's common stock (excluding stock options, but including vested deferred stock units and vested restricted stock units) having a fair market value equal to five times the directors' annual base cash retainer. Non-employee directors must comply with the stock ownership guidelines within five years of their appointment to the Board of Directors, other than directors serving when we last revised the guidelines in August 2010, who must comply with the new stock ownership guidelines by August 2015. All of our non-employee directors have met the stock ownership requirement.


Other Compensation

        We reimburse directors for any out-of-pocket expenses incurred in connection with service as a director. We also provide health care coverage to directors but only if the director is not eligible for coverage under another group health care benefit program. Health care coverage is provided generally on the same terms and conditions as current employees. Upon retirement from the Board of Directors, current directors may continue to obtain health care coverage under benefit continuation coverage, and after the lapse of such coverage, under the Company's post-employment medical plan for up to a total of 96 months if they are otherwise eligible.

        The Company maintains a program through which it will match up to $15,000 of charitable donations made by each director for each calendar year. The directors do not receive any financial benefit from this program because the charitable income tax deductions accrue solely to the Company. Donations under the program may not be made to family trusts, partnerships or similar organizations.

        Our corporate aircraft use policy prohibits personal use of corporate aircraft by any director. Because there is essentially no incremental cost to the Company, however, the policy does permit a director's family member to accompany the director on a business flight on Company aircraft provided a seat is available.

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Equity Conversion Program

        Directors may elect to convert any or all director cash compensation earned into deferred stock units, which must be held until completion of his or her service on the Board. The conversion grants are made on the day the eligible cash compensation becomes payable to the director and immediately vest upon grant. If a director elects to convert his or her cash compensation into deferred stock units, he or she receives the number of deferred stock units equal to the cash compensation foregone, divided by the closing price of our common stock on the date of grant, rounded up to the nearest share.


Cash Deferral Plan

        Under our Directors' Compensation Deferral Plan ("Director Deferral Plan"), non-employee directors may elect annually to defer receipt of all or a percentage of their cash compensation. Amounts deferred are credited to a bookkeeping account maintained for each director participant that uses a collection of unaffiliated mutual funds as measuring investments. Subject to certain additional rules set forth in the Director Deferral Plan, a participating director may elect to receive the distribution in one of the following ways:


2013 Director Compensation Table

        The following table provides summary information for the year ended December 31, 2013 relating to compensation paid to or accrued by us on behalf of our non-employee directors who served in this capacity during 2013. Mr. Hemsley and Dr. Bueno are employee directors and do not receive additional compensation for serving as a director.

Name

Fees Earned
or Paid in
Cash
($)(1)




Stock
Awards
($)(2)



Option
Awards
($)(3)



Change in
Pension
Value and
Non-Qualified
Deferred
Compensation
Earnings
($)(4)








All Other
Compensation
($)(5)



Total
($)

William C. Ballard, Jr.

  125,000   150,093       17,500   292,593
 

Richard T. Burke

  425,000   150,093       26,423   601,516
 

Robert J. Darretta

  125,000   150,120       2,500   277,620
 

Michele J. Hooper

  135,000   150,093       17,808   302,901
 

Rodger A. Lawson

  129,822   150,093       23,686   303,601
 

Douglas W. Leatherdale

  135,179   150,093       17,500   302,772
 

Glenn M. Renwick

  140,000   150,099       17,500   307,599
 

Kenneth I. Shine, M.D.

  125,000   150,093       17,500   292,593
 

Gail R. Wilensky, Ph.D.

  135,000   150,093       17,500   302,593
 
(1)
Mr. Darretta and Mr. Renwick elected to convert 2013 cash compensation into 2,010 and 2,251 deferred stock units, respectively. Mr. Leatherdale elected to defer all 2013 cash compensation under the Director Deferral Plan.

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(2)
The amounts reported reflect the aggregate grant date fair value of the stock awards granted in 2013 computed in accordance with FASB ASC Topic 718, based on the closing stock price on the grant date. The amounts reported include for each director the aggregate grant date fair value of the annual equity award of deferred stock units granted in quarterly installments. The amounts reflect the value of fractional shares issued with the quarterly installments as we round grants of deferred stock units up to the nearest whole share. For Messrs. Darretta and Renwick, we combined the cash compensation they elected to convert into deferred stock units on a quarterly basis and the value of the quarterly deferred stock unit grant prior to determining the number of deferred stock units to be granted each quarter.


The aggregate grant date fair values of the stock awards granted in 2013 (including, for Messrs. Darretta and Renwick, the deferred stock units issued in lieu of cash compensation) computed in accordance with FASB ASC Topic 718, based on the closing stock price on the grant date, are as follows:

Name
 
January 2,
2013
($)
  April 1,
2013
($)
  July 1,
2013
($)
 
October 1,
2013
($)

William C. Ballard, Jr.

  37,524   37,505   37,540   37,524

Richard T. Burke

  37,524   37,505   37,540   37,524

Robert J. Darretta*

  68,775   68,759   68,780   68,806

Michele J. Hooper

  37,524   37,505   37,540   37,524

Rodger A. Lawson

  37,524   37,505   37,540   37,524

Douglas W. Leatherdale

  37,524   37,505   37,540   37,524

Glenn M. Renwick*

  72,538   72,533   72,521   72,507

Kenneth I. Shine, M.D.

  37,524   37,505   37,540   37,524

Gail R. Wilensky, Ph.D.

  37,524   37,505   37,540   37,524
 
*
Includes the value of deferred stock units issued upon conversion
of annual cash retainer as described in footnote 1 above of
$125,000 for Mr. Darretta and $140,000 for Mr. Renwick.

Name
  Deferred
Stock Units

William C. Ballard, Jr.

  15,339

Richard T. Burke

  15,339

Robert J. Darretta

  28,852

Michele J. Hooper

  21,589

Rodger A. Lawson

  13,865

Douglas W. Leatherdale

  15,339

Glenn M. Renwick

  29,164

Kenneth I. Shine, M.D.

  23,582

Gail R. Wilensky, Ph.D.

  15,339
(3)
The Company did not grant stock option awards to directors in 2013. As of December 31, 2013, our non-employee directors held outstanding (and unexercised) stock option awards as follows: Mr. Ballard — 153,000 stock options; Mr. Burke — 175,200 stock options; Mr. Darretta — 56,621 stock options; Ms. Hooper — 35,000 stock options; Mr. Leatherdale — 145,510 stock options; Mr. Renwick — 33,929 stock options; Dr. Shine — 2,500 stock options; and Dr. Wilensky — 154,120 stock options.

