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 $500 million of 5.75% senior unsecured notes due March 1, 2028, and $750 million of 5.875% senior unsecured notes due March 1, 2033. The outlook for the ratings is stable. Proceeds are expected to refinance $1 billion in debt due in December and for general corporate purposes. Humana maintains a financial leverage of 41%, which is in line with industry standards, while targeting a debt-to-capital ratio below 40%.

Positive

• Assigned Long-Term IR of 'bbb-' indicates good credit quality.
• Proceeds from debt will refinance existing obligations, enhancing financial stability.
• Financial leverage remains in line with industry peers.

Negative

• Financial leverage is elevated at approximately 41%, exceeding Humana's long-term target.

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 $500 million of 5.75% senior unsecured notes due March 1, 2028, and $750 million of 5.875% senior unsecured notes due March 1, 2033. The outlook assigned to these Credit Ratings (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 debt issue will be used for repayment of debt maturities coming due in December totaling $1 billion, as well as for general corporate purposes, including the 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 somewhat elevated at approximately 41%, as measured by AM Best, at third-quarter 2022, including the new debt issuances. Additionally, the financial leverage remains in line with industry peers. The total debt outstanding also is impacted by the 2021 debt issuance to finance the acquisition of Kindred at Home. On a long-term basis, Humana targets a more conservative debt-to-capital ratio of below 40%. This target is in line with its earlier announced plans to deleverage, using a portion of the proceeds from the sale of Kindred at Home’s hospice, which was completed in August 2021.

However, Humana’s financial flexibly remains strong 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 in 2022. 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-digit range during 2022.

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

Joseph Zazzera

Director

+1 908 439 2200, ext. 5797

joseph.zazzera@ambest.com

Al Slavin

Communications Specialist

+1 908 439 2200, ext. 5098

al.slavin@ambest.com

Source: AM Best

FAQ

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

Humana's Long-Term Issue Credit Rating assigned by AM Best is 'bbb-' (Good).

How much debt did Humana issue recently and what are the interest rates?

Humana issued $500 million of 5.75% senior unsecured notes and $750 million of 5.875% senior unsecured notes.

What is the purpose of Humana's recent debt issuance?

The debt issuance will be used to repay $1 billion in debt maturities and for general corporate purposes.

What is Humana's current financial leverage?

Humana's financial leverage is approximately 41%, which is somewhat elevated.

What long-term debt-to-capital ratio does Humana aim for?

Humana targets a more conservative debt-to-capital ratio of below 40%.