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Fitch Assigns 'BBB' Rtg To Humana's Sr Debt; Affs Existing Rtgs.

Business Editors

NEW YORK--(BUSINESS WIRE)--July 26, 2001

Fitch assigns a preliminary rating of 'BBB' to Humana's proposed $300 million senior debt offering. At the same time, Fitch affirms its 'BBB' bank credit facility and long-term issuer rating and commercial paper rating of 'F2'.

The Rating Outlooks are Stable.

Humana intends to issue $300 million of five-year senior notes due 2006. The net proceeds will be used to paydown a portion of its revolving bank facility of which $445 million is outstanding. The senior, unsecured notes will rank pari passu to all other existing/future unsecured senior debt.

The transaction will effectively lengthen the debt structure, replacing a portion of the short-term debt. Fitch does not expect material changes in financial leverage or coverage as total debt outstanding will remain the same. Humana's debt at year-end 2000 consisted of $520 million of bank debt and $80.0 million in commercial paper. The commercial paper program is backed 100% by a $1.0 billion line of credit that expires in August 2002. From a financial leverage perspective, there has not been much of a change since year- end 2000. Humana's leverage, as measured by the ratio of total debt to total capital, was 29.7% at 3/31/2001, and is expected to trend downward to approximately 27% by year-end 2001. Fitch considers Humana's operating subsidiaries to be adequately capitalized relative to statutory requirements and to have good dividend capacity. Based on this, Fitch anticipates consolidated GAAP EBIT/interest coverage to be in the 5x to 6x range going forward.

Humana's ratings reflect the company's good balance sheet fundamentals and large, well diversified health operations. Humana's recent operating performance has improved in recent quarters in line with Fitch's expectations (3.6% EBITDA operating margin in first quarter of 2001), but remains below industry peers. Humana's operations are conducted primarily through 6 insurance and 10 HMO subsidiaries, which have established strong competitive positions in several markets and product lines. The subsidiaries are subject to a high degree of regulation that varies significantly by market and product line. Fitch's ratings reflect the competitive market conditions and the potential for adverse regulatory and legal issues that face Humana and the health care industry as a whole.

Humana Inc. Current Fitch Ratings:

Humana Inc.

--Bank credit facility and long-term issuer 'BBB';

--Commercial Paper, 'F2';

--Senior Debt `BBB'.
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Publication:Business Wire
Geographic Code:1USA
Date:Jul 26, 2001
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