(4)
The Director Deferral Plan does not credit above-market earnings or preferential earnings to the amounts deferred. There are no measuring investments tied to Company stock performance. The measuring investments are a collection of unaffiliated mutual funds identified by the Company.

(5)
In 2013, the Company matched charitable contributions made by directors to charitable organizations selected by directors pursuant to the Company's Board Matching Program as follows: Mr. Ballard — $15,000; Mr. Burke — $15,000; Ms. Hooper — $14,833; Mr. Lawson — $15,000; Mr. Leatherdale — $15,000; Mr. Renwick — $15,000; Dr. Shine — $15,000; and Dr. Wilensky — $15,000. In 2013, the Company also made a $2,500 contribution to a charitable organization selected by each director in lieu of 2012 holiday gifts. We also paid $8,923, $475 and $6,186 in health care premiums on behalf of Mr. Burke, Ms. Hooper and Mr. Lawson, respectively.

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CERTAIN RELATIONSHIPS AND TRANSACTIONS

Approval or Ratification of Related-Person Transactions

        The Board of Directors has adopted a written Related-Person Transactions Approval Policy, which is administered by the Audit Committee. A copy of the policy is available on our website at www.unitedhealthgroup.com. Under the policy, "related-person" transactions are prohibited unless approved or ratified by the Audit Committee. In general, a related-person transaction is any transaction or series of transactions (or amendments thereto) directly or indirectly involving a director, executive officer or shareholder beneficially owning more than 5% of our common stock, or any of their respective immediate family members, in which the Company or its subsidiaries is directly or indirectly a participant and the amount involved exceeds $1.00 (or, in the case of a director, that is not deemed to be immaterial under the Company's Standards for Director Independence).

        Related-person transactions under the policy do not include:

        Under the policy, the Company determines whether a transaction falls under the definition of a related-person transaction requiring review by the Audit Committee. In determining whether to approve or ratify a related-person transaction, the Audit Committee will consider, among other things, whether the terms of the related-person transaction are fair to the Company and on terms at least as favorable as would apply if the other party was not an affiliate; the business reasons for the transaction; whether the transaction could impair the independence of a director under the Company's Standards for Director Independence; and whether the transaction would present an improper conflict of interest for any director or executive officer of the Company.

        Any member of the Audit Committee who has an interest in the transaction under discussion will abstain from voting on the approval of the related-person transaction, but may, if so requested by the Chair of the Audit Committee, participate in some or all of the Audit Committee's discussions of the related-person transaction. Any related-person transaction that is not approved or ratified, as the case may be, will be voided, terminated or amended, or other actions will be taken in each case as determined by the Audit Committee so as to avoid or otherwise address any resulting conflict of interest.

        As required under SEC rules, transactions in which the Company was or is to be a participant and the amount involved exceeds $120,000, and in which any related person had or will have a direct or indirect material interest, are disclosed below.


Related-Person Transactions

Transactions with Edson Bueno

        In December 2013, the Company made a cash investment in Amil through a purchase of $425 million of Amil common shares. As a result of this investment, and as provided under Brazilian law, Dr. Bueno, a member of the Company's board, and his partner, Dr. Dulce Pugliese, exercised their statutory preemptive rights as shareholders of Amil to acquire $46 million of Amil common shares to maintain each party's respective ownership percentage in Amil following the transaction.

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        Set forth below is information regarding business relationships between Amil and related persons which existed prior to the Company's acquisition of Amil. The Audit Committee of the Board of Directors has ratified these relationships.

        Diagnosticos da America S.A. ("DASA"). As of April 4, 2014, Dr. Bueno owned directly and through an affiliated entity approximately 48% of DASA, the largest provider of laboratory tests and medical diagnostic services in Latin America. DASA provides vaccinations, diagnostic services and laboratory and pathology tests to many customers in Brazil, including Amil plan members. Services outside of São Paulo, Brazil are provided pursuant to a contract which automatically renews for successive 36-month terms. Services in São Paulo are provided pursuant to a contract with a term ending in 2026 (which is renewable for successive 15-year terms). Amil generally receives a discount on services provided to its members ranging from 2% to 12.5%, depending on volume. Amil has granted DASA the exclusive right to provide laboratory and pathology testing services at approximately 64 locations in São Paulo during the term of the contract and receives a discount on services ranging from 4% to 15%, depending on volume. From January 1, 2013 to December 31, 2013, Amil paid DASA approximately $178 million, which reflects discounts over market rates in part due to exclusivity arrangements. The Company believes that the contract terms are equal to or better than what could be obtained from unaffiliated third parties.

        Hospital Investments. Dr. Bueno owns a 51% interest in six hospitals and a 41.5% interest in another hospital that provide services in Brazil to Amil plan members. Services to Amil plan members represent approximately 27% of the aggregate revenue of these hospitals during the period from January 1, 2013 through December 31, 2013. The services are provided pursuant to contracts between Amil and each individual hospital. The contracts will expire in 2022. From January 1, 2013 to December 31, 2013, Amil paid these hospitals approximately $164 million for services to Amil plan members and the real estate lease payments described below. The Company believes that the contract terms are equal to what could be obtained from unaffiliated third parties and are comparable to, or lower than, rates that are charged to other Brazilian health plans. Amil also has a right of first offer and a right of first refusal to purchase interests in these hospitals should Dr. Bueno or his affiliates determine to transfer their interests to third parties within ten years from the date of the closing, or October 26, 2022.

        Hospital de Clínicas de Niteroi Ltda. ("HCN"). HCN, in which Dr. Bueno owns a 51% interest, is a real estate company which leases medical facilities and office space to Amil. All of the leases run through October 2022. The aggregate rent for Amil's use of the properties was approximately $15 million for 2013. The lease terms are subject to annual adjustment based on the variation of a general Brazilian price index. The Company believes that the contract terms are equal to what could be obtained from unaffiliated third parties. Amil has a right of first offer and a right of first refusal should Dr. Bueno or his affiliates determine to transfer any of the properties to third parties within ten years from the date of the closing, or October 26, 2022.

        Aeromil Táxi Aéreo Limitada ("Aeromil"). In connection with the Company's acquisition of Amil, Amil sold 80% of Aeromil, an air taxi business, to Dr. Bueno to comply with Brazilian restrictions on foreign ownership of such businesses. Dr. Bueno's son-in-law is the CEO of Aeromil. Aeromil will provide on-demand emergency medical transport services to Amil through October 2014, with automatic renewal for succeeding two-year terms. The cost to Amil for such services is based on the operating costs (including utilization and maintenance) of the relevant aircraft. From January 1, 2013 to December 31, 2013, Amil paid Aeromil approximately $8 million for emergency medical transport services. Amil is entitled to receive dividends equaling 99.9% of the profits of Aeromil and has an irrevocable option to purchase all of Dr. Bueno's shares in Aeromil at a price of approximately $15 million, the price paid by Dr. Bueno for his stake in Aeromil. Amil's call option has an indefinite term so long as each party holds stock in Aeromil. Dr. Bueno is restricted from selling his shares in Aeromil except pursuant to Amil's call option.

