AM Best has affirmed the Financial Strength Rating (FSR) of A- (Excellent) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of “a-” (Excellent) for the majority of 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 affirmed the Long-Term ICR of “bbb-” (Good) and the Long-Term Issue Credit Ratings (Long-Term IRs) of Humana Inc. AM Best also has affirmed the Short-Term Issue Credit Rating (Short-Term IR) of AMB-2 (Satisfactory) for Humana Inc. Additionally, AM Best has affirmed the FSR of B++ (Good) and the Long-Term ICR 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 reflect Humana Health Group’s balance sheet strength, which AM Best assesses as adequate, as well as its adequate operating performance, favorable business profile and appropriate enterprise risk management (ERM).

Humana Health Group’s balance sheet strength assessment has been pressured over the past year due to top line growth and dividends to the holding company outpacing net income. Operating performance for the company has continued to be favorable; however, earnings did decline in 2021 based on increased medical utilization and lower risk-adjusted revenue for its core Medicare Advantage business. AM Best notes that earnings were elevated in 2020 from the deferral of non-urgent care due to COVID. Risk-adjusted revenues for Humana Health Group’s Medicare Advantage business declined in 2021 due to the lack of claims and encounter data during 2020, which resulted from the sharp decrease in provider visits by seniors. Medical utilization returned to near normal levels in 2021 combined with increased medical expenditures for COVID testing and treatments. Operating performance for the first half of 2022 has improved with top line growth and margins being reported at more historic levels.

Humana has a favorable business profile with a national footprint and is the second largest insurer of Medicare Advantage in the United States. The company is also expanding its presence in Managed Medicaid and now operating under contracts with six states. Further business diversification is provided through Humana’s TRICARE military contract providing healthcare services for over six million individuals. The organization is also growing its non-regulated healthcare services business to build capabilities for its integrated care delivery model, including pharmacy, provider and home health care services. Humana has a well-developed mature ERM program that actively manages existing and emerging risk.

Financial flexibility is provided by the holding company, Humana, which includes 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. Financial leverage at the holding company has been elevated based on financing for the Kindred at Home acquisition in 2021 and was approximately 45% at the end of second quarter 2022. In the third quarter of 2022, Humana closed on a transaction for the sale of a 60% stake in Kindred At Home’s hospice operations, the proceeds of which are expected to be used to pay down a portion of outstanding debt. It is anticipated that financial leverage will be approximately 40% by year end 2022. Although Humana’s financial leverage has been elevated due to the Kindred at Home acquisition, its earnings before interest and taxes (EBIT) interest coverage has remained strong at over 10 times.

The ratings of Humana 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, appropriate ERM and the support of the parent, Humana Inc.

Risk-adjusted capital for Humana Health of Puerto Rico Group has improved materially over the past two years based on favorable net earnings and to a lesser degree a decline in enrollment. Net earnings in 2020 were enhanced due to the deferral of non-emergent care. Margins compressed in 2021 but remained favorable. Historically, operating results have been volatile based on challenges with Medicare Advantage funding for this region. The parent company supports the operational and capital requirements of its insurance subsidiaries in Puerto Rico and these entities are integrated into Humana Inc.’s consolidated ERM program.

The FSR of A- (Excellent) and the Long-Term ICRs of “a-” (Excellent) have been affirmed 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 affirmed with stable outlooks:

Humana Inc.—

— “bbb-”(Good) on $600 million 3.15% senior unsecured notes, due 2022

— “bbb-” (Good) on $400 million 2.9% senior unsecured notes, due 2022

— “bbb-” (Good) on $1.5 billion 0.65% senior unsecured notes, due 2023

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

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

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

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

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

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

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

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

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

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

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

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

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

The following indicative Long-Term IRs have been affirmed with stable outlooks for the shelf

registration:

Humana Inc.—

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

— “bb+” (Fair) on subordinated debt securities

— “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.

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