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A.M. Best Affirms Ratings of Humana Inc. and Its Subsidiaries


Tuesday, September 20, 2011 11:07 am EDT



Public Company Information:

"Understanding BCAR for Life and Health Insurers"

OLDWICK, N.J.--(BUSINESS WIRE)--A.M. Best Co. has affirmed the financial strength ratings (FSR) and issuer credit ratings (ICR) of the insurance 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 the ICR of “bbb+” of Kanawha Insurance Company (Lancaster, SC) (Kanawha). The outlook for the FSR is stable, while the outlook for the ICR has been revised to negative from stable. The outlook for all remaining ratings is stable.

Concurrently, A.M. Best has withdrawn the FSR of A- (Excellent) and the ICR of “a-” of Cariten Insurance Company (Knoxville, TN). The ratings were withdrawn due to the company’s negligible operating scale and lack of membership. (See below for a detailed listing of the companies and ratings.)

The rating affirmations for the subsidiaries of Humana (excluding Kanawha) acknowledge the organization’s consistent operating revenue development through membership growth, primarily in the Medicare Advantage products. Despite the prolonged economic downturn, growth in earnings has continued into the first half of 2011. Humana maintains significant liquidity, which allows the organization to execute its business development strategy, fulfilling operating and investment cash flow requirements. Humana’s debt-to-capital ratio was well within A.M. Best’s guidelines for the ratings and below many of its peers.

Offsetting rating factors reflect Humana’s concentration in government sponsored programs, which includes Medicare Advantage and Medicaid. While these lines of business have proven to be profitable, their level of concentration in the organization’s business mix exposes the health insurance operation to significant business concentration risk. The organization’s commercial segment has not exhibited equally favorable operating trends, reflecting a somewhat lower rate of revenue development as well as flat to declining earnings.

The negative outlook for the ICR of Kanawha reflects the company’s significant underwriting and operating losses in each of the last five years; a trend that has continued in 2011. Despite having favorable investments, the company’s risk insurance operations and investment returns are not sufficiently hedged and have produced increasing losses. Kanawha has received strong financial support in the form of capital infusions over the last five years and most recently in 2011 from Humana.

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

  • Humana Insurance Company
  • Humana Medical Plan, Inc.
  • Humana Health Plan, Inc.
  • Humana Health Benefits Plan of Louisiana, Inc.
  • Humana Health Plan of Texas, Inc.
  • Humana Health Insurance Company of Florida, Inc.
  • Humana Benefits Plan of Illinois, Inc.
  • Humana Health Plan of Ohio, Inc.
  • Humana Employers Health Plan of Georgia, Inc.
  • Humana Insurance Company of New York
  • HumanaAdvantage Care Plan
  • Humana Wisconsin Health Organization Insurance Corporation
  • Humana Insurance Company of Kentucky
  • Cariten Health Plan, Inc.
  • CarePlus Health Plans, Inc.
  • HumanaDental Insurance Company
  • DentiCare Inc.
  • CompBenefits Insurance Company
  • CompBenefits Company
  • CompBenefits Dental, Inc.
  • The Dental Concerns, Inc.

The FSR of B+ (Good) and ICR of “bbb-” have been affirmed for the following subsidiaries of Humana Inc.:

  • Humana Health Plans of Puerto Rico, Inc.
  • Humana Insurance of Puerto Rico, Inc.

The following debt ratings have been affirmed:

Humana Inc.—

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

-- “bbb-” on $300 million 6.3% senior unsecured notes, due 2018

-- “bbb-” on $500 million 7.2% senior unsecured notes, due 2018

-- “bbb-” on $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 unsecured debt securities

-- “bb+” on subordinated debt securities

-- “bb” on preferred shares

The principal methodologies used in determining these ratings is Best’s Credit Rating Methodology -- Global Life and Non-Life Insurance Edition, which provides a comprehensive explanation of A.M. Best’s rating process and highlights the different rating criteria employed. Additional key criteria utilized include: “Rating Health Insurance Companies”; “Risk Management and the Rating Process for Insurance Companies”; “Understanding BCAR for Life and Health Insurers”; Rating Members of Insurance Groups”; and “A.M. Best’s Ratings & the Treatment of Debt.” Methodologies can be found at www.ambest.com/ratings/methodology.

Founded in 1899, A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

Copyright © 2011 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.


A.M. Best Co.
David Mitchell
Senior Financial Analyst
(908) 439-2200, ext. 5556
Sally Rosen
Managing Senior Financial Analyst
(908) 439-2200, ext. 5280
Carole Lovell
Public Relations Associate
(908) 439-2200, ext. 5445
Jim Peavy
Assistant Vice President, Public Relations
(908) 439-2200, ext. 5644

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