UnitedHealth struggles to sell Amil, agency says

UnitedHealth Group, the largest U.S. healthcare operator by market value, is struggling to sell Amil, due to mounting losses in its individual plan portfolio and antitrust concerns, which has put some competitors out of the loop, according to four sources with subject knowledge.

After studying various sales models for Amil ten years after acquiring the operation, UnitedHealth decided last month to suspend the process, according to the sources.

UnitedHealth had previously agreed to pay a buyer to take over the portfolio of individual plans and even record a loss on the sale of the entire Amil, but it has not received offers it considered attractive, the sources said.

The last one involved Dasa and Bradesco Seguros, a subsidiary of Bradesco. But with Dasa’s shares down 44% this year, financing the business partly through equity has become less viable.

UnitedHealth declined to comment on details of the deal or operations in Brazil. “UHG is a long-term investor in Brazil, which it entered in 2012, and intends to continue to serve the Brazilian healthcare market,” said spokesman Matthew Stearns in an emailed statement.

Some private equity funds also looked at the deal but decided not to bid because of its complexity, according to a fifth source.

Dasa and Bradesco Seguros proposed payment in installments and that UnitedHealth remain for a period in the company as a minority partner, an offer that was rejected by the North American company, the sources said.

Dasa and Bradesco Seguros did not comment on the matter, as did BTG Pactual, which has the mandate to sell.

UnitedHealth had already accepted the possibility of losing money on the sale, as it became clear that it was unlikely to get the $5 billion it paid for Amil 10 years ago, the sources said. Two of the sources estimated the value of the deal in Brazil currently at around US$ 1 billion (about R$ 5.284 billion).

So far, UnitedHealth has not recorded any losses on its balance sheets related to the Brazilian operation. In January, the company changed the way it reports international business. Now, Amil is included in the global division of corporate and individual health plans, which includes this type of business in the United States.

Some of Amil’s biggest rivals, such as the hospital chain Rede D’Or, looked at a potential acquisition in January, but ended up closing alternative deals, which makes an acquisition of Amil difficult due to possible problems in the competition defense body Conselho Administrativo de Defesa Economic (Cade).

In February, Rede D’Or announced the purchase of the insurance company SulAmérica. Rede D’Or did not respond to requests for comment about Amil.

regulatory headache

UnitedHealth Group Chief Executive Andrew Witty announced the decision to divest from Amil shortly after taking office last year. The group has 3.4 million health plan beneficiaries in Brazil, 2.2 million dental plan beneficiaries and manages 31 hospitals and 82 clinics. Hospitals and part of the health plan portfolio, which is contracted by companies, are profitable.

The private health market in Brazil has grown and today there are 49 million beneficiaries.

But decisions by the National Supplementary Health Agency (ANS) have created headaches for the sector since UnitedHealth bought Amil. The portfolio of 340,000 individual beneficiaries cannot undergo a price adjustment greater than those determined by the ANS, while court decisions, among others, have continuously increased mandatory coverage. That’s why most insurers stopped selling them, but existing portfolios need to be maintained.

UnitedHealth even offered to pay 3 billion reais to an investment company, Fiord Capital, to take over the portfolio, but regulators banned the deal.

Since buying Amil, UnitedHealth’s global revenue has nearly tripled to $290 billion last year, reducing the importance of investing in Brazil. The company, which originally operated health plans, now has activities in pharmacies, data analytics and medical clinics in the US.