# Humana Inc: Form 10-Q for the period ended Jun 30, 2010

- Company: [Humana Inc](/companies/hum.md) (CIK 49071)
- Form: 10-Q
- Filed: 2010-08-02
- Accepted by EDGAR: Aug 2, 2010, 16:31 ET
- Period: 2010-06-30
- Accession: 0001193125-10-173680
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/49071/000119312510173680/d10q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/49071/000119312510173680/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2010-06-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2010-04-01 to 2010-06-30 | $8.65bn | us-gaap:Revenues |
| Revenue | 6 months, 2010-01-01 to 2010-06-30 | $17.09bn | us-gaap:Revenues |
| Selling, general and administrative | 3 months, 2010-04-01 to 2010-06-30 | $1.16bn | us-gaap:SellingGeneralAndAdministrativeExpense |
| Selling, general and administrative | 6 months, 2010-01-01 to 2010-06-30 | $2.29bn | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2010-04-01 to 2010-06-30 | $562.1m | us-gaap:OperatingIncomeLoss |
| Operating income | 6 months, 2010-01-01 to 2010-06-30 | $1.01bn | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2010-04-01 to 2010-06-30 | $26.2m | us-gaap:InterestExpense |
| Interest expense | 6 months, 2010-01-01 to 2010-06-30 | $52.5m | us-gaap:InterestExpense |
| Income tax | 3 months, 2010-04-01 to 2010-06-30 | $195.8m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 6 months, 2010-01-01 to 2010-06-30 | $353.9m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2010-04-01 to 2010-06-30 | $340.1m | us-gaap:NetIncomeLoss |
| Net income | 6 months, 2010-01-01 to 2010-06-30 | $598.8m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2010-04-01 to 2010-06-30 | $2.00 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 6 months, 2010-01-01 to 2010-06-30 | $3.52 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2010-04-01 to 2010-06-30 | $2.02 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 6 months, 2010-01-01 to 2010-06-30 | $3.56 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2010-04-01 to 2010-06-30 | 170,229,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 6 months, 2010-01-01 to 2010-06-30 | 170,154,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 6 months, 2010-01-01 to 2010-06-30 | $1.08bn | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 6 months, 2010-01-01 to 2010-06-30 | $91.4m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Share repurchases | 6 months, 2010-01-01 to 2010-06-30 | $57.9m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2010-06-30 | $2.00bn | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2010-06-30 | $10.79bn | us-gaap:AssetsCurrent |
| Total assets | at 2010-06-30 | $15.69bn | us-gaap:Assets |
| Current liabilities | at 2010-06-30 | $6.00bn | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2010-06-30 | $9.21bn | us-gaap:Liabilities |
| Long-term debt | at 2010-06-30 | $1.67bn | us-gaap:LongTermDebtNoncurrent |
| Shareholders' equity | at 2010-06-30 | $6.48bn | us-gaap:StockholdersEquity |
| Shares outstanding | at 2010-06-30 | 169,232,426 shares | dei:EntityCommonStockSharesOutstanding |

## Management's discussion and analysis

As filed, 1,383 characters.

(a) None.

(b) N/A

(c) The following table provides information about purchases by us during the three months ended June 30, 2010 of equity securities that are registered by us pursuant to Section 12 of the Exchange Act:

| Period | Total Number of Shares Purchased(1) | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(1)(2) | Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs(1) |
| --- | ---: | ---: | ---: | ---: |
| April 2010 | — | $— | — | $— |
| May 2010 | — | — | — | — |
| June 2010 | 1,025,000 | 48.7589 | 1,025,000 | 200,052,918 |
| Total | 1,025,000 | $48.7589 | 1,025,000 | $200,052,918 |

(1) As announced on December 11, 2009, in December 2009, the Board of Directors authorized the repurchase of up to $250 million of our common stock shares exclusive of shares repurchased in connection with employee stock plans. Under this share repurchase authorization, shares may be purchased from time to time at prevailing prices in the open market, by block purchases, or in privately-negotiated transactions, subject to certain restrictions on volume, pricing, and timing. As of August 1, 2010 the remaining authorized amount totaled $200.0 million and the authorization expires on December 31, 2011.

(2) Excludes 168,357 shares repurchased in connection with employee stock plans.

## Market risk

As filed, 3,543 characters.

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. Until October 7, 2008, we exchanged the fixed interest rate under all of our senior notes for a variable interest rate based on LIBOR using interest rate swap agreements. As a result, changes in interest rates generally resulted in an increase or decrease to investment income partially offset by a corresponding decrease or increase to interest expense, partially hedging our exposure to interest rate risk. However, due to extreme volatility in the securities and credit markets, LIBOR increased while the interest rate we would earn on invested assets like cash and cash equivalents decreased. As a result, we terminated all of our interest rate swap agreements, fixing the average interest rate under our senior notes at 6.08%. In exchange for terminating our rights under the interest rate swap agreements, we received $93.0 million in cash from the counterparties representing the fair value of the swap assets. We may re-enter into interest rate swap agreements in the future depending on market conditions and other factors. Amounts borrowed under the revolving credit portion of our $1.0 billion unsecured revolving credit agreement bear interest at either a fixed rate or floating rate based on LIBOR plus a spread. There were no borrowings outstanding under our credit agreement at June 30, 2010.

