Fitch ratings have taken a rating action on the U.S. health
insurer UnitedHealth Group Inc. ( UNH )
and also affirmed the company's senior unsecured debt an 'A-'
rating. The Insurer Financial strength ratings of its subsidiaries
were also affirmed at 'AA-.' The ratings are of an investment grade
with a good credit quality, while a stable outlook translates into
minimum possibilities of a change in rating.
Fitch is impressed with the way UnitedHealth has protected and
improved its earnings despite the numerous challenges posed by the
Health Care Reform Act. It is one of the most diversified of the
listed managed care companies in the U.S.
Fitch is also satisfied with UnitedHealth's performance in
parameters such as EBIDTA margin of 9.5%, financial leverage of
1.24x, EBIDTA to interest coverage of 17.2x. Fitch also views
favorably the company's balance sheet strength with debt to ratio
However, the rating agency is watchful of the several external
factors that can affect the company's performance, such as
uncertainty related to the implementation of the Health Care
Reform Act, the effect of rising medical costs as well as
competitive pressure present in few of the markets where the
Hence, it can be assumed that the rating agency may slash its
IFS or IDR rating by a notch if UnitedHealth fails to generate
strong cash flow, gets impaired to price its products led by
regulatory restrictions; increases debt ratio above 35% levels;
debt/EBIDTA ratio above 1. 9x; and decline in EBIDTA/interest
coverage ratio below 8x.
On the other hand, the company's debt ratings can be pulled up
by a notch if it maintains its debt to EBIDTA ratio near 10.0x,
leverage ratio near 30.0x and interest coverage ratio at mid-teen
Fitch also rates peer company Aetna Inc. 's (
IDR at "A" and "AA-."
UnitedHealth currently retains a Zacks #3 Rank, which translates
into a short-term Hold rating. We are also maintaining our
long-term Neutral recommendation on its shares.
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UNITEDHEALTH GP (UNH): Free Stock Analysis
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