AM Best Downgrades UnitedHealth Group's Credit Ratings and Outlooks to Stable

AM Best downgraded UnitedHealth Group's credit ratings to "a-" from "a", citing a significant decline in UnitedHealthcare's operating performance. The downgrade is due to a projected $6.5 billion in additional medical expenses for full-year 2025, primarily driven by Medicare Advantage costs. The outlook for the ratings has been revised to stable.

AM Best, a global credit rating agency, has downgraded the Long-Term Issuer Credit Ratings (Long-Term ICR) of UnitedHealth Group Incorporated (UnitedHealth Group) from "a" (Excellent) to "a-" (Excellent) [1]. Concurrently, the Financial Strength Rating (FSR) of UnitedHealth Group has been downgraded from A+ (Superior) to A (Excellent), and the Long-Term ICR of its health and dental insurance subsidiaries, collectively known as UnitedHealthcare, has been downgraded from "aa-" (Superior) to "a+" (Excellent) [1].

The downgrades are attributed to a significant deterioration in UnitedHealthcare's operating performance, which is no longer supportive of a very strong operating performance assessment. UnitedHealthcare is expected to report overall profitability, but earnings will be materially lower than historical levels [1]. The company now projects an additional $6.5 billion in medical expenses for full-year 2025, primarily due to increased costs in Medicare Advantage [1].

Despite the downgrade, the outlook for these ratings has been revised to stable, indicating that AM Best expects UnitedHealthcare's financial condition to remain stable in the near term. The downgrade reflects the company's strong balance sheet strength, supported by very strong risk-adjusted capital, as measured by Best's Capital Adequacy Ratio (BCAR) [1].

UnitedHealthcare's strong balance sheet is bolstered by its conservative investment strategy, with invested assets primarily held in investment-grade fixed income securities and cash and short-term investments. The company's liquidity has historically been good, with favorable operating cash flow and high cash balances, supplemented by internal lines of credit [1].

The downgrade also reflects the company's strategic challenges, including notable changes in senior management and financial outlook reductions due to pricing and product design not keeping pace with emerging medical trends [1]. UnitedHealth Group's equity has shown consistent growth over the past five years, driven by retained earnings, despite large share repurchases and growing dividend programs [1].

Overall, AM Best expects UnitedHealth Group to deleverage to its targeted financial leverage over the near to medium term, driven by favorable operating cash flows, parent company cash, a commercial paper program, and a $21 billion revolving credit facility [1].

References:
[1] https://finance.yahoo.com/news/am-best-downgrades-credit-ratings-201800069.html
[2] https://www.morningstar.com/news/business-wire/20250828917145/am-best-downgrades-credit-ratings-of-unitedhealth-group-incorporated-and-its-subsidiaries-revises-outlooks-to-stable