Humana Inc. (NYSE:HUM)

The analysis of the financial ratios over the series of quarterly periods reveals several notable trends in the company's leverage and coverage ratios.

Debt to Equity Ratio

The debt to equity ratio exhibits fluctuations within a moderate range over the periods. Initially, the ratio hovers around 0.5 to 0.58 through 2019, briefly rises to 0.66 in the first quarter of 2020, and then mostly stays between 0.5 and 0.8. There is a peak near the end of 2021 at 0.8 followed by a decline in 2022 but a gradual increase resumes in 2024, reaching approximately 0.84 at the start of 2024 before a slight decrease. Overall, this ratio indicates periodic variability but maintains a balanced leverage profile.

Debt to Capital Ratio

This ratio mirrors the debt to equity pattern with values clustering broadly between 0.33 and 0.46. There is a noticeable elevation in late 2021 and throughout 2022 reaching peaks near 0.46, before slightly declining or stabilizing near 0.43 to 0.44 in early to mid-2024. This suggests relatively stable use of capital structure with modest increases in debt financing during the observed timeline.

Debt to Assets Ratio

The debt to assets ratio remains mostly stable between 0.2 to 0.23 initially, dropping to under 0.2 through mid-2021, before showing a sharp increase in late 2021 to around 0.29. Post-2021, the ratio fluctuates between 0.21 and 0.27, with a mild rise towards 0.27 observed by mid-2024. This indicates a slight uptick in asset financing through debt in recent years after a period of lower debt relative to assets.

Financial Leverage Ratio

This ratio shows an increasing trend overall. Starting near 2.4 to 2.6 in 2019, it climbs to cross the 3.0 threshold multiple times between 2021 and 2024. Notably, there is a peak of 3.35 in mid-2023 followed by slight declines but maintaining values above 2.8 through 2024. This steady increase suggests growing reliance on financial leverage, indicating the company is employing more debt relative to equity and assets over time.

Interest Coverage Ratio

The interest coverage ratio data becomes available starting from late 2019, showing strong coverage initially with values over 15, reaching a peak of 22.25 in the last quarter of 2019. Starting from 2020, the ratio exhibits a sharp declining trend, dropping consistently through 2021, 2022, and onwards to low single digits by the end of 2024 (around 3.98). This significant decrease signals increasing difficulty in meeting interest expenses, reflecting either higher interest costs, lower earnings, or a combination thereof.

In summary, the financial leverage of the company has risen over the observed timeframe, as shown by increasing debt to equity and financial leverage ratios. Simultaneously, the company’s ability to cover interest expenses has weakened markedly, which may be a point of concern regarding the sustainability of the current debt levels. Although the debt ratios suggest a moderate and stable capital structure, the declining interest coverage necessitates closer monitoring of earnings and expense management to ensure financial health.

The financial data over the analyzed periods reveals several notable trends in terms of the company's debt, equity, and leverage ratios. These metrics exhibit fluctuations that provide insights into the company's financial strategy and risk profile.

Total Debt

The total debt demonstrates variability across the quarters, with values ranging from approximately $5.9 billion to over $13.5 billion. Starting from around $6.2 billion in early 2019, debt levels increased significantly in 2020, peaking near $12.8 billion by the end of that year. During 2021, the debt showed an overall rise, peaking above $13.2 billion, followed by a decline through much of 2022. However, the debt level rose again in 2023 and 2024, reaching around $13.4 billion by the third quarter of 2024. This pattern suggests active debt management, possibly linked to financing activities or strategic investments.

Stockholders’ Equity

Stockholders’ equity generally displays an upward trend with some fluctuations. Starting close to $10.8 billion in the first quarter of 2019, equity increased steadily, reaching a peak of approximately $16.3 billion in late 2021. During 2022, equity levels showed some volatility, dipping slightly before recovering. In 2023 and into 2024, equity maintained a relatively stable to slightly increasing level, reaching about $17.6 billion by the third quarter of 2024. This growth trend indicates continued accumulation of retained earnings or capital inflows, reflecting potentially strong operational performance or capital raising activities.

Debt to Equity Ratio

The debt to equity ratio exhibits significant variation, reflecting the changing balance between leverage and equity financing. The ratio started at a moderate level around 0.58 in early 2019, declining to below 0.5 in mid to late 2019, indicating relatively lower leverage. A sharp increase occurred in 2020, with the ratio peaking near 0.87 by early 2022, suggesting increased reliance on debt relative to equity during this period. Subsequently, the ratio decreased somewhat to levels around 0.7 in 2023, before rising again toward 0.76 in mid-2024. These fluctuations imply adjustments in capital structure, potentially influenced by market conditions, refinancing, or strategic financial decisions.

