TEXT-Fitch expects to rate Humana's new notes 'BBB'
Dec 5 - Fitch Ratings said today that it expects to assign 'BBB' ratings to Humana Inc.'s (HUM) planned issue of approximately $1 billion of senior unsecured notes. The 'BBB' ratings are equivalent to Fitch's ratings on HUM's currently outstanding senior unsecured notes. Fitch's expectation is that the notes will be issued with a mix of 10 and 30 year maturities and that proceeds will be used to fund a portion of HUM's previously announced acquisition of Metropolitan Health Networks, Inc. (MDF) and for general corporate purposes. HUM plans to acquire MDF's common shares and repay MDF's outstanding debt in exchange for approximately $850 million. Fitch estimates HUM's EBITDA-based interest coverage ratio through Sept. 30, 2012 including the planned $1 billion issue on a pro forma basis, and assuming the issue is split evenly between 10 and 30 year maturities, at 17.8x. Fitch considers the pro forma ratio strongly supportive of the company's current ratings and notes that from 2007-2011, HUM's EBITDA coverage ratio averaged 20.4x. Including the planned $1 billion issue on a pro forma basis, HUM's Sept. 30, 2012 debt-to-annualized EBITDA and debt-to-capital ratios are 1.0x and 25% respectively, both of which are consistent with Fitch's median ratio guidelines for the company's current ratings. HUM's reported Sept. 30, 2012 debt-to-annualized EBITDA and debt-to-capital ratios were 0.6x and 16%. HUM's ratings continue to reflect the company's strong operating and financial performance characterized by favorable revenue and earnings trends. The ratings also recognize material growth in HUM's shareholders' equity and moderating premium growth in recent years resulting in improving NAIC risk-based capital (RBC) ratios and underwriting leverage ratios. Humana's ratings also consider its concentrated focus in the Medicare Advantage (MA) market. The company's membership and premiums revenues are materially more concentrated in MA business than those of its peers. Fitch believes this concentration could have an adverse impact on Humana's market position as it believes that the U.S. government's role as the primary funder of MA programs limits MA plan providers' pricing power and flexibility. From a ratings perspective, these negative characteristics of the MA market are partially offset by the growing market for MA products due to the aging U.S. population, and the desire to implement managed care practices in the Medicare market in an effort to contain health care costs. Key Rating Triggers that could lead to an upgrade include: --Improvements in Medicare's fiscal condition that reduces downward pressure on MA premium rates or a deceleration of medical care cost trends that reduces pressure on MA providers' costs; --A reduction in Humana's targeted debt-to-capital ratio to 20% and increase in the company's organization-wide NAIC RBC to 350%; --Financial metrics, especially interest coverage and EBITDA/revenue margin ratios that approximate current levels. Key Rating Triggers that could lead to a downgrade of the ratings include: --A multi-year freeze or reduction in reimbursement rates paid to MA plan providers; --Acquisitions that Fitch views as aggressively financed or containing an excessive amount of integration risk; --Humana increasing its financial leverage target above 30% or reducing its organization-wide NAIC RBC ratio target below 250%; --Run-rate EBITDA-based interest coverage and EBITDA/revenue ratios below 7x and 5%, respectively. Additional information is available at www.fitchratings.com. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings. Applicable Criteria and Related Research: --'Insurance Rating Methodology' (Oct. 18, 2012); --'Health Insurance and Managed Care (U.S.) Sector Credit Factors' (Aug. 21, 2012). Applicable Criteria and Related Research: Insurance Rating Methodology - Amended Health Insurance and Managed Care (U.S.) Sector Credit Factors
- Radar showed missing plane may have turned back: Malaysia military
- Missing Malaysian jet may have disintegrated in mid-air: source |
- Malaysian plane presumed crashed; questions over false IDs |
- Exclusive: Malaysia plane probe narrows on mid-air disintegration - source