Humana 2006 Annual Report Download - page 15

PART I
ITEM 1. BUSINESS
General
Headquartered in Louisville, Kentucky, Humana Inc., referred to throughout this document as “we,” “us,”
“our,” the “Company” or “Humana,” is one of the nation’s largest publicly traded health benefits companies,
based on our 2006 revenues of $21.4 billion. We offer coordinated health insurance coverage and related services
through a variety of traditional and consumer-choice plans for government-sponsored programs, employer
groups, and individuals. As of December 31, 2006, we had approximately 11.3 million members in our medical
benefit programs, as well as approximately 1.9 million members in our specialty products programs. During
2006, 67% of our premiums and administrative services fees were derived from contracts with the federal
government, including 17% related to our contracts in Florida with the Centers for Medicare and Medicaid
Services, or CMS, and 12% related to our TRICARE contracts. Under our CMS contracts in Florida, we provide
health insurance coverage to approximately 518,900 members as of December 31, 2006.
We were organized as a Delaware corporation in 1964. Our principal executive offices are located at 500
West Main Street, Louisville, Kentucky 40202, the telephone number at that address is [phone], and our
website address is www.humana.com.
We adopted SFAS No. 123 (revised 2004), Share-Based Payment, or SFAS 123R, on January 1, 2006. We
have adjusted prior period amounts to reflect the effect of expensing stock awards under the modified
retrospective application method of SFAS 123R as discussed in Note 11 to the consolidated financial statements
included in Item 8.—Financial Statements and Supplementary Data.
This Annual Report on Form 10-K contains both historical and forward-looking information. See
Item 1A.—Risk Factors for a description of a number of factors that could adversely affect our results or
business.
Business Segments
We manage our business with two segments: Government and Commercial. The Government segment
consists of members enrolled in government-sponsored programs, and includes three lines of business: Medicare,
TRICARE, and Medicaid. The Commercial segment consists of members enrolled in products marketed to
employer groups and individuals, and includes two lines of business: medical (fully and self insured) and
specialty. We identified our segments in accordance with the aggregation provisions of Statement of Financial
Accounting Standards (SFAS) No. 131, Disclosures About Segments of an Enterprise and Related Information,
or SFAS 131, 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 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 often 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. We believe our customer,
membership, revenue, and pretax income diversification across segments and products allows us to increase our
chances of success.
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