Overall, the data reveals a pattern of increasing leverage particularly in 2020 and 2021, accompanied by growth in equity. While the company increased its debt significantly during some periods, equity growth helped partially offset the leverage, resulting in moderate debt to equity ratios. The recent trends indicate some stabilization but with periodic increases in leverage that should be monitored in the context of broader financial strategy and economic conditions.

Total Debt

The total debt demonstrates fluctuations over the analyzed period. Initially, from March 2019 to December 2019, total debt hovered between approximately $5.9 billion and $6.3 billion. A notable increase occurred during the first three quarters of 2020, peaking near $8.1 billion in March 2020. Following this, debt levels generally declined slightly and stabilized around $7.0 to $7.9 billion for the remainder of 2020. In 2021, debt showed a significant spike during the third and fourth quarters, reaching values as high as $12.8 billion before slightly tapering off towards the end of 2021. From 2022 onwards, the debt figures exhibited some volatility but largely remained within a range of $10.8 billion to $13.3 billion. The latest quarters in 2024 indicate a modest increase relative to earlier 2024, with total debt rising to approximately $13.3 billion.

Total Capital

Total capital figures reveal a general upward trend across the entire timeline. Starting at around $17.1 billion in March 2019, capital steadily increased, with a few periods of accelerated growth, such as during 2020, where capital rose to above $23.7 billion by September 2020, albeit with a dip in the fourth quarter of 2020. The year 2021 saw substantial capital increases, especially in the third and fourth quarters when it surged close to $28.9 billion. Although fluctuations appear in 2022 and early 2023 with some decline and recovery in capital levels, the overall trajectory remains positive. The data for late 2023 and early 2024 confirms this trend, with capital reaching nearly $31.0 billion by September 2024.

Debt to Capital Ratio

The debt to capital ratio exhibits variability, reflecting changes in both debt and capital amounts. Initially, the ratio remained relatively stable around 0.33 to 0.37 during 2019, indicating moderate leverage. A slight increase is observed in early 2020, with ratios touching approximately 0.40, driven by rising debt levels. The ratio then declined somewhat in late 2020, reflecting the combination of reduced debt and increased capital. However, 2021 brought a marked increase, with the ratio peaking at approximately 0.44 to 0.46, signaling heightened leverage due to significant debt accumulation in relation to capital. This higher leverage level persisted into 2022, with ratios consistently near 0.46, before decreasing somewhat to around 0.40 to 0.43 in 2023, suggesting partial deleveraging or capital growth outpacing debt. Entering 2024, the ratio increased again to approximately 0.43 to 0.46, indicating a renewed emphasis on debt within the capital structure.

The financial data reveals notable fluctuations in the key balance sheet metrics over the reported quarters. An examination of total debt, total assets, and the debt-to-assets ratio provides insight into the changing financial leverage and asset base dynamics.

Total Debt

Total debt exhibits significant variability across the periods. Starting around $6.2 billion in early 2019, the balance shows an upward trend reaching peaks near $12.8 billion at the end of 2021 and $13.5 billion in the third quarter of 2024. Noteworthy is the sharp increase between mid-2021 and late 2021, where the debt nearly doubled within a year. Following peaks, some quarters show a moderate decrease but debt remains elevated compared to the early periods.

Total Assets

Total assets steadily increase from approximately $28.3 billion in the first quarter of 2019 to levels consistently above $45 billion starting in early 2021. A pronounced growth phase occurs between the end of 2020 and the end of 2023, where assets grow from about $35 billion to over $55 billion. The data also shows some fluctuation in late 2022 and early 2023, with assets dipping to around $43 billion but recovering to above $50 billion by mid-2024. This reflects an expanding asset base over the entire period, albeit with some volatility.

Debt to Assets Ratio

The debt-to-assets ratio remains relatively stable within a range of approximately 0.19 to 0.29 throughout the reported quarters. Early periods show ratios near 0.20 to 0.22, dipping slightly during mid-2021 to 0.19 before jumping to around 0.28-0.29 during late 2021 to early 2022, coinciding with the spike in total debt and asset variations. Following this, the ratio oscillates between approximately 0.21 and 0.27, indicating fluctuating leverage but no clear long-term trend toward either significant deleveraging or increased financial risk.

