A.M. Best Comments on UnitedHealth Group Inc.'s Earnings Guidance and Settlements
OLDWICK, N.J.-- July 03, 2008 --A.M. Best Co. has commented that the ratings of UnitedHealth Group Inc. (UnitedHealth) (Minnetonka, MN) (NYSE: UNH) and its subsidiaries remain unchanged following the company's release of a revision to earnings guidance and reduced second quarter and full year 2008 earnings. UnitedHealth also announced a settlement in the federal securities class action and Employee Retirement Income Security Act (ERISA) lawsuits.
On July 2, 2008, UnitedHealth announced a revision to its earnings outlook for 2008 following an assessment of preliminary second quarter 2008 results and recent business trends. The company's risk-based commercial business produced a lower level of gross margin than expected due to increased pressure on premium yields, which are resulting from a competitive commercial business environment. Furthermore, UnitedHealth is experiencing a decrease in the gross margin for Medicare Part D and Medicare Chronic Special Needs Plans.
Additionally, UnitedHealth announced that it had reached an agreement to settle both the federal securities class action and ERISA lawsuits. Both lawsuits arose from UnitedHealth's historical stock option practices. As a result of the settlements, UnitedHealth will pay $895 million pre-tax into a settlement fund for the benefit of class members of the federal securities class action lawsuit and $17 million into a settlement fund for the benefit of ERISA class members. UnitedHealth's insurance carriers will cover the majority of the ERISA settlement.
A.M. Best expects UnitedHealth to continue to experience pressure in the commercial market, which may result in lower margins. The result of these announcements and the subsequent payment for the settlements are expected to increase UnitedHealth's debt-to-capital ratio above 40%, should the company use debt for the payment. While A.M. Best is not comfortable with an increase in the debt-to-capital ratio above 40%, A.M. Best expects the ratio to remain less than 45% and for this ratio to return to 40%by second quarter 2009. A.M. Best also expects UnitedHealth's earnings before interest and taxes (EBIT) interest coverage to remain at 10 times or greater. Additionally, A.M. Best would like UnitedHealth to scale back its share repurchase program until the debt-to-capital ratio decreases to 40%.
On January 29, 2008, A.M. Best issued a press release announcing a downgrade to the ratings of UnitedHealth Group and select subsidiaries. At that time, A.M. Best considered the change in the company's capital structure and increase in debt-to-capital ratio in the rating action.
If UnitedHealth's debt-to-capital ratio increases above 45% or if the company announces another negative revision to earnings (including any additional settlements or fines), a negative rating action may occur. Additionally, A.M. Best would take into consideration the magnitude of the amount of any settlement or fine in any rating action. A.M. Best will continue to monitor the financial results and risk-based capitalization of UnitedHealth and its insurance subsidiaries, as well as continue its ongoing dialogue with company management.
Founded in 1899, A.M. Best Company is a global full-service credit rating organization dedicated to serving the financial and health care service industries, including insurance companies, banks, hospitals and health care system providers. For more information, visit www.ambest.com.
Contacts
A.M. Best Co.
Analysts:
Sally Rosen, 908-439-2200, ext. 5280
sally.rosen@ambest.com
or
Kenneth Frino, 908-439-2200, ext. 5012
kenneth.frino@ambest.com
or
Public Relations:
Jim Peavy, 908-439-2200, ext. 5644
james.peavy@ambest.com
or
Rachelle Morrow, 908-439-2200, ext. 5378
rachelle.morrow@ambest.com
Sterilisation and Disinfectant Markets in Europe Enjoy Mixed Fortunes
LONDON-- July 01, 2008 --The sterilisation and disinfectant market in Europe has been witnessing slow growth as hospitals try to tackle alarmingly high infection rates resulting from inadequately decontaminated patient care equipment. However, the market is mature and saturated, offering little scope for technological innovation, and the complete lack of product differentiation is hampering competition. While the disinfection market has shown potential for expansion, the sterilisation market remains largely static.
