Humana Inc. (NYSE: HUM) announced today the completion of its public offering of $1.0 billion in senior notes. These senior notes are comprised of $500 million of the companys 3.125 percent senior notes, due 2029, at 99.898 percent of the principal amount, and $500 million of the companys 3.950 percent senior notes, due 2049, at 99.634 percent of the principal amount (collectively, Senior Notes Offerings).
The company expects net proceeds from the Senior Notes Offerings of 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 the companys term note. As of June 30, 2019, the outstanding balance under the companys term note was $650 million and the interest rate in effect on that outstanding balance was 3.55 percent.
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.
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 Humanas 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 companys 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, Humanas 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 companys business may be materially adversely affected, which is of particular importance given the concentration of the companys 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 Humanas proprietary rights to its systems, or to defend against cyber-security attacks, the companys 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 companys 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 companys 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 Humanas results of operations, including restricting revenue, enrollment and premium growth in certain products and market segments, restricting the companys ability to expand into new markets, increasing the companys medical and operating costs by, among other things, requiring a minimum benefit ratio on insured products, lowering the companys Medicare payment rates and increasing the companys expenses associated with a non-deductible health insurance industry fee and other assessments; the companys financial position, including the companys ability to maintain the value of its goodwill; and the companys 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 Humanas business, and when, or in what form, such legislative or judicial changes may occur cannot be predicted with certainty.
- Humanas 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 companys cost of doing business and may adversely affect the companys business, profitability and cash flows.
- Humanas failure to manage acquisitions, divestitures and other significant transactions successfully may have a material adverse effect on the companys 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 companys business may be adversely affected.
- Humanas 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 Humanas financial performance.
- If Humana does not continue to earn and retain purchase discounts and volume rebates from pharmaceutical manufacturers at current levels, Humanas gross margins may decline.
- Humanas ability to obtain funds from certain of its licensed subsidiaries is restricted by state insurance regulations.
- Downgrades in Humanas 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 Humanas 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 quarters ended March 31, 2019 and June 30, 2019; and
- Form 8-Ks filed during 2019.
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.
Humana Investor Relations
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Humana Corporate Communications
e-mail: [email protected]