A.M. Best Comments on Humana's Proposed Acquisition of CompBenefits.OLDWICK, N.J. -- A.M. Best Co. has commented that the financial strength ratings, issuer credit ratings and debt ratings of Humana Inc. (Humana) (Louisville, KY) [NYSE NYSE See: New York Stock Exchange : HUM] and its insurance and health maintenance organizations (HMO HMO health maintenance organization. HMO n. A corporation that is financed by insurance premiums and has member physicians and professional staff who provide curative and preventive medicine within certain financial, ) subsidiaries remain unchanged. The outlook for all ratings is negative. This follows the announcement that Humana has entered into a definitive agreement to acquire CompBenefits, Corp.(CompBenefits), a privately held dental and vision benefit company based in Atlanta, GA. Humana plans to acquire CompBenefits for $360 million, and the acquisition is to be financed by a combination of cash and debt. The transaction is expected to close in third quarter 2007, pending regulatory approval. The acquisition of CompBenefits by Humana will broaden Humana's dental benefit portfolio by adding HMO and exclusive provider organization exclusive provider organization (EPO), n a dental benefits plan that provides benefits only if care is rendered by institutional and professional providers with whom the plan contracts (with some exceptions for emergency and out-of-area services). (EPO EPO see erythropoietin. EPO Erythropoietin, see there ) products to Humana's current indemnity and preferred provider organization pre·ferred provider organization n. Abbr. PPO A medical insurance plan in which members receive more coverage if they choose health care providers approved by or affiliated with the plan. (PPO PPO abbr. preferred provider organization PPO Managed care Preferred provider organization, see there Infectious disease Pleuropneumonia-like organism, see there ) dental product offerings. Humana's specialty product offerings will also be diversified with the addition of vision benefit products offered by CompBenefits. After the close of the transaction, Humana is projected have a 27%-28% debt/capitalization ratio, which is adequate for the organization's current ratings. In the past year, Humana has been inactive in making acquisitions as the organization focused on its expansion in the Medicare Part D and Medicare Advantage markets. Humana successfully achieved a significant Medicare market presence, and government contracts now account for approximately two-thirds of Humana's total revenue. Current government funding of Medicare programs is good, but proposed funding cuts could affect Humana's revenue stream. The CompBenefits acquisition is expected to generate additional revenue in Humana's commercial business segment, which will diversify cash flows for the organization. For Best's Ratings, an overview of the rating process and rating methodologies, please visit www.ambest.com/ratings. Founded in 1899, A.M. Best Company is a full-service credit rating organization dedicated to serving the financial services The examples and perspective in this article or section may not represent a worldwide view of the subject. Please [ improve this article] or discuss the issue on the talk page. industries, including the banking and insurance sectors. For more information, visit www.ambest.com. |
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