AM Best Affirms Credit Ratings of UnitedHealth Group Incorporated and Its UnitedHealthcare Subsidiaries
December 18 2018 - 2:32PM
Business Wire
AM Best has affirmed the Financial Strength Rating (FSR)
of A (Excellent) and the Long-Term Issuer Credit Rating (Long-Term
ICR) of “a+” for the majority of the UnitedHealthcare insurance
subsidiaries of UnitedHealth Group Incorporated (UnitedHealth
Group) (Minnetonka, MN) (NYSE:UNH). Concurrently, AM Best has
affirmed the Long-Term ICR of “a-” and the Long-Term and Short-Term
Issue Credit Ratings (Long-Term; Short-Term IR) of UnitedHealth
Group. The outlook of these Credit Ratings (ratings) is stable.
In addition, AM Best has upgraded the Long-Term ICR to “a+” from
“a” and affirmed the FSR of A (Excellent) for Dental Benefit
Providers of California, Inc. (San Francisco, CA), Nevada Pacific
Dental (Las Vegas, NV) and National Pacific Dental, Inc.
(Richardson, TX). The outlook of these ratings is stable. (See link
below for a detailed listing of the companies and ratings.)
The ratings reflect UnitedHealthcare’s balance sheet strength,
which AM Best categorizes as strong, as well as its strong
operating performance, very favorable business profile and very
strong enterprise risk management (ERM).
UnitedHealthcare has maintained a stable level of risk-adjusted
capital. Although its insurance subsidiaries pay significant
dividends to the holding company, earnings from operations are
consistently favorable. Furthermore, UnitedHealth Group manages
subsidiary capital and holding company cash on a quarterly basis to
ensure that capital needs at the insurance entities are met.
Invested assets for UnitedHealthcare are held predominantly in high
quality fixed income securities. Liquidity is very good based on
strong cash flow from operations supplemented by credit facilities
with the parent company.
Operating performance continues to be strong, with steady
premium growth and favorable operating earnings reported. Top line
growth has been consistent over the years but most recently the
main driver has been UnitedHealthcare’s Medicare business.
Increased earnings from operations are being driven by increased
revenues, appropriate pricing, good medical cost management and
operational efficiencies. The company also benefits from the
services, technology and innovations from its affiliate, Optum.
Operating margins have remained stable with low volatility.
UnitedHealthcare has a nationwide presence and formidable market
share in all market segments, especially in the Medicare business.
The company has a large membership base with domestic enrollment of
approximately 43 million members. Medicare business has been the
primary driver of enrollment growth during 2018. A contributing
factor to this growth is the company’s long-standing relationship
with AARP.
UnitedHealth Group has a comprehensive ERM program that it
deploys throughout the organization. This ERM framework is mature,
governance is well-established and the company utilizes advanced
stress testing and scenario testing, as well as economic capital
modeling. ERM is incorporated within business decision making and
strategic planning.
UnitedHealth Group continues to report strong and diversified
earnings. Earnings growth is being reported for its
UnitedHealthcare health insurance business, as well as from Optum,
the company’s health services operations. UnitedHealthcare’s
increased earnings are driven by premium growth and stable
operating margins. Optum’s non-regulated earnings and operating
cash flows have consistently shown a good level of growth generated
by both new business and acquisitions with margin expansion.
UnitedHealth Group has favorable financial flexibility through
its dividends from insurance subsidiaries, non-regulated earnings
from Optum, substantial operating cash flows and a $10 billion
credit facility. However, financial leverage is elevated and
goodwill and intangible assets is high due to the company’s history
of acquisitions. Financial leverage has moderated over the past few
years and was at 38.3% as of the third quarter of 2018. This metric
is expected to increase modestly for year-end 2018 due to a recent
debt issue but will be within the company’s plan to manage
financial leverage at approximately 40%. Goodwill and intangible
assets to equity was at 130% at Sept. 30, 2018; however, the
company has not had any material write-downs. UnitedHealth Group’s
earnings before interest and taxes (EBIT) interest coverage remains
strong at over 12 times based on solid earnings from
operations.
A complete listing of UnitedHealth Group Incorporated and its
subsidiaries’ FSRs, Long-Term ICRs and Long-Term and Short-Term
Issue Credit Ratings also is available.
This press release relates to Credit Ratings that have been
published on AM 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 see AM Best’s Recent
Rating Activity web page. For additional information
regarding the use and limitations of Credit Rating opinions, please
view Understanding Best’s Credit Ratings. For
information on the proper media use of Best’s Credit Ratings and AM
Best press releases, please view Guide for Media - Proper
Use of Best’s Credit Ratings and AM Best Rating Action Press
Releases.
AM Best is a global rating agency and information provider
with a unique focus on the insurance industry. Visit
www.ambest.com for more information.
Copyright © 2018 by A.M. Best Rating
Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.
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version on businesswire.com: https://www.businesswire.com/news/home/20181218005796/en/
Bridget MaehrAssociate Director+1 908 439 2200,
ext. 5321bridget.maehr@ambest.com
Sally RosenSenior Director+1 908 439 2200, ext.
5280sally.rosen@ambest.com
Christopher SharkeyManager, Public Relations+1
908 439 2200, ext. 5159christopher.sharkey@ambest.com
Jim PeavyDirector, Public Relations+1 908 439
2200, ext. 5644james.peavy@ambest.com
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