Fitch downgrades Humana's credit ratings

By Matt Tracy

WASHINGTON, Dec 15 (Reuters) - Credit rating agency Fitch on Monday downgraded the credit ratings of insurance giant Humana along with various subsidiaries.

In a Monday report accompanying its downgrades, Fitch analysts cited a dim outlook for Humana's revenue margins recovery to previously higher levels. This was due primarily to higher-than-normal use of healthcare across the sector, as well as "significantly lower" Medicare Advantage-related quality bonus payments, the analysts said.

Humana's reported earnings have gradually declined over the past five years and shown volatility in part due to pandemic-linked, as well more recent elevated, healthcare utilization.

Humana's debt-to-Ebitda ratio, which is a key financial leverage ratio used by Fitch, was significantly above Fitch's guidelines for its previous higher rating of the insurer. It last stood at 3.6x as of the end of September.

Fitch downgraded Humana's long-term issuer rating to the second-lowest rung of investment-grade quality on Monday. Analysts maintained Humana has a favorable company profile, due primarily to a strong competitive position in the Medicare Advantage market, among other factors.

Humana in October lost a bid in court to challenge the Centers for Medicare & Medicaid Services' 2025 ratings for its Medicare Advantage plans, which could result in millions of dollars in lost bonus payments to the company from the government.

The rating agency also downgraded the insurer financial strength ratings of various Humana subsidiaries by one notch though still in the upper-medium grade of investment-grade quality. (Reporting by Matt Tracy in Washington, D.C.; Editing by Chris Reese)