Fitch Affirms Humana's Ratings.

Business Editors

NEW YORK--(BUSINESS WIRE)--May 15, 2001

Fitch affirms its 'BBB' bank credit facility and long term issuer rating of Humana Inc. (Humana). At the same time, Fitch affirms Humana's commercial paper rating of 'F2'. The Rating Outlook is Stable.

Humana's

ratings reflect the company's good balance sheet fundamentals and large, well diversified health operations. Humana's operations are conducted primarily through 6 insurance and 10 HMO subsidiaries which have established strong competitive positions in several markets and product lines. The subsidiaries are subject to a high degree of regulation that varies significantly by market and product line. Fitch's ratings reflect the competitive market conditions and the potential for adverse regulatory and legal issues that face Humana and the health care industry as a whole.

Humana is in a transitional period, with a focus on reducing the non-core segments of its business to improve profitability. The non-core businesses include select parts of Medicare and Medicaid, and small group and large group commercial business that have been unprofitable due to lack of critical size, market presence, or inadequate pricing potential. The company is concentrating on the lines of business that provide steady performance, good profitability, growth potential and significant contracting leverage. In addition, the profitability initiatives include adequate re-pricing and the elimination of ineffective risk arrangements with its providers. Profitability improved considerably in 2000, with GAAP pretax income of $114 million compared with a pretax loss of $404 million in 1999. The losses in 1999 occurred mainly from a $340 million write-down in goodwill and a $120 million loss associated with the sale of its workers comp business. Humana's pretax operating margin of 1.0% in 2000 is expected to improve, ranging between 1.8% and 2.0% for year-end 2001. The company's first quarter 2001 pretax income of $42 million was an increase 56% over the $27 million earned during the same period in 2000.

Financial leverage, as measured by the ratio of total debt to capital, was 30% at year-end 2000, down from 35% at year-end 1999. Fitch expects it to trend downward, ranging between 25% and 27% by year-end 2001. Outstanding debt at year-end consisted of $520 million of bank debt and $80 million of commercial paper. The commercial paper program is backed 100% by a $1 billion line of credit that expires in August 2002.

Fitch considers Humana's operating subsidiaries to be adequately capitalized relative to statutory requirements and to have good dividend capacity. Based on this, Fitch anticipates consolidated GAAP based EBIT/interest coverage to be in the 5 times (x) to 6x range in 2001.

Humana Inc.

-- Bank credit facility and long term issuer 'BBB',

-- Commercial Paper, 'F2'.