UnitedHealth Group’s US$4bn bond on Wednesday was over three times subscribed, according to a lead bank on the deal. The trade came a day after the company reported third-quarter net profits had grown over 26%.
UnitedHealth, the US’s largest health insurer, said it expected earnings to grow 13%-16% in 2018 as medical costs remain low, and that it expects to benefit from new insurance products backed by President Trump, according to a Reuters report.
That positive backdrop allowed the company to tighten pricing through bookbuild and a final order book of US$12.3bn.
UnitedHealth sold Obamacare individual plans in about two dozen states before booking financial losses and then mostly pulling out of the market this year.
That turned investors onto the credit, a healthcare analyst said.
“From a credit standpoint you appreciate the prudence of trimming the [Obamacare] exchange exposure - it brought in a negative margin,” the analyst said.
CreditSights analysts said they consider UnitedHealth’s credit profile to be among the strongest in the entire insurance sector.
“The company’s ability to continually generate both regulated and un-regulated cash flows positions UnitedHealth favorably,” they wrote in a report Tuesday.
UnitedHealth (A3/A+/A-) approached investors with four fixed tranches of three, five, ten and 30 years, with initial talk of T+50bp, T+65bp area, T+90bp area and T+115bp area.
The deal was initially announced with two floating rate tranches of 18 month and three-year maturities but UnitedHealth dropped the former.
It launched a US$900m three-year fixed at T+30bp, a US$300m three year floater at 3mL+7bp, a US$900m five year fixed at T+45bp, a US$950m 10 year at T+70bp, a US$950m 30-year at T+95bp.
At launch levels, the bonds were only paying new issue concessions of 2bp-3bp, according to IFR calculations.
