A.M. Best Affirms Ratings of UnitedHealth Group Incorporated and Its Subsidiaries

  A.M. Best Affirms Ratings of UnitedHealth Group Incorporated and Its

Business Wire

OLDWICK, N.J. -- December 13, 2012

A.M. Best Co. has affirmed the financial strength ratings (FSR) and issuer
credit ratings (ICR) of the insurance subsidiaries of UnitedHealth Group
Incorporated (UnitedHealth) (Minnetonka, MN) [NYSE: UNH]. Additionally, A.M.
Best has upgraded the FSRs to A (Excellent) from A- (Excellent) and the ICRs
to “a” from “a-” for the following subsidiaries of UnitedHealth: Health Plan
of Nevada Inc. (Las Vegas, NV) and Sierra Health and Life Insurance Company
Inc. (Los Angeles, CA). Concurrently, A.M. Best has affirmed the ICR of “bbb+”
and debt ratings of UnitedHealth. The outlook for these ratings is stable.

A.M. Best also has assigned debt ratings of “bbb+” to $625 million 0.85%
senior unsecured notes, $625 million 1.4% senior unsecured notes, $625 million
2.75% senior unsecured notes and $625 million 3.95% senior unsecured notes all
issued on October 17, 2012 by UnitedHealth. The outlook assigned to these debt
ratings is stable.

Additionally, A.M. Best has withdrawn the FSR of A (Excellent) and ICR of “a”
of PacifiCare Life Assurance Company (Denver, CO), as the company is inactive.

The rating affirmations for the organization reflect its premium growth,
strong earnings, highly liquid assets, ability to adjust to market changes and
high degree of technological innovations. These strengths are further
supported by the significant market presence, diverse non-insurance operations
and financial strength of UnitedHealth. The organization has a wide geographic
reach and a diversified portfolio, which includes commercial, Medicare and
Medicaid managed care products. UnitedHealth also continues to expand its
profitable non-regulated businesses and its share of non-regulated earnings
remains significantly higher compared to its peers. Furthermore,
UnitedHealth’s non-regulated subsidiaries are well positioned for continuous
revenue growth. Non-regulated earnings enhance UnitedHealth’s financial
flexibility by contributing to its already strong interest coverage as well as
reducing its reliance on dividends from its regulated subsidiaries.

Partially offsetting these positive rating factors are A.M. Best’s concerns,
which arise from UnitedHealth managing to a lower level of risk-based
capitalization at its regulated entities. Following consistently high
dividends to UnitedHealth, the level of risk-based capitalization at the
leading regulated subsidiary, UnitedHealthcare Insurance Company (UHIC)
(Hartford, CT), though improved in 2011 remains low compared to its peers and
A.M. Best’s expectations. However, this is offset by the parent’s ability to
support the legal entities through capital infusions.

A.M. Best does acknowledge that UHIC is a significant source of dividends and
consistently produces strong operating results. In addition, UHIC’s improved
ability to predict claims trends and better fund transfer mechanisms within
UnitedHealth enhances the entire organization’s ability to support each
subsidiary and mitigate lower capitalization concerns. Although A.M. Best
expects earnings to remain strong, operating margins at UnitedHealth, in line
with the industry trend, have declined compared to its historical levels and
are likely to moderate further. The earnings deterioration is due to
competitive pressure, implementation of minimum loss ratio requirements
related to the Patient Protection and Affordable Care Act and the changing
business mix within the organization’s growing share of Medicare and Medicaid
products where the margins are lower. In the near term, A.M. Best notes that
UnitedHealth’s financial flexibility is reduced because of the expected
increase in its financial leverage as well as the increase of the level of
goodwill in its related acquisition of Amil Participacoes SA (Brazil).
However, both UnitedHealth’s financial leverage and goodwill are in line with
peers. Furthermore, UnitedHealth has proven its ability to quickly reduce
financial leverage.

The upgrading of the ratings for Health Plan of Nevada Inc. and Sierra Health
and Life Insurance Company Inc. acknowledges their strong earnings, improved
capitalization and integration into UnitedHealth.

Key rating drivers that may lead to positive rating actions for UnitedHealth
and its subsidiaries include substantial earnings growth, improvement in
risk-adjusted capital at regulated entities and reduction in financial
leverage. 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, an increase in financial leverage beyond A.M. Best’s expectations
or substantial deterioration in interest coverage.

For a complete list of UnitedHealth Group Incorporated and its subsidiaries’
FSRs, ICRs and debt ratings, please see

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. Key criteria utilized include: “Understanding BCAR for Life/Health
Insurers”; “Insurance Holding Company and Debt Ratings”; “Rating Members of
Insurance Groups”; “Risk Management and the Rating Process for Insurance
Companies”; “Rating Commercial Paper”; and “Evaluating Country Risk.” Best’s
Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.

Founded in 1899, 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 © 2012 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.


A.M. Best Co.
Doniella Pliss, 908-439-2200, ext. 5104
Senior Financial Analyst
Kenneth Frino, 908-439-2200, ext. 5012
Group Vice President
Rachelle Morrow, 908-439-2200, ext. 5378
Senior Manager, Public Relations
Jim Peavy, 908-439-2200, ext. 5644
Assistant Vice President, Public Relations
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