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

Rhea-AI Summary

AM Best has assigned a Long-Term Issue Credit Rating of “bbb-” (Good) to Humana Inc. (HUM) for its recent issuance of $750 million in 3.70% senior unsecured notes due 2029. The outlook for this rating is stable, and Humana's overall financial health remains unchanged. Proceeds will support general corporate purposes and debt management, with Humana aiming for a more conservative long-term debt-to-capital ratio of 35%. Despite elevated financial leverage at 44%, operating cash flow is strong at $2.3 billion, contributing to favorable revenue growth.

Positive

• Assigned a Long-Term Issue Credit Rating of “bbb-” (Good) by AM Best.
• Stable outlook for the credit rating.
• Proceeds from the notes will support general corporate purposes.
• Strong operating cash flow reported at $2.3 billion.
• Favorable growth in premium and service revenues.

Negative

• Financial leverage remains elevated at approximately 44%.
• Absence of IPO after divesting plans for Kindred at Home's hospice and personal care services.

OLDWICK, N.J.--(BUSINESS WIRE)-- AM Best has assigned a Long-Term Issue Credit Rating (Long-Term IR) of “bbb-” (Good) to Humana Inc.’s (Humana) (headquartered in Louisville, KY) [NYSE:HUM] recently announced $750 million of 3.70% senior unsecured notes due 2029. The outlook assigned to the Credit Rating (rating) is stable. Humana’s Long-Term Issuer Credit Rating of “bbb-” (Good), its existing Long-Term IRs and the ratings of its insurance subsidiaries are unchanged.

It is anticipated that the proceeds of this issue will be used for general corporate purposes including debt maturities and repayment of outstanding short-term borrowings. As a result, AM Best expects that this issue will be neutral to Humana’s financial leverage. Financial leverage remains elevated at approximately 44%, as measured by AM Best, at year-end 2021 due to debt issuances in 2021 to finance the acquisition of Kindred at Home. On a long-term basis, Humana targets a more conservative debt-to-capital ratio of 35%. Humana announced plans to deleverage by divesting of Kindred at Home’s hospice and person care services business via an initial public offering (IPO) after close of the transaction, which was completed in August 2021. This has not occurred to date and absent the IPO, financial leverage will decline only through equity growth or retirement of debt. However, Humana’s financial flexibly remains good with holding company cash and subsidiary dividend capacity, as well as its commercial paper program and revolving credit facilities totaling $4 billion. Furthermore, operating cash flow remains very good at $2.3 billion in 2021. Humana’s operating results have been favorable with material growth of premium and service revenues with fairly consistent operating margins and strong return-on-equity metrics. Coverage remains strong in the low double digits.

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.

Copyright © 2022 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.

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Bridget Maehr

Associate Director

+1 908 439 2200, ext. 5321

bridget.maehr@ambest.com

Christopher Sharkey

Manager, Public Relations

+1 908 439 2200, ext. 5159

christopher.sharkey@ambest.com

Sally Rosen

Senior Director

+1 908 439 2200, ext. 5280

sally.rosen@ambest.com

Jim Peavy

Director, Communications

+1 908 439 2200, ext. 5644

james.peavy@ambest.com

Source: AM Best

FAQ

What is Humana's Long-Term Issue Credit Rating assigned by AM Best?

Humana has been assigned a Long-Term Issue Credit Rating of “bbb-” (Good) by AM Best.

What are the details of Humana's recent note issuance?

Humana issued $750 million of 3.70% senior unsecured notes due 2029.

What does the stable outlook mean for Humana's credit rating?

The stable outlook indicates that AM Best does not anticipate a change in Humana's creditworthiness in the near term.

What is Humana's current financial leverage ratio?

Humana's current financial leverage is approximately 44%.

What is Humana's goal for its long-term debt-to-capital ratio?

Humana targets a long-term debt-to-capital ratio of 35%.

How much operating cash flow did Humana report?

Humana reported an operating cash flow of $2.3 billion in 2021.