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
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Copyright Business Wire 2013