In summary, the data demonstrates an overall growth in asset size and total debt, with debt rising notably during certain periods, resulting in temporary spikes in leverage. The debt to assets ratio shows moderate volatility but remains within a consistent range, suggesting stable capital structure management despite the absolute increases in liabilities and assets. The balance sheet indicates dynamic financial positioning, with the company managing growing asset levels alongside fluctuating but contained leverage ratios.

Total assets

Over the observed period, total assets demonstrate a general upward trend with fluctuations. Starting from approximately 28.3 billion US dollars at the end of Q1 2019, assets increased steadily through 2019 and early 2020, peaking near 38.5 billion US dollars by mid-2020. Subsequently, a decline occurred by the end of 2020, followed by a recovery and further growth into 2021 reaching above 45 billion US dollars in Q3 2021. The period from late 2021 to late 2022 shows continued expansion, peaking near 50.7 billion in Q3 2022. However, Q4 2022 saw a notable drop to around 43 billion, followed by a recovery in 2023 with assets again approaching the 56 billion level by Q2 2023. The last data points of 2023 and into mid-2024 indicate a modest contraction or stabilization just above 50 billion.

Stockholders’ equity

Stockholders’ equity displayed steady growth with some periods of moderation. Beginning at roughly 10.8 billion US dollars in early 2019, equity rose to nearly 14.4 billion by mid-2020, showing consistent accumulation of capital or retained earnings. A slight decline appeared by the end of 2020, with equity hovering around 13.7 billion, followed by renewed growth through 2021 surpassing 16 billion US dollars at Q3 2021. Equity values maintained relative stability around 15 to 16 billion from late 2021 through most of 2022, with a peak of approximately 16.3 billion in Q3 2022. A decline occurred in Q4 2022, mirroring the total assets dip, but equity recovered again by early 2023, rising steadily to a recorded high of 17.5 billion in Q3 2024. This pattern reflects overall strengthening in the company's net asset base over time with periodic consolidations.

Financial leverage

The financial leverage ratio exhibited variability indicative of shifts in the company’s capital structure. Starting at 2.61 in Q1 2019, leverage slightly decreased through 2019 into early 2020, reaching a lower ratio of approximately 2.42. In 2020, the ratio increased again, fluctuating between 2.44 and 2.8, before stabilizing around 2.5 to 2.8 in late 2020 and 2021. Notable increases occurred from Q4 2021 through mid-2022, with leverage reaching above 3.0, peaking at 3.12 in late 2022. The highest leverage levels are seen in early to mid-2023, with ratios around 3.3 to 3.35, suggesting increased reliance on debt or liabilities relative to equity during this period. Towards the latter months of 2023 and mid-2024, the ratio decreased gradually to near 2.85, implying a modest reduction in leverage or an increase in equity base relative to liabilities.

Earnings before Interest and Tax (EBIT)

Over the observed series, EBIT exhibits significant fluctuations with pronounced quarterly variability. Initial quarters in 2019 demonstrate moderate EBIT values ranging roughly between 649 and 1301 million USD. Mid to late 2020 shows a notable peak with values reaching as high as 2687 million USD, followed by a sharp decline and even negative EBIT in December 2020 (-380 million USD). Subsequent periods register recovery and stabilization, with EBIT generally trending between 800 and 1700 million USD in 2021 and 2022. However, the end of 2022 and into 2023 again reflects volatility with EBIT dipping to low positive or near-zero values before partially recovering in later quarters. The most recent quarters reveal a downward trend in EBIT, culminating in a negative EBIT of -469 million USD by the end of 2023. Thus, the data indicates a volatile EBIT pattern with episodic gains and losses, suggesting external or operational factors impacting profitability episodically.

Interest Expense

Interest expense shows a consistent upward trend over the entire period, increasing steadily from approximately 60 million USD in early 2019 to nearly 170 million USD by late 2024. This represents nearly a threefold increase in interest costs over the span of these years. The steady growth in interest expenses could be indicative of rising debt levels, increased borrowing costs, or changes in capital structure that elevate financial obligations.

Interest Coverage Ratio

The interest coverage ratio starts at relatively high levels (above 15 in early 2019), reflecting strong earnings relative to interest obligations. This ratio peaks around 22.25 in late 2019 to early 2020, corresponding with the spike in EBIT at that time. However, from 2021 onwards, the interest coverage ratio consistently declines, indicating reduced earnings capacity relative to interest expenses. This decline continues progressively, with the ratio falling below 4 by the end of 2024. The downward trajectory suggests diminishing ability to cover interest expenses through operational earnings, likely as a consequence of decreasing EBIT and rising interest costs. The trend poses potential concerns regarding the company's financial flexibility and credit risk.