TEXT-S&P rates Humana Inc. planned notes 'BBB'

Wed Dec 5, 2012 11:38am EST

Dec 5 - Standard & Poor's Ratings Services said today that it has assigned
its 'BBB' senior unsecured debt rating to Humana Inc.'s (NYSE: HUM)
(BBB/Positive/--) planned issuance of approximately $1 billion in senior
unsecured notes. This issuance will consist of a mix of 10-year and 30-year
maturities.

We expect Humana to use the debt proceeds to fund its pending acquisition of 
Metropolitan Health Networks Inc. (B+/Watch Pos/--), a Florida-based medical 
services organization (MSO). The transaction has already received federal 
antitrust clearance and we expect it to close by year-end 2012.

The ratings are based on Humana's strong market shares in Medicare Advantage 
and Medicare Part D, favorable business growth trends, very strong 
risk-adjusted capitalization at the regulated insurance subsidiaries, and 
strong liquidity and financial flexibility. Slightly offsetting these 
strengths are Humana's very high business concentration in government-funded 
business, a historically underperforming commercial health insurance business, 
and the ongoing integration risks associated with an active M&A strategy.

Strategically, the Metropolitan Health transaction makes sense in relation to 
Humana's growth needs and its overall integrated delivery strategy. Humana has 
experienced substantial Medicare-based growth nationally during the past 
several years. With its latest round of acquisitions, which has focused on 
MSOs and primary-care assets, Humana is effectively looking to gain more 
control over its provider base. This will allow it to better service its 
growing membership and more effectively execute its medical and 
care-management programs.

Financially, Humana has enough balance sheet flexibility, from a holding 
company cash and debt leverage perspective, to acquire Metropolitan Health 
without any rating implications. As of Sept. 30, 2012, the holding company had 
total cash and short-term investments of $522 million. With the new debt 
issuance, Humana's adjusted debt-to-capital ratio increases from 21% as of 
Sept. 30, 2012, to 28% on a pro-forma adjusted basis. This is consistent with 
our long-term expectations that Humana will keep its debt-to-capital ratio in 
the 25%-30% range.

RELATED CRITERIA AND RESEARCH
Holding Company Analysis, June 11, 2009

RATINGS LIST
Humana Inc.
 Counterparty Credit Rating            BBB/Positive/--

New Rating
Humana Inc.
 10-Yr. And 30-Yr. Sr. Unsec. Notes    BBB

Complete ratings information is available to subscribers of RatingsDirect on 
the Global Credit Portal at www.globalcreditportal.com. All ratings affected 
by this rating action can be found on Standard & Poor's public Web site at 
www.standardandpoors.com. Use the Ratings search box located in the left 
column.
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