AM Best Comments on Credit Ratings of UnitedHealth Group Incorporated and Its Subsidiaries Following Completion of Change Healthcare Inc. Acquisition

Rhea-AI Summary

AM Best has reaffirmed the Credit Ratings of UnitedHealth Group (NYSE:UNH) and its subsidiaries post-acquisition of Change Healthcare, valued at $14 billion. The deal closed on Oct. 3, 2022, following legal delays from an antitrust suit. AM Best expects financial leverage to rise above 40% and interest coverage to decline through 2023, yet believes UnitedHealth will manage its leverage effectively, returning to the 40% range. The company's strong financial flexibility is underscored by a $15 billion revolving credit facility and substantial cash flows from its Optum operations.

Positive

• Acquisition of Change Healthcare may enhance service offerings and operational efficiencies.
• The company maintains high financial flexibility with a significant cash reserve and large commercial paper program.
• The anticipated return to a 40% financial leverage indicates effective long-term financial management.

Negative

• Expected increase in financial leverage above 40% raises concerns about potential financial strain.
• Declining interest coverage may impact the company's ability to meet debt obligations.

OLDWICK, N.J.--(BUSINESS WIRE)-- AM Best has commented that the Credit Ratings (ratings) of UnitedHealth Group Incorporated (UnitedHealth Group) (Minnetonka, MN) [NYSE:UNH] and its insurance subsidiaries remain unchanged following its completed acquisition of Change Healthcare Inc. (Change Healthcare) (Nashville, TN) [NASDAQ:CHNG], a leading health care technology company. The outlooks of these Credit Ratings (ratings) remain stable.

The close of this transaction had been delayed following the antitrust suit from the U.S. Department of Justice; however, the U.S. federal judge cleared the way for the transaction to be completed late in September. The close of the transaction was announced on Oct. 3, 2022. The transaction is valued at approximately $14 billion, and includes $5.3 billion debt of Change Healthcare that UnitedHealth Group retired. UnitedHealth Group has financed the transaction with cash on hand and short-term debt, which likely is to be converted to long-term debt later in fourth-quarter 2022.

Following the transaction, AM Best anticipates an increase in financial leverage to above 40% and decline in interest coverage at year-end 2022 and through 2023. However, UnitedHealth Group has managed its financial leverage at 40% over the long term, and has experienced temporary fluctuations following sizeable acquisitions. AM Best anticipates that the group will continue to deploy deleveraging actions to revert to the 40% range over the next 12 months, as it has done in the past. UnitedHealth Group also has a high level of financial flexibility, supported by its large commercial paper program, parent company cash and substantial subsidiary dividend capacity, as well as a revolving credit facility of $15 billion. Furthermore, UnitedHealth Group has significant nonregulated operating earnings and cash flows from its Optum operations, which include OptumRx, Optum Health and OptumInsight.

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.

Copyright © 2022 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.

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Antonietta Iachetta

Senior Financial Analyst

+1 908 439 2200, ext. 5792

antonietta.iachetta@ambest.com

Christopher Sharkey

Manager, Public Relations

+1 908 439 2200, ext. 5159

christopher.sharkey@ambest.com

Doniella Pliss

Director

+1 908 439 2200, ext. 5104

doniella.pliss@ambest.com

Al Slavin

Communications Specialist

+1 908 439 2200, ext. 5098

al.slavin@ambest.com

Source: AM Best

FAQ

What was the value of UnitedHealth Group's acquisition of Change Healthcare?

The transaction was valued at approximately $14 billion.

When did UnitedHealth Group complete the acquisition of Change Healthcare?

The acquisition was completed on Oct. 3, 2022.

What impact will the acquisition of Change Healthcare have on UnitedHealth Group's financial leverage?

AM Best anticipates that financial leverage will rise above 40% following the acquisition.

How does UnitedHealth Group plan to manage its increased financial leverage?

UnitedHealth Group is expected to implement deleveraging actions over the next 12 months.

What is the outlook on UnitedHealth Group's Credit Ratings after the acquisition?

AM Best has confirmed that the outlook of UnitedHealth Group's Credit Ratings remains stable.