Humana Prices $1.0 Billion Debt Offering
August 08 2019 - 5:31PM
Business Wire
Humana Inc. (NYSE: HUM) announced today that it has priced a
public offering of $1.0 billion in senior notes. These senior notes
are comprised of $500 million of the company’s 3.125 percent senior
notes, due 2029, at 99.898 percent of the principal amount and $500
million of the company’s 3.950 percent senior notes, due 2049, at
99.634 percent of the principal amount (collectively, “Senior Notes
Offerings”). The Senior Notes Offerings are expected to close on
August 15, 2019, subject to the satisfaction of customary closing
conditions.
The company expects net proceeds from the Senior Notes Offerings
will be approximately $990 million, after deducting underwriters’
discounts and estimated offering expenses. The company intends to
use the net proceeds from this offering, together with available
cash, to repay its $400 million aggregate principal amount of 2.625
percent senior notes due October 1, 2019 on the maturity date and
repay outstanding amounts due under our term note. As of June 30,
2019, the outstanding balance under our term note was $650 million
and the interest rate in effect on that outstanding balance was
3.55 percent.
BofA Securities, Inc., Barclays Capital Inc. and Wells Fargo
Securities, LLC are acting as active joint book-running managers
for the Senior Notes Offerings.
The Senior Notes Offerings are being made pursuant to an
effective shelf registration statement (including a base
prospectus) filed with the Securities and Exchange Commission (the
“SEC”). The Senior Notes Offerings may be made only by means of a
prospectus and related prospectus supplement, copies of which may
be obtained by contacting BofA Securities, Inc. at
dg.prospectus_requests@baml.com or toll-free at 1-800-294-1322, or
by calling Barclays Capital Inc. at (888) 603-5847 or by calling
Wells Fargo Securities, LLC toll-free at 1-800-645-3751. An
electronic copy of the registration statement and prospectus
supplement, together with the base prospectus, is available on the
SEC’s website at www.sec.gov.
This press release does not constitute an offer to sell or a
solicitation of an offer to buy the securities described herein,
nor shall there be any sale of these securities in any state or
jurisdiction in which such an offer, solicitation or sale would be
unlawful prior to registration or qualification under the
securities laws of any such jurisdiction.
Cautionary Statement
This news release includes forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995.
When used in investor presentations, press releases, Securities and
Exchange Commission (SEC) filings, and in oral statements made by
or with the approval of one of Humana’s executive officers, the
words or phrases like “expects,” “believes,” “anticipates,”
“intends,” “likely will result,” “estimates,” “projects” or
variations of such words and similar expressions are intended to
identify such forward-looking statements.
These forward-looking statements are not guarantees of future
performance and are subject to risks, uncertainties, and
assumptions, including, among other things, information set forth
in the “Risk Factors” section of the company’s SEC filings, a
summary of which includes but is not limited to the following:
- If Humana does not design and price its products properly and
competitively, if the premiums Humana receives are insufficient to
cover the cost of healthcare services delivered to its members, if
the company is unable to implement clinical initiatives to provide
a better healthcare experience for its members, lower costs and
appropriately document the risk profile of its members, or if its
estimates of benefits expense are inadequate, Humana’s
profitability could be materially adversely affected. Humana
estimates the costs of its benefit expense payments, and designs
and prices its products accordingly, using actuarial methods and
assumptions based upon, among other relevant factors, claim payment
patterns, medical cost inflation, and historical developments such
as claim inventory levels and claim receipt patterns. The company
continually reviews estimates of future payments relating to
benefit expenses for services incurred in the current and prior
periods and makes necessary adjustments to its reserves, including
premium deficiency reserves, where appropriate. These estimates,
however, involve extensive judgment, and have considerable inherent
variability because they are extremely sensitive to changes in
claim payment patterns and medical cost trends, so any reserves the
company may establish, including premium deficiency reserves, may
be insufficient.
- If Humana fails to effectively implement its operational and
strategic initiatives, particularly its Medicare initiatives, and
state-based contract strategy, the company’s business may be
materially adversely affected, which is of particular importance
given the concentration of the company’s revenues in these
products. In addition, there can be no assurances that the company
will be successful in maintaining or improving its Star ratings in
future years.
- If Humana fails to properly maintain the integrity of its data,
to strategically implement new information systems, to protect
Humana’s proprietary rights to its systems, or to defend against
cyber-security attacks, the company’s business may be materially
adversely affected.
- Humana is involved in various legal actions, or disputes that
could lead to legal actions (such as, among other things, provider
contract disputes and qui tam litigation brought by individuals on
behalf of the government), governmental and internal
investigations, and routing internal review of business processes
any of which, if resolved unfavorably to the company, could result
in substantial monetary damages or changes in its business
practices. Increased litigation and negative publicity could also
increase the company’s cost of doing business.
