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.
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