        Employment of Solange Novelli Medina. Ms. Medina, who shares a household with Dr. Bueno, serves as Amil's head of design. In 2013, she received approximately $162,000 in salary and profit sharing payments from Amil. She also received benefits under Amil's benefit plans that are generally available to Amil employees.

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        With the exception of the Amil common share transaction, which was converted at the exchange rate as of the date of the transaction (R$2.336 to US$1.00), U.S. dollar amounts above have been converted into U.S. dollars based on an exchange rate of R$2.1501 to US$1.00, the average exchange rate for the year ended December 31, 2013. These exchange rates are the same exchange rates used for financial reporting purposes.

Transactions with 5% Shareholders

        BlackRock Inc. beneficially owns approximately 6.2% of our common stock. The Company paid BlackRock approximately $2.9 million for investment management fees in 2013. BlackRock maintains a self-funded health insurance plan through the Company and paid the Company approximately $939,000 for administrative services in 2013.

        FMR LLC beneficially owns approximately 5.23% of our common stock. The Company paid Fidelity Management & Research Company ("Fidelity"), a wholly owned subsidiary of FMR LLC, approximately $2.2 million in investment and benefits management fees in 2013. Fidelity maintains a self-funded health insurance plan through the Company and paid the Company approximately $11.1 million for administrative services in 2013. Fidelity also paid the Company approximately $52,000 in insurance premiums and $3,700 for online notification services in 2013.


COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

        During fiscal 2013, Messrs. Ballard, Darretta (through June 3, 2013), Lawson and Leatherdale served on the Compensation Committee. None of these persons has ever been an officer or employee of the Company or any of our subsidiaries and has no interlocking relationships requiring disclosure under applicable SEC rules.


AUDIT COMMITTEE REPORT

        The Audit Committee of our Board of Directors is comprised of three non-employee directors, all of whom are audit committee financial experts, as defined by the SEC. The Board of Directors has determined that all of the members of the Audit Committee are independent within the meaning of the listing standards of the NYSE, the rules of the SEC and the Company's Standards for Director Independence. The Audit Committee operates under a written charter adopted by the Board of Directors which you may access in the corporate governance section of our website at www.unitedhealthgroup.com/About/CorporateGovernance.aspx.

        The Audit Committee has responsibility for selecting and evaluating the independent registered public accounting firm, which reports directly to the Audit Committee, overseeing the performance of the Company's internal audit function, and assisting the Board of Directors in its oversight of enterprise risk management. Management has primary responsibility for the Company's consolidated financial statements and the overall reporting process, for maintaining adequate internal control over financial reporting and, with the assistance of the Company's internal auditors, for assessing the effectiveness of the Company's internal control over financial reporting. Deloitte & Touche LLP ("Deloitte") has served as the Company's independent registered public accounting firm since 2002.

        While it is not the duty of the Audit Committee to plan or conduct audits, the Audit Committee discusses with the Company's independent registered public accounting firm and the internal auditors the overall scope and plans for their respective audits. The Company's independent registered public accounting firm is responsible for performing an independent audit of the Company's consolidated financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States), expressing an opinion as to the conformity of the consolidated financial statements with generally accepted accounting principles in the United States of America, and auditing management's assessment of the effectiveness of internal control over financial reporting. The Audit Committee's responsibility is to monitor and oversee these processes. The Audit Committee meets regularly with the internal auditors and independent registered public accounting firm, with and without

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management present, to discuss the results of their examinations, the evaluation of the Company's internal control over financial reporting and the overall quality of the Company's accounting.

        The Audit Committee has adopted a Policy for Approval of Independent Auditor Services (the "Policy") outlining the scope of services that the independent registered public accounting firm may provide to the Company. The Policy sets forth guidelines and procedures the Company must follow when retaining the independent registered public accounting firm to perform audit, audit-related, tax and other services. The Policy also specifies certain non-audit services that may not be performed by the independent registered public accounting firm under any circumstances. Pursuant to these guidelines, the Audit Committee approves fee thresholds annually for each of these categories, and services within these thresholds are deemed pre-approved.

        Management represented to the Audit Committee that the Company's consolidated financial statements were prepared in accordance with generally accepted accounting principles. The Audit Committee has reviewed and discussed with management and Deloitte in separate sessions the Company's consolidated financial statements for the years ended December 31, 2013, December 31, 2012 and December 31, 2011, management's annual report on the Company's internal control over financial reporting and Deloitte's attestation. The Audit Committee also discussed with management and Deloitte the process used to support certifications by the Company's CEO and CFO that are required by the SEC and the Sarbanes-Oxley Act of 2002 to accompany the Company's periodic filings with the SEC and the process used to support management's annual report on the Company's internal controls over financial reporting.

        The Audit Committee discussed with Deloitte matters required to be discussed by Public Company Accounting Oversight Board Auditing Standard No. 16 (Communications with Audit Committees) and Rule 2-07 of Regulation S-X. Deloitte also provided to the Audit Committee the written disclosures and the letter required by applicable requirements of the Public Company Accounting Oversight Board regarding Deloitte's communications with the Audit Committee concerning independence, and the Audit Committee discussed with Deloitte the accounting firm's independence. In considering the independence of Deloitte, the Audit Committee took into consideration whether the provision of non-audit services is compatible with maintaining the independence of Deloitte. In connection with its selection of Deloitte as the Company's independent registered public accounting firm for the year ending December 31, 2014, the Audit Committee conducted a performance evaluation of Deloitte's services.

        Based upon the Audit Committee's review of the financial statements, independent discussions with management and Deloitte, and the Audit Committee's review of the representation of management and the report of the independent registered public accounting firm to the Audit Committee, and subject to the limitations of the Audit Committee's role, the Audit Committee recommended to the Board of Directors that the audited consolidated financial statements for the years ended December 31, 2013, December 31, 2012 and December 31, 2011 be included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2013 filed with the SEC.