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 an average S&P credit rating of AA at June 30, 2010. Our net unrealized position improved $183.3 million from a net unrealized gain position of $71.4 million at December 31, 2009 to a net unrealized gain position of $254.7 million at June 30, 2010. As of June 30, 2010, we had gross unrealized losses of $36.0 million on our investment portfolio primarily due to an increase in market interest rates and tighter liquidity conditions in the current markets than when the securities were purchased, and as such, there were no material other-than-temporary impairments during the six months ended June 30, 2010. While we believe that these impairments are temporary 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 other-than-temporary 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 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 3.4 years as of June 30, 2010. Based on the duration including cash equivalents, a 1% increase in interest rates would generally decrease the fair value of our securities by approximately $344 million.

## Controls and procedures

As filed, 1,255 characters.

Under the supervision and with the participation of our Chief Executive Officer, or CEO, our Chief Financial Officer, or CFO, and our Principal Accounting Officer, we carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures for the quarter ended June 30, 2010.

Based on our evaluation, our CEO, CFO, and Principal Accounting Officer concluded that our disclosure controls and procedures are effective to provide reasonable assurance that information the Company is required to disclose in its reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, including, without limitation, ensuring that such information is accumulated and communicated to the Company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

There have been no changes in the Company’s internal control over financial reporting during the quarter ended June 30, 2010 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

## Risk factors

As filed, 5,230 characters.

Except as set forth below, there have been no changes to the risk factors included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2009, filed with the SEC on February 19, 2010, as modified by the changes to those risk factors included in other reports we filed with the SEC subsequent to February 19, 2010:

- *Recently enacted health insurance reform, including The Patient Protection and Affordable Care Act and The Health Care and Education Reconciliation Act of 2010, could have a material adverse effect on our results of operations, including restricting revenue, enrollment and premium growth in certain products and market segments, increasing our medical and administrative costs by, among other things, requiring a minimum benefit ratio, lowering our Medicare payment rates and increasing our expenses associated with a non-deductible federal premium tax; financial position, including our ability to maintain the value of our goodwill; and cash flows. In addition, if the new non-deductible federal premium tax is imposed as enacted, and if we are unable to adjust our business model to address this new tax, there can be no assurance that the non-deductible federal premium tax would not have a material adverse effect on our results of operations, financial position, and cash flows.*

In March 2010, the President signed into law The Patient Protection and Affordable Care Act and The Health Care and Education Reconciliation Act of 2010 (which we collectively refer to as the Health Insurance Reform Legislation) which enact significant reforms to various aspects of the U.S. health insurance industry. Due to its complexity and the lack of comprehensive interpretive guidance or implementing regulations by The Department of Health and Human Services (HHS), the Department of Labor, the Treasury Department, and the National Association of Insurance Commissioners, the full impact of the Health Insurance Reform Legislation is not yet fully known.

The provisions of the Health Insurance Reform Legislation include, among others, imposing significant new non-deductible federal premium taxes and other assessments on health insurers, limiting Medicare Advantage payment rates, stipulating a prescribed minimum ratio for the amount of premium revenues to be expended on medical costs, additional mandated benefits and guarantee issuance associated with Commercial medical insurance, requirements that limit the ability of health plans to vary premiums based on assessments of underlying risk, heightened scrutiny by state and federal regulators of our business practices, including our Medicare bid and pricing practices, and additional regulations governing premium rate increase requests. Implementation dates of the provisions of the Health Insurance Reform Legislation generally vary from as early as six months from the date of enactment, or September 23, 2010, to as late as 2018.

There are numerous steps required to implement the Health Insurance Reform Legislation including, for example, additional regulations to be promulgated by HHS to address important aspects of measuring and applying the minimum required benefit ratios. Further, various health insurance reform proposals are also emerging at the state level. Because of the unsettled nature of these reforms and numerous steps required to implement them, we cannot predict what additional health insurance reforms will be implemented at the federal or state level, or the effect that any future legislation or regulation will have on our business. However, it is reasonably possible that the Health Insurance Reform Legislation and related regulations, as well as future legislative changes, in the aggregate could have a material adverse affect on our results of operations, including restricting revenue, enrollment and premium growth in certain products and market segments, increasing our medical and administrative costs, lowering our Medicare payment rates and increasing our expenses associated with the non-deductible federal premium tax; financial position, including our ability to maintain the value of our goodwill; and cash flows. If we fail to effectively implement our operational and strategic initiatives with respect to the implementation of the Health Insurance Reform Legislation, our business may be materially adversely affected. In addition, if the new non-deductible federal premium tax is imposed as enacted, and if we are unable to adjust our business model to address this new tax, there can be no assurance that the non-deductible federal premium tax would not have a material adverse effect on our results of operations, financial position, and cash flows. For more information on the Health Insurance Reform Legislation, please refer to “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part I of this Form 10-Q.

This list of important factors is not intended to be exhaustive, and should be read in conjunction with the more detailed description of these risks that may be found in our reports filed with the SEC from time to time, including our annual reports on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K.

Filed Aug 2, 2010.
Source: SEC EDGAR, the filing index for accession 0001193125-10-173680. Last ingested by Listed: Nov 13, 2026, 14:11 ET. No prices; not investment advice.