Market Overview

Humana Announces Intent to Acquire American Eldercare

Humana (NYSE: HUM) today announced that it has signed a definitive agreement to acquire American Eldercare Inc., the largest provider of nursing home diversion services in the state of Florida (serving frail and elderly individuals in home and community-based settings). Terms of the transaction were not disclosed.

As the only Provider Service Network selected to provide Medicaid long-term care services across the entire state of Florida, American Eldercare complements Humana's core capabilities and strength in serving seniors and disabled individuals with a unique focus on individualized and integrated care. Annualized revenues for American Eldercare of approximately $75 million are anticipated to increase to over $1 billion in 2015.

The transaction is subject to state regulatory approvals and is anticipated to close by the fourth quarter of 2013.

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 health care services delivered to its members, if the company is unable to implement clinical initiatives to provide a better health care 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. These estimates, however, involve extensive judgment, and have considerable inherent variability because they are extremely sensitive to changes in payment patterns and medical cost trends. If Humana fails to effectively implement its operational and strategic initiatives, particularly its Medicare initiatives (given the concentration of the company's revenues in the Medicare business), the company's business may be materially adversely affected. 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's business may be materially adversely impacted by CMS's adoption of a new coding set for diagnoses (commonly known as ICD-10). Humana is involved in various legal actions and governmental and internal investigations, any of which, if resolved unfavorably to the company, could result in substantial monetary damages. 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 health care programs including, among other things, loss of material government contracts, governmental audits and investigations, potential inadequacy of government-determined payment rates or other changes in the governmental programs in which Humana participates. Recently enacted health insurance reform, including The Patient Protection and Affordable Care Act and The Health Care 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 (and particularly how the ratio may apply to Medicare plans, including aggregation, credibility thresholds, and its possible application to prescription drug plans), lowering the company's Medicare payment rates and increasing the company's expenses associated with a non-deductible federal premium tax and other assessments; financial position, including the company's ability to maintain the value of its goodwill; and cash flows. In addition, if the new non-deductible federal premium tax and other assessments, including a three-year commercial reinsurance fee, were imposed as enacted, and if Humana is unable to adjust its business model to address these new taxes and assessments, such as through the reduction of the company's operating costs, there can be no assurance that the non-deductible federal premium tax and other assessments would not have a material adverse effect on the company's results of operations, financial position, and cash flows. 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. Any failure to manage operating costs could hamper Humana's profitability. Any failure by Humana to manage acquisitions and other significant transactions successfully may have a material adverse effect on its 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 its 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. Changes in economic conditions could adversely affect Humana's business and results of operations. The securities and credit markets may experience volatility and disruption, which may adversely affect Humana's business. Given the current economic climate, Humana's stock and the stock of other companies in the insurance industry may be increasingly subject to stock price and trading volume volatility. 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, 2012 (as amended by the Form 10-K/A filed on April 12, 2013) ; Form 10-Q for the quarter ended March 31, 2013; Form 8-Ks filed during 2013. About American Eldercare

American Eldercare Inc. was founded in 1993 as a Home Nursing provider and has evolved into the largest provider of nursing home diversion services, pursuant to a Medicaid waiver program, in the state of Florida.

By beginning as a home health agency American Eldercare understands the challenges faced by its members and providers. The company believes the best way to ensure appropriate care to meet a person's needs is to constantly work with its members and their providers of choice. Working together, the company develops innovative solutions to help members stay independent. American Eldercare's experience has also taught it that long-term care requires a different focus than primary care to meet its members' needs. The social aspect of long-term care can sometimes be missed by organizations not specializing in long-term care. American Eldercare is singularly devoted to long-term care and how it can impact the lives of all Floridians.

About Humana

Humana Inc., headquartered in Louisville, Kentucky, is a leading health care company that offers a wide range of insurance products and health and wellness services that incorporate an integrated approach to lifelong well-being. By leveraging the strengths of its core businesses, Humana believes it can better explore opportunities for existing and emerging adjacencies in health care that can further enhance wellness opportunities for the millions of people across the nation with whom the company has relationships.

More information regarding Humana is available to investors via the Investor Relations page of the company's web site at www.humana.com, including copies of:

Annual reports to stockholders; Securities and Exchange Commission filings; Most recent investor conference presentations; Quarterly earnings news releases; Replays of most recent earnings release conference calls; Calendar of events (including upcoming earnings conference call dates and times, as well as planned interaction with research analysts and institutional investors); Corporate Governance information.

Posted-In: News M&A

 

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