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Rating Action:

Moody’s rates UnitedHealth Group’s senior notes A3; outlook stable

13 May 2020

Approximately $5.0 billion of new debt securities rated

New York , May 13, 2020 – Moody's Investors Service has assigned an A3 senior unsecured debt rating to UnitedHealth Group Incorporated's (UnitedHealth, NYSE: UNH, senior debt at A3) planned issuance of $4.0 - $5.0 billion of senior unsecured debt due in January 2026 and May 2030, 2040, 2050 and 2060. Net proceeds from the offering are for general corporate and working capital purposes, including the refinancing of commercial paper and redemption of maturing debt. The planned issuance constitutes a takedown from UnitedHealth's shelf registration filed in February 2020. The outlook on UnitedHealth is stable.

RATINGS RATIONALE

This issuance will increase UnitedHealth's financial leverage (debt-to-capital, where debt is adjusted for operating leases) from 47.4% as of March 31, 2020 to approximately 50% on a pro-forma basis, with the offsetting benefit of enhancing its liquidity to cover upcoming debt maturities and other contingencies during the economic slowdown. Adjusting for $10 billion of debt issued during Q1 2020 solely to enhance liquidity by holding over $10 billion in excess cash in this period of uncertainty, debt-to-capital would increase from 42.0% to approximately 45% pro-forma, which, nonetheless, remains above Moody's expectation (40%) for the current rating. We expect this increase to be temporary as UnitedHealth will use the proceeds of the proposed issuance, in part, to pay down outstanding commercial paper ($1.2 billion outstanding as of March 31, 2020) and its bank credit facilities ($10 billion), as well as redeem $1.5 billion of debt maturing and callable in July 2020. Moody's expects the net additional debt to also be offset by a reduced level of share repurchases in the remainder of 2020 and estimates that adjusted debt-to-capital will be modestly above 40% by year-end 2020.

Moody's A3 senior unsecured debt rating for UnitedHealth and A1 insurance financial strength (IFS) rating of UnitedHealthcare Insurance Company (UHIC) are supported by its leading US position in medical membership and sizeable franchise in South America. UnitedHealth's credit profile is also enhanced through Optum (unrated), its non-regulated health services subsidiary, which generated more than half of cash flows to the parent in 2019. Optum, whose largest client is UHC but has a sizeable presence with external clients as well, has leading positions in pharmacy services, the provider space and data and analytics. The Optum businesses are characterized by significant scale, growth potential and strong competitive positions. With $242 billion in consolidated revenues in 2019, UNH was the sixth largest US company. These strengths are partially mitigated by relatively high leverage, a lower RBC capital ratio than its national peers and a high level of goodwill, reflecting the company's frequent acquisitions.

FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS

The rating agency stated that the ratings may be upgraded if the following occur: 1) Financial leverage (debt to capital, where debt includes operating leases) is maintained below 35%; 2) EBITDA interest coverage is above 15x; and/or 3) The consolidated risk-based capital (RBC) ratio is maintained above 275% of company action level (CAL). However, Moody's said that the ratings may be downgraded if: 1) financial leverage is maintained above 40%; 2) the RBC ratio is sustained below 250% of CAL; and/or 3) there is a significant write-down (or increased likelihood) of goodwill/intangibles.

The following ratings have been assigned:

UnitedHealth Group Incorporated – senior unsecured notes due January 2026 and May 2030, 2040, 2050 and 2060 at A3.

The outlook on UnitedHealth Group and its affiliates is stable.

UnitedHealth Group is headquartered in Minnetonka, Minnesota. For the three months ending March 31, 2020 the company reported revenues of about $64.4 billion. At March 31, 2020 shareholders' equity was $59.9 billion and total medical membership (excluding Part D Medicare membership) was approximately 48.5 million.

The principal methodology used in these ratings was US Health Insurance Companies Methodology published in November 2019 available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1187569 . Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

REGULATORY DISCLOSURES

For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004 .

For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

The rating has been disclosed to the rated entity or its designated agent(s) and issued with amendment resulting from that disclosure.

This rating is solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1133569 .

The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the EU and is endorsed by Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Dean Ungar, CFA
VP-Sr Credit Officer
Financial Institutions Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS : 1 212 553 0376
Client Service : 1 212 553 1653

Marc R. Pinto, CFA
MD-Financial Institutions
Financial Institutions Group
JOURNALISTS : 1 212 553 0376
Client Service : 1 212 553 1653

Releasing Office :
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS : 1 212 553 0376
Client Service : 1 212 553 1653

© 2020 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.

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