AM Best has assigned a Long-Term Issue Credit Rating of "bbb-" (Good) to the $1 billion, 6.625% fixed rate junior subordinated notes, due 2056, of Humana Inc. (Humana) (headquartered in Louisville, KY) (NYSE:HUM). The outlook assigned to this Credit Rating (rating) is stable. All other ratings of Humana and its subsidiaries remain unchanged.

Humana expects to use the proceeds from the junior subordinated notes issuance for general corporate purposes, which may include repayment of existing indebtedness, including borrowings under its commercial paper program. AM Best expects the issuance to increase financial leverage slightly in the intermediate term. The company's financial leverage, as measured by AM Best, will increase slightly from year-end 2025 to approximately 41.8% with the new issuance. Financial leverage has exceeded the organization's long-term target debt-to-capital ratio of 40%, but management expects to manage to this target through increases in equity and continued deleveraging over the course of the year.

Humana's earnings before interest and taxes (EBIT) interest coverage remains solid at 4-8 times in recent years; however, it has dropped off from the double-digit range a few years ago due to a decline in operating results, driven by increased utilization and changes in reimbursement in its Medicare Advantage segment in the last few years, as well as higher interest expenses.

Humana has sound liquidity measures as the organization generates consistently strong operating cash flows; however, cash flow in 2025 totaled $0.9 billion, a notable decrease from $3 billion in 2024. This was driven by timing impacts, the increase in receivables due to the Inflation Reduction Act and the unfavorable impact of working capital items. Liquidity is also supported by dividends primarily from subsidiaries, which totaled $1.1 billion for 2025, as well as its lines of credit totaling $5 billion, as well as its $5 billion commercial paper program and access to short-term borrowings from the Federal Home Loan Bank of Cincinnati through its subsidiary, Humana Insurance Company.

The organization's consistent-yet-declining profitability has driven equity growth over the past five-year period. Humana again generated strong premium growth in 2025, driven by its core Medicare Advantage segment, but premium revenue is also generated from its Medicaid managed care and supplementary lines. Although profitability increased in 2025, net income was impacted by increased utilization in Medicare Advantage. AM Best expects the company's earnings to remain positive albeit with margin compression throughout 2026.

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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AM Best Assigns Issue Credit Rating to Humana Inc.'s New Junior Subordinated Notes