AM Best Affirms Credit Ratings of UnitedHealth Group Incorporated and Its Subsidiaries

AM Best has affirmed the Long-Term Issuer Credit Ratings (Long-Term ICR) of "a" (Excellent) and the Long- and Short-Term Issuer Credit Ratings (Long-Term IR; Short-Term IR) of UnitedHealth Group Incorporated (UnitedHealth Group) (Minnetonka, MN) (NYSE:UNH). Concurrently, AM Best has affirmed the Financial Strength Rating (FSR) of A+ (Superior) and the Long-Term ICRs of "aa-" (Superior) of the health and dental insurance subsidiaries of UnitedHealth Group, collectively referred to as UnitedHealthcare. The outlook of these Credit Ratings (ratings) is stable. (See link below for a detailed listing of the companies and ratings.)

The ratings reflect UnitedHealthcare's balance sheet strength, which AM Best assesses as strong, as well as its very strong operating performance, very favorable business profile and very strong enterprise risk management (ERM).

The rating affirmations of UnitedHealthcare reflect sustained balance sheet strength metrics and a very strong operating performance. The group's risk-adjusted capitalization is at the very strong level, as measured by Best's Capital Adequacy Ratio (BCAR). Capital and surplus growth is supported by retained net earnings in excess of dividends to the parent. UnitedHealthcare actively manages subsidiary risk-adjusted capital on a near- to long-term basis to ensure capital levels are supportive of premium growth. Investment risk is on the low side as the vast majority of assets are held in investment grade fixed income securities and cash/short-term investments with no material exposure to equities, real estate or schedule BA assets. The conservative asset allocation drives strong liquidity measures along with favorable operating cash flows supplemented by internal credit agreements.

UnitedHealthcare's operating performance is assessed as very strong with a consistent trend of premium growth, which was driven by enrollment gains in most lines of business. Over the past year, all business lines reported an increase in premiums except Medicaid. Medicaid premiums moderated approximately 2 percent over the past year as growth from new contracts mostly offsetting membership losses from state redeterminations of eligibility. Net earnings are mostly driven by favorable underwriting results. The group's investment income remains positive and has shown growth but contributes modestly to overall net earnings. UnitedHealthcare's operating earnings benefit from its large scale with a membership base of 54 million individuals, providing cost advantages for medical expenditures and administrative expenses. UnitedHealthcare's strategic focus is on value-based care and reimbursement models to align provider and payor, which aid in managing medical cost trends and improve outcomes for members.

UnitedHealthcare holds substantial market share in all lines of business and on a national basis. Premiums and earnings are well-diversified by business segment and geography. A large membership base of 54 million members provides significant economies of scale. Furthermore, the integration of UnitedHealthcare with its affiliate, Optum, affords UnitedHealthcare a competitive advantage in that it provides access to advanced capabilities for cost management, care delivery, pharmacy and innovative technology, and strong data analytics.

UnitedHealth Group's ERM program is very mature with a well-established framework and governance. This program is dynamic, being used in daily operations and strategic business planning. Conversely, the large scale of the organization and numerous acquisitions exposes it to material business and reputational risks. Future growth could be challenged by federal and state agencies.

UnitedHealth Group has strong financial flexibility with material non-regulated operating cash flows from its Optum operations. Equity has shown consistent growth over the past five years, driven entirely by retained earnings despite large share repurchases and growing dividend programs. Strong liquidity is driven by favorable operating cash flows, parent company cash, a commercial paper program and a $21 billion revolving credit facility. Financial leverage at year-end 2024 was elevated at 43.7%, as measured by BCAR, and is above the company's long-term target of 40%. Additionally, earnings before interest and tax coverage remain good but declined in 2024 to about eight times. Furthermore, UnitedHealth Group had a large amount of goodwill and intangibles on the balance sheet totaling approximately 132% of equity. There has been no history of any material impairments and acquired assets continue to contribute favorably to revenues and earnings.

UnitedHealth Group's operating performance declined materially in 2024, due to $2 billion in direct expenses related to the Change Healthcare cyber breach and $8.3 billion non-cash loss on the sale of its South American business. Core business segments have performed well, although margins on the health business have been under pressure due to medical costs, utilization trends and specialty pharmacy costs. Revenue and earnings growth are expected to return to historical trends in the near term. The company has significant scale and is well-diversified between business segments in its insurance operations, as well as within its non-regulated Optum healthcare service businesses. However, government programs have become a large portion of insurance revenue and earnings.

A complete listing of UnitedHealth Group Incorporated and its subsidiaries' FSRs, Long-Term ICRs and Long-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 use of Best's Credit Ratings, Best's Performance Assessments, Best's Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best's Ratings & Assessments.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

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