(1) DESCRIPTION OF BUSINESS
United HealthCare Corporation (United HealthCare, or "we," "us," "our") is a national leader in offering health care coverage and related services to help people achieve improved health and well-being through all stages of life. We provide a broad spectrum of products and services and operate in all 50 states, the District of Columbia and Puerto Rico, as well as internationally. Our products and services reflect a number of core capabilities, including medical information management, health benefit administration, risk assessment and pricing, health benefit design, and provider contracting and risk sharing. With these capabilities, we provide comprehensive health care management services through organized health systems and insurance products, including health maintenance organizations (HMOs), point-of-service plans (POS), preferred provider organizations (PPOs) and managed indemnity programs. We also offer specialized health care management services and products such as behavioral health services, workers' compensation and disability services, utilization review services, specialized provider networks, employee assistance programs, knowledge and information services, and administrative services.

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
We have prepared the consolidated financial statements according to generally accepted accounting principles and have included the accounts of United HealthCare and its subsidiaries. We have eliminated all significant inter-company accounts and transactions.

These consolidated financial statements include some amounts that are based on our best estimates and judgments. The most significant estimates relate to medical costs payable and other policy liabilities, intangible asset valuations and integration reserves relating to the recent acquisitions. These estimates may be adjusted as more accurate information becomes available, and any adjustment could be significant.

REVENUE RECOGNITION
Premium revenues are recognized in the period enrolled members are entitled to receive health care services. Premium payments received from our customers prior to such period are recorded as unearned premiums. Management services and fee revenues are recognized in the period the related services are performed. Premium revenues related to Medicare and Medicaid programs as a percentage of total premium revenues were 22% in 1997, 19% in 1996, and 22% in 1995.

MEDICAL COSTS
Medical costs include claims paid, claims in process and pending, and estimated unreported claims and charges by physicians, hospitals and other health care providers for services provided to enrolled members during the period. Medical cost adjustments to prior period estimates are reflected in the current period.

CASH AND CASH EQUIVALENTS AND INVESTMENTS
Cash and cash equivalents are highly liquid investments with an original maturity of three months or less. The fair value of cash and cash equivalents approximates carrying value because of the short maturity of the instruments. Investments with a maturity of less than one year are classified as short-term.

Investments held by trustees or agencies according to state regulatory requirements are classified as held to maturity based on our ability and intent to hold these investments to maturity. Such investments are reported at amortized cost. All other investments are classified as available for sale and are reported at fair value based on quoted market prices. Unrealized gains and losses on investments available for sale are excluded from earnings and reported as a separate component of shareholders' equity, net of income tax effects. To calculate realized gains and losses on the sale of investments available for sale, we use the amortized cost of each investment sold. We have no investments classified as trading securities.

ASSETS UNDER MANAGEMENT
In connection with the 1995 acquisition of The MetraHealth Companies, Inc. (MetraHealth) (see Note 3), we are administering certain aspects of the health care operations of MetraHealth's predecessor companies related to business we expect to be transferred to United HealthCare according to agreements made during the initial formation of MetraHealth. As this business transfers to United HealthCare, associated assets are invested in marketable securities according to our investment policy.

OTHER POLICY LIABILITIES
Other policy liabilities principally relate to experience-rated indemnity products and primarily include retrospective rate credit reserves and customer balances.

Retrospective rate credit reserves represent premiums we received in excess of claims and expenses charged under eligible contracts. Reserves established for closed policy years are based on actual experience, while reserves for open years are based on estimates of premiums, claims and expenses incurred.

Customer balances consist principally of deposit accounts and reserves that have accumulated under certain experience-rated contracts. At the customer's option, these balances may be returned to the customer or may be used to pay future premiums or claims under certain eligible contracts.

PROPERTY AND EQUIPMENT
Property and equipment is stated at cost. Depreciation is calculated using the straight-line method over the estimated useful life of the respective assets, ranging from 3 years to 30 years.

GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill represents the purchase price and transaction costs associated with businesses we acquired in excess of the estimated fair value of the net assets of these businesses. To the extent possible, a portion of the excess purchase price and transaction costs is assigned to certain identifiable intangible assets, primarily employer group contracts. Goodwill and other intangible assets are being amortized on a straight-line basis over useful lives ranging from 3 years to 40 years.

The useful lives of goodwill and other intangible assets have been assigned based on our best judgment. We periodically evaluate whether certain circumstances may affect the estimated useful lives or the recoverability of the unamortized balance of goodwill or other intangible assets.

