Humana 2007 Annual Report Download - page 69

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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 were as follows at December 31, 2007.
Less than 12 months 12 months or more Total
2007 Fair Value
Unrealized
Losses Fair Value
Unrealized
Losses Fair Value
Unrealized
Losses
(in thousands)
U.S. Government obligations ......... $ 46,272 $ (391) $169,599 $(1,718) $ 215,871 $ (2,109)
Tax exempt municipal securities ...... 265,816 (4,098) 284,644 (2,147) 550,460 (6,245)
Corporate and other securities ........ 323,102 (8,645) 52,564 (1,164) 375,666 (9,809)
Mortgage-backed securities .......... 104,656 (1,282) 124,071 (2,299) 228,727 (3,581)
Debt securities ................ 739,846 (14,416) 630,878 (7,328) 1,370,724 (21,744)
Non-redeemable preferred stocks ...... 6,400 (1,575) — — 6,400 (1,575)
Common stocks ................... 3 (2) — — 3 (2)
Equity securities ............... 6,403 (1,577) — — 6,403 (1,577)
Total investment securities ....... $746,249 $(15,993) $630,878 $(7,328) $1,377,127 $(23,321)
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 cost, 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, 2007 resulted from 472 positions out of a total of 1,165 positions held.
Approximately 14% of the carrying value of our investment securities have been in an unrealized loss position
greater than one year. Of these investment securities in an unrealized loss position longer than a year,
approximately 99% of the carrying value are within 5% of recovering fair value up to cost. The unrealized losses
at December 31, 2007 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.
Goodwill and Long-lived Assets
At December 31, 2007, goodwill and other long-lived assets represented 20% of total assets and 63% of
total stockholders’ equity.
SFAS No. 142, Goodwill and Other Intangible Assets, or SFAS 142, requires that we test 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 our operating segments or
one level below the operating segments which comprise our reportable Commercial and Government segments.
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