Humana 2003 Annual Report Download - page 39

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held, or where an observable quoted market price does not exist, are estimated using a variety of valuation
methodologies. Such methodologies include reviewing the value ascribed to the most recent financing,
comparing the security with securities of publicly traded companies in a similar line of business, and reviewing
the underlying financial performance including estimating discounted cash flows. Unrealized holding gains and
losses, net of applicable deferred taxes, are included as a component of stockholders’ equity until realized from a
sale or impairment.
Gross unrealized losses and fair value, aggregated by investment category and length of time that individual
securities have been in a continuous unrealized loss position at December 31, 2003, included the following:
Less than 12 months 12 months or more Total
Fair
Value
Unrealized
Losses
Fair
Value
Unrealized
Losses
Fair
Value
Unrealized
Losses
(in thousands)
U.S. Government obligations ........... $251,218 $(2,125) $ — $ — $251,218 $ (2,125)
Tax exempt municipal securities ......... 90,705 (1,566) 21,979 (494) 112,684 (2,060)
Corporate and other securities ........... 121,184 (3,674) 714 (4) 121,898 (3,678)
Mortgage-backed securities ............. 47,060 (1,295) — — 47,060 (1,295)
Redeemable preferred stocks ............ — — 21,348 (734) 21,348 (734)
Debt securities ................... 510,167 (8,660) 44,041 (1,232) 554,208 (9,892)
Equity securities ..................... — — 7,162 (285) 7,162 (285)
Long-term investment securities ..... $510,167 $(8,660) $51,203 $(1,517) $561,370 $(10,177)
We regularly evaluate our investment securities for impairment. We consider factors affecting the investee,
factors affecting the industry the investee operates within, and general debt and equity market trends. We
consider the length of time an investment’s fair value has been below carrying value, the near term prospects for
recovery to carrying value and our intent and ability to hold the investment until maturity or market recovery is
realized. If and when a determination is made that a decline in fair value below the cost basis is other than
temporary, the related investment is written down to its estimated fair value through earnings. The risks inherent
in assessing the impairment of an investment include the risk that market factors may differ from our
expectations; facts and circumstances factored into our assessment may change with the passage of time; or we
may decide to subsequently sell the investment. The determination of whether a decline in the value of an
investment is other than temporary requires us to exercise significant diligence and judgment. The discovery of
new information and the passage of time can significantly change these judgments. The status of the general
economic environment and significant changes in the national securities markets influence the determination of
fair value and the assessment of investment impairment.
Unrealized losses at December 31, 2003 resulted from 96 positions. Less than 3% of the carrying value of
our consolidated investment securities have been in an unrealized loss position greater than one year. The
unrealized losses at December 31, 2003 generally can be attributed to changes in interest rates. All securities
trading at an unrealized loss remain current on all contractual payments and we believe it is probable that we will
be able to collect all amounts due according to the contractual terms of the debt securities. After taking into
account these and other factors, including our ability and intent to hold these securities until recovery or maturity,
we determined the unrealized losses on these investment securities were temporary.
We recorded impairment losses of $3.2 million in 2003, $27.2 million in 2002, and $2.4 million in 2001
after an evaluation indicated that a decline in fair value below the cost basis was other than temporary.
Goodwill and Long-lived Asset
At December 31, 2003, goodwill and other long-lived assets represented 23% of total assets and 65% of
total stockholders’ equity.
31