Members of the Audit Committee

Glenn M. Renwick, Chair
Robert J. Darretta
Michele J. Hooper

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INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Disclosure of Fees Paid to Independent Registered Public Accounting Firm

        Aggregate fees billed to the Company for the fiscal years ended December 31, 2013 and 2012 represent fees billed by the Company's principal independent registered public accounting firm, Deloitte & Touche LLP, the member firms of Deloitte Touche Tohmatsu, and their respective affiliates, which includes Deloitte Consulting (collectively, "Deloitte & Touche"). The Audit Committee pre-approved the audit and non-audit services provided in the years ended December 31, 2013 and December 31, 2012 by Deloitte & Touche, as reflected in the table below.

 

  Year Ended  

Fee Category


2013

2012

Audit Fees

  $18,141,000   $17,350,000

Audit-Related Fees(1)

  7,929,000   9,546,000
     

Total Audit and Audit-Related Fees

  $26,070,000   $26,896,000

Tax Fees(2)

  1,446,000   998,000

All Other Fees(3)

  451,000   175,000
     

Total

  $27,967,000   $28,069,000
 
(1)
Audit-Related Fees for 2013 and 2012 include benefit plan and other required audits, an audit of one of our subsidiaries, certain AICPA agreed-upon procedures, internal control assessments, due diligence services and services related to the acquisition of Amil.

(2)
Tax Fees include tax compliance, planning and support services. In 2013 and 2012 approximately $1,161,000 and $598,000, respectively, of Tax Fees were related to international tax services. In 2013 and 2012 approximately $185,000 and $248,000, respectively, of Tax Fees were related to tax compliance (review and preparation of corporate and expatriate tax returns, review of the tax treatment for certain expenses and claims for refunds).

(3)
All Other Fees include consulting fees.


Audit Committee's Consideration of Independence of Independent Registered Public Accounting Firm

        The Audit Committee has reviewed the nature of non-audit services provided by Deloitte & Touche and has concluded that these services are compatible with maintaining the firm's ability to serve as our independent registered public accounting firm.


Audit and Non-Audit Services Approval Policy

        The Audit Committee has adopted a Policy for Approval of Independent Auditor Services (the "Policy") outlining the scope of services that Deloitte & Touche may provide to the Company. The Policy sets forth guidelines and procedures the Company must follow when retaining Deloitte & Touche to perform audit, audit-related, tax and other services. The Policy also specifies certain non-audit services that may not be performed by Deloitte & Touche under any circumstances. Pursuant to these guidelines, the Audit Committee approves fee thresholds annually for each of these categories, and services within these thresholds are deemed pre-approved. All fees reported above were approved pursuant to the Policy. The services provided by our independent registered public accounting firm and related fees are discussed with the Audit Committee and the Policy is evaluated and updated periodically by the Audit Committee.

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PROPOSAL 3 — RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

        The Audit Committee is directly responsible for the appointment, evaluation, compensation, retention and oversight of the independent registered public accounting firm retained to audit the Company's financial statements. The Audit Committee has appointed Deloitte & Touche LLP ("Deloitte") as our independent registered public accounting firm for the year ending December 31, 2014. Deloitte has been retained as our independent registered public accounting firm since 2002. The Audit Committee is responsible for approving audit fees associated with the retention of Deloitte. In order to assure continuing auditor independence, the Audit Committee periodically considers whether there should be a regular rotation of our independent registered public accounting firm. Further, as part of the Audit Committee's assessment of Deloitte and in conjunction with the mandated rotation of the audit firm's lead engagement partner, the Chair of the Audit Committee is involved in reviewing the selection of Deloitte's new lead engagement partner.

        The Board of Directors has proposed that shareholders ratify the appointment of Deloitte at the Annual Meeting. If shareholders do not ratify the appointment of Deloitte, the Audit Committee will reconsider the appointment but is not obligated to appoint another independent registered public accounting firm. The Audit Committee evaluates, at least every three years, whether to rotate our independent registered public accounting firm.

        Representatives of Deloitte are expected to be present at the meeting, will have an opportunity to make a statement and will be available to respond to questions from shareholders.

        The Board of Directors recommends that you vote FOR ratification of the appointment of Deloitte as our independent registered public accounting firm for the year ending December 31, 2014. Executed proxies will be voted FOR ratification of this appointment unless you specify otherwise.

PROPOSAL 4 — SHAREHOLDER PROPOSAL REGARDING CUMULATIVE VOTING

        We have been informed that John Chevedden intends to introduce the proposal set forth below at the Annual Meeting. In accordance with SEC rules, the text of the proposal is printed verbatim from the submission. The Company will provide to shareholders the address and reported holdings of the Company's common stock for the proposal sponsor promptly upon receiving an oral or written request. The Board of Directors has recommended a vote against this proposal for the reasons set forth following the proposal.


Shareholder Proposal — Cumulative Voting

Proposal 4 — Cumulative Voting

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Cumulative Voting — Proposal 4

Board of Directors' Recommendation

        The Board of Directors unanimously recommends a vote AGAINST the foregoing proposal for the following reasons:

        The Board of Directors has carefully considered this shareholder proposal and has concluded that the proposal is not in the best interests of the Company and our shareholders.

        Cumulative voting increases a shareholder's voting power in director elections by granting the shareholder votes equal to the number of shares owned multiplied by the number of directorships subject to election. Shareholders may then cast the aggregate votes in favor of just one candidate or disperse the aggregate votes among any number of candidates. This gives shareholders, particularly shareholders owning a relatively small number of shares, a level of influence on individual director elections that is disproportionate to their stock ownership.

        The primary use of cumulative voting is to allow minority blocs of investors to place their representatives on the Board of Directors. We believe each director's election should involve a broader mandate, and to that end we have a majority voting standard in our Articles of Incorporation. In 2013, each of our directors was elected by more than 90% of the votes cast at the annual meeting.

        In addition to majority voting, we have a range of leading governance practices described elsewhere in this proxy statement and in our Principles of Governance. These include the annual election of all directors; nine of

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eleven Board members are independent and we have an independent chairman. In 2006, we formed a shareholder nominating advisory committee to provide a formal means of input from shareholders regarding the identification and nomination of director candidates. We are recognized for our leading governance practices: in the latest evaluation by Institutional Shareholder Services Inc. the Company achieved the top governance rating.

        The Board believes that implementing cumulative voting, as requested in the proposal, can lead to circumstances that are incompatible with a director discharging his or her fiduciary duties. A director elected by a minority shareholder or group faces a conflict between the fiduciary duty owed to all shareholders and the allegiance to the shareholder or group that elected him or her. This is particularly an issue if the director is affiliated with a shareholder or group pursuing a specific, narrow agenda. These potential conflicts could undermine the ability of Board members to represent the best interests of the Company and all shareholders.

        For these reasons, the Board of Directors recommends that you vote AGAINST this proposal. Executed proxies will be voted AGAINST this proposal unless you specify otherwise.


