A.M. Best Affirms Credit Ratings of Humana Inc. and Its Subsidiaries
03 May 2018 - 6:49AM
Business Wire
A.M. Best has affirmed the Financial Strength Rating
(FSR) of A- (Excellent) and the Long-Term Issuer Credit Ratings
(Long-Term ICR) of “a-” for the majority of the insurance
subsidiaries of Humana Inc. (Humana) (headquartered in
Louisville, KY) [NYSE: HUM]. Concurrently, A.M. Best has affirmed
the Long-Term ICR of “bbb-”, as well as the existing Long- and
Short-Term Issue Credit Ratings of Humana. The outlook of these
Credit Ratings (ratings) remains stable.
Concurrently, A.M. Best has affirmed the FSR of A- (Excellent)
and the Long-Term ICR of “a-” of the dental insurance subsidiaries
of Humana (collectively referred to as Humana Dental Group).
The outlook of these ratings remains stable.
Moreover, A.M. Best also has affirmed the FSR of B++ (Good) and
the Long-Term ICRs of “bbb+” of the following Humana subsidiaries:
Humana Insurance of Puerto Rico, Inc. and Humana Health
Plans of Puerto Rico, Inc. (both domiciled in Puerto Rico). The
outlook of the FSR is stable, while the outlook of the Long-Term
ICRs is negative. These companies are collectively referred to as
Humana Health of Puerto Rico Group.
Additionally, A.M. Best has maintained the under review with
negative implications status for the FSR of B++ (Good) and the
Long-Term ICR of “bbb+” of Kanawha Insurance Company
(Kanawha) (Lancaster, SC). These ratings will remain under review
with negative implications pending the previously announced sale of
this entity to Continental General Insurance Company,
(Continental General) a Texas-based insurance company wholly owned
by HC2 Holdings, Inc.
(See link below for a detailed listing of all Humana Inc.
companies and ratings.)
A.M. Best recognizes that Humana Inc.’s debt-to-capital ratio is
expected to remain below the 35% range over the medium term, and
that interest coverage was approximately 17 times earnings at
year-end 2017, which includes the one-time break-up fee from the
dissolved Aetna merger. A.M. Best expects Humana’s coverage ratio
to remain in a range above 10 times earnings in the near term.
The Humana Health Group ratings reflect the group’s
balance sheet strength, which A.M. Best categorizes as strong, as
well as its adequate operating performance, favorable business
profile and appropriate enterprise risk management (ERM).
The credit ratings of Humana’s health insurance entities reflect
the aggregate strength of risk-adjusted capitalization driven by
the favorable operating results over the medium term. The operating
results are augmented by the strong margins from Humana’s core
business line of individual Medicare Advantage product results. Its
retail segment contributed earnings before income and taxes (EBIT)
of approximately $1.9 billion and a 4.4% of margin in 2017.
Offsetting the favorable 2017 operating results was a near-term
decline in premium compared with the prior year, which was
attributed to the company’s exit from the individual Affordable
Care Act business; however, this segment was unprofitable for
Humana. Additionally, the high percentage of business derived from
Medicare Advantage adds concentration risk.
The Humana Dental Group’s ratings reflect its balance sheet
strength, which A.M. Best categorizes as very strong, as well as
its adequate operating performance, neutral business profile and
appropriate ERM. Humana’s dental companies add complementary dental
and vision options for employer groups and individuals. These
entities are well capitalized and are a diversified source of
earnings for the Humana organization.
The Humana Health of Puerto Rico Group ratings reflect the
group’s balance sheet strength, which A.M. Best categorizes as
adequate, as well as its marginal operating performance, limited
business profile and appropriate ERM. The Puerto Rico companies are
strategic to Humana’s Medicare Advantage offerings in markets
outside of the U.S. domestic markets. The operating earnings were
weak as a result of weaker reimbursement rates on its Medicare
business. The expectation in 2018 is that rate increases in the
Puerto Rico market for Medicare Advantage plans may result in more
favorable operating results.
The ratings of Kanawha reflect the group’s balance sheet
strength, which A.M. Best categorizes as adequate, as well as its
weak operating performance, limited business profile and
appropriate ERM. A.M. Best anticipates that the ratings of Kanawha
will remain under review with negative implications until the
transaction closes with Continental General, which is estimated to
be in early third quarter 2018, subject to regulatory approval.
For a complete listing of FSRs, Long-Term ICRs and Long- and
Short-Term Issue Credit Ratings for Humana Inc. and its life/health
subsidiaries, please visit Humana Inc.
This press release relates to Credit Ratings that have been
published on A.M. 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 A.M.
Best’s Recent Rating Activity web page. For
additional information regarding the use and limitations of Credit
Rating opinions, please view Understanding Best’s Credit
Ratings. For information on the proper media use of Best’s
Credit Ratings and A.M. Best press releases, please view
Guide for Media - Proper Use of Best’s Credit Ratings and A.M.
Best Rating Action Press Releases.
A.M. Best is the world’s oldest and most authoritative
insurance rating and information source. For more information,
visit www.ambest.com.
Copyright © 2018 by A.M. Best Rating Services, Inc. and/or
its affiliates. ALL RIGHTS RESERVED.
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version on businesswire.com: https://www.businesswire.com/news/home/20180502006791/en/
A.M. BestWayne Kaminski, +1 908 439 2200, ext.
5061Senior Financial
Analystwayne.kaminski@ambest.comorChristopher Sharkey, +1
908 439 2200, ext. 5159Manager, Public
Relationschristopher.sharkey@ambest.comorJoseph Zazzera,
MBA, +1 908 439 2200, ext.
5797Directorjoseph.zazzera@ambest.comorJim Peavy, +1
908 439 2200, ext. 5644Director, Public
Relationsjames.peavy@ambest.com
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