OREANDA-NEWS. Fitch Ratings has affirmed UnitedHealth Group Incorporated's (UNH) Issuer Default Rating (IDR) at 'A' and its senior unsecured notes at 'A-'. Fitch has also affirmed the 'AA-' Insurer Financial Strength ratings of UNH's insurance company subsidiaries. The Rating Outlook remains Negative. A complete list of rating actions follows at the end of this release.

KEY RATING DRIVERS

The affirmation of UNH's ratings reflects the company's leading market position and significant size and scale as well as solid operating performance from diverse sources. Balanced against these strengths is the increased financial leverage associated with the company's acquisition of Catamaran Corporation (Catamaran).

The Negative Outlook reflects uncertainty as to UNH's ability to reduce its financial leverage to levels more commensurate with the company's current ratings.

UNH's position as the largest U. S. health insurer in terms of total revenues, GAAP equity and total medical membership could endure as the DOJ challenges mergers between Aetna Inc. and Humana Inc. as well as Anthem Inc. and Cigna Corporation. Fitch categorizes UNH as having a 'large' market position and size/scale under the agency's rating criteria, and companies with this profile are supportive of the 'AA' category. The company's credit profile also benefits from significant cash flows derived from subsidiaries whose dividend payments are generally less heavily regulated than those of health insurers.

Financial leverage ratios remain outside Fitch's medians for the current rating category with UNH's debt-to-EBITDA and debt-to-total capital ratios at 2.4x and 48% as of June 30, 2016, down modestly from year-end 2015 levels of 2.5x and 49%, respectively. Fitch expects a reduction in financial leverage ratios as UNH moderates share repurchase activity during the second half of 2016.

UNH's EBITDA-based interest coverage remained supportive of current ratings at 13.4x based on six month 2016 EBITDA and interest expense. ACA exchange sourced business continues to be a drag on earnings as UNH's management reported an expectation to lose approximately $605 million related to the individual ACA compliant segment for the full year 2016 beyond the $245 million premium deficiency reserve established in 2015. UNH participated in public exchange offerings in 34 states during 2016 and has announced its exit from all but three state exchanges for 2017.

UNH's ratings recognize the company's solid operating margins and overall profitability, as well as the inherent strength and diversity of the company's health benefits and health services operations. UNH reported an EBITDA margin of 7.9% through the first six months of 2016, down compared with 8.7% for the comparable period in 2015, reflecting lower margins at Catamaran. UNH's operating margins are slightly below expectations for the company's current rating. Annualized return on total capital was 10.1% through the first half of 2016, which remains consistent with both recent results and Fitch's median guideline for the current rating category.

UNH's businesses display great scale and diversity and sources of unregulated earnings and cash flows have grown steadily over the past several years notably with the Catamaran acquisition. Catamaran offers retail pharmacy care services to health plans and employers and provides healthcare information technology solutions to the pharmacy benefits management industry. The company's Optum business segment contributed $2.4 billion of pre-tax income in the first six months of 2016 or more than one-third of total pre-tax income.

RATING SENSITIVITIES

Key rating triggers that could result in a downgrade include:

--Lack of meaningful progress over the next 12 months towards returning to historic leverage measures of debt-to-EBITDA and financial leverage ratios approximating 1.5x and 40%, respectively;

--Material deterioration in NAIC risk-based capital ratio below 225% of the company action level;

--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 affirmed the following ratings with a Negative Outlook:

UnitedHealth Group Incorporated

--Long-term IDR at 'A';

--Short-term IDR at 'F1';

--Commercial paper rating at 'F1';

--1.875% senior unsecured notes due November 2016 at 'A-';

--Floating rate senior unsecured notes due January 2017 at 'A-';

--6.000% senior unsecured notes due June 2017 at 'A-';

--1.450% senior unsecured notes due July 2017 at 'A-';

--1.400% senior unsecured notes due October 2017 at 'A-';

--6.000% senior unsecured notes due November 2017 at 'A-';

--1.400% senior unsecured notes due December 2017 at 'A-';

--6.000% senior unsecured notes due February 2018 at 'A-';

--1.900% senior unsecured notes due July 2018 at 'A-';

--1.625% senior unsecured notes due March 2019 at 'A-';

--2.300% senior unsecured notes due December 2019 at 'A-';

--2.700% senior unsecured notes due July 2022 at 'A-';

--3.875% senior unsecured notes due October 2020 at 'A-';

--4.700% senior unsecured notes due February 2021 at 'A-';

--3.375% senior unsecured notes due November 2021 at 'A-';

--2.875% senior unsecured notes due December 2021 at 'A-';

--2.875% senior unsecured notes due March 2022 at 'A-';

--3.350% senior unsecured notes due July 2022 at 'A-';

--0% senior unsecured notes due November 2022 at 'A-';

--2.750% senior unsecured notes due February 2023 at 'A-';

--2.875% senior unsecured notes due March 2023 at 'A-';

--3.750% senior unsecured notes due July 2025 at 'A-';

--4.625% senior unsecured notes due July 2035 at 'A-';

--5.8% senior unsecured notes due March 2036 at 'A-';

--6.5% senior unsecured notes due June 2037 at 'A-';

--6.625% senior unsecured notes due November 2037 at 'A-';

--6.875% senior unsecured notes due February 2038 at 'A-';

--5.7% senior unsecured notes due October 2040 at 'A-';

--5.95% senior unsecured notes due February 2041 at 'A-';

--4.625% senior unsecured notes due November 2041 at 'A-';

--4.375% senior unsecured notes due March 2042 at 'A-';

--3.95% senior unsecured notes due October 2042 at 'A-';

--4.25% senior unsecured notes due March 2043 at 'A-';

--4.750% senior unsecured notes due July 2045 at 'A-'.

UnitedHealthcare Insurance Company

UnitedHealthcare Insurance Company of Illinois

UnitedHealthcare Insurance Company of New York

Sierra Health & Life Insurance Company, Inc.

Health Plan of Nevada, Inc.

UnitedHealthcare of Florida, Inc.

PacifiCare of Arizona, Inc.

Oxford Health Insurance, Inc.

Oxford Health Plans of New York, Inc.

UnitedHealthcare of Wisconsin, Inc.

UnitedHealthcare Benefits of Texas, Inc.

UHC of California

PacifiCare Life & Health Insurance Company

UnitedHealthcare Plan of the River Valley

--IFS at 'AA-'.