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

OLDWICK, N.J.--(BUSINESS WIRE)--A.M. Best Co. has affirmed the financial strength ratings (FSR), issuer credit ratings (ICR) and debt ratings of Humana Inc. (Humana) (Louisville, KY) [NYSE: HUM] and its insurance and HMO subsidiaries. The outlook for all ratings is negative. (See below for a detailed list of ratings.)

The rating of Humana’s insurance and HMO subsidiaries reflect the company geographic diversity of its membership, strong membership and revenue growth and improving commercial segment performance. Offsetting rating factors include the enterprise’s lack of revenue stream diversification, dependency on government contracts, low operating margins and modest capitalization.

Humana’s national presence, brand recognition and good marketing strategy have contributed to its solid market position in the Medicare market. Humana has reached the second highest market share in the Medicare Part D product line and has had significant growth in its Medicare Advantage membership. Humana continues to improve the profitability of its commercial business segment. Margins in this segment are expected to remain flat as Humana works to stabilize its membership and business mix.

Humana has successfully achieved a significant Medicare market presence, realizing large membership growth in the Medicare Advantage and Medicare Part D product lines. While Humana had made considerable capital contributions to its insurance and HMO subsidiaries in support of this membership growth, its risk-based capitalization is considered modest. Government contracts account for approximately two-thirds of Humana’s revenue. Humana’s operating margins are relatively low as compared to its peers, and earnings rely heavily on government funded programs, specifically Medicare.

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

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

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

• Humana Health Plan of Texas, Inc.
• Humana Health Benefit Plan of Louisiana, Inc.

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

• CarePlus Health Plans, Inc.
• CHA HMO, Inc.

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

• Humana Health Plans of Puerto Rico, Inc.

• Humana Insurance of Puerto Rico, Inc.

An FSR of A- (Excellent) and an ICR of “a-” have been assigned to Humana Insurance Company of New York.

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

The following indicative ratings on universal shelf securities have been affirmed:

Humana Inc.—

-- “bbb-” on senior note securities

-- “bb+” on subordinated debt securities

-- “bb” on preferred shares

The ICR of “bbb-” has been affirmed for Humana Inc.

Founded in 1899, A.M. Best Company is a full-service credit rating organization dedicated to serving the financial services industries, including the banking and insurance sectors. For more information, visit www.ambest.com.