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UnitedHealth's (UNH) Arms Receive Rating Actions From AM Best
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UnitedHealth Group, Inc.’s (UNH - Free Report) selected health and dental insurance units, collectively called UnitedHealthcare, get a rating upgrade from the credit rating agency AM Best.
The credit rating giant recently upgraded the Financial Strength Rating (FSR) to A+ (Superior) from A (Excellent) and the Long-Term Issuer Credit Rating (Long-Term ICR) to "aa-" (Superior) from "a+" (Excellent) for most of the health and dental insurance arms of UNH. The outlook of the ratings was changed to stable from positive.
The Long-term ICR was revised to "a" (Excellent) from "a-" (Excellent) and also upgraded its related Long-Term Issue Credit Ratings and Short-Term Issue Credit Rating.
Reasons Behind the Ratings
These ratings indicate UNH’s solid solvency position, well-diversified business and operating excellence. UnitedHealth’s strength in business profile and a very strong enterprise risk management are also reflected in its ratings.
The rating hikes also reflect UNH’s profitability metrics, solid earnings results, growing premiums and strategic capital management. The medical HMO player has been primarily gaining from premium growth derived from government programs for a while and also from underwriting gains.
UnitedHealth expects strong growth in individual MA and when combined with its group Medicare gains, the year 2021 looks as another year of market-leading growth. UNH also expects continued growth in Medicaid owing to transitions in coverage and net new market gains.
Other companies in the same space also gaining from government business include Anthem, Inc. and Cigna Corp. (CI - Free Report) .
Leading market position and an attractive core business that continue to be driven by new deals, renewed agreements and expansion of service offerings should help UnitedHealth retain the momentum. Its expansion of the health services segment and international business provides significant diversification benefits and shields it from stringent regulation in the United States.
The HMO player constantly gains traction from higher membership and its cost-curbing measures.
UnitedHealth has a healthy balance sheet with strong financial flexibility, marked by its consistent cash generated from operations over the years. This also enabled UNH to manage its capital and invest in business. UNH has been generating a positive cash flow from operations from the past many years, reflecting its operational efficiency.
UnitedHealth’s health service business, branded as Optum, is becoming increasingly valuable. Optum contributes to around half of UNH’s consolidated earnings. This business line has been witnessing a margin expansion and double-digit growth year over year for the past three years. Its product offerings and a nationwide presence also contribute to its overall rating upgrade. Despite the effects of the COVID-19 pandemic, the health insurer is well-poised for growth.
UNH has maintained its financial leverage in the 40% range over a long term, experiencing temporary fluctuations following sizeable buyouts. However, this could change following the Change Healthcare buyout, which is expected to close in the first half of 2022. Management believes that this currently Zacks Rank #3 (Hold) player will deploy deleveraging actions to revert to its 40% range. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
In the past year, the stock has gained 41%, outperforming its industry's growth of 34.9%.
Image Source: Zacks Investment Research
Stock to Consider
Another better-ranked stock in the medical sector is Molina Healthcare, Inc. (MOH - Free Report) .
With a Zacks Rank #2 (Buy) at present, MOH is a multi-state managed care organization participating exclusively in government-sponsored healthcare programs, such as the Medicaid program and the State Children's Health Insurance Program (SCHIP), catering to low-income persons.
Molina Healthcare’s earnings managed to beat mark in two of its trailing four quarters (missing the mark in the remaining two), the average beat being 4%.
Shares of Molina Healthcare have gained 47.5% in the past year.
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UnitedHealth's (UNH) Arms Receive Rating Actions From AM Best
UnitedHealth Group, Inc.’s (UNH - Free Report) selected health and dental insurance units, collectively called UnitedHealthcare, get a rating upgrade from the credit rating agency AM Best.
The credit rating giant recently upgraded the Financial Strength Rating (FSR) to A+ (Superior) from A (Excellent) and the Long-Term Issuer Credit Rating (Long-Term ICR) to "aa-" (Superior) from "a+" (Excellent) for most of the health and dental insurance arms of UNH. The outlook of the ratings was changed to stable from positive.
The Long-term ICR was revised to "a" (Excellent) from "a-" (Excellent) and also upgraded its related Long-Term Issue Credit Ratings and Short-Term Issue Credit Rating.
Reasons Behind the Ratings
These ratings indicate UNH’s solid solvency position, well-diversified business and operating excellence. UnitedHealth’s strength in business profile and a very strong enterprise risk management are also reflected in its ratings.
The rating hikes also reflect UNH’s profitability metrics, solid earnings results, growing premiums and strategic capital management. The medical HMO player has been primarily gaining from premium growth derived from government programs for a while and also from underwriting gains.
UnitedHealth expects strong growth in individual MA and when combined with its group Medicare gains, the year 2021 looks as another year of market-leading growth. UNH also expects continued growth in Medicaid owing to transitions in coverage and net new market gains.
Other companies in the same space also gaining from government business include Anthem, Inc. and Cigna Corp. (CI - Free Report) .
Leading market position and an attractive core business that continue to be driven by new deals, renewed agreements and expansion of service offerings should help UnitedHealth retain the momentum. Its expansion of the health services segment and international business provides significant diversification benefits and shields it from stringent regulation in the United States.
The HMO player constantly gains traction from higher membership and its cost-curbing measures.
UnitedHealth has a healthy balance sheet with strong financial flexibility, marked by its consistent cash generated from operations over the years. This also enabled UNH to manage its capital and invest in business. UNH has been generating a positive cash flow from operations from the past many years, reflecting its operational efficiency.
UnitedHealth’s health service business, branded as Optum, is becoming increasingly valuable. Optum contributes to around half of UNH’s consolidated earnings. This business line has been witnessing a margin expansion and double-digit growth year over year for the past three years. Its product offerings and a nationwide presence also contribute to its overall rating upgrade. Despite the effects of the COVID-19 pandemic, the health insurer is well-poised for growth.
UNH has maintained its financial leverage in the 40% range over a long term, experiencing temporary fluctuations following sizeable buyouts. However, this could change following the Change Healthcare buyout, which is expected to close in the first half of 2022. Management believes that this currently Zacks Rank #3 (Hold) player will deploy deleveraging actions to revert to its 40% range. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
In the past year, the stock has gained 41%, outperforming its industry's growth of 34.9%.
Stock to Consider
Another better-ranked stock in the medical sector is Molina Healthcare, Inc. (MOH - Free Report) .
With a Zacks Rank #2 (Buy) at present, MOH is a multi-state managed care organization participating exclusively in government-sponsored healthcare programs, such as the Medicaid program and the State Children's Health Insurance Program (SCHIP), catering to low-income persons.
Molina Healthcare’s earnings managed to beat mark in two of its trailing four quarters (missing the mark in the remaining two), the average beat being 4%.
Shares of Molina Healthcare have gained 47.5% in the past year.