AM Greatest Affirms Credit score Rankings of UnitedHealth Group Included and Most Subsidiaries; Upgrades Credit score Rankings of Sure Subsidiaries
AM Greatest has affirmed the Lengthy-Time period Issuer Credit score Score (Lengthy-Time period ICR) of “a-” and the Lengthy-Time period Challenge Credit score Rankings (Lengthy-Time period IR) of UnitedHealth Group Included (UnitedHealth Group) (Minnetonka, MN) [NYSE: UNH]. AM Greatest additionally has affirmed the Quick-Time period Challenge Credit score Score (Quick-Time period IR) of UnitedHealth Group. Concurrently, AM Greatest has affirmed the Monetary Power Score (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 Rankings (rankings) is optimistic.
As well as, AM Greatest 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 Price, TX, and collectively are known as USHEALTH. Lastly, AM Greatest 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 beneath for an in depth itemizing of the businesses and rankings.)
The rankings of UnitedHealthcare mirror its stability sheet power, which AM Greatest categorizes as sturdy, in addition to its sturdy working efficiency, very favorable enterprise profile and really sturdy enterprise threat administration (ERM). The optimistic outlooks for UnitedHealthcare mirror the continued strengthening of profitability metrics. Whereas it’s anticipated that UnitedHealthcare’s means to regulate and handle medical price will assist longer-term earnings stability, the impacts from the COVID-19 pandemic have altered the working efficiency pattern. Working outcomes over the previous yr have been elevated because of the results of the deferral of non-essential care, which was most evident through the second quarter of 2020. Whereas utilization has returned to near-normal ranges, there nonetheless is a few melancholy in precise claims quantity. Profitability metrics will more than likely decline over the subsequent yr and be extra in keeping with historic ranges. The premium development pattern stays sturdy.
AM Greatest expects stability sheet power to be maintained as sturdy based mostly on the favorable working outcomes and the corporate’s capital administration technique. Threat-adjusted capital has proven strengthening over the previous three years based mostly on the excessive stage of earnings and a average stage of dividends to mum or dad. UnitedHealthcare manages statutory capital intently to make sure capital and liquidity is maintained at applicable ranges. Investments are held primarily in funding grade mounted earnings securities with minimal publicity to beneath funding grade or fairness investments. Liquidity is supported by constantly sturdy working cash circulation and supplemented by credit score amenities with the mum or dad firm.
UnitedHealthcare’s enterprise profile could be very favorable as its sturdy earnings are well-diversified by geography and by enterprise section. The corporate has a nationwide presence with outstanding market share in most markets. Whereas the corporate has an elevated quantity of enterprise derived from authorities applications, this balances nicely in opposition to the dependence on industrial enterprise, which is vulnerable to financial pressures. UnitedHealthcare’s massive 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 consumer 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 inside 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 development and working earnings from its medical health insurance and nonregulated Optum enterprise. Optum supplies UnitedHealth Group with important nonregulated cash circulation and working earnings, in addition to enterprise diversification. UnitedHealth Group has a excessive stage of economic 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 proportion of goodwill and intangible belongings to fairness has been declining, primarily as a result of fairness development, and was at 115% at Sept. 30, 2020. Though this metric is on the excessive aspect, 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 based mostly on its sturdy working earnings.
The rankings of USHEALTH mirror its stability sheet power, which AM Greatest categorizes as sturdy, in addition to its sturdy working efficiency, restricted enterprise profile and applicable enterprise threat administration (ERM). The ranking upgrades of USHEALTH mirror the strengthening of its risk-adjusted capital by retained earnings.
The rankings of Chesapeake Life mirror its stability sheet power, which AM Greatest categorizes as very sturdy, in addition to its ample working efficiency, restricted enterprise profile and applicable ERM. The ranking upgrades of Chesapeake Life are based mostly on enchancment of its ERM evaluation to applicable, based mostly on integration with the mum or dad 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 development technique.
A [url=”]full+itemizing[/url] of UnitedHealth Group Included and its subsidiaries’ FSRs, Lengthy-Time period ICRs and Lengthy- and Quick-Time period IRs additionally is obtainable.
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