A.M. Best Assigns Issue Credit Ratings to UnitedHealth Group Incorporated’s New Senior Unsecured Notes
March 09 2017 - 1:55PM
Business Wire
A.M. Best has assigned Long-Term Issue Credit Ratings of
“bbb+” to the $625 million 3.375% senior unsecured notes due 2027
and the $725 million 4.25% senior unsecured notes due 2047 that
were recently issued by UnitedHealth Group Incorporated
(UnitedHealth) (Minnetonka, MN) [NYSE:UNH]. The outlook assigned to
these Credit Ratings (ratings) is stable. A.M. Best expects the
proceeds from this offering to be used by UnitedHealth to pay down
outstanding commercial paper borrowings and for debt maturities in
June and July of 2017. The existing ratings of UnitedHealth and its
subsidiaries are unchanged.
Following these issuances, A.M. Best expects UnitedHealth’s
financial leverage to remain unchanged. UnitedHealth’s
debt-to-capital ratio was at 46% at year-end 2016. The ratio is
elevated mainly due to a significant increase in debt in 2015 for
the financing of the acquisition of Catamaran Corporation. Despite
the increase in elevated financial leverage, UnitedHealth maintains
strong interest coverage of 12 times. In addition, UnitedHealth
plans to lower its financial leverage to below 40% by the end of
2017. UnitedHealth’s ratio of goodwill plus intangibles to
shareholders’ equity increased substantially following the
Catamaran transaction and exceeds 145%, which puts pressure on
UnitedHealth’s balance sheet. However, the company has no history
of sizeable goodwill write-downs, and the acquisition of Catamaran
has had a favorable effect on operating earnings for UnitedHealth’s
OptumRx division.
UnitedHealth has a good level of financial flexibility, which is
supported by its commercial paper program, parent company cash,
subsidiary dividends and credit facility. Moreover, UnitedHealth’s
non-regulated operating earnings and cash flows are materially
higher than that of its peers. The company’s net income increased
significantly in 2016 driven by the strong earnings contribution
from the Optum operations. Additionally, consolidated earnings are
projected to remain strong.
This press release relates to Credit Ratings that have been
published on A.M. 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 A.M.
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.
A.M. Best is the world’s oldest and most authoritative
insurance rating and information source. For more information,
visit www.ambest.com.
Copyright © 2017 by A.M. Best Rating
Services, Inc. and/or its subsidiaries. ALL RIGHTS
RESERVED.
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version on businesswire.com: http://www.businesswire.com/news/home/20170309006153/en/
A.M. BestBridget Maehr, +1 908-439-2200, ext.
5321Senior Financial
Analystbridget.maehr@ambest.comorSally Rosen, +1
908-439-2200, ext. 5280Senior
Directorsally.rosen@ambest.comorChristopher Sharkey, +1
908-439-2200, ext. 5159Manager, Public
Relationschristopher.sharkey@ambest.comorJim Peavy, +1
908-439-2200, ext. 5644Director, Public
Relationsjames.peavy@ambest.com
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