Humana 2004 Annual Report Download - page 41

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The Government segment SG&A expense ratio decreased 120 basis points from 13.4% for 2003 to 12.2%
for 2004. The Government segment SG&A expense ratio for 2003 included an approximate 20 basis point impact
from the Jacksonville, Florida building writedown.
Depreciation and amortization for 2004 totaled $117.8 million compared to $126.8 million for 2003, a
decrease of $9.0 million, or 7.1%. Accelerated depreciation from reducing the estimated useful life of software
increased depreciation expense $9.3 million in 2004 and $13.5 million in 2003. We review the carrying value and
useful life of software when changes in the use of the asset in our operations indicate the carrying value may not
be recoverable or the estimated useful life changes. Amortization of other intangible assets decreased when the
other intangible assets allocated to an acquired TRICARE contract became fully amortized in the second quarter
of 2003. This was partially offset by the increased amortization expense associated with other intangible assets
recorded in connection with the April 1, 2004 Ochsner acquisition.
Interest Expense
Interest expense was $23.2 million for 2004, compared to $17.4 million for 2003, an increase of $5.8
million. This increase primarily resulted from higher average outstanding debt, due to the issuance of $300
million senior notes in August 2003.
Income Taxes
Our effective tax rate in 2004 of 32.7% decreased 0.9% compared to the 33.6% effective tax rate in 2003.
Our effective tax rate is lower than the federal statutory rate due primarily to tax-exempt investment income. See
Note 8 to the consolidated financial statements for a complete reconciliation of the federal statutory rate to the
effective tax rate.
We expect an effective tax rate in 2005 of approximately 30%. This is lower than the statutory rate
primarily due to the resolution of a contingent gain during the first quarter of 2005 in connection with the
expiration of the statute of limitation on a tax position related to the 2000 tax year and tax exempt investment
income.
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