AM Best Assigns Issue Credit Ratings to Humana Inc.’s Senior Unsecured Notes

OLDWICK, N.J.–(BUSINESS WIRE)–#insuranceAM Best has assigned Long-Term Issue Credit Ratings (Long-Term IR) of “bbb-” (Good) to Humana Inc.’s (Humana) (headquartered in Louisville, KY) [NYSE: HUM] recently announced $750 million 1.350% senior unsecured notes due 2027, the $750 million 2.150% senior unsecured notes due 2032 and the $1.5 billion 0.65% senior unsecured notes due 2023. The outlook assigned to these Credit Ratings (ratings) 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.

Net proceeds from the debt issuance along with $300 million cash at the company and borrowings of $500 million from the term loan will be used to finance the $5.7 billion acquisition of Kindred at Home, which also included $1.9 billion of Kindred at Home’s indebtness, net of Humana’s 40% existing ownership stake. As previously announced, the Kindred at Home acquisition is expected to close during the third quarter of 2021, subject to customary regulatory approvals.

With the $3 billion debt issuance, financial leverage will increase above 40%, falling out of Humana’s targeted range; however, Humana has announced plans to divest its majority stake in Kindred at Home’s hospice and personal care services in the fall via an initial public offering (IPO). If Humana is able to complete the IPO in the fall of 2021, the company has announced it would use proceeds to pay down a portion of the debt. AM Best expects that if Humana successfully completes the IPO of the Kindred at Home hospice and personal care services, its financial leverage would fall to approximately 40% at year-end 2021 and could improve to targeted levels in the following year. In the event Humana was not able to undertake an IPO on Kindred hospice operations in 2021, financial leverage would remain above targeted levels for a longer time.

With the increase in Humana’s financial leverage with the recent debt issuance, financial flexibility will become more limited. However, liquidity is supplemented by dividends from Humana’s insurance operations, $4 billion in credit facilities, commercial paper program and cash at its parent company. Additionally, earnings before interest and taxes interest coverage has been in the high teens and is expected to remain strong at over 10 times.

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 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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Contacts

Antonietta Iachetta
Senior Financial Analyst
+1 908 439 2200, ext. 5792
[email protected]

Sally Rosen
Senior Director
+1 908 439 2200, ext. 5280
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Christopher Sharkey
Manager, Public Relations
+1 908 439 2200, ext. 5159
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Jim Peavy
Director, Communications
+1 908 439 2200, ext. 5644
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