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

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AM Best has assigned a Long-Term Issue Credit Rating of bbb- (Good) to Humana's recent $500 million, 5.7% senior unsecured notes due March 13, 2026 and $750 million, 5.5% senior unsecured notes due March 15, 2053. The outlook for these ratings is stable. The issuance aims to replace existing term loans, pre-fund upcoming maturities, and support general corporate purposes. Humana's financial leverage was approximately 42% as of Dec. 31, 2022, which is expected to moderate to about 40% long-term. Despite elevated leverage, earnings before interest and taxes coverage remains strong at over 10 times.

Positive
  • Assigned Long-Term Issue Credit Rating of bbb- (Good).
  • Earnings before interest and taxes interest coverage remains strong at over 10 times.
  • Good insurance subsidiary dividend capacity based on operating performance.
Negative
  • Financial leverage at 42% as of Dec. 31, 2022, expected to increase in the near term.

OLDWICK, N.J.--(BUSINESS WIRE)-- AM Best has assigned a Long-Term Issue Credit Rating (Long-Term IR) of “bbb-” (Good) to the recently announced $500 million, 5.7 % senior unsecured notes due March 13, 2026 and the $750 million, 5.5% senior unsecured notes due March 15, 2053, issued by Humana Inc. (Humana) (headquartered in Louisville, KY) [NYSE: HUM]. 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.

This issuance is expected to be used to replace the outstanding term loan, prefund debt maturities for later in 2023, and for general corporate purposes, including paying down outstanding commercial paper. AM Best anticipates that this debt issue will increase Humana’s financial leverage in the near term; this metric will moderate over the next two quarters as upcoming maturities are paid down. Humana’s financial leverage at Dec. 31, 2022 was approximately 42%, as measured by AM Best. Financial leverage at the holding company has been elevated based on financing for the Kindred at Home acquisition in 2021; this is inclusive of the sale of a 60% stake in Kindred At Home’s hospice operations, a portion of these proceeds were used to pay down an outstanding term loan in 2022.

On a longer-term basis, Humana plans to manage financial leverage at approximately 40%. Although Humana’s financial leverage has been elevated, earnings before interest and taxes (EBIT) interest coverage has remained strong at over 10 times. Financial flexibility includes the holding company 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. Insurance subsidiary dividend capacity remains good based on favorable operating performance. Additionally, operating earnings from Humana’s non-regulated CenterWell business are growing and contributing favorably to the organization and debt service.

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 © 2023 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.

Bridget Maehr

Associate Director

+1 908 439 2200, ext. 5321

bridget.maehr@ambest.com

Joseph Zazzera

Director

+1 908 439 2200, ext. 5797

joseph.zazzera@ambest.com

Christopher Sharkey

Manager, Public Relations

+1 908 439 2200, ext. 5159

christopher.sharkey@ambest.com

Al Slavin

Senior Public Relations Specialist

+1 908 439 2200, ext. 5098

al.slavin@ambest.com

Source: AM Best

FAQ

What is Humana's Long-Term Credit Rating?

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

When do Humana's new senior unsecured notes mature?

The $500 million notes mature on March 13, 2026, and the $750 million notes mature on March 15, 2053.

What is Humana's financial leverage as of December 31, 2022?

Humana's financial leverage was approximately 42% as of December 31, 2022.

How will Humana use the funds from the new notes?

The funds will replace outstanding term loans, pre-fund debt maturities, and support general corporate purposes.

What is the outlook for Humana's Credit Ratings?

The outlook for Humana's Credit Ratings is stable.

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