Humana Inc. · NYSE:HUM
Humana — Merger or Acquisition (July 2015)
35 slides from Humana's merger presentation, Jul 6, 2015
Slide 1: Aetna to Acquire Humana
July 3, 2015 Aetna to Acquire Humana (C) Aetna Inc. 2015 All rights reserved.
Slide 2: Participants
Participants Mark T. Bertolini Chairman and Chief Executive Officer, Aetna Inc. Bruce Broussard President and Chief Executive Officer, Humana Inc. Karen Rohan President, Aetna Inc. Shawn Guertin EVP and Chief Financial Officer, Aetna Inc. Aetna + Humana | July 3, 2015 Aetna Inc. 2
Slide 3: Important Information For Investors And Shareholders
Important Information For Investors And Shareholders This communication does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval. In connection with the proposed transaction between Aetna Inc. ([]Aetna[]) and Humana Inc. ([]
Slide 4: Cautionary Statement
Cautionary Statement This presentation contains forward - looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. You can generally identify forward - looking statements by the use of forward
Slide 5: Cautionary Statement (Cont'd)
Cautionary Statement (Cont[]d) Aetna[]s social media activities, data security breaches, other cybersecurity risks or other causes; Aetna[]s ability to diversify Aetna[]s sources of revenue and earnings (including by creating a consumer business and expanding Aetna[]s foreign operations), transform
Slide 6: Agenda
Agenda [] Transaction Summary [] Strategic Rationale [] Financial Overview [] Conclusion
Slide 7: Aetna + Humana: Creating a New Healthcare Leader
Aetna + Humana | July 3, 2015 Aetna Inc. 6 + : Creating a New Healthcare Leader Note: 2015 Projected Revenue: see notes at end of presentation for additional disclosures on financial metrics. Source: Bloomberg and company projections The managed care industry continues to be highly competitive with
Slide 8: Aetna + Humana: Creating a New Healthcare Leader
+ : Creating a New Healthcare Leader [] Aetna and Humana are positioned to better serve members in a rapidly changing managed care industry [] Highly complementary assets, with Humana[]s Medicare focus and Aetna[]s strong Commercial presence [] Well diversified business portfolio [] Improved cost st
Slide 9: Key Transaction Terms
Key Transaction Terms Note: Estimates based on current projections. (1) Purchase price based on closing Aetna share price on 2 - July - 2015. (2) Humana unaffected price as of 28 - May - 2015. See Notes at end of presentation for additional disclosures on financial metrics
Slide 10: Aetna and Humana Are the Right Partners
Aetna + Humana | July 3, 2015 Aetna Inc. 9 + Are the Right Partners [] After a thorough review of the industry prospects and strategic alternatives, the Aetna and Humana boards concluded the transaction is the best value creation opportunity for our respective shareholders [] Key considerations incl
Slide 11: Agenda
Agenda [] Transaction Summary [] Strategic Rationale [] Financial Overview [] Conclusion Aetna + Humana | July 3, 2015 Aetna Inc. 11
Slide 12: Compelling Strategic Combination
Compelling Strategic Combination [] Improved membership positioning [] Further diversifies portfolio by increasing government exposure [] Enhances consumer capabilities [] Enhances provider engagement efforts [] Compelling synergy potential [] Expands capital and balance sheet strength Aetna + Human
Slide 13: Improved Membership Positioning
Improved Membership Positioning Commercial Insured Members (M) Medicare Advantage Members (M) Source: Company reports As of March 31, 2015 The managed care industry continues to be highly competitive with even smaller operators acting as viable competitors in the markets in which they operate Aetna
Slide 14: Diversified Revenue Base
Diversified Revenue Base 2015E Revenue: 2015E Revenue: 2015E Combined $61 billion $54 billion Revenue: $115 billion Commercial Risk Medicare Medicaid ASC and Other Source: Aetna and Humana internal projections. Note: See notes at end of presentation for additional disclosures on financial metrics. A
Slide 15: A Leading Government Platform
A Leading Government Platform Medicare Advantage Medicare PDP Medicaid Members Membership figures as of March 31, 2015 Aetna + Humana | July 3, 2015 Aetna Inc. 15
Slide 16: A Leading Commercial Platform
A Leading Commercial Platform Commercial Insured Commercial ASC Public Exchange Members Members* Members Membership figures as of March 31, 2015 *Excludes Humana[]s TRICARE members Aetna + Humana | July 3, 2015 Aetna Inc. 16
Slide 17: Enhanced Geographic Profile
Enhanced Geographic Profile [] Adds 9.8 million medical members and 4.4 million PDP members [] Increases medical membership in four of Aetna[]s top 10 states [] Improves Aetna[]s position in many other geographies Top 10 Aetna Medical Membership States Top 10 Humana Medical Membership Sates Aetna an
Slide 18: Aetna + Humana Provider Capabilities
Aetna + Humana Provider Capabilities Our combined provider capabilities enhance the ability to manage care and relationships with providers Note: Illustrative capabilities shown, not all inclusive. Humana capabilities shown are organized under the Transcend and Transcend Insights brands Aetna + Huma
