Insurer UnitedHealth's CEO's compensation up 4 pct in 2012 as earnings, stock price advance

UnitedHealth Group Inc. kept CEO Stephen J. Hemsley’s salary stable in 2012 but bumped up his total compensation for a year in which the nation’s largest health insurer grew earnings and enrolment and launched a major acquisition.

The Minnetonka, Minn., insurer gave its top executive a compensation package valued at about $13.9 million last year, according to the company’s proxy statement filed with the Securities and Exchange Commission. That’s up 4 per cent from the $13.4 million total he received last year.

Hemsley, 60, received a $1.3 million annual salary in 2012, like he has the past several years. He also received $7 million in stock awards, which is the same total as 2011. But his performance-based bonus climbed 7 per cent to $5.3 million, and he received $287,443 in other compensation, up from $154,804 in 2011.

Other compensation included savings plan contributions and a $125,000 Hart-Scott-Rodino Antitrust Improvement Act filing fee payment UnitedHealth made on behalf of the CEO so he could maintain and increase his stock ownership in the company.

A spokesman said UnitedHealth made the payment because Hemsley’s holdings had approached an anti-trust threshold in the law.

When determining the pay package, the compensation committee of UnitedHealth’s board considered the insurer’s growth and results, “all of which were achieved in a challenging economic environment,” the proxy said.

Hemsley had said heading into 2012 that high unemployment rates, which hurt enrolment, and a sluggish economy would challenge the insurer that year.

UnitedHealth, which covers about 42 million people, saw its full-year earnings climb 7.5 per cent last year to $5.53 billion, as revenue grew more than 8 per cent to top $110 billion.

The insurer’s Medicare Advantage enrolment also grew, as the company solidified its position as the biggest provider of the privately run, subsidized versions of the government’s Medicare program for the elderly and disabled people.

The insurer, which became a Dow Jones industrial average component in September, also raised the quarterly dividend it pays shareholders more than 30 per cent to 21.25 cents in the middle of last year.

UnitedHealth also announced in October that it would spend about $4.9 billion to buy a majority stake in Brazilian health benefits and care provider Amil Participacoes SA. The company is the largest health insurer in Brazil and also owns hospitals and clinics.

Overall, UnitedHealth shares climbed 7 per cent to close 2012 at $54.24, a smaller gain than the 13.4 per cent advance from the Standard & Poor’s 500 index.

The Associated Press formula calculates an executive’s total compensation during the last fiscal year by adding salary, bonuses, perks, and the estimated value of stock and stock options awarded during the year. The AP formula does not count changes in the present value of pension benefits. That makes the AP total slightly different in some cases from the total reported by companies to the Securities and Exchange Commission.

The value that a company assigned to an executive’s stock and option awards for 2012 was the present value of what the company expected the awards to be worth to the executive over time. Companies use one of several formulas to calculate that value. However, the number is just an estimate, and what an executive ultimately receives will depend on the performance of the company’s stock in the years after the awards are granted. Most stock compensation programs require an executive to wait a specified amount of time to receive shares or exercise options.

Outside AP’s calculation of his 2012 total compensation, Hemsley also acquired 284,836 shares that had vested with a value of $15.3 million. He also exercised options to acquire 600,000 shares and realized a value of $12.5 million. Those options and stock awards had been previously given to the executive.

The proxy said Hemsley directly owned UnitedHealth shares valued at about $140 million, as of March 1.