OFFICE OF THE CHAIRMAN
Pictured left to right are
Travers H. Wills, chief operating officer and chief executive officer, Health Plans;
William W. McGuire, M.D., president, chairman and chief executive officer; and
Stephen J. Hemsley, senior executive vice president.

I am understandably proud of the performance of United HealthCare in 1997 and eager to express my appreciation to the thousands of men and women who contributed so much to achieve our exceptional results on your behalf. > We grew revenues 17 percent to nearly $12 billion. > We achieved record earnings levels. > We continued to build on an exceptional financial position - generating nearly $700 million in cash from operations. > And we enriched the skills, systems and resources that will allow us to sustain and advance this level of performance. As proud as we are of our present performance, it is the future that dominates our thinking and captures our imagination. United HealthCare has always been more focused on a future full of possibilities than any past achievement. We believe that our constant attention to new market opportunities is what allows us to perform so well in the here and now. We are ideally positioned for an even greater future. It is a future where United HealthCare will define and lead a vast health and well-being marketplace - defined as the products, services and related channels of access and distribution that will advance the physical, mental and social well-being of people. I call this a "frontier" market because its consumer potential is still untapped. It is dynamic, enormous in size, and offers immense potential to create enduring economic value while improving the lives of those it addresses. Our past achievements demonstrate that United HealthCare is uniquely capable of assuming leadership of this new territory. In this decade alone, United HealthCare will have grown its revenues from $1 billion to more than $17 billion this year. In the process, we have established a strong presence in virtually every major U.S. market and an expanded portfolio of international interests. We have a truly expandable infrastructure - the systems, core processes, expertise, people, places and reservoirs of data - with boundaries that lie well beyond the provinces of today's health insurance. Within this infrastructure, our 30,000 skilled employees cultivate the intellectual assets that will be essential to shape and lead this health and well-being market into the next century. Our exceedingly strong financial position combined with proven acquisition and integration skills allow us to supplement our organic growth both vertically through our defined business segments, as well as horizontally into new markets. In 1997, Standard and Poor's reaffirmed our A+ rating - the highest rating of any company in this field. As we embrace the rapidly advancing age of consumer participation in health and well-being, perhaps the most enduring aspect of our enterprise will be our long-standing consumer-oriented culture. The innovative and consumer-friendly design of our products and services, the simple convenience of our networks, the human touch we strive to bring to every contact with our members, all position United HealthCare to forge an increasingly more intimate relationship directly with the consumer. We believe these attributes are part of the reason that, in March 1998, Fortune magazine again acknowledged United HealthCare as the most admired company in the health services field. These accomplishments did not occur because we took a "business as usual" approach to the market or the future. We are a distinctive and profoundly different enterprise by intent. Our intent - and our commitment to our shareholders - is to remain different, distinctive and driven to expand our potential. Accordingly, we are again taking steps toward the future - acting from a position of strength and taking our performance to the next level. In January 1998, we initiated efforts to realign our operations into six customer-oriented, more independently driven but strategically aligned business segments. We are aligning our focus, management, products and services, resources, systems, creativity and energies to attack these six high-potential markets: Health Plans With more than $10 billion in revenues projected for 1998, this is our historic market. We will intensify our efforts to grow and provide additional innovative managed care products, delivered through our group of over 40 local health plans. Retiree and Senior Services In perhaps the largest emerging consumer market in America today, we will pursue new and more diverse businesses dedicated to serving the specific needs of seniors and retired Americans. Our $3.5 billion business partnership with American Association of Retired Persons (AARP), which became effective in January 1998, represents a dramatic entrance into this new market for United HealthCare. Insurance Services We possess the assets and expertise to emerge as an increasingly broader based provider of insurance products and services. With 1998 insurance revenues estimated at just under $1 billion, we will pursue the development of specialty insurance products and services that we believe can be cultivated and grown within our business segment portfolio. Specialized Care Services With 1998 revenues projected at more than $600 million for this segment, we will advance our already substantial presence in behavioral and social health and well-being, and incubate more businesses built around access to specialized care and disease management networks. Strategic Business Services Through our Strategic Business Services segment, we will serve as the operating backbone and product channel to large group employers, governments and institutions, payors and providers of health care services, and others seeking the best in benefit products and business and administrative services. These service offerings, while initially dominated by health and benefit administration, will grow into a much broader and diverse portfolio responding to the escalation of outsourcing and specialization demands of this market segment. Knowledge and Information For years we have used our vast reserves of data and expertise, technology and analytical tools to serve and advance our health businesses. Now we are advancing these resources as a business, just as the age of knowledge is dawning. For knowledge and information concerning the health of Americans, the needs and trends of giving care, and the behavior of the most sophisticated health delivery market on earth, we seek to make United HealthCare the first image that comes to mind. What was an internal department two years ago will advance to revenues projected at more than $200 million in 1998. And it's just the beginning. I close this letter by encouraging you to read further and learn more about us from this annual report. I invite you to get to know and understand who we are and what we are about. Whether you are an individual looking for a career, a business or institution looking for answers and solutions, a consumer seeking access to the best care and value available anywhere, or an investor searching for exceptional and sustainable returns, you will learn that United HealthCare is an enterprise with a singular and valuable destiny. Sincerely, William W. McGuire, M.D. President, Chairman and Chief Executive Officer