PROPOSAL 5 — SHAREHOLDER PROPOSAL REGARDING LOBBYING DISCLOSURE

        We have been informed that AFL-CIO Reserve Fund intends to introduce the proposal set forth below at the Annual Meeting. In accordance with SEC rules, the text of the proposal is printed verbatim from the submission. The Company will provide to shareholders the address and reported holdings of the Company's common stock for the proposal sponsor promptly upon receiving an oral or written request. The Board of Directors has recommended a vote against this proposal for the reasons set forth following the proposal.


Shareholder Proposal — Lobbying Disclosure Report

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Board of Directors' Recommendation

        The Board of Directors unanimously recommends a vote AGAINST the foregoing proposal for the following reasons:

        The Board of Directors has carefully considered this shareholder proposal and has concluded that the proposal is not in the best interests of the Company and our shareholders and is redundant to existing comprehensive state and federal public disclosure requirements.

Background

        As a participant in the regulated health care industry, we have an obligation to our Company and shareholders to engage with policymakers on an ongoing basis. We have pursued and will continue to pursue efforts to help inform public policy decisions at both the state and federal levels that have the potential to improve and sustain the quality and delivery of health care and that affect our customers, employees, consumers, and the communities in which we operate. Our activities include advocacy efforts at the federal and state levels; thought leadership regarding health care modernization and other important issues impacting the Company and our customers; educational outreach and promotion; campaign contributions; and other related activities.

        This shareholder proposal reflects the opinions of the proponents related to three components of the Company's lobbying activities: transparency of the Company's positions on public policy and policies and procedures related thereto; advocacy efforts including membership in different groups; and lobbying costs. As detailed below, our positions are clear, our advocacy is well disclosed, and our expenditures — which are far below material financial levels — are disclosed in conformity with all state and federal requirements.

Lobbying Activities

        Lobbying activities are led by our Government Affairs group and are subject to oversight by senior management and the Public Policy Committee of our Board of Directors. In addition, the Public Policy Committee assists the Board of Directors in fulfilling its responsibilities relating to our public policy, health care reform and modernization activities, political contributions, government relations, community and charitable activities, third party activities (including trade associations and industry groups) and corporate social responsibility, and is responsible for overseeing the risks associated with these activities. The Public Policy Committee receives regular reports from management on these matters; oversees our policies; and reviews the purposes and benefits of these activities at each meeting. The Committee provides reports of its activities to our Board of Directors at each in-person meeting. The Committee meets four times per year.

        We comply fully with all state and federal laws concerning the disclosure of our lobbying expenses. These disclosures are publicly available and provide extensive detail regarding the Company's lobbying expenses and the nature of its lobbying activities. All proposed contributions go through a legal and business approval process designed to ensure compliance with applicable federal or state campaign finance and related laws, internal policies and, in the case of contributions from our PACs, the applicable PAC's bylaws. All contributions must

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reflect the Company's interests and not those of its individual officers or directors. No campaign contributions are given in anticipation of, in recognition of, or in return for an official act.

Legislative and Regulatory Priorities

        Our advocacy and legislative priorities at the federal and state levels are publicly disclosed in our "Roadmap for Transforming America's Health Care System" and "Playbook for States Seeking to Modernize Their Health Care Systems," which contain detailed information about our positions on health care reform and other public policy issues and are available on our website. In addition, between 2009 and 2013, the Company's United Center for Health Reform & Modernization issued ten working papers that draw on our internal expertise and extensive external partnerships to develop and offer innovative, practical solutions for the most significant health care challenges facing our nation. This information is also publicly available on our website at www.unitedhealthgroup.com/Health%20Reform/Default.aspx.

CPA-Zicklin Rating

        In the 2013 CPA-Zicklin Index of Corporate Political Accountability and Disclosure, the Company was specifically identified as having the highest score in our industry, having increased our score by over 10% compared to the prior year.

Trade Association Activity

        We believe that it is in the best interests of our Company and our shareholders to belong to trade associations and industry and other groups, where we benefit from the general business, technical and industry standard-setting expertise these organizations provide. The Company has stated publicly that we do not agree with all positions taken by these groups. We make a Political Contributions report available on our website and, on an annual basis, we report the aggregate amount of dues paid to certain trade associations that are not deductible under Section 162(e) of the Internal Revenue Code.

Lobbying and Political Spending Expenditures are not Financially Material

        Our expenses related to political and lobbying activities are not financially material. In 2013, our total expenses relating to political and lobbying activities, even using a broad definition of such, were significantly less than one tenth of one percent of our total operating costs. Therefore, we do not believe that additional line item disclosure of these immaterial amounts would be beneficial to our investors and believe that preparation of the additional disclosures requested by the proponents would impose administrative burdens on the Company. Accordingly, the Board does not believe that implementing the proposal is in the best interests of the Company or our shareholders.

Shareholders did not Approve Similar Proposals in Prior Years

        Our shareholders were presented with substantially similar proposals submitted by the same proponent at our 2012 and 2013 annual meetings. In accordance with Minnesota law, the lobbying proposals submitted at our 2012 and 2013 annual meetings did not pass, having only received 23% and 19% of the votes, respectively. In the shareholder supporting statement for this Annual Meeting, the proponent provides no new compelling arguments in support of the proposal.

        For these reasons, the Board of Directors recommends that you vote AGAINST this proposal. Executed proxies will be voted AGAINST this proposal unless you specify otherwise.

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QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING AND VOTING

1.     What is the purpose of the Annual Meeting?

        At the Annual Meeting, shareholders will act upon the matters outlined in the Notice of Annual Meeting of Shareholders. These include the election of directors, an advisory vote to approve our executive compensation, ratification of the appointment of Deloitte & Touche LLP as our independent registered public accounting firm and, if properly presented at the meeting, two shareholder proposals. Also, once the business of the Annual Meeting is concluded, management of the Company will give a business update. Management, Chairs of each standing Board committee and representatives of Deloitte & Touche LLP will be available to respond to questions from shareholders.

2.     What is a proxy statement?

        The Company's Board of Directors is soliciting proxies for use at the 2014 Annual Meeting of Shareholders. A proxy statement is a document we give you when we are soliciting your vote pursuant to SEC regulations.

3.     What is a proxy?

        It is your legal designation of another person to vote the stock you own in the manner you direct. That other person is called a proxy. If you designate someone as your proxy in a written document, that document also is called a proxy or a proxy card. We have designated Dannette L. Smith and Amy L. Schneider to serve as proxies for the Annual Meeting. The Board of Directors will use the proxies at the 2014 Annual Meeting of Shareholders. The proxies also may be voted at any adjournments or postponements of the meeting.

