Fitch Rates UnitedHealth Group's Planned Issuance 'A-(EXP)'

CHICAGO--()--Fitch Ratings has assigned an 'A-(EXP)' rating to UnitedHealth Group Incorporated's (UNH) planned issue of between $1.5 billion and $2.5 billion of senior unsecured notes. The ratings are equivalent to Fitch's ratings on UNH's outstanding senior unsecured notes. UNH's 'A' Issuer Default Rating currently has a Negative Rating Outlook.

Fitch anticipates UNH using proceeds from the planned issuance to pay down outstanding commercial paper balances, making the issuance neutral to financial leverage ratios.

KEY RATING DRIVERS

The 'A-(EXP)' rating reflects expectations that UNH's financial leverage ratios will be unchanged by the issuance. The company reported debt-to-EBITDA and debt-to-total capital ratios of 2.5x and 49%, respectively at Dec. 31, 2015. Fitch expects a reduction in debt levels during 2016 consistent with UNH's forecast for debt-to-total capital at year-end 2016 to be in a range between 42% and 44%.

UNH's EBITDA-based interest coverage was 15.9x in 2015, but is estimated to be approximately 11x using run-rate 2016 interest expense. The company had issued $14 billion in debt in July 2015 to partially fund the Catamaran Corp. (CTRX) acquisition and consequently, full year 2015 interest expense does not fully reflect current debt levels.

RATING SENSITIVITIES

Key rating triggers that could result in a downgrade include:

--Lack of meaningful progress over the next 12-24 months towards debt-EBITDA and financial leverage ratios approximating 1.5x and 37% respectively;

--EBITDA-to-interest coverage below 10x.

Key rating triggers that could result in a return to a Stable Outlook include:

--Significant progress toward deleveraging targets of debt-to-EBITDA ratio below 1.8x and financial leverage ratio below 41%, while maintaining a double-digit EBITDA-to-interest coverage ratio.

FULL LIST OF RATING ACTIONS

Fitch has assigned the following rating:

UnitedHealth Group Incorporated

--Senior unsecured notes 'A-(EXP)'.

Additional information is available on www.fitchratings.com

Applicable Criteria

Insurance Rating Methodology (pub. 16 Sep 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=871172

Additional Disclosures

Dodd-Frank Rating Information Disclosure Form

https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=999801

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=999801

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https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31

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Contacts

Fitch Ratings
Primary Analyst
Douglas M. Pawlowski, CFA
Senior Director
+1-312-368-2054
Fitch Ratings, Inc.
70 West Madison Street
Chicago, IL 60601
or
Secondary Analyst
Mark E. Rouck, CPA, CFA
Senior Director
+1-312-368-2085
or
Committee Chairperson
Douglas L. Meyer, CFA
Managing Director
+1-312-368-2061
or
Media Relations:
Hannah James, +1-646-582-4947
hannah.james@fitchratings.com

Contacts

Fitch Ratings
Primary Analyst
Douglas M. Pawlowski, CFA
Senior Director
+1-312-368-2054
Fitch Ratings, Inc.
70 West Madison Street
Chicago, IL 60601
or
Secondary Analyst
Mark E. Rouck, CPA, CFA
Senior Director
+1-312-368-2085
or
Committee Chairperson
Douglas L. Meyer, CFA
Managing Director
+1-312-368-2061
or
Media Relations:
Hannah James, +1-646-582-4947
hannah.james@fitchratings.com