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A.M. Best Revises Outlook to Positive for UnitedHealth Group Incorporated and Its Subsidiaries
[December 11, 2014]

A.M. Best Revises Outlook to Positive for UnitedHealth Group Incorporated and Its Subsidiaries


A.M. Best has affirmed the financial strength rating (FSR) of A (Excellent) and the issuer credit ratings (ICR) of "a" for the majority of the insurance subsidiaries of UnitedHealth Group Incorporated (UnitedHealth) (Minnetonka, MN) [NYSE:UNH]. Concurrently, A.M. Best has affirmed the ICR of "bbb+" and debt ratings of UnitedHealth. The outlook for the majority of ICRs has been revised to positive from stable. The outlook for the FSR is stable.

A.M. Best also has assigned debt ratings of "bbb+" to $750 million 1.4% senior unsecured notes due 2017, $500 million 2.3% senior unsecured notes due 2019, and $750 million 2.875% senior unsecured notes due 2021 - all issued recently by UnitedHealth. The outlook assigned to these debt ratings is positive.

The rating affirmation for UnitedHealth reflects the strength of its earnings combined with its dominant market position and sophisticated operations. UnitedHealth continues to demonstrate its ability to identify and capitalize upon strategic opportunities, as well as effectively control medical cost trend through innovative provider contracts, product pricing and member engagement, all supported by advanced technological capabilities. These strengths are further enhanced by the growing diversification of health insurance business under UnitedHealthcare, significant market presence and diverse non-insurance health services operations of UnitedHealth. In addition, UnitedHealth's non-insurance operations are expanding and currently represent approximately 25% of operating earnings and more than 35% of revenues prior to eliminations. The revision of outlook to positive from stable reflects A.M. Best's opinion that UnitedHealth's insurance subsidiaries have successfully absorbed the initial negative impact of recent market changes and are well-positioned for future profitable growth in various market segments.

Partially offsetting these strengths are the declining operating margins at UnitedHealthcare, which is in line with the industry trend. The margin compression is a result of new non-deductible insurance fees imposed by the Patient Protection and Affordable Care Act (ACA), reduced Medicare Advantage reimbursement and changing business mix with a growing share of lower margin, government-funde products. In addition, the ACA prompted a significant number of employer groups to migrate from risk to self-funded arrangements leading to lower risk and narrower margins, thus reducing earnings potential for UnitedHealth insurance subsidiaries.



Furthermore, A.M. Best is concerned with UnitedHealth managing to a lower level of risk-adjusted capitalization at its lead regulated entity, UnitedHealthcare Insurance Company (UHIC), relative to peers. A.M. Best does acknowledge that UHIC has historically generated strong operating results; although the trend is expected to continue, earnings margins have moderated. UnitedHealth has the resources and willingness to provide support to UHIC if needed. Additionally, UnitedHealth's financial leverage and goodwill, although increased in recent years, remain in line with peers. Nevertheless, the company maintains strong financial flexibility, supported in part by growing cash flow from the non-insurance operating subsidiaries.

Key rating drivers that may lead to positive rating actions for UnitedHealth and its subsidiaries include revenue and earnings growth at UnitedHealthcare insurance entities; successful absorption of new membership in government programs; improvement in risk-adjusted capital at regulated entities; and maintenance of UnitedHealth Group's financial flexibility. Key rating drivers that may lead to negative rating actions include a sizeable decline in risk-adjusted capital at UnitedHealth's lead operating entity, UHIC; significant weakening of operating performance across the enterprise; deterioration of market share; an increase in financial leverage beyond A.M. Best's expectations; or substantial deterioration in interest coverage.


For a complete listing of UnitedHealth Group Incorporated and its subsidiaries' FSRs, ICRs and debt ratings, please visit UnitedHealth Group.

The methodology used in determining these ratings is Best's Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best's rating process and contains the different rating criteria employed in the rating process. Best's Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.

Key insurance criteria reports utilized:

  • Rating Members of Insurance Groups
  • Risk Management and the Rating Process for Insurance Companies
  • Understanding BCAR for U.S. and Canadian Life/Health Insurers
  • Insurance Holding Company and Debt Ratings
  • Analyzing Insurance Holding Company Liquidity
  • Evaluating Country Risk

This press release relates to rating(s) that have been published on A.M. Best's website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please visit A.M. Best's Ratings & Criteria Center.

A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

Copyright © 2014 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.


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