Moody's: Humana view negative

Moody's Investors Service said it affirmed Humana Inc.'s Baa3 senior unsecured debt ratings and changed the outlook to negative from stable following the company's announcement that it revised earnings guidance for 2008.

Although the reduced earnings forecast was isolated to the standalone Medicare Part D prescription drug products and did not significantly impact key financial metrics, the agency said the revision highlighted potential risk management issues.

According to Moody's, incorrect actuarial assumptions led to design flaws in the product offerings. As a result, members with higher prescription drug utilization were attracted to this product, leading to higher claim costs for Humana.

The agency said it has concerns with Humana's ability to correctly price and design the product in the future given the complexities surrounding it.

Offsetting these concerns is Humana's improved commercial segment and growing specialty business that have provided diversity to Humana's credit profile, Moody' said. And the company's risk-based capital remains strong while financial leverage is being managed at a moderate level for its rating level.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.