Fitch Affirms Ratings for United Health

April 27, 2004

Fitch Ratings has affirmed the ratings of UnitedHealth Group Inc. (UnitedHealth) and its subsidiaries. The rating affirmation affects approximately $2.4 billion of outstanding long-term debt and commercial paper. The Rating Outlook is Stable.

The rating action follows the company’s announcement that it has agreed to acquire Connecticut-based Oxford Inc. (Oxford) for consideration of approximately $5 billion, with the net payment structured 30% in cash and 70% in shares of UnitedHealth’s common stock.

Fitch expects UnitedHealth to fund the cash portion of the purchase price primarily with debt, resulting in consolidated leverage of approximately 28.5%, which is essentially the company’s run rate leverage and is within Fitch’s expectations. Fitch views the transaction as strategically beneficial to UnitedHealth. Oxford is a managed care company operating primarily in New York, New Jersey and Connecticut. The company has performed well in recent years, and holds a good competitive position in its region of operation. Fitch believes that the provider networks of these two companies will complement one another. Oxford’s existing regional network, which Fitch considers to be strong, is likely to add depth to UnitedHealth’s network in the region, thereby providing broader access to care at more attractive reimbursement levels than what UnitedHealth currently achieves.

At the same time, UnitedHealth’s network will broaden Oxford’s access to care, likely reducing the number of out-of-network claims produced by Oxford’s members. In addition, many multi-state, New York headquartered companies may find UnitedHealth’s strong national network very attractive.

Fitch expects an incremental cost benefit from the migration of Oxford’s enrollees to UnitedHealth’s very strong administrative platform. While integration risks are a normal consideration with this transaction, Fitch’s concerns are somewhat mitigated by the fact that Oxford’s enrollment base is less than 8% that of UnitedHealth. In addition, UnitedHealth has a good track record of successful integration.

Fitch’s ratings on UnitedHealth reflect the inherent strength and diversity of the company’s health services operations, good balance sheet fundamentals, strong earnings track record and excellent cash flow. UnitedHealth has a balanced mix of risk-based and fee-based businesses, which have contributed significantly to the stability of the company’s financial performance. The ratings also consider the competitive pressures in several of the company’s core markets driven by price competition, increasing medical cost trends, and the evolving regulatory and political environment impacting the health insurance and managed care industry.

Fitch expects UnitedHealth to maintain financial leverage in the 25%-30% range. The company’s very strong liquidity profile is supported by strong operating cash flow and access to external financing sources. Fitch expects debt/EBITDA of 1.0 times (x) and earnings-based interest coverage of approximately 30x in 2004.

UnitedHealth’s active share repurchase program is expected to be managed in line with Fitch’s expectations for financial leverage.

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