AM Best Assigns Indicative Issue Credit Ratings to Humana Inc.’s New Shelf Registration

Rhea-AI Summary

AM Best has assigned long-term credit ratings to Humana's recently filed shelf registration, including “bbb-” for senior unsecured issues and “bb+” for subordinated issues. The outlook is positive and reflects strong financial leverage at 33.3% as of year-end 2020. Humana’s earnings have been robust, bolstered by increased Medicare Advantage membership, and the company maintains a strong earnings coverage ratio of approximately 17 times. Existing ratings for Humana and its subsidiaries remain unchanged.

Positive

• Assigned 'bbb-' long-term credit rating for senior unsecured issues.
• Positive outlook for the credit ratings.
• Strong financial leverage at 33.3% as of year-end 2020.
• Robust earnings coverage ratio of approximately 17 times.

Negative

• Financial leverage temporarily increased to 39.2% after a $1.1 billion debt issuance.

AM Best has assigned indicative Long-Term Issue Credit Ratings of “bbb-” to senior unsecured issues, “bb+” to subordinated issues and “bb” to preferred stock to the recently filed shelf registration of Humana Inc. (Humana) (headquartered in Louisville, KY) [NYSE: HUM]. The outlook assigned to these Credit Ratings (ratings) is positive. Concurrently, AM Best has withdrawn the ratings on the previous shelf registration. The existing ratings of Humana and its insurance subsidiaries are unchanged.

Financial leverage, as calculated by AM Best, was at 33.3% at year-end 2020, within Humana’s targets. The leverage had increased in the first quarter 2020 following Humana’s issuance of $1.1 billion of debt, which had increased financial leverage temporarily to 39.2%. Earnings before interest and taxes interest coverage is strong at approximately 17 times earnings at year-end 2020. AM Best expects Humana’s coverage ratio to remain in a range above 10 times earnings in the near term. Additionally, 2020 net operating earnings results were very strong, reflecting strengthening Medicare Advantage membership gains in Humana’s core business.

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 media use of Best’s Credit Ratings and AM Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and AM Best Rating Action Press Releases.

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.

Copyright © 2021 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.

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FAQ

What credit ratings were assigned to Humana by AM Best?

AM Best assigned 'bbb-' for senior unsecured issues, 'bb+' for subordinated issues, and 'bb' for preferred stock.

What is the outlook for Humana's credit ratings?

The outlook for Humana's credit ratings is positive.

How strong is Humana's financial leverage?

Humana's financial leverage was at 33.3% at year-end 2020.

What was Humana's earnings coverage ratio?

Humana reported an earnings coverage ratio of approximately 17 times at year-end 2020.

What caused the temporary increase in Humana's financial leverage?

The temporary increase to 39.2% was due to Humana's issuance of $1.1 billion in debt.