New York, December 05, 2012 -- Moody's Investors Service has affirmed Humana Inc.'s (NYSE: HUM, Humana's) debt ratings (senior debt at Baa3) and assigned a Baa3 senior unsecured debt rating to the company's new $1 billion issuance of 10 year and 30 year notes. The proceeds from the debt will be used to fund the recently announced acquisition of Metropolitan Health Networks, Inc. (B1 stable) and for other general corporate purposes. The A3 insurance financial strength (IFS) rating of Humana's operating subsidiaries, Humana Insurance Company (HIC) and Humana Medical Plan, Inc. (HMP) were also affirmed. The outlook on all the ratings is stable.

RATINGS RATIONALE

Moody's said Humana's Baa3 senior unsecured debt rating and the A3 insurance financial strength ratings for Humana Insurance Company (HIC) and Humana Medical Plan, Inc. (HMP), reflect the combination of a historically consistent financial profile, highlighted by solid capital adequacy with a consolidated risk based capital (RBC) ratio in excess of 200% company action level (CAL), stable earnings margins with net margins averaging 3.5% over the last several years, and a moderate financial leverage ratio (24.4% as of September 30, 2012), together with a significant market position as a result of approximately 9 million medical members in 23 states and Puerto Rico.

However, the rating agency stated that the company's risk profile is increased as a result of having a significant portion of its earnings and revenue dependent on its Medicare Advantage (MA) business. According to Moody's, Humana's MA business currently accounts for approximately 64% of Humana's premiums and fees. Moody's major concern with MA business is the change in government reimbursement levels under the healthcare reform law; it is not clear how current MA members will respond to the resulting benefit and premium changes that will likely result from the reduced reimbursement levels over the next several years. That said, the rating agency noted that despite significant reimbursement reductions in 2010 and 2011 and the implementation of healthcare reform cuts in 2012, Humana and other Medicare Advantage carriers have continued to show increased membership.

Humana announced on November 5, 2012 that it had entered into a definitive agreement to acquire Metropolitan Health Networks, Inc. and that it had acquired a non-controlling equity interest in MCCI Holdings, L.L.C. (unrated). Both companies are medical service organizations that provide and coordinate medical care for Medicare and Medicaid beneficiaries. Humana will pay approximately $850 million for Metropolitan (including the repayment of Metropolitan's debt), while the terms of the MCCI transaction were not disclosed. With the new debt issuance of $1 billion to fund these acquisitions, the rating agency stated that Humana's financial flexibility will be diminished; however, Humana financial leverage ratio (debt to capital, where debt includes operating leases) is expected to remain in line with rating expectations of below 30%.

Moody's commented that while Humana has some experience with the ownership and management of provider organizations, these acquisitions carry a number of risks. In particular, the integration of these health facilities into Humana's existing operations and networks will present business challenges. Steve Zaharuk, Moody's Senior Vice President stated; "In addition to integration risks, the ownership of provider organizations carries the perceived conflicts associated with being involved in all aspects of a medical care transaction: approver, provider, and payor."

"Offsetting these risks", Mr. Zaharuk added, "are the cost savings that can come as a result of a closer alignment with the physicians that are managing the care of Humana'sMedicare Advantage population, which could result in more stable and predictable results." Ideally," he went on to say, "these cost savings could also translate into a competitive pricing advantage."

The rating agency stated that Humana's ratings could be upgraded if EBITDA margins are sustained above 6%, if Humana's consolidated risk-based capital (RBC) ratio is maintained at or above 200% of company action level (CAL), if annual organic membership grows by at least 3% balanced between commercial and Medicare Advantage products, and if there is a more balanced distribution between Medicare and Commercial premiums. However, if annual medical membership declines by 25% or more, if adjusted financial leverage increases above 40%, if Medicare Advantage premiums account for over 70% of total premiums and fees, if there is a decrease in the consolidated RBC ratio below 150% of CAL, or if there is a loss or impairment of a major Medicare contract, Moody's said that the ratings may be downgraded.

Moody's has affirmed the following ratings with a stable outlook:

Humana Inc. -- senior unsecured debt at Baa3; provisional senior unsecured debt at (P)Baa3; provisional subordinated debt at (P)Ba1; provisional preferred stock at (P)Ba2.

Humana Insurance Company -- insurance financial strength at A3;

Humana Medical Plan, Inc. - insurance financial strength at A3.

Humana Inc., headquartered in Louisville, Kentucky, is a leading health care company serving approximately 9 million medical members (excluding 3 million Standalone PDP members) as of September 30, 2012. For the first nine months of 2012, the company reported total revenues of approximately $29.6 billion with shareholders' equity as of September 30, 2012 of approximately $8.7 billion.

The principal methodology used in rating Humana was Moody's Rating Methodology for U.S. Health Insurance Companies published in May 2011. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

Visit Moody's website at www.moodys.com for more information.

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Stephen Zaharuk Senior Vice President Financial Institutions Group Moody'sInvestors Service, Inc.250 Greenwich StreetNew York, NY 10007 U.S.A. JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653Robert Riegel MD - Insurance Financial Institutions Group JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653 Releasing Office: Moody's Investors Service, Inc.250 Greenwich StreetNew York, NY 10007 U.S.A. JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653(C) 2012 Moody's Investors Service, Inc. and/or its licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

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