Humana 2005 Annual Report Download - page 67

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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, 2005, included the following:
Less than 12 months 12 months or more Total
2005 Fair Value
Unrealized
Losses Fair Value
Unrealized
Losses Fair Value
Unrealized
Losses
(in thousands)
U.S. Government obligations ....... $ 611,683 $ (3,790) $272,176 $ (8,481) $ 883,859 $(12,271)
Tax exempt municipal securities ..... 470,477 (4,846) 258,825 (7,914) 729,302 (12,760)
Corporate and other securities ....... 248,016 (4,932) 131,166 (4,867) 379,182 (9,799)
Mortgage-backed securities ......... 51,921 (742) 36,987 (2,225) 88,908 (2,967)
Redeemable preferred stocks ........ — — 6,862 (338) 6,862 (338)
Debt securities ............... 1,382,097 (14,310) 706,016 (23,825) 2,088,113 (38,135)
Non-redeemable preferred stocks .... 4,409 (37) 5,477 (206) 9,886 (243)
Total investment securities ..... $1,386,506 $(14,347) $711,493 $(24,031) $2,097,999 $(38,378)
We regularly evaluate our investment securities for impairment. We consider factors affecting the issuer,
factors affecting the industry the issuer 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 severity of the decline, 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 a charge to
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, 2005 resulted from 447 positions out of a total of 731 positions held.
Approximately 26% 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, 2005 primarily were caused by
increases in interest rates. All issuers of 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 the severity
of the decline and our ability and intent to hold these securities until recovery or maturity, we determined the
unrealized losses on these investment securities were temporary and, as such, no impairment was required.
There were no impairment losses recorded in 2005 or 2004. We recorded $3.2 million in 2003 after an
evaluation indicated that a decline in fair value below the cost basis was other than temporary.
Goodwill and Long-lived Assets
At December 31, 2005, goodwill and other long-lived assets represented 27% of total assets and 75% of
total stockholders’ equity.
SFAS No. 142, Goodwill and Other Intangible Assets, requires that we not amortize goodwill to earnings,
but instead that we test goodwill at least annually for impairment at a level of reporting referred to as the
reporting unit and more frequently if adverse events or changes in circumstances indicate that the asset may be
impaired. A reporting unit is one level below our Commercial and Government segments. The Commercial
segment’s two reporting units consist of fully and self-insured medical and specialty. The Government segment’s
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