UnitedHealth cuts 4,000 jobs and 2008 outlook

UnitedHealth said its restructuring would change operations on every level to focus more on regional coverage. The new UnitedHealth will be "simpler, leaner and faster," Chief Executive Stephen J. Hemsley said.

Analysts saw the announcements as perhaps the end of a long rough patch for UnitedHealth, the nation's second-largest health insurer. Shares in UnitedHealth Group fell 51 cents, or 2 percent, to close at $25.12 Wednesday after sliding to $25.04 earlier in the session, a level not reached since 2003.

The company has been wrestling since 2006 with the backdating scandal, which led to the forced departure of CEO Bill McGuire, who helped build UnitedHealth into a managed-care powerhouse.

UnitedHealth took a big step toward making those problems go away by agreeing to pay $895 million to settle a class-action lawsuit led by the California Public Employees Retirement System (CalPERS) and Alaska Plumbing and Pipefitting Industry Pension Trust. The plaintiffs had argued that options backdating cost shareholders money.

UnitedHealth will pay $17 million to resolve another suit related to the Employee Retirement Income Security Act.

CalPERS and attorneys who follow such settlements said they believed the $895 million was the largest in an options backdating class action. Other recent settlements include $160 million last month between Brocade Communications Systems Inc. and shareholders and a $117.5 million settlement between Mercury Interactive Corp. and shareholders last October.

"This is a significant, epic settlement," said Ramzi Abadou, an attorney for CalPERS. He also noted a corporate governance change calling for a shareholder-nominated director, calling it "a major advance in corporate-shareowner relations."

Hemsley said the settlements will help UnitedHealth avoid more costly litigation.

Most analysts focused on the restructuring and the lowered profit forecast, which was widely expected.