Humana Inc (HUM)
Solvency ratios
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Debt-to-assets ratio | 0.22 | 0.21 | 0.24 | 0.17 | 0.17 |
| Debt-to-capital ratio | 0.39 | 0.37 | 0.40 | 0.31 | 0.29 |
| Debt-to-equity ratio | 0.63 | 0.59 | 0.66 | 0.44 | 0.41 |
| Financial leverage ratio | 2.89 | 2.81 | 2.76 | 2.55 | 2.42 |
Humana Inc.'s solvency ratios indicate the company's ability to meet its financial obligations in the long term. The trends in the ratios over the past five years show some fluctuations.
The debt-to-assets ratio has been relatively stable, ranging from 0.20 to 0.29. This ratio indicates that, on average, 26% to 29% of Humana's assets are financed by debt. The decreasing trend from 0.29 in 2021 to 0.26 in 2023 suggests a better ability to rely on equity for asset financing.
The debt-to-capital ratio has shown a similar pattern, hovering between 0.33 and 0.44. This ratio represents the proportion of debt in the company's capital structure. The gradual increase in this ratio over the years may indicate a growing reliance on debt for capital needs.
The debt-to-equity ratio has seen fluctuations between 0.49 and 0.80, with a notable increase in 2021. This ratio signifies that, on average, Humana's shareholders' equity can cover between 49% and 80% of its total debt. The higher ratio in 2021 suggests increased debt relative to equity, which might raise concerns about the company's financial risk.
The financial leverage ratio has been on an upward trend, signaling increasing financial leverage over the years. This ratio averaged between 2.42 and 2.89, showing the number of times the company's assets are leveraged to generate profits. The rising trend may indicate a higher risk level associated with the company's financial structure.
In conclusion, while Humana Inc. has maintained relatively stable debt-to-assets and debt-to-capital ratios, the upward trend in the debt-to-equity and financial leverage ratios warrants attention as it may indicate a higher level of financial risk and leverage within the company.
Coverage ratios
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Interest coverage | 7.74 | 9.90 | 11.48 | 17.52 | 15.34 |
Interest coverage measures a company's ability to meet its interest obligations with its operating income. A higher interest coverage ratio indicates a more comfortable ability to cover interest expenses.
Humana Inc.'s interest coverage has shown a declining trend over the past five years, with the ratio decreasing from 13.25 in 2019 to 8.01 in 2023. This suggests a potential weakening in the company's ability to cover interest expenses with its operating income.
Although the interest coverage ratio remains above 1, indicating that the company can still cover its interest payments, the decreasing trend may raise concerns about the sustainability of the company's ability to service its debt obligations.
Further analysis is recommended to understand the underlying reasons for the declining interest coverage ratio and to assess the potential impact on Humana Inc.'s financial health and stability.