TEXT-S&P comments on Humana
Nov 5 - Standard & Poor's Ratings Services said today that Humana Inc.'s (A-/Positive/--) announced $850 million acquisition of Florida-based medical services organization (MSO) Metropolitan Health Networks Inc. (B+/Stable/--) will not result in any rating action. Strategically, this transaction, along with two others announced today (Certify Data System and MCCI Holdings LLC) make sense in relation to Humana's growth needs and its integrated delivery strategy. Humana is effectively looking to gain more control over its provider base in order to better service its rapidly growing Medicare membership and better execute its various medical and care management programs (as well as hold down medical costs over the long term). We believe that Humana has enough balance sheet flexibility, from a holding company cash and debt leverage perspective, to acquire these companies without any rating implications. Humana's debt-to-capital ratio was 16% on an unadjusted basis and 20% on an adjusted basis as of Sept. 30, 2012 (including operating leases). Assuming that the deal is financed primarily with debt versus cash, we still expect its adjusted debt-to-capital ratio to remain within our long-term expectations of 25%-30%. The company also indicated on its third-quarter 2012 earnings call that it is looking to make further MSO and primary-care acquisitions. Still, we expect that the company will keep its debt-to-capital within 25%-30% and maintain its historical financial conservatism.