The most significant components of goodwill and other intangible assets are comprised of goodwill of $1.2 billion in 1997 and $1.1 billion in 1996, and employer group contracts of $900 million in 1997 and $939 million in 1996, net of accumulated amortization.

LONG-LIVED ASSETS
We review long-lived assets for events or changes in circumstances that would indicate we may not recover their carrying value. We consider a number of factors, including estimated future undiscounted cash flows associated with the long-lived asset, to make this decision. We record assets held for sale at the lower of the carrying amount or fair value, less any costs associated with the final settlement.

INCOME TAXES
Deferred income tax assets and liabilities are recognized for the differences between the financial and income tax reporting bases of assets and liabilities based on enacted tax rates and laws. The deferred income tax provision or benefit generally reflects the net change in deferred income tax assets and liabilities during the year. The current income tax provision reflects the tax consequences of revenues and expenses currently taxable or deductible on various income tax returns for the year reported.

STOCK-BASED COMPENSATION
We use the intrinsic value method for determining stock-based compensation expenses. Under the intrinsic value method, we do not recognize compensation expense when the exercise price of an employee stock option equals or exceeds the fair market value of the stock on the date the option is granted. Information on what our stock-based compensation expenses would have been had we calculated those expenses using fair market values of outstanding stock options is included in Note 8.

NET EARNINGS PER COMMON SHARE
In 1997, we adopted a new accounting standard that changes the way we determine earnings per share (SFAS No. 128). Under this new standard, basic net earnings per common share is computed by dividing net earnings applicable to common shareholders by the weighted-average number of common shares outstanding during the period. Diluted net earnings per common share is determined using the weighted-average number of common shares outstanding during the period, adjusted for the dilutive effect of outstanding stock options. We do not consider convertible preferred stock a common stock equivalent when calculating diluted earnings per share because the result would be anti-dilutive.

RECLASSIFICATIONS
Certain 1996 and 1995 amounts in the consolidated financial statements have been reclassified to conform with the 1997 presentation. These reclassifications have no effect on net earnings or shareholders' equity as previously reported.

(3) ACQUISITIONS
On December 31, 1997, we acquired Medicode, Inc. (Medicode), a leading provider of health care information products. We issued approximately 2.4 million shares of common stock and 507,000 common stock options with a total fair value of $140 million in exchange for all outstanding shares of Medicode. We accounted for the acquisition using the purchase method of accounting, which means the purchase price was allocated to assets and liabilities based on estimated fair values at the date of acquisition. The purchase price and costs associated with the acquisition exceeded the estimated fair value of net assets acquired by $135 million and have been assigned to goodwill. The pro forma effects of the Medicode acquisition on our consolidated financial statements were not material.

On April 12, 1996, we completed the acquisition of HealthWise of America, Inc. (HealthWise). HealthWise owned or operated health plans in Maryland, Kentucky, Tennessee and Arkansas that served 154,000 members at the time of acquisition. We issued 4.3 million shares of common stock in exchange for all outstanding shares of HealthWise. We accounted for the acquisition as a pooling of interests; however, we did not restate our historical consolidated financial results because the effects of this acquisition on our consolidated financial statements were not material. In connection with the HealthWise acquisition, we incurred nonoperating merger costs of $15 million.

On March 29, 1996, we completed the acquisition of PHP, Inc. (PHP), a North Carolina-based health plan that served 132,000 members at the time of acquisition. We issued 2.3 million shares of common stock, with a fair value of $140 million, in exchange for all outstanding shares of PHP. We accounted for the acquisition using the purchase method of accounting. The purchase price and costs associated with the acquisition exceeded the estimated fair value of net assets acquired by $115 million and have been assigned to goodwill. The pro forma effects of the PHP acquisition on our consolidated financial statements were not material.

We acquired MetraHealth on October 2, 1995. MetraHealth was formed in January 1995 by combining the group health care operations of Metropolitan Life Insurance Company and The Travelers Insurance Group. At the time of acquisition, MetraHealth served over 10 million individuals, including 5.9 million in network-based care programs, 469,000 of whom were health plan members. We accounted for the acquisition using the purchase method of accounting. Based on estimates made at the date of acquisition, the purchase price and costs associated with the acquisition exceeded the estimated fair value of net assets acquired by $992 million.

