# Humana Inc: Form 10-Q for the period ended Mar 31, 2012

- Company: [Humana Inc](/companies/hum.md) (CIK 49071)
- Form: 10-Q
- Filed: 2012-04-30
- Accepted by EDGAR: Apr 30, 2012, 16:39 ET
- Period: 2012-03-31
- Accession: 0001193125-12-196253
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/49071/000119312512196253/d310613d10q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/49071/000119312512196253/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2012-03-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2012-01-01 to 2012-03-31 | $10.22bn | us-gaap:Revenues |
| Selling, general and administrative | 3 months, 2012-01-01 to 2012-03-31 | $1.38bn | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2012-01-01 to 2012-03-31 | $416.0m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2012-01-01 to 2012-03-31 | $26.0m | us-gaap:InterestExpense |
| Income tax | 3 months, 2012-01-01 to 2012-03-31 | $142.0m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2012-01-01 to 2012-03-31 | $248.0m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2012-01-01 to 2012-03-31 | $1.49 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2012-01-01 to 2012-03-31 | $1.51 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2012-01-01 to 2012-03-31 | 166,088,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2012-01-01 to 2012-03-31 | $2.35bn | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months, 2012-01-01 to 2012-03-31 | $86.0m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Dividends paid | 3 months, 2012-01-01 to 2012-03-31 | $41.0m | us-gaap:PaymentsOfDividends |
| Share repurchases | 3 months, 2012-01-01 to 2012-03-31 | $151.0m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2012-03-31 | $3.66bn | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2012-03-31 | $14.06bn | us-gaap:AssetsCurrent |
| Total assets | at 2012-03-31 | $20.70bn | us-gaap:Assets |
| Current liabilities | at 2012-03-31 | $8.82bn | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2012-03-31 | $12.47bn | us-gaap:Liabilities |
| Long-term debt | at 2012-03-31 | $1.62bn | us-gaap:LongTermDebtNoncurrent |
| Shareholders' equity | at 2012-03-31 | $8.23bn | us-gaap:StockholdersEquity |
| Shares outstanding | at 2012-03-31 | 163,179,240 shares | dei:EntityCommonStockSharesOutstanding |

## Management's discussion and analysis

As filed, 1,841 characters.

(a) None.

(b) N/A

(c) The following table provides information about purchases by us during the three months ended March 31, 2012 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) |
| --- | ---: | ---: | ---: | ---: |
| January 2012 | 0 | $0 | 0 | $561,274,880 |
| February 2012 | 0 | 0 | 0 | 561,274,880 |
| March 2012 | 1,150,000 | 86.95 | 1,150,000 | 461,318,520 |
| Total | 1,150,000 | $86.95 | 1,150,000 | $461,318,520 |

(1) As announced on April 26, 2011, in April 2011, the Board of Directors replaced its previously approved share repurchase authorization of up to $250 million with a new authorization for repurchases of up to $1 billion of our common shares exclusive of shares repurchased in connection with employee stock plans, expiring on June 30, 2013. 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 regulatory restrictions on volume, pricing, and timing. As of April 30, 2012, the remaining authorized amount under this authorization totaled $461 million.

As announced on April 30, 2012, in April 2012, the Board of Directors replaced the 2011 share repurchase authorization with a new authorization for repurchases of up to $1 billion of our common shares exclusive of shares repurchased in connection with employee stock plans. This new authorization will expire on June 30, 2014.

(2) Excludes 0.6 million shares repurchased in connection with employee stock plans.

## Market risk

As filed, 2,084 characters.

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

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 March 31, 2012. Our net unrealized position improved $17 million from a net unrealized gain position of $525 million at December 31, 2011 to a net unrealized gain position of $542 million at March 31, 2012. At March 31, 2012, we had gross unrealized losses of $13 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 2012. 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 3.3 years as of March 31, 2012 and 3.9 years as of December 31, 2011. Based on the duration including cash equivalents, a 1% increase in interest rates would generally decrease the fair value of our securities by approximately $434 million.

## Controls and procedures

As filed, 1,276 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 March 31, 2012.

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 Securities Exchange Act of 1934 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 March 31, 2012 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

## Risk factors

As filed, 4,440 characters.

Except as set forth below, there have been no changes to the risk factors included in our 2011 Form 10-K, as modified by the changes to those risk factors included in other reports we filed with the SEC subsequent to February 24, 2012:

- The following replaces, in its entirety, the fifth bullet under the risk factor “As a government contractor, we are exposed to risks that may materially adversely affect our business or our willingness or ability to participate in government health care programs” appearing in our 2011 Form 10-K:

CMS uses a risk-adjustment model which apportions premiums paid to Medicare Advantage (MA) plans according to health severity. The risk-adjustment model pays more for enrollees with predictably higher costs. Under this model, rates paid to MA plans are based on actuarially determined bids, which include a process that bases our prospective payments on a comparison of our beneficiaries’ risk scores, derived from medical diagnoses, to those enrolled in the government’s original Medicare program. Under the risk-adjustment methodology, all MA plans must collect and submit the necessary diagnosis code information from hospital inpatient, hospital outpatient, and physician providers to CMS within prescribed deadlines. The CMS risk-adjustment model uses this diagnosis data to calculate the risk-adjusted premium payment to MA plans. We generally rely on providers to code their claim submissions with appropriate diagnoses, which we send to CMS as the basis for our payment received from CMS under the actuarial risk-adjustment model. We also rely on providers to appropriately document all medical data, including the diagnosis data submitted with claims.

CMS is continuing to perform audits of various companies’ selected MA contracts related to this risk adjustment diagnosis data. These audits are referred to herein as Risk-Adjustment Data Validation Audits, or RADV audits. RADV audits review medical record documentation in an attempt to validate provider coding practices and the presence of risk adjustment conditions which influence the calculation of premium payments to MA plans.

On February 24, 2012, CMS released a “Notice of Final Payment Error Calculation Methodology for Part C Medicare Advantage Risk Adjustment Data Validation (RADV) Contract-Level Audits”. The final payment error calculation methodology provides that, in calculating the economic impact of audit results for an MA contract, if any, the results of the audit sample will be extrapolated to the entire MA contract based upon a comparison to “benchmark” audit data in the government fee-for-service program. This comparison to the government program benchmark audit is necessary to determine the economic impact, if any, of audit results because the government program experience provides the basis for MA plans’ risk adjustment to payment rates.

Additionally, the computation of a 99 percent confidence interval will be applied to the payment error estimate for the entire MA contract, which mitigates the potential for sampling error adversely impacting the extrapolated result for the entire contract.

The final methodology, including the first application of extrapolated audit results to determine audit settlements, will be applied to the next round of RADV contract level audits to be conducted on 2011 premium payments. MA contracts will be selected for audit after the close of the final reconciliation for the payment year being audited. The final reconciliation occurs in August of the calendar year following the payment year.

Estimated audit settlements, if any, are recorded as a reduction of premium revenue in our consolidated statements of comprehensive income, based upon available information. However, we are awaiting additional guidance from CMS regarding the benchmark audit data in the government fee-for-service program and the identification of our specific MA contracts that will be selected for audit. Accordingly, we cannot determine whether such audits will have a material adverse effect on our results of operations, financial position, or cash flows.

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 report on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K.

Filed Apr 30, 2012.
Source: SEC EDGAR, the filing index for accession 0001193125-12-196253. Last ingested by Listed: Nov 10, 2026, 18:12 ET. No prices; not investment advice.