Company: HUM
Filing Date: 2025-02-20
Form Type: 10-K
Source: 0000049071-25-000007
Chunk: 1

Company: HUMANA INC
Filing Date: 2025-02-20
Form: 10-K
Item: Item 7A
Chunk 1
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 between changes in fair value and changes in interest rates, providing a general indication of the sensitivity of the fair values of our fixed maturity securities to changes in interest rates. However, actual fair values may differ significantly from estimates based on duration. The average duration of our investment portfolio, including cash and cash equivalents, was approximately 3.8 years as of December 31, 2024 and 3.0 years as of December 31, 2023. Based on the duration including cash equivalents, a 1% increase in interest rates would generally decrease the December 31, 2024 fair value of our securities by approximately $783 million.

We have also evaluated the impact on our investment income and interest expense resulting from a hypothetical change in interest rates of 100, 200, and 300 basis points over the next twelve-month period, as reflected in the following table. The evaluation was based on our investment portfolio, outstanding indebtedness, and outstanding swap contract portfolio at December 31, 2024 and 2023. Our investment portfolio consists of cash, cash equivalents, and investment securities. The modeling technique used to calculate the pro forma net change in pretax earnings considered the cash flows related to fixed income investments and debt, which are subject to interest rate changes during a prospective twelve-month period. This evaluation measures parallel shifts in interest rates and may not account for certain unpredictable events that may affect interest income, including unexpected changes of cash flows into and out of the portfolio, changes in the asset allocation, including shifts between taxable and tax-exempt securities, spread changes specific to various investment categories and the mix of short-term versus long-term debt. In the past ten years, changes in 10 year US treasury rates during the year have not exceeded 300 basis points, have changed between 200 and 300 basis points one time, have changed between 100 and 200 basis points five times, and have changed by less than 100 basis points four times.

Increase (decrease) inpretax earnings given aninterest rate decrease ofX basis pointsIncrease (decrease) inpretax earnings given aninterest rate increase ofX basis points (300)(200)(100)100200300(in millions)As of December 31, 2024Investment income (a)$(322)$(210)$(105)$106 $207 $308 Interest expense (b)123 82 41 (41)(82)(123)Pretax$(199)$(