AM Best has assigned Long-Term Issue Credit Ratings (Long-Term IRs) of 'bbb' (Good) to
In addition, AM Best has assigned indicative Long-Term IRs of 'bbb' (Good) to senior unsecured issues, 'bbb-' (Good) to subordinated issues and 'bb+' (Fair) to preferred stock and of the recently filed shelf registration of Humana. The outlook assigned to these Credit Ratings (ratings) is stable. Concurrently, AM Best has withdrawn the ratings on the previous shelf registration, which expired.
Humana is anticipated to use the proceeds from the senior unsecured notes issuance for general corporate purposes, including the repayment of existing debt and outstanding commercial paper. As such, AM Best expects the issuance to be mostly neutral to financial leverage. Financial leverage, as measured by AM Best, was approximately 42% as of year-end 2023, slightly exceeding the organization's long-term target debt-to-capital ratio of 40%. Humana's earnings before interest and taxes (EBIT) interest coverage remains solid at about 8 times; however, it did decrease at year-end 2023 due to a moderate decline in operating results driven by increased utilization in its Medicare Advantage segment in the fourth quarter of 2023, as well as higher interest expense.
Humana has sound liquidity measures as the organization maintains consolidated cash holdings of
The organization's consistent profitability has driven equity growth over the past five years. Humana generated strong premium growth in 2023, driven by a membership increase in its core Medicare Advantage segment. However, service revenue derived from its CenterWell segment declined because of the divestiture of its 60% ownership in
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