AM Best Assigns Issue Credit Ratings to Humana Inc.’s New Senior Unsecured Notes and New Shelf Registrations
14 March 2024 - 7:47AM
Business Wire
AM Best has assigned Long-Term Issue Credit Ratings
(Long-Term IRs) of “bbb” (Good) to Humana Inc.’s (Humana)
(headquartered in Louisville, KY) [NYSE: HUM] recently announced
$1.25 billion 5.375% senior unsecured notes, due 2031, and $1
billion 5.75% senior unsecured notes, due 2054. In addition, AM
Best has assigned indicative Long-Term IRs of “bbb” (Good) to
senior unsecured issues, “bbb-” (Good) to subordinated issues and
“bb+” (Fair) to preferred stock and of the recently filed shelf
registration of Humana. The outlook assigned to these Credit
Ratings (ratings) is stable. Concurrently, AM Best has withdrawn
the ratings on the previous shelf registration, which expired.
Humana is anticipated to use the proceeds from the senior
unsecured notes issuance for general corporate purposes, including
the repayment of existing debt and outstanding commercial paper. As
such, AM Best expects the issuance to be mostly neutral to
financial leverage. Financial leverage, as measured by AM Best, was
approximately 42% as of year-end 2023, slightly exceeding the
organization's long-term target debt-to-capital ratio of 40%.
Humana’s earnings before interest and taxes (EBIT) interest
coverage remains solid at about 8 times; however, it did decrease
at year-end 2023 due to a moderate decline in operating results
driven by increased utilization in its Medicare Advantage segment
in the fourth quarter of 2023, as well as higher interest
expense.
Humana has sound liquidity measures as the organization
maintains consolidated cash holdings of $4.7 billion and generates
consistently strong operating cash flows, which totaled $4 billion
in 2023. Liquidity is also supported by subsidiary dividends, its
$4 billion commercial paper program, and access to short-term
borrowings from the Federal Home Loan Bank of Cincinnati through
its subsidiary, Humana Insurance Company.
The organization’s consistent profitability has driven equity
growth over the past five years. Humana generated strong premium
growth in 2023, driven by a membership increase in its core
Medicare Advantage segment. However, service revenue derived from
its CenterWell segment declined because of the divestiture of its
60% ownership in Gentiva Hospice operations. While profitability
remained solid in 2023, net income was impacted by increased
utilization in Medicare Advantage and supplementary benefits in the
fourth quarter of 2023. AM Best expects the company’s earnings to
remain positive albeit with margin compression.
This press release relates to Credit Ratings that have been
published on AM Best’s website. For all rating information relating
to the release and pertinent disclosures, including details of the
office responsible for issuing each of the individual ratings
referenced in this release, please see AM Best’s Recent
Rating Activity web page. For additional information
regarding the use and limitations of Credit Rating opinions, please
view Guide to Best's Credit Ratings. For information
on the proper use of Best’s Credit Ratings, Best’s Performance
Assessments, Best’s Preliminary Credit Assessments and AM Best
press releases, please view Guide to Proper Use of Best’s
Ratings & Assessments.
AM Best is a global credit rating agency, news publisher and
data analytics provider specializing in the insurance industry.
Headquartered in the United States, the company does business in
over 100 countries with regional offices in London, Amsterdam,
Dubai, Hong Kong, Singapore and Mexico City. For more information,
visit www.ambest.com.
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Timothy Willey Financial Analyst +1 908 882 2433
timothy.willey@ambest.com
Christopher Sharkey Associate Director, Public
Relations +1 908 882 2310
christopher.sharkey@ambest.com
Joseph Zazzera Director +1 908 882 2442
joseph.zazzera@ambest.com
Al Slavin Senior Public Relations Specialist +1
908 882 2318 al.slavin@ambest.com
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