4.     What is the difference between a shareholder of record and a shareholder who holds stock in street name?

        Shareholders of Record. If your shares are registered in your name with our transfer agent, Wells Fargo Shareowner Services, you are a shareholder of record with respect to those shares and the Notice of Internet Availability of Proxy Materials ("Notice") or the proxy materials were sent directly to you by Broadridge Financial Solutions.

        Street Name Holders. If you hold your shares in an account at a bank or broker, then you are the beneficial owner of shares held in "street name." The Notice or proxy materials were forwarded to you by your bank or broker, who is considered the shareholder of record for purposes of voting at the Annual Meeting. As a beneficial owner, you have the right to direct your bank or broker on how to vote the shares held in your account.

5.     How many shares must be present to hold the Annual Meeting?

        In order to conduct the Annual Meeting, holders of a majority of the shares entitled to vote as of the close of business on the record date must be present in person or by proxy. This constitutes a quorum. Your shares are counted as present if you attend the Annual Meeting and vote in person, if you vote your proxy over the internet or by telephone, or by mail. Abstentions and broker non-votes will be counted as present for purposes of establishing a quorum. If a quorum is not present, we will adjourn the Annual Meeting until a quorum is obtained.

6.     How can I access the proxy materials for the Annual Meeting?

        Shareholders may access the proxy materials, which include the Notice of Annual Meeting of Shareholders, Proxy Statement (including a form of proxy card) and Annual Report for the year ended December 31, 2013 on the internet at www.unitedhealthgroup.com/proxymaterials. We will also provide a hard copy of any of these documents free of charge upon request to: UnitedHealth Group Incorporated, 9900 Bren Road East, Minnetonka, Minnesota 55343, Attention: Secretary to the Board of Directors.

        Instead of receiving future copies of our proxy materials by mail, you can elect to receive an e-mail that will provide electronic links to these documents. Opting to receive your proxy materials online will save the cost of producing and mailing documents to your home or business, will give you an electronic link to the proxy voting site and will also help preserve environmental resources.

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        Shareholders of Record. If you vote on the internet at www.proxyvote.com, simply follow the prompts for enrolling in the electronic proxy delivery service. You also may enroll in the electronic proxy delivery service at any time by going directly to www.unitedhealthgroup.com and following the enrollment instructions.

        Street Name Holders. If you hold your shares in a bank or brokerage account, you may also have the opportunity to receive the proxy materials electronically. Please check the information provided in the proxy materials you receive from your bank or broker regarding the availability of this service.

7.     How do I attend the Annual Meeting? What do I need to bring?

        To attend the Annual Meeting, you will need to bring an admission ticket and valid photo identification.

        Only our shareholders are entitled to attend the meeting. The procedure that you must follow in order to attend the meeting depends on whether you are a shareholder of record or a street name holder of our common stock.

        Shareholders of Record. If you are a shareholder of record and received a Notice, the Notice is your admission ticket. If you are a shareholder of record and received proxy materials by mail, your admission ticket is attached to your proxy card. You will need to bring the Notice or the admission ticket and valid photo identification with you to the Annual Meeting in order to be admitted to the meeting.

        Street Name Holders. If you hold your shares in street name, bring with you to the Annual Meeting valid photo identification and your most recent brokerage statement or a letter from your broker or other nominee indicating that you hold our shares. We will use that statement or letter to verify your ownership of common stock and admit you to the Annual Meeting; however, you will not be able to vote your shares at the Annual Meeting without a legal proxy, as described in Question 8.

        Please note that use of cameras, phones or other similar electronic devices and the bringing of large bags, packages or sound or video recording equipment will not be permitted in the meeting room. Attendees will also be required to comply with rules of order and procedure that will be available at the meeting.

8.     How can I vote at the Annual Meeting if I own shares in street name?

        If you are a street name holder, you may not vote your shares at the Annual Meeting unless you obtain a legal proxy from your bank or broker. A legal proxy is a bank's or broker's authorization for you to vote the shares it holds in its name on your behalf. To obtain a legal proxy, please contact your bank or broker for further information.

9.     What shares are included on the Notice, proxy card or voting instruction form?

        If you are a shareholder of record, you will receive only one Notice or proxy card for all the shares of common stock you hold:

        If you hold your shares in street name, you will receive one Notice or voting instruction form for each account you have with a bank or broker. If you hold shares in multiple accounts, you may need to provide voting instructions for each account.

        If you hold shares in our 401(k) savings plan and do not vote your shares or specify your voting instructions on your proxy card, the administrators of the 401(k) savings plan will vote your 401(k) plan shares in the same proportion as the shares for which they have received voting instructions. To allow sufficient time for voting by the 401(k) administrators, your voting instructions must be received by 11:59 p.m. Eastern Time on May 28, 2014.

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10.  How can I listen to the live webcast of the Annual Meeting?

        You can listen to the live webcast of the Annual Meeting by logging on to our website at www.unitedhealthgroup.com and clicking on "Investors" and then on the link to the webcast. An archived copy of the webcast will also be available on our website for 14 days following the Annual Meeting.

11.  What different methods can I use to vote?

        By Written Proxy. All shareholders of record who received proxy materials by mail can vote by written proxy card. If you received a Notice or the proxy materials electronically, you may request a proxy card at any time by following the instructions on the Notice or on the voting website. If you are a street name holder, you will receive instructions on how you may vote from your bank or broker, unless you previously enrolled in electronic delivery.

        By Telephone or Internet. All shareholders of record can vote by telephone from the United States and Canada, using the toll-free telephone number on the proxy card, or through the internet using the procedures and instructions described on the Notice or proxy card. Street name holders may vote by internet or telephone if their bank or broker makes those methods available, in which case the bank or broker will enclose the instructions with the proxy materials. The internet and telephone voting procedures are designed to authenticate shareholders' identities, allow shareholders to vote their shares and to confirm that their instructions have been properly recorded.

        In Person. All shareholders of record may vote in person at the Annual Meeting. Street name holders may vote in person at the Annual Meeting if they have a legal proxy, as described in Question 8.

        The Notice is not a proxy card and it cannot be used to vote your shares.

12.  What is the record date and what does it mean?

        The record date for the Annual Meeting is April 4, 2014. Only owners of record of shares of common stock of the Company at the close of business on the record date are entitled to notice of and to vote at the Annual Meeting, or at any adjournments or postponements of the Annual Meeting. On April 4, 2014, there were 984,105,999 shares of common stock issued, outstanding and entitled to vote. Each owner of record on the record date is entitled to one vote for each share of common stock held.

