Humana 2005 Annual Report Download - page 97

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Humana Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
which aggregated $722.2 million. Although the minimum required levels of equity are largely based on premium
volume, product mix, and the quality of assets held, minimum requirements can vary significantly at the state
level.
Most states rely on risk-based capital requirements, or RBC, to define the required levels of equity. RBC is a
model developed by the National Association of Insurance Commissioners to monitor an entity’s solvency. This
calculation indicates recommended minimum levels of required capital and surplus and signals regulatory
measures should actual surplus fall below these recommended levels. If RBC were adopted by all states and
Puerto Rico at December 31, 2005, we would be required to fund $14.7 million in one of our Puerto Rico
subsidiaries to meet all requirements. After this funding, we would have $378.2 million of aggregate capital and
surplus above any of the levels that require corrective action under RBC.
14. COMMITMENTS, GUARANTEES AND CONTINGENCIES
Leases
We lease facilities, computer hardware, and other equipment under long-term operating leases that are
noncancelable and expire on various dates through 2023. We sublease facilities or partial facilities to third party
tenants for space not used in our operations. Rent with scheduled escalation terms are accounted for on a straight-
line basis over the lease term. Rent expense and sublease rental income, which are recorded net as an
administrative expense, for all operating leases was as follows for the years ended December 31, 2005, 2004 and
2003:
2005 2004 2003
(in thousands)
Rent expense ................................. $81,357 $ 78,222 $ 70,815
Sublease rental income .......................... (11,192) (11,291) (12,007)
Net rent expense ........................... $70,165 $ 66,931 $ 58,808
Future annual minimum payments due subsequent to December 31, 2005 under all of our noncancelable
operating leases with initial terms in excess of one year are as follows:
Minimum
Lease
Payments
Sublease
Rental
Receipts
Net Lease
Commitments
(in thousands)
For the years ending December 31:
2006 ................................. $ 84,993 $ (4,163) $ 80,830
2007 ................................. 71,969 (3,562) 68,407
2008 ................................. 49,653 (1,863) 47,790
2009 ................................. 31,882 (889) 30,993
2010 ................................. 30,443 (515) 29,928
Thereafter ............................. 28,173 (1,325) 26,848
Total ............................. $297,113 $(12,317) $284,796
Purchase Obligations
We have agreements to purchase services, primarily information technology related services, or to make
improvements to real estate, in each case that are enforceable and legally binding on us and that specify all
significant terms, including: fixed or minimum levels of service to be purchased; fixed, minimum or variable
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