The total purchase price of the acquisition was $1.1 billion in cash and $500 million of convertible preferred stock, for a total amount at closing of $1.6 billion. In addition, the former owners of MetraHealth were eligible to receive up to an additional $350 million if MetraHealth achieved certain 1995 operating results, as defined. In 1996, we paid $105 million in cash, including interest, as full settlement of the 1995 earnout. This earnout payment has been reflected in the accompanying consolidated financial statements as additional goodwill. With the settlement of the 1995 earnout and certain revisions to estimates made in connection with the acquisition, goodwill and other intangible assets associated with the MetraHealth acquisition totaled $1.2 billion.

In addition, certain of MetraHealth's former owners were eligible to receive up to an additional $175 million in cash for each of 1996 and 1997 if our post-acquisition combined net earnings for each of those years reached certain specified levels. Based on combined operating results for those years, no payment related to these earnouts was required.

Had the MetraHealth acquisition occurred on January1, 1995, combined unaudited pro forma results for the year ended December 31, 1995, would have been: revenues - $8.7 billion; net earnings before restructuring charges - $450 million; and net earnings per common share before restructuring charges - $2.53. After considering 1995 restructuring charges, net earnings would have been $353 million in 1995 ($1.98 per common share).

(4) RESTRUCTURING CHARGES
In connection with our acquisition of MetraHealth, we developed a comprehensive plan to integrate the business activities of the combined companies (the Plan). The Plan included, among other things, the disposition, discontinuance and restructuring of certain businesses and product lines, and the recognition of certain asset impairments. In the fourth quarter of 1995, we recorded $154 million in restructuring charges associated with the Plan.

In conjunction with ongoing integration efforts, we modified the Plan during 1996. The restructuring reserves established with the original Plan were an accurate estimation of the costs incurred; however, we needed to reallocate the reserve estimates among the associated activities as the original Plan evolved. A reconciliation of restructuring activities during 1997, 1996 and 1995 is as follows (in millions):

		1997	1996	1995
Balance at beginning of year		$28	$141	$ -
Provisions for restructuring costs:
	Severance and Outplacement	-	(10)	24
	Contract Terminations	-	3	58
	Noncancelable Lease Obligations	-	7	20
	Asset Impairments	-	-	52
Cash Payments
	Severance and Outplacement	(3)	(9)	(2)
	Contract Terminations	(9)	(39)	(9)
	Noncancelable Lease Obligations	(5)	(13)	(2)
Noncash Activities
	Property, equipment and software writedowns	-	(52)	-
Balance at end of year		$11	$28	$141

(5) PROVISION FOR FUTURE LOSSES
In the second quarter of 1996, we recorded a provision to medical costs of $45 million to cover estimated losses we expect to incur through the remaining terms of two large multiyear contracts in our St. Louis health plan. Through December 31, 1997, losses under these contracts of $26 million have been applied against the established reserve. We believe the remaining balance in the reserve will be sufficient to cover any future losses from these contracts.

(6) CASH AND INVESTMENTS
As of December 31, 1997 and 1996, the amortized cost, gross unrealized holding gains and losses, and fair value of cash and investments were as follows (in millions):

1997			Amortized Cost	Gross Unrealized Holding Gains	Gross Unrealized Holding Losses	Fair Value
Cash and Cash Equavilents			$750	$-	$-	$750
Investments Available for Sale
	U.S. Government and Agencies		685	9	(3)	691
	State and State Agencies		775	17	-	792
	Municipalities and Local Agencies		845	18	-	863
	Corporate		439	6	-	445
	Other		435	-	-	435
		Total Investments Available for Sale	3,179	50	(3)	3,226
Instruments Held to Maturity
	U.S. Government and Agencies		38	-	-	38
	State and State Agencies		2	-	-	2
	Municipalities and Local Agencies		1	-	-	1
	Corporate		18	-	-	18
	Other		6	-	-	6
		Total Investments Held to Maturity	65	-	-	65
		Total Cash and Investments	$3,994	$50	$(3)	$4,041

1996
Cash and Cash Equivalents			$1,037	$-	$-	$1,037
Investments Available for Sale
	U.S. Government and Agencies		825	1	(14)	812
	State and State Agencies		471	2	-	473
	Municipalities and Local Agencies		474	3	(1)	476
	Corporate		416	1	(3)	414
	Other		179	-	-	179
		Total Investments Available for Sale	2,365	7	(18)	2,354
Investments Held to Maturity
	U.S. Government and Agencies		36	-	-	36
	State and State Agencies		5	-	-	5
	Municipalities and Local Agencies		1	-	-	1
	Corporate		17	-	-	17
	Other		3	-	-	3
		Total Investments Held to Maturity	62	-	-	62
		Total Cash and Investments	$3,464	$7	$(18)	$3,453