        The record date was established by our Board of Directors as required by the Minnesota Business Corporation Act. Owners of record of common stock at the close of business on the record date are entitled to:

13.  If I submit a proxy, may I later revoke it and/or change my vote?

        Shareholders of record may revoke a proxy and/or change their vote prior to the completion of voting at the Annual Meeting by:

        Street name holders may revoke a proxy and/or change their vote prior to the completion of voting at the Annual Meeting by:

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14.  Are votes confidential? Who counts the votes?

        We hold the votes of all shareholders in confidence from directors, officers and employees except:

        We have retained Broadridge Financial Solutions to tabulate the votes. We have retained Carl T. Hagberg & Associates to act as independent inspector of the election.

15.  How may I confirm my vote was counted?

        We are offering our shareholders the opportunity to confirm their votes were cast in accordance with their instructions. Vote confirmation is consistent with our commitment to sound corporate governance standards and an important means to increase transparency. Beginning May 19, 2014 and for up to two months after the Annual Meeting, you may confirm your vote beginning 24 hours after your vote is received, whether it was cast by proxy card, electronically or telephonically. To obtain vote confirmation, log onto www.proxyvote.com using your control number (located on your Notice or proxy card) and receive confirmation on how your vote was cast. If you hold your shares through a bank or brokerage account, the ability to confirm your vote may be affected by the rules of your bank or broker and the confirmation will not confirm whether your bank or broker allocated the correct number of shares to you.

16.  What are my choices when voting for director nominees and what vote is needed to elect directors?

        In the vote on the election of director nominees, shareholders may:

A director nominee will be elected if the number of votes cast "for" the nominee exceeds the number of votes cast "against" the nominee. To address a holdover provision in Minnesota law that allows a director who has not been re-elected to remain in office until a successor is elected and qualified, we have a policy requiring any director who does not receive a greater number of votes "for" than "against" his or her election in an uncontested election to tender his or her resignation from the Board of Directors following certification of the shareholder vote. Under this policy, the Board of Directors will determine whether to accept or reject the offer to resign within 90 days of certification of the shareholder vote. The text of this policy appears in our Principles of Governance, which are available on our website at www.unitedhealthgroup.com.

        The Board of Directors recommends a vote FOR each of the nominees.

17.  What are my choices when voting on each of the other proposals considered at the Annual Meeting?

        For each of the other proposals shareholders may:

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18.  What vote is needed to approve each of the other proposals?

        Each of the other proposals, other than the advisory vote to approve our executive compensation, must be approved by the holders of a majority of the shares of common stock present and entitled to vote in person or by proxy at the Annual Meeting in order to pass. For the advisory vote to approve our executive compensation, the Board of Directors will consider the results of that advisory vote when considering future executive compensation decisions.

19.  What is the Board's recommendation with regard to each proposal?

        The Board of Directors makes the following recommendation with regard to each proposal:

20.  What if I do not specify a choice for a matter when returning a proxy?

        Shareholders should specify their choice for each matter in the manner described in the Notice or on their proxy card. If no specific instructions are given, proxies that are signed and returned will be voted:

21.  Are my shares voted if I do not provide a proxy?

        If you are a shareholder of record and do not provide a proxy, you must attend the Annual Meeting in order to vote. If you hold shares through an account with a bank or broker, your shares may be voted by the bank or broker on some matters if you do not provide voting instructions. Banks and brokers have the authority under NYSE rules to vote shares for which their customers do not provide voting instructions on routine matters. The ratification of Deloitte & Touche LLP as our independent registered public accounting firm is considered a routine matter. The election of directors, the advisory vote to approve our executive compensation and the shareholder proposals are not considered routine and banks and brokers cannot vote shares without instruction on those matters. Shares that banks and brokers are not authorized to vote are counted as "broker non-votes."

22.  How are abstentions and broker non-votes counted?

        Abstentions have no effect on the election of directors under Minnesota law.

        Under Minnesota law, abstentions have the effect of an "AGAINST" vote on the proposal seeking advisory approval of our executive compensation, the ratification of the appointment of the Company's independent registered public accounting firm and the shareholder proposals.

        Under Minnesota law, broker non-votes have no effect on the election of directors, proposal seeking advisory approval of our executive compensation, or the shareholder proposals.

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23.  Does the Company have a policy about directors' attendance at the Annual Meeting of Shareholders?

        The Company expects directors to attend the Annual Meeting, absent a compelling reason. All of our directors attended the 2013 Annual Meeting.

24.  What are the deadlines for submitting shareholder proposals for the 2015 Annual Meeting?

        Shareholder Proposals to Be Considered for Inclusion in the Company's Proxy Materials. To be considered for inclusion in our proxy statement for our 2015 Annual Meeting, shareholder proposals submitted pursuant to SEC Rule 14a-8 must be received no later than December 24, 2014 and be submitted in accordance with Rule 14a-8. These shareholder proposals must be in writing and received by the deadline described above at our principal executive offices at UnitedHealth Group Center, 9900 Bren Road East, Minnetonka, Minnesota 55343, Attention: Secretary to the Board of Directors. If we do not receive a shareholder proposal by the deadline described above, the proposal may be excluded from our proxy statement for our 2015 Annual Meeting.

        Other Shareholder Proposals for Presentation at the 2015 Annual Meeting. A shareholder proposal that is not submitted for inclusion in our proxy statement for our 2015 Annual Meeting, but is instead sought to be presented at the 2015 Annual Meeting, must comply with the "advance notice" deadlines in our Bylaws. As such, these shareholder proposals must be received no earlier than February 2, 2015, and no later than the close of business on March 4, 2015. These shareholder proposals must be in writing and received within the "advance notice" deadlines described above at our principal executive offices at UnitedHealth Group Center, 9900 Bren Road East, Minnetonka, Minnesota 55343, Attention: Secretary to the Board of Directors. These shareholder proposals must be in the form provided in our Bylaws and must include the information set forth in the Bylaws about the shareholder proposing the business and any associated person, including information about the direct and indirect ownership of or derivative positions in the Company's common stock and arrangements and understandings related to the proposed business or the voting of the Company's common stock. If we do not receive a shareholder proposal and the required information regarding the shareholder and any associated person by the "advance notice" deadlines described above, the proposal may be excluded from the proxy statement and from consideration at the 2015 Annual Meeting. The "advance notice" requirement described above supersedes the notice period in SEC Rule 14a-4(c)(1) of the federal proxy rules regarding the discretionary proxy voting authority with respect to such shareholder business.