Slide 19: Aetna + Humana Consumer Capabilities
Aetna + Humana Consumer Capabilities The combined platform enhances the ability to offer consumers clinical engagement and consumer experience capabilities Note: Illustrative capabilities shown above, not all inclusive. Aetna + Humana | July 3, 2015 Aetna Inc. 19
Slide 20: PBM Optionality
PBM Optionality [] Over 600M prescriptions in 2015E [] 4 th largest PBM on stand-alone basis [] Option value to create high growth services company with substantive unregulated cash flow Aetna + Humana | July 3, 2015 Aetna Inc. 20
Slide 21: Agenda
Agenda [] Transaction Summary [] Strategic Rationale [] Financial Overview [] Conclusion Aetna + Humana | July 3, 2015 Aetna Inc. 21
Slide 22: Investment Highlights
Investment Highlights [] Creates a diversified and comprehensive leader in the managed care industry [] Significantly improved membership base and revenue [] Complementary businesses provide unique product diversification and geographic reach [] Combined platforms provide best-in-breed provider and
Slide 23: Aetna + Humana at a Glance
Aetna + Humana at a Glance Note: Membership as of March 31, 2015 . Combined Aetna + Humana metrics are estimated. See notes at end of presentation for additional disclosures on financial metrics. Some figures may not add due to rounding. Aetna + Humana | July 3, 2015 Aetna Inc. 23
Slide 24: Purchase Price and Consideration
Purchase Price and Consideration [] Purchase price of $230.11 per Humana share [] $125 per share in cash consideration [] $105.11 in shares of AET stock [] Implied consideration mix: 54% Cash and 46% Stock [] Premium of 29% based on Humana[]s unaffected trading price of $178.41 on May 28, 2015 [] An
Slide 25: Compelling Synergy Potential
Compelling Synergy Potential SG and A Network PBM [] Rationalize duplicative corporate [] Humana members gain access to [] Potential to realize PBM synergies and administrative functions Aetna[]s national network by optimizing PBM relationships [] Consolidate IT systems and [] Potential enhancements
Slide 26: Financial Impact
Financial Impact Note: Estimates based on current projections. Synergies, transaction and integration- related costs are pre - tax. See notes at end of presentation for additional disclosures on financial metrics. Aetna + Humana | July 3, 2015 Aetna Inc. 26
Slide 27: Sources and Uses of Funds
Sources and Uses of Funds The average interest rate on Aetna[]s transaction debt is projected to be ~3%, pre-tax Note: Excludes transaction- related costs. Aetna + Humana | July 3, 2015 Aetna Inc. 27
Slide 28: Cash Flow and Capital Management
Cash Flow and Capital Management Aetna[]s strong balance sheet is anticipated to deleverage rapidly based on strong cash flow characteristics, while maintaining attractive capital return Note: Estimates are based on current projections. See notes at end of presentation for additional disclosures on
Slide 29: Key Steps for a Successful Integration
Key Steps for a Successful Integration Integration Highlights Integration Timeline [] Best of breed management, systems and processes [] Centers of Excellence in Louisville and Hartford [] Experienced integration team with proven track record of success in place [] Finalized 100-day integration plan
Slide 30: Case Study: $8.7 billion Coventry Acquisition
Case Study: $8.7 billion Coventry Acquisition Aetna closed the Coventry acquisition on May 7, 2013 Largest acquisition in Aetna history Largest multi- line MCO acquisition in the last decade Successful integration [] Over 4 million medical members [] Commercial, Medicare and Medicaid [] 21 State app
Slide 31: Case Study: Coventry Integration Success
Case Study: Coventry Integration Success Deleveraging Commitment Projection: [] 35% debt / cap ratio two years post-close Actual: [] 35% debt / cap ratio achieved 3Q14, three quarters ahead of projection [] $ 400 million of incremental debt to finance bswift [] Moody[]s Upgrade in May 2015 citing []
Slide 32: Agenda
Agenda [] Transaction Summary [] Strategic Rationale [] Financial Overview [] Conclusion
Slide 33: Creating a New Healthcare Leader
Aetna + Humana | July 3, 2015 Aetna Inc. 32 + : Creating a New Healthcare Leader [] Aetna and Humana are positioned to better serve members in a rapidly changing managed care industry [] Highly complementary assets, with Humana[]s Medicare focus and Aetna[]s Commercial presence [] Well diversified b
Slide 34: Notes
Notes 1. Projected operating revenue for Aetna excludes net realized capital gains or losses and other items, if any, from total revenue. Aetna is not able to project the amount of future net realized capital gains or losses or any such other items and therefore cannot reconcile projected operating
Slide 35: Notes (Continued)
Notes (Continued) 3. Parent cash flow represents excess cash flow available to the parent after payment of estimated fixed charges, shareholder dividends, issuance and/or maturity of debt, and inclusive of estimated available cash from employee stock programs. Aetna + Humana | July 3, 2015 Aetna Inc