AM Best Assigns Issue Credit Ratings to Humana Inc.’s New Senior Unsecured Notes

AM Best has assigned a Long-Term Issue Credit Rating of “bbb” (Good) to the $750 million, 5.5% senior unsecured notes, due 2035, and the $500 million, 6.0% senior unsecured notes, due 2055, issued by Humana Inc. (Humana) (headquartered in Louisville, KY) [NYSE: HUM]. The outlook assigned to these Credit Ratings (ratings) is stable. Humana’s Long-Term Issuer Credit Rating of “bbb” (Good), its Long-Term IRs and the ratings of its insurance subsidiaries are unchanged.

Humana expects to use the proceeds from the senior unsecured notes issuance for general corporate purposes, including the repayment of existing debt of $600 million, 4.5% senior unsecured notes maturing in April 2025, and short-term borrowings outstanding under its commercial paper program, which as of March 2025 was approximately $885 million. AM Best expects the issuance to increase financial leverage in the immediate term and then be reduced after the repayments. Financial leverage, as measured by AM Best, was 42% as of year-end 2024, and will increase to approximately 45% with the new issuance. Financial leverage has exceeded the organization's long-term target debt-to-capital ratio of 40%, but management expects that through increases in equity and continued deleveraging over the course of the year, they will get closer to this target. Humana’s earnings before interest and taxes (EBIT) interest coverage remains solid at 5-8 times in recent years; however, it has declined from the double-digit range a few years ago due to a moderate decline in operating results driven by increased utilization and changes in reimbursement in its Medicare Advantage segment in 2023 and 2024, as well as higher interest expense.

Humana has sound liquidity measures as the organization generates consistently strong operating cash flows, which totaled $3 billion in 2024. Liquidity is also supported by dividends primarily from subsidiaries, which totaled $1.5 billion for 2024, as well as its lines of credit totaling $4.75 billion, 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-yet-declining profitability has driven equity growth over the past five-year period. Humana again generated strong premium growth in 2024, driven by its core Medicare Advantage segment, but premium revenue is also generated from its Medicaid managed care and supplementary lines. While profitability remained solid in 2024, net income was impacted by increased utilization in Medicare Advantage. AM Best expects the company’s earnings to remain positive albeit with margin compression.

Revenue and earnings are also diversified through Humana’s non-insurance segment, CenterWell. The CenterWell entities focus on value-based care initiatives through primary care, home care and pharmacy services operations. Furthermore, Humana Health Group holds the TRICARE East contract, which was recently renewed for an extended period. The group’s operations are supported by a well-developed enterprise risk management program to ensure proper oversight and mitigation of key risks.

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.

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