25.  How are proxies solicited and what is the cost?

        We bear all expenses incurred in connection with the solicitation of proxies. We have engaged D.F. King & Co., Inc. to assist with the solicitation of proxies for a base fee of $20,000 plus expenses. We will reimburse brokers, fiduciaries and custodians for their costs in forwarding proxy materials to beneficial owners of common stock.

        Our directors, officers and employees may also solicit proxies by mail, telephone and personal contact. They will not receive any additional compensation for these activities.

26.  Where can I find more information about my voting rights as a shareholder?

        The SEC has an informational website that provides shareholders with general information about how to cast their vote and why voting should be an important consideration for shareholders. You may access that information at www.sec.gov/spotlight/proxymatters.shtml or at www.investor.gov.

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

        The following table provides information about a shareholder known to us to beneficially own more than 5% of the outstanding shares of our common stock, based solely on the information filed by such shareholder in 2014 for the year ended December 31, 2013 on Schedule 13G under the Exchange Act.

Name and Address of Beneficial Owner


Amount and Nature of
Beneficial Ownership


Percent of
Class

BlackRock, Inc.(1)

  62,853,812   6.20%

40 East 52nd Street

       

New York, New York 10022

       

FMR LLC(2)

  52,657,813   5.23%

245 Summer Street

       

Boston, Massachusetts 02210

       
 
(1)
This information, including percent of class, is based on the Schedule 13G/A filed with the SEC by BlackRock, Inc. on February 10, 2014. BlackRock, Inc. reported having sole voting power over 52,130,421 shares, sole dispositive power over 62,814,571 shares, and shared voting and dispositive power over 39,241 shares.

(2)
This information, including percent of class, is based on the Schedule 13G filed with the SEC by FMR LLC on February 14, 2014. FMR LLC reported having sole voting power over 2,516,332 shares and sole dispositive power over 52,657,813 shares.

        The following table provides information about the beneficial ownership of our common stock as of April 4, 2014 by each director and nominee for director, each named executive officer, and by all of our current directors, executive officers and director nominees as a group. As of April 4, 2014, there were 984,105,999 shares of our common stock issued, outstanding and entitled to vote.

Name of Beneficial Owner or Identity of Group

 

Ownership of
Common Stock


Number of Shares
Deemed Beneficially
Owned as a Result of
Equity Awards Exercisable
or Vesting Within 60 Days
of April 4, 2014






 
Total(1)

Percent of
Common
Stock
Outstanding
William C. Ballard, Jr.     65,556 (2)    133,000     198,556   *
 
Edson Bueno, M.D.     8,416,905        57,200     8,474,105   *
 
Richard T. Burke     2,314,776 (2)(3)    163,480     2,478,256   *
 
Robert J. Darretta     34,048 (2)(4)      56,621     90,669   *
 
Michele J. Hooper     25,976 (2)      35,000     60,976   *
 
Rodger A. Lawson     20,877 (2)                0       20,877   *
 
Douglas W. Leatherdale     965,431 (2)(4)(5)    145,510     1,110,941   *
 
Glenn M. Renwick     33,221 (2)      33,929     67,150   *
 
Kenneth I. Shine, M.D.     24,606 (2)         1,250      25,856   *
 
Gail R. Wilensky, Ph.D.     50,446 (2)    133,020     183,466   *
 
Stephen J. Hemsley     2,697,471 (6)(7) 1,358,547     4,056,018   *
 
David S. Wichmann     352,125 (6)     897,684     1,249,809   *
 
Gail K. Boudreaux     31,988        14,896     46,884   *
 
Larry C. Renfro     35,218        14,896     50,114   *
 
Marianne D. Short     6,251        13,241     19,492   *
 
All current directors, executive officers and director nominees as a group (16 individuals)     15,083,413 (8) 3,058,274     18,141,687   1.84%
 
*
Less than 1%.

(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

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(2)
Includes the following number of vested deferred stock units which are considered owned under the Company's stock ownership guidelines for directors: Mr. Ballard — 16,356 deferred stock units; Mr. Burke — 16,356 deferred stock units; Mr. Darretta — 30,708 deferred stock units; Ms. Hooper — 22,606 deferred stock units; Mr. Lawson — 13,310 deferred stock units; Mr. Leatherdale — 16,356 deferred stock units; Mr. Renwick — 31,181 deferred stock units;
Dr. Shine — 24,606 deferred stock units; and Dr. Wilensky — 16,356 deferred stock units.

(3)
Includes 86,000 shares held in trust for the benefit of Mr. Burke's children. Mr. Burke does not have voting or investment power over these shares and disclaims beneficial ownership of these shares.

(4)
Includes the following number of shares known to be pledged as security: Mr. Darretta — 3,340 shares, and Mr. Leatherdale — 898,160 shares. The three-month average daily trading volume for the Company's common stock was 5,196,270 as of April 4, 2014. To discourage pledging shares of the Company's common stock, our insider trading policy requires advance approval of the Compensation Committee of any pledging of common stock by directors, executive officers and other members of management. Pledges that existed prior to the policy's adoption in November 2012 have been grandfathered. Mr. Darretta's shares are held in a margin account for which no loans are outstanding. Messrs. Darretta and Leatherdale continue to satisfy our stock ownership guidelines when pledged shares are excluded from their individual holdings.

(5)
Includes 36,800 shares held in irrevocable trusts for the benefit of Mr. Leatherdale's children and 6,615 shares held in irrevocable trusts for the benefit of Mr. Leatherdale's grandchildren. Mr. Leatherdale disclaims beneficial ownership of these shares. Also includes 7,500 shares held in a charitable foundation which are beneficially owned by Mr. Leatherdale.

(6)
Includes the following number of shares held in trust for the individuals pursuant to our 401(k) plan:
Mr. Hemsley — 298 shares; and Mr. Wichmann — 224 shares. Pursuant to the terms of the 401(k) plan, a participant has sole voting power over his or her shares; however, the plan trustee votes all unvoted shares in the same proportions as the actual proxy votes submitted by plan participants.

(7)
Includes 24,000 shares held in a charitable foundation which are beneficially owned by Mr. Hemsley.

(8)
Includes the indirect holdings included in footnotes 3, 5, 6 and 7.


SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

        Section 16(a) of the Exchange Act requires our executive officers and directors, and persons who beneficially own more than 10% of our common stock, to file initial reports of ownership and reports of changes in ownership with the SEC and the NYSE. Executive officers, directors and greater-than-10% beneficial owners are required by SEC rules to furnish us with copies of all Section 16(a) reports they file. Based solely on our review of these reports and written representations from our executive officers and directors, we believe that all of our executive officers and directors complied with all Section 16(a) filing requirements during 2013.


HOUSEHOLDING NOTICE

&