A.M. Best Assigns Ratings to UnitedHealth Group Incorporated’s New Senior Unsecured Notes Business Wire 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 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 © 2013 by A.M. Best Company, Inc. ALL RIGHTS RESERVED. Contact: A.M. Best Co. Doniella Pliss, 908-439-2200, ext. 5104 Senior Financial Analyst firstname.lastname@example.org or Kenneth Frino, 908-439-2200, ext. 5012 Group Vice President email@example.com or Rachelle Morrow, 908-439-2200, ext. 5378 Senior Manager, Public Relations firstname.lastname@example.org or Jim Peavy, 908-439-2200, ext. 5644 Assistant Vice President, Public Relations email@example.com
A.M. Best Assigns Ratings to UnitedHealth Group Incorporated’s New Senior Unsecured Notes
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