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OLDWICK, N.J.--([ BUSINESS WIRE ])--A.M. Best Co. has affirmed the financial strength ratings (FSR) and issuer credit ratings (ICR) of the insurance subsidiaries of UnitedHealth Group Incorporated (UnitedHealth) (Minnetonka, MN) (NYSE: UNH). Concurrently, A.M. Best has affirmed the ICR of abbb+a and debt ratings of UnitedHealth. Additionally, A.M. Best has assigned debt ratings of abbb+a to $400 million 1.875% senior unsecured notes, $500 million 3.375% senior unsecured notes and $600 million 4.625% senior unsecured notes all issued on November 10, 2011 by UnitedHealth. The outlook for all the above ratings is stable.

"Risk Management and the Rating Process for Insurance Companies"

A.M. Best also has assigned an FSR of A (Excellent) and ICRs of aaa to the following UnitedHealth entities: UnitedHealthcare of Mississippi, Inc. (Ridgeland, MS) and Physicians Health Choice of Texas, Inc. (San Antonio, TX). The outlook assigned to these ratings is stable.

In addition, A.M. Best has withdrawn the FSR of B++ (Good) and ICRs of abbba for the following UnitedHealth subsidiaries: Health Net of Connecticut, Inc. (Shelton, CT), Health Net of New Jersey, Inc. (Old Bridge, NJ), Health Net of New York, Inc. and Health Net Insurance of New York, Inc. (both domiciled in New York, NY), following their membership transition to other UnitedHealth subsidiaries. (See link below for a detailed listing of the companies and ratings.)

The affirmation of the ratings of UnitedHealth and its insurance subsidiaries reflects the organizationas premium growth, strong earnings, high degree of product and technological innovations. These strengths are further supported by the significant market presence, diverse non-insurance operations and good financial flexibility of the enterprise. UnitedHealth is one of the nationas largest health benefits companies, serving more than 75 million people, and draws its strength from a good mix of regulated and non-regulated businesses. The organization has a wide geographic reach and a diversified portfolio, which includes commercial, Medicare and Medicaid managed care products. UnitedHealth also continues to expand its profitable non-regulated businesses, and the organizationas share of non-regulated earnings remains significantly higher compared to its peers. Furthermore, UnitedHealthas non-regulated subsidiaries are well positioned for continuous revenue growth. Non-regulated earnings enhance UnitedHealthas financial flexibility by contributing to already strong interest coverage and reducing the companyas reliance on dividends from regulated subsidiaries. In addition, UnitedHealthas financial leverage declined over the last two years, which puts it within A.M. Bestas expectations and in line with its peers.

Partially offsetting these strengths are the concerns that arise from managing to a lower level of risk-based capitalization at the regulated entities and their declining statutory operating margins. Following consistently high dividends to UnitedHealth, the level of risk-based capitalization at the leading regulated subsidiary, UnitedHealthcare Insurance Company (UHIC) (Hartford, CT), though improved from 2009 and 2008, is low compared to its peers and A.M. Bestas expectations. A.M. Best does acknowledge that UHIC is a significant source of dividends and consistently produces strong operating results. In addition, UHICas improved ability to predict claims trends, better fund transfer mechanisms within the organization and UnitedHealthas enhanced ability to support the subsidiaries, mitigate the lower capitalization concerns. Although A.M. Best expects earnings to remain strong, operating margins at UnitedHealth, in line with the industry trend, have declined compared to historical levels and are likely to moderate further. The earnings deterioration is due to competitive pressure, implementation of minimum loss ratio requirements related to the Patient Protection and Affordable Care Act and changing business mix with a growing share of Medicare and Medicaid products where the margins are lower.

Key rating drivers that may lead to positive rating actions for UnitedHealth and its subsidiaries include substantial earnings growth, improvement in risk-adjusted capital at regulated entities and significant organic growth in shareholdersa equity. Key rating drivers that may lead to negative rating actions include decline in risk-adjusted capital at UnitedHealthas lead operating entity, UHIC, significant weakening of operating performance, an increase in financial leverage beyond A.M. Bestas expectations or substantial deterioration in interest coverage.

For a complete list of UnitedHealth Group Incorporated and its subsidiariesa FSRs, ICRs and debt ratings, please see [ www.ambest.com/press/012604unitedhealth.pdf ].

The principal methodology used in determining these ratings is [ Bestas Credit Rating Methodology -- Global Life and Non-Life Insurance Edition ], which provides a comprehensive explanation of A.M. Bestas rating process and highlights the different rating criteria employed. Additional key criteria utilized include: aRating Health Insurance Companiesa; aUnderstanding BCAR for Life/Health Insurersa; aA.M. Best Ratings & the Treatment of Debta; aRating Members of Insurance Groupsa; aRisk Management and the Rating Process for Insurance Companiesa; aRating Commercial Papera; and aAssessing Country Risk.a Methodologies can be found at [ www.ambest.com/ratings/methodology ].

Founded in 1899, A.M. Best Company is the worldas oldest and most authoritative insurance rating and information source. For more information, visit [ www.ambest.com ].

Copyright 2012 by A.M. Best Company, Inc.ALL RIGHTS RESERVED.