A.M. Best Co. has commented that the financial strength, issuer credit and debt ratings of Humana Inc. (Humana) (Louisville, KY) (NYSE: HUM) and its insurance and health maintenance organization (HMO) subsidiaries remain unchanged. The outlook for all ratings is stable.
This comment follows the announcement that Humana has entered into a definitive agreement to acquire Metropolitan Health Networks (Metropolitan), a medical services organization that provides and coordinates medical care for approximately 87,500 Medicare Advantage, Medicaid and other beneficiaries, primarily in Florida, utilizing a primary care-centric business model. Metropolitan’s integrated care delivery systems include 35 state-of-the-art primary care medical centers and a robust network of affiliated physicians serving mainly Humana members. The transaction is valued at approximately $850 million, and Humana expects to finance the transaction with a combination of cash and debt.
The transaction provides Humana with business diversification as well as access to care for its members. Additionally, it may allow Humana to expand the Metropolitan model to other geographic regions.
While the transaction and issuance of new debt will increase the company’s financial leverage, it is expected to remain within the guidelines for its current ratings and below many of its peers.The acquisition is expected to close by the end of the first quarter of 2013, subject to state and federal regulatory approvals and other customary closing conditions. The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Best’s Credit Rating Methodology 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 © 2012 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.