As of December 31, 1997, the contractual maturities of cash and cash equivalents and investments were as follows (in millions):

YEARS TO MATURITY			Less Than One Year	One to Five Years	Over Five to Ten Years	Over Ten Years
At Amortized Cost:
	Cash and Cash Equivalents		$750	$-	$-	$-
	Investments Available for Sale		506	1,191	678	804
	Investments Held to Maturity		36	29	-	-
		Total Cash and Investments	$1,292	$1,220	$678	$804
At Fair Value:
	Cash and Cash Equivalents		$750	$-	$-	$-
	Investments Available for Sale		506	1,202	695	823
	Investments Held to Maturity		36	29	-	-
		Total Cash and Investments	$1,292	$1,231	$695	$823

Mortgage-backed securities that do not have a single maturity date have been presented in the above tables based on their estimated maturity dates.

Under applicable government regulations, several United HealthCare subsidiaries are required to maintain specific capital levels to support their operations. In addition, at December 31, 1997, trustees or state regulatory agencies held investments of $65 million to ensure adequate financial reserves exist as required by state regulatory agencies. After taking these regulations and certain business considerations into account, we had $960 million in cash and investments available for general corporate use at December 31, 1997. Investment income earned on all investments accrues to United HealthCare.

(7) CONVERTIBLE PREFERRED STOCK
We have 10 million shares of $0.001 par value preferred stock authorized for issuance. With our acquisition of MetraHealth, we designated a series of 500,000 shares as 5.75% Series A Convertible Preferred Stock (Preferred Stock). This Preferred Stock was issued to certain former shareholders of MetraHealth as a portion of the total consideration of the MetraHealth acquisition (see Note 3).

Preferred Stock dividends are fully cumulative and payable quarterly at the rate of 5.75% annually from available funds.

At the option of the Preferred shareholders, each share of Preferred Stock may be converted into 20.21 shares of United HealthCare common stock. At our option, we may redeem the Preferred Stock, in whole or in part, anytime after October 1, 1998, at certain defined redemption rates. The Preferred Stock must be redeemed no later than October 1, 2005. Holders of Preferred Stock do not have voting rights, but do have preference upon liquidation or dissolution of United HealthCare.

(8) SHAREHOLDERS' EQUITY
STOCK REPURCHASE PROGRAM
In November 1997, the board of directors authorized a stock repurchase program under which up to 10% of our outstanding common stock may be repurchased. These repurchases may be made from time to time at prevailing prices in the open market, subject to certain restrictions on volume, pricing and timing. The repurchased shares will be available for reissuance for the employee stock option and purchase plans and for other corporate purposes. Repurchase activity in 1997 was not significant.

DIVIDENDS
On February 10, 1998, the board of directors approved an annual dividend for 1998 of $0.03 per share to holders of common stock. Dividends will be paid on April 15, 1998, to shareholders of record at the close of business on April 1, 1998.

REGULATORY REQUIREMENTS
Regulated United HealthCare subsidiaries must comply with certain minimum capital or tangible net equity requirements in each of the states in which they operate. As of December 31, 1997, all regulated subsidiaries were in compliance in all material respects with these requirements.

STOCK-BASED COMPENSATION PLANS
We have stock and incentive plans (Stock Plans) for the benefit of eligible employees. As of December 31, 1997, the Stock Plans allowed for the future granting of up to 1,033,000 shares as incentive or non-qualified stock options, stock appreciation rights, restricted stock awards, and performance awards to employees.

In 1995, we adopted the Non-employee Director Stock Option Plan (the 1995 Plan) to benefit members of the board of directors who are not employees. Up to 350,000 shares of common stock may be issued under the terms of the 1995 Plan. As of December 31, 1997, 74,000 shares were available for future grants of non-qualified stock options under the 1995 Plan.

Options generally are granted at an exercise price not less than the fair market value of the common stock at the date of grant. They may be exercised over varying periods up to 10 years from the date of grant.

