Company: HUM
Filing Date: 2025-02-20
Form Type: 10-K
Source: 0000049071-25-000007
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Company: HUMANA INC
Filing Date: 2025-02-20
Form: 10-K
Item: Item 7A
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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our earnings and financial position are exposed to financial market risk, including those resulting from changes in interest rates.

The level of our pretax earnings is subject to market risk due to changes in interest rates and the resulting impact on investment income and interest expense. We have entered into interest-rate swap agreements with major financial institutions to convert our interest-rate exposure on some of our senior notes payable from fixed rates to variable rates, based on Secured Overnight Financing Rate (SOFR), to align interest costs more closely with floating interest rates received on our cash equivalents and investment securities Under the revolving credit agreements, at our option, we can borrow on either a competitive advance basis or a revolving credit basis. The revolving credit portion bears interest at either Term SOFR or the base rate plus a spread. The competitive advance portion of any borrowings will bear interest at market rates prevailing at the time of borrowing on either a fixed rate or a floating rate based on Term SOFR, at our option. There were no borrowings outstanding under our credit agreements at December 31, 2024 or December 31, 2023.

Interest rate risk also represents a market risk factor affecting our consolidated financial position due to our significant investment portfolio, consisting primarily of fixed maturity securities of investment-grade quality with a weighted average S&P credit rating of AA- at December 31, 2024. Our net unrealized loss position increased $89 million from a net unrealized loss position of $1.3 billion at December 31, 2023 to a net unrealized loss position of 

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$1.4 billion at December 31, 2024. At December 31, 2024, we had gross unrealized losses of $1.4 billion on our investment portfolio primarily due to an increase in market interest rates since the time the securities were purchased.  We did not record any material credit allowances for debt securities that were in an unrealized loss position during 2024 and 2023. While we believe that these impairments will be recovered and we currently do not have the intent to sell such securities, given the current market conditions and the significant judgments involved, there is a continuing risk that future declines in fair value may occur and material realized losses from sales or credit loss impairments may be recorded in future periods.

Duration is the time-weighted average of the present value of the bond portfolio’s cash flow. Duration is indicative of the relationship