Humana 2006 Annual Report Download - page 99

Humana Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Stock options to purchase 854,379 shares in 2006, 826,587 shares in 2005, and 2,865,166 shares in 2004
were anti-dilutive and, therefore, were not included in the computations of diluted earnings per common share.
13. STOCKHOLDERS’ EQUITY
Stock Repurchases
During 2006, we acquired 467,767 of our common shares in connection with employee stock plans at an
aggregate cost of $26.2 million, or an average of $56.03 per share.
Stockholders’ Rights Plan
Our stockholders’ rights plan expired in accordance with its terms in February 2006.
Regulatory Requirements
Certain of our subsidiaries operate in states that regulate the payment of dividends, loans, or other cash
transfers to Humana Inc., our parent company, and require minimum levels of equity as well as limit investments
to approved securities. The amount of dividends that may be paid to Humana Inc. by these subsidiaries, without
prior approval by state regulatory authorities, is limited based on the entity’s level of statutory income and
statutory capital and surplus. In most states, prior notification is provided before paying a dividend even if
approval is not required.
As of December 31, 2006, we maintained aggregate statutory capital and surplus of $2,066.0 million in our
state regulated subsidiaries. Each of these subsidiaries was in compliance with applicable statutory requirements
which aggregated $1,430.3 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 their required levels of equity
discussed above. 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
the remaining states and Puerto Rico at December 31, 2006, each of our subsidiaries would be in substantial
compliance and we would have $516.2 million of aggregate capital and surplus above any of the levels that
require corrective action under RBC, or individual state requirements.
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 2017. 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, 2006, 2005 and 2004:
2006 2005 2004
(in thousands)
Rent expense ................................. $104,711 $ 81,357 $ 78,222
Sublease rental income ......................... (10,442) (11,192) (11,291)
Net rent expense .......................... $ 94,269 $ 70,165 $ 66,931
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