Humana 2002 Annual Report Download - page 101

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HUMANA INC.
SCHEDULE I—PARENT COMPANY FINANCIAL INFORMATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
Parent company financial information has been derived from our consolidated financial statements and
excludes the accounts of all operating subsidiaries. This information should be read in conjunction with our
consolidated financial statements.
Certain reclassifications have been made to the prior years’ parent company financial information.
2. TRANSACTIONS WITH SUBSIDIARIES
Management Fee
Through intercompany service agreements approved, if required, by state regulatory authorities, Humana
Inc., our parent company, charges a management fee for reimbursement of certain centralized services provided
to its subsidiaries including information systems, disbursement, investment and cash administration, marketing,
legal, finance, and medical and executive management oversight.
Guarantee
Through indemnity agreements approved by state regulatory authorities, certain of our regulated
subsidiaries generally are guaranteed by our parent company in the event of insolvency for (1) member coverage
for which premium payment has been made prior to insolvency; (2) benefits for members then hospitalized until
discharged; and (3) payment to providers for services rendered prior to insolvency.
Notes Receivables from Operating Subsidiaries
We funded certain subsidiaries with surplus note agreements. These notes are generally non-interest bearing
and may not be repaid without the prior approval of the Departments of Insurance. In August 2002, Humana Inc.,
our parent company, received $12.0 million from one of our subsidiaries in satisfaction of a surplus note.
Notes Payable to Operating Subsidiaries
We borrowed funds from certain subsidiaries with notes generally collateralized by real estate. These notes,
which have various payment and maturity terms, bear interest ranging from 6.65% to 6.75% and are payable
between 2003 and 2009. We recorded interest expense of $4.2 million, $5.2 million and $5.7 million related to
these notes for the years ended December 31, 2002, 2001 and 2000, respectively.
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