This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

A.M. Best Affirms Ratings Of UnitedHealth Group Incorporated And Its Subsidiaries

Partially offsetting these positive rating factors are A.M. Best’s concerns, which arise from UnitedHealth managing to a lower level of risk-based capitalization at its regulated entities. Following consistently high dividends to UnitedHealth, the level of risk-based capitalization at the leading regulated subsidiary, UnitedHealthcare Insurance Company (UHIC) (Hartford, CT), though improved in 2011 remains low compared to its peers and A.M. Best’s expectations. However, this is offset by the parent’s ability to support the legal entities through capital infusions.

A.M. Best does acknowledge that UHIC is a significant source of dividends and consistently produces strong operating results. In addition, UHIC’s improved ability to predict claims trends and better fund transfer mechanisms within UnitedHealth enhances the entire organization’s ability to support each subsidiary and mitigate lower capitalization concerns. Although A.M. Best expects earnings to remain strong, operating margins at UnitedHealth, in line with the industry trend, have declined compared to its historical levels and are likely to moderate further. The earnings deterioration is due to competitive pressure, implementation of minimum loss ratio requirements related to the Patient Protection and Affordable Care Act and the changing business mix within the organization’s growing share of Medicare and Medicaid products where the margins are lower. In the near term, A.M. Best notes that UnitedHealth’s financial flexibility is reduced because of the expected increase in its financial leverage as well as the increase of the level of goodwill in its related acquisition of Amil Participacoes SA (Brazil). However, both UnitedHealth’s financial leverage and goodwill are in line with peers. Furthermore, UnitedHealth has proven its ability to quickly reduce financial leverage.

The upgrading of the ratings for Health Plan of Nevada Inc. and Sierra Health and Life Insurance Company Inc. acknowledges their strong earnings, improved capitalization and integration into UnitedHealth.

Key rating drivers that may lead to positive rating actions for UnitedHealth and its subsidiaries include substantial earnings growth, improvement in risk-adjusted capital at regulated entities and reduction in financial leverage. Key rating drivers that may lead to negative rating actions include a sizeable decline in risk-adjusted capital at UnitedHealth’s lead operating entity, UHIC, significant weakening of operating performance across the enterprise, an increase in financial leverage beyond A.M. Best’s expectations or substantial deterioration in interest coverage.

2 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG

Markets

DOW 18,020.25 -17.72 -0.10%
S&P 500 2,105.03 -3.89 -0.18%
NASDAQ 5,042.1130 -18.1330 -0.36%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs