AM Best has assigned a Long-Term Issue Credit Rating (Long-Term IR) of "bbb" (Good) to the recently announced $500 million, 5.75 % senior unsecured notes, due 2028, and the $850 million, 5.95% senior unsecured notes, due 2034, issued by Humana Inc. (Humana) (headquartered in Louisville, KY) (NYSE:HUM). The outlook assigned to these Credit Ratings (ratings) is stable. Humana's Long-Term Issuer Credit Rating of "bbb" (Good), its Long-Term IRs and the ratings of its insurance subsidiaries are unchanged.

This issuance is expected to be used to pay down outstanding commercial paper balances and for general corporate purposes. Humana had $1.5 billion of senior unsecured notes mature on Aug. 3, 2023; part of this debt issuance previously had been retired in February 2023 with the remaining notes paid using commercial paper. AM Best anticipates that this debt issue will be neutral to Humana's financial leverage. Humana's unadjusted financial leverage at Sept. 30, 2023, was approximately 41%, as measured by AM Best.

On a longer-term basis, Humana plans to manage financial leverage at approximately 40%. Humana's earnings before interest and taxes (EBIT) interest coverage remains strong at over 10 times. Humana has good financial flexibility with strong operating cash flow, solid subsidiary dividends, available 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.

Balance sheet metrics are supported by continued favorable operating performance from core insurance operations supplemented by its non-regulated health care services business. Premium growth has been strong through the third quarter of 2023, driven by industry leading Medicare Advantage membership gains. Revenues from Humana's health care services business, CenterWell, has contracted primarily due to the divestiture of 60% of the hospice operations of Gentiva (formerly Kindred). Overall operating earnings have increased based on increased premium revenue. The medical loss ratio increased as expected due to a return to pre-pandemic utilization levels and plan design investments. Offsetting this is improvement in the overall operating ratio from the divesture of the hospice operations and increased scale of a larger membership base. Return of capital to shareholder programs have increased in recent periods but historically have been flexible to achieve insurance entity risk adjusted capital and financial leverage within management targets.

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 Ratings to Humana Inc.'s Senior Unsecured Notes