UnitedHealth Group said it is settling a federal securities class-action lawsuit brought by major shareholders for $895 million, and is slashing 4,000 jobs and warning of weaker profits due to the poor economy and higher Medicare costs.
The California Public Employees Retirement System brought the lawsuit in U.S. District Court of Minnesota over the insurers stock-option grant practices. UnitedHealth Groups previous chief executive officer, William McGuire, resigned from the company in December 2006 over the stock-backdating scandal. UnitedHealth said neither the company nor any of the individuals admit any wrongdoing as part of the proposed settlement agreement.
CalPERS said the proposed settlement, which is subject to approval by the board of directors of both parties as well as the court, also provides shareholder protections such as a mandated holding period for option shares acquired by executives, shareowner approval of any stock option re-pricing, and that incentive compensation take into consideration UnitedHealths performance as compared to its peer group.
The Minnetonka, Minn.-based insurer said it is cutting 5% of its workforce in a restructuring and has revised its 2008 outlook downward amid continued economic pressures. -- by Rebecca Vesely