A summary of the activity under our Stock Plans and the 1995 Plan during 1997, 1996 and 1995 is presented in the table below (shares in thousands):

	1997		1996		1995
	Shares	Weighted-Average Exercise Price	Shares	Weighted-Average Exercise Price	Shares	Weighted-Average Exercise Price
Outstanding at beginning of year	16,894	$29	14,927	$28	11,509	$22
Granted	4,366	$44	4,125	$33	6,792	$35
Issued in acquisition	507	$4	-	$-	-	$-
Exercised	(3,095)	$20	(1,336)	$19	(2,168)	$16
Forfeited	(1,559)	$35	(822)	$33	(1,206)	$31
Outstanding at end of year	17,113	$34	16,894	$29	14,927	$28
Exercisable at end of year	6,702	$28	6,914	$23	4,542	$23

The following table summarizes information about stock options outstanding at December 31, 1997 (shares in thousands):

We increased additional paid-in capital $37 million in 1997, $15 million in 1996, and $29 million in 1995 to reflect the tax benefit we received upon the exercise of nonqualified stock options.

We do not recognize compensation expense in connection with stock option grants related to the Stock Plans and the 1995 Plan because we grant stock options at exercise prices that equal or exceed the fair market value of the stock at the time options are granted. If we had determined compensation expense using fair market values for the stock, net earnings and diluted net earnings per common share would have been reduced to the following pro forma amounts:

		1997	1996	1995
Net Earnings (in millions)
	As reported	$460	$356	$286
	Pro Forma	$430	$332	$266
Diluted Net Earnings Per Common Share
	As reported	$2.26	$1.76	$1.57
	Pro Forma	$2.10	$1.63	$1.46
Weighted-Average Fair Value of Options Granted		$25	$23	$24

To determine compensation cost under the fair value method, the fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model.

Principal assumptions used in applying the Black-Scholes model were as follows:

	1997	1996	1995
Risk-free interest rate	6.0%	6.6%	6.4%
Expected volatility	56%	57%	55%
Expected dividend yield	0%	0%	0%
Expected life in years	5.6	5.0	5.2

Because we did not apply the fair value method of accounting to options granted prior to January 1, 1995, the resulting pro forma compensation cost may not be representative of what can be expected in future years.

EMPLOYEE STOCK OWNERSHIP PLAN
We have an unleveraged Employee Stock Ownership Plan (ESOP) for the benefit of all eligible employees. Company contributions to the ESOP are made at the discretion of the board of directors. We made contributions to the ESOP of $4 million in 1997, $3 million in 1996, and $1 million in 1995.

EMPLOYEE STOCK PURCHASE PLAN
The Employee Stock Purchase Plan (ESPP) allows all eligible employees to purchase shares of common stock on semiannual offering dates at a price that is the lesser of 85% of the fair market value of the shares on the first day or the last day of the semiannual period. Employee contributions to the ESPP were $17 million for 1997, $16 million for 1996, and $7 million for 1995. Through the ESPP, we issued employees 422,000 shares in 1997, 392,000 shares in 1996, and 216,000 shares in 1995. As of December 31, 1997, 3.2 million shares were available for future issue.

(9) INCOME TAXES
Components of the Provision for Income Taxes

Year Ended December 31, (in millions)		1997	1996	1995
Current
	Federal	$171	$159	$182
	State	20	18	27
	Total Current	191	177	209
Deferred		91	48	(34)
	Total Provision	$282	$225	$175

Reconciliation of Statutory to Effective Income Tax Rate

Year Ended December 31		1997	1996	1995
Federal Statutory Rate		35.0%	35.0%	34.9%
State Income Taxes, net of federal benefit		2.8	2.4	3.0
Tax-exempt Investment Income		(2.9)	(2.0)	(2.6)
Intangible Amortization		2.8	3.1	2.0
Other, net		0.3	0.2	0.7
	Effective Income Tax Rate	38.0%	38.7%	38.0%

Components of Deferred Income Tax Assets and Liablilities

December 31,		1997	1996
Deferred Income Tax Assets:
	Medical Costs Payable and Other Accrued Liabilities	$22	$39
	Facility Consolidation Reserves	18	24
	Loss Reserve Discounting	10	21
	Severance and Deferred Compensation	-	19
	Unearned Premiums	19	12
	Bad Debt Allowance	9	10
	Other Restructuring Reserves	1	10
	Impaired Assets Reserves	4	9
	Intangible Amortization	3	6
	Unrealized Losses on Investments Available for Sale	-	4
	Other	2	9
	Total Deferred Income Tax Assets	88	163
Deferred Income Tax Liablilities:
	Capitalized Software Development	(19)	(8)
	Unrealized Gains on Investments Available for Sale	(18)	-
	Other	(10)	(1)
	Total Deferred Income Tax Liablilities	(47)	(9)
Net Deferred Income Tax Assets		$41	$154

We paid income taxes of $124 million in 1997, $96 million in 1996, and $190 million in 1995.

