AM Finest Affirms Credit score Scores of UnitedHealth Group Included and Most Subsidiaries; Upgrades Credit score Scores of Sure Subsidiaries
AM Finest has affirmed the Lengthy-Time period Issuer Credit score Ranking (Lengthy-Time period ICR) of “a-” and the Lengthy-Time period Situation Credit score Scores (Lengthy-Time period IR) of UnitedHealth Group Included (UnitedHealth Group) (Minnetonka, MN) [NYSE: UNH]. AM Finest additionally has affirmed the Brief-Time period Situation Credit score Ranking (Brief-Time period IR) of UnitedHealth Group. Concurrently, AM Finest has affirmed the Monetary Energy Ranking (FSR) of A (Wonderful) and the Lengthy-Time period ICRs of “a+” of nearly all of the well being and dental insurance coverage subsidiaries of UnitedHealth Group, collectively known as UnitedHealthcare. The outlook of those Credit score Scores (rankings) is constructive.
As well as, AM Finest has upgraded the FSR to A (Wonderful) from A- (Wonderful) and the Lengthy-Time period ICRs to “a” from “a-” of Enterprise Life Insurance coverage Firm, Freedom Life Insurance coverage Firm of America and Nationwide Basis Life Insurance coverage Firm. These corporations are domiciled in Fort Value, TX, and collectively are known as USHEALTH. Lastly, AM Finest has upgraded the FSR to A (Wonderful) from A- (Wonderful) and the Lengthy-Time period ICRs to “a” from “a-” of The Chesapeake Life Insurance coverage Firm (Chesapeake Life) (Oklahoma Metropolis, OK). The outlook of those rankings is steady. (See hyperlink under for an in depth itemizing of the businesses and rankings.)
The rankings of UnitedHealthcare replicate its stability sheet power, which AM Finest categorizes as sturdy, in addition to its sturdy working efficiency, very favorable enterprise profile and really sturdy enterprise threat administration (ERM). The constructive outlooks for UnitedHealthcare replicate the continued strengthening of profitability metrics. Whereas it’s anticipated that UnitedHealthcare’s potential to manage and handle medical value will assist longer-term earnings stability, the impacts from the COVID-19 pandemic have altered the working efficiency development. Working outcomes over the previous yr have been elevated because of the results of the deferral of non-essential care, which was most evident throughout the second quarter of 2020. Whereas utilization has returned to near-normal ranges, there nonetheless is a few despair in precise claims quantity. Profitability metrics will more than likely decline over the following yr and be extra in step with historic ranges. The premium progress development stays sturdy.
AM Finest expects stability sheet power to be maintained as sturdy primarily based on the favorable working outcomes and the corporate’s capital administration technique. Danger-adjusted capital has proven strengthening over the previous three years primarily based on the excessive stage of earnings and a average stage of dividends to father or mother. UnitedHealthcare manages statutory capital intently to make sure capital and liquidity is maintained at acceptable ranges. Investments are held primarily in funding grade mounted revenue securities with minimal publicity to under funding grade or fairness investments. Liquidity is supported by persistently sturdy working cash circulation and supplemented by credit score amenities with the father or mother firm.
UnitedHealthcare’s enterprise profile may be very favorable as its sturdy earnings are well-diversified by geography and by enterprise section. The corporate has a nationwide presence with distinguished market share in most markets. Whereas the corporate has an elevated quantity of enterprise derived from authorities applications, this balances properly in opposition to the dependence on industrial enterprise, which is inclined to financial pressures. UnitedHealthcare’s giant membership base affords the corporate the advantages of economies of scale for medical and administrative bills. Moreover, the corporate’s strategic partnerships with AARP and its affiliate, Optum, improve product choices and its well being care service capabilities in addition to for shopper retention.
UnitedHealth Group has a really mature and high-functioning ERM program. The corporate performs superior stress and situation testing, solvency evaluation and financial capital modeling. This system is embedded throughout the firm and is utilized in operational administration of its enterprise, strategic planning and in its response to the COVID-19 pandemic.
UnitedHealth Group continues to report sturdy consolidated income progress and working earnings from its medical health insurance and nonregulated Optum enterprise. Optum offers UnitedHealth Group with vital nonregulated cash circulation and working earnings, in addition to enterprise diversification. UnitedHealth Group has a excessive stage of monetary flexibility with materials nonregulated cash circulation, excessive dividend capability from its medical health insurance subsidiaries and a $12.5 billion credit score facility. Monetary leverage has remained steady within the 40% vary over the previous two years and it anticipated to be managed on this vary on a long-term foundation. The share of goodwill and intangible belongings to fairness has been declining, primarily as a consequence of fairness progress, and was at 115% at Sept. 30, 2020. Though this metric is on the excessive facet, the corporate has no historical past of fabric write-downs and the corporate exams its goodwill yearly. UnitedHealth Group’s earnings earlier than curiosity and taxes (EBIT) curiosity protection are sturdy at over 11 occasions for full-year 2019 primarily based on its sturdy working earnings.
The rankings of USHEALTH replicate its stability sheet power, which AM Finest categorizes as sturdy, in addition to its sturdy working efficiency, restricted enterprise profile and acceptable enterprise threat administration (ERM). The score upgrades of USHEALTH replicate the strengthening of its risk-adjusted capital by retained earnings.
The rankings of Chesapeake Life replicate its stability sheet power, which AM Finest categorizes as very sturdy, in addition to its satisfactory working efficiency, restricted enterprise profile and acceptable ERM. The score upgrades of Chesapeake Life are primarily based on enchancment of its ERM evaluation to acceptable, primarily based on integration with the father or mother firm’s ERM program.
The rankings of USHEALTH and Chesapeake Life are enhanced by UnitedHealth Group as they supply gross sales, product and applied sciences, that are a part of UnitedHealthcare’s specialty enterprise progress technique.
An entire itemizing of UnitedHealth Group Included and its subsidiaries’ FSRs, Lengthy-Time period ICRs and Lengthy- and Brief-Time period IRs additionally is on the market.
This press launch pertains to Credit score Scores which were printed on AM Finest’s web site. For all score data referring to the discharge and pertinent disclosures, together with particulars of the workplace liable for issuing every of the person rankings referenced on this launch, please see AM Finest’s Current Ranking Exercise net web page. For added data concerning the use and limitations of Credit score Ranking opinions, please view Information to Finest’s Credit score Scores. For data on the right media use of Finest’s Credit score Scores and AM Finest press releases, please view Information for Media – Correct Use of Finest’s Credit score Scores and AM Finest Ranking Motion Press Releases.
AM Finest is a worldwide credit standing company, information writer and information analytics supplier specializing within the insurance coverage business. Headquartered in america, the corporate does enterprise in over 100 nations with regional workplaces in New York, London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico Metropolis. For extra data, go to www.ambest.com.
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