AM Best Downgrades Credit Ratings of Humana Health of Puerto Rico Group’s Subsidiaries; Affirms Credit Ratings of Humana Inc. and Most of Its Health Insurance Subsidiaries
The ratings of Humana Health Group reflects its balance sheet strength, which AM Best assesses as adequate, as well as its strong operating performance, favorable business profile and appropriate enterprise risk management (ERM).
Humana Health Group’s balance sheet strength is assessed as adequate, despite a decline in risk-adjusted capitalization to a weak level, as measured by Best’s Capital Adequacy Ratio (BCAR). The decline was primarily driven by strong premium growth in 2023 and related required capital to support these risks. The group’s premium expansion has outpaced capital growth in recent years, due largely to dividends from the regulated entities to the parent, Humana.
The Humana Health Group maintains a conservative invested asset portfolio that is mainly composed of investment grade fixed income securities, cash, and short-term investments in order to preserve capital and to supplement operating gains. Capitalization has increased annually over the past five years, rising at a
Humana Health Group generates the majority of its premium base from MA, but premium income is also sourced from Medicaid managed care and supplementary lines, including dental and vision. Effective 2023, Humana exited the commercial market. While its concentration of business in government health programs makes the organization susceptible to headwinds in the MA and Medicaid businesses, Humana benefits from an excellent market position that spans nationwide, which supports its favorable business profile assessment. 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. All of the group’s operations are supported by a well-developed ERM program to ensure proper oversight and mitigation of key risks.
The ratings of Humana Health of Puerto Rico Group reflect its balance sheet strength, which AM Best assesses as weak, as well as its marginal operating performance, limited business profile and appropriate ERM.
The ratings downgrade Humana Health of Puerto Rico Group and outlook revision to negative reflect its weakening risk-adjusted capitalization measures, driven by significant operating losses since 2023. These operating losses were predominantly brought on by a material increase in the MA medical cost trend, its primary business segment, which has persisted through 2024. This has caused a substantial deterioration of the group’s surplus, especially at Humana Health Plans of
Humana Health of Puerto Rico Group maintains the support of its parent company, Humana, as evidenced by material capital support within the past year in the form of two
The parent, Humana, has a good level of financial flexibility due to its strong operating cash flows, subsidiary dividends and material available cash position. This is further enhanced by its commercial paper program, revolving credit agreement and access to a borrowing capacity through the Federal Home Loan Bank of
AM Best has affirmed the FSR of A (Excellent) and the Long-Term ICR of “a” (Excellent) with stable outlooks for the following health and dental insurance subsidiaries of Humana Inc.:
- Humana Medical Plan, Inc.
- Humana Insurance Company
- Humana Health Plan, Inc.
-
Humana Health Benefit Plan of
Louisiana , Inc. -
Humana Health Plan of
Texas , Inc. -
Humana Health Insurance Company of
Florida , Inc. -
Humana Benefit Plan of
Illinois , Inc. -
Humana Health Plan of
Ohio , Inc. -
Humana Employers Health Plan of
Georgia , Inc. -
Humana Insurance Company of
New York - Humana Wisconsin Health Organization Insurance Corporation
-
Humana Insurance Company of
Kentucky - Cariten Health Plan Inc.
- CarePlus Health Plans, Inc.
- HumanaDental Insurance Company
- CompBenefits Insurance Company
- CompBenefits Company
- CompBenefits Dental, Inc.
- The Dental Concern, Inc.
- DentiCare, Inc.
The following Long-Term IRs have been affirmed with stable outlooks:
Humana Inc.-
— “bbb” (Good) on
— “bbb” (Good) on
— “bbb” (Good) on
— “bbb” (Good) on
— “bbb” (Good) on
— “bbb” (Good) on
— “bbb” (Good) on
— “bbb” (Good) on
— “bbb” (Good) on
— “bbb” (Good) on
— “bbb” (Good) on
— “bbb” (Good) on
— “bbb” (Good) on
— “bbb” (Good) on
— “bbb” (Good) on
— “bbb” (Good) on
— “bbb” (Good) on
— “bbb” (Good) on
— “bbb” (Good) on
— “bbb” (Good) on
The following indicative Long-Term IRs have been affirmed with stable outlooks for the following shelf registrations:
Humana Inc.—
— “bbb” (Good) on senior unsecured debt securities
— “bbb-” (Good) on subordinated debt securities
— “bb+” (Fair) on preferred stock
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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Timothy Willey
Financial Analyst
+1 908 882 2433
timothy.willey@ambest.com
Joseph Zazzera
Director
+1 908 882 2442
joseph.zazzera@ambest.com
Christopher Sharkey
Associate Director, Public Relations
+1 908 882 2310
christopher.sharkey@ambest.com
Al Slavin
Senior Public Relations Specialist
+1 908 882 2318
al.slavin@ambest.com
Source: AM Best