A.M. Best Upgrades Ratings of Several Subsidiaries of UnitedHealth Group Incorporated Business Wire OLDWICK, N.J. -- December 11, 2013 A.M. Best Co. has upgraded the financial strength ratings (FSR) to A (Excellent) from A- (Excellent) and the issuer credit ratings (ICR) to “a” from “a-” of the following subsidiaries of UnitedHealth Group Incorporated (UnitedHealth) (Minnetonka, MN) (NYSE: UNH): AmeriChoice of New Jersey, Inc. (Newark, NJ), UnitedHealthcare Community Plan, Inc. (Southfield, MI), UnitedHealthcare of Pennsylvania, Inc. (Pittsburgh, PA) and UnitedHealthcare Community Plan of Ohio, Inc. (Westerville, OH). Additionally, A.M. Best has affirmed the FSRs and ICRs of the remaining subsidiaries of UnitedHealth. Concurrently, A.M. Best has affirmed the ICR of “bbb+” and debt ratings of UnitedHealth. The outlook for all ratings is stable, with the exception of the commercial paper program, which does not have an outlook. (See link below for a detailed listing of the companies and ratings.) The rating affirmations reflect the organization’s high degree of business diversification, strong earnings, highly liquid assets, its ability to adjust to market changes and its high degree of technological innovations. These strengths are further supported by the significant market presence, diverse non-insurance operations and financial strength of UnitedHealth. UnitedHealth continues to expand its profitable non-regulated Optum 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. The affirmation of the debt ratings and the notching of two reflect UnitedHealth’s financial flexibility, which is enhanced through robust non-regulated earnings that contribute to its already strong interest coverage as well as the reduce reliance on dividends from its regulated subsidiaries. Partially offsetting these strengths are the organization’s recent lower operating margins, managing to a lower level of risk-based capitalization compared to peers and its high dividend payments to the parent company. However, the dividends are expected to decline in 2013 compared to prior years. The reduced profitability of the regulated business is in line with the industry trend and is a result of reduced Medicare Advantage reimbursement, including sequestration, competitive pressure, higher capital expenditures and a changing business mix with a growing share of lower margin Medicare and Medicaid products. The earnings at the health benefits segment are expected to decline further in 2014 driven by losses in commercial enrollment, as individuals are migrating to public exchanges where UnitedHealth decided to have a limited presence in 2014. In addition, profitability will be affected by new non-deductible insurance fees imposed by The Patient Protection and Affordable Care Act of 2010. The rating upgrades for AmeriChoice of New Jersey, Inc., UnitedHealthcare Community Plan, Inc,, UnitedHealthcare of Pennsylvania, Inc. and UnitedHealthcare Community Plan of Ohio, Inc. reflect their integration into UnitedHealth and their increased strategic importance to the organization, as the Medicaid segment is expected to expand substantially in the near term. Key rating drivers that may lead to positive rating actions for UnitedHealth and its subsidiaries include earnings growth within the UnitedHealthcare division, successful absorption of new membership in government programs, improvement in risk-adjusted capital at regulated entities and a 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, UnitedHealthcare Insurance Company; a significant weakening of operating performance across the enterprise; deterioration of market share; an increase in financial leverage beyond A.M. Best's expectations or a substantial deterioration in interest coverage. For a complete list of UnitedHealth Group Incorporated and its subsidiaries’ FSRs, ICRs and debt ratings, please see www.ambest.com/press/121110unitedhealth.pdf. 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. 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 Senior Financial Analyst (908) 439-2200, ext. 5104 email@example.com or Kenneth Frino Group Vice President (908) 439-2200, ext. 5012 firstname.lastname@example.org or Rachelle Morrow Senior Manager, Public Relations (908) 439-2200, ext. 5378 email@example.com or Jim Peavy Assistant Vice President, Public Relations (908) 439-2200, ext. 5644 firstname.lastname@example.org
A.M. Best Upgrades Ratings of Several Subsidiaries of UnitedHealth Group Incorporated
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