Consolidated income tax returns for fiscal years 1995 and 1994 are being examined by the Internal Revenue Service. We do not believe any adjustments that may result will have a significant impact on consolidated operating results or financial position.

(10) COMMITMENTS AND CONTINGENCIES
LEASES
We lease facilities, computer hardware and other equipment under long-term operating leases that are non-cancelable and expire on various dates through 2011. Rent expense under all operating leases was $104 million in 1997, $114 million in 1996, and $61 million in 1995.

At December 31, 1997, future minimum annual lease payments under all noncancelable operating leases were as follows (in millions):

SERVICE AGREEMENTS
On June 1, 1996, and November 16, 1995, we entered into separate 10-year contracts with nonaffiliated third parties for information technology services. Under the terms of the contracts, the third parties assumed responsibility for certain data center operations and support. On September 19, 1996, we entered into a 10-year contract with a third party for certain data network and voice communication services. Future payments under all of these contracts are estimated to be $1.5 billion; however, the actual timing and amount of payments will vary based on usage. Expenses incurred in connection with these agreements were $125 million in 1997, $70 million in 1996, and $6 million in 1995.

LEGAL PROCEEDINGS
We are involved in legal actions that arise in the ordinary course of business. Although we cannot predict the outcomes of legal actions, it is our opinion that the resolution of any currently pending or threatened actions will not have an adverse effect on our consolidated financial position or results of operations.

BUSINESS RISKS
Certain factors relating to the health care industry and our business should be carefully considered. Companies offering health care coverage and health care management services are heavily regulated at federal and state levels. While we cannot predict regulatory changes or their impact, it is possible that operations and financial results could be negatively affected.

After several years of moderate increases in health care costs and utilization, the industry experienced a pronounced increase during 1996. Although these increases appear to have stabilized, there is no assurance that health care costs and utilization will not continue to increase at a more rapid pace. If they do, we may not be able to meet our objective of maintaining price increases at least sufficient to cover health care cost increases.

Additionally, the health care industry is highly competitive and has seen significant consolidation over the past few years. The current competitive markets in certain areas may limit our ability to price products at appropriate levels. These competitive factors may adversely affect the consolidated financial results.

CONCENTRATIONS OF CREDIT RISK
Investments in financial instruments such as marketable securities and commercial premiums receivable may subject United HealthCare to concentrations of credit risk. Our investments in marketable securities are managed by professional investment managers within guidelines established by the board of directors. As a matter of policy, these guidelines limit the amounts that may be invested in any one issuer. Concentrations of credit risk with respect to commercial premiums receivable are limited due to the large number of employer groups that comprise our customer base. As of December 31, 1997, there were no significant concentrations of credit risk.

(11) RECENTLY ISSUED ACCOUNTING STANDARDS

In 1998, we will adopt a new accounting standard (SFAS No. 130) that will require us to report comprehensive income and its components, defined in the standard as changes in the equity of our business during a reporting period excluding changes resulting from investments by and distributions to our shareholders. This new standard will not affect net earnings or shareholders' equity as previously reported.

In 1998, we also will adopt a new accounting standard (SFAS No. 131) that will require us to report financial and descriptive information about our reportable operating segments. Generally, financial information will be required to be reported on the basis that it is used internally to evaluate segment performance and to allocate resources to segments. This new standard will only affect financial statement disclosures and will not affect how we determine net earnings or shareholders' equity.

(12) QUARTERLY FINANCIAL DATA (UNAUDITED)
The following is a summary of unaudited quarterly results of operations for the years ended December 31, 1997 and 1996 (in millions, except per share data):

	Quarters Ended
	March 31	June 30	September 30	December 31
1997
Revenues	$2,851	$2,931	$2,958	$3,054
Operating Expenses	$2,673	$2,746	$2,771	$2,862
Net Earnings	$109	$116	$116	$119
Net Earnings Applicable to Common Shareholders	$102	$108	$109	$112
Basic Net Earnings per Common Share	$0.55	$0.58	$0.58	$0.59
Diluted Net Earnings Common Share	$0.54	$0.57	$0.57	$0.58
1996
Revenues	$2,318	$2,492	$2,587	$2,677
Operating Expenses	$2,125	$2,395	$2,438	$2,520
Net Earnings	$119	$51	$91	$95
Net Earnings Applicable to Common Shareholders	$112	$43	$84	$88
Basic Net Earnings per Common Share	$0.64	$0.24	$0.46	$0.48
Diluted Net Earnings Common Share	$0.62	$0.23	$0.45	$0.47