A.M. Best Assigns Ratings to UnitedHealth Group Incorporated’s New Senior
OLDWICK, N.J. -- March 1, 2013
A.M. Best Co. has assigned debt ratings of “bbb+” to the $250 million floating
rate senior unsecured notes due 2014, the $500 million 1.625% senior unsecured
notes due 2019, the $750 million 2.875% senior unsecured notes due 2023, and
the $750 million 4.25% senior unsecured notes due 2043 that were recently
issued by UnitedHealth Group Incorporated (UnitedHealth) (Minnetonka, MN)
[NYSE: UNH]. The outlook on all ratings is stable.
A.M. Best expects the proceeds from this offering to be used by UnitedHealth
for the repayment of its commercial paper and for the completion of the
acquisition of Amil Participacoes SA (Amil) (Brazil). The existing ratings of
UnitedHealth and its subsidiaries are unchanged.
Following these issuances, UnitedHealth’s debt-to-capital ratio is expected to
increase to 36% at the end of first quarter 2013 compared to 35% at year-end
2012. However, the financial leverage that increased substantially during 2012
due to the acquisition of Amil remains within the company’s expectation and in
line with peers that recently completed a sizeable acquisition. UnitedHealth
is committed to bring financial leverage to under 35% by year-end 2013.
Earnings Before Interest and Taxes (EBIT) interest coverage is expected to
decline in 2013 compared to 2012 as the interest expense grows. Additionally,
future regulated business margins may temper, driven by competitive pressure,
requirements related to the Patient Protection and Affordable Care Act and the
changing business mix, with a growing share of Medicare and Medicaid products
where the margins are lower. Furthermore, as a result of a significant
increase in goodwill and intangible assets in 2012, goodwill-to-equity ratio
was 115% at year-end 2012 compared to 95% in 2011, putting pressure on the
company’s balance sheet. However, a substantial portion of UnitedHealth’s
goodwill is over seven years old, and the company does not have a history of
sizeable goodwill write-downs.
UnitedHealth’s financial flexibility is supported by its commercial paper
program, parent company cash, subsidiary dividends and credit facility. In
addition, UnitedHealth earns a steady stream of income from its profitable
non-regulated businesses that remains much higher compared to its peers.
Furthermore, UnitedHealth’s non-regulated subsidiaries are well positioned for
continuous revenue growth.
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: “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
Founded in 1899, A.M. Best Company is the world’s oldest and most
authoritative insurance rating and information source. For more information,
Copyright © 2013 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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