UnitedHealth Group, Minnetonka, Minn., said it expects charges related to its restatement of past stock-option grants to be significantly greater than the $286 million it forecast earlier this year. The nations second-largest health insurer, under fire for having manipulated the timing of stock-option grants to its top executives, said it hasnt determined the full amount of the cash and noncash compensation charges it will have to take to resolve the accounting problem. The company said it expects the total to be material for certain periods. It also said none of its financial statements since 1994 should be relied on, and it plans to delay filing third-quarter results with the Securities and Exchange Commission.
UnitedHealth also named G. Mike Mikan as its new chief financial officer, replacing Patrick Erlandson, who resigned last month. Most recently, Mikan was senior vice president of finance. UnitedHealth also signed a four-year employment agreement with Stephen Hemsley, who will replace William McGuire as chief executive officer on or before Dec. 1. The company said Hemsley, currently president and chief operating officer, agreed to reprice or relinquish certain past stock-option grants, cutting his current holdings by $190 million. As of Dec. 31, 2005, Hemsley held $663 million in exercisable options and an additional $82 million in options that could not be exercised yet, according to the companys April 7 proxy statement. Separately, the law firm representing McGuire said he had agreed to reduce the value of his stock-option holdings by $200 million. McGuire announced his resignation last month after an internal probe concluded that many of the stock-option grants he had received were surreptitiously timed to maximize their value. He held more than $1.6 billion in exercisable options as of Dec. 31, 2005. -- by Laura B. Benko