New analysis from Frost & Sullivan (http://www.medicaldevices.frost.com), European Sterilisation and Disinfection Equipment Market, finds that the market earned revenues of over USD269.7 million in 2007 and estimates this to reach USD352.0 million in 2014.
"Though the sterilisation and disinfection equipment market is not characterised by a strong level of technological development, certain mutations are contributing to the overall positive growth," says Frost & Sullivan Research Analyst Kieu A. Vuong. "For instance, slack growth in the low-temperature gas steriliser segments is compensated by positive trends impacting the disinfector equipment sector."
The spurt in the number of surgical procedures utilising minimally invasive instruments such as endoscopes is also driving the need for sophisticated systems for proper disinfection and maintenance of such equipment. This demand for more efficient disinfecting methods is fuelling the growth of the automatic endoscope reprocessor (AER) segment. The washers and AER disinfection markets are exhibiting continuous growth due to advancements in surgical instrumentation and liquid chemical disinfectants as well.
However, emerging trends indicate increasing consolidation and centralisation of hospitals in Europe, drastically reducing the number of hospitals and the number of potential customers. End-user consolidation is a challenge for this market, as purchasing power is augmented.
"High prices along with slow rate of product replacement will force manufacturers to identify different revenue streams in order to maintain and increase their profit margins," notes Vuong. "Despite several attempts at creating a unified platform, insecurities concerning the standardisation and regulation of products continue."
Nonetheless, participants can accrue revenues by providing integrated service packages and proper nurturing of customer relationships, since virtually all hospitals are already equipped with infection control equipment. To achieve the high standards required for service packages, many companies have entered into partnerships to reduce costs and enhance their offering.
If you are interested in a virtual brochure, which provides manufacturers, end users and other industry participants with an overview of the European sterilisation and disinfection equipment market, then send an e-mail to Patrick Cairns, Corporate Communications, at pcairns_pr@frost.com, with your full name, company name, title, telephone number, company e-mail address, company website, city, state and country. Upon receipt of the above information, an overview will be sent to you by e-mail.
European Sterilisation and Disinfection Equipment Market is part of the Medical Devices Growth Partnership Service programme, which also includes research in the following markets: cardiovascular, wound care, surgical, orthopaedic and others. All research services included in subscriptions provide detailed market opportunities and industry trends that have been evaluated following extensive interviews with market participants. Interviews with the press are available.
Frost & Sullivan, the Growth Partnership Company, partners with clients to accelerate their growth. The company's TEAM Research, Growth Consulting and Growth Team MembershipT empower clients to create a growth-focused culture that generates, evaluates and implements effective growth strategies. Frost & Sullivan employs over 45 years of experience in partnering with Global 1000 companies, emerging businesses and the investment community from more than 30 offices on six continents. For more information about Frost & Sullivan's Growth Partnerships, visit http://www.frost.com.
European Sterilisation and Disinfection Equipment Market
M236
Contacts
Frost & Sullivan
Corporate Communications - Europe & Africa
Patrick Cairns, +27 18 468 2315
patrick.cairns@frost.com
or
Corporate Communications - North America
Stacie Kopecki, 210-247-2450
fax: 210-348-1003
stacie.kopecki@frost.com
or
Corporate Communications - Asia Pacific
Jasminder Kaur, 65-6890-0937
fax: 65-6890-0988
jkaur@frost.com
or
Corporate Communications - South Asia
Remi Chatterjee, +91-44-4001 3419
fax: +91-22-2832 4713
remi.chaterjee@frost.com
or
Corporate Communications - Middle East
Nimisha Iyer, +91 22 4001 3404
fax: +91 22 2832 4713
niyer@frost.com
or
Corporate Communications - China
Amelia Wong, +86 21 5407 5783, ext. 8669
cell: +86 13621724823
amelia.wong@frost.com
or
Corporate Communications - Latin America
José María Jantus, + 54-11-4777-9951
fax: + 54-11-4777-0071
jose.jantus@frost.com
http://www.frost.com
