Humana 2003 Annual Report Download - page 98

Humana Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
connection with the acquisition was $32.9 million. Unaudited pro forma results of operations information have
not been presented because the effect of the acquisition was not significant to our results of operations or
financial position.
15. SEGMENT INFORMATION
We manage our business with two segments: Commercial and Government. The Commercial segment
consists of members enrolled in products marketed to employer groups and individuals, and includes three lines
of business: fully insured medical, administrative services only, or ASO, and specialty. The Government segment
consists of members enrolled in government-sponsored programs, and includes three lines of business:
Medicare+Choice, Medicaid, and TRICARE. We identified our segments in accordance with the aggregation
provisions of Statement of Financial Accounting Standards No. 131, Disclosures About Segments of an
Enterprise and Related Information which is consistent with information used by our Chief Executive Officer in
managing our business. The segment information aggregates products with similar economic characteristics.
These characteristics include the nature of customer groups and pricing, benefits and underwriting requirements.
The accounting policies of each segment are the same and are described in Note 2. The results of each
segment are measured by income before income taxes. We allocate all selling, general and administrative
expenses, investment and other income, interest expense, and goodwill, but no other assets or liabilities, to our
segments. Members served by our two segments generally utilize the same medical provider networks, enabling
us to obtain more favorable contract terms with providers. Our segments also share overhead costs and assets. As
a result, the profitability of each segment is interdependent.
Our segment results were as follows for the years ended December 31, 2003, 2002, and 2001:
Commercial Segment
2003 2002 2001
(in thousands)
Revenues:
Premiums:
Fully insured:
HMO ......................................... $2,871,697 $2,610,926 $2,165,031
PPO .......................................... 3,369,109 2,888,107 2,776,857
Total fully insured ........................... 6,240,806 5,499,033 4,941,888
Specialty .......................................... 320,206 337,295 304,714
Total premiums ............................. 6,561,012 5,836,328 5,246,602
Administrative services fees ............................... 122,846 103,203 84,204
Investment and other income .............................. 106,513 67,947 75,846
Total revenues .............................. 6,790,371 6,007,478 5,406,652
Operating expenses:
Medical ............................................... 5,440,414 4,871,792 4,358,488
Selling, general and administrative .......................... 1,131,843 1,066,216 936,539
Depreciation and amortization ............................. 82,948 71,243 97,964
Total operating expenses ...................... 6,655,205 6,009,251 5,392,991
Income (loss) from operations ................................. 135,166 (1,773) 13,661
Interest expense ............................................. 14,156 13,401 15,674
Income (loss) before income taxes .............................. $ 121,010 $ (15,174) $ (2,013)
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