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A.M. Best Affirms Ratings of Humana Inc. and Its Core Insurance and Health Maintenance Organization Subsidiaries

Category:

Wednesday, June 2, 2010 10:57 am EDT

Dateline:

OLDWICK, N.J.

Public Company Information:

NYSE:
HUM

OLDWICK, N.J.--(BUSINESS WIRE)--A.M. Best Co. has affirmed the financial strength ratings (FSR) and issuer credit ratings (ICR) of the majority of the core insurance and health maintenance organization (HMO) subsidiaries of Humana Inc. (Humana) (Louisville, KY) (NYSE: HUM). A.M. Best also has affirmed the ICR of “bbb-” and debt ratings of Humana.

Additionally, A.M. Best has affirmed the FSR of B++ (Good) and ICR of “bbb+” of Kanawha Insurance Company (Lancaster, SC).

At the same time, A.M. Best has affirmed the FSR of B+ (Good) and ICRs of “bbb-” of Humana Health Plan of Puerto Rico, Inc. and Humana Insurance Company of Puerto Rico, Inc. (both domiciled in San Juan, PR).

Concurrently, A.M. Best has upgraded the FSR to A- (Excellent) from B++ (Good) and ICRs to “a-” from “bbb+” of Humana Health Plan of Texas, Inc. (Austin, TX), Cariten Health Plan Inc. and Cariten Insurance Company (both domiciled in Knoxville, TN).

In addition, A.M. Best has upgraded the FSR to A- (Excellent) from B++ (Good) and ICRs to “a-” from “bbb” for the remaining subsidiaries of Humana. The outlook for all ratings is stable. (See below for a detailed listing of the companies and ratings.)

The rating affirmations for the core subsidiaries of Humana reflect strong premium growth, national product offerings and positive operating results. Humana continues to report strong premium revenue growth driven mainly by the company’s Medicare Advantage products. This trend is anticipated to continue in the near term as first quarter 2010 Medicare Advantage membership growth was strong. Humana offers products nationally, mainly through its Medicare Advantage product offerings, but also has geographically grown its commercial product offerings through expansion of its specialty benefits portfolio. Humana has consistently reported positive operating and net income results. Earnings from operations reached $1.7 billion in 2009 up 61% from the prior year. First quarter 2010 operating earnings were up 38% over first quarter 2009.

Partially offsetting these positive rating factors is the high concentration of Humana’s premium revenue and operating earnings in government-sponsored programs, especially in Medicare products; declining commercial medical and stand-alone Medicare Part D membership; and modest subsidiary consolidated risk-based capitalization. In 2009, 76% of Humana’s premium revenue and 87% of its operating earnings were derived from government-sponsored programs, with a heavy reliance on Medicare products. Commercial medical membership has declined as the company continues to be challenged to grow this segment of its business. Humana’s membership in its Medicare Part D products declined significantly in 2009, mainly due to losses in its auto assigned dual eligible membership. Consolidate risk-based capital continues to improve incrementally for the organization and is adequate for its current rating level, but the capital levels at its larger HMOs are considered modest.

The rating upgrades recognize these companies’ role as strategic subsidiaries of Humana. These subsidiaries play a significant role in enabling Humana to be able to offer a comprehensive product portfolio of health, dental and vision products across targeted geographies.

The FSR has been upgraded to A- (Excellent) from B++ (Good) and the ICRs to “a-” from “bbb” for the following subsidiaries of Humana Inc.

  • CarePlus Health Plans, Inc.
  • CompBenefits Company
  • CompBenefits Dental, Inc.
  • CompBenefits Insurance Company
  • DentiCare, Inc.
  • Humana AdvantageCare Plan
  • Humana Benefit Plan of Illinois, Inc.
  • The Dental Concern, Inc.

The FSR of A- (Excellent) and ICRs of “a-” have been affirmed for the following subsidiaries of Humana Inc.:

  • Humana Insurance Company
  • Humana Insurance Company of Kentucky
  • HumanaDental Insurance Company
  • Humana Insurance Company of New York
  • Humana Medical Plan, Inc.
  • Humana Health Plan, Inc.
  • Humana Health Insurance Company of Florida, Inc.
  • Humana Health Plan of Ohio, Inc.
  • Humana Wisconsin Health Organization Insurance Corporation
  • Humana Employers Health Plan of Georgia, Inc
  • Humana Health Benefit Plan of Louisiana, Inc.

The following debt ratings have been affirmed:

Humana Inc.—

-- “bbb-” on the $500 million 6.45% senior unsecured notes, due 2016

-- “bbb-” on the $300 million 6.30% senior unsecured notes, due 2018

-- “bbb-” on the $500 million 7.20% senior unsecured notes, due 2018

-- “bbb-” on the $250 million 8.15% senior unsecured notes, due 2038

The following debt ratings on the shelf registration have been affirmed:

Humana Inc.—

-- “bbb-” on senior note securities

-- “bb+” on subordinated debt securities

-- “bb” on preferred shares

For Best’s Credit Ratings, an overview of the rating process and rating methodologies, please visit www.ambest.com/ratings.

The principal methodologies used in determining these ratings, including any additional methodologies and factors that may have been considered, can be found at www.ambest.com/ratings/methodology.

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.

Contact:

A.M. Best Co.
Analysts
Bridget Maehr, 908-439-2200, ext. 5321
bridget.maehr@ambest.com
or
Sally Rosen, 908-439-2200, ext. 5280
sally.rosen@ambest.com
or
Public Relations
Rachelle Morrow, 908-439-2200, ext. 5378
rachelle.morrow@ambest.com
or
Jim Peavy, 908-439-2200, ext. 5644
james.peavy@ambest.com