- As a government contractor, Humana is exposed to risks that may
materially adversely affect its business or its willingness or
ability to participate in government healthcare programs including,
among other things, loss of material government contracts,
governmental audits and investigations, potential inadequacy of
government determined payment rates, potential restrictions on
profitability, including by comparison of profitability of the
company’s Medicare Advantage business to non-Medicare Advantage
business, or other changes in the governmental programs in which
Humana participates.Changes to the risk-adjustment model utilized
by CMS to adjust premiums paid to Medicare Advantage, or MA, plans
according to the health status of covered members, including
proposed changes to the methodology used by CMS for risk adjustment
data validation audits that fail to address adequately the
statutory requirement of actuarial equivalence, if implemented,
could have a material adverse effect on our operating results,
financial position and cash flows.
- The Healthcare Reform Law, including The Patient Protection and
Affordable Care Act and The Healthcare and Education Reconciliation
Act of 2010, could have a material adverse effect on Humana’s
results of operations, including restricting revenue, enrollment
and premium growth in certain products and market segments,
restricting the company’s ability to expand into new markets,
increasing the company’s medical and operating costs by, among
other things, requiring a minimum benefit ratio on insured
products, lowering the company’s Medicare payment rates and
increasing the company’s expenses associated with a non-deductible
health insurance industry fee and other assessments; the company’s
financial position, including the company’s ability to maintain the
value of its goodwill; and the company’s cash flows. Additionally,
potential legislative or judicial changes, including activities to
invalidate, repeal or replace, in whole or in part, the Health Care
Reform Law, creates uncertainty for Humana’s business, and when, or
in what form, such legislative or judicial changes may occur cannot
be predicted with certainty.
- Humana’s business activities are subject to substantial
government regulation. New laws or regulations, or changes in
existing laws or regulations or their manner of application could
increase the company’s cost of doing business and may adversely
affect the company’s business, profitability and cash flows.
- Humana’s failure to manage acquisitions, divestitures and other
significant transactions successfully may have a material adverse
effect on the company’s results of operations, financial position,
and cash flows.
- If Humana fails to develop and maintain satisfactory
relationships with the providers of care to its members, the
company’s business may be adversely affected.
- Humana’s pharmacy business is highly competitive and subjects
it to regulations in addition to those the company faces with its
core health benefits businesses.
- Changes in the prescription drug industry pricing benchmarks
may adversely affect Humana’s financial performance.
- If Humana does not continue to earn and retain purchase
discounts and volume rebates from pharmaceutical manufacturers at
current levels, Humana’s gross margins may decline.
- Humana’s ability to obtain funds from certain of its licensed
subsidiaries is restricted by state insurance regulations.
- Downgrades in Humana’s debt ratings, should they occur, may
adversely affect its business, results of operations, and financial
condition.
- The securities and credit markets may experience volatility and
disruption, which may adversely affect Humana’s business.
In making forward-looking statements, Humana is not undertaking
to address or update them in future filings or communications
regarding its business or results. In light of these risks,
uncertainties, and assumptions, the forward-looking events
discussed herein may or may not occur. There also may be other
risks that the company is unable to predict at this time. Any of
these risks and uncertainties may cause actual results to differ
materially from the results discussed in the forward-looking
statements.
Humana advises investors to read the following documents as
filed by the company with the SEC for further discussion both of
the risks it faces and its historical performance:
- Form 10-K for the year ended December 31, 2018;
- Form 10-Q for the quartersended March 31, 2019 and June 30,
2019; and
- Form 8-Ks filed during 2019.
About Humana
Humana Inc. is committed to helping our millions of medical and
specialty members achieve their best health. Our successful history
in care delivery and health plan administration is helping us
create a new kind of integrated care with the power to improve
health and well-being and lower costs. Our efforts are leading to a
better quality of life for people with Medicare, families,
individuals, military service personnel, and communities at
large.
To accomplish that, we support physicians and other health care
professionals as they work to deliver the right care in the right
place for their patients, our members. Our range of clinical
capabilities, resources and tools – such as in-home care,
behavioral health, pharmacy services, data analytics and wellness
solutions – combine to produce a simplified experience that makes
health care easier to navigate and more effective.
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version on businesswire.com: https://www.businesswire.com/news/home/20190808005940/en/
Amy Smith Humana Investor Relations (502) 580-2811 e-mail:
Amysmith@humana.com
Alex Kepnes Humana Corporate Communications (502)
580-2990 e-mail: Akepnes@humana.com
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