AM Best Upgrades Credit Ratings of Humana Inc. and Most of Its Health Insurance Subsidiaries

AM Best has upgraded the Financial Strength Rating (FSR) to A (Excellent) from A- (Excellent) and the Long-Term Issuer Credit Ratings (Long-Term ICRs) to “a” (Excellent) from “a-” (Excellent) for the health and dental insurance subsidiaries of Humana Inc. (Humana) (headquartered in Louisville, KY) [NYSE: HUM]. These subsidiaries collectively are referred to as Humana Health Group. Concurrently, AM Best has upgraded the Long-Term ICR to “bbb” (Good) from “bbb-” (Good) and the Long-Term Issue Credit Ratings (Long-Term IRs) of Humana Inc. (Humana). AM Best also has affirmed the Short-Term Issue Credit Rating of AMB-2 (Satisfactory) for Humana. Additionally, AM Best has affirmed the FSR of B++ (Good) and the Long-Term ICRs of “bbb” (Good) of the following Humana subsidiaries: Humana Insurance of Puerto Rico, Inc. and Humana Health Plans of Puerto Rico, Inc. These companies are domiciled in Puerto Rico and collectively are referred to as Humana Health of Puerto Rico Group. The outlook of these Credit Ratings (ratings) is stable. (See below for a detailed listing of Humana Health Group members and Long-Term IRs.)

The ratings of Humana Health Group reflect 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).

The ratings of Human Health of Puerto Rico Group reflect its balance sheet strength, which AM Best assesses as adequate, as well as its marginal operating performance, limited business profile and appropriate ERM, as well as its strategic role as a subsidiary of Humana.

The rating upgrades of Humana Health Group reflect a sustained trend of premium revenue growth and strong operating results. Premium revenue growth has been reported consistently over the past five years and has been especially strong through the first half of 2023, driven by Medicare Advantage membership gains above original expectations. Overall operating earnings have increased based on increased premium revenue, with some operating margin improvement. The medical loss ratio increased as expected based on a return to pre-pandemic utilization levels, as well as from plan design investments. Offsetting this is improvement in the overall operating ratio from increased scale of a larger membership base and operational efficiencies. Future premium growth is expected to be driven by membership gains for Humana Health Group’s core Medicare Advantage business and to a lesser degree Medicaid and Dual Eligible enrollment gains as the company is exiting all employer group medical business. Humana Health Group has maintained relatively stable risk-adjusted capital, as measured by Best Capital Adequacy Ratio (BCAR). Balance sheet metrics are supported by continued favorable operating performance from core insurance operations and a conservative high quality investment portfolio. Humana offers Medicare products on a national basis and has the second-largest membership base. Humana Health Group also is a long-term TRICARE East contract holder. Health insurance operations are enhanced by the organization’s nonregulated, CenterWell, health care services business. CenterWell provides primary care, home care and pharmacy services focused on the senior population with an emphasis on value-based care. The organization has a comprehensive ERM program with mature governance. The program is integrated into day-to-day operations and strategic business planning.

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. Returns of capital to shareholder programs have increased in recent periods but historically have been flexible to achieve management-established insurance entity risk-adjusted capital and holding company financial leverage targets. Humana’s unadjusted financial leverage, as of June 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 interest coverage remains strong at over 10 times.

The rating affirmations of Human Health of Puerto Rico Group reflect improved risk-adjusted capital and favorable earnings over the past three years. However, underwriting results have turned unfavorable through the first half of 2023. Humana Health of Puerto Rico Group receives rating enhancement based on the strategic role it plays for Humana to offer Medicare Advantage products in all states and territories.

AM Best has upgraded the FSR to A (Excellent) from A- (Excellent) and the Long-Term ICRs to “a” (Excellent) from “a-” (Excellent) with stable outlooks for the following health and dental insurance subsidiaries of Humana Inc.:

• Humana Insurance Company
• Humana Medical Plan, Inc.
• 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 upgraded with stable outlooks:

Humana Inc.—

-- to “bbb” (Good) from “bbb-” (Good) on $600 million 3.85% senior unsecured notes, due 2024

-- to “bbb” (Good) from “bbb-” (Good) on $600 million 4.5% senior unsecured notes, due 2025

-- to “bbb” (Good) from “bbb-” (Good) on $500 million 5.7% senior unsecured notes, due 2026

-- to “bbb” (Good) from “bbb-” (Good) on $750 million 1.35% senior unsecured notes, due 2027

-- to “bbb” (Good) from “bbb-” (Good) on $600 million 3.95% senior unsecured notes, due 2027

-- to “bbb” (Good) from “bbb-” (Good) on $500 million 5.75% senior unsecured notes, due 2028

-- to “bbb” (Good) from “bbb-” (Good) on $500 million 3.125% senior unsecured notes, due 2029

-- to “bbb” (Good) from “bbb-” (Good) on $750 million 3.7% senior unsecured notes, due 2029

-- to “bbb” (Good) from “bbb-” (Good) on $500 million 4.875% senior unsecured notes, due 2030

-- to “bbb” (Good) from “bbb-” (Good) on $750 million 2.15% senior unsecured notes, due 2032

-- to “bbb” (Good) from “bbb-” (Good) on $750 million 5.875% senior unsecured notes, due 2033

-- to “bbb” (Good) from “bbb-” (Good) on $250 million 8.15% senior unsecured notes, due 2038

-- to “bbb” (Good) from “bbb-” (Good) on $400 million 4.625% senior unsecured notes, due 2042

-- to “bbb” (Good) from “bbb-” (Good) on $750 million 4.95% senior unsecured notes, due 2044

-- to “bbb” (Good) from “bbb-” (Good) on $400 million 4.8% senior unsecured notes, due 2047

-- to “bbb” (Good) from “bbb-” (Good) on $500 million 3.95% senior unsecured notes, due 2049

-- to “bbb” (Good) from “bbb-” (Good) on $750 million 5.5% senior unsecured notes, due 2053

The following indicative Long-Term IRs have been upgraded with stable outlooks for the following shelf registrations:

Humana Inc.—

-- to “bbb” (Good) from “bbb-” (Good) on senior unsecured debt securities

-- to “bbb-” (Good) from “bb+” (Fair) on subordinated debt securities

-- to “bb+” (Fair) from “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.

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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