AM Best Assigns Issue Credit Ratings to Humana Inc.’s Senior Unsecured Notes
February 28 2023 - 4:02PM
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.
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2200, ext. 5321 bridget.maehr@ambest.com
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