AM Best has affirmed the Financial Strength Rating (FSR)
of A- (Excellent) and the Long-Term Issuer Credit Ratings
(Long-Term ICR) of “a-” (Excellent) for the majority of the health
and dental insurance subsidiaries of Humana Inc. (Humana)
(headquartered in Louisville, KY) [NYSE: HUM]. These subsidiaries
collectively are referred to as Humana Health Group. Concurrently,
AM Best has affirmed the Long-Term ICR of “bbb-” (Good) and the
Long-Term Issue Credit Ratings (Long-Term IRs) of Humana Inc. AM
Best also has affirmed the Short-Term Issue Credit Rating
(Short-Term IR) of AMB-2 (Satisfactory) for Humana Inc.
Additionally, AM Best has affirmed the FSR of B++ (Good) and the
Long-Term ICR of “bbb” (Good) of the following Humana subsidiaries:
Humana Insurance of Puerto Rico, Inc. and Humana Health Plans of
Puerto Rico, Inc. These companies are domiciled in Puerto Rico and
collectively are referred to as Humana Health of Puerto Rico Group.
The outlook of these Credit Ratings (ratings) is stable. (See below
for a detailed listing of Humana Health Group members and Long-Term
IRs.)
The ratings reflect Humana Health Group’s balance sheet
strength, which AM Best assesses as adequate, as well as its
adequate operating performance, favorable business profile and
appropriate enterprise risk management (ERM).
Humana Health Group’s balance sheet strength assessment has been
pressured over the past year due to top line growth and dividends
to the holding company outpacing net income. Operating performance
for the company has continued to be favorable; however, earnings
did decline in 2021 based on increased medical utilization and
lower risk-adjusted revenue for its core Medicare Advantage
business. AM Best notes that earnings were elevated in 2020 from
the deferral of non-urgent care due to COVID. Risk-adjusted
revenues for Humana Health Group’s Medicare Advantage business
declined in 2021 due to the lack of claims and encounter data
during 2020, which resulted from the sharp decrease in provider
visits by seniors. Medical utilization returned to near normal
levels in 2021 combined with increased medical expenditures for
COVID testing and treatments. Operating performance for the first
half of 2022 has improved with top line growth and margins being
reported at more historic levels.
Humana has a favorable business profile with a national
footprint and is the second largest insurer of Medicare Advantage
in the United States. The company is also expanding its presence in
Managed Medicaid and now operating under contracts with six states.
Further business diversification is provided through Humana’s
TRICARE military contract providing healthcare services for over
six million individuals. The organization is also growing its
non-regulated healthcare services business to build capabilities
for its integrated care delivery model, including pharmacy,
provider and home health care services. Humana has a well-developed
mature ERM program that actively manages existing and emerging
risk.
Financial flexibility is provided by the holding company,
Humana, which includes cash and a $4 billion commercial paper
program backed by its revolving credit agreement. Additionally, the
organization has access to short-term borrowings from the Federal
Home Loan Bank of Cincinnati through its subsidiary, Humana
Insurance Company. Financial leverage at the holding company has
been elevated based on financing for the Kindred at Home
acquisition in 2021 and was approximately 45% at the end of second
quarter 2022. In the third quarter of 2022, Humana closed on a
transaction for the sale of a 60% stake in Kindred At Home’s
hospice operations, the proceeds of which are expected to be used
to pay down a portion of outstanding debt. It is anticipated that
financial leverage will be approximately 40% by year end 2022.
Although Humana’s financial leverage has been elevated due to the
Kindred at Home acquisition, its earnings before interest and taxes
(EBIT) interest coverage has remained strong at over 10 times.
The ratings of Humana Health of Puerto Rico Group reflect its
balance sheet strength, which AM Best assesses as adequate, as well
as its marginal operating performance, limited business profile,
appropriate ERM and the support of the parent, Humana Inc.
Risk-adjusted capital for Humana Health of Puerto Rico Group has
improved materially over the past two years based on favorable net
earnings and to a lesser degree a decline in enrollment. Net
earnings in 2020 were enhanced due to the deferral of non-emergent
care. Margins compressed in 2021 but remained favorable.
Historically, operating results have been volatile based on
challenges with Medicare Advantage funding for this region. The
parent company supports the operational and capital requirements of
its insurance subsidiaries in Puerto Rico and these entities are
integrated into Humana Inc.’s consolidated ERM program.
The FSR of A- (Excellent) and the Long-Term ICRs of “a-”
(Excellent) have been affirmed with stable outlooks for the
following health and dental insurance subsidiaries of Humana
Inc.:
- Humana Insurance Company
- Humana Medical Plan, Inc.
- Humana Health Plan, Inc.
- Humana Health Benefit Plan of Louisiana, Inc.
- Humana Health Plan of Texas, Inc.
- Humana Health Insurance Company of Florida, Inc.
- Humana Benefit Plan of Illinois, Inc.
- Humana Health Plan of Ohio, Inc.
- Humana Employers Health Plan of Georgia, Inc.
- Humana Insurance Company of New York
- Humana Wisconsin Health Organization Insurance Corporation
- Humana Insurance Company of Kentucky
- Cariten Health Plan Inc.
- CarePlus Health Plans, Inc.
- HumanaDental Insurance Company
- CompBenefits Insurance Company
- CompBenefits Company
- CompBenefits Dental, Inc.
- The Dental Concern, Inc.
- DentiCare, Inc.
The following Long-Term IRs have been affirmed with stable
outlooks:
Humana Inc.—
— “bbb-”(Good) on $600 million 3.15% senior unsecured notes, due
2022 — “bbb-” (Good) on $400 million 2.9% senior unsecured notes,
due 2022 — “bbb-” (Good) on $1.5 billion 0.65% senior unsecured
notes, due 2023 — “bbb-” (Good) on $600 million 3.85% senior
unsecured notes, due 2024 — “bbb-” (Good) on $600 million 4.5%
senior unsecured notes, due 2025 — “bbb-” (Good) on $750 million
1.35% senior unsecured notes, due 2027 — “bbb-” (Good) on $600
million 3.95% senior unsecured notes, due 2027 — “bbb-” (Good) on
$500 million 3.125% senior unsecured notes, due 2029 — “bbb-”
(Good) on $750 million 3.7% senior unsecured notes, due 2029 —
“bbb-” (Good) on $500 million 4.875% senior unsecured notes, due
2030 — “bbb-” (Good) on $750 million 2.15% senior unsecured notes,
due 2032 — “bbb-” (Good) on $250 million 8.15% senior unsecured
notes, due 2038 — “bbb-” (Good) on $400 million 4.625% senior
unsecured notes, due 2042 — “bbb-” (Good) on $750 million 4.95%
senior unsecured notes, due 2044 — “bbb-” (Good) on $400 million
4.8% senior unsecured notes, due 2047 — “bbb-” (Good) on $500
million 3.95% senior unsecured notes, due 2049
The following indicative Long-Term IRs have been affirmed with
stable outlooks for the shelf registration:
Humana Inc.—
— “bbb-” (Good) on senior unsecured debt securities — “bb+”
(Fair) on subordinated debt securities — “bb” (Fair) on preferred
stock
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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