CONTACTS:
FOR IMMEDIATE RELEASE
OLDWICK, N.J. - AUGUST 17, 2006 12:00 AM (EDT)
A.M. Best Co. has affirmed the financial strength ratings (FSR), issuer credit ratings (ICR) and debt ratings of UnitedHealth Group, Inc. (UnitedHealth) [NYSE: UNH] (Minnetonka, MN) and its subsidiaries. All rating outlooks have been revised to negative. (See link below for a detailed list of the ratings.)
These rating actions follow UnitedHealth's August 9, 2006 announcement that it will delay filing its quarterly report on Form 10-Q for the quarter ending June 30, 2006. The delay in filing the second quarter Form 10-Q is due to the question as to the accounting of stock options and the unknown amount of potential non-cash charges. If it is determined that certain stock options are subject to variable accounting, the potential non-cash charges could be significant because of the increase in UnitedHealth's stock price during the period under review. A.M. Best is concerned about the unknown amount of any potential non-cash charges and its impact on UnitedHealth's balance sheet. However, A.M. Best does recognize that UnitedHealth generates strong diversified earnings, in excess of $1.9 billion for the first six months of 2006, and robust cash flows from operations, which have exceeded $4.6 billion the first six months of 2006. Additionally, UnitedHealth has announced that it will not purchase shares under its stock repurchase program until it completes all required Securities and Exchange Commission (SEC) filings. This action by UnitedHealth should help to offset some of the impact of any non-cash charges to the company's balance sheet.
While A.M. Best believes that it is important for UnitedHealth to resolve the non-cash charges in order to move forward, the impact of the stock option review could continue to pose a distraction to UnitedHealth in the near term.
A.M. Best will be conducting ongoing discussions with UnitedHealth's management as further information develops. Once the amount of the non-cash charges are determined and the findings of UnitedHealth's independent review of its stock option programs is complete, A.M. Best will evaluate the information and determine if an additional rating action is necessary.
For a complete list of UnitedHealth Group Inc.'s FSRs, ICRs and debt ratings, please visit UnitedHealth.
A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source.