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AM Best has assigned Long-Term Issue Credit Ratings (Long-Term IR) of "a-" (Excellent) to UnitedHealth Group Incorporated’s (UnitedHealth Group) (Minnetonka, MN) [NYSE: UNH] recently issued $1.0 billion .55% senior unsecured notes, due 2024; $1.0 billion 1.15% senior unsecured notes, due 2026; $1.5 billion 2.3% senior unsecured notes, due 2031; $1.5 billion 3.05% senior unsecured notes, due 2041; and $2.0 billion 3.25% senior unsecured notes, due 2051. The outlook assigned to these Credit Ratings (ratings) is positive. UnitedHealth Group’s Long-Term Issuer Credit Rating of "a-’’ (Excellent), its Long-Term IRs and the ratings of its insurance subsidiaries are unchanged.
The proceeds from this issuance are expected to be used to pay off outstanding commercial paper, $750 million of senior unsecured notes maturing in June 2021 and for general corporate purposes. UnitedHealth Group had $5.4 billion of commercial paper outstanding at March 31, 2021. AM Best anticipates the issuance will be neutral to financial leverage ratio, which measured 40% as of March 31, 2020. UnitedHealth Group manages its total debt to capital at approximately 40% and maintains strong earnings before interest and taxes interest coverage in the low double digits. Furthermore, UnitedHealth Group has excellent liquidity through parent company cash, subsidiary dividend capacity, non-regulated cash flow and a $12.5 billion revolving credit agreement.
UnitedHealth Group has reported strong revenue development and earnings growth over the past several years from its UnitedHealthcare insurance business and its Optum operations, a trend that is expected to continue over the medium term. UnitedHealth Group’s business is well-diversified and its integrated business model has performed well during the COVID-19 pandemic. Investments are predominantly investment grade fixed income securities with low volatility of income streams and asset valuation, which contribute favorably to cash flows. These favorable earnings trends are driving balance sheet strengthening of the organization, which is reflected in the positive outlook.
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