AM Best

AM Best Revises Outlooks to Positive for UnitedHealth Group Incorporated and Its UnitedHealthcare Subsidiaries


Bridget Maehr
Associate Director
+1 908 439 2200, ext. 5321

Sally Rosen
Senior Director
+1 908 439 2200, ext. 5280
Christopher Sharkey
Manager, Public Relations
+1 908 439 2200, ext. 5159

Jim Peavy
Director, Public Relations
+1 908 439 2200, ext. 5644


OLDWICK - DECEMBER 18, 2019 04:45 PM (EST)
AM Best has revised the outlooks to positive from stable and affirmed the Long-Term Issuer Credit Rating (Long-Term ICR) of “a-” and the Long-Term Issue Credit Ratings (Long-Term IR) of UnitedHealth Group Incorporated (UnitedHealth Group) (Minnetonka, MN) [NYSE: UNH]. AM Best also has affirmed the Short-Term Issue Credit Rating (Short-Term IR) of UnitedHealth Group. Concurrently, AM Best has revised the outlooks to positive from stable and affirmed the Financial Strength Rating (FSR) of A (Excellent) and the Long-Term ICRs of “a+” of the majority of the health and dental insurance subsidiaries of UnitedHealth Group, collectively referred to as UnitedHealthcare.

In addition, AM Best has affirmed the FSR of A- (Excellent) and the Long-Term ICRs of “a-“ of Enterprise Life Insurance Company, Freedom Life Insurance Company of America and National Foundation Life Insurance Company. These companies are domiciled in Fort Worth, TX, and collectively are referred to as USHEALTH. Lastly, AM Best has affirmed the FSR of A- (Excellent) and the Long-Term ICR of “a-” of The Chesapeake Life Insurance Company (Chesapeake Life) (Oklahoma City, OK). The outlook of these Credit Ratings (ratings) is stable. (See link below for a detailed listing of the companies and ratings.)

The ratings of UnitedHealthcare reflect its 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). The revision of the outlooks to positive reflects the continuing trend of strong operating performance of UnitedHealthcare. UnitedHealthcare has shown incremental strengthening of its risk-adjusted capital. This is being driven by strong operating results, which are outpacing top-line growth and dividends to the holding company. UnitedHealth Group actively manages the statutory capital of its insurance subsidiaries and holding company cash on a quarterly basis to ensure current and future capital needs at the insurance entities are balanced with capital deployment by the holding company. UnitedHealthcare’s investments are conservative in that they are held almost entirely in high-quality fixed income securities, and there is minimal exposure to equities or below investment grade securities. Liquidity is very good in AM Best’s view, based on strong operating cash flow supplemented by credit facilities with the parent company.

Operating performance continues to be strong, with very good premium growth and consistently favorable operating earnings. Premium revenue has shown a steady upward trend with a five-year compounded annual growth rate in the low double-digit range. Premium development has been especially strong for UnitedHealthcare’s Medicare Advantage business. Operating earnings have grown driven by the strong top-line growth and stable to improving margins. UnitedHealthcare’s operating margins benefit from the organization’s prudent pricing strategy, an emphasis on quality cost-effective provider networks and sound medical and pharmacy cost management practices, as well as operational efficiencies from economies of scale. The results of UnitedHealthcare are further enhanced by the services, technology and innovations from its affiliate, Optum.

UnitedHealthcare’s business profile is very favorable due to its nationwide presence and substantial market positon in all market segments, especially in the Medicare business. The long-standing relationship with AARP contributed to the company’s strong position in Medicare product offerings: Medicare supplement and Medicare Advantage. The company has the largest domestic membership base of any health insurer in the United States, with over 43 million members. UnitedHealthcare employs technology to further its medical management capabilities and health services. The organization focuses on the use of technology to improve member health and experience while emphasizing quality cost efficient care.

UnitedHealth Group has a dynamic ERM program that is utilized throughout the organization. ERM is a continuous process with annual reassessment and risk identification. The program’s framework is well-established with an appropriate governance structure. The company performs advanced stress- and scenario-testing, a solvency assessment and economic capital modeling. ERM is utilized for operational business decision-making and for business line and enterprise-wide strategic planning.

UnitedHealth Group continues to report strong and diversified earnings from operations. Earnings growth is being reported for its UnitedHealthcare health insurance business, as well as from Optum, the company’s health services operations. Optum provides the organization with a significant source of nonregulated earnings and cash flow, which continues to grow based on business development and acquisitions, coupled with margin expansion. Furthermore, operating margins from Optum are considerably higher than those of UnitedHealthcare.

UnitedHealth Group has robust financial flexibility through nonregulated earnings from Optum, strong operating cash flows, dividends from insurance subsidiaries and a $12.5 billion credit facility. Nevertheless, the company is an active issuer of debt and has a history of growing through acquisitions. As a result, financial leverage remains elevated and goodwill and intangible assets to capital is high. Financial leverage has moderated over the past few years and was at 41.5% as of the third quarter of 2019, as measured by AM Best. This metric is expected to moderate by year-end 2019 to be within the company’s long-term plan to manage financial leverage at approximately 40%. Goodwill and intangible assets to equity was at 131% at Sept. 30, 2019; even though this is high, the company has not had any material write-downs over the past decade. UnitedHealth Group’s earnings before interest and taxes (EBIT) interest coverage are strong at over 11 times based on solid earnings from operations.

The ratings of USHEALTH reflect its balance sheet strength, which AM Best categorizes as adequate, as well as its strong operating performance, limited business profile and appropriate enterprise risk management (ERM).

The ratings of Chesapeake Life reflect its balance sheet strength, which AM Best categorizes as very strong, as well as its adequate operating performance, limited business profile and marginal ERM.

The ratings of USHEALTH and Chesapeake Life are enhanced by UnitedHealth Group as the acquisition of both companies was for the further expansion and strengthening of UnitedHealthcare’s special benefits product offerings and distribution.

A complete listing of UnitedHealth Group Incorporated and its subsidiaries’ FSRs, Long-Term ICRs and Long- and Short-Term IRs 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 Guide to 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 credit rating agency, news publisher and data provider specializing in the insurance industry. The company does business in more than 100 countries. Headquartered in Oldwick, NJ, AM Best has offices in cities around the world, including London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City.

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