Humana Will Sell Workers Comp Unit, Make Managed Care Core Business

Humana Inc., Louisville, Ky., said it has reached a definitive agreement to sell its wholly-owned subsidiary, PCA Property & Casualty Insurance Co. as part of a company-wide focus on core managed care businesses.

Humana has agreed to sell PCA P&C to FolksAmerica Holding Co., Inc. of New York, a subsidiary of Bermuda-based White Mountains Insurance Group, Ltd., for $125 million in cash. The proceeds of the sale primarily will be used to reduce debt. The sale of the subsidiary is subject to standard regulatory approvals and is expected to close in the first quarter of 2000.

Humana acquired PCA P&C in 1997 as part of its acquisition of Physician Corp. of America (PCA). With the integration of the former PCA's managed care operations completed, Humana viewed the PCA workers compensation operation as a non-core asset.

Humana has also reached a definitive agreement to sell its individual Medicare supplemental business to United Teachers Associates Insurance Co. of Austin, Texas. The Medicare supplemental product currently serves 42,000 members in 17 states.

Humana, one of the nation's largest publicly traded managed care companies, has suffered from financial losses in recent years. Company executives hope the sale of these two units will shore up its balance sheet.

"Humana has made measurable progress in the second half of 1999 in improving our profitability," said James E. Murray, senior vice president and chief financial officer of Humana. "The decision to sell the workers compensation and Medicare supplemental businesses allows us to focus more effectively on our core health insurance businesses."

Humana also announced it is evaluating the goodwill associated with the company's prior acquisitions including the 1997 purchase of PCA. The company is likely to take a charge in the range of $400 to $500 million in the fourth quarter ending December 31, 1999, primarily as a result of its evaluation of goodwill and a loss on the sale of PCA P&C of approximately $65 million pretax.

"Today's announcements are important steps toward improving the quality of Humana's balance sheet and freeing cash to reduce debt and take advantage of market opportunities," Murray said. Humana provides health care services through a variety of delivery systems to 6 million health plan members in 15 states and Puerto Rico.